The Paris court order for former Société Générale trader
Jérôme Kerviel to pay the largest ever damages awarded against an
individual in French judicial history, has sharply divided public
opinion.
Kerviel who brought the bank close to collapse when it was revealed
that he had lost 4.9 billion euros in illegal betting on financial
markets, was sentenced to five years in jail two of which suspended, for
fraud and ordered to repay the bank’s losses .
His lawyer, Olivier Metzner called the sentence, “unreasonable,
unacceptable and totally excessive” and has lodged an appeal. The size
of the fine is the equivalent to nearly one third of the annual amount
of the EU’s agriculture subsidies to France (which total almost €14
billion) and will take the trader, now said to be earning under 2000
euros a month, 177,000 years to pay off.
Although the bank claims it was unaware of Kerviel’s dealings, the
33-year-old disgraced trader says his bosses encouraged him to break the
rules as long as the money poured in. Heads rolled at executive level
after the scandal first broke and the bank was subsequently fined 4
million euros by the supervisory authorities.
There are conflicting reports as to whether Société Générale will
spare Kerviel from repaying the full amount or, with a lien on his
earnings, force him into penury for the rest of his life.
The sentence has become a national talking point, provoking very mixed reactions.
Speaking after the trial, the president (or Speaker of the House) of
the National Assembly Bernard Accoyer (UMP) said :”Since the outset all
the figures in this affair have been beyond comprehension and this
outcome merely continues that.” He told Canal + :”I never
comment on judicial decisions and I note an appeal has been lodged, but I
would say the world of high finance is in some kind of completely crazy
cycle, it is total madness and all the figures bandied about since this
began and indeed through to today are incomprehensible. I call for a
return to commonsense both in this affair but more widely in the world
of finance generally”.
He was not alone and while no one (except the defence team)
questioned the rigorously argued correctness of the 70-page judgment
handed down against Kerviel, the harshness of the sentence caused a
sharp collective gasp for air. As American commentator Arthur Goldhammer
noted in his blog on France: “Yesterday we hung the Holocaust on
Pétain, today we hang the heist of the millennium on Jérôme Kerviel. But
let’s face it: neither of these guys could have pulled it off alone.
Good luck to the state on collecting on that 5 billion euros fine
though”.
Indeed the view emerging in the media is that Kerviel has been hung
out to dry and made the European fall guy for the appalling oversight
failures by the French bank itself and in a wider context, in some way a
scapegoat for public anger at the global banking system and the
wrecking ball it took to the world economy in 2008.
Anger and anxiety abound in equal measure judging by the vox pops on
the radio stations, commenters on newspaper websites and cafe small-talk
in La France Profonde. “I don’t believe we are even a quarter
of the way through this banking crisis” observed Francine as she served
beer in a small village hotel in the Lot recently. “The government tells
us to spend to help the economy but we all know we must tighten belts
and save for the bad times ahead, no one I know is off on a spending
spree anytime soon” she said.
Wisley as it turns out, if some of the latest economic forecasts are anywhere near the truth.
In a recent hardhitting report “Where did our money go? Building a banking system fit for purpose”,
Tony Greenham Head of Finance and Business and Andrew Simms Policy
Director of the UK’s New Economics thinktank are anything but
optimistic. “The report concludes that considering the massive impact of
the failure of the banks, action to address systemic problems has been
woefully inadequate. It also argues that the current banking system is
not yet fit for purpose when it comes to addressing the major economic,
social and environmental challenges that we currently face.”
And they are not alone. Despite the best efforts of the European
Central Bank to put the best face on the outlook ahead, pessimistic
economists continue to surface bearing reports of euro area doom and
gloom.
So might it all go the way of the ill-starred Latin Monetary Union
(LMU)? (This was an earlier attempt dreamt up by the French in 1848 and
formally dissolved in failure in 1926, under which LMU, an extension of
the franc zone, became a currency union covering Belgium, Switzerland,
Italy, Greece and Bulgaria based on a joint silver and gold standard)
Most certainly yes is the view of Gabriel Stein, a director of London-based Lombard Street Research. Writing recently on the Critical Reaction website about the ongoing threat of a Greek default
he noted: “Moreover, Greece is constantly at risk from contagion
because of trouble elsewhere – especially from Spain, Portugal or
Ireland. History teaches us two things which the Greek government should
take to heart. First, subunits in a monetary union can default (eg,
states of the United States in the Panic of 1837). Second, if the only
threat your creditors hold over you is that they won’t lend you more
money if you default, you should default. At the end of the day, Greece
almost certainly will have to default – i.e. restructure its debt. That
is not the end of the world. The country should also leave the euro
area. A break-up of the euro area will cause substantial financial
instability. It is not something to be desired, even in countries
outside the single currency. But the choice is not between break-up and
no break-up. The choice is between some countries – primarily Greece,
Portugal, Span and finally Italy – leaving the EA, allowing the core –
Germany, Benelux, Austria and France – to proceed with deeper
integration (leaving the remaining small countries in the minnow vs.
whale situation); or between the break-up of the whole single currency.
But membership of the euro is primarily a political issue. As yet, there
is no serious constituency in Greece – let alone the other candidates
for leaving – that advocates reclaiming monetary sovereignty. Therefore,
it will take further crises – crises that are inherent in the
construction of EMU – before these issues are resolved. The Greek crisis
is therefore indeed the end of the beginning – the end of the ‘innocent
phase of EMU; and the beginning of the end – the end game where a
number of countries will have to leave.”
Listen here to this mp3 voice report
from Radio France Internationale – English Service. (Clicking will
download an mp3 file which can be played in Windows Media Player or
similar or on an Ipod).
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