Financial crisis: time to drop the banks?

The UK Chancellor says the eurozone nations have only six weeks to work out measures to prevent a looming financial disaster. Experts tell RT that in order to escape a collapse countries need to stop bailing out the banks.

­Speaking at the IMF meeting on Friday, UK chancellor George Osborne urged European leaders to raise their efforts to prevent a crisis in the eurozone. Osborne set the next G20 meeting in Cannes on November 3-4 as the deadline.

Patience is running out in the international community. More needs to be done to avoid a disorderly outcome,” he said. “The eurozone has six weeks to resolve its political crisis.

In Washington, G20 finance ministers came up with an unplanned communiqué with a commitment to “a strong and coordinated international response to address the renewed challenges facing the global economy.

The officials also pledged to ensure adequate bank capitalization and to access liquidity. Still, their statement released the day before the meeting at the IMF cited “financial system fragility” and “heightened downside risks from sovereign stresses” among the threats to growth.

Europe was urged to implement a July promise to expand the powers of its 440-billion-euro ($593 billion) rescue fund, the European Financial Stability Facility (EFSF). For now, the eurozone is debating whether to allow the EFSF to buy the debt of stressed governments within the union and aid troubled banks and offer credit lines.

But Paul Craig Roberts, a columnist and former under-secretary of the US Treasury under Ronald Reagan, says the world needs to shift its focus from banks if they want to see any recovery.

As long as the ECB, the G20, the IMF, and the US Federal Reserve are focused on saving the banks at all costs, no sensible outcome is possible,” Roberts told RT. “It is not up to the IMF whether Greece defaults. If they default, it means their loans will have to be restructured to what they can pay. The banks then will not have to write down their losses. If losses endanger the banks, then the European Central Bank could turn its attention to what it takes to save the banks.

But finding other sides to the crisis will not be an easy thing to do, as the policy makers in the United States and Europe are in the hands of the bankers, said Roberts. Due to this, banks have been bailed out regardless of the cost to the general public or to national economies.