Sergi Cutillas – Who is the vice-president of the European Central Bank Luis De Guindos?

Luis De Guindos is the EU elite’s right sort of politician, as Sergi Cutillas documents.

Sergi Cutillas is an economist and worked in the financial sector before taking up his work as a financial justice activist in early 2012. He is a member of the European Research Network on Social and Economic Policy. He is now Secretary of Economy and Work in Podemos Catalonia.

Cross-posted from Makroskop (in German)

Yanis Varoufakis once declared that he would go out for drinks with his colleague at the Eurogroup Luis De Guindos, since despite their ideological distance they shared a good personal chemistry, adding that De Guindos was one of the few in the Eurogroup that really knew how modern capitalism works. In the first half of 2015 De Guindos gave full support to the German minister Schäuble in his destructive stance against Greece and its government. The comments by Varoufakis speak both for the dangerous friendships of the former Greek minister (see Éric Toussaint’s article about the subject here) and for the good communicative skill and lack of substance of Luis De Guindos.

De Guindos, 58-year old Madrileño, member of the Opus Dei, attended in his youth the elitist Roman Catholic school Santa María del Pilar. He studied Economics and Business in the University College of Financial Studies (CUNEF), a reputed private university in the field of finance and economics where De Guindos graduated with distinctions. Later he obtained his PhD in Economics in the public Universidad Complutense de Madrid.

De Guindos belongs to the Superior Body of commercial technicians and economists of the State, known for being a selective group of functionaries of the State related to the Opus Dei, which was created in the 50s by the ministers of the Franco regime belonging to the Opus. Such ministers, admirers of the ordoliberal doctrine of the School of Fribourg gave shape to the Spanish modern State and its economic structures. Such select group championed the Stabilization Plan of 1959, the negotiations of Spain’s entry into the IMF, the World Bank and the GATT, and into the European Economic Community. This group has served as platform to the elite close to the Catholic Church to achieve high bureaucratic positions in large private and public firms with ties to the State, in government, as well as in international organisations like the World Bank, the IMF and the like. Three vice-presidents, five of the last six governors of the Bank of Spain, eleven ministers and twenty-two secretaries of State have been members of the body of commercial technicians.

Since the late 80s De Guindos held different executive positions in the private sector, until he moved to the Spanish finance ministry between 1996 and 2004, becoming secretary of state for the Economy between 2002 and 2004, with Rodrigo Rato as minister (their relationship would later break down in 2012 when De Guindos intervened Bankia at that time chaired by Rato). In 2004, when Partido Popular was ousted from government, he returned to the private sector. In 2006 he became member of the global board directors of Lehman Brothers and executive chairman for Spain and Portugal until 2008 when the bank went to bankruptcy. In mid-2008, in his period as private banker he participated in the misselling of participatory quotas of savings bank CAM, which three years later were worth nothing (see here the video of De Guindos that such financial product would make history). De Guindos has also been a member of the boards of the former energy public monopoly Endesa and the public bank Banco Mare Nostrum until 2011 when he became minister. Since then the Spanish government in effect has had two finance ministers, Mr de Guindos as minister for the economy and Cristóbal Montoro as treasury minister. Being one of the few senior ministers who is both fluent in English and has experience in the financial sector, Mr de Guindos has enjoyed the higher international profile of the two.

Soon after reaching office in late 2011 De Guindos had to face pressures in the sovereign debt markets which came together with the threat by the Eurogroup of a fully-fledged state bail-out program with its corresponding Troika intervention. During the first months of 2012 the Eurogroup kept pressing Spain to reduce the fiscal deficit (a memorable image of this was Juncker strangulating De Guindos at the entry of the Eurogroup meeting in March 2012). On June 9, 2012, Guindos had to capitulate to pressures of the EU and the IMF and ask for a bail-out of up to 100 billion euros for the Spanish financial sector. Finally, Spain received 41.3 billion from the EU rescue fund (ESM) to recapitalise the savings banks and create a bad bank for real estate assets, Sareb. Due to this, in 2012, De Guindos was considered the worst finance minister of the EU by the Financial Times although at home he would claim having avoided a tougher bail-out. The programme was limited to the restructuring of the banking sector and the loan, he made clear, was not a bail-out but an “enhanced conditions credit line” for which Spaniards should be happy.

De Guindos likes to present himself as a pragmatic who avoids too ideological positions. There is some truth to this, as he will be a ferocious right-winger or a centrist neo-Keynesian if either identity serves him in the game of scaling the power ladder. He has claimed, for instance, that despite being a member of the European Popular Party his positions in the Eurogroup have often been to the left of ‘socialists’ like the Dutch Jeroen Dijsselbloem or the Slovak Peter Kazimir. On the other hand, in 2010 he was coordinator for a book ‘Spain: keys for prosperity’, promoted by the neoconservative think tank FAES and with aprologue by former Prime Minister Jose María Aznar. The book, praised without any trace of criticism, the economic policy implemented by Aznar, Rato and himself during 1996-2004 (which led to the real state bubble), and stablished several fundamental axis of economic policy for Partido Popular for the next period. These policies would soon materialise in the manner of a shock doctrine from December 2011 introduced by Rajoy’s first government, which almost simultaneously imposed damaging public expenditure cuts, a labour reform that attacked labour rights, a financial reform sweeping away the system of cajas (the Spanish savings banks that had a history of almost 200 years), and a regressive tax reform.

In July 2015 De Guindos presented his candidacy for the presidency of the Eurogroup. But neither the support of Minister Schäuble nor the intense campaign deployed for more than a year served to beat the Dutch socialist Jeroen Dijsselbloem, who managed to renew his mandate. From that moment, the relationship between the two politicans worsened. After their clash the dutchman frequently criticised his economic management, while De Guindos responded by fiercely rebuking Dijsselbloem for his misogynist and racist comments last spring saying that southern countries had wasted their money in ‘women and drinks’. When the successor of Dijsselbloem was elected last December, De Guindos resigned to despite the apparent favourite to position himself for the ECB job, probably as he had already decided upon his candidacy.

De Guindos also played an important role in the inauguration of the European Single Resolution Mechanism. On June 7th 2017 the acute crisis of Banco Popular, known for being the bank of the Opus Dei, was resolved by the Single Resolution Board applying a bail-in and selling the bank to Banco Santander for just one euro. The resolution of Banco Popular was surrounded with suspicion of fraud to say the least. The operation was based on a secret valuation report by Deloitte that was only made public in March, while parts still remain secret. Such reports, written in a matter of a few days, imposed net worth write off of 15 billion euros, the exact amount available in a bail-in of all shareholders and subordinate debt holders but sparing senior bondholders and depositor -, a happy coincidence if one thinks of the political costs of bailing-in small investors and depositors. Only three months before the resolution Banco Popular’s net worth exceeded 11 billion euros, also having passed very comfortably the stress test of the European Banking Association of July 2016. Despite such net worth write-offs the intervention allegedly took place for liquidity reasons. Soon after it would became clear that the Public Administration had withdrawn large amounts of cash days before the intervention which contributed to the 17 billion euro deposit run on Banco Popular. De Guindos, behind the operation, was successful on many fronts. First he helped Santander recapitalise by selling it a not long before solvent bank with the strongest client base of small and middle sized enterprises in Spain, consolidating the two banks in the larger of the two, Santander. At a European level he claimed that Spain was first in applying the resolution mechanism and bail-in in a proper manner, giving lustre again to the Banking Union, which had suffered an important credibility loss from Italy’s Monte dei Paschi crisis months before. With this newly gained “credibility” , afew days later the Banking Union pushed through the state bail-outs of Veneto Banca, Banca Popolare di Vicenza (see here), and Monte Dei Paschi di Siena (and here) avoiding the application of the resolution directive.

Finally it is important to note that De Guindos has played a very important role in the crisis of Catalonia in the closing months of of 2017. De Guindos put strong pressure on Catalan political leaders and society by warning on the economic impacts of independence: he tried to deter the Catalan movement by using a threatening tone when speaking the hypothetical catastrophic impact of going forward with secession. Even though, De Guindos subtly deviated from the official line of the government, mentioning the possibility of an agreement regarding wider fiscal self-determination for the region in exchange for putting a stop to the referendum, probably seeing the Catalan crisis as a danger for his candidacy at the ECB. However, Rajoy did not allow any negotiation and the referendum took place on October 1st on the background of massive police violence agianst peaceful demonstrators. It was in that context of crisis that only five days later De Guindos paved the way for the flight of companies from Catalonia. That day he approved an urgent decree that allowed companies to change their registered office (their regional tax residence), without the need for the decision to pass through a meeting of shareholders, as is usually the case with listed companies. The minister in this way tried to break the internal cohesion of Catalan political leadership in their goal to declare independence in the next days, a strategy that was partially effective. Such ‘soft-power’ tactics were a response mainly to the demand by the European Union to stop the use of violence, pointing to other means to reach political stability as soon as possible.

De Guindos last ‘carambola’ (break shot in billards) was due to the recent difficulties of Angela Merkel in forming a government. After more than two months of negotiation between the CDU and the SPD to form a new Grand Coalition, on February 8th both parties announced a government agreement. Given the weakness of Angela Merkel in the CDU, the SPD has played its cards to get important portfolios, and above all, finance. However, the situation of the SPD in the negotiations was not sufficiently advantageous for the CDU to give up the finance ministry without compensation, which until now was key to control both Germany and the Eurozone. Such concessions can be explained by the fact that the CDU want to preside over the ECB in 2019, a position that would compensate for the loss. For that, the CDU will need support of Rajoy at the European Council, where the president of the ECB is elected. De Guindos’ nomination compensates Rajoy’s loyalty to Merkel in the past and reassures his future support at the Council and the ECB.

Regarding his position of monetary policy De Guindos has stated that he sees central banking as a global game, adding that although  in principle he is in favour of tight money, he knows that all central banks are currently ‘doping’ their economies, which should make him more flexible. Some voices at the ECB don’t consider De Guindos qualified for the position. Others argue that his political skill will be useful in case of last minute negotiations as well as to facilitating the softening of German positions in favour of Southern Eurozone members. Regardless of the perspective, it is amply clear that from a technical point of view his colleagues at the board are better prepared for the job. As De Guindos admits himself, “There are times when I am considered a technocrat and sometimes a politician, it depends on how you look at things. I am an economist who has worked in politics”.

In the end, as with Rajoy, De Guindos’ major achievements are the result of his lack of principle and his tactical skill to be in the right place at the right time to seize opportunities for augmenting his power. His best score in this regard has without doubt come from acting as a loyal subordinate ally to the German finance minister Wolfgang Schäuble. In this context it is difficult to imagine that, when facing the new presidenct of the ECB, De Guindos will have developed his own policy initiatives to protect the interests of the periphery of Europe.


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