Austerity for whom?

“[Romania] is now at the crossroads, and strong decisions should be made in terms of reducing public expenses,” said Vincent Alexandre, an emerging-markets economist at BNP Paribas, France’s largest bank.

Alexandre was responding to a question from a reporter about yesterday’s protests in Romania where 30,000 workers, pensioners, and unemployed people took to the streets in Bucharest, the nation’s capital, to protest recent austerity measures announced by the government.

The austerity measures cut pensions for retirees, cut pay for public sector workers, and eliminate the jobs of 74,000 public sector workers.

The protests, organized by five Romanian unions, urged lawmakers to support a no confidence vote against the government, which would have toppled the current government and forced new elections.

Today, the government survived the no confidence vote by a narrow margin much to the relief of BNP Paribus’s Alexandre, who told the reporter, “the biggest concern is that if the government falls, we aren’t sure what comes next and that magnifies uncertainty.”

BNP Paribus, however, wasn’t as concerned about government spending two years ago when it faced collapse.  It gladly accepted $7.5 billion from the French government’s State Shareholding Corporation to cover losses it was facing because of its exposure to US mortgage-backed securities. 

It also took $4.9 billion from the US government to cover the bank’s exposure to AIG’s worthless credit swaps, and it took advantage of the Us government’s Temporary Liquidity Guarantee Program to issue a billion dollars worth of bonds that had the full backing of the US government.

Thanks to help from the French and US governments, BNP Paribus was able to avoid catastrophe and return to profitability. In 2009, less than a year after receiving government aid, BNP Paribus paid its financial managers bonuses totalling one billion euros. Shortly after paying the bonuses, the bank announced that it would begin repaying the French government for its aid.

It appears that in the eyes of bankers, government spending is good when it helps banks bridge tough economic times, but bad when it does the same for workers.

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