BARCELONA, Feb. 10 (Xinhua) -- The root problem of the financial system is still present some ten years after the subprime crisis, Xabier Vence, Professor of Applied Economics at the University of Santiago de Compostela (USC) told Xinhua in a recent interview.
"The economy did not find ways to restore growth in a solid and sustained way," Vence said, adding that "austerity policies aggravate the situation by preventing demand from recovering."
According to the economist, the business model within the financial system has not changed and "it is simply living with assisted ventilation thanks to two huge oxygen pumps: bailouts with public funds in the U.S. and in almost all EU countries, and fantastic injections of money by central banks."
Vence warned that these policies only "temporarily save the banks, but they do not help the productive economy recovery, neither the families" and they are going from being a "temporary oxygen pump" to a future "time bomb."
The crisis revealed "the exhaustion of an extreme financialization system of the economy," Vence said, explaining that the system had tried to "supply with increasing indebtedness the lack of dynamism of the real productive economy."
Speculation and excessive credit boosted a bubble that erupted in 2008 triggering a global financial crisis with severe consequences for the productive economy, the banking sector and society in general.
For the recovery, Vence advocates a radical change in the financial system that should serve the productive economy and society as a whole.
"If the model does not change, we remain controlled by the interests and logic of financial capital, I think it is difficult for the economy to recover in a lasting way," Vence warned, "at most, there could be a new bubble."
Vence believes that there could be a short-term economic recession in some countries derived from the current situation.
"The definancialization of the economy would have to be the goal and the basic condition to lay the foundations of a new model," he said, referring to a new model of financial globalization that gives more power to countries in order to define their own productive, industrial, commercial and cohesion policies, thus giving "a new impetus to growth based on the expansion of domestic solvent demand."
