And another bank bites the dust. From this side of the pond we have never understood the shelter of Chapter Eleven. That is something that simply doesn’t exist in Europe. If a company goes broke, it goes broke, what in the US would be called Chapter Seven. This simply ends mismanaged or falling behind companies, weeding out the chaff. In my country there is something called “deferral of payment status”, a sort of micro Ch. 11, protecting you from immediate liquidation by upset creditors, but it’s in no way comparable. The biggest issue, as we see it with Chapter 11 is that the competition NOT needing the shelter is still playing by the normal rules, giving the sheltered company competitive advantage it surely doesn’t deserve. The end result could be the competition failing and ultimately filing for… Chapter 11! Something that has happened with the airline industry (yes, this is a gross simplification, I know).

Having said that, on this side a few nasty bags of tricks are played too, and one could argue that at least Chapter Eleven is played out in the open. Alitalia, the state owned national carrier, is loosing 4.5 mln dollar a DAY for ages now and recently the Italian government pumped 450 mln Italian tax payers dollars into this IC patient. Of course it’s all gone by now and nothing has changed. That “fuel injection”, hehe, is illegal under European law though and we’ll see what comes of it.

Added September 17th: Same goes for Olympic Airlines. The Greek government is facing steep European fines for illegally injecting 130 850 million Euro’s (185 mln 1.2 billion dollars) in it. But then, how much is that, compared to 85 billion dollars for AIG? Well, how about per capita (I took the countries inhabitants. If I had to use the European population as baseline, I would have to dig for say all the illegal airline state support cases.)

Alitalia: $8
Olympic Airlines: $18 $120
AIG: $285

To be fair, the airline state support has been going on for ages, we’re looking at the tip of the iceberg.