Sunday, November 27, 2011

The Bloodless Coup in the Eurozone: Financial Totalitarianism Disguised as Democracy

Thousands of years and countless rivers of blood and treasure to decide European hegemony.  Athens was the birthplace of democracy.  Italy was the Renaissance capital of feuding royal states.

Now there is no need for bloody wars to decide the fate of European sovereignty.  The all-powerful Troika (the European Commission, the ECB and the IMF) has pulled off a bloodless coup , pushing out democratically elected officials in both Greece and Italy to replace them with unelected “technocrats” from a cozy financial network.

The word “technocrat” is efficient and innocuous.  It hides illegitimate leadership.  The word also disguises the incestuous relationships between the money men and women.

The bankers are in charge because the elected leaders of the Greek and Italian people couldn’t meet the demands of investors in their government bonds.  It’s not that the leaders didn’t try.  They were willing to face riots, strikes and vociferous opposition to do their bidding.  But all their efforts couldn’t calm the markets.  So the Troika put their own people in charge.

Lucas Papademos replaced Greek Prime Minister Papandreou, who had the temerity to suggest that the Greek people vote on austerity.  Papademos had been head of the Greek Central Bank when it joined the Eurozone:
Papademos was in charge when Greek officials lied about their fiscal position to the EU authorities and he presided over the failure of the Greek government to collect taxes from rich Greeks (like himself)…Greece is to be run by the very man responsible for getting them in this mess.
Even though Italy didn’t get a bailout, Prime Minister Berlusconi was pushed out and Mario Monti, another “technocrat”, took his place.    Monti worked briefly for Goldman Sachs, then became EU Commissioner for years, where he insisted on “liberalizing and deregulating” markets.  He is a close friend of the new head of the ECB, Mario Draghi, another Italian banker:
In the 1990s, when a number of countries, including Italy and Greece, engaged deliberately in credit swap transactions to take part of government debt and deficits off the official accounts with the connivance and help of Goldman Sachs in particular, Draghi was director general of the Italian Treasure and then joined Goldman Sachs (2002-2005).  Not even two degrees of separation: Draghi and Papademos both got their doctorates in economics at MIT in 1978.
Ex-French finance minister Christine Lagarde leads the IMF.  She headed up a global law firm that advised on “creative accounting” schemes for government debt.  Her deputy, David Lipton, used to work at Moore Capital, a global hedge fund.  Klaus Regling, who also worked at Moore Capital, runs the European Financial Stability Facility (EFSF), an entity created to provide bailouts. 

There is barely a quarter of the money needed for a true bailout fund in the EFSF (440 billion euros versus an estimated 2 trillion euros) but many investment houses have imaginative ideas of how to create a structured, tranched vehicle leveraged at four times the size of the fund.  These are the same ideas that demolished the housing market.  But no matter:
Fees from EFSF bond issuance will be worth 1% of a likely $100-billion of issuance to the big European banks and the likes of Goldman Sachs.  So they will be making good money out of the “bailout” funding.
The Greek people are not happy with their plight.  Says Alexandros Moraitakis, president of the Nuntius stock brokerage firm, most of whose employees have been laid off (in the past two years, the Greek stock market has lost 75% of its value):
“Greece does not decide, now the troika people decide, and they make experiments in the Greek market,” he says.  “Up to now they were unsuccessful.  Without growth, nothing will be done.”
Unemployment has doubled.  Even after two years of harsh measures, Greece is in recession and spiraling downward.  Not only has the Troika demanded austerity in exchange for bailouts, it has also put its own people in the indebted countries to oversee their progress:
[T]here’s widespread criticism that the troika is going to have a permanent office in Athens for the rest of the decade.

German Chancellor Angela Merkel has made clear that over-indebted eurozone countries must be closely overseen by international inspectors.
To lose sovereignty because of economic bumbling leading to German domination is the kind of poisonous tonic that topples governments.

Newspaper publisher and journalist George Kirtsos points out that statements by German politicians disparaging the Greek people have revived old memories of the brutality of the German occupation during World War II.

The Troika’s severe, almost punitive quid pro quo demanding not merely creditor sovereignty but crippling austerity is in stark contrast to the Marshall Plan (aka The European Recovery Plan or ERP), which was a large-scale American program to aid European economies devastated by World War II.  The U.S. allotted $13 billion for the plan.  In addition to the $12 billion it spent as a bridge covering the time until the plan came into affect, its cost was 10% of U.S. GDP of $258 billion.  17 countries were included.  The
European recipients didn’t receive the goods and services as a gift; they were loans to be paid back in local currency, usually on credit.

The Marshall Plan money was in the form of grants that did not have to be repaid.  In addition to ERP grants, the Export-Import Bank (an agency of the U.S. government) at the same time made long-term loans at low interest rates to finance major purchases in the U.S., all of which were repaid.
 In the case of Germany there also were 16 billion marks of debts from the 1920s, which had defaulted in the 1930s, but which Germany decided to repay to restore its reputation. This money was owed to government and private banks in the U.S., France and Britain. Another 16 billion marks represented postwar loans by the U.S. Under the London Debts Agreement of 1953, the repayable amount was reduced by 50% to about 15 billion marks and stretched out over 30 years, and compared to the fast-growing German economy were of minor impact.

As Kirstos said, “[I]f you want to do nation-building and force the Greeks to pay the price for the German nation-building in Greece, this is something that cannot be done in political terms.”

Anti-German statements are everywhere:

There are growing fears that Germans are plotting to buy Greek monuments and islands on the cheap, and there’s a revival of anger over Greek demands for compensation for Nazi atrocities

The occupying overseer from the Troika is referred to as the Gestapo.

Now that the “technocrats” are in charge, what’s the plan?  More public sector spending cuts, higher taxes, massive privatization of state assets and other measures to ensure that all the bonds held by the European financial sector are paid back in full and there is no default. 

Even though Greek private sector debt got a 50% haircut, the average Greek will still suffer a 30% reduction in living standards over the next decade.  And government debt will be at least 120% of GDP by the end of the decade at best, burdening the next generation with repayment into the following generation. 

The same problem besets Italy.  As 58-year-old Pietro Pappagallo, an Italian citizen from Bari, said:

”I’m worried about my savings that could become waste paper.  All the efforts to put something aside and I won’t get anything for it.  I’ve already faced four changes of my pension.  I had planned my life out and now they say I have to work more.  As a father, I worry for my children, who will probably never have a pension.”

The Troika (de facto, German Chancellor Merkel) wants many things: financial capital paid in full, no default, punitive measures against profligate nations “to toe the line on fiscal prudence and run balanced budgets and get their debt down so that the burden of taxation on the profits of the capitalist sector can be reduced.” 

Does it matter that the very people calling the shots today were the ones helping these governments hide their debts for fat fees?  It should be recognized and shouted to the rooftops that democracy is merely a cover for financial totalitarianism.  A sharp rebuke from the Troika and both democratically-elected Papandreou and Berlusconi were ejected.  Generations of the lower 99% who had little or nothing to say about complex financial transactions disgorgin fees here and there will live out diminished lives with little expectation of change.

The sick joke of it all is that austerity as a program of economic growth doesn’t work:

The reality is that, despite all the efforts of the social democrat leaders in adopting “neoliberal” policies of fiscal austerity, privatization, reduction in pension benefits and the destruction of labor protection laws, Greece will still not meet the targets set by the Troika.

Maybe the endgame isn’t austerity.  Maybe it’s privatization: picking off priceless assets for fire sale prices.  The vultures are circling.

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