11 July 2015

Behind Germany’s Refusal to Grant Debt Relief: Financial Eugenics and the Will to Power

"What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage in the sense of ethical responsibility to stand up to it."

Jamie Galbraith, Greek Revolt Threatens Entire Neoliberal Project

It is probably less an issue of ethical responsibility and more an act of self-interest for most.  Having taken their fill of the Third World, and now working their way into the developed nations, why would anyone assume that Greece would be sufficient for the maw of neoliberal greed.

The above interview with Galbraith is worth reading.  For one thing it contains the seed of the current spin that Tsipras called the referendum in order to lose it, and to somehow save himself and betray the Greeks.   And for another you will be able to read what Jamie Galbraith really thinks, the parts that the friends of the financial establishment have carefully excluded from their versions of the story.

The calling of the referendum was politically brilliant, because it defused the notion of an extremist government standing irrationally against the Troika.  This derailed the path towards a 'color revolution' backed by the oligarchs, to take out these mad leftists who were not speaking for the people.  

Remember the economic decision involving Europe which provoked the recent coup d'état in the Ukraine?  In that case the government did not have the backing of the people, and it took hold, at least in the Western portions of the country.   Wash, rinse, repeat.

Of course the Greek referendum was famously too close to predict when first called by Syriza, and surprisingly late in the game for most everyone else as you may recall   And Tsipras called it to lose? How soon some choose to forget.  But it changed the course of events in a dramatic way.  As it was it did not help their bargaining position, but as Galbraith says they did not expect it to improve their bargaining position because their counterparts were implacable and not negotiating in good faith.

But it put the field of play into better terms if your goal is playing for survival, and time.  Syriza is knocking down all the rationales and excuses to visit harsh terms on Greece that the Troika and their enablers are using.  They are exposing the Eurocrats for what they really are.

Empires set on unsustainable foundations are like financial bubbles and Ponzi schemes.  They are inherently non-productive and consuming, so they must continue to grow, or choke on their own detritus.   Transferring wealth as your major economic policy requires a steady source of new supply.

Most of the American media has fallen into line with the neoliberal agenda. It might seem surprising, but power has its attraction under corporatism, even for people who would ordinarily consider themselves to be 'liberal.'

There are concerning things happening in the Western world, and a lack of traction towards individual freedom amongst 'the great democracies.'

We look with a sense of foreboding at Germany's growing desire to bring their version of order and efficient management of lands and people to the rest of Europe.

The growing militancy in Japan, and Abe's aggressive pushing aside of constitutional restraints, is undernoted in the West, but of great concern to those in Asia.

Greece would look to the US for assistance in vain, given that Obama's representative to the continent is Victoria Nuland, the bearer of color revolutions and the reaping of ancient lands and cultures for profit.  

No, even the developed nations of the West have been caught up in the will to power.

What is good? All that enhances the feeling of power, the Will to Power, and the power itself in man. What is bad? All that proceeds from weakness. What is happiness? The feeling that power is increasing--that resistance has been overcome. Not contentment, but more power; not peace at any price, but war; not virtue, but competence.

The first principle of our humanism is that the weak and the failures shall perish. And they ought to be helped to perish.   What is more harmful than any vice?  Active pity for all failure and weakness--- Christianity.

Friedrich Nietzsche
At least in this latest incarnation of the will to power some, including the Pope thank God, are speaking out early, publicly, and strongly against the rising tide of injustice, the senseless abuse and indifference towards people, especially the vulnerable and the weakest, and the impulse towards dehumanizing bureaucratic rule and neo-totalitarianism. 

How many human lives, how much misery, how much of the richness of the land, are we willing to sacrifice to the indifferent god of the markets and its insatiable Banks.

As always silence is complicity, and apathy is a comfort to something as old as Babylon, and evil as sin.

Behind Germany’s refusal to grant Greece debt relief

Tomorrow’s EU Summit will seal Greece’s fate in the Eurozone. As these lines are being written, Euclid Tsakalotos, my great friend, comrade and successor as Greece’s Finance Ministry is heading for a Eurogroup meeting that will determine whether a last ditch agreement between Greece and our creditors is reached and whether this agreement contains the degree of debt relief that could render the Greek economy viable within the Euro Area.

Euclid is taking with him a moderate, well-thought out debt restructuring plan that is undoubtedly in the interests both of Greece and its creditors. (Details of it I intend to publish here on Monday, once the dust has settled.) If these modest debt restructuring proposals are turned down, as the German finance minister has foreshadowed, Sunday’s EU Summit will be deciding between kicking Greece out of the Eurozone now or keeping it in for a little while longer, in a state of deepening destitution, until it leaves some time in the future.

The question is: Why is the German finance Minister, Dr Wolfgang Schäuble, resisting a sensible, mild, mutually beneficial debt restructure? The following op-ed just published in today’s The Guardian offers my answer. [Please note that the Guardian’s title was not of my choosing. Mine read, as above: Behind Germany’s refusal to grant Greece debt relief ). Click here for the op-ed or…

Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.

In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.

Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.

To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
Once the sordid operation was complete, Europe had automatically acquired another reason for refusing to discuss debt restructuring: it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.

Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.

In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.

Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.

With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.
One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.