The imposition of the euro had one true goal – to end the European welfare state
by Michael Nevradakis in Athens and Greg Palast in New York
Not surprisingly, by nearly two to one, Greeks have overwhelmingly rejected the cruel, economically bonkers “austerity” programme required by the European Central Bank in return for an ECB loan to pay Greece’s creditors.
In doing so, the Greek people overcame an unprecedented campaign of fear from the Greek and international media, the European Union (EU), and most of our political parties.
What’s simply wacko is that, while voting No to austerity, many Greeks wish to remain shackled to the euro, the very cause of our miseries.
Before we explain how the euro is the cause of this horror show, let’s clear up one thing right away. All week, worldwide media was filled with news of the Greek “crisis.” Yes, the economy stinks, with one in four Greeks unemployed. But two other euro nations, Spain and Cyprus, also are suffering this depression level of unemployment. Indeed, more than 11 per cent of workers in seven euro nations, including Portugal and Italy, are out of work.
But unlike Greece, these other suffering nations have quietly acquiesced to their “austerity” punishments. Spaniards now accept that they are fated forevermore to be low-paid servants to beer-barfing British tourists. Spanish Prime Minister Mariano Rajoy, who has enacted a draconian protest ban at home to keep his own suffering masses at bay, has joined in the jackal pack rejecting anything but the harshest of austerity terms for Greece.
The difference between these quiescent nations and Greece is that the Greeks won’t take it any more.What the media call the Greek “crisis” is, in fact, resistance. But it’s a resistance whose leaders are leading them nowhere.
For decades, Greeks have suffered governments that are both corrupt and dishonest.The election of Syriza changed all that — the government is now merely dishonest.
Our new Syriza Prime Minister, Alexis Tsipras, correctly called the austerity plan “blackmail.” However, before Sunday’s vote, Tsipras told the nation a big fat fib. He said we could vote down the European Bank’s plan but keep the European Bank’s coin, the euro. How? Tsipras won’t say.
It’s part of a policy ploy his outgoing finance minister Yanis Varoufakis calls “creative ambiguity.” To translate — creative ambiguity is Greek for “bullshit.”
Tsipras’s claim that Greece can keep the euro while rejecting austerity is crazy talk. The fact is that German Chancellor Angela Merkel, the Cruella De Vil of the eurozone, will ignore the cries of the bleeding Greeks and demand we swallow austerity — or lose the euro.But so what if we lose the euro? The best thing that can happen to Greece, and should have happened long, long ago, is that Greece flee the eurozone.
That’s because it is the euro itself that is the virus responsible for Greece’s economic ills.Indeed, the sadistic commitment to “austerity” was minted into the coin’s very metal. We’re not guessing. One of us (Palast, an economist by training) has had long talks with the acknowledged “father” of the euro, Professor Robert Mundell. It’s important to mention the other little bastard spawned by the late Prof Mundell — “supply-side” economics, otherwise known as “Reaganomics,” “Thatcherism” or simply “voodoo” economics.
The imposition of the euro had one true goal — to end the European welfare state.
For Mundell and the politicians who seized on his currency concept, the euro itself would be the vector infecting the European body politic with supply side Reaganomics. Mundell saw a euro’d Europe as free of trade unions and government regulations — a Europe in which the votes of parliaments were meaningless. Each eurozone nation, able to control neither the value of its own currency, nor its own budget, nor its own fiscal policy, could only compete for business by slashing regulations and taxes. Mundell said: “[The euro] puts monetary policy out of the reach of politicians … Without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”
Here’s how it works. To join the eurozone, nations must agree to keep their deficits to no more than 3 per cent of GDP and total debt to no more than 60 per cent of GDP. In a recession, that’s plain insane. By contrast, President Barack Obama pulled the US out of recession by increasing deficit spending to a staggering 9.8 per cent of GDP, and he raised the nation’s debt to 101 per cent from a pre-recession 62 per cent. Republicans screamed, but it worked. The US has lower unemployment than any eurozone nation.
As Obama scolded the European tormentors of Greece: “You cannot keep on squeezing countries that are in the midst of depression.” Cutting spending power only leads to less spending which leads to further cuts in spending power — a death spiral we see today in the eurozone from Greece to Italy to Spain — but not in Germany.
“Not in Germany.” There’s the rub. Normally, a nation such as Greece can quickly recover from debt-induced recession by devaluing its currency. Greece would become a dirt cheap tourist destination once more and its lower-cost exports would zoom, instantly increasing competitiveness. And that’s what Germany can’t allow. Germany lured other European nations into the euro in order to keep them from undercutting Germany’s prices in export markets.
Restricted by the 3 per cent deficit rule, the only recourse left for eurozone debtors? Pay the piper with “austerity” measures.
So therein lies the lie. Tsipras tells his fellow Greeks that we can live in a looking glass world, where we can have our euro and eat it too — that we can stay handcuffed to the euro but run free without austerity.
The nonsense continues — following the announcement of the official results of the referendum on Sunday night, Tsipras tweeted that the Greek electorate voted for a “Europe of solidarity and democracy,” while the now-resigned finance minister Varoufakis tweeted that “Greece’s place in the eurozone is non-negotiable,” claiming that he would not allow the “only alternative,” the old drachma trading alongside the euro.
Syriza’s euro-fetish was already evident in its pre-referendum proposals to the IMF and European Bank, a 47-page document which included €8 billion in new austerity measures plus a new round of sell-offs of state industries, the maintenance of a primary surplus of 1 per cent this year which would increase in the coming years, the increase of the retirement age to 67, and making permanent the previously “temporary” taxes upon an already overtaxed populace.
In Tsipras’s own proposal, there was no word of a debt write-down or stoppage of payments, despite the fact that the government’s own Debt Audit Commission announced on June 17 that the bulk of Greece’s debt is illegal, “odious,” and should not be paid.
Instead, Tsipras has come out in support of the IMF’s proposal for a mere 30 per cent “debt haircut” and a 20-year grace period, effectively sweeping the problem under the rug. Greece is currently running a deficit, meaning that in order for the 1 per cent surplus to be achieved, Syriza must cut, cut, cut. Exactly as Mundell and the supply-siders intended.
Like Obama, Tsipras knows that cutting pensions, privatising and closing industries, slashing wages — in other words, “austerity” or, to use the latest jargon, “reform” — is not just cruel, it’s plain stupid. It can only push a nation in recession into depression. That’s not just theory. The troika (the European Central Bank, IMF and European Commission) first imposed their vicious austerity measures on Greece in 2010. Greeks watched their annual salaries plummet to half of a German’s paycheque. Greece’s supposedly generous pensions have been cut eight times during the crisis, while two-thirds of pensioners live below the poverty line. Everything from Greece’s airports to harbours, the national lottery to prime publicly owned real estate was sold off, while schools and hospitals were shuttered.
And, for the first time since World War II, widespread starvation has returned. 500,000 children in Greece are said to be malnourished. Students fainting from hunger in frigid schools which cannot afford heating oil is now a common phenomenon.
This cruel “belt tightening,” the troika promised, would restore Greece’s economy by 2012 (and then 2013, 2014, and 2015). In reality, unemployment went from a terrible 12.5 per cent in 2010 to a horrendous 25.6 per cent today.
Now, the troika demands more of the same, a continuation of this disastrous policy.
Meanwhile, following the referendum result which made him a hero, finance minister Varoufakis resigned. Ironically, while Varoufakis rubbed German officials the wrong way with his unorthodox style, he, too, maintained the pro-euro myth.
Previous austerity measures continued under his watch. To please the mad austerity masters, he said he would “squeeze blood from a stone” to repay the IMF — which he did in May, when all remaining funds in the Greek Treasury were rounded up by presidential decree to make that month’s IMF loan payment.
Varoufakis was so wedded to the euro that he claimed that Greece would be unable to print its old currency, the drachma, because we destroyed our currency printing presses when we joined the euro. In fact, the government’s banknote printing facility in Athens still operates, printing the 10-euro note.
Meanwhile, our future flees. A quarter of a million university graduates have abandoned our nation. They have no choice — unemployment for those under 25 has hit 48.6 per cent.I know that many Greeks, Cypriots, Italians and Portuguese all express a visceral fear of leaving the euro. Depending on which polls one chooses to believe, anywhere from a near-majority to an overwhelming majority of Greeks wish to remain in the euro at all costs.
From the hysterical statements I heard from some Greeks that, “We cannot leave Europe!” you’d think that dropping the euro will cause Greece to break off at the Albanian border and crash into Africa.
It would be refreshing to hear political leaders say the honest economic truth — “Workers of Europe unite! You have nothing to lose but the euro — and your chains.”
Michael Nevradakis is host of Dialogos Radio in Athens. Greg Palast is the author of the New York Times bestsellers, The Best Democracy Money Can Buy, Billionaires & Ballot Bandits, Armed Madhouse and the highly acclaimed Vultures’ Picnic.