First published by the Huffington Post on 23rd September 2011
As mayhem breaks out on stock markets; as Eurozone banks freeze up; and as the global financial system approaches a frightening ‘danger zone,’ the champions of the globalised ‘free market’ and of the Euro are in search of a scapegoat.
Instead of accepting that it is the broken banking system; the de-regulated financial Eurozone, and the deflationary monetarist policies of the Maastricht Treaty that are the roots of the crisis, the Troika (the IMF/EU/ECB) want to identify a convenient whipping boy.
Instead of going after the real culprits — un-regulated bankers that lent recklessly, confident they would always be bailed out by taxpayers — the approach of the Troika is to scapegoat Greece. The implication is that the whole fabric of the Euro, and with it the global economy, is torn apart because one poor country, Greece, will not enforce ever-deeper austerity on her people.
Let’s get this straight. The Greek economy — and with it the Euro — is disintegratingbecause Greek politicians are implementing austerity, not because they are failing to.
As one of the poorest of the Eurozone economies, Greece was always the most vulnerable to the global financial crisis. The ‘Troika’ can build a credible case that Greece’s politicians should not have borrowed from the private bankers of Europe, and therefore Greeks share responsibility for the debt.
But Greece was only able to borrow because, with the help of Goldman Sachs, she was welcomed by Europe’s bankers and leaders into the pre-existing de-regulated, financial framework that is the Eurozone. A monetary union designed above all to promote, protect and subsidise the interests of money-lenders and speculators in the private bank-debt and sovereign debt markets.
Greece’s entry into the Eurozone was of course a mistake. But the idea that Greece has misbehaved to an extent that deems her responsible for destroying the European and global financial fabric is, frankly, absurd.
The fact is Greece and Greece’s debt is a symptom of the crisis, not the cause.
That is why the spectacle of the IMF’s representative Bob Traa hectoring Greeks this week was both hypocritical and spurious.
All unbiased persons of common sense recognise that more austerity — more unemployment, poverty, suicides, family breakdown, civil unrest — will crush Greece. It does not require a PhD from Harvard to work that out. Last year Greece’s GDP declined by 4.4%, according to the IMF. So far this year GDP has plunged by a further 7.3%, according to official statistics.
That is why the IMF’s call for “a reinvigoration of structural reforms” is so profoundly irrational and self-serving.
Who believes that declining economic activity in Greece can save both her economy, the bankrupt European banking system and the Euro?
No sane person can believe that sacking 100,000 civil servants in a single year, increasing taxes on fuel, lowering the tax threshold so that the poorest Greeks pay for this crisis, cutting back on wages and old peoples’ pensions — will a) repay debts b) re-capitalise banks and c) lead to economic recovery.
Instead, these policies will trigger wider social unrest and the inevitable default — sooner rather than later. And a Greek default, accompanied by social upheaval will be contagious, making things much, much worse for Europe as a whole.
So stop whipping Greece.
As we at PRIME have repeatedly pointed out, austerity policies pose a grave threat to a global financial system over-burdened by the debts generated by an out-of-control banking system.
The Troika seem unable to acknowledge that austerity is the wrong remedy for another crisis; the crisis of a bankrupt banking system broken on the back of de-regulated finance.
To address that crisis, the Troika must manage the write-down and write-off of unpayable private and sovereign debts in an orderly manner. This they refuse to do.
Instead their approach is that the private banking system must be protected from losses (and the discipline of the market) — at all costs.
By this approach they are failing the people of Europe, as well as Greece: throwing good money after bad.
It is the failure of the Troika to extend their focus beyond the narrow interests of the private, wealthy banking elite of Europe — and towards the interests of all Europeans — that is causing economic failure.
Above all it is the failure of the Troika to promote policies in Europe that would create and increase employment — in Greece and throughout the Eurozone.
For employment is the only way to raise the income (and tax revenues) needed to repay debts; and to restore the economy and the public finances (of Greece and other countries) to health.
Because the IMF, EU politicians and ECB bankers cannot accept or implement these self-evident remedies, the people of Greece are well advised to go it alone; to default and escape the clutches of politicians and officials determined to strangle all possibility of economic recovery.
Others have gone before — and recovered: Russia in 1998; Argentina in 2001 and Iceland in 2008 — after the biggest banking collapse in economic history.
Greece has only her austerity chains to lose.