Monday, July 20, 2015

An exchange with Uwe Meixner on the European Council's strangling of ordinary Greeks

    "And yet the German government did just this [made things even worse than what he named the toxic demands themselves] when finance minister Schaeuble threatened Greek exit from the euro, thus unashamedly revealing itself as Europe’s chief disciplinarian. The German government thereby made for the first time a manifest claim for German hegemony in Europe – this, at any rate, is how things are perceived in the rest of Europe, and this perception defines the reality that counts. I fear that the German government, including its social democratic faction, have gambled away in one night all the political capital that a better Germany had accumulated in half a century – and by “better” I mean a Germany characterised by greater political sensitivity and a post-national mentality." - Juergen Habermas, interview, The Guardian, July 16, 2015 here


   Uwe Meixner, a philosophy professor at Augsburg, has  complained that my commentary on Greece resistance – see here and here - was one-sided and in fact, mistaken.  Perhaps he tries too hard to take up the other side.  But note that whether real people are suffering horribly and unnecessarily is a starting point of any decent analysis.  That 60 per cent of young people are unemployed or that old people rummage through trash for food, that under the disciplinary tutelage of the Eurozone Greek GDP has declined 25% and is pretty well now in free fall, and that Germany and others hold out no hope but something worse, does not register. Being so caught up morally in defending Germany’s honor as lender and Greek “dishonor” as a borrower misses this cardinal point.

       Second, Uwe substitutes anger at the Greek government and elite (very corrupt) for thinking about ordinary people (there is the briefest glimpse…).  He fails to respond to – or understand – the fundamental Keynsian point that cutting government spending on the poor further depresses an economy.  I will restate the point: in a depression, if there is a public works program, i.e. for green energy or to maintain the jobs of public school teachers as in the Obama stimulus, ordinary people are employed.  They tend to spend money locally or at least domestically with a multiplier effect in terms of employing others (those who work at stores, who make and serve food, who work at gas stations,  fix cars or drive buses, etc.).  This multiplier effect is the opposite of rewarding banks (for instance, Goldman Sachs, a leading predator in the crisis over Greece) and many others in the .0001.  A tax cut for ordinary people will also stimulate the economy or, more indirectly, a currency devaluation as in Iceland which makes a country’s products cheaper, augments exports, and furthers employment.

      Third, Uwe also fails to understand that the economic arrangements of the Eurozone, in particular, depriving national governments of any ability to print money or depreciate a currency to provide a lift in a frozen economy and abridging even the ability  to spend money to put poor people to work in a depression  means a deeper depression.  And the Eureaucrats thumbing their nose at the suffering of ordinary Greeks, spitting in the face of a referendum which voted no on their terms because most people are hurting too badly, and “waterboarding” the leader of Syriza at their grim meeting as one official desceribed – what Paul Krugman described as going “from punitive to vindictive” - pretty well does in Europe as a healthy, cooperative arrangement in which the sacrifice of national sovereignty does not mean something extreme – and extremely bad – for most people, especially working/poor people.

    Worse yet, there is a credibility question.  European membership is not subject to a vote in most cases (is not democratic, though it has some large benefits to citizens).  But with a spectacle like this, is its future promising?

    Fourth, the International Monetary Fund is infamous for its stringent, anti-decent or anti-common good insistence on cutting the budget deficits of less developed countries by forcing "austerity," that is,  cutting social programs of benefit to ordinary people.  IMF economists in specious "value free" language refer to education of children or health care as "particular" interests, but they are, in fact, universal, human rights- or democracy- or common good-serving interests, and IMF policy is, generally speaking, a form of imperial tyranny). 

    It has not been, any more than Europe, a group responsive to or intelligent about the core points of Keynsian economics underlined above.  Yet in this case, even the IMF has warned – rightly – that Europe’s conditions are too severe and will lead to a debt twice the (declining) national output!  One really has to go far – and the European Union did – to produce so bizarre an "ally" for ordinary Greeks…

    Fifth, Uwe emphasizes what is awful about inflation – and certainly Germany in the early 20s, as I said in a previous post, is a cardinal, frightening example. German fear of a repetition is reasonable.  But the analogy between individual debt and national debt, particularly because governments or central banks can print money and devalue currency does not hold (when it does not result in too much inflation).  Worse yet, this prejudice prevents governments - or the EU in Brussels - doing what it can to reactivate an economy, and makes things worse and worse.

    Sixth, the United States is a federal system which, despite all its comparative weaknesses as a welfare state  - "big government" in the US is for war – i.e. the Republicans, Rand Paul and company excepted – are the leading pro-war, big government party…) still taxes Connecticut to pay modest benefits for the unemployed or ensure bank deposits in Mississippi.  A large union which has no central government to take care of crises – mostly for the poor in one part – and no provision to help people, when others, too, will face crises (immediately in Spain, Portugal, Italy and soon perhaps France), is not well thought out – as the shocking example of "civilized" Europe preying, unmercifully, on the Greek` people illustrates (if these are Christians, what are anti-Christians...).

   Seventh, Uwe is angry at me because I joined the phrase racism to the phrase austerity in describing finance minister Schauble’s effort to drive the Greeks out of the Eurozone. I doubt that either Schauble or Merkel is personally a racist (yesterday Merkel insensitively told a Palestinian high school student that people like her had to leave Europe but when she cried, tried unsurprisingly not successfully to comfort her…Watch the video here). 

      But the anger here is that other people are not disciplined like Germans and that Greeks are "lazy" (so lazy that many elderly hunt in garbage cans for food…).  This is the line of all the advocates of austerity – European bankers, Merkel, Schauble, Paul Ryan -  whose arguments are based, for instance, on the Rogoff-Reinhart fraud that a 90% ratio of debt to GDP infallibly results in an economy's  collapse – see the remarkable discoveries of Thomas Herndon, the first year graduate student at U.Mass.Amherst, about "The Emperor's New Clothes" here and here.).  The argument stigmatizes, as Romney put it, “the 47% parasites,” or in Jeb Bush's words,  “Americans need to work harder” (no one works longer hours than ordinary Americans; Europeans through class war and wars have mercifully long vacations).  See Krugman below.

     Now the Bushes and Romney born with a silver spoon in their mouths classically project on the poor their own laziness (and, sadly, though they have a choice about it, worthlessness as human beings).  They look at others and see themselves, the greater their passion and meanness, the clearer, in psychological terms, the projection… 

        Internationally, there is an ideology among rich people that the poor must be forced to work harder (in case anyone thought Scrooge was outdated in 21st century capitalism…).  And of course, Rand Paul, inheriting the racism of Ron Paul, and many of his followers offer the same idiom.

     The ideology that Germans are victims of others and that the "lazy" Greeks are making it by "sponging off" European generosity is another example.  It is unbecoming of those most powerful in Europe and particularly the elite to be so on about the fiscal and alleged moral Schuld of others.   

    And “laziness” – that’s what the owners used to say about slaves.  It is blaming the victims.  It is as classically racist as you can get.

    As I warned in the first post, destroy Syriza and you will probably get Golden Dawn.  Many Germans wish to prevent the inflation which was instrumental in the rise of fascism – and are, counterproductively, imposing on Greece and will, in the upshot of this, do so elsewhere in Europe, a depression which will further the fanatic Right (Hollande's austerity, the opposite of a determined program to help the 6 million Algerian immigrants and other French workers, has already bred conditions very likely furthering the ascension of "National" Front...).  That terrible consequence is unintended by most of the supporters of this cruel, vindictive and counterproductive policy,  is sad.

         Germans have commendably put up holocaust memorials – there is nothing like this in terms of lynching in the American  South as Bryan Stevenson of the Equal Justice Initiative has rightly emphasized.  See here.  Germany has many intelligent, common good-sustaining welfare programs – no student debt for university training, compared to the vast post-1990 mortgages on the future of students - a sabotaging of democratic education by the banks - in the United States.  Many Germans are anti-racist.  I hope that these understandings, which go far in some respects, will finally be turned, before it is too late, to the ideology which has possessed its leaders…


     Uwe first wrote

       “For once, try to be fair. Matters a very complicated, and not as simple as you make them out to be. You have called our finance minister a racist. I know that he is no such thing. Spain, Portugal, Italy, Ireland, Slovakia, Slovenia are on the way to a better future, and so would be Greece if it hadn’t fallen to Syriza.   


       He then wrote:

“(1)    The first thing that must be distinguished is being in the Euro-zone and being in the EU.
(2)    Greece got into the Euro-zone (not into the EU) on the basis of a swindle – providing false data about its economy. The swindle was not perpetrated by the Greek people, of course[!!!], but by the government of Greece at the time when the Euro was established as a European currency.
(3)     Germany agreed to give up the “Deutsche Mark” (which was a sacrifice especially demanded by France for her agreeing to the reunification of Germany) on condition that all countries that have the Euro as their currency obey strict rules of economic stability. Germany insisted on these rules especially due to the very bad historic experiences with inflation in the twenties of the 20th century.
(4)    Greece, though it once agreed to stick to these rules, does not stick to these rules, and does not want to do anything that would, in the long run, help it stick to these rules.[no, Greece has imposed enormous austerity repeatedly on its people at the demand of the European Council; further reforms may be needed, but surely there has to be a change of direction…]
(5)    This situation does not only exasperate the German government, but also the governments of Britain, the Netherlands, Belgium, Luxemburg, Austria, Finland, of the Baltic countries, Slovenia, and also of Poland and Czechia (though these two EU-countries are not in the Euro-zone). There is exasperation also in France, Rumania, Bulgaria, Slovakia (and to some extent even in Spain, Portugal, Italy, Ireland). The exasperation has nothing to do with racism. Especially, it has nothing to do with German racism [you speak of governments, not of ordinary people...; that there are also some reasons which coincide with racism - bad economics and sometimes, a coincidence about racism? - does not make the characterization of ordinary Greeks less reprehensible]. You are overly impressed by some headlines in German newspapers that are on the trash level. Please consider what newspapers on the same level in Greece write about Germany and the German government. They turn Chancellor Merkel into a new Hitler. This is unconscionable. [if that is unconsciounable and surely it is, why is the bitterness about Greek “laziness” and the unwillingness to notice how unremittingly oppressive and what a failure repeated European demands have been, not so…]
(6)    The Euro has already been speculated against (mostly by US speculators [yes! like Goldman Sachs, emphasized above, who should be fought...]) and has already come under heavy pressure. If the Euro breaks down, due to the crisis of Greece, this would be a true catastrophe.
(7)    My suggestions would be that Greece leaves the Euro-zone but stays in the EU, and makes a new start.[this is a good suggestion except that it is unclear why ordinary Greeks should expect better treatment from an EU in which it remains than it has received in the Euro-zone]
(8)    The US forgave Germany much of its debt in 1953 – but the US  did so, of course, on condition that Germany become a truly reformed country (and a strong fortress against the Soviet threat).[No, the US gave the aid to produce hope in Europe and create conditions in which it could survive in addition to its imperial/Cold War purposes]. Today, the EU would forgive Greece much its debt, too – on condition that Greece become a truly reformed country [evidence?  Even the IMF can’t shake Germany and Europe into good sense…]. But so far there are no signs in this direction [again, repeated economic strangling of ordinary people – austerities – seems to be a sign of trying; where is the willingness to learn from experience, i.e. the intelligence in Europe?].        


  He then added:

          “American tourists are more disliked in the Caribean Islands and in Middle [Central] and South America than German tourists, and certainly more disliked than German tourists ever were by the people of Mallorca. [it is odd of Uwe to choose "ugly Americans" as a comparison set for Germans – not good company… - and especially with me, since I am very critical of the US in Latin America from the Monroe Doctrine on, inter alia; but I am afraid there are not enough American tourists in Mallorca to make his last point very likely – English perhaps in Menorca  though we have to ask Mallorquins and Menorquins…]

        There is a very basic rule of economics, one that even nobel prize winners cannot afford to ignore: “Do not spend more than you earn, except for short periods (or you will get into deep trouble). Do not spend more than you earn especially if you are economically weak.” [if one chooses maxims like this to deal with depression – whatever corruption there has been previously – you end up doing what the European Union, with cruelty and vindictiveness – has done and blaming the victims.  These maxims are classic for individuals, but false about countries in depressions, and stubborn insistence on them is destroying Europe…] This rule has been continuously transgressed by Greek governments for decades, always relying on the conviction that others will pay in the end. As has happened with other peoples that have (willy-nilly) accepted irresponsible, corrupt,  criminal governments, the Greek people is now paying (justly-unjustly) the price for the crimes of its rulers [now is Greece really a patch on the Third Reich after which the US bailed out Germany…?]. But the price is certainly not so high as in other, much more serious cases in world history.   

The New York Times
The Laziness Dogma
Paul Krugman
July 15, 2015

Americans work longer hours than their counterparts in just about every other wealthy country; we are known, among those who study such things, as the "no-vacation nation." According to a 2009 study, full-time U.S. workers put in almost 30 percent more hours over the course of a year than their German counterparts, largely because they had only half as many weeks of paid leave. Not surprisingly, work-life balance is a big problem for many people.

But Jeb Bush -- who is still attempting to justify his ludicrous claim that he can double our rate of economic growth -- says that Americans "need to work longer hours and through their productivity gain more income for their families." Bush's aides have tried to spin away his remark, claiming that he was only referring to workers trying to find full-time jobs who remain stuck in part-time employment. It's obvious from the context, however, that this wasn't what he was talking about. The real source of his remark was the "nation of takers" dogma that has taken over conservative circles in recent years -- the insistence that a large number of Americans, white as well as black, are choosing not to work, because they can live lives of leisure thanks to government programs.

You see this laziness dogma everywhere on the right. It was the hidden background to Mitt Romney's infamous 47 percent remark. It underlay the furious attacks on unemployment benefits at a time of mass unemployment and on food stamps when they provided a vital lifeline for tens of millions of Americans. It drives claims that many, if not most, workers receiving disability payments are malingerers -- "Over half of the people on disability are either anxious or their back hurts," says Sen. Rand Paul. [on many issues of interventions and civil liberties, intelligent, what Paul says about this issue is disgusting, the crudest projection of a man who so far, except about blacks in prison, just doesn't look or care...]

It all adds up to a vision of the world in which the biggest problem facing America is that we're too nice to fellow citizens facing hardship. And the appeal of this vision to conservatives is obvious: It gives them another reason to do what they want to do anyway, namely slash aid to the less fortunate while cutting taxes on the rich.

Given how attractive the right finds the image of laziness run wild, you wouldn't expect contrary evidence to make much, if any, dent in the dogma. Federal spending on "income security" -- food stamps, unemployment benefits, and pretty much everything else you might call "welfare" except Medicaid -- has shown no upward trend as a share of GDP; it surged during the Great Recession and its aftermath, but quickly dropped back to historical levels. Paul's numbers are all wrong, and more broadly disability claims have risen no more than you would expect, given the aging of the population. But no matter, an epidemic of laziness is their story and they're sticking with it.

Where does Jeb Bush fit into this story? Well, before his "longer hours" gaffe, he had professed himself a great admirer of the work of Charles Murray, a conservative social analyst most famous for his 1994 book "The Bell Curve," which claimed that blacks are genetically inferior to whites. What Bush seems to admire most, however, is a more recent book, "Coming Apart," which notes that over the past few decades, working-class white families have been changing in much the same way that African-American families changed in the 1950s and 1960s, with declining rates of marriage and labor force participation.

Some of us look at these changes and see them as consequences of an economy that no longer offers good jobs to ordinary workers. This happened to African-Americans first, as blue-collar jobs disappeared from inner cities, but has now become a much wider phenomenon thanks to soaring income inequality. Murray, however, sees the changes as the consequence of a mysterious decline in traditional values [an epochal blaming the victim explanation in the service of the predators who fund him...], enabled by government programs which mean that men no longer "need to work to survive." And Bush presumably shares that view.

The point is that Bush's clumsy call for longer work hours wasn't a mere verbal stumble. It was, instead, an indication that he stands firmly on the right side of the great divide over what working American families need.

There's now an effective consensus among Democrats that workers need more help, in the form of guaranteed health insurance, higher minimum wages, enhanced bargaining power, and more [Democrats need to be pushed from below to enact any of these things...]. Republicans, however, believe that American workers just aren't trying hard enough to improve their situation, and that the way to change that is to strip away the safety net while cutting taxes on wealthy "job creators." And while Jeb Bush may sometimes sound like a moderate, he's very much in line with the party consensus. If he makes it to the White House, the laziness dogma will rule public policy.


Yanks Varoufakis's marking up of The Euro Summit statement:

Euro Summit Statement Brussels, 12 July 2015
The Euro Summit stresses the crucial need to rebuild trust with the Greek authorities [i.e. the Greek government must introduce new stringent austerity directed at the weakest Greeks that have already suffered grossly] as a pre- requisite for a possible future agreement on a new ESM programme [i.e. for a new extend-and-pretend loan].

In this context, the ownership by the Greek authorities is key [i.e. the Syriza government must sign a declaration of having defected to the troika’s ‘logic’], and successful implementation should follow policy commitments.

A euro area Member State requesting financial assistance from the ESM is expected to address, wherever possible, a similar request to the IMF This is a precondition for the Eurogroup to agree on a new ESM programme. Therefore Greece will request continued IMF support (monitoring and financing) from March 2016 [i.e. Berlin continues to believe that the Commission cannot be trusted to ‘police’ Europe’s own ‘bailout’ programs].

Given the need to rebuild trust with Greece, the Euro Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures [i.e. Greece must subject itself to fiscal waterboarding, even before any financing is offered]. These measures, taken in full prior agreement with the Institutions, will include:

By 15 July

   the streamlining of the VAT system [i.e. making it more regressive, through rate rises that encourage more VAT evasion]and the broadening of the tax base to increase revenue [i.e. dealing a major blow at the only Greek growth industry – tourism].
   upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform programme [i.e. reducing the lowest of the low of pensions, while ignoring that the depletion of pension funds’ capital due to the 2012 troika-designed PSI and the ill effects of low employment & undeclared paid labour].
   the safeguarding of the full legal independence of ELSTAT [i.e. the troika demands complete control of the way Greece’s budget balance is computed, with a view to controlling fully the magnitude of austerity it imposes on the government.]
   full implementation of the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular by making the Fiscal Council operational before finalizing the MoU and introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions [i.e. the Greek government, which knows that the imposed fiscal targets will never be achieved under the imposed austerity, must commit to further, automated austerity as a result of the troika’s newest failures.]

By 22 July

   the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs [i.e. foreclosures, evictions and liquidation of thousands of homes and businesses who are not in a position to keep up with their mortgages/loans.]
   the transposition of the BRRD with support from the European Commission.
Immediately, and only subsequent to legal implementation of the first four above-mentioned measures as well as endorsement of all the commitments included in this document by the Greek Parliament, verified by the Institutions and the Eurogroup, may a decision to mandate the Institutions to negotiate a Memorandum of Understanding (MoU) be taken [i.e. The Syriza government must be humiliated to the extent that it is asked to impose harsh austerity upon itself as a first step towards requesting another toxic bailout loan, of the sort that Syriza became internationally famous for opposing.]

This decision would be taken subject to national procedures having been completed and if the preconditions of Article 13 of the ESM Treaty are met on the basis of the assessment referred to in Article 13.1. In order to form the basis for a successful conclusion of the MoU, the Greek offer of reform measures needs to be seriously strengthened to take into account the strongly deteriorated economic and fiscal position of the country during the last year [i.e. the Syriza government must accept the lie that it, and not the asphyxiation tactics of the creditors, caused the sharp economic deterioration of the past six months – the victim is being asked to take the blame by the on behalf of the villain.]

The Greek government needs to formally commit to strengthening their proposals [i.e. to make them more regressive and more inhuman] in a number of areas identified by the Institutions, with a satisfactory clear timetable for legislation and implementation, including structural benchmarks, milestones and quantitative benchmarks, to have clarity on the direction of policies over the medium-run. They notably need, in agreement with the Institutions, to:
   carry out ambitious pension reforms [i.e. cuts] and specify policies to fully compensate for the fiscal impact of the Constitutional Court ruling on the 2012 pension reform [i.e. cancel the Court’s decision in favour of pensioners] and to implement the zero deficit clause [i.e. cut by 85% the secondary pensions that the Syriza government fought tooth and nail to preserve over the past five months] or mutually agreeable alternative measures [i.e. find ‘equivalent’ victims] by October 2015;
   adopt more ambitious product market reforms with a clear timetable for implementation of all OECD toolkit I recommendations [i.e. the recommendations that the OECD has now renounced after having re-designed these reforms in collaboration with the Syriza government], including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, except over-the-counter pharmaceutical products, which will be implemented in a next step, as well as for the opening of macro-critical closed professions (e.g. ferry transportation). On the follow-up of the OECD toolkit-II, manufacturing needs to be included in the prior action;
   on energy markets, proceed with the privatisation of the electricity transmission network operator (ADMIE), unless replacement measures can be found that have equivalent effect on competition, as agreed by the Institutions [i.e. ADMIE will be sold off to specific foreign vested interests at the behest of the Institutions.]
   on labour markets, undertake rigorous reviews and modernisation of collective bargaining [i.e. to make sure that no collective bargaining is allowed], industrial action [i.e. that must be banned] and, in line with the relevant EU directive and best practice, collective dismissals [i.e. that should be allowed at the employers’ whim], along the timetable and the approach agreed with the Institutions [i.e. the Troika decides.]
On the basis of these reviews, labour market policies should be aligned with international and European best practices, and should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth [i.e. there should be no mechanisms that waged labour can use to extract better conditions from employers.]
   adopt the necessary steps to strengthen the financial sector, including decisive action on non-performing loans [i.e. a tsunami of foreclosures is ante portas] and measures to strengthen governance of the HFSF and the banks [i.e. the Greek people who maintain the HFSF and the banks will have precisely zero control over the HFSF and the banks.], in particular by eliminating any possibility for political interference especially in appointment processes. [i.e. except the political interference of the Troika.] On top of that, the Greek authorities shall take the following actions:
   to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means [i.e. an East German-like Treuhand is envisaged to sell off all public property but without the equivalent large investments that W. Germany put into E. Germany in compensation for the Treuhand disaster.] The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments [i.e. public property will be sold off and the pitiful sums will go toward servicing an un-serviceable debt – with precisely nothing left over for public or private investments.] This fund would be established in Greece and be managed by the Greek authorities under the supervision of the relevant European Institutions [i.e. it will be nominally in Greece but, just like the HFSF or the Bank of Greece, it will be controlled fully by the creditors.] In agreement with Institutions and building on best international practices, a legislative framework should be adopted to ensure transparent procedures and adequate asset sale pricing, according to OECD principles and standards on the management of State Owned Enterprises (SOEs) [i.e. the Troika will do what it likes.]
   in line with the Greek government ambitions, to modernise and significantly strengthen the Greek administration, and to put in place a programme, under the auspices of the European Commission, for capacity-building and de-politicizing the Greek administration [i.e. Turning Greece into a democracy-free zone modelled on Brussels, a form of supposedly technocratic government, which is politically toxic and macro-economically inept] A first proposal should be provided by 20 July after discussions with the Institutions. The Greek government commits to reduce further the costs of the Greek administration [i.e. to reduce the lowest wages while increasing a little the wages some of the Troika-friendly apparatchiks], in line with a schedule agreed with the Institutions.
   to fully normalize working methods with the Institutions, including the necessary work on the ground in Athens, to improve programme implementation and monitoring [i.e. The Troika strikes back and demands that the Greek government invite it to return to Athens as Conqueror – the Carthaginian Peace in all its glory.] The government needs to consult and agree with the Institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to Parliament [i.e. Greek Parliament must, again, after five months of short-lived independence, become an appendage of the Troika – passing translated legislation mechanistically.] The Euro Summit stresses again that implementation is key, and in that context welcomes the intention of the Greek authorities to request by 20 July support from the Institutions and Member States for technical assistance, and asks the European Commission to coordinate this support from Europe;
   With the exception of the humanitarian crisis bill, the Greek government will reexamine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme commitments or identify clear compensatory equivalents for the vested rights that were subsequently created [i.e. In addition to promising that it will no longer legislative autonomously, the Greek government will retrospectively annul all Bills it passed over the past five months.]

The above-listed commitments are minimum requirements to start the negotiations with the Greek authorities. However, the Euro Summit made it clear that the start of negotiations does not preclude any final possible agreement on a new ESM programme, which will have to be based on a decision on the whole package (including financing needs, debt sustainability and possible bridge financing) [i.e. self-flagellate, impose further austerity upon an economy crushed by austerity, and then we shall see whether the Eurogroup will grave you with another toxic, unsustainable loans.]

The Euro Summit takes note of the possible programme financing needs of between EUR 82 and 86bn, as assessed by the Institutions [i.e. the Eurogroup conjured up a huge number, well above what is necessary, in order to signal the debt restructuring is out and that debt bondage ad infinitum is the name of the game.] It invites the Institutions to explore possibilities to reduce the financing envelope, through an alternative fiscal path or higher privatisation proceeds [i.e. And, yes, it may possible that pigs will fly.] Restoring market access, which is an objective of any financial assistance programme, lowers the need to draw on the total financing envelope [i.e. which is something the creditors will do their utmost to avoid, e.g. by ensuring that Greece will only enter the ECB’s quantitative easing program in 2018, once quantitative easing is… over.]
The Euro Summit takes note of the urgent financing needs of Greece which underline the need for very swift progress in reaching a decision on a new MoU: these are estimated to amount to EUR 7bn by 20 July and an additional EUR 5bn by mid August [i.e. Extend and Pretend gets another spin.] The Euro Summit acknowledges the importance of ensuring that the Greek sovereign can clear its arrears to the IMF and to the Bank of Greece and honour its debt obligations in the coming weeks to create conditions which allow for an orderly conclusion of the negotiations. The risks of not concluding swiftly the negotiations remain fully with Greece [i.e. Once more, demanding that the victim takes all the blame in behalf of the villain.] The Euro Summit invites the Eurogroup to discuss these issues as a matter of urgency.

Given the acute challenges of the Greek financial sector, the total envelope of a possible new ESM programme would have to include the establishment of a buffer of EUR 10 to 25bn for the banking sector in order to address potential bank recapitalisation needs and resolution costs, of which EUR 10bn would be made available immediately in a segregated account at the ESM [i.e. the Troika admits that the 2013-14 recapitalisation of the banks, which would only need a top up of at most 10 billion, was insufficient – but, of course, blames it on… the Syriza government.]

The Euro Summit is aware that a rapid decision on a new programme is a condition to allow banks to reopen, thus avoiding an increase in the total financing envelope [i.e. The Troika closed Greece’s banks to force the Syriza government to capitulate and now cries out for their re-opening.] The ECB/SSM will conduct a comprehensive assessment after the summer. The overall buffer will cater for possible capital shortfalls following the comprehensive assessment after the legal framework is applied.

There are serious concerns regarding the sustainability of Greek debt [N.b. Really? Gosh!] This is due to the easing of policies during the last twelve months, which resulted in the recent deterioration in the domestic macroeconomic and financial environment [i.e. It is not the Extend and Pretend ‘bailout’ loans of 2010 and 2012 that, in conjunction with GDP-sapping austerity, caused the debt to scale immense heights – it was the prospect, and reality, of a government that criticized the the Extend and Pretend ‘bailout’ loans that… caused Debt’s Unustainability!]

The Euro Summit recalls that the euro area Member States have, throughout the last few years, adopted a remarkable set of measures supporting Greece’s debt sustainability, which have smoothed Greece’s debt servicing path and reduced costs significantly [i.e. The 1st & 2nd ‘bailout’ programs failed, the debt skyrocketing as it was always going to since the real purpose of the ‘bailout’ programs was to transfer banking losses to Europe’s taxpayers.] Against this background, in the context of a possible future ESM programme, and in line with the spirit of the Eurogroup statement of November 2012 [i.e. a promise of debt restructure to the previous Greek government was never kept by the creditors], the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review [i.e. Yet again, the Troika shall let the Greek government labour under un-payable debt and when, as a result, the program fails, poverty rises further and incomes collapse much more, then we may haircut some of the debt – as the Troika did in 2012.]

The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken [N.b. The Syriza government has been suggesting, since January, a moderate debt restructure, with no haircuts, maximizing the expected net present value of Greece’s repayments to creditors’ – which was rejected by the Troika because their aim was, simply, to humiliate Syriza.] Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and in a timely manner [N.b. Which can only happen after a substantial debt restructure.] Provided that all the necessary conditions contained in this document are fulfilled, the Eurogroup and ESM Board of Governors may, in accordance with Article 13.2 of the ESM Treaty, mandate the Institutions to negotiate a new ESM programme, if the preconditions of Article 13 of the ESM Treaty are met on the basis of the assessment referred to in Article 13.1. To help support growth and job creation in Greece (in the next 3-5 years) [N.b. Having already destroyed growth and jobs for the past five years…] the Commission will work closely with the Greek authorities to mobilise up to EUR 35bn (under various EU programmes) to fund investment and economic activity, including in SMEs [i.e. Will use the same order of magnitude of structural funds, plus some fantasy money, as were available in 2010-2014.] As an exceptional measure and given the unique situation of Greece the Commission will propose to increase the level of pre-financing by EUR 1bn to give an immediate boost to investment to be dealt with by the EU co-legislators [i.e. Of the headline 35 billion, consider 1 billion as real money.] The Investment Plan for Europe will also provide funding opportunities for Greece [i.e. the same plan that most Eurozone ministers of finance refer to as a phantom program].


Dr Schäuble’s Plan for Europe: Do Europeans approve? – English version of my article in Die Zeit
Posted on July 17, 2015 by yanisv

On 15th July 2015 Die Zeit published this piece. Here is the original English language version.
The reason five months of negotiations between Greece and Europe led to impasse is that Dr Schäuble was determined that they would.

By the time I attended my first Brussels meetings in early February, a powerful majority within the Eurogroup had already formed. Revolving around the earnest figure of Germany’s Minister of Finance, its mission was to block any deal building on the common ground between our freshly elected government and the rest of the Eurozone.[1]

Thus five months of intense negotiations never had a chance. Condemned to lead to impasse, their purpose was to pave the ground for what Dr Schäuble had decided was ‘optimal’ well before our government was even elected: That Greece should be eased out of the Eurozone in order to discipline member-states resisting his very specific plan for re-structuring the Eurozone. This is no theory of mine. How do I know Grexit is an important part of Dr Schäuble’s plan for Europe? Because he told me so!

I am writing this not as a Greek politician critical of the German press’ denigration of our sensible proposals, of Berlin’s refusal seriously to consider our moderate debt re-profiling plan, of the European Central Bank’s highly political decision to asphyxiate our government, of the Eurogroup’s decision to give the ECB the green light to shut down our banks. I am writing this as a European observing the unfolding of a particular Plan for Europe – Dr Schäuble’s Plan. And I am asking a simple question of Die Zeit’s informed readers:

Is this a Plan that you approve of? Is this Plan good for Europe?

Dr Schäuble’s Plan for the Eurozone

The avalanche of toxic bailouts that followed the Eurozone’s first financial crisis offers ample proof that the non-credible ‘no bailout clause’ was a terrible substitute for political union. Wolfgang Schäuble knows this and has made clear his plan to forge a closer union. “Ideally, Europe would be a political union”, he wrote in a joint article with Karl Lamers, the CDU’s former foreign affairs chief (Financial Times, 1st September 2014).

Dr Schäuble is right to advocate institutional changes that might provide the Eurozone with its missing political mechanisms. Not only because it is impossible otherwise to address the Eurozone’s current crisis but also for the purpose of preparing our monetary union for the next crisis. The question is: Is his specific plan a good one? Is it one that Europeans should want? How do its authors propose that it be implemented?

The Schäuble-Lamers Plan rests on two ideas: “Why not have a European budget commissioner” asked Schäuble and Lamers “with powers to reject national budgets if they do not correspond to the rules we jointly agreed?” “We also favour”, they added “a ‘Eurozone parliament’ comprising the MEPs of Eurozone countries to strengthen the democratic legitimacy of decisions affecting the single currency bloc.”

The first point to raise about the Schäuble-Lamers Plan is that it is at odds with any notion of democratic federalism. A federal democracy, like Germany, the United States or Australia, is founded on the sovereignty of its citizens as reflected in the positive power of their representatives to legislate what must be done on the sovereign people’s behalf.

In sharp contrast, the Schäuble-Lamers Plan envisages only negative powers: A Eurozonal budget overlord (possibly a glorified version of the Eurogroup’s President) equipped solely with negative, or veto, powers over national Parliaments. The problem with this is twofold. First, it would not help sufficiently to safeguard the Eurozone’s macro-economy. Secondly, it would violate basic principles of Western liberal democracy.

Consider events both prior to the eruption of the euro crisis, in 2010, and afterwards. Before the crisis, had Dr Schäuble’s fiscal overlord existed, she or he might have been able to veto the Greek government’s profligacy but would be in no position to do anything regarding the tsunami of loans flowing from the private banks of Frankfurt and Paris to the Periphery’s private banks.[2] Those capital outflows underpinned unsustainable debt that, unavoidably, got transferred back onto the public’s shoulders the moment financial markets imploded. Post-crisis, Dr Schäuble’s budget Leviathan would also be powerless, in the face of potential insolvency of several states caused by their bailing out (directly or indirectly) the private banks.

In short, the new high office envisioned by the Schäuble-Lamers Plan would have been impotent to prevent the causes of the crisis and to deal with its repercussions. Moreover, every time it did act, by vetoing a national budget, the new high office would be annulling the sovereignty of a European people without having replaced it by a higher-order sovereignty at a federal or supra-national level.
Dr Schäuble has been impressively consistent in his espousal of a political union that runs contrary to the basic principles of a democratic federation. In an article in Die Welt published on 15th June 1995, he dismissed the “academic debate” over whether Europe should be “…a federation or an alliance of states”. Was he right that there is no difference between a federation and an ‘alliance of states’? I submit that a failure to distinguish between the two constitutes a major threat to European democracy.

Forgotten prerequisites for a liberal democratic, multinational political union

One often forgotten fact about liberal democracies is that the legitimacy of its laws and constitution is determined not by its legal content but by politics. To claim, as Dr Schäuble did in 1995, and implied again in 2014, that it makes no difference whether the Eurozone is an alliance of sovereign states or a federal state is purposely to ignore that the latter can create political authority whereas the former cannot.

An ‘alliance of states’ can, of course, come to mutually beneficial arrangements against a common aggressor (e.g. in the context of a defensive military alliance), or in agreeing to common industry standards, or even effect a free trade zone. But, such an alliance of sovereign states can never legitimately create an overlord with the right to strike down a states’ sovereignty, since there is no collective, alliance-wide sovereignty from which to draw the necessary political authority to do so.
This is why the difference between a federation and an ‘alliance of states’ matters hugely. For while a federation replaces the sovereignty forfeited at the national or state level with a new-fangled sovereignty at the unitary, federal level, centralising power within an ‘alliance of states’ is, by definition, illegitimate, and lacks any sovereign body politic that can anoint it. Nor can any Euro Chamber of the European Parliament, itself lacking the power to legislate at will, legitimise the Budget Commissioner’s veto power over national Parliaments.

To put it slightly differently, small sovereign nations, e.g. Iceland, have choices to make within the broader constraints created for them by nature and by the rest of humanity. However limited these choices, Iceland’s body politic retains absolute authority to hold their elected officials accountable for the decisions they have reached within the nation’s exogenous constraints and to strike down every piece of legislation that it has decided upon in the past. In juxtaposition, the Eurozone’s finance ministers often return from Eurogroup meetings decrying the decisions that they have just signed up to, using the standard excuse that “it was the best we could negotiate within the Eurogroup”.

The euro crisis has expanded this lacuna at the centre of Europe hideously. An informal body, the Eurogroup, that keeps no minutes, abides by no written rules, and is answerable to precisely no one, is running the world’s largest macro-economy, with a Central Bank struggling to stay within vague rules that it creates as it goes along, and no body politic to provide the necessary bedrock of political legitimacy on which fiscal and monetary decisions may rest.

Will Dr Schäuble’s Plan remedy this indefensible system of governance? If anything, it would dress up the Eurogroup’s present ineffective macro-governance and political authoritarianism in a cloak of pseudo-legitimacy. The malignancies of the present ‘Alliance of States’ would be cast in stone and the dream of a democratic European federation would be pushed further into an uncertain future.

Dr Schäuble’s perilous strategy for implementing the Schäuble-Lamers Plan

Back in May, in the sidelines of yet another Eurogroup meeting, I had had the privilege of a fascinating conversation with Dr Schäuble. We talked extensively both about Greece and regarding the future of the Eurozone. Later on that day, the Eurogroup meeting’s agenda included an item on future institutional changes to bolster the Eurozone. In that conversation, it was abundantly clear that Dr Schäuble’s Plan was the axis around which the majority of finance ministers were revolving.
Though Grexit was not referred to directly in that Eurogroup meeting of nineteen ministers, plus the institutions’ leaders, veiled references were most certainly made to it. I heard a colleague say that member-states that cannot meet their commitments should not count on the Eurozone’s indivisibility, since reinforced discipline was of the essence. Some mentioned the importance of bestowing upon a permanent Eurogroup President the power to veto national budgets. Others discussed the need to convene a Euro Chamber of Parliamentarians to legitimise her or his authority. Echoes of Dr Schäuble’s Plan reverberated throughout the room.

Judging from that Eurogroup conversation, and from my discussions with Germany’s Finance Minister, Grexit features in Dr Schäuble’s Plan as a crucial move that would kickstart the process of its implementation. A controlled escalation of the long suffering Greeks’ pains, intensified by shut banks while ameliorated by some humanitarian aid, was foreshadowed as the harbinger of the New Eurozone. On the one hand, the fate of the prodigal Greeks would act as a morality tale for governments toying with the idea of challenging the existing ‘rules’ (e.g. Italy), or of resisting the transfer of national sovereignty over budgets to the Eurogroup (e.g. France). On the other hand, the prospect of (limited) fiscal transfers (e.g. a closer banking union and a common unemployment benefit pool) would offer the requisite carrot (that smaller nations craved).

Setting aside any moral or philosophical objections to the idea of forging a better union through controlled boosts in the suffering of a constituent member-state, several broader questions pose themselves urgently:

   Are the means fit for the ends?
   Is the abrogation of the Eurozone’s constitutional indivisibility a safe means of securing its future as a realm of shared prosperity?
   Will the ritual sacrifice of a member-state help bring Europeans closer together?
   Does the argument that elections cannot change anything in indebted member-states inspire trust in Europe’s institutions?
   Or might it have the precise opposite effect, as fear and loathing become established parts of Europe’s intercourse?

Conclusion: Europe at a crossroads

The Eurozone’s faulty foundations revealed themselves first in Greece, before the crisis spread elsewhere. Five years later, Greece is again in the limelight as Germany’s sole surviving statesman from the era that forged the euro, Dr Wolfgang Schäuble, has a plan to refurbish Europe’s monetary union that involves jettisoning Greece on the excuse that the Greek government has no ‘credible’ reforms on offer.

The reality is that a Eurogroup sold to Dr Schäuble’s Plan, and strategy, never had any serious intention to strike a New Deal with Greece reflecting the common interests of creditors and of a nation whose income had been crushed, and whose society was fragmented, as a result of a terribly designed ‘Program’. Official Europe’s insistence that this failed ‘Program’ be adopted by our new government ‘or else’ was nothing but the trigger for the implementation of Dr Schäuble’s Plan.

It is quite telling that, the moment negotiations collapsed, our government’s argument that Greece’s debt had to be restructured as part of any viable agreement was, belatedly, acknowledged. The International Monetary Fund was the first institution to do so. Remarkably Dr Schäuble himself also acknowledged that debt relief was needed but hastened to add that it was politically “impossible”. What I am sure he really meant was that it was undesirable, to him, because his aim is to justify a Grexit that triggers the implementation of his Plan for Europe.

Perhaps it is true that, as a Greek and a protagonist in the past five months of negotiations, my assessment of the Schäuble-Lamers Plan, and of their chosen means, is too biased to matter in Germany.

Germany has been a loyal European ‘citizen’ and the German people, to their credit, have always yearned to embed their nation-state, to lose themselves in an important sense, within a united Europe. So, setting aside my views on the matter, the question is this:

What do you, dear reader, think of it? Is Dr Schäuble’s Plan consistent with your dream of a democratic Europe? Or will its implementation, beginning with the treatment of Greece as something between a pariah state and a sacrificial lamb, spark off a never-ending feedback between economic instability and the authoritarianism that feeds off it?

[1] “Elections can change nothing” and “It is the MoU or nothing”, were typical of the utterances that he greeted my first intervention at the Eurogroup with.

[2] Moreover, if the Greek state had been barred from borrowing by Dr Schäuble’s budget commissioner, Greek debt would still have piled up via the private banks – as it did in Ireland and Spain.

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