Welcome to plutonomy

The lie that the Greek economy needed to be ‘bailed-out’ camouflages a vicious class war to keep capitalism afloat. Ravaging the Third World is no longer enough; Europeans must be returned to serfdom. English law is used to strip the Greeks of sovereignty, democracy and human rights, to force them into bondage and reduce their country to real estate for speculators. Greece is the looking glass for the cripples of the Eurozone but Britons should pay attention.

There is a cultivated delusion that the euro was created to advance a common goal of peace and prosperity and heal the trauma of the old slaughterhouse. In reality ‘monetary union’ provides a framework for the neo-mercantilist exploitation of poor countries by the rich. The euro is a straitjacket says anti-debt campaigner Eric Toussaint.

When the euro was created, the German currency was undervalued (as requested by Germany) and the currencies of weaker countries were overvalued. That made German exports more competitive in the markets of other European countries, and the weakest, such as Greece, Portugal, Spain, and the Central and Eastern European countries were the hardest hit.

Development options in these ‘crisis’ nations were further restricted by their inability to create and spend money into their economies. Their power to issue currency had been relinquished to the European Central Bank which is legally forbidden from directly financing Member States who are in turn  prohibited from helping each other.They were chained to the market and forced to borrow from private banks.

Meanwhile a conspiracy of top US Treasury officials and bankers smashed controls on banking in all 156 member states of the World Trade Organisation – bar Brazil. They prised open national markets allowing casino style banking, the derivatives trade and the US sub-prime cancer to go global. But it would be a mistake to regard the Great Recession which followed as the product of Wall Street folly and greed. Capitalism is condemned to falling profitability and shrinking demand. Frantic speculation, financialisation and the effort to make money out of money, is primarily a desperate and hopeless response. The Eurozone Profiteers – a Corpwatch investigation (based on a case study of six European banks) found:

The European banking crisis was not just a series of unfortunate mistakes, but a result of the deliberate policies of politicians in Brussels, Paris, and Bonn who, in the late 1990s, went out of their way to encourage big banks in these countries to compete internationally.  First, Germany and France—which had traditionally supported their banks’ lending to local and regional businesses—withdrew state guarantees, and privatized their banking sectors. Then, in 1997 the successful conclusion of the World Trade Organization’s deal opened up trade in financial services, and major European banks became aware that the big Anglo-American banks were snapping at their heels and that they needed to be more competitive. These two crucial motivating factors coincided with the introduction of the euro in 1999-2002. So these banks—all of which had solid credit ratings but little prospect of expanding at home—used their easy access to money to try to win new business by lending to the poorer countries at the periphery of the E.U. who suddenly were blessed with historically low interest rates and borrowing costs. After struggling with high interest rates for decades as well as high unemployment, the poorest countries of the EuroZone jumped at the cheap and easy loans that came their way.

Before the Great Recession ended the party in 2009, French and German banks had profitably lent over a trillion euros to Greece, Ireland, Portugal, Italy and Spain. Now they risked substantial losses – and bankruptcy. The exposure of foreign (essentially EU) banks in Greece amounted to €140 billion. French banks held €60 billion, German banks €35 billion. Critically, €80 billion was tied to insecure private debt (which had soared 74 percent in less than two decades). Already a year earlier the Greek government had provided a €28 billion ‘aid’ package for Greek banks.

The Debt Truth Committee established by the Greek parliament describes how this banking crisis was cynically conjured into a sovereign-debt emergency. To save the banks the government of George Papandreou resorted to economic sabotage. It created the illusion that Greece faced “exceptional occurrences beyond its control’ so that the EU could bestow the poisoned chalice of a loan not otherwise available to member states. Spending cuts, austerity measures and dire economic forecasts were used to exaggerate economic woe. Predictably interest rates rose making it punitively expensive to roll-over expiring Greek bonds. To turn the dagger the Greek public deficit and debt were retrospectively inflated for 2006 to 2009.

In total, it is estimated that as a result of these technically unsupported adjustments, the budget deficit for 2009 was increased by an estimated 6 to 8 percentage points of GDP. Likewise, public debt was increased by a total of €28 billion.We consider the falsification of statistical data as directly related to the dramatization of the budget and public debt situation. This was done in order to convince public opinion in Greece and Europe to support the bail-out of the Greek economy in 2010 with all its catastrophic conditionalities for the Greek population. The European parliaments voted on the “rescue” of Greece based on falsified statistical data. The banking crisis was underestimated by an overestimation of the public sector economic problems.

The growth of Greek public debt was not due to rising state expenditure. This remained lower than that of other Eurozone countries. Two thirds of the debt accumulated between 1980 and 2007 is accounted for by the snowball effect of high interest rates. Extravagant defence spending added €40 billion to the debt created from 1995 to 2009. Tax evasion, non-payment of employer contributions to social security and illicit capital outflows did the rest of the damage. All of this is attributable to corruption and fraud in high places.

Alternatives to cover the financing gaps of the 2010 budget – including the cessation of payments and the cancellation of debt – were effectively pre-empted by the government. The IMF provided an entirely false projection of the impact that austerity  -demanded as a condition of any loan – would have on the Greek economy. It forecast a decline of 1.5 percent in GDP between 2009 and 2014 against an actual 22 percent slump. This was no honest mistake. Reality was manipulated so that the IMF could endorse the sustainability of the ‘rescue’ program. The Debt Truth Committee notes:

This substantial divergence was perfectly predictable, even inside the IMF. Many executive directors expressed their deep scepticism on these “overly benign” economic projections at the board meeting on 9th May 2010. They raised “considerable doubts about the feasibility of the program”, which could prove to be “ill-conceived and ultimately unsustainable”: “It is very  likely  that  Greece  might  end  up  worse  off  after implementing this program” which is only “a bailout of Greece’s private-sector bondholders, mainly European financial institutions”.The final decision was nevertheless pushed forward by the US and most European directors arguing that “the striking thing is that the [Greek] private sector is fully behind the program” and “debt restructuring has been ruled out by the Greek authorities themselves”.

Duplicity was also an essential ingredient in implementing the loan agreements to the satisfaction of private creditors. Various ‘mechanisms’ were used by the Troika – the technocrats of the European Central Bank, the European Council and the IMF- to extract payment and exact tribute. These ‘mechanisms’ have been painstakingly analysed by the Debt Truth Committee.

 The justification for these agreements was to address the debt crisis, by making financial support conditional on the implementation of the Memorandums’ measures. In reality, they provided the tools for the generation of a great amount of debts towards bilateral creditors and EFSF (European Financial Stability Fund) deepening the debt crisis. The Memorandum’s  measures  destructively  affected Greece’s economy and peoples’ life. The analysis of the complex texts of the agreements reveal the use of mechanisms that, rather than support Greece, allowed for the majority of borrowed funds to be transferred to financial institutions, whilst at the same time, also accelerated the privatization process,  through the  use of financial instruments. Greece had to pay all manner of abusive costs for this process.

The result of the “Greek rescue” (2010-2014) was the largest increase in sovereign debt  – from €299.69 billion (129.7% of GDP) to €317.94 billion (177.1% of GDP). The two support programs (€110 billion in 2010 and €130 billion in 2012) were simply a colossal bail-out of private creditors. Extortion was armour-plated by the inclusion of prejudicial clauses in the agreements.

If any one or more of the provisions contained in this Agreement should be or become fully or in part invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not be affected or impaired thereby. Provisions which are fully or in part invalid, illegal or unenforceable shall be interpreted and thus implemented according to the spirit and purpose of this Agreement.

And again.

The Borrower hereby irrevocably and unconditionally waives all immunity to which it is or may become entitled, in respect of itself or its assets, from legal proceedings in relation to this Agreement, including, without limitation, immunity from suit, judgment or other order, from attachment, arrest or injunction prior to judgment, and from execution and enforcement against its assets to the extent not prohibited by mandatory law”

To obstruct any attempt to challenge such abusive clauses – and to bypass the Greek Constitution – English law was chosen as the governing law for the loan agreements. The assumption is that a tribunal mandated to apply only English law would restrict itself to a strict interpretation of the law of contract.  English law provides little protection for social and collective rights and Britain’s  Human Rights Act is subject to territorial limitations. Despite this the Truth Debt Committee says it is still possible to argue the agreements are unfair.

Even if English law were to be applied, the terms of the agreement would be deemed largely repugnant. For one thing, it has been held that as far as possible, the common law must be developed in a way that gives effect to the ECHR or, as it has been put, to ‘weave the Convention rights into the principles of the common law and of equity’. Fundamental provisions of the ECHR have evidently been breached here. Secondly, under the common law, credit agreements that are highly prejudicial in favour of the lender, further imposing unconscionable conditions that interfere with the borrower’s personal sphere and life choices are contrary to public policy. Finally English courts have in practice accepted that good faith is part of English law through EU law and principles…the  bad faith of the parties with which they intended to bypass the Greek constitution and the country’s international law obligations, as well as the unconscionable character of the agreements, render them invalid under English law.

The Committee found that the reforms imposed under the agreements undermined the right to work.

Labour market reforms imposed by the Memoranda  severely undermine the realization of the right to work, causing grave institutional breakdown. Destroying the system of collective bargaining agreements and labour arbitration resurrected the individual employment agreement as prime determining factor of employment conditions.Successive wage cuts and tax hikes brought massive lay-offs, erosion of labour standards, increased job insecurity, and widespread precariousness, with  over-flexible, lowly-paid  jobs  where  women and young predominate. The minimum wage was pushed below poverty thresholds. Unemployment exploded from 7.3% to 27.9%  (2008-2013). Public sector employment decreased from 942,625 to 675,530 between 2009-2013, with pay shrinking by over 25%. Private sector wages fell at least 15% till 2013. Youth unemployment reached 64.9% in May 2013.

Rights to health, education, social security, housing and self-determination also disappeared, the last through the wholesale privatisation of state property. The impact on Greek society has been devastating.

Currently 23.1% of the population live below the poverty line, with relative poverty rate almost doubling in 2009-2012, and 63.3% are impoverished as a consequence of austerity policies alone.Severe material deprivation increased from 11% to 21.5% of the population in 2009-2014. Over 34% of children are at risk of poverty or social exclusion in 2013. The unequal impact of the measures dramatically worsened inequality, with the poorest 10% of the population losing an alarming 56.5% of their income

Despite this horrifying portent of the future, Britain’s major political parties are committed to austerity, and the government to the repeal of the Human Rights Act. The latter would erode at least one plank of the Greek argument under English law. It would also make it more difficult to challenge the advance of austerity in Britain on human rights’ grounds. The obsession with replacing the Act is only explicable in this context of attrition.

Conditionalities attached to the Greek loan agreements were intended in the first instance to divert every available euro to the coffers of private creditors. No mercy was shown as disease spread, mental health problems ballooned and the suicide rate rose to unprecedented levels. But like austerity in Britain the template is neoliberalism, the privatisation of common resources and the commodification of all human values. As the notorious Citigroup ‘Plutonomy Memos’ revealed, in such a market kingdom inefficient consumers are redundant.

Debt and debt forgiveness have been part of the fabric of economic life for millennia. Anthropologist David Graeber observes:

Historically, as we have seen, ages of virtual, credit money have also involved creating some sort of overarching institutions – Mesopotamian sacred kingship, Mosaic jubilees, Sharia or Canon Law – that place some sort of controls on the potentially catastrophic social consequences of debt. Almost invariably, they involve institutions (usually not strictly coincident to the state, usually larger) to protect debtors. So far the movement this time has been the other way around: starting with the ’80s we have begun to see the creation of the first effective planetary administrative system, operating through the IMF, World Bank, corporations and other financial institutions, largely in order to protect the interests of creditors.

This is the system – backed by violence – that forces Greeks to service odious, illegal, illegitimate and unsustainable debts. The acceptance of a third bail-out by the Syriza government – under even harsher conditions – is treason.


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