Can Europe escape the debt trap? Yes – and here’s how

Today activists in Ireland are following Greece’s example by launching a public audit of the country’s debt to establish its legitimacy

Financial markets have successfully demanded the imposition of severe austerity on the periphery of the eurozone – Greece, Ireland and Portugal – to deal with public debt. The markets have also raised concerns about it in the United States, Britain and Japan, clamouring for austerity. Public debt seems to operate like a mask behind which lies a shadowy world of creditors to whose upkeep entire economies are mortgaged.

Can that mask be lifted? It has been in other countries, through the mechanism of a debt audit. Initiatives like this have happened in Brazil, Ecuador and elsewhere in order to untangle the web of secrecy around the debt and work out who lent what to whom, when and for what purpose. Typically, there is an expectation that some, at least, of the debt, will be found to be “illegitimate”, and can therefore be repudiated.

Ecuador provides a striking example. In 2007 President Correa established a debt audit commission, which reported in 2008 that a portion of the country’s debt was indeed illegitimate and had done “incalculable damage” to Ecuador’s people and environment. The price of illegitimate debt subsequently collapsed in the open markets, and Ecuador got rid of it easily.

Despite predictions of economic disaster the country registered 3.7% economic growth in 2010, and the forecast is for growth in excess of 5% in 2011. The salience of the Ecuadorian example for current debates in Europe is obvious.

This is why a campaign for a Greek audit commission was launched in March with the support of civil organisations, trade unions and political parties. One of its greatest successes has been the documentary Debtocracy, which has been watched by a million people. In a country that feels humiliated and dejected, the campaign has offered a modicum of hope. Such has been its popular appeal that, in a singularly ill-judged remark, a minister denounced it for equating Greece with “Latin American banana republics”.

In an example of European solidarity several bodies, including Action from Ireland, the Irish Debt and Development Coalition and the trade union Unite, are, on 4 May, launching a debt audit in Ireland. Academics with expertise in economics, finance, law and related disciplines are being commissioned to trawl through the public accounts to tackle several questions. To whom is the bank debt owed? When was it contracted? Specifically, was it before or after the government’s September 2008 bank guarantee was issued? When is the debt due for repayment? How much has already been repaid, and to whom?

Meanwhile the Greek campaign is taking steps to start its own investigations. What is the legal status of debt contracted with the helpful services of Goldman Sachs that presented public borrowing as a derivative transaction? How legal is debt to finance further arms procurement in one of the most militarised countries in the world? Above all, how legitimate is the extraordinary loan of €110bn by the European Union and the International Monetary Fund that it is claimed is needed to “bail out” the country – at the price of ferocious public spending austerity? The loan did not follow the normal procedure for contracting public debt, including approval by Greece’s parliament.

These preliminary investigations will establish facts to further the demand for a full democratic audit and a sovereign response to debt. What is ultimately necessary is full access to debt data, the power to examine witnesses, and even the ability to examine bank accounts. On this basis properly constituted audit commissions could make credible recommendations on debt that is illegitimate or simply unsustainable. The sovereign state could then take appropriate action, including repudiation of debt and cessation of payments.

The campaigns for debt audits will also have an important educational function to perform across Europe. People in core countries, including Germany, seem not to have yet grasped that the loans provided by the EU and the IMF are not bailing out feckless Mediterraneans and Celts. In fact they are bailing out banks that engaged in profitable and irresponsible lending throughout the 2000s. And that will be a theme of a gathering of activists in Athens on 6-8 May. Participants from across the world will trade ideas on how to tackle European public debt. After more than three years of crisis, grassroots movements are at last emerging to oppose the grip of debt, austerity and neoliberalism across Europe.

Costas Lapavitsas and Andy Storey
guardian.co.uk, Wednesday 4 May 2011 14.00 BST
http://www.guardian.co.uk/commentisfree/2011/may/04/european-debt-crisis-audit-commission

Debt Audit Commission

Brazilian national, Maria Lucia Fatoreli has taken part in the world’s first audit commission that brought significant change in Equador.
Athens International Radio (www.air1044fm.gr) and journalist Helen Skopis, spoke to her to find out what prompted the introduction of this initiave and the impact it has had worldwide.

GREEK POLICE THREATEN TO ARREST TROIKA AS BUDGET ROW ESCALATES

by Jane Burgermeister

*GREEK POLICE SAY THEY WILL ARREST TROIKA FOR JEOPARDISING SURVIVAL OF GREEK PEOPLE AND UNDERMINING DEMOCRACY

*WILDCAT STRIKES AND SIT INS IN PROTEST AT NEW AUSTERITY MEASURES

*EU TRIES TO COMPEL ALL POLITICAL PARTIES TO SIGN UP BEFORE ELECTIONS: END OF DEMOCRACY

The Greek police force is seeking an arrest warrant for the “Troika” officials belonging to the European Commission, the European Central Bank and the International Monetary Fund.

The Greek police federation sent a letter to ECB, the IMF and the EC, warning them that the arrest of the Troika could be imminent in a letter, which was also published in the Greek press.

http://www.reuters.com/article/2012/02/10/us-greece-police-idUSTRE8190UC20120210

http://www.welt.de/politik/article13861468/Griechen-Polizei-droht-EU-Gesandten-mit-Verhaftung.html

The police accuse the Troika of undermining democracy, jeopardizing the survival of the Greek people and looting the country.

No doubt there is one honest judge left who will be ready to sign the arrest warrant if the police really need one. After all, police just nab burglars and put them in jail even without a warrant.

This blogger has argued all along that the Greek penal euro bailout is a gigantic crime scene and those individual who are responsible should be held to account.

The Troika are key figures in the EU bankster bailout scam, but the investigation needs to be widened. European Arrest Warrants should be issued for the German Chancellor Angela Merkel, the French President Nicolas Sarkozy as well as the German Finance Minister Wolfgang Schäuble, among others.

Firstly, Merkel played a crucial role in burying the recommendation by German economists for an orderly insolvency mechanism to be introduced in 2010, leaving Greece facing the prospect of a chaotic default inside the eurozone if it does not agree to paying penal interest rates to foreign creditors on a staggering and growing national debt.

Secondly, Merkel bullied Greek Prime Minister Andreas Papandreous into dropping a referendum on the euro bailout scam according to Bild newspaper, which celebrated her as “Merkules”.

“The open threats worked,” writes Bild, brazenly admitting the thuggery of Merkel. How long are people in Europe going to tolerate this mafia in power?

http://www.bild.de/politik/ausland/griechenland-krise/griechen-kuschen-vor-merkel-20811288.bild.html

German citizens, who are also victims of the same bankster bailout scam – plans are afoot to raise the pension age to 75 or 80 -, should do their civic duty and support the arrest of this clique before Germans suffer the same fate and austerity cuts as the euro Ponzi scheme runs its course.

The Greek police threat to arrest the Troika comes as people are rising up against a new wave of austerity cuts.

More legal action should be launched by Greece to sue the EU, IMF and ECB for compensation.

In 2010 already this blog explained that the austerity measures being implemented by the Troika would lead to a death debt spiral. Greece is sinking deeper and deeper in debt precisely because it is doing what the Troika says. The mainstream media turn cause and effect on their head and claim Greece is in trouble because it is NOT carrying out austerity measures.

Greece is in a death spiral, Ambrose Evans-Pritchard wrote in the Telegraph yesterday.

“Another normal day at the Hellenic Statistical Authority.

We learn that:

Greece’s manufacturing output contracted by 15.5pc in December from a year earlier.

Industrial output fell 11.3pc, compared to minus 7.8pc in November.

Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.

I have little further to add. This is what a death spiral looks like,” he writes.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014720/greek-death-spiral-accelerates/

“It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you,” he writes.

This is what happens

1) if you join a fixed exchange system at a rate which makes your domestic industry uncompetitive

2) then are allowed to run up a huge current account deficit in stealth by courtesy of the ECB and Bundesbank using the Target 2 payments system,

3) then have statisticians in the EU and Greek exaggerate your national debt to declare a national souvereign debt crisis,

4) and then have a brutal corset of interest payments to the banksters imposed on you, and also simultaneous monetary and fiscal contraction.

108 Pasok MPs have now called for an investigation into the statistics fraud.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_15_09/02/2012_427044

What this looting means for ordinary people in Greece is explained by Daniel Neun.

http://www.radio-utopie.de/2012/02/09/der-weltfinanzkrieg-iii-griechenland-im-wurgegriff-der-menschenschinder-geostrategische-hintergrunde/

500,000 people in Greece, in the meantime, have no more funds at all. They can’t claim support from the state and they can’t get a job.

15,000 people are already homeless.

The unemployment rate among people under 25 is 50%.

Children are collapsing in schools due to a lack of nourishment.

250,000 people depend on the church and charity for a daily meal.

The Orthodox church feeds 30,000 people a day.

Half the apartment blocks in the poor districts of Athens were not heated this winter.

Half a million people have gone to eke out a living in the country.

One million people are threatened with having their electricity cut off because they cannot pay the property tax which is being collected by electricity companies.

Every fifth business in Athens has closed down.

And the new round of cuts has not even begun to take effect.

Minimum wages will be cut by 22%.

The wages of state employees to be frozen.

150,000 officials are to be axed by 2012.

Power, infrastructure and real estate is to be sold off to foreign companies for a song under a special trust agency.

The banks are to receive 40 billion euros as recapitalization.

http://www.radio-utopie.de/2012/02/10/griechenland-ticker-tag-1-im-sozialen-aufstand/

To accelerate the looting of Greece, Merkel and Schäuble proposed setting up a “Gauleiter” or budget overseer with control over the entire tax revenues of the country. Another proposal is to set up a special account to service the foreign creditors which the Greek government has no access to.

A German lawmaker has even called for Greece to be given a new name.

Georgios „Jorgo“ Chatzimarkakis said that the country needs to be given a new constitution – perhaps one enshrining Angela Merkel as the new Queen.

http://www.focus.de/politik/ausland/europapolitiker-chatzimarkakis-fdp-mann-fordert-umbenennung-griechenlands_aid_710678.html

Is it any wonder that the country is now on the brink of a revolution with wildcat strikes and the occupation of ministry buildings?

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_10/02/2012_427106

Only in the studios of ARD Globalist puppet Thomas Gottschalk do the voice of the Greek people not count. Gottschalk portrays the Greeks as children who need supervision of their economy because they can’t manage it themselves by adults like much of the rest of the mainstream German media, including Bild newspaper.

Germans should run the Greek economy because Greeks are too infantile to manage it. Democracy has no more role to pay. That is the patronizing message of Gottschalk crammed into the first week of his new early evening propaganda show.

The Telegraph calls the comments of far-right party leader, George Karatzaferis inflammatory, also strongly suggesting an independent political view has no more place in the new Greek bankster colony.

“The Greek far-right party leader, George Karatzaferis, said he could not vote in favour of the €130bn proposed bailout package proposed for the country.

In inflammatory comments made at a press conference, Mr Karatzaferis also said the IMF mission chief for Greece should be persona non grata in the country.

I explained to the other political leaders that I cannot vote for this loan agreement. If we want things to go forward, Poul Thomsen must be declared persona non grata for Greece.

We are not going to vote. Humiliation was imposed on us. I do not tolerate this. And I do not allow it, no matter how hungry I might be.

Ouch.”

http://www.telegraph.co.uk/finance/debt-crisis-live/9073437/Debt-crisis-live.html

The Greek parliament is expected to vote through the EU package this Sunday as it has voted through all the other austerity cuts so far.

However, even Greek Finance Minister Evangelos Venizelos has been forced to recognise that the country is at a turning point and must make a decision about whether to chose the euro or the Drachma. Especially if the Drachma is introduced as public money printed by the government with no interest attached, a return to the Drachma should prove to be the start of a recovery for Greece, attracting tourists, making its industry competitive again and allowing liquidity to flow through the economy.

http://birdflu666.wordpress.com/2012/02/10/greek-police-threaten-to-arrest-troika-as-budget-row-escalates/

Keiser Report: Troika Tanks & Junta Bots (E187)

Iceland fared better than us by letting its banks fail

By Thomas Molloy

ICELAND pursued better policies than Ireland or Latvia when the three countries’ economies collapsed in 2007 because the Reykjavik government allowed banks to fail, according to a new report by the influential Bruegel think tank.

The report by economist Zsolt Darvas looked at the response of the three small and open economies. The three countries all initially allowed the credit boom to fuel property speculation and investment imbalances. As the crisis began, property prices fell, banks went bust and all three countries had to turn to the International Monetary Fund (IMF) for help.

The governments then introduced fiscal austerity programmes, structural reforms and reforms of the banking system. These similarities allow economists to compare the different responses in an attempt to determine what worked best.

“The experience with the collapse of the gigantic Icelandic banking system suggests that letting banks fail when they had a faulty business model can be the right choice,” the report notes.

“The banking sector suffered meltdown in Iceland and foreign lenders to banks suffered massive losses. Yet, the crisis impact was much more benign in Iceland than Latvia.”

Mr Darvas notes that it was the last Fianna Fail-led government’s decision to issue a bank guarantee to Irish-based banks [that led to the crisis deepening] but adds that Ireland then came under pressure from the European Central Bank to keep the guarantee in place.

“While socialising bank losses in Ireland was initially an Irish decision, later, when the Irish government wanted to change course, European institutions barred it primarily in the name of financial stability in the euro area and beyond,” he writes.

The report is sceptical that a collapse in the Irish banking sector would have harmed the rest of the eurozone.

“Little is known about what would have happened to financial stability outside Ireland in the event of letting Irish banks default, but one thing is clear: other countries have benefited from the Irish socialisation of a large share of bank losses, which has significantly contributed to the explosion of Irish public debt,” it adds.

Regulation

The only way to avoid potential cross-country spillovers of national bank collapses would be to centralise the regulation and supervision of European banking along with the system for bailing out insolvent lenders, the report concludes.

“There is a strong case for a banking federation,” states the report.

Iceland has suffered least among the three countries. Latvia has suffered most since the economic crisis began — seeing a bigger collapse in output than any other country in the world, the report notes.

Ireland has endured the fifth worst economic contraction, while Iceland’s was the seventh worst. Latvia has also suffered the worst declines in employment. Iceland came out from the crisis with the smallest drop in employment (-5pc).

The good news for all three countries is that recovery has begun in each economy. Latvia is seeing the fastest improvements, although this has not yet generated many jobs. Both Latvia and Iceland have returned to the bond markets.

- Thomas Molloy

Irish Independent

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