EU/IMF/Bankers fight democracy in Greece

     For one action to be taken in solidarity with the Greek people, see here.


      The election of Syriza was a great sign of hope for the Greek people and ordinary people everywhere.  The European/American bankers are enforcing an austerity program in Greece, producing shocking youth unemployment – 65% – and driving many to suicide.  Gnawing at Syriza, they seek at this moment to steal pensions.
     The banks have long made “Social Democrats” their tools, as for example Hollande in France…Driving people to despair, they have created preconditions for the triumph of the extreme right.
    Paul Krugman, an economist who writes intelligently (almost alone) in the commercial press, puts it forcefully in the New York Times below:
     “It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.” 
        The bureaucrats of the EU, pressed on by Germany and the IMF, are not technocrats, but cruel, anti-democratic fools…
     The Syriza government, having buckled to EU pressure, has nonetheless refused to accept even more austerity and preconditions which try to force it from power.
     So there is, among poor people in Greece, a run on the banks, and a forced limit of a 60 euros ($67) per person withdrawal.
    And Prime Minister Alexis Tsipras has called for a referendum, an appeal to democracy against the banks/EU (the corruption of the European “Community” and its leaders in opposing democracy, toward Syriza originally and towards this referendum, is unspeakable…)
    There is a lot of media talk about the absence of “trust” between the EU and Syriza.  What the EU has imposed on ordinary Greeks, as Joseph Stiglitz, another fine economist, also points out below, is a horror.  For the Syriza leadership had worked with the EU, even accepting existing austerity, but trying to limit further abridgment of a common good at home.  
   The grotesque cynicism/racism of Wolfgang Schauble, the German finance minister as well as the German commercial press toward Greece, reported in a Times’ column by Alexander Sorkin yesterday, is startling:
     “To Mr. Geithner’s dismay, however, Mr. Schäuble took the conversation in a different direction. ‘He told me there were many in Europe who still thought kicking the Greeks out of the eurozone was a plausible — even desirable — strategy,’ Mr. Geithner later recounted in his memoir, “Stress Test: Reflections on Financial Crises.” ‘The idea was that with Greece out, Germany would be more likely to provide the financial support the eurozone needed because the German people would no longer perceive aid to Europe as a bailout for the Greeks,’ he says in the memoir.
        ‘At the same time, a Grexit would be traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union,’ Mr. Geithner wrote. ‘The argument was that letting Greece burn would make it easier to build a stronger Europe [sic…] with a more credible firewall.'”  See Andrew Ross Sorkin “The Hard Line on Greece'” here.
     The EU/bankers are happy to drive Greece from the euro rather than do something a) intelligent, b) non-predatory, c) humane.
  If this policy is Europe, Europe will die (the Right will come to power pretty shortly…)
      Given the power of banks over democracy and to harm ordinary people, GREXIT – Greece leaving the European Union – looks better for the Greek people by the hour.
       The Greeks could heal their economy as Iceland did…
      But the irrational general economic terms of the European Union – no tolerance for any country to pursue an independent fiscal or monetary policy to get out of economic crisis – is destroying the benefits of cooperation (mainly: heading off predatory nationalisms, ability to seek education throughout the Union,  easy travel, acceptance of migration internally to a considerable extent, European funding of preservation of art, for example the New Acropolis Museum and the like).
        The European Union has, from the first, harmed workers and does not tolerate democracy about entrance or to oppose strangling austerity.  As Stiglitz puts it,
       “…concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.”
     After the Euro was adopted, I was visiting in Toledo, Spain on a Sunday with my family.  There was a march of 4,000 workers, in solidarity with 75,000 in Madrid.  Prices had tripled; wages had not gone up…
   Before the current crisis, as Krugman rightly says below, the financial situation of Greece in terms of debt was no worse than the UK, for long periods.  What the bankers have imposed is an unnecessary crisis stealing from the livelihood – subsistence – of ordinary people. 
     Austerity is, in Europe and the United States, a way to cut or privatize common good-serving public programs, while shifting money to the now transnational/offshore/”citizens” only of their bank accounts, the .0001%.
      Since Keynes, economists have known that a stimulus like Obama’s (only bigger; his was 2/3 the needed size) can get money to employ poor people on publicly useful jobs (green jobs; teaching and the like).  They spend the money domestically, with a multiplier effect – other locals are employed in sales of food, laundry, gas stations and the like –  that begins to get an economy out of depression.
     As Thomas Herndon, a graduate student at U Mass Amherst (previously at Evergreen State) showed, the famous Rogoff-Reinhart claim that every government with a debt ratio of 90% to Gross Domestic Product needs austerity is not only false, but fraudulent (these are “illustrious” Harvard professors, Rogoff a former Vice-President of the International Monetary Fund).   
   This is also Congressman Paul Ryan’s theme song ( Ryan – the “brains” of the Republican and much of the “Democratic” outfit, speaks, only “for the money’s sake.”
    Krugman had pointed out the obvious flaw in the Rogoff-Reinhart thesis: if a nation goes into a depression, its output will sink relative to its debt (“correlation is not causation,” to put in cliche terms).  But the only way to get it out of a depression is Keynsian programs of stimulus or tax cuts to ordinary people (along perhaps with monetary easing or devaluation of currency – a stimulus to exports and, hence, employment as in Iceland).
    Instead, Romney or Jaime Dimon or Robert Rubin or the many other hedge fund, Wall Street clowns of both parties often spend their “tax-relief” abroad (Romney would not even release his taxes as Presidential candidate, even though his father – George Romney –  had made this a cardinal point of this in his  campaign; that is because Mitt often pays no taxes at all, and at most, much less, on his $250 million “income” from stock – a tax rate for one year’s returns of 13.9% –  than his garderner or cook…. 
      When the rich buy an elevator for a fancy car at their fifth house in Aruba, no multiplier effect will occur in the United States.  
      Similarly, when Goldman-Sachs which took its “bailout money,” spent it in China, reaped a profit, and paid it back, there was no stimulus to the American economy at all…
     Herndon, a beginning graduate student in economics demanded to look at the Rogoff-Reinhart tables – they had not shared them in their famous conference paper for the IMF, being widely publicized for saying what the bankers/big money/kept politicians wanted to hear…
    They had made a statistical error and had incomplete data.  The fraud Herndon revealed just underlines Krugman’s argument (after the repeated failures of austerity, that argument ought to have been enough, but there is gale-force money behind impoverishment of ordinary people in the U.S. and more strikingly in Europe, especially Greece.  

    What is happening in Greece is already happening in Spain and Italy and France – and signs point the same way in the United States, particularly for young blacks, chicanos and poor whites.
     Despite a wave of well funded,  belligerent rightwing economics typified by Rogoff-Reinhard – in this central and influential policy claim, these claims are as toxic as the “research” that nicotine really doesn’t harm you or that burning coal is unconnected to global warming – this fact is well known to most (honorable,  literate) economists.  It is the decisive scientific point of Keynsianism (after working for Roosevelt, Richard V. Gilbert, my father, wrote about this after World War II, in Seymour Harris ed, Saving American Capitalism).
        But Krugman has now recognized, even in the Times, that Michael Kalecki, the Polish Marxist/Keynsian theorist of economic cycles, was right in a lecture in 1942.  He said there – and Krugman did not believe him until the bizarre elite response to the 2008 collapse –  that the rich will oppose any programs that benefit the working classes, and will starve them to death for fear of their seeking higher wages and better conditions.
     Social Democracy is thus not possible under capitalism, even though it would save it economically (did save it for a period after World War II; today, this is the history of  Papandreou and the austerity “socialists” in Greece, Hollande in France – cutting government programs that help the poor, becoming isolated from and even detested among their own original supporters, and as an accompaniment/result,  furthering racism and Golden Dawn, Marine Le Pen and other – literally – fascists).
     Krugman has long remarked that the costs of this policy are to throw away millions of people – the long term unemployed in the US who are eligible for no further insurance – and far greater numbers in Europe.  Greek youth unemployment is 60% (austerity has forced a 25% decline in GDP).  
     A foolish New York Times editorial yesterday here does not describe the impoverishment already forced on the people of Greece by “troika” austerity – see here.  One cannot look at the harms has been imposed on the Greek people – and the failure time after time of false EU/banker “predictions” that extreme cuts for the poor will lead to economic boom – and not be horrified.
      So the Times turns its eyes away.
       Krugman says, below, startled I think as for a long time so mainstream and serious an economist, that he would vote no on Greece accepting the bankers’ terms. So would Stiglitz hoping for the revival of democracy.
     Krugman rightly (and rather kindly) refers to the phony “technocrats” of Europe as “fantasists.”
      Real democracy, consulting the people from below, is the nightmare of the EU/bankers…
       May the Greek people again stand up!
      We all have a common interest in standing up to the Banks and the Koch brothers/Adelsons, et al (and the mainstream parties, including, sadly. Obama in so far as they represent them). 
     To survive, let alone flourish, we need to be democratic internationalists…For an action to be taken now, see here.
      For the Greek people carry our fate, too.  We should stand with them.
The Awesome Gratuitousness of the Greek Crisis
 JUNE 29, 2015 7:10 AM 
 Paul Krugman
Barry Eichengreen asks himself why his influential analysis, suggesting that the euro was irreversible now appears wrong. Surely in a direct, mechanical sense what we’re seeing is the process I warned about five years ago:
Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I’m sure it has no intention of doing that. But at this point it’s all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday — and at that point the logic of hanging on to the common currency come hell or high water becomes a lot less compelling.
But doesn’t the ultimate cause lie in wild irresponsibility on the part of the Greek government? I’ve been looking back at the numbers, readily available from the IMF, and what strikes me is how relatively mild Greek fiscal problems looked on the eve of crisis.
In 2007, Greece had public debt of slightly more than 100 percent of GDP — high, but not out of line with levels that many countries including, for example, the UK have carried for decades and even generations at a stretch. It had a budget deficit of about 7 percent of GDP. If we think that normal times involve 2 percent growth and 2 percent inflation, a deficit of 4 percent of GDP would be consistent with a stable debt/GDP ratio; so the fiscal gap was around 3 points, not trivial but hardly something that should have been impossible to close.
Now, the IMF says that the structural deficit was much larger — but this reflects its estimate that the Greek economy was operating 10 percent above capacity, which I don’t believe for a minute. (The problem here is the way standard methods for estimating potential output cause any large slump to propagate back into a reinterpretation of history, interpreting the past as an unsustainable boom.)
So yes, Greece was overspending, but not by all that much. It was over indebted, but again not by all that much. How did this turn into a catastrophe that among other things saw debt soar to 170 percent of GDP despite savage austerity?
The euro straitjacket, plus inadequately expansionary monetary policy within the eurozone, are the obvious culprits. But that, surely, is the deep question here. If Europe as currently organized can turn medium-sized fiscal failings into this kind of nightmare, the system is fundamentally unworkable.
Bank Runs as Greece Stands Up to Financial Institutions
Paul Krugman
OK, this is real: Greek banks closed, capital controls imposed. Grexit isn’t a hard stretch from here — the much feared mother of all bank runs has already happened, which means that the cost-benefit analysis starting from here is much more favorable to euro exit than it ever was before.
Clearly, though, some decisions now have to wait on the referendum.
I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone — me included — the troika is now effectively demanding that the policy regime of the past five years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness to leave will inspire a rethink, although probably not. But even so, devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different.
Second, the political implications of a yes vote would be deeply troubling. The troika clearly did a reverse Corleone — they made Tsipras an offer he can’t accept, and presumably did this knowingly. So the ultimatum was, in effect, a move to replace the Greek government. And even if you don’t like Syriza, that has to be disturbing for anyone who believes in European ideals.
New York Times, op-ed
Greece Over the Brink
JUNE 29, 2015
It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.
Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent’s most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors’ demands for harsh austerity, while the European Central Bank has managed to contain market panic.
But the situation in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital controls — limits on the movement of funds out of the country. It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the “troika” — the institutions representing creditor interests — for yet more austerity. Greece should vote “no,” and the Greek government should be ready, if necessary, to leave the euro.
To understand why I say this, you need to realize that most — not all, but most — of what you’ve heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous [?????] ) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.
So why didn’t this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.
And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it’s what happened in Iceland more recently. But Greece, without its own currency, didn’t have that option.
So have I just made the case for “Grexit” — Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That’s why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.
But the troika was having none of it. It’s easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.
This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can’t accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.


But they shouldn’t, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.
Finally, acceding to the troika’s ultimatum would represent the final abandonment of any pretense of Greek independence. Don’t be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn’t about analysis, it’s about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.
So it’s time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

The Guardian, June 29, 2015
  Joseph Stiglitz: how I would vote in the Greek referendum

     Neither alternative – approval or rejection of the troika’s terms –
will be easy, and both carry huge risks

     The rising crescendo of bickering and acrimony within Europe might 
seem to outsiders to be the inevitable result of the bitter endgame
 playing out between Greece and its creditors. In fact, European
 leaders are finally beginning to reveal the true nature of the ongoing
 debt dispute, and the answer is not pleasant: it is about power and
 democracy much more than money and economics.

 Of course, the economics behind the programme that the “troika” (the
 European Commission, the European Central Bank, and the International
 Monetary Fund) foisted on Greece five years ago has been abysmal,
resulting in a 25% decline in the country’s GDP. I can think of no
depression, ever, that has been so deliberate and had such
 catastrophic consequences: Greece’s rate of youth unemployment, for
 example, now exceeds 60%.

It is startling that the troika has refused to accept responsibility
for any of this or admit how bad its forecasts and models have been. 
But what is even more surprising is that Europe’s leaders have not 
even learned. The troika is still demanding that Greece achieve a 
primary budget surplus (excluding interest payments) of 3.5% of GDP by

Economists around the world have condemned that target as punitive,
because aiming for it will inevitably result in a deeper downturn.
Indeed, even if Greece’s debt is restructured beyond anything 
imaginable, the country will remain in depression if voters there
 commit to the troika’s target in the snap referendum to be held this 

 In terms of transforming a large primary deficit into a surplus, few
 countries have accomplished anything like what the Greeks have
 achieved in the last five years. And, though the cost in terms of 
human suffering has been extremely high, the Greek government’s recent
 proposals went a long way toward meeting its creditors’ demands.
We should be clear: almost none of the huge amount of money loaned to
Greece has actually gone there. It has gone to pay out private-sector
creditors – including German and French banks. Greece has gotten but a
pittance, but it has paid a high price to preserve these countries’
banking systems. The IMF and the other “official” creditors do not
need the money that is being demanded. Under a business-as-usual
scenario, the money received would most likely just be lent out again
to Greece.

But, again, it’s not about the money. It’s about using “deadlines” to
force Greece to knuckle under, and to accept the unacceptable – not
 only austerity measures, but other regressive and punitive policies.

 But why would Europe do this? Why are European Union leaders resisting
 the referendum and refusing even to extend by a few days the June 30
deadline for Greece’s next payment to the IMF? Isn’t Europe all about

In January, Greece’s citizens voted for a government committed to
ending austerity. If the government were simply fulfilling its
 campaign promises, it would already have rejected the proposal. But it
 wanted to give Greeks a chance to weigh in on this issue, so critical
for their country’s future wellbeing.

That concern for popular legitimacy is incompatible with the politics
of the eurozone, which was never a very democratic project. Most of 
its members’ governments did not seek their people’s approval to turn
 over their monetary sovereignty to the ECB. When Sweden’s did, Swedes 
said no. They understood that unemployment would rise if the country’s
monetary policy were set by a central bank that focused
single-mindedly on inflation (and also that there would be
insufficient attention to financial stability). The economy would
suffer, because the economic model underlying the eurozone was
predicated on power relationships that disadvantaged workers.

And, sure enough, what we are seeing now, 16 years after the eurozone 
institutionalised those relationships, is the antithesis of democracy:
 many European leaders want to see the end of prime minister Alexis
 Tsipras’ leftist government. After all, it is extremely inconvenient
 to have in Greece a government that is so opposed to the types of
policies that have done so much to increase inequality in so many
 advanced countries, and that is so committed to curbing the unbridled
power of wealth. They seem to believe that they can eventually bring
down the Greek government by bullying it into accepting an agreement
that contravenes its mandate.

 It is hard to advise Greeks how to vote on 5 July. Neither alternative
– approval or rejection of the troika’s terms – will be easy, and both 
carry huge risks. A yes vote would mean depression almost without end. 
Perhaps a depleted country – one that has sold off all of its assets,
 and whose bright young people have emigrated – might finally get debt
forgiveness; perhaps, having shrivelled into a middle-income economy,
Greece might finally be able to get assistance from the World Bank.
 All of this might happen in the next decade, or perhaps in the decade 
after that.

By contrast, a no vote would at least open the possibility that 
Greece, with its strong democratic tradition, might grasp its destiny
 in its own hands. Greeks might gain the opportunity to shape a future
 that, though perhaps not as prosperous as the past, is far more
 hopeful than the unconscionable torture of the present.

 I know how I would vote.


Joseph E. Stiglitz, a Nobel laureate in economics, is University
 Professor at Columbia University. His most recent book, co-authored
 with Bruce Greenwald, is Creating a Learning Society: A New Approach 
to Growth, Development, and Social Progress.