A Euro-protest of the troika’s Euro-austerity regime

Neoliberalism is an ideology and a compulsion

The symbol of the Euro in front of the Europea...

Mike Whitney and Dean Baker argue that those leading the European Central Bank, the European Union, and the International Monetary Fund (The Troika) find it difficult to experience the world but through the lens of their idiotic economic theory. Baker had the recent opportunity to observe the Troika in action. He drew this conclusion:

There is no economic reasoning behind the troika’s positions. For practical purposes, Greece and the other debt-burdened countries are dealing with crazy people. The pain being imposed is not a route to economic health; rather it is a gruesome bleeding process that will only leave the patient worse off. The economic doctors at the troika are clueless when it comes to understanding a modern economy.

Mike Whitney’s analysis affirms Baker’s assessment. Whitney notes that, “If Greece’s €130 billion loan was going to be used for fiscal stimulus, then it might be worth the commitment. Because that kind of money could put a lot people back to work and kick-start the economy fast.” Yet…he continues by observing:

But the loan isn’t going to be used for stimulus. It’s going to be used to recapitalize the banks and pay off creditors, neither of which will do anything to boost activity or create jobs. So, why bother? Why dig an even deeper hole if it achieves nothing? If that’s the case, then Greece should just default now and start rebuilding the economy ASAP. There’s no point in putting it off any longer.

Indeed, why would Greece accept the bitter medicine dispensed by the European Union?

The troika (the European Central Bank, the European Union, and the International Monetary Fund) is demanding another €3 billion in spending cuts even though unemployment is tipping 20 percent and the economy shrank 7 percent in the last quarter. What sense does that make? You don’t have to be a genius to figure out that Greece won’t reach its budget targets if tax revenues continue to fall because everyone’s either been laid off or taking a pay-cut. It will just make a bad situation even worse. But the troika doesn’t worry about these type of things. They don’t care that their lamebrain economic theories have failed miserably so far, or that their austerity measures have been a complete flop. They just keep plugging along making the same mistakes over and over again, impervious to the criticism of reputable economists, oblivious to the abysmal results, they remain steadfast in their commitment to belt tightening, sure that a strict diet of breadcrumbs and water is the best way to nurse an ailing economy back to health. It doesn’t bother them that the facts prove otherwise.

An austerity politics entails personal suffering for many people. It immiserates them by design. This effect is considered a feature of an austerity regime. And the Greeks have already suffered, as we know. But an austerity politics also makes little sense during a recession. It is a policy regime a crazy person recommends.

The upshot: The government of Greece, if it were rational, would take the Argentinean path to recovery. Country debt and risk are not perpetual prison sentences. If Greece were to take this path, it would default on its obligations and exit the European Union (advocated here). It ought to do so because its current predicament and the proposed — or imposed — ‘remedy’ for it will only serve to transfer wealth to the financial institutions holding Greece’s debt and, of course, to plunder the country of those assets worth owning (discussed by Michael Hudson here). Greek “have-nots” have and continue to protest this imperial imposition on their country. It is rational for them to do this just as it is rational for the Greek government default on its financial obligations and jettison the Euro.

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Quote of the day

Thomas Naylor claims:

The euro is going down and may take the 17 nation euro zone with it, if not the entire 28 nation European Union. Or maybe it will be the other way around? Does it really matter?

Having never recovered from the 2008 recession, the collapse of the euro will drive the U.S. economy deeper into the quagmire of more unemployment, negative economic growth, schizophrenic fiscal policy, Congressional gridlock, inflationary monetary policy, and the rout of the dollar. Is it possible that whatever the White House, the Congress, or the Fed may do will make not one whit of a difference?

To deflect public opinion away from their incompetence and corruption the White House, the Congress, the Fed, the European Central Bank, and all of the political leaders of Europe need an international scapegoat. What could be better than a war against some unpopular rogue state such as Cuba, Iran, North Korea, or Venezuela whose leader is considered by many Americans to be demonic.

Enter Israeli Prime Minister Benjamin Netanyahu bearing gifts for American and European political leaders. “Have I got a deal for you,” says Netanyahu. “Why don’t NATO and its Arab allies take out the nuclear weapons program of the terrorist state of Iran? It would divert the attention of the American and European people away from their economic woes. Everyone (except the Iranians) would gain.”

Serendipity or conspiracy?

Quote of the day

Serge Halami of Le Monde Diplomatique appropriately compared the recent European Union, European Central Bank and International Monetary Fund (“the troika”) intervention in Greece’s affairs to the Soviet Union’s termination of the Prague Spring:

For people in countries suffering under austerity measures, the history of Europe provides some outstanding examples. In some ways, recent events in Athens recall Czechoslovakia in 1968: the crushing of the Prague Spring and the removal of the Communist leader Alexander Dubcek. The troika has played the same part in reducing Greece to a protectorate as the Warsaw Pact did in Czechoslovakia, with Papandreou in the role of Dubcek, but a Dubcek who would never have dared to resist. The doctrine of limited sovereignty has been applied, though admittedly it is preferable and less immediately lethal to have its parameters set by rating agencies rather than by Russian tanks rolling over the borders.

Having crushed Greece and Italy, the EU and the IMF have now set their sights on Hungary and Spain.

Both interventions were intended to undermine democratic accountability in a peripheral state. Both, by the way, were successful.

Quote of the day

Michael Hudson wrote:

The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011.

Hudson follows this passage by making a case for the euthanasia of the rentier class (Keynes) and for fiat money. To be sure, his solutions are as politically improbable as they are humanly necessary.

Berlusconi to walk like a Grecian pol?

Berlusconi, bloodied, but not yet out

It appear so:

Italy’s stock and bond markets endured a volatile session on Monday as Silvio Berlusconi was reported to have denied reports that he intended to resign as prime minister.

Fabrizio Cicchitto, head of the parliamentary group of Mr Berlusconi’s People of Liberty party, said in a statement that the prime minister had told him that “rumours of his resignation were baseless”.

Ansa news agency also quoted Mr Berlusconi as telling people close to him that the reports were not true. A page on Facebook under the name of the prime minister quoted him as dismissing the rumours.

Franco Bechis, deputy editor of Libero, a pro-Berlusconi newspaper, had said earlier on Monday that Mr Berlusconi would resign on Monday night or Tuesday. Mr Bechis later said on Twitter that the prime minister had decided after talking to his family in Milan to call a vote of confidence in his government on the basis of its mandate to pass reforms requested by the European Union.

A financial source close to the prime minister told the Financial Times that Mr Berlusconi intended to step down later on Monday.

The reasons for Berlusconi’s latest humiliation?

European efforts to solve a growing sovereign debt crisis have failed to quell market unease on the Continent, and the skepticism over Greece points to continued volatility this week.

Among fresh warning signs, Italy’s cost of borrowing has jumped to the highest rate since the country adopted the euro.

And:

The yield on 10-year Italian notes has surpassed that on Spanish debt by nearly a full percentage point, reaching 6.51 percent on Monday after leaders at a meeting last week of the Group of 20 nations failed to come up with details on how to stop the European crisis from spreading. The rising yield is troubling because once the interest rates on the debt of Greece and Portugal surpassed 7 percent they shot up far higher, requiring those countries to turn to outside sources of financing. Rates on their debt remain in double digits.

At the end of last month, Italy issued 3 billion euros worth of bonds at an interest rate of more than 6 percent, about 1.5 percentage points higher than it had had to pay as recently as the summer. The extra bond yields are adding as much as 3 billion euros (about $4.1 billion ) annually in additional interest payments, estimates Tobias Blattner, a former economist at the European Central Bank who is an economist at Daiwa Securities in London.

Analysts are concerned that if interest rates on Italian debt keep rising, the country may no longer be able to afford to borrow on the open markets and instead would have to turn to official lenders like the European Union or the International Monetary Fund.

The latest rate “is a warning,” said Mark McCormick, currency strategist at Brown Brothers Harriman. “Seven percent would be a point of no return.”