LIES
& MYTHS
The more laws and restrictions there are,
the poorer the people become.
The sharper men’s weapons,
The more trouble in the land.
The more ingenious and clever men are,
The more strange things happen. The more rules and regulations,
The more thieves and robbers.
Lao Tsu. “The Tao Te Ching” 6th century BCE
Executive Summary:
- Myths are dangerous precisely because they rely more on cultural memory and prejudice than facts
- The GREEK issue: In reality it was a bail out of some of the richest people in EUROPEAN society on the cost on some of the poorest
- “Lazy” GREEKS work 600 hours more a year than GERMANS.
- North versus South – ant versus lazy grasshopper
- AMERICANS are certainly a lot more nervous about GREECE exiting the EUROZONE than GERMANY
- GREECE: It was not the public sector but the private sector that went haywire
- IRELAND, PORTUGAL, SPAIN and GREECE’S dept were moved by EU and US financial institutions from private sector to the public sector
- EUROPEAN CENTRAL BANK refused to intervene on currency speculators interest rates hikes in PORTUGAL
- EUROPEAN countries spend more of their GDP on services than does ATHENS
- After GREECE’S EU membership rejection in 1999 GOLDMAN SACHS essentially cooked the books to paved the way to make GREECE look like it cleared the bar
- Troika bailout: GREEK government had to institute an austerity program that saw economic activity decline 25 percent and unemployment rise to 27 Percent
- Virtually all of the “bailout”—89 percent—went to the banks that gambled in the 1999 to 2007 real estate casino
- Public spending was not the cause of deficits - But what are those debts?
- GERMANY’S stern move against Greece is to demoralize anti-austerity movements in SPAIN, PORTUGAL and IRELAND
MYTHS
ARE DANGEROUS PRECISELY BECAUSE THEY RELY MORE ON CULTURAL MEMORY AND PREJUDICE
THAN FACTS,
“Debt, n. An ingenious
substitute for the chain and whip of the slave driver.” – Ambrose Bierce,
Journalist & writer
“The history of an
oppressed people is hidden in the lies and agreed myth of its conquerors.” –
Meridel Le Suer, Author & activist
Myths are dangerous
precisely because they rely more on cultural memory and prejudice than facts,
and behind the current crisis between GREECE and the EUROPEAN UNION (EU) lays a
fable that bears little relationship to why ATHENS and a number of other
countries in the 28-member organization find themselves in deep distress.
NORTH
VERSUS SOUTH – ANT VERSUS LAZY GRASSHOPPER
The tale is a variation
of Aesop’s allegory of the industrious ant and the lazy, fun-loving
grasshopper, with the “northern countries”—GERMANY, the NETHERLANDS, BRITAIN,
FINLAND—playing the role of the ant, and GREECE, SPAIN, PORTUGAL, and IRELAND
the part of the grasshopper.
The ants are sober and
virtuous—lead by the frugal Swanbian house Frau, GERMAN Chancellor ANDREA
MERKEL—the grasshoppers are spendthrift, corrupt lay-abouts who have spent
themselves into trouble and now must pay the piper.
Background
Information: NORTH VERSUS SOUTH
GERMAN
ELITES VIEW SOUTHERN EUROPEANS AS INFERIOR
EROSION
OF THE SOVEREIGNTY OF EUROPEAN COUNTRIES
The problem is that this
myth bears almost no relationship to the actual roots of the crisis or what the
solutions might be. And it perpetuates a fable that the debt is the fault of
individual countries rather than a serious crisis at the very heart of the EU.
FIRST,
A LITTLE MYTH BUSTING - IT WAS NOT THE PUBLIC SECTOR BUT THE PRIVATE SECTOR
THAT WENT HAYWIRE
The EUROPEAN debt crisis
goes back to the end of the roaring ‘90s when the banks were flushed with money
and looking for ways to raise their bottom lines. One major strategy was to
pour money into real estate, which had the effect of creating bubbles,
particularly in SPAIN and IRELAND. In the latter, from 1999 to 2007, bank loans
for IRISH real estate jumped 1,730 percent, from 5 million Euros to 96.2
million Euros, or more than half the GDP of the Republic. Housing prices
increased 500 percent. “It was not the public sector but the private sector
that went haywire in Ireland,” concludes Financial Times analyst MARTIN WOLF.
SPAIN, which had a budget
surplus and a low debt ratio, went through much the same process, and saw an
identical jump in housing prices: 500 percent.
In both countries there
was corruption, but it wasn’t the penny ante variety of tax evasion or profit
skimming. Politicians—eager for a piece of the action and generous
“donations”—waved zoning rules, environmental regulations, and cut sweetheart
tax deals. Hundreds of thousands of housing projects went up, many of them
never to be occupied.
Then the AMERICAN banking
crisis hit in 2008, and the bottom fell out. Suddenly, the ants were in
trouble. But not really, because the ants have a trick: they gamble and the
grasshoppers pay.
THE
TRICK – DEPTS WERE MOVED FROM PRIVATE SECTOR TO THE PUBLIC SECTOR
The “trick,” as JOSEPH
STIGLITZ, Nobel Laureate in economics, points out, is that EUROPE (and the
U.S.) have moved those debts “from the private sector to the public sector—a
well-established pattern over the past half-century.”
FINTAN O’TOOLE, author of
SHIP OF FOOLS: How Stupidity and Corruption sank the Celtic Tiger, estimates
that to save the IRISH-ANGLO Bank IRISH taxpayers shelled out $30 billion
Euros, a sum that was the equivalent of the Island’s entire tax revenues for
2009. The EUROPEAN CENTRAL BANK—which, along with the INTERNATIONAL MONETARY
FUND (IMF) and the EUROPEAN COMMISSION, make up the “TROIKA”—strong-armed IRELAND
into adopting austerity measures that tanked the country’s economy, doubled the
unemployment rate, increased consumer taxes, and forced many of the country’s
young people to emigrate. Almost half of IRELAND’S income tax now goes just to
service the interest on its debts.
Background
Information:
6
BILLION DOLLARS SUPPORT FOR YOUTH UNEMPLOYMENT VERSUS 60 BILLION DOLLARS FOR
SUPPORTING EUROPE’S BANKS
EUROPEAN
CENTRAL BANK REFUSED TO INTERVENE ON CURRENCY SPECULATORS INTEREST RATES HIKES
IN PORTUGAL
Poor PORTUGAL. It had a
solid economy and a low debt ratio, but currency speculators drove up interest
rates on borrowing beyond what the government could afford, and the EUROPEAN
CENTRAL BANK REFUSED to intervene. The result was that LISBON was forced to
swallow a “bailout” that was laden with austerity measures that, in turn,
torpedoed its economy.
Background
Information: GREECE AND THE AUSTERITY MEASURES
PERMANENT
AUSTERITY - DEMOCRACY AT STAKE?
NIGEL
FARAGE SPEAKS TO GREECE: YOU'RE BEING DESTROYED BY THE "ECONOMIC
PRISON" OF THE EURO
WASHINGTON
POST ADMITS AUSTERITY 'KILLING' GREECE
BANK
RESCUES AS AN EXCUSE TO APPLY FURTHER AUSTERITY
WHO
IS CONTINUALLY FORCING NEW ROUNDS OF AUSTERITY MEASURES ON SOUTHERN EU STATES?
THE TROIKA?
EUROPE
WAS A LEADER IN TERMS OF QUALITY INFRASTRUCTURE
EUROPEAN
COUNTRIES SPEND MORE OF THEIR GDP ON SERVICES THAN DOES ATHENS
In
GREECE’S case corruption was at the heart of the crisis, but not the popular
version about armies of public workers and tax dodging oligarchs. There are
rich tax dodgers aplenty in GREECE, but GERMANY, SWEDEN, and many other EUROPEAN
countries spend more of their GDP on services than does ATHENS. GREECE spends
44.6 percent of its GDP on its citizens, less than the EU average and below GERMANY’S
46 percent and SWEDEN’S 55 percent.
And
as for lazy: GREEKS work 600 hours more a year than GERMANS.
THE
GREEK ISSUE: IN REALITY IT WAS A BAIL OUT OF SOME OF THE RICHEST PEOPLE IN
EUROPEAN SOCIETY ON THE COST OF THE POOREST
According to economist MARK
BLYTH, author of Austerity: The History of a Dangerous Idea, GREEK public
spending through the 2000s is “really on track and quite average in comparison
to everyone else’s,” and the so-called flood of “public sector jobs” consisted
of “ 14,000 over two years.” All the talk of the profligate GREEK government is
“a lot of nonsense” and just “political cover for the fact that what we’ve done
is bail out some of the richest people in EUROPEAN society and put the cost on
some of the poorest.”
There was a “score” in GREECE.
However, it had nothing to do with free spending, but was a scheme dreamed up
by GREEK politicians, bankers, and the AMERICAN finance corporation, GOLDMAN
SACHS.
Background
Information: GREEK DEFAULT?
GREECE’S
LOOMING DEFAULT - A SOLUTION TO THE PROBLEM
ONE
HAND FEEDS THE OTHER
AFTER
GREECE’S EU MEMBERSHIP REJECTION IN 1999 GOLDMAN SACHS ESSENTIALLY COOKED THE
BOOKS TO PAVED THE WAY TO MAKE GREECE LOOK LIKE IT CLEARED THE BAR
GREECE’S application for
EU membership in 1999 was rejected because its budget deficit in relation to
its GDP was over 3 percent, the cutoff line for joining. That’s where GOLDMAN
SACHS came in. For a fee rumored to be $200 million (some say three times that),
the multinational giant essentially cooked the books to make GREECE look like
it cleared the bar. Then GREECE’S political and economic establishment hid the
scheme until the 2008 crash shattered the illusion.
Background
Information: GOLDMAN SACHS AND THE FINANCIAL INSTITUTIONS
GREECE
AND THE FINGERPRINTS OF GOLDMAN SACHS
GREECE’S
LOOMING DEFAULT - A SOLUTION TO THE PROBLEM
ONE
HAND FEEDS THE OTHER
IT
WAS THE BUSY LITTLE ANTS, NOT THE FIDDLING GRASSHOPPERS THAT BROUGHT ON THE
EUROPEAN DEBT CRISIS.
AMERICAN, GERMAN, FRENCH,
and DUTCH banks had to know that they were creating an unstable real estate
bubble—a 500 percent jump in housing prices is the very definition of the
beast—but kept right on lending because they were making out like bandits.
TROIKA
BAILOUT: GREEK GOVERNMENT HAD TO INSTITUTE AN AUSTERITY PROGRAM THAT SAW
ECONOMIC ACTIVITY DECLINE 25 PERCENT AND UNEMPLOYMENT RISE TO 27 PERCENT
When the bubble popped
and EUROPE went into recession, GREECE was forced to apply for a “bailout” from
the TROIKA. In exchange for 172 billion Euros, the GREEK government instituted
an austerity program that saw economic activity decline 25 percent,
unemployment rise to 27 Percent (and over 50 percent for young GREEKS). The
cutbacks slashed pensions, wages, and social services, and drove 44 percent of
the population into poverty.
Virtually
all of the “bailout”—89 percent—went to the banks that gambled in the 1999 to
2007 real estate casino. What the GREEK—as well as SPANIARDS, PORTUGUESE, and IRISH—got
was misery.
There are other EU
countries, including ITALY and FRANCE that, while not in quite the same boat as
the “distressed four,” are under pressure to bring down their debt ratios.
PUBLIC
SPENDING WAS NOT THE CAUSE OF DEFICITS - BUT WHAT ARE THOSE DEBTS?
This past summer, the
Committee for a Citizen’s Audit on the Public Debt issued a report on FRANCE, a
country that is currently instituting austerity measures to bring its debt in
line with the magic “3 percent” ratio. What the Committee concluded was that 60
percent of the FRENCH public debt was “illegitimate.”
More than 18 other
countries, including BRAZIL, PORTUGAL, ECUADOR, GREECE and SPAIN, have done the
same “audit,” and, in each case, found that increased public spending was not
the cause of deficits. From 1978 to 2012, FRENCH public spending actually
declined by two GDP points.
The main culprit in the
debt crisis was a fall in tax revenues resulting from massive tax cuts for
corporations and the wealthy. According to RAZMIG KEUCHEYAN, sociologist and
author of THE LEFT HEMISPHERE, this “NEOLIBERAL MANTRA” that was supposed to
increase investment and employment did the opposite.
According to the study,
the second major reason was the increase in interest rates that benefits
creditors and speculators. Had interest rates remained stable during the 1990s,
debt would be significantly lower.
KEUCHEYAN
argues that tax reductions and interest rates are “political decisions” and
that “public deficits do not grow naturally out of the normal course of social
life. They are deliberately inflicted on society by the dominant classes to
legitimize austerity policies that will allow the transfer of value from the
working classes to the wealthy ones.”
The INTERNATIONAL LABOR
ORGANIZATION recently found that wages have, indeed, stalled or declined
throughout the EU over the past decade.
GERMANY’S
STERN MOVE AGAINST GREECE IS TO DEMORALIZE ANTI-AUSTERITY MOVEMENTS IN SPAIN,
PORTUGAL AND IRELAND.
The audit movement calls
for repudiating debt that results from “the service of private interests” as opposed
to the “wellbeing of the people.” In 2008, ECUADOR canceled 70 percent of its
debt as “illegitimate.”
How this plays out in the
current GREEK-EU crisis is not clear. The SYRIZA government is not asking to
cancel the debt—though it would certainly like a write down—but only that it be
given time to let the economy grow. The recent four-month deal may give ATHENS
some breathing room, but the ants are still demanding austerity and tensions
are high.
What seems clear is that GERMANY
and its allies are trying to force SYRIZA into accepting conditions that will
undermine its support in GREECE and demoralize anti-austerity movements in
other countries.
Background
Information: GERMAN POLICIES
AUSTERITY
POLICIES ADVOCATED BY THE EUROPEAN UNION - PROMOTED PRIMARILY BY GERMANY’S
ANGELA MERKEL
WHAT
IS GERMANY'S REAL ROLL IN ALL THIS?
TROIKA
IS BURDENING THE MIDDLE AND LOWER ECONOMIC STRATA OF SOCIETY WITH EXCESSIVE
TAXES, LEADING DIRECTLY TO STARVATION
AMERICANS
ARE CERTAINLY A LOT MORE NERVOUS ABOUT GREECE EXITING THE EUROZONE THAN GERMANY
The U.S. can play a role
in this—President OBAMA has already called for easing the austerity
policies—through its domination of the IMF. By itself WASHINGTON can outvote GERMANY,
the NETHERLANDS, and FINLAND, and could exert pressure on the two other TROIKA
members to compromise. Will it? Hard to say, but the AMERICANS are certainly a
lot more nervous about GREECE exiting the EUROZONE than GERMANY.
But the key to a solution
is exploding the myth.
That has already begun.
Over the past few weeks, demonstrators in GREECE, SPAIN, ITALY, GERMANY, PORTUGAL,
GREAT BRITAIN, BELGIUM and AUSTRIA have poured into the streets to support SYRIZA’S
stand against the Troika. “The Left has to work together having as its common
goal the elimination of predatory capitalism” says MAITE MOLA, vice-president
of the EUROPEAN Left organization and member of the PORTUGUESE parliament. “And
the solution should be EUROPEAN.”
In the end, the
grasshoppers might just turn Aesop’s fable upside down.
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