Monday, June 17, 2013

Who benefits from neoliberal policies in Europe?

The Real News reports on last week's protests over the shutting down of the Greek state TV service ERT, Thousands Strike Greek Gov't Pulling the Plug on State TV 06/13/2013:

Greek democrats won a victory on ERT Monday, as the BBC News reports in Greek court suspends ERT broadcaster closure 06/17/2013. The conflict over ERT has increased the possibility of new elections coming soon: " as coalition leaders went into talks, the main opposition party Syriza held a rally in Athens' Syntagma Square to demand early elections."

The Austrian news magazine Profil in an article by Christina Hiptmayr asks, Milliarden für Griechenland: Wer sind die Profiteure? ("Billions for Greece: Who are the profiteers?") 17.06.2013. Short answers:

  • We can't tell you; it's secret (German Finance Minister Wolfgang Schäuble and Jörg Asmussen, a director of the ECB)
  • Deutsche Bank (that doesn't want higher taxes now on financial institutions)
  • Some of Greece's creditors (although who benefited by how much, we don't know)
  • Big European banks (which ones, consult Herrs Schäuble and Asmussen)
  • Hedge funds (for details, ask Schäuble and Asmussen)
  • European insurance companies (check with Schäuble and Asmussen on who and how much)

Hiptmayr's article is largely devoted to a new report by the left-leaning ATTAC Austria group, which is often described misleading as an "anti-globalization" group, Greek Bail-Out: 77% went into the Financial Sector 17.06.2013, with additional background material.

When the Greek debt crisis became obvious in 2009, the Troika (EU, ECB, IMF) acting at German Chancellor Angela Merkel's direction and insistence, didn't take the action that even then was very obviously needed, imposing a "haircut," a debt writedown, on the Greek public debt. That would have required Greece's creditors, not least among then German and French banks, to take losses at a time when their income and balance sheets were already under pressure from the "North Atlantic crisis," as Joseph Stiglitz and others describe the current depression.

This Yannis Ioannou cartoon of 06/06/2013 shows predators charging into Greece behind the Troika tank flying the flags of the IMF and the eurozone:

The English version of ATTAC's report concludes, "At least 77% of the bail-out money can directly or indirectly be attributed to the financial sector," though it notes that "the European Union (EU) and the International Monetary Fund (IMF) have applied 23 tranches comprising €206,9 billion to the so-called 'Greek bail-out'," but "have however provided hardly any documentation on the exact usage of those huge amounts of public funds."

But the report describes the following estimate of how they estimate €204.1 billion of the €206.9 billion was applied:

  • €58,2 billion (28,13%) were used to recapitalise Greek banks – instead of restructuring the too big and moribund sector in a sustainable way and letting the banks' owners pay for their losses.
  • €101,331 billion (48,98%) went to creditors of the Greek state. €55,44 billion of these were used to repay maturing government bonds – instead of letting the creditors bear the risk for which they had received interest payments before. Another €34,6 billion served as incentive to make creditors agree to the so-called "haircut" in March 2012. €11,3 billion were used in a debt buyback in December 2012, when the Greek state bought back almost worthless bonds from its creditors.
  • €43,7 billion (22,46%) went into the national budget or couldn't be definitively attributed.
  • €0,9 billion (0,43%) were used as Greek contribution to the new bail-out fund ESM.

Greece wound up with a bailout that prevented them from defaulting on payments to their creditors for a couple of years, while much of the Greek debt was then transferred off the books of private creditors and on to those of public institutions. Not all the beneficiaries were non-Greeks, though:

Among those actually rescued is the multi-billion Latsis clan, one of the richest families in Greece, owning large parts of the state-rescued "Eurobank Ergasias". Speculators benefited, too: During the debt buyback in December 2012, the hedge fund Third Point pocketed €500 million with the aid of European public funds. "When Barroso, the President of the European Commission, labels the so-called Greek bail-out an act of solidarity, you have to ask: Solidarity with whom?", [Lisa] Mittendrein [a member of ATTAC Austria's governing board] comments.
The report gives a glimpse of how this "solidarity" bailout may look to Greeks:

  • Several times, EU and IMF reneged on their announcements and withheld promised disbursements by weeks or even months to put pressure on Greek democracy: in autumn 2011 to prevent a referendum on austerity policy; in May/June 2012 to raise the chances of Troika-friendly parties in the national elections. By withholding promised funds, the Troika forces the Greek government to issue short-term bonds to avoid imminent bankruptcy. Since those "treasury bills", maturing within a few weeks or months, carry a higher interest rate, this actually increases Greek government debt. This serves as further evidence that debt reduction is not the Troika's main interest, but rather a pretext to push forward the destruction of the welfare state and workers' rights.
  • A tranche of €1 billion disbursed in June 2012 was primarily used to finance Greece's compulsory contribution to the EFSF-replacement ESM. Thus, the EFSF financed its own successor – yet not directly but by raising Greek government debt.

Profil's Hiptmayr takes care to distance herself a bit from the hippies at ATTAC Austria with this stale bit of euro-crisis conventional wisdom:

Keine Frage, die Hauptschuld an ihrem Schuldendesaster tragen die Griechen selbst. Doch das Geld, etwa für die Finanzierung ihres aufgeblähten Staatsapparates, haben sie sich von ausländischen Investoren geliehen. Diese haben kräftig mitverdient am Verschwendungswahn Griechenlands.

[No question that the primary fault for the debt disaster lies upon the Greeks themselves. Certainly, foreign investors lent them the financing for their overblown state apparatus. They also mightily empowered Greece's wasteful madness.]
Please. The more German and Austrian media repeat this kind of lazy non-analysis, the more surprised their readers will be when Greece or Spain bails out of the euro and the prices for German and Austrian exports soar, with results most Germans and Austrians will not like.

Former SPD Chancellor and longtime professional elder statesman Helmut Schmidt gave an interview to the Handelsblatt paper, „Der Euro ist prima“ 17.06.2013, in which he called (somewhat obliquely in the linked report) for a Krugmanesque stimulatory fiscal policies in Germany that would involved increasing German wages and salaries and raise inflation in Germany in order to power a recovery that could lift the rest of the eurozone out of the current recession and put the whole currency zone into a sustainable growth path. He also criticized the exorbitant salaries of bank executives.

I'm confident Angela Merkel won't listen to him. Nor will she listen to his warning that it has been a big mistake for her to play such an obviously leading role in Europe as she has with her austerity policies. He thinks that, because of the Second World War and the Holocaust, such a role would not be feasible for Germany "for centuries."

As part of the current G-8 summit in Northern Ireland, the negotiations officially began on the Transatlantic Trade and Investment Partnership (TTIP), another neoliberal project to reduce wages, weaken unions, eliminate worker protections, promote privatization and deregulate corporations. The fact that Merkel is enthusiastic about it is reason enough in itself to be extremely suspicious of it.

Obama spoke about it today along with others. (Remarks by President Obama, U.K. Prime Minister Cameron, European Commission President Barroso, and European Council President Van Rompuy on the Transatlantic Trade and Investment Partnership 06/17/2013) According to these fellows, it's all good:

Cameron: "And we should be clear about what these numbers could really mean: 2 million extra jobs, more choice and lower prices in our shops."

Barroso: "I’d rather have our companies invest in you, in overseas products and services and job creation, than in double-testing, or multiple inspections, or even separate manufacturing lines. Our regulators need to build bridges faster and more systematically." Yeah, all this inspecting bridges and such is soo-oooo 20th century! "So even if these negotiations may not always be easy, I’m sure they will be worth it for the sake of the jobs it creates and because of the strategic dimension of what we are doing."

Obama: "It would increase exports, decrease barriers to trade and investment. As part of broader growth strategies in both our economies, it would support hundreds of thousands of jobs on both sides of the ocean."

Van Rompuy: "It shows the political will to work together -- to work together with our long-standing and most trusted partner on the essential objective for governments on either side of the Atlantic -- growth, jobs, and prosperity."

Did I mention they said it would create jobs?

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