Puerto Rico’s religious leaders have called for debt relief of the Caribbean U.S. territory in the face of the 72 billion dollar liability that represents 20,000 dollars of debt for every man, woman and child.

In a statement issued Aug. 31, the clergy called on the U.S. Federal Reserve to intervene if Congress fails to pass bankruptcy protection to the financially-strapped island.

“This debt crisis threatens to push more of our people into poverty and put people out of work,” said San Juan Archbishop Roberto González Nieves, leader of Puerto Rico’s mostly Catholic population.

“The religious community stands with vulnerable people and we call for the crisis to be resolved in a way that protects the poor and grows our economy,” he added.

At a press conference in San Juan, leaders of the major religious groups laid out six principles to resolve the crisis.

“Puerto Rico’s religious leaders are fighting for the lives of their people,” stated Eric LeCompte, executive director of the faith-based development coalition Jubilee USA Network.

Jubilee USA Network is an alliance of more than 75 U.S. organisations and 400 faith communities working with 50 Jubilee global partners. Jubilee’s mission is to build an economy that serves, protects and promotes the participation of the most vulnerable.

LeCompte visited Puerto Rico in mid-August to advise religious and political leaders on solutions to the crisis.  “We need to get Puerto Rico’s debt back to sustainable levels and ensure that the island has a path for economic growth,” he said

Some of the hedge funds, arguing for cuts in Puerto Rico’s economic growth, were or are currently involved in debt disputes in Greece, Argentina and Detroit, Michigan.

Two recent reports, one commissioned by a group of hedge funds which purchased the island’s distressed debt and the other authorised by Puerto Rico’s own government, suggest new austerity plans to pay off portions of the debt.

The reports note a range of “fiscal adjustments”, including reducing the minimum wage, education resources and healthcare costs. One of the principles promoted by the coalition of religious leaders is that any resolution to the financial crisis prevents further austerity plans.

The religious leaders raised concern over predatory hedge fund activity in their statement. Beyond the Catholic Church, other religious groups signing the statement include Methodists, Lutherans, Evangelicals, Pentecostals and the Disciples.

“As religious leaders, we see how desperate the situation is for Puerto Rico’s people,” said Reverend Heriberto Martínez Rivera, secretary-general of Puerto Rico’s Biblical Society and the leader of the religious coalition confronting the debt crisis.

“Too many of our people are already suffering from austerity policies and many brothers and sisters have left for the United States hungry for work and a better quality of life,” he added.

Beyond calling for debt relief and criticising austerity policies, the religious leaders’ statement asserts the need for greater Puerto Rican budget transparency and participation in future debt negotiations by people negatively affected by the crisis.

Edited by Phil Harris   

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Aug 22 2015 (IPS)

As the political situation in Brazil appears to be reaching a state of unstable equilibrium, or more bluntly, as it is transformed from instability to impasse, the economy continues to deteriorate.

The sharpening of political conflicts that could lead to an outright collapse of the economy seems to have been attenuated by the shift on Apr. 7 of effective political power from President Dilma Rousseff to Vice-President Michel Temer.

Fernando Cardim de Carvalho

Temer was successful in bringing Renan Calheiros, the chairman of the Federal Senate, back to the government camp, in a power-sharing agreement meant to isolate the chairman of the House, Eduardo Cunha, who has assumed a much more radical stance. The arrangement has worked so far.

The pressure on the President to resign or on the appropriate bodies to give cause to initiate impeachment processes seems to have reached its limit. Popular opposition to the federal administration, which has its stronghold in Sao Paulo – as shown in mass demonstrations in March and April and most recently on Aug. 16 – has not seen the snowball growth its leaders expected.

In sum, positions seem to have been hardened as a measure of political accommodation has been reached, with the Brazilian Democratic Movement Party (PMDB) taking the lead on the side of government, and the formal opposition to government, including the nominally leading opposition party, the Brazilian Social Democracy Party (PSDB), rallying to the side of Eduardo Cunha, still their best hope on the way to an impeachment procedure.

Street demonstrations at this point seem to be unable to change this picture. Still, it should be noted that only the opposition has been able to organise large demonstrations. Attempts by pro-government groups to do the same in favour of the government have been few and largely unsuccessful.

In this context, as expected, the Brazilian economy continues to deteriorate. The contractionary impact of fiscal retrenchment has been greater than anticipated because not many people can foresee what will come next. In fact, no one can, even if announced measures will in fact be implemented while current difficulties, including fiscal difficulties, grow further.

The federal government was not able to pass the contractionary measures it argued to be essential, thus creating a ‘Catch 22’ situation in which one expects the success of the government to be very bad for the country but its failure to be even worse. Many economists are predicting a fall in 2015 GDP close to two percent, postponing chances of recovery until at least 2017.

“[Brazil] finds itself at an impasse. No political force seems to be strong enough, or even interested in finding a better and more promising alternative policy strategy”
If this contraction actually happens, it will be one the most serious recessions in recent history, much worse than what happened in 2008 and 2009.

The reasons for this are complex and the government is partly correct to point to the worsening of the external scenario. China can no longer carry Brazil forward. The recovery of the U.S. economy is weak and volatile. Europe is unable to overcome its own fossilised views on the virtues of austerity, causing the whole area to limp around.

Of course, this excuse only goes so far. Many analysts had called the attention of government authorities to the fact that growth during President Lula da Silva’s two terms in office (2003-2011) would vanish in the event that China lost its breath, as has actually happened.

The country lost the opportunity to make the investments, particularly in infrastructure, which could have increased its productive capacity. Efficient industrial policies should have been consistently implemented to that end, public investment should have been expanded, and consistent exchange rate policies should have been sought to change the picture of overvaluation that has been killing local manufacturing, on and off, since the Real Plan was implemented in 1994.

Practically nothing of this was effectively done. Investment plans were announced that had no consequence, local manufacturers became importers on an increasing scale, and roads, ports and energy production fell behind needs, while the government presented policies to increase household indebtedness to expand consumption as a successful combination of economic and social policies.

In the last two years of Rousseff’s first term (2011-2014), these policies were not even successful in increasing growth rates and GDP stalled as the government appealed more and more to tricks, particularly accounting tricks, and the distribution of favours to politically-connected sectors to try to revive the economy.

To a large extent, the turn to austerity was motivated by the failure to revive the economy, which doubled the bet on mistaken policies. Austerity measures in a shrinking economy can only accelerate the fall. But the dissolution of the political power of the president tripled the bet.

No one can believe that the president has the power to effectively pursue an alternative policy path. In fact, if the alternative to austerity is going back to what she did in her first term, the president will not find any supporters, except, perhaps, in her fast-shrinking number of hard-core believers.

So the country finds itself at an impasse. No political force seems to be strong enough, or even interested in finding a better and more promising alternative policy strategy. The more radical opponents – the Workers’ Party (PT) and the PSDB – got lost in a ‘blame game’, trying to pin down which of two presidents, Fernando Henrique Cardoso or Lula, had been worse.

None of them seems to have anything to offer. PMDB does not deal in wholesale strategies, it is more interested in retailing. Given the steep loss of trust in the PT or its leaders, including Lula, the party seems to be excluded from any power arrangement to be designed in the near future (its perspectives for the long-term future are at a minimum very uncertain).

The situation of the PSDB is not much better, because all it has in its favour is the receding memory of the Cardoso period, in which much the same problems were as serious as they are now and the party was as incompetent in pointing to solutions as the PT is now.

In this situation, the PMDB stepped in. It reached some measure of political stability but it has no vision of where to take the economy. Given its structure as a federation of state leaderships, the PMDB deals better with favours than with strategies.

As happened under President José Sarney in the late 1980s, this may be enough – in the best of circumstances – to put the brakes on economic deterioration but not to guide its revival.

The country will survive, of course, as it has done in the past.  The problem is that Brazil has experience of unfortunately all too frequent low-quality political leadership, so even the optimistic analysts can only see hardship ahead. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
SAN SALVADOR, Aug 20 2015 (IPS)

The long saga on Greece is apparently over – European institutions have given Athens a third bailout of 86 billion euros which, combined with the previous two, makes a grand total of 240 billion euros.

Roberto Savio

There is no doubt that the large majority of European citizens are convinced that this is a great example of solidarity, and that if Greece is not now able to walk on its own feet, the responsibility will lie solely with Greek citizens and their government.

But this is only due to the fact that the media system has, by and large, ceased to provide alternative views … and some people even ignore that the bailout is a loan, and therefore increases the country’s debt.

In fact, the productive economy of Greece saw very little of that money because the bailouts were merely financial operations and Greek citizens, not only did not see anything, they have even had to pay a brutal price.

The truth behind the operation has been aptly described by Mujtaba Rahman, the respected chief Eurozone analyst for the London-based Eurasia Group, who said: “The bailout is not really about a growth plan for Greece, but a plan to make sure the European Central Bank (ECB) and the International Monetary Fund (IMF) get paid, and the euro area does not break up.”

And the purpose of this third bailout is clear. Of the famous 86 billion, 36 billion will go to pay the debt with the other European governments (and first of all Germany). Another 25 billion will go to recapitalize the Greek banks, because much capital left the country, heading for safer European banks. Another 18 billion will go to pay interest on the debt which Greece has been piling up. And, finally, seven billion will go to pay the debt of the state with Greek enterprises.“How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?”

So, seven will go to the real economy and nothing to the citizens, who will have now to go through several new drastic measures of austerity, which will further depress their standards of living and their ability to spend.

Financially, the bailouts have been a success. All the losses and bad exposure of European institutions have been passed on to Greece. Before the first bailout, French banks were exposed with bad bonds for 63 billion euros, now only for 1.6 billion with no losses. German banks have gone from 45 to five billion.

What is intriguing is that a number of studies show that until the very last moment, when it was widely known that Greece was in deep crisis, European banks and investors continued to buy Greek bonds.

Were they certain that Greece would pay? No, but they were confident that the Greek government would be rescued, and that they would therefore recover their investments, which is exactly what happened.

The financial system has now a life of its own and has nothing to do with real economy, which it dwarfs by being 40 times larger (if we judge by the volumes of daily financial transactions against the production of goods and services). Capital is untouchable and circulates freely in Europe, unlike its citizens. And now there is a great wave of legislation to introduce lower taxation for the richest one percent!

During the negotiations, one frequent accusation levelled against the Greeks was that they were unable to have their rich ship-owners pay their share of taxes. Of course, ship-owners place their money where it cannot be reached.

But is this not hypocritical when we know that there are at least two trillion euros stashed in fiscal paradises, and that, just to give one example, nobody has got Ryanair to really pay taxes? Not to mention the fact that when he was prime minister of Luxembourg, European Commission President Jean-Claude Juncker granted secret tax rebates to over a hundred international companies?

Now Agence France Press has circulated a new astonishing study from the German Leibnitz Institute of Economic Research, which says that Germany has profited from the Greek crisis to the tune of 100 billion euros, saving money through lower interest payments on funds the government borrowed amid investor “flights to safety” and “these savings exceed the cost of the crisis – even if Greece were to default on its entire debt.”

Meanwhile, a large number of studies point out how, by having a positive balance of trade with its European partners, Germany is in fact sucking capital from Europe.

Interpreting the third bailout and its conditions of austerity as a mere economic operation would be to commit a great error.

No economist can believe that Greece will be able to pay back and not only because it has always had a fragile economy, with little industry and with tourism as its main source of income (aggravated by decades of mismanagement and the corruption of its traditional parties, the very parties that European leaders would like to see come back).

Greece is already in recession and now the doubling of VAT is going to compress consumption further, also because there will now be further reductions in pensions and public salaries (which have been already cut by 20 percent).  It is widely believed that the Greek debt will now reach 200 percent of its GDP, up from 170 percent prior to the bailout.

How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?

Well, it is no coincidence that the IMF, which is the Rotary Club of conservative economists, has refused to join this bailout. The IMF has said it will not put in any money unless European creditors (which is a diplomatic way of saying Germany) accept a restructuring of the Greek debt.

It is clear that the bailout has not been a technical but a political operation. Many European leaders, starting with Juncker himself, intervened in last month’s internal Greek referendum, asking Greeks to vote against Prime Minister Alexis Tsipras. They indicated clearly and openly, in a campaign that the Wall Street Journal repeated in the United States, that the revolt against austerity and the neoliberal economy should be stopped dead in its tracks to avoid political contagion.

For her part, German Chancellor Angela Merkel has declared on German television that she has come to the conclusion that °Tsipras has changed°. This has an air of dejà vu … was it not then British Prime Margaret Thatcher who, intent on destroying the trade unions, launched her famous TINA slogan – There Is No Alternative?

And is there no alternative to this kind of Europe? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Original illustration courtesy of Stéphane Roux

By Pavlos Georgiadis
ATHENS, Aug 18 2015 (IPS)

Just over a month ago, Greek citizens were asked to go to the polls for a referendum that posed the country with an unprecedented existential dilemma and challenged the EU with the possibility of its collapse.

The question that shook the world was a choice between a Plan A – more of the same, evidently failed austerity policies that made the country lose 25 percent of its GDP in five years – and a Plan B – a poorly designed Grexit, with unpredictable consequences that could mean the country’s sudden death.Instead of viewing Greece as a scapegoat, Europe should take this unique opportunity to capitalise on the solutions created by the civil society in the country.

It is an indisputable fact that Greece requires major reforms and Greeks know this better than anyone else. These are related, among others, to major existing legislative gaps, the country’s geography which generates huge transaction costs, a cultural gap between cities and rural areas, and the decision making processes in the country.

Such reforms are of systemic nature, something that no politician in Greece seems able to grasp or advocate. The old guard that still rules the country’s affairs, despite being fully aware of its own failure, is still opting for quick and flaky solutions that hardly address the causes of this crisis.

The same goes for Europe’s leaders, who seem to be more cloistered than ever, limited to their national egos and political clientele. They seem to lack the capacity, both morally and intellectually, but above all the vision to steward Europe’s human face, while addressing this crisis.

A project of “unity in diversity” is threatened by its outdated, largely opaque decision making structures that govern its economics. This explains why European leaders, in the past years, instead of solutions have been offering no more than a narrative based on the worst possible stereotypes.

A top-down approach that plundered Greece into depression and made Greeks, especially the youth, feel like little hamsters in some sort of sick socio-economic experiment.

This crisis never had its crisis manager, exposing the EU’s deficiencies and the distance that splits the politicians’ realities with those of citizens. This is not only evident in the way political leaders handle the Greek case, but other challenges too, such as the TTIP, climate change and immigration.

A new political arena is thus emerging within the EU, that has nothing to do with traditional ideological divides of the left or the right. This new political arena struggles to balance top-down versus bottom-up approaches to our ways of making decisions and planning the future.

Based on this recognition, it is clear that besides a “Plan A” (a politically humiliating and financially unsustainable agreement) and a “Plan B” (the risk of a Grexit), Greece is in dire need of working out a “Plan C”.

A roadmap for advancing towards a real transition back to the Commons, based on civil engagement for participatory mapping and collective management of the assets that influence what is currently under attack: the everyday lives of the people.

Greece needs to put in an unprecedented effort in order to overcome an unprecedented challenge, engaging the best actors in key social fields such as health, food, education and social welfare, just to name a few. At this point, this is absolutely necessary in order to maintain social cohesion and explore systemic solutions during the difficult times to come.

The starting point should probably be in the fields, which a recent study by Endeavor Greece identified as the only dynamic sectors that survive the crisis: agriculture, product manufacturing and Information and Communications Technology (ICT).

The food sector, especially, can pave the way since it is already an integral part of the country’s cultural fabric. With around 13 percent of the Greek workforce engaged in agriculture (the EU average is just over 5 percent), a carefully structured plan for a transition towards agroecology can become an extremely powerful vector of change and a drive for Greece’s new economy.

Community gardens like Per.Ka., located inside an abandoned army camp in Thessaloniki, and peer to peer networks like Peliti -Europe’s largest seed-swap community- are already carving out new food system paradigms.

This new process can only be led by the youth of Greece. Highly skilled, socially networked and internationally educated, many of them are looking back to the land to seek ways out of unemployment.

All these years, these young Greeks have been deprived access to bank loans, while others were transferring 250 billion euros outside the country. Should they be connected with food business incubators, seed funding opportunities and open source technologies, they could catalyse this transition towards a quality, climate-friendly agrifood system which connects the land with health, education, tourism, energy, transport and other services.

Of course, this would require the types of reforms against existing institutional barriers and an outdated legal framework in Greece. Unfortunately, in the last five years, such reforms have never been put on the table by successive Greek governments nor their creditors.

Agrifood is only one example of the few sectors that can generate considerable social, economic and environmental benefits which are necessary towards a more resilient future for the country.

Moreover, it is possibly one of the very few ways to create jobs for the youth, who are challenged by a staggering 52.4 percent unemployment rate, the highest in the EU. Citizens are in need of new options and new development indicators need to be considered in rebuilding the country’s economy.

This change needs to start at the local level, leveraging the potential of the aforementioned initiatives and many more that are acting at the grassroots.

The conditions are ripe, as the 2014 municipal elections brought staff with fresh ideas into office in Greek local authorities. The cities of Athens and Thessaloniki, home to half of the country’s population, received the Mayors Challenge and 100 Resilient Cities awards respectively.

Each one offers one million euros to their budgets for delegating, implementing and scaling strategies for civic participation and urban regeneration. It remains to be seen whether the tools and opportunities offered by those grants and networks will be used efficiently, and not from obsolete mismanagement attitudes and the nepotism of the past.

The challenge is also huge for the citizens of the rest of Europe, who are largely misinformed by reporters of mainstream media, landing in Athens with a mandate from their editors to mainly report on horror stories and misery icons.

This is the time to change this agenda of shame, and instead of viewing Greece as a scapegoat, Europe should take this unique opportunity to capitalise on the solutions created by the civil society in the country.

Again, the youth can play a major role in strengthening the vision of a unified Europe, despite the power games that unfold at the political level. After all, we are the first true European generation.

Evidently, Greece was turned into an experiment in suffocating austerity. But what if Greece became the testing ground for visualising, prototyping and scaling a new economic paradigm that is socially inclusive, climate friendly and economically viable?

I am not sure whether the “Plan C” is the right name for this process. It is quite likely that populist politicians in Greece and Europe might abuse the term, like they did with so many others.

But the essence remains: this is a plan of solidarity, collaboration and resilience. And it is time that this dialogue opened all over Europe, if it wants to remain a Union, and maintain its leading role in the world.

Follow Pavlos Georgiadis on  Twitter: @geopavlos

Edited by Kitty Stapp

Excerpt:

By Roberto Savio
SAN SALVADOR, Aug 1 2015 (IPS)

In recommendations to German Chancellor Angela Merkel at the end of July, the German Council of Economic Experts outlined how a weak member country could leave the Eurozone and called for strengthening the European monetary union.

German Finance Minister Wolfgang Schäuble wants Greece out because he does not believe that it will ever be able to refund the loans it has received so far, and because he thinks it is question of principle to be strict. In an interview with Der Spiegel a few days after the historical date of Jul. 13, at the end of negotiations on Greece, he said: “My grandmother used to say: benevolence comes before dissoluteness.”

Roberto Savio

Explaining the recommendations of the Council of Economic Experts, however, its chairman Christoph M. Schmidt expressed another opinion. “To ensure the cohesion of monetary union, we have to recognise that voters in creditor countries are not prepared to finance debtor countries permanently … A permanently uncooperative member state should not be able to threaten the existence of the euro.”

This is the best illustration of Germany’s Europe. Any country which does not fit into the German scenario will have to quit. Europe is no longer a question of solidarity, it is all about fiscal and monetary considerations.

Germany now says that federalism has exceptions – whenever a member of the Eurozone is perceived to be challenging the rules of the monetary union, it will be subject to complete annihilation of its state sovereignty and national democracy. This is the kind of federalism that Germany has now proclaimed.

This German position on its vision of Europe, where political and ideal considerations are no longer the basis of the European project, has triggered a strong response from a normally obedient France.“We should all realise that the idea of Europe as a political project, based on solidarity and mutual support, is on the wane. Monetary union is no longer just a step towards a democratic political union”

President François Hollande, who appears to have suddenly woken up, has come out with a call to reinforce European integration through the establishment of a “Eurozone government”, which run in the opposite direction from that of Berlin.

Germany will of course go ahead and pursue its own course, but the Paris-Berlin axis which was conceived as the fulcrum of European integration has now been seriously weakened after Germany’s imposed agreement on Greece on Jul. 13. So we have now a major realignment.

France has been the country which has always blocked any substantial progress on European integration, by continually voting against any radical step towards integration in order to preserve as much of its national sovereignty as possible.

Now it is Germany which is intent on changing the course of integration, from a political project to a fixed exchange monetary system based on creditor countries – a system in which some democracies are more equal than others.

Schäuble has been reported as expressing concern over the European Commission’s increased political role, interfering in political issues for which it has no mandate. And it is a stark fact that the Jul. 13 Brussels agreement has sought to remove politics and discretion from the functioning of the monetary union, an idea that has long been very dear to the French, and now are the French who want more European integration as protection from a German Europe.

We should all realise that the idea of Europe as a political project, based on solidarity and mutual support, is on the wane.

Monetary union is no longer just a step towards a democratic political union, as Helmut Kohl and François Mitterand sought at the reunification of Germany, and the creation of the Euro.

We are, in fact, going back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a mechanism which worked primarily for Germany, and which led to the exit of the British pound and the temporary exit of the Italian lira.

But the euro, as Nobel laureate in economics Paul Krugman says, “has turned into a Roach Motel, a trap that’s hard to escape.” Once you’re in, you cannot get out, and you have to accept the diktat of the creditors.

Another Nobel laureate in economics, Joseph Stigliz, who was Chief Economist of the World Bank, says that the current European policy of austerity at any cost, is like going back to a “19^th century debtors’ prison. Just as imprisoned debtors could not make the income to repay, the deepening depression in Greece will make it less and less able to repay.”

Of course, what is never said openly (except by Stigliz) is that in the Greek bailout one central reason for the extremism of the new package of conditions was to teach a lessons to a radical left-wing party, Syriza, and to the Greek people who had had the audacity to reject the calls from European leaders to vote against that party.

It is not by chance that countries like Poland, which were asking to be admitted to the Eurozone, have withdrawn their applications.  The euro has become a rallying political issue, with parties from all over Europe asking to withdraw. It has become the first line of action for those who oppose European integration.

Until now, the answer of European governments has been that withdrawal is impossible under the European constitution. But now that the German Council of Economic Experts has come out with a concrete proposal on how to do that, that line of defence is crumbling.

According to many analysts, Angela Merkel is playing with fire. Germany cannot remain a credible leader of a coalition of Northern and Eastern European countries and ignore the realities and needs of Southern Europe. This is unsustainable, even in the medium term.

Meanwhile, the world goes on. Within seven years India will have overtaken China as the most populous country in the world, while within a few decades Nigeria will have a larger population than the United States.

And Europe? Europe will have become the continent with most old people and lower productivity, and will have to face its four horses of the apocalypse:

• a solution to relations with Russia;
• common agreement on how to deal with the dramatic flow of immigrants, when countries are not even able to relocate 40,000 people in a region of 450 million;
• a real policy on the explosive Middle East and terrorism; and soon
• the request of United Kingdom for a new agreement on the European Union, or else it will exit Europe.

We can safely bet that those negotiations, which will be based purely on economic issues, will be the kiss of death for the original European dream. (END/COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, Jun 9 2015 (IPS)

Only 50 years of Cold War (and the fact that German Chancellor Angela Merkel grew up in East Germany) can possibly explain the strange political power of the United States over Europe.

After a bilateral meeting between Merkel and U.S. President Barack Obama (so much for transparency and participation), the Jun. 7-8 G7 summit opened in Germany and we found out that there had been a trade-off.

Roberto Savio

Merkel agreed that Europe should continue the sanctions against Russia – and so the other members of the G7 duly agreed – and Obama toned down the U.S. position on Greece.

That position had been forcefully expressed by U.S. Treasury Secretary Jacob Lew a few days earlier to European leaders: solve the Greek problem, or this will have a global impact that we cannot afford. This had suddenly accelerated negotiations, with the hope then that everything would be solved before the G7 summit.

But Greece did not accept the plan of the President of the European Commission, Jean-Claude Juncker, which was suspiciously close to International Monetary Fund (IMF) positions.

At the G7 summit, Obama softened the U.S. position on Greece, and even said that “Athens must implement the necessary reforms.”

Obstinacy on sanctions against Russia ignores the fact that, in a very delicate economic moment, Europe has lost a considerable part of its exports because of Russia’s retaliatory block on European imports. It is also difficult to see what advantage there is for Europe in pushing Russia into the arms of China. We will soon be seeing joint naval exercise between the two countries, which will only escalate tensions.

But let us look at Greece given that its tug of war with Europe has now been going on for five years.

Let us recall briefly. Greece had been spending much more than it could by distributing public jobs under any government, by giving easy pensions to everyone, and so on. Then, in 2009, the centre-left Panhellenic Socialist Movement (PASOK) won the elections and we found out that the figures Athens had been giving Brussels were false.

The real deficit stood at almost 12.5 percent of gross domestic product (GDP), confirmation of what the European Union and its bodies had long suspected but which it had done nothing about.“Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means”

To avoid going into the agonising details of the continuous negotiations between Greece and the European Union, I jump to the January elections this year which the left-wing Syriza party won and its leader Alexis Tsipras was named Prime Minister on a clear programme: stop the austerity programme imposed by the “Troika” – IMF, EU and the European Central Bank (ECB) – on behalf of the European countries, led by Germany, Netherlands, Austria and Finland.

Greece is on its knees. Officially, unemployment has gone from 11.9 percent in 2010 to 25.5 percent today, but it is widely considered to be around 30 percent. Among young people, it is close to 60 percent. GDP has gone into a 25 percent decline, Greek citizens have lost about 30 percent of their revenues and public spending has been slashed to the point that hospitals have great difficulty in functioning.

Yet, the request (order) of the “Troika” is simple – cut everything the deficit has been eliminated.

So, for example, cut pensions, which have been already been cut twice. In any case, this would reap a paltry 100 million euros but would cripple people who are living on less than 685 euro a month. Or, raise VAT on tourism, from the present 6.5 percent to 13.6 percent, which would be a deadly blow to Greece’s only important source of income.

This is the plan presented by Juncker, whose arrival as head of the European Commission was accompanied by a grandiose Marshall Plan for Europe, a plan which has since disappeared totally from the scene.

In an article a few days ago titled ‘Europe’s Last Act?”, Joseph E. Stiglitz, Nobel laureate in economics, argues that the idea of austerity as a uniform recipe for Europe is missing reality.

“The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

“The troika’s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece’s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed program.”

It is on austerity that the paths of the United States and the European Union divide.

The United States has embarked on investing for growth, despite pressure from the Republican party for austerity, and the U.S. economy is picking up again.

But Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means. As The Economist put it in an article on the Greek crisis: “In German eyes this crisis is all about profligacy”.

It did not help that another very minor crisis – that of Cyprus between 2012 and 2013 – confirmed Germany’s view about the profligacy of the south of Europe. In the case of Cyprus, the “Troika” settled the crisis at a cost of 10 billion euros.

There is widespread agreement that the crisis of Greece, which represents just two percent of the total European budget, could have been settled at the beginning with a 50-60 billion euro loan. But only since Tsipras became prime minister, and with popular support started to refuse to accept the creditors’ plan, has Greece has become a very important issue.

There is now talk of a “Grexit”, or Greece’s exit from the European Union. This would have a cascade effect, and it would mean the end of Europe as a common dream, of a Europe based on solidarity and communality.

In the G7, Obama has insisted on investments and demand as a way out of the crisis. Merkel has again repeated that Europe does not need stimulus financed by debt, but stimulus coming from the reform of inefficient economies. At this point, perhaps “everything is always about something else”, as the late award-winning Sri Lankan journalist Tarzie Vittachi once told me.

An enlightening comment on the Greek situation has come from Hugo Dixon writing in The New York Times of Jun. 7. The Greek prime minister “will have to choose between saving his country and sticking to a bankrupt far-left ideology. If he is smart, he can secure a few more concessions from creditors and a goodish deal for Greece. If not, he will drag the country into the abyss.”

And then, it is interesting to note that one of the main reasons for being so hard with Syriza is that the citizens of Spain, Portugal and Ireland, who were the first to swallow the bitter pill of austerity, would revolt if they saw a different path for Greece, and it just happens that those countries have conservative governments.

The entire European political system reeled with shock at the victory of Syriza, and again a few days ago at the victories of the left-wing anti-establishment Podemos party in municipal elections in Spain.

For some reason, the very authoritarian and conservative government of Viktor Orbán in Hungary, the victory of the very conservative Andrzej Duda as president in Poland, as well as the rise of Matteo Salvini’s anti-European and anti-immigration Lega Nord party in Italy create no panic, not even if Salvini looks to Russian President Vladimir Putin and Marine Le Pen, leader of France’s right-wing Front National, as figures of reference.

So, the real issue now in the case of Greece is to punish an anti-establishment figure like Tsipras and show that the radical left cannot run a country.

Who really believes that there will masses of citizens in Madrid, Lisbon or Dublin taking to the streets to protest if Europe does a somersault of solidarity and idealism, and lowers its requests or dilutes them over more time? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, May 19 2015 (IPS)

The victory of the Conservative Party and the debacle of the Labour Party in the recent British general elections is yet another sign of the crisis facing left-wing forces today, leaving aside the question of how, under the British electoral system, the Labour Party actually increased the number of votes it won but saw a reduction in the number of seats it now holds in Parliament (24 seats less than the previous 256).

Roberto Savio

If the proportional rather than uninominal system had been used, the Conservative Party with its 11 million votes would have won 256 and not 331 seats in Parliament (far short of the absolute majority of 326 needed to govern), while at the other extreme the United Kingdom Independence Party with nearly four million votes would have landed 83 and not just the one seat it ended up with – results that would be hard to imagine anywhere else and a good example of insularity.

To an extent, the recent British general elections mirrored the U.S. presidential elections in 2000 when Democratic candidate Al Gore won around half a million more popular votes than Republican candidate George W. Bush but failed to win the majority of electoral college votes on which the U.S. system is based. The outcome was eight years of George W.  Bush administration, the war in Iraq, the crisis of multilateralism, and all the paraphernalia of “America’s exceptional destiny”.

Let us venture now into an analysis that will have the politologues among us cringing.“The left has tried to mimic the winners, instead of trying to be an alternative to the process of neoliberal globalisation and, since the beginning of the world financial crisis in 2008 … it has had no real answer to the crisis”

It is now generally recognised that the end of the Soviet Union has given free way to a kind of capitalism without control, marked by an unprecedented supremacy of finance which, in terms of volume of investments, overwhelmingly exceeds the real or productive economy.

In its wake, neoliberal thinking has found the left totally unprepared, because part of its function had been to provide a democratic alternative to Communism, which was suddenly no longer a threat.

The left therefore has tried to mimic the winners, instead of trying to be an alternative to the process of neoliberal globalisation and, since the beginning of the world financial crisis in 2008 (with its bail-out cost so far of over four trillion dollars), it has had no real answer to the crisis.

Ever since the industrial revolution, the identity of the left had been to press for social justice, equality of opportunities and redistribution, while the right placed the emphasis on individual efforts, less role for the state and success as motivation.

Continuing with this brutal simplification, we have to add that the left, from Marx to Keynes, always studied how to create economic growth and redistribution – Marx by abolishing private property, social democrats through just taxation.

But it never studied the creation of a progressive agenda in the event case of an economic crisis such as the one we are now facing, with structural unemployment, young people obliged  to accept any kind of contract, new technologies which are making the concept of classes disappear, and rendering trade unions – erstwhile powerful actors for social justice – irrelevant.

It is unprecedented that the top 25 hedge fund managers received a reward in 2014 of 11.62 billion dollars, yet neither U.S. President Barack Obama nor Ed Miliband, then still leader of the Labour Party at the recent British general elections (until he resigned after election defeat), saw it fit to denounce this obscene level of greed.

Meanwhile, Europe as a political project is clearly in disarray, and now faces a “Grexit” on its southern flank and a “Brexit” on its northern flank.

In the case of a “Grexit” (the possible abandonment of the European Union by Greece), Greece faces the prospects of having to make substantial concessions to Europe, thus reneging on the promises of Alexis Tsipras who was voted in as prime minister in rebellion against years of dismantlement of public and social structures imposed in the name of austerity.

What is at stake here is the very neoliberal model itself and not only is ordoliberal Germany supported by allies like Austria, Finland and the Netherlands erecting a wall against any form of leniency, but countries which accepted painful cuts and where conservatives are now in power, like Spain, Portugal and Ireland, see leniency as giving in to the left.

A “Brexit” (the possible abandonment of the European Union by Britain) is a different affair. It is a game being played by British Prime Minister David Cameron to negotiate a more favourable agreement for Britain with the European Union.

A referendum will be held before the end of 2017 and the four million people who voted for the UKIP in the recent elections, plus the country’s “Euro-sceptics”, threaten to push Britain out of the European Union, especially if Cameron does not manage to obtain some substantial concessions from Brussels.

Meanwhile, if Europe is in disarray, the United States has a serious problem of governance. Analyst Moisés Naím, who served as editor-in-chief of Foreign Policy magazine from 1996 to 2010, has pinpointed a few examples of how this has translated into self-inflicted damage.

One concerns China which, after waiting five years trying to get the Republican-dominated Congress to authorise and increase in its stake in the International Monetary Fund (IMF) from a ridiculous 3.8 percent to 6 percent (compared with the 16.5 percent of the United States), got fed up and established an alternative fund, the Asian Infrastructure Investment Bank (AIIB).

Washington tried unsuccessfully to kill the initiative by putting pressure on its allies but first the United Kingdom, then Italy, Germany and France announced their participation in the new bank, which now has 50 member countries and the United States is not one of them.

Another example was the attempt by the Republican-dominated Congress to kill the Export-Import Bank of the United States (Ex-Im Bank) which has provided support for U.S exporters to the tune of 570 billion dollars since it was set up by President Franklin D. Roosevelt in 1934.  In just the last two years, China has provided 670 billion dollars in support for its exporters. Moral of the story: U.S. companies will be at a clear disadvantage.

As Larry Summers, a great proponent of U.S. hegemony, put it, “the US will not be in a position to shape the global economic system”.

The latest snub to the U.S. role of world leader came from four Arab heads of state who snubbed a U.S.-Gulf States summit at Camp David on May 14. The summit had been called by Obama to reassure the Gulf states that the ongoing negotiations with Iran over a nuclear agreement would not diminish their relevance, but the rulers of Saudi Arabia, United Arab Emirates, Oman and Bahrain deserted the summit.

However, there is no more striking example of mistake-making than the joint effort by the United States and Europe to push Russian President Vladimir against the wall over his engagement in Ukraine by imposing heavy sanctions.

There was no apparent reflection on the wisdom of encircling a paranoid and autocratic leader, albeit one with strong popular support, by progressively also bringing in all Eastern and Central European countries. The result of this encirclement of Russia is that China has now come to the rescue of Russia, by injecting money into the country’s asphyxiated economy.

China will invest around six billion dollars in the construction of a high speed railway between Moscow and Kazan, is financing a 2,700 kilometre pipeline for the supply of 30 billion cubic metres of Russian gas over a period of 30 years, plus several other projects, including the establishment of a two billion dollar common fund for investments and a loan of 860 million dollars to the Russian Sberbank bank.

So, the net result is that Russia has been pushed out of Europe and into the arms of China, and the two are now starting joint naval and military manoeuvres.  Is this in the interest of Europe?

At the end of the day, the decline of Europe and the United States perhaps comes down to a decline of political vision, with democracy being substituted by partocracy, and the statesman of yesteryear being substituted by very much more modest and self-referential political leaders.

This is all taking place amid a growing disaffection with politics, which is now aimed basically at administrative choices, making corruption easy. At least this is what around one-third of electors now appear to believe when they are asked if they think that they can make a difference at elections … and this is why a rapidly growing number of people are deserting the ballot box. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Fernando J. Cardim de Carvalho
RIO DE JANEIRO, Apr 1 2015 (IPS)

Even moderately well-informed analysts knew that the Brazilian economy was in dire straits as President Dilma Rousseff initiated her second term in office in January.

Unlike her predecessor, Luiz Inácio Lula da Silva (2003-2011), Rousseff had not the same luck with the situation of the international economy. But also, unlike Lula, Rousseff showed herself a poor saleswoman for Brazilian goods and an even poorer manager of domestic economic policy.

Fernando Cardim de Carvalho

There was a strong suspicion that economic policy, especially in the last two years of her first term, had been conducted in ad hoc ways and that serious adjustments would be needed to steer the economy back to working condition anyway. Still, the situation seemed to be even worse than most analysts feared.

More surprising, however, is to find out that Brazilian politics is also in dire straits. Caught off guard by the Petrobras corruption scandal, federal authorities, beginning with Rousseff herself, seemed to become paralysed by the rapid fall in public support, completely losing the power of initiative and creating a dangerous political vacuum in the country.

It is a vacuum rather than a political threat because the opposition seems to be as lost as the president. The political right, never very fond of democratic institutions any way, seemed to be more interested in making the president “bleed” – as stated by Senator (and former vice-presidential candidate) Aloysio Nunes Ferreira, of the Brazilian Social Democracy Party – than with fighting for political hegemony.

Economic problems were certainly fostered by the quality of economic policy-making in the second half of Rousseff’s first term. The realisation that tailwinds created by the Chinese demand for raw materials were no longer blowing led the government to implement a series of measures to stimulate the economy that turned out to be largely useless.

It was not “heterodoxy” that characterised the policy, it was uninformed wishful thinking. A plethora of measures were taken in isolation, without any apparent unifying strategy behind them, distributed mostly as “gifts” from the federal government (which later contributed to the public perception that corruption became a system of government). “Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts”

Plagued by semi-structural exchange rate problems, whereby Brazilian producers lose competitiveness in the face of imported goods in domestic markets and of other sellers in international markets, the federal administration tried to deal with them piecemeal, mostly through instruments like tax reductions or changes in tax rates.

Obsessed with car production, the government burned resources trying to stimulate production (only to meet increasing resistance of other countries to import them, most notably Argentina), again without any strategy thinking about how these newly-produced automobiles would be used in polluted and traffic-jammed Brazilian cities.

The federal government was not deficient only in terms of strategic thinking but also in terms of home caretaking: all available evidence points to the high probability that tax reductions and other similar measures were decided without any calculation of costs, lost fiscal revenues, and so on.

Anti-cyclical macroeconomic policy in late 2008 relied to a large extent on the expansion of consumption expenditures fuelled by increasing household indebtedness. The increase in non-performing loans and income stagnation made this option more and more unsustainable. Investment, in contrast, public and private, repeatedly frustrated expectations.

Unable to finance badly needed infrastructure investments, the government showed itself to be extraordinarily slow in devising appropriate strategies to attract private investors to implement them. Apparently lost in their own inability to define a way out of the mess, the government “muddled through” situations where more forceful definitions were required, as was the case of electric power.

The list of failures or of situations where the government showed inability to lead is long and well known. What was surprising to some extent was to find out that all evidence suggests that the government itself was unaware of what was going on.

Winning re-election by a narrow margin, President Rousseff, characteristically after a long period of hesitation, decided to take a 180-degree turn, asking a known orthodox and fiscal conservative economist to head an empowered Ministry of Finance, surprising even her supporters who seemed to be perplexed by the need to defend policies that they hotly denounced when presented by opposition politicians.

This picture would be difficult enough to manage without the Petrobras scandal. But Petrobras is not only the largest company in the country, it is practically a symbol of the nationality. Besides, energy was supposed to be Rousseff’s area of expertise and she was in fact responsible for the company’s policies for a while, as Minister of Mines and Power.

An increasingly loud murmur of a possible impeachment of the president led her to equivocal political decisions, beginning with the definition of her cabinet, widely considered to be particularly low quality, and alienating not only her major party in government, the Brazilian Democratic Movement Party, but even the majority of her own Workers’ Party.

The result of such initiatives was illustrated by the twin public demonstrations of Mar. 13 and 15.

On Mar. 13, nominal supporters of Rousseff marched through the streets of most of the largest cities in the country. Speaking to the press, most of the leaders of the march (Lula did not participate) declared conditional support for Rousseff – that is, conditional on the firing of the Minister of Finance and change of newly announced austerity policies.

On Mar. 15, an even larger crowd marched in the same cities declaring unconditional opposition to the president.

Brazil is living through a very dangerous period right now. Neither the government, nor the parliamentary opposition are led by leaders the population trusts. The president is slow and generally equivocal when making fateful decisions. The right-wing opposition seemed to be more interested in enjoying the possibility of enacting a “third” ballot to obtain at least a moral condemnation of the president.

This would be bad enough for a country that has just celebrated thirty years of civilian government. When the economy adds its own heavy problems to the political vacuum, it is impossible not to fear the future. (END/IPS COLUMNIST  SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Yilmaz Akyüz
GENEVA, Mar 30 2015 (IPS)

Debt restructuring is a component of crisis management and resolution, and needs to be treated in the context of the current economic conjuncture and vulnerabilities.

International debt workout mechanisms are not just about debt reduction, but include interim arrangements to provide relief to debtors, including temporary hold on debt payments and financing.

They should address liquidity as well as solvency crises but the difference is not always clear. Most start as liquidity crises and can lead to insolvency if not resolved quickly.

Yilmaz Akyuz

Liquidity crises also inflict serious social and economic damages as seen in the past two decades even when they do not entail sovereign defaults.

International mechanisms should apply to crises caused by external private debt as well as sovereign debt. Private external borrowing is often the reason for liquidity crises. Governments end up socialising private debt. They need mechanisms that facilitate resolution of crises caused by private borrowing.

Only one of the last eight major crises in emerging and developing economies was due to internationally-issued sovereign debt (Argentina). Mexican and Russian crises were due to locally-issued public debt; in Asia (Thailand, Korea and Indonesia) external debt was private; in Brazilian and Turkish crises too, private (bank) debt played a key role alongside some problems in the domestic public debt market.

We have had no major new crisis in the South with systemic implications for over a decade thanks to highly favourable global liquidity conditions and risk appetite, both before and after the Lehman Brothers bank collapse in 2008, due to policies in major advanced economies, notably the United States.

But this period, notably the past six years, has also seen considerable build-up of fragility and vulnerability to liquidity and solvency crises in many developing countries."There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure”

Sovereign international debt problems may emerge in the so-called ‘frontier economies’ usually dependent on official lending. Many of them have gone into bond markets in recent years, taking advantage of exceptional global liquidity conditions and risk appetite. There are several first-time Eurobond issuers in sub-Saharan Africa and elsewhere.

In emerging economies, internationally-issued public debt as percentage of gross domestic product has declined significantly since the early 2000s. Much of the external debt of these economies is now under local law and in local currency.

However, there are numerous cases of build-up of private external debt in the foreign exchange markets issued under foreign law since 2008. Many of them may face contingent liabilities and are vulnerable to liquidity crises.

An external financial crisis often involves interruption of a country’s access to international financial markets, a sudden stop in capital inflows, exit of foreign investors from deposit, bond and equity markets and capital flight by residents. Reserves become depleted and currency and asset markets come under stress. Governments are often too late in recognising the gravity of the situation.

International Monetary Fund (IMF) lending is typically designed to bail out creditors to keep debtors current on their obligations to creditors, and to avoid exchange restrictions and maintain the capital account open.

The IMF imposes austerity on the debtor, expecting that it would make debt payable and sustainable and bring back private creditors. It has little leverage on creditors.

There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure; and risks are created for the financial integrity of the IMF.

Many of these problems were recognised after the Asian crisis of the 1990s, giving rise to the sovereign debt restructuring mechanism, originally designed very much along the lines advocated by the U.N. Conference on Trade and development (UNCTAD) throughout the 1980s and 1990s (though without due acknowledgement).

However, it was opposed by the United States and international financial markets and could not elicit strong support from debtor developing countries, notably in Latin America. It was first diluted and then abandoned.

The matter has come back to the attention of the international community with the Eurozone crisis and then with vulture-fund holdouts in Argentinian debt restructuring.

After pouring money into Argentina and Greece, whose debt turned out to be unpayable, the IMF has proposed a new framework to “limit the risk that Fund resources will simply be used to bail out private creditors” and to involve private creditors in crisis resolution. If debt sustainability looks uncertain, the IMF would require re-profiling (rollovers and maturity extension) before lending. This is left to negotiations between the debtor and the creditors.

However, there is no guarantee that this can bring a timely and orderly re-profiling. If no agreement is reached and the IMF does not lend without re-profiling, then it would effectively be telling the debtor to default. But it makes no proposal to protect the debtor against litigation and asset grab by creditors.

There is thus a need for statutory re-profiling involving temporary debt standstills and exchange controls. The decision should be taken by the country concerned and sanctioned by an internationally recognised independent body to impose stay on litigation.

Sanctioning standstills should automatically grant seniority to new loans, to be used for current account financing, not to pay creditors or finance capital outflows.

If financial meltdown is prevented through standstills and exchange controls, stay is imposed on litigation, adequate financing is provided and contractual provisions are improved, the likelihood of reaching a negotiated debt workout would be very high.

The role of the IMF in crisis management and resolution is incontrovertible. However, the IMF cannot be placed at the centre of international debt workout mechanisms. Even after a fundamental reform, the IMF board cannot act as a sanctioning body and arbitrator because of conflict of interest; its members represent debtors and creditors.

The United Nations successfully played an important role in crisis resolution in several instances in the past.

The Compensatory Financing Facility – introduced in the early 1960s to enable developing countries facing liquidity problems due to temporary shortfalls in primary export earnings to draw on the Fund beyond their normal drawing rights at concessional terms – resulted from a U.N. initiative.

A recent example concerns Iraq’s debt. After the occupation of Iraq and collapse of the Saddam Hussein regime, the U.N. Security Council adopted a resolution to implement stay on the enforcement of creditor rights to use litigation to collect unpaid sovereign debt.

This was engineered by the very same country, the United States, which now denies a role to the United Nations in debt and finance on the grounds that it lacks competence on such matters, which mainly belong to the IMF and the World Bank.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This article is partly based on South Centre Research Paper 60 by Yilmaz Akyüz titled Internationalisation of Finance and Changing Vulnerabilities in Emerging and Developing Economies.

Excerpt:

By Roberto Savio
ROME, Mar 12 2015 (IPS)

The world is clearly splitting into two parallel worlds, with each going their own way, in what we could call the ‘Acapulco paradox’.

Take the official version of the image of Acapulco – a splendid Mexican resort, with horse riding on the beaches, a place blessed by nature and enriched by beautiful villas, gourmet restaurants, a place of bliss and relaxation.

Roberto Savio

Now take the version of the people living there – a place torn by criminal gangs with several deaths every day, where locals live in fear and total insecurity.

In the same way, there are now two ways to look at global reality.

One is the macroeconomic approach based on global data and, according to which, Greece has been doing better along with Italy, Portugal and Spain. In those countries, macroeconomic data are improving. Spain is even being touted as the example of how a country, which went through the bitter pill of austerity, now has growth at the same level as Germany.

Then, speak with young people, among whom unemployment is close to 40 percent, or with pensioners, or with those working in the hospital and education sectors, and you get a totally different picture. According to Caritas, the number of people living in misery has doubled in the last seven years.

The alternative model is the United States, which invested in growth and not in austerity like Europe. Its growth is running at 2.4 percent against an anaemic 0.1 percent for Europe. Again, the positive macro data do not coincide with the people’s data.

“Take the official version of the image of Acapulco, a place of bliss and relaxation. Now take the version of the people living there, a place torn by criminal gangs, where locals live in fear and total insecurity. In the same way, there are now two ways to look at global reality”
Let us take the latest example of economic recovery: the decision of the Walmart retail chain, one of the largest employers in the United States to increase the hourly wage from 8.9 to 10 dollars. This looks like very positive news, but the fact is that 60 percent of Walmart staff do not work sufficient hours to make a living – some work just two days a week, and with 640 dollars a month you are still into poverty.

Maybe it is just a coincidence, but the suicide rate rose from 11 per 100,000 people in 2005 to 13 seven years later. In the time it takes to read this article, six Americans will have tried to kill themselves and in another ten minutes one will have succeeded. More than 40,000 Americans took their own lives in 2012, more than died in car crashes, says the American Association of Suicidology.

If you start looking into the macro data, things become clearer. Profits from the financial sector are now over 20 percent of the total, double the level from the Second World War to the 1970s, and since 1970 productivity has grown by less than half. What this means is that the real economy has grown by half that of finance.

It is now clear that it is growth of the finance industry which is really holding back the rest of the economy, and far fewer people are employed in the financial sectors than in production and services.

These data come from nothing less than the Bank of International Settlements, the Gotha of the banking world, which also reports that brilliant people are trying to move into the financial sector, to the detriment of other sectors of the economy.

Looking into the figures opens up fascinating analyses. One of them from Hong Kong, published in the New York Times in the first week of March, deals with the personal wealth of lawmakers from China and the United States.

The NYT reported that according to the Shanghai-based Hurun Report, of the 1,271 richest people in China – a record 203 – nearly 16 percent are in the Parliament or its advisory body. Their combined net worth is 463.8 billion dollars, which is more than the annual economic output of Austria.

By comparison, American lawmakers are poorer. Eighteen of the Chinese lawmakers have a net worth greater than the 535 members of the U.S. Congress, the nine members of the U.S. Supreme Court and U.S. President Barack Obama’s cabinet.

We should pity the U.S. lawmakers, the 22 richest members of whom have only an average of 124 million dollars (70 percent of the senators are millionaires anyhow) and make up only four percent of the Senate, while four percent of the richest Chinese lawmakers are the country’s 203 billionaires.

Statistics in Europe also open the way to illuminating reflections. Take Spain, for example, where billionaires are in decline. In the Forbes list of the richest men in the world, Spain now has 21, five less than last year. Their combined wealth is 116,300 million dollars, and they increased their wealth in a year by only 500 million dollars, against the 3,200 million dollars of the richest man in the world, Bill Gates.

Yet, 500 million dollars is the equivalent of 35,714 average yearly  salaries, close to the population of the sunny town of Teruel in eastern Spain (around 36,000), and 116,300 million dollars is the equivalent of 8.3 million yearly salaries, equal to the combined population of Andalusia, the largest Spanish region, and the Balearic Islands.

The problem is that those two worlds are supposed to meet and relate through political institutions: Parliament, which represents everybody, and Government, which is supposed to regulate society for the good of every citizen.

Well, a good case study comes again from Spain, where it is possible to become a Spanish resident without going to Spain. It is sufficient to buy two millions euros’ worth of the country’s public debt, or buy one million euros’ worth of shares, or buy a house that costs at least 500,000 euros plus taxes, to become a Spanish resident. Since September 2013, 530 foreigners have obtained that right.

It is probable that the experience of obtaining a Spanish residence permit of the tens of thousands who crossed the Mediterranean at risk of their lives (it is estimated that over 20,000 have died up to now) looks very different. And many European countries have taken a similar path, including the United Kingdom, Cyprus and Portugal

In the United Kingdom, there is now a debate on a law from 1914 which excludes “non-domiciled” residents (‘non-doms’) from paying taxes on their foreign income or assets. It is enough to have a domicile abroad, usually by declaring permanent home in a tax haven. The number of ‘non-doms’ surged by 22 percent between 2000 and 2008 (year of the last available date), to reach 130,000 people.

This is part of an effort to reduce taxation on rich people, by creating loopholes and new regulations, to attract as many rich people as possible. President François Hollande in France has learnt at his expense what it means to speak of taxing the rich and had to make a quick turnaround. Obama is doing the same, and the only ‘leader’ who is speaking about taxing the rich is now Pope Francis.

However, one of the best examples of the ‘Acapulco paradox’ comes from the City in London.

After all the popular uprising about the disproportionate salaries of bankers, with public declarations from the U.K. government, the Church of England and the Bank of England, the announcement of an improvement in the U.K. economy by the European authorities has been taken at face value.

Barclays, for example, is increasing salaries by 40 percent, and an increase in salaries of 25 percent is expected all over the City this year. A young financial analyst, just out of university, at entrance salary could expect to take home the equivalent of 100,000 dollars per year.

While this will be good for statistics on average incomes, the yearly incomes of the 10 percent poorest British citizens will keep them at survival level. It is likely that their view of economic recovery will be different from those in the City. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Guillermo Medina
MADRID, Mar 4 2015 (IPS)

At last, on Tuesday Feb. 24, the Eurogroup (of eurozone finance ministers) approved the Greek government’s commitment to a programme of reforms in return for extending the country’s bailout deal.

The agreement marks the end of tense and protracted negotiations. It consists of a four-month extension for the second bailout programme worth 130 billion euros (over 145 billion dollars), in force since 2012 and which was due to expire on Feb. 28. The first bailout was for 110 billion euros, equivalent to 123 billion dollars.

Guillermo Medina

During this period, the European Central Bank (ECB) will provide Greece with liquidity and the terms of a new bailout will be hammered out.

The eleventh-hour agreement was no doubt motivated partly by fears that a “Grexit” – Greek withdrawal from the eurozone monetary union – would have triggered a financial earthquake with unforeseeable consequences. The result is a very European-style compromise that averts catastrophe and gains time while avoiding facing the underlying problems.

In exchange for an extension of financial support from Greece’s partners and creditors, Prime Minister Alexis Tsipras will have to submit all his government’s measures during this period to Eurogroup inspection.

But the deal promises Greece more than just restrictions. The country will have to pay its debts to the last euro, but if, as seems probable, deadlines for primary surplus targets are extended, the country will have greater ability to pay (France has just secured this for itself).

In the final document, Greece promised to adopt a tax reform that would make the system fairer and more progressive, as well as reinforce the fight against corruption and tax evasion and reduce administrative spending.“Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future”

If the government pursues these goals, together with the fight against contraband, efficiently and with determination (as indeed it should, because they are part of its programme and target its domestic enemies), the income will be helpful for the application of its social and economic programmes.

In view of the successive positions that Greece has had to relinquish in the course of the negotiations, it appears that the country has achieved the little that could be achieved.

The negotiations between Greece and its European partners mark a milestone in the political tussle in the European Union since the reunification of Germany in 1990, between moving towards a Europeanised Germany or a Germanised Europe.

Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future.

Germany has openly tried to impose its convictions and its hegemony on Europe. Greece was only the immediate battlefield. Brussels and Berlin have been divided from the outset about how to solve the Greek crisis, but Germany prevailed.

However, the masters of Europe do not have any interest in “destroying” Greece, and so cutting off their nose to spite their face. They are satisfied with a demonstration of the asymmetry of power between the two sides, and the public contemplation of assured failure for whoever defies the status quo and supports any policy that deviates from the one true official line.

The problem with a Germanised Europe is not the preponderant role that Germany would play, but that it would impose a “Made in Germany” model of Europe that conforms to its own interests. That is how it would differ from a Europeanised Germany.

The Greek crisis has highlighted the ever-widening contrast between the values and ideals that we consider to be central to the European project, such as solidarity, mutual aid and social justice, and the new values that set aside basic aims like full employment, social welfare and equal opportunities.

It is paradoxical that Europe, which is apparently absent from or baffled by threats from the opposite shore of the Mediterranean, should take a harsh, tough attitude with a small partner overwhelmed by debt. It is also paradoxical that structural reforms are demanded of Greece, without admitting Europe’s own urgent need to redesign the eurozone and reframe the policies that have led to the poor performance of its monetary union.

The Greek crisis and the difficulties in overcoming it have a great deal to do with a design of the euro that benefits financial interests, particularly Germany’s.

The project neglected the harmonisation of tax policies and created a European Central Bank that lacked the powers that permit the U.S. Federal Reserve and the Bank of England to issue money and buy state debt.

As is well known, the ECB has made loans to European banks at very low interest rates, and they in turn have made loans to states, including Greece, at much higher interest. Government debts thus mounted up, and in order to pay they were forced to cut public spending.

Why does Europe persist in following failed policies while refusing to follow those that have lifted the United States out of recession? The only explanation is stubborn attachment to an ideological vision of economic policy that is devoid of pragmatism.

How can insistence on the path of error be explained at such a time? There may well be a quota of incompetence, but the basic reason is, as Nobel prize-winners Joseph Stiglitz and Paul Krugman affirm, that the goal of the policies imposed by the “Troika” (European Commission, ECB and International Monetary Fund) is to protect the interests of financial capital. And this is because the powers of political institutions, the media and academia, are dominated by financial capital, with German financial capital at the core.

Financial interests are essentially capable of shaping the decisions of European governance institutions. In the United States this subservience is less clear-cut, allowing hefty penalties to be imposed on certain banks, as well as the development of other economic strategies.

This is because independent mechanisms of control and oversight exist, the Federal Reserve has well-defined goals (whereas the ECB has spent years fighting the insistent threat of inflation), and there is democratic administration with the political will to resist.

In conclusion: the issue is to clarify what sort of Europe the citizens of Europe want, and what institutional changes are needed to achieve it.

And even more importantly, having seen the consecration of German hegemony over the Old World, what sort of German leadership would be compatible with a united Europe based on solidarity? Is this even possible? (END/IPS COLUMNIST SERVICE)

Translated by Valerie Dee/Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Alexis Tsipras (centre), Syriza’s charismatic 40-year-old leader, has been campaigning under the banner “Hope is on its way.” Credit: Mirko Isaia/cc by 2.0

By Marianna Fotaki
COVENTRY, England, Jan 24 2015 (IPS)

The European Union should not be afraid of the leftist opposition party Syriza winning the Greek election, but see it as a chance to rediscover its founding principle – the social dimension that created it and without which it cannot survive.

Greece’s entire economy accounts for three per cent of the euro zone’s output but its national debt totals €360 billion or 175 per cent of the country’s GDP and poses a continuous threat to its survival.

Courtesy of Marianna Fotaki

While the crippling debt cannot realistically be paid back in full, the troika of the EU, European Central Bank, and IMF insist that the drastic cuts in public spending must continue.

But if Syriza is successful – as the polls suggest – it promises to renegotiate the terms of the bailout and ask for substantial debt forgiveness, which could change the terms of the debate about the future of the European project.

It would also mean the important, but as yet, unaddressed question of who should bear the costs and risks of the monetary union within and between the euro zone countries is likely to become the centrepiece of such negotiations.

The immense social cost of the austerity policies demanded by the troika has put in question the political and social objectives of an ‘ever closer union’ proclaimed in the EU founding documents.The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

Formally established through the Treaty of Rome in 1957, the European Economic Community between France, Germany, Italy and the Benelux countries tied closely the economies of erstwhile foes, rendering the possibility of another disastrous war unaffordable. Yet the ultimate goal of integration was to bring about ‘the constant improvements of the living and working conditions of their peoples’.

The European project has been exceptionally successful in achieving peaceful collaboration and prosperity by progressively extending these stated benefits to an increasing number of member countries, with the EU now being the world’s largest economy.

Since the economic crisis of 2007, however, GDP per capita and gross disposable household incomes have declined across the EU and have not yet returned to their pre-crisis levels in many countries. Unemployment is at record high levels, with Greece and Spain topping the numbers of long-term unemployed youth.

There are also deep inequalities within the euro zone. Strong economies that are major exporters have benefitted from free trade and the fixed exchange rate mechanism protecting their goods from price fluctuations, but the euro has hurt the least competitive economies by depriving them of a currency flexibility that could have been used to respond to the crisis.

Without substantial transfers between weaker and stronger economies, which accounts for only 1.13 per cent of the EU’s budget at present, there is no effective mechanism for risk sharing among the member states and for addressing the consequences of the crisis in the euro zone.

But the EU was founded on the premise of solidarity and not as a free trade zone only. Economic growth was regarded as a means for achieving desirable political and social goals through the process of painstaking institution building.

With 500 million citizens and a combined GDP of €12.9 trillion in 2012 shared among its 27 members the EU is better placed than ever to live up to its founding principles. The member states that benefitted from the common currency should lead in offering meaningful support rather than decimating their weaker members in a time of crisis by forcing austerity measures upon them.

This is not denying the responsibility for reckless borrowing resting with the successive Greek governments and their supporters. However, the logic of a collective punishment of the most vulnerable groups of the population must be rejected.

The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

With youth unemployment above 50 per cent, many well-educated people have left the country. There is no access to free health care and the weak social safety net from before the crisis has all but disappeared. The dramatic welfare retrenchment combined with unemployment has led to austerity induced suicides and people searching for food in garbage cans in cities.

A continued commitment to the policies that have produced such outcomes in the name of increasing the EU’s competitiveness challenges the terms of the European Union’s founding principles. The creditors often rationalise this using a rhetoric that assumes tax-evading unproductive Greeks brought this predicament upon themselves – they are seen as the undeserving members of the euro zone.

Such reasoning creates an unhealthy political climate that gives rise to extremist nationalist movements in the EU such as the Greek criminal Golden Dawn party, which gained almost 10 per cent of votes in the last European Parliament elections.

Explaining the euro zone debt crisis as a morality tale is both deleterious and untrue. The problematic nature of such moralistic logic must be challenged: one cannot easily justify on ethical grounds forcing the working poor to bail out a banking system from which many wealthy people benefit, or transferring the consequences of reckless lending by commercial outlets to the public.

Nor can one explain the acquiescence of creditors to the machinations of the nepotistic self-serving corrupt elites dominating the state over the last 40 years that got Greece into the euro zone on false data and continue to rule it. As I have argued, the bailout money was given to the very people who are largely responsible for the crisis, while the general population of Greece is being made to suffer.

Greece’s voters are determined to stop the ruling classes from continuing their nefarious policies that have brought the country to the brink of catastrophe, but in the coming elections their real concern will be opposing the sacrifice of the futures of an entire generation.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS-Inter Press Service.

Edited by Kitty Stapp

Excerpt:

Typical agricultural landscape of Ukraine, Kherson Oblast. Credit: Dobrych (Flickr)/CC-BY-SA-2.0, via Wikimedia Commons

By Frederic Mousseau
OAKLAND, United States, Aug 12 2014 (IPS)

Mostly unreported as the Ukraine conflict captures headlines, international financing has played a significant role in the current conflict in Ukraine.

In late 2013, conflict between pro-European Union (EU) and pro-Russian Ukrainians escalated to violent levels, leading to the departure of President Viktor Yanukovych in February 2014 and prompting the greatest East-West confrontation since the Cold War.

Frédéric Mousseau

A major factor in the crisis that led to deadly protests and eventually Yanukovych’s removal from office was his rejection of an EU association agreement that would have further opened trade and integrated Ukraine with the European Union. The agreement was tied to a 17 billion dollars loan from the International Monetary Fund (IMF). Instead, Yanukovych chose a Russian aid package worth 15 billion dollars plus a 33 percent discount on Russian natural gas.

The relationship with international financial institutions changed swiftly under the pro-EU government put in place at the end of February 2014 which went for the multi-million dollar IMF package in May 2014.

Announcing a 3.5 billion dollars aid programme on May 22, World Bank president Jim Yong Kim lauded the Ukrainian authorities for developing a comprehensive programme of reforms, and their commitment to carry it out with support from the World Bank Group. He failed to mention the neo-liberal conditions imposed by the Bank to lend money, including that the government limit its own power by removing restrictions that hinder competition and limiting the role of state control in economic activities. “The stakes around Ukraine's vast agricultural sector, the world’s third largest exporter of corn and fifth largest exporter of wheat, constitute a critical factor that has been overlooked. With ample fields of fertile black soil that allow for high production volumes of grains, Ukraine is the breadbasket of Europe”

The rush to provide new aid packages to the country with the new government aligned with the neo-liberal agenda was a reward from both institutions.

The East-West competition over Ukraine, however, is about the control of natural resources, including uranium and other minerals, as well as geopolitical issues such as Ukraine’s membership in the North Atlantic Treaty Organization (NATO).

The stakes around Ukraine’s vast agricultural sector, the world’s third largest exporter of corn and fifth largest exporter of wheat, constitute a critical factor that has been overlooked. With ample fields of fertile black soil that allow for high production volumes of grains, Ukraine is the breadbasket of Europe.

In the last decade, the agricultural sector has been characterised by a growing concentration of production within very large agricultural holdings that use large-scale intensive farming systems. Not surprisingly, the presence of foreign corporations in the agricultural sector and the size of agro-holdings are both growing quickly, with more than 1.6 million hectares signed over to foreign companies for agricultural purposes in recent years.

Now the goal is to set policies that will benefit Western corporations. Whereas Ukraine does not allow the use of genetically modified organisms (GMOs) in agriculture, Article 404 of the EU agreement, which relates to agriculture, includes a clause that has generally gone unnoticed: both parties will cooperate to extend the use of biotechnologies.

Given the struggle for resources in Ukraine and the influx of foreign investors in the agriculture sector, an important question is whether the results of the programme will benefit Ukraine and its farmers by securing their property rights or pave the way for corporations to more easily access property and land.

By encouraging reforms such as the deregulation of seed and fertiliser markets, the country’s agricultural sector is being forced open to foreign corporations such as Dupont and Monsanto.

The Bank’s activities and its loan and reform programmes in Ukraine seem to be working toward the expansion of large industrial holdings in Ukrainian agriculture owned by foreign entities.

Amid the current turmoil, the World Bank and the IMF are now pushing for more reforms to improve the business climate and increase private investment. In March 2014, the former prime minister ad interim, Arsenij Yatsenyuk, welcomed strict and painful structural reforms as part of the 17 billion dollars IMF loan package, dismissing the need to negotiate any terms.

The IMF austerity reforms will affect monetary and exchange rate policies, the financial sector, fiscal policies, the energy sector, governance, and the business climate.

The loan is also a precondition for the release of further financial support from the European Union and the United States. If fully adopted, the reforms may lead to significant price increases of essential consumer goods, a 47 to 66 percent increase in personal income tax rates, and a 50 percent increase in gas bills. These measures, it is feared, will have a devastating social impact, resulting in a collapse of the standard of living and dramatic increases in poverty.

Although Ukraine started implementing pro-business reforms under president Yanukovych through the Ukraine Investment Climate Advisory Services Project and by streamlining trade and property transfer procedures, his ambition to mould the country to the World Bank and IMFs standards was not reflected in other realms of policy and his allegiance to Russia eventually led to his removal from office.

Following the installation of a pro-West government, there has been an acceleration of structural adjustment led by the international institutions along with an increase in foreign investment, aimed at further expansion of large-scale acquisitions of agricultural land by foreign companies and further corporatisation of agriculture in the country.

The experience of structural adjustment programmes around the developing world foretells that it will increase foreign control of the Ukrainian economy as well as increase poverty and inequality. As Western powers get ready to impose sanctions on Russia for its transgressions in Ukraine, it remains unclear how programmes and conditionalities imposed by the World Bank will improve the lives of Ukrainians and build a sustainable economic future.

Excerpt:

Civil society activists from five Arab countries are urging the International Monetary Fund (IMF) to ease pressure on their governments to reduce food and fuel subsidies until stronger social-protection schemes and other basic reforms are implemented.

In a new report, the Arab NGO Network for Development (ANND) and the Egyptian Center for Economic and Social Rights (ECESR) argue that social safety nets in Egypt, Jordan, Morocco, Tunisia, and Yemen are inadequate – or, in some cases, too corrupt — to compensate for the loss of critical subsidies on which the poor and even the middle class depend."The pressure should be on the global community that is pushing these austerity measures without considering the actual context or impact on low-income people." -- Leila Hilal

Indeed, in the absence of stronger safety nets, even the gradual removal of subsidies for key commodities may contribute to continuing unrest across the region as the three-year-old “Arab Awakening” plays out, according to the 20-page report.

“In the near term, the unwinding of subsidies cannot serve as the panacea for the serious budgetary and fiscal difficulties facing most Arab states,” according to the report, which was released here Thursday by the Middle East Task Force of the New America Foundation (NAF), a non-partisan think tank.

“By continuing to press Arab governments to remove subsidies, the IMF has inadequately responded to the sweeping social and political changes stemming from the 2011 uprisings and subsequent period of unrest,” it said.

The report also called on the IMF to urge national governments to take other measures, notably instituting progressive tax systems and cutting the military budget, in order to increase revenues and cut spending. Governments must also be encouraged to consult more with civil-society organisation (CSOs), labour unions, and local authorities regarding economic-reform programmes, according to the report.

Jo Marie Griesgraber, who directs New Rules for Global Finance Coalition, welcomed the report, saying it was the latest indication of growing interest by grassroots groups both in the Arab world and in other countries in transition, such as Ukraine and Burma, in the IMF and of their understanding that national economic problems need to be addressed at the global level.

At the same time, she noted that the authors may be overstating the leverage the IMF enjoys over national governments with which it is required under its charter to negotiate agreements.

Bakeries struggled to produce bread in the face of Egypt’s 2011 wheat shortage. Credit: Emad Mekay/IPS

“I’m sure, if given a choice, the IMF would prefer that reducing subsidies would not be the first policy option they would want to implement to reduce deficits,” she told IPS. “It’s a government policy, and the government is going to agree to cut subsidies to the poor before it agrees to cut military expenditures.”

“The IMF can’t do everything; you need the World Bank; you need regional banks; you need an international court to throw corrupt officials in jail; you need a national political commitment for people to pay taxes,” she said. “The IMF is too limited in what it alone can do, although it serves as a convenient scapegoat for governments.”

Leila Hilal, NAF’s Middle East task force director, agreed that states “are engaging the IMF bilaterally without consulting the affected populations.”

With the recent uprisings, she told IPS in an interview from Jordan, “people feel that their voices are more valuable, that they have more agency, and that there’s much more at stake in terms of policy, and they want to be heard.

“So the idea is that the pressure should be on the global community that is pushing these austerity measures without considering the actual context or impact on low-income people,” she said.

While the mass demonstrations, violence, and political upheavals across the Arab world continue to capture the headlines, relatively little attention has been paid to the underlying economic problems that many analysts believe lie at the root of the continuing regional turbulence.

The Washington-based IMF, which is dominated by the wealthy Western nations, has long been involved in the Middle East/North Africa (MENA) region, particularly in the five low- and middle-income countries that are the subject of the report.

The lender of last resort for failing economies, it provides short-term loans that are subject to recipient governments’ compliance with conditions designed to reduce, if not eliminate their fiscal deficits.

Over much of its history, it acquired a controversial reputation for pushing severe austerity on governments as part of “structural adjustment” programmes which hit the poor and most vulnerable sectors of society the hardest, often as a result of cuts to food and fuel subsidies, as well as social services, including health and education.

The IMF said it was unable to comment before deadline.

Cuts in subsidies have been particularly controversial because of their immediate impact on the population. In 1977, for example, a cut in bread subsidies in Egypt provoked widespread unrest, as did Jordan’s attempts cut subsidies in 1989 and again in 1996. When the IMF sent a mission to Egypt in April last year, it was greeted with protests by civil-society groups, labour unions, and political parties anticipating that the agency would demand similar cuts as a condition for much-needed loans.

In much of the region, food and fuel subsidies make up a large percentage of government spending; in 2012, for example, they accounted for 10 percent of the Egyptian budget.

As the report itself notes, the Fund – as well as its development sister agency, the World Bank — has become increasingly sensitive to these criticisms and sought to persuade governments with which it negotiates the loan conditions to mitigate the impact on the poor by reducing subsidies more gradually and, with the Bank’s help,  strengthening social-safety nets for the most vulnerable.

But the report, which was based on interviews with more than a dozen prominent civil-society activists from the five countries, as well as analyses of IMF staff reports and other IMF documents, argues that these efforts are sometimes based on faulty assumptions.

“Theoretically, the IMF proposes the expansion of social safety nets as a way to offset the negative impact of subsidy removal on the poor,” it said. “In practice, however, social protection schemes are underdeveloped and often nonexistent in Arab countries, and are thus incapable of cushioning the poor against rising prices. In many instances, corruption and the absence of transparency mechanisms further complicate the task of distribution social welfare benefits.”

“Subsidy reform should only occur upon the establishment of sustainable and comprehensive social protection schemes, and can only proceed with broad support from a variety of stakeholders,” according to the report.

“Our analysis highlights the need for the IMF and the G8 countries to adapt their advice to the changing political and socio-economic conditions in the Arab region,” said NAF’s Abdulla Zaid, one of four the report’s co-authors. “The Fund’s one-size-fits-all advice prioritising fiscal austerity measures over social and economic rights fails to account for the harmful impact subsidy removal would have on low and middle-income individuals, and thus, stability.”

By Hazel Henderson
ST. AUGUSTINE, Florida, Nov 4 2013 (Columnist Service)

It is time to move the global policy debate beyond the binary options of “austerity” versus “stimulus.” Both these macroeconomic policies have caused untold harm to millions and produced dangerous policy stalemates in Europe and the U.S., Japan and other countries.

The experiments in Europe to impose austerity have not only caused unemployment, falling growth rates and quality of life but also rising extremism and political polarisation.

Europeans have learned that debts can’t be paid by more borrowing. And the U.S. Congress is succumbing to mob rule by 50 Republicans who shut down the government. These self-inflicted crises are damaging U.S. credibility and its currency.

The lessons of stimulus are equally dire. Monetary expansion loses effectiveness with each new round of money-printing, whether as bond-buying by the European Central Bank or “quantitative easing” – QEs I, II and III – by the U.S. Federal Reserve.

Hazel Henderson

Pumping up stock markets on the textbook theory that this financial prosperity will trickle down to the real economies of “Main Street” becomes less and less effective. Asset bubbles reappear, along with angry retirees and savers, rising inequality, extremist political parties and legislative deadlock.

Central bankers in emerging markets complain that all this monetary stimulus destabilises their own currencies and economies. Chinese officials plan to launch their renminbi as a global currency and have inked an agreement with Britain to make London its trading centre.

Meanwhile, fiscal stimulus causes predictable conflicts about where funds will be directed, who will win and who will lose. Popular tax cuts rarely target those whose needs assure spending their funds into the economy and often end up in more saving by rich recipients. Spending on public services and infrastructure is a larger multiplier, but is too often spent on roads or bridges to nowhere.

The question arises: are austerity or stimulus the only two options, as macroeconomic theories insist? Increasingly, leaders who claim “there is no alternative” are in disrepute.

Even the grandees of the economics profession, including those of the George Soros-backed think tank INET, are now looking for alternatives, some even pronouncing macroeconomics as defunct.

A new view from Mariana Mazzucato in her The Entrepreneurial State (2013) cuts through this narrow debate within the conventional box of economics, forcing us to look at the bigger picture through wider lenses of science policy and the evolution of technologies in the real world.

As a former science-policy wonk at the U.S. Office of Technology Assessment, the National Academy of Engineering, I enjoyed Mazzucato’s slaying of so many defunct sacred cows of macroeconomics. She begins by debunking the narrow public vs. private sector framework, exposing the myth that private business and entrepreneurs are smarter and more successful than governments in the key process of innovation.

The embarrassing truth is that economics has studied the innovation process since Robert Solow’s attempt in 1957. No coherent theory has yet emerged. Engineering and technology often precede science and theory, challenging many sacred cows of tax policy and that it and research and development (R&D) funds and investments are drivers of innovation, which is a systemic product of many social, historical, geographical and cultural factors.

Another myth is that venture capital (VC) is risk-taking. Evidence shows governments in many countries are the primary risk-takers with VCs surfing the waves created by tax-payers, often providing two to eight times more venture funding than VCs.

Even Apple obtained early help with a 500,000-dollar loan from the U.S. government’s Small Business Investment Company. And every one of the 12 key technologies in its iPhone was funded by government research grants, as was the internet itself.

Not to pick on Apple, Mazzucato shows that the Fast Fourier Transform algorithm (FFT), the basis of Google’s success, was also funded by government research. In fact, the entire myth of Silicon Valley’s entrepreneurship and brilliance was based on military funding and Cold War R&D which continues to this day.

I called out special pleaders like the American Energy Innovation Council of which Bill Gates of MicroSoft is a member in my “Advice for Bill Gates”. They began calling in 2010 for tripling government funds for clean energy – about which Silicon Valley is demonstrably ignorant.

All this upends the economics of stimulus versus austerity and its deeper basis on the myth that governments are bureaucratic and stupid at “picking winners” while the private sector is smart and creates the innovation engine that produces our jobs and economic growth.

Over 20 million jobs in the U.S. are created by governments at all levels. Starving government does not help economies recover, as shown in Europe, or lead in the U.S. to the “magic of marketplace” recoveries.

All these economic bromides are nonsense, and it is time to go beyond economics and look at the real processes of technological and social innovation through new spectacles.

In my The Politics of the Solar Age, I reviewed the evolution of human societies from the age of agriculture, the use of energy from wood and waterwheels to whale oil, fossil fuels to the next stage of innovation: the green economies of today’s emerging Solar Age.

Green technologies are the next great wave of human innovation. To fully exploit all these vast new opportunities, we must drop old economic categories and see the world anew. This can end the current gridlocks endlessly fighting over how to allocate resources to incumbent 20th century industries like fossil fuels and between competing legacy interests groups.

More austerity or stimulus simply deflates or inflates the decaying old pie! Human development requires investing in the technologies of the future, not bailing out old industries and past mistakes.

China, Germany, South Korea and Denmark have used government risk-taking policies to invest in the rapid growth of their green sectors and companies providing insights into their paradigms beyond economics. U.S. market fundamentalism leads to political gridlock, shutting down government services, mindless “sequestration” and loss of international prestige and competitiveness.

A clearer vision of our next human stage of development and policies articulating goals to achieve them is now vital – particularly in the U.S.

All this attests to the bankruptcy of economics, its cognitive biases toward individualism, zero sum games and against collective win-win action – even on our small, polluted plane.

The phrase “survival of the fittest” was coined by Herbert Spencer in The Economist in1864, spawning the ugly philosophy of Social Darwinism. Charles Darwin’s actual thesis saw the human species’ survival through bonding and cooperating rather than competing.

We can now take in all the new scientific information available from NASA’s 12 geosynchronous satellites for better knowledge of our planet, deeper due diligence and more accurate metrics and risk management, as I describe in my “Mapping the Global Transition to the Solar Age”.

Excerpt:

Thousands of civil servants have marched through the Greek capital, Athens, and the second largest city, Thessaloniki, amid a two-day nationwide strike against planned job cuts.

Schools and courts were closed and hospitals were functioning with reduced staff on Wednesday and Thursday while trains were halted for four hours, and journalists joined in with a three-hour work stoppage, pulling news broadcasts off the air.

Efforts to reduce the 600,000-strong civil service, long seen by critics as wasteful and corrupt, have been resisted by labour unions who say the scheme will only worsen the plight of Greeks enduring a sixth year of recession.

The latest strikes, called by public-sector umbrella union ADEDY, came days before representatives of the “troika” of European Union, European Central Bank and International Monetary Fund (IMF) lenders visit Athens to check on progress made on promised reforms.

“A long, onerous and painful winter has begun,” said ADEDY, which together with private-sector union GSEE represents about 2.5 million workers in this country of 11 million people.

“The truth is that with every troika visit, our national dignity is destroyed. The economy and society are ruined,” it added.

Policy defended

Speaking for the government, health minister Adonis Georgiadis told Al Jazeera: “Greece was the last Soviet state in the European Union. This has to be ended and we will end it now. This is for the benefit of the Greek people.

“We will be liberals and we will let the market work as all ordinary and good and serious people are doing in the rest of the world. Why be afraid of that?”

Government plans call for the suspension on partial pay of 25,000 civil servants this year in a drive to reduce the size of the public sector and meet conditions to continue receiving rescue loans.

Many of those suspended are expected to eventually lose their jobs.

Officials have, however, pledged not to back down.

The government claims it will set up basic state insurance for the 1.4 million jobless and the poor by the end of the year.

It will also take some of the pressure off hospitals through a chain of primary healthcare centres.

But it admits that a lot of state health care may end up being outsourced to the private sector.

Al Jazeera’s John Psaropoulos, reporting from Athens, said: “Slimmer state services in health and education may bode well for the bottom line but they will likely deepen the divide between the haves and the have-nots.

“These state workers fearful of losing their jobs know which camp they’re likely to end up in.”

Austerity measures

Greece has been depending on bailout loans from the IMF and other European countries since May 2010.

In return, it has implemented a series of strict austerity measures to reform its economy.

James Meadway, a senior economist at the New Economics Foundation think-tank in London, believes the protesters are right in their demands.

“Austerities of increasing severities have been applied in some European countries and we are not seeing any serious or sustained recoveries in these economies,” he told Al Jazeera.

“Precisely because austerity is the thing that drives recession. You are setting up this vicious circle of decline in which Greece is very much trapped.

“There are different options like investment and spending by government and creating jobs or perhaps looking to institutions like the German state bank KFW, which has created some 200,000 jobs a year over the last few years and the government action could be used to actually promote recovery in places like Greece, Spain or Portugal.

“But Greece is doing the exact opposite.”

Published under an agreement with Al Jazeera.

John Hendra. Credit: UN Women/Catianne Tijerina

By Thalif Deen
UNITED NATIONS, Jun 10 2013 (IPS)

The widespread financial crisis in Europe, and its negative fallout in the developing world, has triggered severe austerity measures worldwide.

At least nine countries – Belgium, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Slovak Republic and Spain – are reportedly phasing out or eliminating subsidies."Austerity pushes the responsibility for, and cost of, social and public goods back onto households, and in effect, onto women." -- John Hendra

The austerity measures include cutting/capping public sector wages, increasing consumption taxes, pension reforms, further targeting safety nets, and reforms of both the healthcare system and the labour market.

But women are the prime victims of these austerity measures being imposed by financially-troubled governments worldwide.

Asked how specific these constraints are on women, John Hendra, U.N. assistant secretary-general and deputy executive director, Policy and Programme Bureau at U.N. Women, told IPS, “There’s no doubt that the poorest and most vulnerable, the majority of whom are women, are hardest hit by austerity.”

He said this is the case in both developed and developing countries alike.

The poorest and most vulnerable households have already been adjusting to crisis, including higher food and fuel prices, for many years, and their capacity for resilience is limited, said Hendra, who served as resident representative of the U.N. Development Programme (UNDP) in several countries, including Viet Nam, Tanzania and Latvia.

In August 2012, according to the latest statistics, women’s unemployment was higher than men in 10 European Union member states (Spain, Greece, Slovakia, Italy, France, Poland, Slovenia, Czech Republic, Malta and Luxembourg).

In Greece and Spain, more than one-quarter of the female labour force was unemployed in 2012.

The gender pay gap has also widened in a number of countries, notably Latvia, Romania and Bulgaria.

According to the International Labour Organisation (ILO), the proportion of women in vulnerable employment is higher than for men globally, and in some regions, significantly so: in North Africa 55 percent of women compared to 32 percent of men are in vulnerable employment.

In the Middle East, the numbers are 42 percent compared to 27 percent, and in Sub-Saharan Africa 85 percent compared to 70 percent in 2012.

In an interview with IPS, Hendra said, “In addition, austerity measures such as wage and pension cuts, increased consumption taxes and cuts to social safety nets and services disproportionately impact women due to their vulnerable position in the labour market, lower average incomes than men, greater reliance on social protection and basic services, and primary responsibility for care work in the household.”

And funding for gender equality and women’s organisations has been significantly cut, including vital services for survivors of domestic violence, he pointed out.

Excerpts from the interview follow.

Q: Will the widespread financial crisis, both in the developed and developing world, undermine some of the gains made by women over the last decade?

A: I very much believe so. For example, the crisis and austerity measures have had a negative impact on women’s labour force participation.

In Europe, female workforce participation has declined, women’s unemployment rate is higher than that of men in many countries, and the gender pay gap has increased.

In developing countries, crisis and austerity have pushed many more women into informal and vulnerable work. Because women tend to be employed on fragile, non-permanent contracts, they are more vulnerable to being laid off during recessions.

Women faced disproportionate job losses during the Asian financial crisis (1997-1998) and the 2008-2009 global crisis. Austerity has also undermined progress towards a more equal division of care responsibilities. Cuts in public care and health services have led to a re-privatisation of care work and a return to traditional gender roles.

Austerity pushes the responsibility for, and cost of, social and public goods back onto households, and in effect, onto women.

Q: And how severe is this setback in reaching the U.N.’s Millennium Development Goals (MDGs) relating to gender empowerment, maternal health and infant mortality by 2015? Can these be rectified in the UN’s post-2015 agenda? If so, how?

A: There’s a real risk that austerity will slow progress towards achieving the MDGs. As the Organisation for Economic Cooperation and Development (OECD) recently highlighted, austerity measures are likely to slow growth and poverty reduction, and exacerbate inequalities.

According to the Overseas Development Institute (ODI) and Plan International, a one percent fall in gross domestic product (GDP) increases infant mortality by 7.4 deaths per 1,000 for girls versus 1.5 for boys.

Primary school completion rates fall during recession, with girls experiencing a 29 percent decrease versus 22 percent for boys.

During economic downturns, more women in developing countries give birth at home, and their nutritional status and the number of anti-natal and post-natal check-ups have declined. Clearly this will significantly hinder achievement of the MDGs.

The U.N.’s post-2015 development agenda can help by squarely addressing inequality, advancing human rights, and ensuring all countries commit to a universal agenda for sustainability, equality and poverty eradication.

Most critical is to ensure gender equality is central to the new development agenda through a standalone goal on gender equality and substantive integration of gender equality into all other goals and targets. Also critical will be to take a hard look at the current growth model and austerity policies.

Over the past few weeks I think we’ve reached a tipping point in the debate on austerity as a flawed policy, with the International Monetary Fund (IMF) admitting the recessionary impact of austerity has been more severe than anticipated, and mistakes identified in the data and analysis on public debt that supported the adoption of austerity measures in many countries.

As (British economist) J.M. Keynes said, “the boom, not the slump is the time for austerity.” Nevertheless austerity policies continue to affect millions of people in the developed and developing world.

Macroeconomic policies must do more than promote growth, they must also promote people’s wellbeing and rights.

Maintaining or even scaling up social investments, including in gender equality and ending violence against women, is key to ensure resilience and promote recovery.

Excerpt:

By Emma Bonino
ROME, May 14 2013 (IPS)

The recent agreement for the normalisation of relations between Serbia and Kosovo has confirmed that the European Union (EU) is still acting as a “magnet”, attracting its external neighbours and transforming and integrating them. Thanks to its prospects for EU membership, the whole Balkan area has become more stable and secure. Unfortunately, this virtuous magnetism no longer exerts the same force of attraction on our own citizens.

Italian Foreign Affairs Minister Emma Bonino. Credit: Victor Sokolowicz/IPS

With every passing day, the founding fathers’ dream of peace and freedom seems to be turning into a nightmare for many.

The EU is increasingly being associated with austerity policies that lead to recession, unemployment and social despair. More worryingly, there are signs that the current crisis is not limited to the EU’s economic sphere but also impacts its most fundamental values.

Everywhere in Europe we see rising intolerance; growing support for xenophobic and populist parties; discrimination and a weakening of the rule of law; and entire populations of undocumented migrants, virtually without rights, punished for their status rather than their individual behaviour.

Our inclusive and open community is threatened by destructive actions pursued by nationalistic and demagogic groups. But they are not the only ones inflicting damage on the Union.

In some countries, including Italy, we see too many violations of the rule of law and of international and European treaties, an unreliable justice system, inhumane and degrading conditions in prisons, serious infringements of human rights and grave cases of lack of accountability. How can we preach respect for universal values abroad if we are among the countries most condemned by the European Court of human rights?

It is in our vital interest to react to all these alarming trends.

To defend the European construction, we need to rediscover its mission. Its founding fathers had to discard a whole world of prejudice and fear. They knew from their tragic experience that building fortresses and walls under the guise of ensuring peace and security was an illusion.

They chose integration, and rejected barriers. And they understood that all freedoms are closely linked: one cannot want free trade yet hinder the free movement of people.

Nationalist and demagogic groups are spreading fear and prejudice across Europe by exploiting the current malaise and social despair of all those without a job, and without faith in their future. As European Central Bank President Mario Draghi stressed: “It is of particular importance at this juncture to address the current high long-term and youth unemployment.” This is a fundamental mission of the new Italian government. The data flow is still depressing, urging us to adopt new measures in coordination with our partners and in full respect of our fiscal commitments.

However, I believe that the choice is not simply between fiscal tightening and reckless spending, nor can fear of and disaffection with Europe be tackled with economic measures or financial engineering alone. No solution is credible without a political dimension and without encompassing the whole European architecture.

We need a new score: a federal solution.

I have spent a lot of time, passion and energy supporting the creation of a federal Europe; not for ideological reasons but simply because I do not know any other system capable of allowing 500 million people – belonging to different nations, cultures, religions and speaking a multitude of languages – to live together in freedom and diversity in the 21st century.

Federalism does not mean that the central European government should become a Leviathan, as described by the frightening words of the Europhobes.

A couple of years ago, I proposed a “light federation”, an institutional model that would absorb no more than five percent of European gross domestic product (GDP) in order to finance specific government functions such as foreign and security policy, scientific research, trans-European networks and safety of commercial transactions, among others.

For instance, how can European governments provide adequate security, with fewer financial resources? Only a shared European defence system, with common, integrated armed forces, would enable us to get out of the corner into which tight budgetary constraints are confining us. European governments are reluctant to take decisive steps towards this goal. The consequences of that reluctance are fragmented initiatives, wasted resources and a growing irrelevance of European influence on the world stage.

The same applies to scientific research, a field where national programmes are often too small to be productive and compete successfully with the huge projects of the other global powers.

The 2014 European parliamentary elections will be a significant test. If we want to prevent the risk of an over-representation of populist parties, we need to put federal Europe at the centre stage of the electoral campaign. The pro-Europe political families should present their own candidate for the presidency of the European Commission and submit political agendas for the future of the EU, stressing that a federal solution would save significant financial resources. So, the federalist perspective could assume concrete meaning for all citizens, avoiding the risk of being perceived as an abstract juridical matter.

In 2014, exactly a century after the murder of Franz Ferdinand in Sarajevo that led to the destruction of Europe, we will have another opportunity to give a new impetus to the federal project, under the Italian presidency of the EU. And after 2014, a review of the treaties could give European citizens a stronger sense of ownership of our common institutions and ensure an easier coexistence between countries in the eurozone and the other member states.

If Europe does not solve its problems of recession and populism, we could lose all that we have achieved since the 1950s, with no estimate of how long it will take to regain the same level of democracy, prosperity and stability as before. But if we adopt a new vision, engage our citizens and unite our governments, we could start a new phase of boosting growth and fostering democratic legitimacy and global influence.

(END/COPYRIGHT IPS)

Excerpt:

By Roberto Savio
ROME, May 6 2013 (IPS)

The European Union (EU) has asked its citizens to brace for further economic misery. In a report on European economic prospects released on May 3, the European Commission said that further deterioration is expected to last at least until 2015. But, as every such report says, things will then get better.

Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News. Credit: IPS

Unemployment in the euro area is expected to climb to 12.2 percent this year, up from 11.4 percent last year. In Spain, unemployment will rise to 27 percent, up from the 25 percent of last year; in Portugal it will rise from 15.9 to 18.9 percent; and after three brutal years of suffering, in Greece it will climb by 2.7 percent to 27 percent.

The trend will be devastating for young people: in Spain alone, it is estimated that 52 percent of young people will be without a job. We are creating a generation that will probably never get back on track.

The same trend is also unfolding in the rich countries of northern Europe. The German economy is expected to grow this year by a mere 0.4 percent, and from Austria to the Netherlands, the picture is one of decline.

This crisis is sapping the foundations and the identity of Europe. Since the end of the Second World War, Europeans have come to expect a social safety net that would cushion the less fortunate until they were able to spring back to work and dignity. Compared with the American dream, in which anybody could achieve the highest economic and social status through individual effort, without meddling by the state, the European dream was very different.

Now, however, most economists agree that this dream has become very distant because there is no way that the economy can lift that many people any longer. In Europe, austerity is eliminating the social safety net.

But while the United States and Japan have taken the road of economic stimulus, injecting massive quantities of money into their systems every month, and already with some visible results, Europe has taken the opposite direction. The European policy is to cut public spending and raise taxes simultaneously as the recipe for eliminating deficits. And, despite clearly available facts and the declarations of some accepting the need for growth, this policy is not changing.

Besides losing its gloss, the EU is fostering a growing resentment. On the same day the European Commission report was released, the strongly anti-Europe United Kingdom Independence Party (UKIP) registered a major success by taking 25 percent of the votes cast in local elections in the United Kingdom. Similar parties are sprouting everywhere, from Belgium to the Netherlands, from Austria to Finland. And, for the first time, a similar party in Germany is now running on a platform to leave the Euro.

The lack of effective leaders who are up to the task is allowing the cracks in Europe’s foundations to grow. In Spain, Prime Minister Mariano Rajoy enjoys a comfortable majority in parliament but is vilified every day by demonstrators throughout the country. In France, President François Hollande also enjoys a solid majority but he now has the approval of only 25 percent of the electorate. Portugal has an almost identical situation, Greece has a very strong anti-austerity and anti Europe party and Italy has a new government with an uncertain future.

Few realise that Italy is a special case of malfunctioning and lack of synchronism with Europe. The end of the Cold War led to the death of the modern Italian political parties, which were created and fuelled by the Cold War: the Communist Party and the Christian Democratic Party.

But in the creation of a new political system, an unparalleled event took place: Silvio Berlusconi, the richest man in Italy, with a powerful media empire, decided to enter politics to escape personal economic and judicial problems. He became a deft politician and ever since Italy has been split between pro-Berlusconians and anti-Berlusconians.

This latter camp has brought together the entire centre-left and left, and is unlike other European left-wing parties such as the Labour Party in England, the Social Democrats in Germany and the Socialist Party in France. Those parties predate the end of the Cold War, and were not built to counteract a one-person party like Berlusconi’s People of Freedom Party. Out of this anomaly has emerged a new Italian political “party”, the Five Star Movement, again led very personally by a comedian-turned-politician, Beppe Grillo, which is also totally asynchronous with Europe. Until Berlusconi retires, Italy will remain split over him, and all elections will be inconclusive and bring no real political agenda to the centre of debate.

If the old generation of German pro-European leaders, like Helmut Kohl and Helmut Schmidt, were still there, it would probably try to educate the Germans on the values of Europe for Germany. Germans are deeply convinced that they should not put their wallets at the disposal of southern Europeans who work less, try to avoid paying taxes, have spent beyond their means and, instead of swallowing the bitter medicine, expect Germans taxpayers to bail them out.

But a study last year by the Kiel Institute for the World Economy found that, in 2011 alone, Germany was able to save the equivalent of 11.1 billion dollars. This was because it could borrow money at much cheaper rates than southern Europe. And last month, a study by Germany’s Bertelsmann Foundation claimed that to leave the euro would cost Germany the equivalent of some 1.6 trillion dollars over 13 years.

The whole of Europe is waiting to see what will happen in the September elections in Germany. The Social Democrats are less pro-austerity than Chancellor Angela Merkel, but in all probability she is going to win. Will she then change her stand against everybody, including even the International Monetary Fund, which is decrying the excesses of austerity? Nobody knows, but many hope.

Meanwhile, the world is not stopping to give Europe time to solve its internal weaknesses. Just read the report of the U.S. National Intelligence Council on global trends. Among others, the U.S., European and Japanese share of global income is projected to fall from 56 percent to 26 percent in 2030. Any further European decline would hasten those projections. So, time is not on Europe’s side.

(END/COPYRIGHT IPS)

Excerpt:

By Mario Queiroz
LISBON, Feb 19 2013 (IPS)

Thousands of people marched through the streets of cities across Portugal “against exploitation and impoverishment” caused by the government’s austerity cuts, in a protest organised by the General Confederation of Portuguese Workers (CGTP), the country’s largest trade union.

Arménio Carlos: “Hunger is back in Portugal”. Credit: Mario Quiroz/IPS

“The European Union should not be an accomplice to neoliberal economic policies that treat people as objects and attack basic social benefits, to the point of negating the United Nations Universal Declaration of Human Rights,” CGTP Secretary-General Arménio Carlos told IPS, while finalising details for the Jornada Nacional de Acçao e Luta (National Day of Action and Struggle) held Saturday.

The CGTP announced on Friday Feb. 15 that it would present a complaint against the Portuguese state before the International Labour Organisations (ILO) for violation of several conventions for the protection of collective bargaining and freedom of association.

Excerpts from the interview with Carlos follow.

Q: Are we seeing a substantive change in the system that used to guarantee what is known as “Social Europe”?

A: What is being called into question is a set of assumptions and principles upholding decent work, as defined by the ILO. One cannot play with people’s lives; they are not “guinea pigs” for neoliberal laboratories to test how far one can go, whether in Portugal, Greece, Spain or Ireland.

Our countries were viewed as of lesser importance, because of their economic and financial problems, but now it is becoming evident that the problems do not only apply to Portuguese, Greek or Irish people. They also affect Germany, the “engine” of Europe, which has entered a phase of economic stagnation. This ought to give those responsible for the EU pause for reflection.

Q: How will Portugal be able to pay its debt of 78 billion euros (equivalent to 110 billion dollars) owed to the EU-International Monetary Fund (IMF)-European Central Bank (ECB) troika?

A: Unless the loan is renegotiated, Portugal will not be able to pay and will become a financial colony.

Renegotiation does not mean evading repayment, it means negotiating suitable conditions in order to do so. But the lenders themselves are hampering the development of economic policies to allow repayment of the debt.

For example, the ECB is helping the financial sector by lending money at 0.7 percent interest and, in turn, banks are making credit available at eight percent to the state and to companies. This means the ECB is presently fomenting financial speculation.

Unemployment is still growing in Portugal and we have almost one million people without work, equivalent to a record figure of 16.9 percent, the third highest jobless rate in the EU, after Greece and Spain. The economic recession is going to continue this year. Tens of thousands of companies are going to close down or go bankrupt.

Q: Does this disheartening future mean that poverty will also increase?

A: Poverty and social exclusion are becoming generalised throughout Portugal, and we are also seeing the return of hunger in this country.

Thousands of children are hungry, and naturally that also means that their parents have also been hungry for some time, due to the neoliberal policy that is bleeding Portuguese people dry.

In addition to the widespread suffering it has caused, the country’s future is being called into question. It is a policy that does not solve problems, but exacerbates them.

Q: The two general strikes and various protest demonstrations in 2012 achieved enormous turnouts. Is that because the demands of the CGTP now go far beyond strictly trade union matters?

A: Reduction of purchasing power is affecting millions of people, and it can be seen at two levels.

First, because of inflation without adjustments in wages, on average over the last two years private sector workers have lost more than 10 percent of their purchasing power, while public sector workers have lost 25 percent or even 30 percent in some cases.

Second, the general state budget for 2013 will impose further income reductions through taxes, which will cause a fall of between six and seven percent in family incomes, so that one can only conclude that the purchasing power of workers will continue in free fall.

Meanwhile, enormous tax benefits are being granted to large economic and financial corporations, without any real effort to combat fraud and tax evasion. It is interesting to know, too, that these crimes cost about 25 percent of GDP.

That is where the problem should begin to be attacked, but it does not happen, because those economic and financial powers are practically untouchable.

The two general strikes and the big demonstrations in 2012, as well as Saturday’s protest, represent a snowballing movement, an unprecedented moment in which the vast majority of Portuguese people can express their discontent and indignation and demand an end to the policies imposed by the troika.

Q: What about labour rights?

A: The balance of labour laws between workers and employers has been further tipped in favour of the bosses, for instance, by reduction in overtime pay, easier dismissal, lower compensation payments and erosion of social protection, as well as an unprecedented attack on collective bargaining.

We are seeing deregulation of labour laws in favour of employers.

At present, miserable levels of compensation are being debated, that would put a Portuguese worker at the level of only 12 percent of an Irish or German worker and between 25 and 30 percent compared to a Spaniard. In addition to the recessionary spiral, in Portugal we have a declining spiral of civilisation.

Q: How far can this go?

A: For a government with a neoliberal viewpoint, there is no limit. They do not see people, they only see numbers and goals. At the end of the day, it is a settling of scores with the April Revolution (or Carnation Revolution, when army captains democratised Portugal in 1974), which brought in a collection of rights that gave value to work and dignity to people.

The government (of Prime Minister Pedro Passos Coelho) remains stone-hearted in the presence of parents who have lost their jobs, children who are denied their right to work, parents whose social protections are withdrawn, children who are forced to emigrate, and elderly people who cannot afford to buy the medicines they need to survive.

Q: What does the CGTP propose?

A: We think that it is not enough to talk about growth. Growth is only possible with investments, more production, better income distribution and higher spending power. To us, these components are essential to solve the fundamental problem.

(END)

Excerpt:

Panahi Gholamhousein (22), an Afghan refugee who spends his days in a room that is barely five square metres with his wife Zarmina (18) and their 19-month-old daughter Zahra, has hardly left his place in downtown Athens since he was beaten up and robbed nearly a month ago.

Extremist sympathisers in the Greek police force breed impunity. Credit: George Laoutaris/CC-BY-ND-2.0

The four attackers “unleashed their dogs on me”, he told IPS. The incident shook him badly, confining him to an apartment shared with many other irregular migrants living in squalid conditions.

The young family – who lost legal status some months ago after withdrawing their asylum application to Greek authorities in exchange for a return ticket to Afghanistan – embody the predicament faced by many migrants caught in a rising wave of xenophobia.

The last three years have seen racist attacks dominating the streets of Athens, spreading fast throughout the country.

Some experts blame the situation on the social stress caused by an extended period of economic austerity – unemployment rates are fast approaching 30 percent and approximately 25 percent of the Greek population now lives below the poverty line.

Last Saturday at 2 a.m. a group of three unidentified assailants used an incendiary explosive device in an attempt to burn Pakistani immigrants alive in their home while they slept.

Navit Navaz was awakened by an explosion from a flaming bottle of gasoline that landed on the edge of the bed. Navaz was subsequently brought to Thriasio Hospital and admitted to the intensive care unit with severe burns on his back and hands.

Two months ago Human Rights Watch released a report describing how gangs of Greeks carry out attacks against migrants with almost total impunity. Authorities are reportedly ignoring complaints, or discouraging victims from filing them at all.

On Jul. 23, the rape and attempted murder of a 15-year-old girl in the island of Paros by a Pakistani migrant worker, Ahmed Vakas, fueled a wave of attacks against foreigners during which Iraq Aladin, an Iraqi immigrant, was beaten and stabbed to death by five hooded youngsters on Aug. 12.

The United Nations High Commissioner for Refugees (UNHCR), along with 20 organisations that comprise the Racist Violence Recording Network, blamed the deterioration of social relations on the “the inability or reluctance of the law enforcement authorities to carry out arrests”.

Extremists on the rise

Many of the attacks are allegedly linked to the neo-fascist party Chrysi Avgi (Golden Dawn) that entered parliament last June with 6.9 percent of the vote and is now climbing even higher in the polls.

So far the organisation has not accepted responsibility for instigating the attacks but continues to endorse racist initiatives. Thus far, only two violent attacks have been linked directly to the party, one against four fishermen at Perama and one in central Athens that involved a Golden Dawn candidate.

According to migrant communities more than 400 attacks took place last year alone, but very few people have been arrested and none of the perpetrators has faced justice.

Opposition MPs and activists claim that Golden Dawn supporters inside the security apparatus breed a culture of impunity.

The problematic relationship between the organisation and elements within the Greek police force provoked close attention two weeks ago when Golden Dawn supporters, along with two of the party’s official deputies, Giorgos Germenis and Panayiotis Iliopoulos, checked legal documents and attacked immigrants’ stalls at a church fair in Rafina, a small town northeast of Athens.

As legitimate members of parliament these deputies have immunity and cannot be arrested by the police.

Furthermore, the local police director failed to report the incident to her central command for two hours and claimed that the deployed forces were not “strong enough to intervene” despite her own description of the incident as verbal abuse.

Victims of the attack have denounced police for turning a blind eye to their vulnerability and the police director of Rafina has been suspended from service.

However, a pattern of impunity for such officials suggests that she might soon resume her post, with the possibility of a promotion.

Golden Dawn has promoted the events in a bid to present itself as a force that guarantees the interest and protection of Greek citizens.

Nikolaos Dendias, minister of public order and citizen protection and commander of all Greek security forces, has stripped Golden Dawn deputies of their police protection following these incidents and allegations.

In a symbolic move the organisation responded by suing the minister and since then it has continued to challenge of state authority – despite allegations from activists that members of the police force and extremists are working hand in glove.

Effective control over the security apparatus by the political leadership is an issue of acute concern according to Anastassia Tsoukala, a criminologist at Paris University XI and former advisor to the ex-minister of citizen protection.

In a recent article that appeared on the local ‘TVXS’ online news site, Tsoukala argued that there is ample proof of mutually beneficial relationships between low ranking policemen and extremists.

“According to information in our hands from the last national elections, a very big percentage of the police personnel share the same ideology as the perpetrators of racist attacks,” Tsoukala wrote.

The percentage of Golden Dawn voters that work for the security apparatus was estimated to be between 17.2 and 23.04 percent in 11 electoral sectors during both national elections last summer.

This relationship is a “danger to the pubic order” according to Tsoukala.

Antonis Liakopoulos, vice president of the Association of Attika Police Officers, responded to these challenges with the assertion that the abuse of authority is a common phenomenon among police forces around the world, “but one should not generalise over these cases”.

The real problem, according to Liakopoulos, is the large numbers of Greek officers who have suffered major wage cuts, and security structures that operate on budgets that are inadequate to support their basic needs.

“This is what makes the police ineffective and unable to offer safety,” he told IPS.

“In a society going through such an acute crisis, wherever police and state institutions fail to exercise effective control, other groups see an opportunity to promote their own agenda,” he added.

Still, U.N. High Commissioner for Human Rights, Navanethem Pillay, in a speech to the Geneva-based Human Rights Council last week, highlighted Greek police ineffectiveness in addressing and preventing “violent xenophobic attacks against migrants, refugees and asylum seekers in recent months”.

Dendias’ repeated promises to establish a special force to address racist violence are still pending. Prosecutor Ioannis Tentes has instructed police stations around the country to stop and, if necessary, apprehend members of the parliament if they become involved in unlawful actions.

(END)