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:

"Indignados" in Málaga, Spain, protest cuts in health and education. Credit: Inés Benítez/IPS

By Roberto Savio
ROME, Jul 8 2013 (IPS)

At the last summit of European heads of state held in Brussels at the end of June, the main theme was youth unemployment, which has now reached 23 percent of European youth (although it stands at 41 percent in Spain).

Last year, the International Labour Organisation issued a dramatic report on Global Employment Trends for Youth 2012 in which it spoke of a “lost generation”.

According to projections, the generation currently seeking to enter the market place will retire with a pension of just 480 euros – if it actually succeeds in entering the market – because of temporary jobs without social contributions.

After long discussions, Europe’s leaders decided to allocate six billion dollars to fight youth unemployment. After much shorter discussions, they decided to allocate up to 60 billion dollars to support Europe’s banks. This, on top of the striking subsidies already received: the European Central Bank alone has given 1,000 billion dollars to the banks at nominal cost.

All the efforts to create a European banking system under a central regulator are now on hold until the German elections in September. As a member of the German delegation at the June summit is reported to have said: ”We know well what we are supposed to do, to calm financial markets. But we are not elected by financial markets, we are elected by German citizens.” (IHT, Jun. 28, 2013).

And of course, no effort has been made to explain to Germany’s citizens why it is in their interest to show economic solidarity with the most fragile countries of Europe. Democracy, as it is understood today, is based on leaders who follow popular feelings, not on leaders who feel it their duty to push their electors towards a world of vision and challenges.

The summit was also obliged to accept the blackmail of British Prime Minister David Cameron: either you maintain the subsidies that then Prime Minister Margaret Thatcher obtained in 1973, when you insisted that we join Europe (which makes Britain a net recipient of European money), or we will block the European budget.

This is because the anti-Europe electorate in Britain is growing and Cameron could not afford to appear weak. But Cameron was one of the strongest proponents of the subsidy for the banks, and no wonder: the financial system now accounts for 10 percent of Britain’s gross domestic product (GDP).

It is a very curious situation, in which Europe has not only spent several hundred billion dollars on its banks, it has even invited the International Monetary Fund (whose controlling member is the U.S.) to join the European institutions and manage the European crisis.

And, in an unprecedented sign of independence from the U.S., Europe has rejected American calls for reducing austerity and starting policies of growth as Washington and Tokyo have been doing, so far with proven success.

Nevertheless, what is common to the three most powerful players in the West (U.S., Europe and Japan) has been their inability – and unwillingness – to place banks under control and react to their string of crimes.

Central bankers from the entire world join in the Bank for International Settlements (BIS) based in Basel. Now its Basel Committee on Banking Supervision has come up with a proposal that would tighten the relationship between the capital of the banks and the volume of financial operations they can afford. The proposal establishes that banks must maintain high-quality capital, like stock or retained earnings, equal to seven percent of their loans and assets, and that the biggest banks may be required to hold more than nine percent.

This is not exactly a revolutionary proposal, and has been criticised as insufficient by many analysts and regulators. This is confirmed by the fact that the U.S. Federal Reserve estimates that between 90 and 95 percent of banks with assets of less than 10 billion dollars already respect such parameters. Well, even this bland proposal has been received with a howl of protest from many banks, claiming that they would have great difficulty in raising capital.

Under the old capitalist economy, no enterprise would run without capital adequate to its need. Today we have a new branch of the economy, which wants to play without capital, and expects the state to bail it out if anything goes wrong. So, let us just look briefly at how many times things went wrong without anybody ever going to jail:

On Apr. 28, 2002, the U.S. Securities and Exchange Commission (SEC), won a lawsuit ordering 10 banks to pay 1.4 billion dollars in compensation and fines because of fraudulent activities. One year later, the SEC discovered that 13 out of 15 financial institutions randomly investigated were guilty of fraud. In 2010, Goldman Sachs agreed to a fine of 550 million dollars to avoid a trial for fraud.

In July last year, the U.S. Senate presented a 335-page report on the British bank HSBC. Over the years it helped drug dealers and criminals recycle illicit money. The fine was 1.9 billion dollars.

In November 2012, SAC Capital was fined 600 million dollars, and in the same month the second leading British bank, Standard Chartered, was fined 667 million dollars.

In February this year, Barclays Bank announced that it had set aside 1.165 billion euros to face fines for “illicit transactions”.

And in March this year, Citigroup accepted a fine of 730 million dollars for “selling investments based on junk to unsuspecting clients”.

We all know that the crisis in which we find ourselves (which, for the optimists, will end in 2020 and for the pessimists in 2025) originated in the U.S., caused by the 10 largest banks’ decision to sell derivatives based on junk and certified by the Standard & Poor’s and Moody’s rating agencies. U.S. taxpayers “donated” 750,000 million dollars to the banks, while the British did the same for HSBC, Royal Bank of Scotland, Barclays Bank and Northern Rock.

While this financial disaster was happening, the ‘Big Five’ (Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers and Bearn Sterns) paid their executives three billion dollars between 2003 and 2007, And, in 2008, they received 20 billion dollars in bonuses while their banks were losing 42 billion dollars.

All of this was certified by Standard & Poor’s and Moody’s, which control 75 percent of the world market. Now Standard & Poor’s has been requested to pay 500 million dollars.

But what about the millions of people who have lost their jobs? The millions of young people who see no future in their lives? It’s the old story: if you steal bread, you go to jail, but if you steal millions, nothing will happen to you … and if you steal millions in a bank, even less reason to worry.

Meanwhile, back at the summit table, the priority for survival is to allocate taxpayers’ money to banks, even if all talk is about youth unemployment.

(END/COPYRIGHT IPS)

Excerpt:

By Roberto Savio
ROME, Apr 12 2013 (IPS)

The flood of elegiac articles on former British Prime Minister Margaret Thatcher is in itself a good measure of how we have all become Thatcherites without realising it. Only those who are not graced by a young age can see how the world and politics have changed so deeply since her days that it is correct to call her a “great revolutionary”.

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

Let us recall something that has been forgotten. Immediately after the end of World War II, two other major events took place. One was decolonisation and the emergence of the Third World, the other was the creation of a powerful and strong socialist bloc, led by the Soviet Union, but with offshoots in Africa, Latin America and Asia, from Angola to Cuba and China, for example. Both events had a sobering effect on the political and philosophical sectors based on capitalism, and led to an era of social democracy. Those two events gave rise to the attempt to create an international order based on cooperation and social justice at national and international levels.

This led the United Nations in 1974 to approve unanimously a plan of action for a new system of international relations aimed at permitting developing countries to regulate and control the activities of multinational corporations operating within their territory, measures to reduce the gap between North and South, and many other provisions that would be considered mere fantasy today. International cooperation was to be the basis of relations between states. A parallel dialogue among Heads of State led to the North-South Summit in Cancun in 1981, where a final plan of action would be hammered out.

Thatcher came into power in 1979, and in Cancun she met Ronald Reagan, who had been elected U.S. president a few months earlier. It was the first international test for Reagan, and he looked down with distaste on any talk about international cooperation and social justice. Prodded and sustained by Thatcher, he simply said that the U.S. had become great not because of aid. It had been the work of thousands of individuals who built railways, factories and companies that had made his country the leader of the world. From now on, the U.S. policy would be to go it alone, and do trade, not aid.

"There is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look after themselves first." - Margaret Thatcher
From that moment, the “Reagan revolution” changed the world. The United Nations was marginalised. The U.S. accepted no international treaty. The communist bloc was to be challenged, not feared. And a permanent unrelenting campaign was waged against the concept of society, and the state. Thatcher famously declared: “There is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look after themselves first.”

Reagan launched “bites” as a way of giving simple answers to complex questions. Pollution? “Trees pollute, not factories”.

And Thatcher? She told: ”Let us glory in our inequality”, explaining that more inequality meant that more wealth was being created by savers at the top of the economic pyramid, presumably to trickle down via new direct investment. She called Nelson Mandela “a terrorist”, and later she would praise dictator Augusto Pinochet as a “champion of democracy”.

Slowly, the two conservative parties, the Republicans in the U.S. and the Tories in Britain, underwent an anthropological metamorphosis. Gone was “compassionate conservatism” or “social conservatism”, and an ideological tide swept in the glorification of wealth, the acceptance of injustice as a fact of life, the demonisation of the State as a brake on the market and individual advancement, and the argument that welfare, trade unions and all other instruments of equity were instruments of support for the lost and unproductive elements of society.

Reagan fired the air controllers, and Thatcher dismantled the coal miners’ unions. It was all summed up in Thatcher’s words: “Marks and Spencer [the supermarket chain] have triumphed over Marx and Engels”.

Reagan left the U.S. saddled with a huge deficit and growing inequality. When she was elected, Thatcher found the poverty level at nine percent, when she left it stood at 24 percent.

Thatcher and Reagan opened the path of legitimising the least social aspects of individuals and politics: selfishness, ostentation of power and status, money over culture, and the idea that those who win do so because they are better. The CEO of JP Morgan, Jamie Dimon, shut up a shareholder in a debate, saying: “I am right because I am richer than you”.

This kind of culture was unknown before Thatcher and Reagan, and now has created the Madoffs, the Berlusconis, the Murdochs and many other new mutants. We have gone through a profound sociological, cultural and anthropological change.

Over time the tide has grown, leading to a loss of identity of the left, which has become neutered by the long drive to uncontrolled capitalism as the only solution.

The old values have lost legitimacy. The new values are profit, competition, wealth: countries act on “defence of their interest”. Thatcher was able to effectively fight for special privileges in the European Community, sowing the seeds for the eurosceptics that now condition the British government. John Major, Tony Blair, and now David Cameron embarked on a number of actions, from the war in Iraq to the present strict medicine of austerity, that would have been unthinkable without her legacy.

And the same happened in the U.S.. Bill Clinton did not even try to revert to pre-Reagan policies, and George W. Bush just resumed the Reagan revolution. The Republican Party is prisoner of the extremists of the Tea Party, and Barack Obama has been obliged to make so many compromises that much of his action has lost real punch.

The dream of a united Europe is in serious jeopardy. There is no solidarity between Northern and Southern Europe. The fact is that there are no common values able to cement international cooperation.

Today, we have no international governance, in the real sense of the word. The United Nations has been re-dimensioned to the issue of development. The world is not even able to take concrete measures on climate change, which is a clear threat for humankind. On the contrary, many companies are looking forward with enthusiasm to the melting of the Arctic, for the new avenues of traffic and mineral exploitation that this will open up. Finance is out of control and wealth has become obscene.

In 2012, the wealth of the world’s 100 richest individuals grew by 240 billion dollars: enough to solve the problems of poverty in the world. Yet, not a single voice is calling for redistribution. Those 100 were already the richest, so presumably they would not suffer too much if 75 percent of their added wealth was taken.

Pesident François Hollande, who tried to present this idea in France, has become an object of shame. The disaster of finance has created 100 million new poor worldwide. Eurostat says youth unemployment is 22.4 percent. Why is there not a real reaction? Because we have all become Thatcherites now.

(END/COPYRIGHT IPS)

Excerpt: