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 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. 

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By Roberto Savio
ROME, Nov 26 2014 (IPS)

After the Italian sea search-and-rescue operation Mare Nostrum at a cost of nine million euros a month, through which the Italian Navy has rescued nearly 100,000 migrants – although perhaps up to 3,000 have died – from the Mediterranean since October 2013, Europe is now presenting its new face in the Mediterranean.

The European Union is launching Joint Operation Triton with a monthly budget of 2.9 million euros and funds secured until the end of the year. Its function is to enforce border controls – not to save “boat people” – and it will patrol just thirty nautical miles from the coast, which pales in comparison with Italy’s Mare Nostrum operation which saw patrols being sent close to the Libyan coast.

Roberto Savio

Even with this very limited operation, British Prime Minister David Cameron has said that the United Kingdom will not contribute because operations that save migrants make them more willing to try to cross the Mediterranean. Of course, there is a perverted logic in this: the more migrants that die, the greater will be the discouragement for others to try.

Following this logic through, the ideal situation therefore would be to reach a death rate that would stop illegal immigration once and for all!

In this context, it is worth noting that the U.K. government is considering withdrawal from the European Convention of Human Rights (something that even Russian President Vladimir Putin has never considered). The argument is that nobody can be above U.K. courts.

London is also refusing to pay its share of increased of contributions to the European Union and is considering how to put an annual cap on the number of Europeans who are entitled to work legally in the United Kingdom.“Since 1986, the year of signing of the Single European Act, Europeans have never been able to agree on a minimum social basis, which would have given them rights as workers to act collectively as Europeans in the face of a market which is economically unified, but with no common social legislation”

And finally, the U.K. government received with great uproar the sentence of the European Court of Justice, which placed a European cap on banker bonuses, rejecting Britain’s claims that it was illegal. The British argument was that pay levels (also of discredited bankers) were part of social policy and thus under the authority of member states not of the European Union.

Meanwhile, the same Court has issued another sentence under which E.U. member states are not obliged to support European citizens who do not have economic activities in the E.U. countries to which they have migrated. And the German Parliament is now preparing a law to expel European immigrants who do not find a job within six months.

Of course, this will open the doors to all other countries to reduce the free movement of Europeans in Europe, a cornerstone of the original vision of a solidary Europe. Now Europeans will be obliged to take any job, and therefore the law of market will become the primary criterion for their movements in Europe.

Since 1986, the year of signing of the Single European Act, Europeans have never been able to agree on a minimum social basis, which would have given them rights as workers to act collectively as Europeans in the face of a market which is economically unified, but with no common social legislation.

In fact, the point has now been reached where social criteria are the last to be used to judge whether a country is recovering or not, well after economic and financial criteria.

A devastated Greece is now again being considered in financial markets because its economic indicators are on the up. And, at the last G20 meeting in Brisbane, Spain was touted as the example that austerity policies – those indicated by German Chancellor Angela Merkel as the example for laggards like Italy and France – are the correct way out of the crisis.

At the same time, a very different source, Caritas, has reported that only 34.3 percent of Spaniards live a normal life, while 40.6 percent are stuck in precariousness, 24.2 percent are already suffering moderate exclusion and 10.9 percent are living in severe exclusion.

To understand the trend, six years ago, 50.2 percent of Spaniards had a normal life. Now, one citizen in four is suffering exclusion, and of those 11 million excluded citizens, 77.1 percent have no job, 61.7 percent no house and 46 percent no health care support.

According to UNICEF’s recent report on children under recession, 76.5 million children in the rich countries live in poverty, and in Spain, 36.3 percent of the country’s children (2.7 million) are living in a state of precariousness.

What is now new is that some major financial institutions have started to draw attention to social issues.

Janet L. Yellen, chairwoman of the U.S. Federal Reserve, has declared that she is concerned about the growing inequality of wealth and income in the United States, and that chances for people to advance economically appear to be diminishing. And Mario Draghi, governor of the European Central Bank, is now constantly mentioning the issues of “unbearable unemployment “and “growing exclusion”.

In the background there is the proven fact that countries which took emergency measures to reduce public borrowing have mostly had weaker growth, like most European countries (with the exception of Germany, helped by a boom in machinery exports to Russia and China), while those which introduced a policy of stimulus, like the United States, Japan and Britain, have done much better, also in reducing unemployment.

But Merkel continues to ignore calls from the International Monetary Fund (IMF), the World Bank and other monetary institutions – she is only interested in pleasing her constituency, which is increasingly looking to its immediate interests and losing sight of European perspectives.

In all this, the banks continue to be uninterested in any social perspective. A few days ago, European and U.S. regulators imposed new fines worth 4.5 billion dollars on a number of major banks (we are now approaching the 200 billion dollar mark since the crisis started in 2008) for illegal activities.

Jamie Dimon, the CEO of the largest of them, JP Morgan, declared in an interview with Andrew Ross Sorkin of CNBC that it is important that United States creates a “safe harbour” where JPMorgan’s illegal practice of hiring the relatives of political leaders “is not punished”.

In Dimon’s country, between 2009 and 2010, 93 percent of economic growth ended up in the pockets of one percent of the population, according to Nobel economics laureate Joseph Stiglitz, and the 16,000 families with wealth of at least 111 million dollars have seen their share of national wealth double since 2012 to 11.2 percent.

The last U.S. presidential elections cost 3.4 billion dollars, and most of that came from this small minority. Democracy, where all votes are equal, is increasingly becoming a plutocracy where money elects.

Meeting leaders of social movements on Oct. 26, Pope Francis told them: “They call me a communist [for speaking of] land, work and housing … but love for the poor is at the centre of the Gospel.” Certainly, governments are doing otherwise …

(Edited by Phil Harris)

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By Yilmaz Akyüz
GENEVA, Jul 16 2014 (IPS)

Since the onset of the crisis, the South Centre has argued that policy responses to the crisis by the European Union and the United States has suffered from serious shortcomings that would delay recovery and entail unnecessary losses of income and jobs, and also endanger future growth and stability. 

Despite cautious optimism from the International Monetary Fund (IMF), the world economy is not in good shape. Six years into the crisis, the United States has not fully recovered, the Euro zone has barely started recovering, and developing countries are losing steam. There is fear that the crisis is moving to developing countries.

Yilmaz Akyuz

There is concern in regard to the longer-term prospects for three main reasons.

First, the crisis and policy response aggravated systemic problems, whereby inequality has widened. Inequality is no longer only a social problem, but also presents a macroeconomic problem. Inequality is holding back growth and creating temptation to rely on financial bubbles once again in order to generate spending.

Second, global trade imbalances have been redistributed at the expense of developing countries, whereby the Euro zone especially Germany has become a deadweight on global expansion.

Third, systemic financial instability remains unaddressed, despite the initial enthusiasm in terms of reform of governance of international finance, and in addition new fragilities have been added due to the ultra-easy monetary policy.“The external financial vulnerability of the South is linked to developing countries’ integration in global financial markets and the significant liberalisation of external finance and capital accounts in these countries” – Yilmaz Akyuz

The policy response to the crisis has been an inconsistent policy mix, including fiscal austerity and an ultra-easy monetary policy. While the crisis was created by finance, the solution was still sought through finance. Countries focused on a search for a finance-driven boom in private spending via asset price bubbles and credit expansion. Fiscal policy has been invariably tight.

The ultra-easy monetary policy created over one trillion dollars in fiscal benefits in the United States – which was more than the initial fiscal stimulus; the entire initial fiscal stimulus was limited to 800 billion dollars.

There was reluctance to remove debt overhang through comprehensive restructuring (i.e. for mortgages in the United States and sovereign and bank debt in the European Union). Thus, the focus was on bailing out creditors.

There was also reluctance to remove mortgage overhang and no attempt to tax the rich and support the poor, particularly in the United Kingdom and the United States – where marginal tax rates are low compared with continental Europe. There has been resistance against permanent monetisation of public deficits and debt, which does not pose more dangers for prices and financial stability than the ultra-easy monetary policy.

The situation in the United States has been better than in other advanced economies. The United States dealt with the financial but not with the economic crisis, whereby recovery has been slow due to fiscal drag and debt overhang. And employment is not expected to return to pre-crisis levels before 2018.

As for the Euro zone, Japan and the United Kingdom, all have had second or third dips since 2008. None of them have restored pre-crisis incomes and jobs.

Meanwhile, trade imbalances have not been removed, but redistributed. East Asian surplus has dropped sharply and Latin America and sub-Saharan Africa have moved to large deficits. Developing countries’ surplus has fallen from 720 billion dollars to 260 billion dollars. On the contrary, advanced economies have moved from deficit to surplus, whereby U.S. deficits have fallen and the Euro zone has moved from a 100 billion dollars deficit to a 300 billion dollars surplus.

As tapering comes to an end and the U.S. Federal Reserve stops buying further assets, the attention will be turned to the question of exit, normalisation and the expectations of increased instability of financial markets for both the United States and the emerging economies.

This exit will also create fiscal problems for the United States because, as bonds held by the Federal Reserve mature and quantitative easing ends, long-term interest rates will rise and the fiscal benefits of the ultra-easy monetary policy would be reversed.

Developing countries lost steam as recovery in advanced economies remained weak or absent due to the fading effect of counter-cyclical policies and the narrowing of policy space. China could not keep on investing and doing the same thing. Another factor contributing to the change of context in developing countries has been the weakened capital inflows that became highly unstable with the deepening of the Euro zone crisis and then Federal Reserve tapering. Several emerging economies have been under stress as markets are pricing-in normalisation of monetary policy even before it has started.

The external financial vulnerability of the South is linked to developing countries’ integration in global financial markets and the significant liberalisation of external finance and capital accounts in these countries. These include opening up securities markets, private borrowing abroad, resident outflows, and opening up to foreign banks. While developing countries did not manage capital flows adequately, the IMF did not provide support in this area, tolerating capital controls only as a last resort and on a temporary basis.

Several deficit developing countries with asset, credit and spending bubbles are particularly vulnerable.  Countries with strong foreign reserves and current account positions would not be insulated from shocks, as seen after the Lehman crisis. When a country is integrated in the international financial system, it will feel the shock one way or another, although those countries with deficits remain more vulnerable.

In regard to policy responses in the case of a renewed turmoil, it is convenient to avoid business-as-usual, including using reserves and borrowing from the IMF or advanced economies to finance large outflows. The IMF lends, not to revive the economy but to keep stable the debt levels and avoid default. It is also inconvenient to adjust through retrenching and austerity.

Ways should be found to bail-in foreign investors and lenders, and use exchange controls and temporary debt standstills. In this sense, the IMF should support such approaches through lending into arrears.

More importantly, the U.S. Federal Reserve is responsible for the emergence of this situation and should take on its responsibility and act as a lender of last resort to emerging economies, through swaps or buying bonds as and when needed. These are not necessarily more toxic than the bonds issued at the time of subprime crisis. The United States has much at stake in the stability of emerging economies. (END/IPS COLUMNIST SERVICE)

*   A longer version of this column has been published in the South Centre Bulletin (No. 80, 30 June 2014).

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"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)

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