If politics were just war by another name, then economics would be the favored
armory of both sides. Europe has gone one step further last week, almost
unimaginably bringing back the era of fascism as it contends with the unwieldy
agglomeration of financial contradictions that the euro project has now become.
The birthplace of democracy, Greece, has gone back to a managed dictatorship
after the collapse of the democratically elected George Papandreou government
on Sunday, to be replaced by a national unity government with a technocrat at
its helm. Reading between the lines, the idea isn't hard to understand: a
pliant government in Athens that is helmed by a
eurocrat, unable to ask any questions of Brussels and unwilling to concede over
any objections from the population of Greece.
The apparent crime of the Greeks was to ask their prime minister for a
referendum on the latest series of proposals from European authorities on a new
bailout for their country (see
The men without qualities, Asia Times Online, October 29, 2011). This
set off panic in stock and bond markets mid-week and prepared the stage for an
ugly showdown as well as unprecedented developments.
For the European governments, this level of panic in the markets was simply
unacceptable as it showed deep "ingratitude" on the part of the Greeks; that
view of course conveniently ignores ground realities of austerity that the
Greeks would endure on their own so that bankers in Paris and Frankfurt
wouldn't face job or pay cuts.
Greece's prime minister was invited to the Group of 20 (G-20) meeting in
Cannes, making the confab G-21 for a while according to wags, although I
maintain that the "G" in G-20 stood for Greece all along. After receiving
suitably strong tongue-lashings from German leader Angela Merkel and French
President Nicholas Sarkozy, a suitably chastened Papandreou dropped plans for a
referendum and instead started work on a national unity government that would
have the implementation of the eurozone bailout plan as its major (and perhaps
only) policy point.
G-20 released an insipid statement that went nowhere in terms of helping the
Europeans. All the fond expectations of the Europeans were dashed to the ground
- be it the increased role of the European Financial Stability Facility (EFSF)
to which various countries would contribute (no contributions were forthcoming
in the end), or expanded powers for the International Monetary Fund (IMF) to
help manage the crisis (ditto).
Poorer countries objected to the very notion of further contributions to bail
out rich European countries, particularly when the Europeans apparently
couldn't agree on priorities. While the statement describes lofty ideals of
growth globally, it does little to actually suggest ways and means of reversing
the problems with countries and zones in recession: in particular, Europe.
To cut the eurozone's structural drag, countries will have to improve
competitiveness. This can only be done if structural constraints on growth are
removed, the main one of which is the overly generous social programs.
Alternatively, Europe can choose to maintain social safeguards but will have to
forsake a strong currency. Inflation would then do to the European lifestyles
what common sense alone couldn't establish.
This is the meta context under which the European crisis resolution is being
fought. Countries with savings - like Germany - do not wish to suffer from
inflation but want instead that their southern neighbors simply destroy
structural benefits instead. Southern countries would rather keep their benefit
systems, but try to depreciate their currencies to a growth path.
Another issue and perhaps the core one is that the elite want one thing, and
have decided to pursue that solution - written by bankers - without heeding the
legitimate demands of those ostensibly being bailed out.
It gets worse. Not content with one unwieldy object, the G-20 also had to
contend with a second one, namely Italy, wherein the government rejected calls
for IMF aid while calling for "increased surveillance" and a formalization of
the troika (European Union, IMF and European Central Bank) in case Italy needed
funds later. Market observers who had to sit through months of uncertainty
waiting for the Europeans to get their act together over a 100 billion euro
(US$137 billion) bailout package for Greece will now have to do the same for a
1 trillion euro package for Italy.
Italian bonds crossed the magic level of 450 basis points (bps) in spread over
Germany last week even as the EFSF failed in its attempted 13 billion euro
funding deal. The level of 450 basis points is important because that sets
rules with respect to collateral posting against global banks, and essentially
puts a sovereign "in play" ie enhances volatility expectations in markets, with
unspecified market demands for resolution driving sentiment.
It fell to the French president to tell off the Greeks in the end: plainly, he
stated, that the Greeks could have any referendum they wanted, but would have
to leave the euro if they went ahead with this particular one. Germany's most
popular newspaper, the Bild, called last week for a referendum in Germany on
whether Greece could stay in the single currency or not.
So it has come to this, that the French who started the era of modern European
democracies with their storming of the Bastille and a cry of "liberty, equality
and fraternity" essentially devalued their own history by telling the Greeks
not to have inconvenient opinions. I can spy the ghost of Marie Antoinette
demanding her head back.
The message from eurocrats couldn't have been more unequivocal if they had
spelled it all out: democracy was an unnecessary complication in the grand
Elsewhere, the new resident of the European Central Bank, Mario Draghi,
conducted his first full meeting and started with an auspicious (I am being
sarcastic) rate cut to get things going. The idea that the new ECB president
would be populist and swing the monetary institution somewhat further on loose
monetary policy than his predecessor ever managed was immediately (of course)
played up in the popular media.
Think about it like this - the ECB has been criticized for inflicting greater
pain on the highly indebted countries by raising rates and failing to do more
towards monetary easing. The incoming head of the ECB likely has very similar
inclinations to his predecessor (he announced, for example, that there was no
mechanism for any country to leave the euro) but has decided to have a stronger
public relations battle by starting off with a small rate cut that would do
absolutely nothing to resolve the core issues because high interest rates are
not the issue while wide credit spreads very much are.
It has been clear with every new European approach to the crisis that the
primary objective of any grouping is to save the European financial system at
all costs. This system includes within it a unwieldy common currency that has
simply failed to meet its objectives for the 11 years of its existence. Rather
than consigning the project to the dustbin of history, the elite of Europe
choose to perpetuate the currency's existence at the expense of the people.
This is what fascism is all about at the end - an overwhelming subjugation of
the individual at the altar of nationalism, the authoritarian rule of a
financial system that disallows countries from following their own courses.
Between them, it is difficult to read too much into the events; even allowing
for a fair bit of doubt to gather in one's mind the unshakable end result is a
feeling of deja vu as it appears that the fascist past echoed by the likes of
Mussolini, Franco and Hitler has come back to roost.
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