The problem is all inside your
head she said to me The answer is easy if
you take it logically I'd like to help you in
your struggle to be free There must be fifty
ways to leave your lover. - Lyrics by Paul
Simon
The euro appears to be a
marriage of incompatible partners. A June 1
article in the London-based Telegraph titled "Why
Europe's Love Affair with the European Project Is
Ending" reported that two-thirds of 9,000
respondents thought that having the euro as their
single currency was a mistake.
For Greece,
it was a tragic mismatch from the beginning; and
like many a breakup, it is really about money.
Greece is a vivacious young woman chained to a
tyrannical old man. She yearns to be free to dance
on her own; but breaking up is hard to do. Defaulting
on her debts will force
her out of the eurozone and back to issuing
drachmas, and she could get brutally beaten by
speculators on foreign exchange markets for her
insolence.
Fortunately, there are
alternatives to an ugly divorce. The treaties
binding the 17 member nations are just a set of
rules, entered into by mutual agreement; and rules
can be bent or broken, especially in crises. The
European Central Bank (ECB) broke a litany of
rules to save the banks, as did the Federal
Reserve to save Wall Street in 2008. Rules that
can be bent for banks can be bent for people and
nations - not just Greece, but all the other
eurozone countries threatening to file for
divorce.
Paul Simon says there must be 50
ways, but here are five creative
alternatives. 1. The open marriage:
return to the drachma without abandoning the
euro - James Skinner, former chairman of
the New Economics Foundation in the UK, suggests
that the Greek government could start issuing
drachmas without abandoning the euro. Drachmas
could be reserved for domestic use - to pay the
government's budget, hire workers, build
infrastructure and expand social services. He
writes:
Greece is suffering from a lack of
money because the only source, the single
currency, has dried up. But there is no law that
states that there has to be only one currency.
... By enabling the Government,
monitored by the Central Bank, to spend newly
created money directly into the economy,
bypassing the banking sector, the burden of
increasing national debt can be avoided. ...
This programme for creating a new Greek
drachma, bypassing the private banking sector,
could start tomorrow. Its immediate effect would
be to get the unemployed back to work. All
existing euro transactions can continue as
before, quite separately from the new currency.
The two currencies can perfectly well co-exist
and run alongside each other. ... Foreign banks
will continue to deal in euros and other
currencies as usual.
This solution was
successfully used in Argentina when its currency
collapsed in 2001. The government walked away from
its debts and started issuing its own Argentine
pesos. Three years after a record debt default on
more than US$100 billion, the country was well on
the road to recovery. Exports increased, the
currency was stable, investors returned,
unemployment diminished and the economy grew by 8%
for two consecutive years.
2.
Separate bank accounts: fire up the printing
presses at the Greek central bank - In a
March 19 article on Seeking Alpha, George Kesarios
observed that the Greek central bank has the power
to issue more than just drachmas. The ECB is not
an ordinary central bank:
Rather, it is a confederation of
central banks. Each European national central
bank can theoretically do the same types of
market operations as the ECB and then some. The
forefathers of the euro have left many monetary
windows open, which, if used correctly, can
solve the European debt crisis in a very short
period without taxpayer funds.
He
cited article 14.4 of the Protocol on the Statute
of the European System of Central Banks (ESCB),
which provides:
14.4. National central banks may
perform functions other than those specified in
this Statute unless the Governing Council finds,
by a majority of two thirds of the votes cast,
that these interfere with the objectives and
tasks of the ESCB. Such functions shall be
performed on the responsibility and liability of
national central banks and shall not be regarded
as being part of the functions of the
ESCB.
That means the national central
banks can do whatever the ECB can do - and even
things it can't. The Greek central bank could step
in and start issuing euros itself. Again, there is
precedent for this. It was under Article 14.4 that
the Irish central bank was able to print 80
billion euros (US$100 billion) as "emergency
liquidity assistance", and the Greek central bank
has already printed 44 billion euros itself.
The Greek government could print euros,
refinance its sovereign debt, and pay the interest
to itself, effectively eliminating the interest
burden. Among other precedents, there is Canada,
which borrowed from its own central bank from 1939
to 1974 to fund major infrastructure projects and
social programs. It pulled this off over a 25-year
period without hyperinflating the currency,
driving up prices, or increasing the public debt,
which remained low and sustainable.
There
is the concern that the euro might suffer by
devaluation if other eurozone members followed
suit. But Kesarios points to the Japanese
experience, "where one can print and print and
then print some more, without the value of the
currency being marked down (due to positive trade
flows)." The euro might be equally resilient.
3. Divorce: just walk away -
According to the May 29 New York Times, the 130
billion euro bailout that was supposed to buy time
for Greece is now mainly just servicing the
interest on the debt. The "troika" - the ECB, IMF,
and European Commission - which holds
three-fourths of the debt, is sequestering the
bailout funds to be paid right back to themselves
in interest payments. This is merely going to
compound the debt to disastrous levels, without a
single cent going to the Greeks or their comatose
economy.
Interest rates on Greek 10-year
bonds have gone to nearly 30% recently. Under the
Rule of 72, at 30% compounded annually, debt
doubles in 2.4 years. If the Greeks can't even pay
the interest on the debt today except by
borrowing, how are they going to repay double the
principal in a mere 2.4 years? At 30%, the Greeks
could be paying over 100% of their gross domestic
product in interest charges. Legally, a contract
that is impossible to perform is void.
Alexis Tsipras, leader of the radical
left-wing Greek party Syriza, which is now in
second place in the Greek parliament, calls it an
"odious debt", a legal term for a national debt
incurred by a regime for purposes that do not
serve the best interests of the nation. An odious
debt under international law need not be repaid.
4. Spousal support: the public bank
option - If divorce is too much to
contemplate, Greece's crippling interest burden
can be relieved by taking advantage of the ECB's
very generous 1% rate for bankers. Article 123 of
the Maastricht Treaty forbids member governments
from borrowing directly from the ECB, but it makes
an exception in paragraph 2 for "publicly owned
credit institutions" - something Greece will have
plenty of when it nationalizes its banks. They can
line up at the ECB's window for its
bargain-basement 1% banking rate and use the
borrowed funds to buy up the national debt.
Researcher Simon Thorpe wrote to the ECB
and asked whether they would object if a publicly
owned credit institution were to borrow from the
ECB and use the funds "to supply the money to a
government such as the Greek government in order
for that government to pay off its debts to
financial markets." [1]
The ECB replied:
According to the Treaty - as you
have just quoted - such publicly owned credit
institutions "shall be given the same treatment
by national central banks and the ECB as private
credit institutions". It is up to the banks to
decide how to use the money they have borrowed
from the central bank system.
5. The dowry: impose a
financial transaction tax - Thorpe notes
that the ECB has issued and lent nearly one
trillion euros to the banks at 1% since December
2011 - three times the total Greek debt of 355
billion euros. [2]
If Greek public banks
borrowed from the ECB at 1% and bought Greece's
sovereign debt, the debt could be paid off in 10
years just from the returns on a very modest
financial transaction tax (FTT) of 0.3%.
Imposing a tiny FTT on all financial
trades would not only be a lucrative source of
revenue but would prevent the attacks of
speculators, both on the newly issued drachma and
on the sovereign debt of Greece and other Eurozone
countries. The FTT has already been implemented in
many countries. In 2011, there were 40 countries
that had FTT in operation, raising $38 billion (29
billion euros). [3]
Where there is a
will, there is a way The problem is finding
the will, particularly among the Eurocrat leaders
holding the reins of power, who may not be looking
for an amicable workout. The marital problems of
Greece and the eurozone stem from an arbitrary set
of rules that were entered into and can be changed
by agreement.
But as Mike Whitney
maintained in a June 3 article titled "Europe
Moves Closer to Banktatorship": "These people are
not interested in fixing the EZ [eurozone]
economy. They are engaged in a stealth campaign to
... solidify the power of big finance over the
individual states. [4]
To avoid that dire
scenario, the popular majority needs to grab the
reins of power. It is fitting that Greece, the
birthplace of European culture and democracy, is
the focus of the struggle against bondage to an
elite banker class. Greece can dance again if she
can set herself free.
Ellen Brown is an attorney and
president of the Public Banking Institute, PublicBankingInstitute.org.
In Web of Debt, her latest of 11 books, she
shows how a private cartel has usurped the power
to create money from the people themselves, and
how we the people can get it back. Her websites
are WebofDebt.com and
EllenBrown.com.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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