When Standard and Poor’s downgraded nine European countries last Friday, they said plainly that European leaders were blinding themselves to the full crisis:
We also believe that the agreement [the latest euro rescue plan] is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU’s core and the so-called “periphery”. As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.
Right after that, German Chancellor Angela Merkel stressed the need to implement fiscal straitjackets quickly in the wake of the downgrade. It’s like nobody even read the S&P report. And nowhere is this more true than Greece, where poverty has risen almost to the level to call the situation an humanitarian disaster, but where European leaders still strive for more “reform”, the equivalent of giving the patient more poison and wondering why they just get sicker. Now they plan to kill the patient outright.
Officials from the so-called troika of foreign lenders to Greece — the European Central Bank, European Union and International Monetary Fund — have come to believe that the country has neither the ability nor the will to carry out the broad economic reforms it has promised in exchange for aid, people familiar with the talks say, and they say they are even prepared to withhold the next installment of aid in March [...]
As recently as November, Greece and its lenders were optimistic that the country’s newly installed prime minister, Lucas Papademos, a well-respected financial technocrat, would stabilize Greece’s soaring debt and help nurse the country back to health.
But since then, his interim government — stocked not with technocrats but with politicians gunning for national elections as soon as March — has been paralyzed. Although it passed the 2012 national budget, it has failed to put into effect most of the unpopular changes mandated by the loan agreement that the previous government made back in 2010, when the country first admitted it was broke.
Yes, it’s amazing Papademos can’t get this done, right? It’s like giving a lumberjack a plastic spoon and wondering why he hasn’t clear-cut the forest yet. Austerity has become self-defeating, whether you call it what it is, or “reform.” Either way, it’s destroying Greece, and mere technocratic leadership won’t solve the problem.
Talks between Greece and its creditors will resume this week. The problem, as I understand it, is that Greek debt has been bought up by hedge funds [and other creditors with default insurance they believe will pay off] and they are playing a game of chicken to recoup the full [or larger] amount for the debt. Greece is simply too weak to have leverage here, since the hedgies are really negotiating by proxy with the EU and ECB and IMF, on the idea that an uncontrolled default is so undesirable that the troika will pay them off at par. So I see nothing coming out of the first level of negotiations unless the troika gets involved.
The European mess will dominate the economic picture until the horrible policy from Europe’s leaders reverses itself.




23 Comments

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No matter how far you have gone down the wrong road…turn back!
It is getting worserious now.
It’s like Europe is a cruise ship with an Italian captain and a Greek crew serving French food to American Capitalists.
Seems like Fallujah.
It’s like the 17th Century medical treatment of bleeding a person to get rid of the bad blood when they are sick.
The only leverage that Greece has right now is to leave the Euro, and while that would be enormously disruptive for them in the short term, I think it would be less disruptive in the long term than a population that might be pushed over the brink from civil unrest into open war with the government.
The real problem is that countries with ostensibly representative governments have given up, without a vote, their sovereignty. This can’t end well; if citizens can’t change horrendous public policy at the ballot box, they will turn to other methods for changing the government.
I have to agree with all the prior commenters!
After last night’s book Salon, I listened to an OWS livestream on MLK and did some research because I had a hunch.
That hunch led me back to that old PNAC stuff and it pretty much blew me away again. Then I ran across an old Democracy Now interview that put it all in perspective.
The Euro was first intended to start a global currency. Because it is ruined now, is no problem, they will replace it soon enough.
The ballot box has been corrupted so that the change you speak of will not happen.
People in the streets, OWS is the only thing we have now.
Agreed!
eCHAN @ 2: yes, any resistence to the banksters’ demands is met with increasing violence that assures a disasterous end for the people. All over promisory notes that were signed by drunks in the global casino.
So much goes back to PNAC. The neoliberals fell right in line with neoconservatives. Governments can continue to implement the policies put forward by both and governments that do so will fail.
Austerity, austerity, and more austerity. The only way the problems in Europe and the US will be solved is through austerity. We must squeeze all of the fat, the excess, the unproductive out of the system. We must remove the regulations on the banks and other big corpses in order to release them from the unnecessary constraints and allow them free rein (in this case reign may fit better) to work the magic of the free market. It will also help if the fed spreads a little more money in their direction.
It assures a disastrous end until the agents of repression (the cops and soldiers) change their allegiance. At some point they will. That is when the 1% bring out their worry beads.
Could it be that the “installed” “technocrats” of the Oligarchical Empire are helping to restore the Glory that was Feudalism?
Just a thought. If so, “heckuva job!”
“Austerity” brings to mind this line from a movie:
“Soylent Green is People!”
And it would help if we just all hand over our paychecks to them too.
I hear from the grapevines that they might wish to get those worry beads out now and start counting them. There are vets and others that are pretty much understanding more than the average American does right now.
Absolutely!
Just think how much money they would save if they didn’t pretend by sending you bills.
Austerity? Hell, yeah–for the 1%! That’ll help..
“It’s like giving a lumberjack a plastic spoon and wondering why he hasn’t clear-cut the forest yet.” Great line.
I prefer the speech from another movie — “Muppets Take Manhattan”:
Pete: “Hey, I tell you what is. Big city, hmm? Live, work, huh? But not city only. Only peoples. Peoples is peoples. No is buildings. Is tomatoes, huh? Is peoples, is dancing, is music, is potatoes. So, peoples is peoples. Okay?”
http://www.youtube.com/watch?v=KQgfgB-vgT0
So, peoples is peoples. Okay? :-P
Greece should adopt the Argentine solution. Declare bankruptcy and tell the IMF to fuck off.
Eurozone crisis analysis in a wonderful Scottish accent (Nov. 2011):
http://www.radioopensource.org/mark-blyth-7-we-cant-all-export-to-mars/
this problem of national bonds speculators with the power to destroy economies is actually amazinly simple to solve.
for hedge funds or private banks or other private investors who hold “insured against loss” govt paper, e. g., paper protected by credit default swaps,
freeze the assets of those entities, seize their official documents, revoke their certificates to operate in that countrty, and tax them 110% on any returns from national govt defaults.
that the hedge funds operate internationally, and may be in new york on hong kong should make no difference.
similarly, bond series numbers known to be held by these speculators could have their value specifically revoked.
alternatively, playing speculators off against each other might have promise – you know, like the army captain said, “if you want to elicit a confession from a suspect you three up and shot the man just to the left or right of the suspect you want to a confession from.” (the use of a torture analogy here is not accidenta – the u.s. broke international law, its own domestic law, and peace treaties iit had signed n order to torture.
why should speculators whose actions might restroy a nation’s economy, or the world’s, be treated with governmental kid gloves.
this approach would work even better if the euro zone acted to do si, better still, if the u.s. co-operated.
if we can spend $500 billion a year in ira for 10 years, why can’t we show a bit of governmental resolve toward bond-value speculators?