Trojan Hearse:Greek Elections and the Euro Leper Colony
Europe is stunned, and bankers aghast, that the new party of the Left, Syriza, won Sunday's parliamentary elections in Greece.
Syriza won on the promise that it will cure Greece of leprosy.
Oddly,
Syriza also promises that it will remain in the leper colony. That is,
Syriza wants to rid Greece of the cruelty of austerity imposed by the
European Central Bank but insists on staying in the euro zone.
The problem is, austerity run wild is merely a symptom of an illness. The underlying disease is the euro itself.
For
the last five years, Greeks have been told that, if you cure your
disease—that is, if you dump the euro—the sky will fall. I guess Greeks
haven’t noticed, the sky has fallen already. With unemployment at 25%,
with doctors and teachers eating out of garbage cans, there is no
further to fall.
In
2010, when unemployment was a terrible 10%, a year into the crisis, the
“Troika” (the European Central Bank, European Commission and the
International Monetary Fund) told the Greeks that brutal austerity
measures would restore their economy by 2012.
Ask yourself, Was the Troika right?
There is a saying in America: Fool me once, shame on you. Fool me twice, shame on me.
Can Greece survive without the euro? Greece is already dead, but the Germans won’t even bother to bury the
corpse. Greeks are told that if they leave the euro and renounce its
debts, the nation will not be able to access world capital markets. The
reality is, Greece can’t access world markets now: no one lends to a
corpse.
There’s a way back across the River Styx. But it’s not by paddling on a euro.
There’s Life after Euro
Many
nations do quite well without the euro. Sweden, Denmark and India do
just fine without the euro—and so does Turkey, which had the luck to be
excluded from the euro-zone. As long as Turks stick to the lira, even
Turkey’s brain-damaged Islamo-fascist President Tayyip Erdoğan cannot
destroy their economy.
Can
Greece just dump the euro? They have happy precedents to follow.
Argentina was once pegged to the US dollar much as Greece is tied to the
euro today. In 2000, Argentines, hungry and angry, revolted.
Argentina ultimately overthrew the dollar dictatorship, the IMF diktats
and the threats of creditors, and defaulted on its dollar bonds. Free at last! In the decade since, the Argentine economy soared. Yes, today, Argentina is under attack by financial vultures, but that is only because the nation became so temptingly wealthy.
I
was in Brazil when its President Luiz Inácio Lula da Silva told the IMF
to go to hell—and rejected privatization of the state banks and the
state oil company, rejected cutting pensions and thumbed his nose at the
rest of the austerity nonsense. Instead, Lula created the bolsa familia,
a massive pay-out to the nation’s poor. The result: Brazil not only
survived but thrived during the 2008-10 world financial crisis.
Despite pressure, Brazil never ceded control of its currency. (It is a
sad irony that Brazil is only now faltering. That’s the fault entirely
of Lula’s successor, President Dilma Rousseff, who is beginning to
dance the austerity samba.)
Austerity: Religion, Not Economics
The
euro is simply the deutschmark with little stars on it. Greece cannot
adopt Germany’s currency without adopting Germany’s finance minister,
Wolfgang Schäuble, as its own.
And
Schäuble has determined that Greece must be punished. As my homey Paul
Krugman points out, there is no credible economic theory that says that
austerity—that is, cutting government spending, cutting wages, cutting
consumer demand—can in any way help a nation in recession, in
deflation. That’s why, in 2009, Obama ordered up stimulus, not a
sleeping pill.
But
austerity has nothing to do with economics. It is religion: the
belief by the stern Lutheran Germans that Greeks have had too much fun,
spent too much money, and spent too much lazy time in the sun—and now
Greeks must pay a price for their sins.
Oddly,
I hear this self-flagellating nonsense from Greeks themselves: we are
lazy. We deserve our punishment. Nonsense. The average Greek works more hours in a year than any other worker in the 34 nations of the OECD; Germans the least.
The Euro’s Father Describes his Little BastardAlexis Tsipras, the leader of Syriza, would like to pretend that austerity and the euro are two different things, that you can marry the pretty girl but not invite her ugly sister to the wedding. Apparently, the Syriza chief is blissfully ignorant of the history of the euro. The horror of austerity is not the consequence of Greek profligacy: it was designed into the euro’s plan from the beginning.
This
was explained to me by the father of the euro himself, economist Robert
Mundell of Columbia University. (I studied economics with Mundell’s
buddy, Milton Friedman.) Mundell not only invented the euro, he also
fathered the misery-making policies of Thatcher and Reagan, known as
“supply-side economics” – or, as George Bush Sr. called it, “voodoo
economics.” Supply-side voodoo is the long-discredited belief that if a
nation demolishes the power of unions, cuts business taxes, eliminates
government regulation and public ownership of utilities, economic
prosperity will follow.
The
euro is simply the other side of the supply-side coin. As Mundell
explained it, the euro is the way in which congresses and parliaments
can be stripped of all power over monetary and fiscal policy.
Bothersome democracy is removed from the economic system. “Without
fiscal policy,” Mundell told me, “the only way nations can keep jobs is
by the competitive reduction of rules on business.”Greece, to survive in a euro economy, can only revive employment by reducing wages. Indeed, the recent tiny reduction in unemployment is the sign that Greeks are slowly accepting a permanent future of low wages serving piña coladas to Germans on holiday cruises.
It
is argued that Greece owes Germany, the IMF and the European Central
Bank for bail-out-billions. Nonsense. None of the billions in bail-out
funds went into Greek pockets. It all went to bail out Deutsche Bank
and other foreign creditors. The EU treasuries swallowed 90% of its
private bankers’ bonds. Germany bailed out Germany, not Greece.
Nevertheless, Greece must pay Germany back, Mr. Tsipras, if you want to continue to use Germany’s currency, that is.
Greece: Goldman Sacked
Greece’s
ruin began with secret, fraudulent currency swaps, designed a decade
ago by Goldman Sachs, to conceal Greek deficits that exceeded the euro
zone’s 3%-of-GDP limit. In 2009, when the truth came out, Greek debt
holders realized they had been cheated. These debt buyers then demanded
usurious levels of interest (or, if you prefer, a high “spread”) to
insure themselves against future fraud. The compounding of this
interest premium brought the Greek nation to its knees. In other words,
the crimes committed to join and stay in the euro, not Greek
profligacy, caused the crisis.
The
USA, Brazil and China escaped from depression by increasing their money
supply and government spending and taking control of currency exchange
rates—crucial tools Greece gave up in return for the euro.
Worse,
once the Trojan hearse of the euro entered Athens, tourism, Greece’s
main industry, drained to Turkey where hotels and souvenirs are priced
in cheap lira. This allowed Dr. Mundell’s remorseless
wage-lowering machine, the euro, to do its work, to force Greece to
strip all its workers of pensions and power.
Greece fell to its knees, with no choice but to beg Germany for mercy.
But
there is no mercy. As Germany’s Schäuble insists, democracy, this
week’s vote, means nothing. "New elections change nothing in the
accords struck with the Greek government,” he says. “[Greeks] have no alternative.”
Ah, but they do, Mr. Schäuble. They can tell you to take your euro and shove it up your Merkel.
Investigative reporter Greg Palast's book, Vultures' Picnic, with the no-BS inside story of the financial collapse, will soon be released in a Greek edition by Livanis.
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