The drachma was good enough for PlatoLast May, in a Times column called Eurodämmerung, Paul Krugman predicted that the Greece's exit from the Eurozone was not just nigh but that it would lead teethe dissolution of the whole project. A few weeks earlier he had laid out the reasons he was becoming more and more convinced that it was just a matter of time for Greece to leave the Eurozone.
Even with a debt restructuring, Greece will be in deep trouble, forced to engage in severe austerity-- and provoke a deep slump-- just to close the primary, non-interest deficit.The only thing that could reduce that need for austerity would be something that helped the economy expand, or at least not contract as much. This would reduce the economic pain; it would also increase revenues, reducing the needed amount of fiscal austerity.But the only route to economic expansion is higher exports-- which can only be achieved if Greek costs and prices fall sharply relative to the rest of Europe.If Greece were a highly cohesive society with collective wage-setting, a sort of Aegean Austria, it might be possible to do this via a collectively agreed reduction in wages across the board-- an “internal devaluation.” But as today’s grim events show, it isn’t.The alternative is a devaluation-- which means leaving the euro.Any announcement of plans to leave the euro would, as Eichengreen points out, trigger disastrous bank runs. By the same token, any suggestion by outside players, like the ECB, that the option exists would amount to invoking a speculative attack on Greek banks, and therefore can’t be made. The whole thing is effectively undiscussable.But that doesn’t mean it can’t happen. Greece is already starting to look like Argentina 2001.
Der Spiegel is reporting this week that German conservatives Angela Merkel (Chancellor) and Wolfgang Schäuble (Finance Minister) are threatening to expel Greece from the euro zone if it does not stick to the austerity dictates of the "troika" (the European Union, International Monetary Fund and European Central Bank)-- in other words, if progressive Alexis Tsipras and his SYRIZA party win the January 25 elections-- as looks likely. Johannes Stern:
The threat from Merkel and Schäuble underscores the antidemocratic character of the EU and the German bourgeoisie. The Greek people not only have no right to determine policy in their own country, they are to be punished if they vote for a party critical of austerity policies dictated by German imperialism.Berlin’s aggressiveness is an expression not only of the EU’s antisocial policies directed against the working class, but also of the deepening crisis in Europe. Six years after the outbreak of the financial crisis and after years of deep social cuts in southern Europe, the political, economic and social tensions within and between European countries have reached the breaking point....From the standpoint of finance capital, the decision has already been made. Greece has to continue to bow to the austerity dictates of Germany and the EU, which have thrown a large section of the Greek population into bitter poverty and gone a long way towards destroying a functioning society.“There will be no Greece law,” said Bavarian Finance Minister Markus Söder (Christian Social Union-- CSU), according to Monday’s Süddeutsche Zeitung. “It is clear for me that there will be no debt relief or reduction just because a new government comes to power.”In Welt am Sonntag, Social Democratic Party (SPD) parliamentary fraction leader Thomas Oppermann warned, “We will insist that the structural reforms in Greece be implemented.”Social Democratic leader and vice chancellor Sigmar Gabriel followed suit, demanding in the Hannoversche Allgemeine Zeitung that Athens implement plans for cuts and economic “reforms.” It was expected that “regardless who forms [the next Greek government], agreements reached with the EU will be upheld.” The German government would “not be blackmailed,” he added.German threats are aimed not so much at preventing SYRIZA from forming a government, as at disciplining the party. The German government intends to compel SYRIZA and Tsipras to accept the debt Memorandum just as unconditionally as had the social democratic PASOK party under then-Prime Minister George Papandreou and the conservative New Democrats under the current Prime Minister, Antonis Samaras.
This week Michael Nevradakis interviewed Greg Palast about how the IMF, Austerity Agenda and Vulture Funds have destroyed Greece's economy and turned the country into a crime scene.
Michael Nevradakis: In light of the upcoming elections, Greece at the present time has unemployment that has surpassed 27 percent, youth unemployment at around 60 percent, hundreds of thousands of Greeks who have migrated abroad, a social state in shambles, and a government in the process of selling off key state industries, public lands and utilities. What is your take on the current economic situation in Greece?Greg Palast: Well, it's fascinating, because if you read the Western press, Greece is now a "success story." By success meaning you're paying off your creditors; your stock market has recovered and the bond market has recovered somewhat. So as far as most of the press is concerned, everything is fine in Greece. The fact that people are unemployed, that people are still losing their homes and livelihoods, doesn't mean much to the press, because all that matters is the stock market and your creditors.I've been investigating the causes of Greece's collapse; it's a crime scene; it's not something that was a matter of Greeks living beyond their means or being lazy, olive pit-spewing slackers, as the Germans would have it. In fact, I actually looked it up: The average Greek worker works 400 hours more a year than the average German worker. It's a hard-working nation. In fact, I think Greeks are harder on themselves than even the Germans are. It's a hard-working nation, a successful nation, and what happened was your economy was stolen from you.Michael Nevradakis: Continuing this narrative of Greece being a so-called success story: After so many years of IMF and troika involvement in Greece, there are many who still maintain that Greece has no other choice but to continue along this path. You've done a lot of investigating into what entities such as the IMF and the World Bank have done elsewhere, in Latin America and in Asia. What has been the impact of IMF involvement and austerity policies in these other regions?Greg Palast: Well, as my fellow economists Paul Krugman and Joe Stiglitz have noted, the austerity programs are like medieval bloodletting. If you're sick, they would drain the blood from you, and if you didn't get better, they would say "oh, the problem is that we didn't drain enough blood" and they would bleed you some more. That's how austerity works.No one has yet beaten Keynes' formula, which is that when there's no demand for products, your economy is going to fall apart. Rebuilding demand is the opposite of austerity. This is when you need to borrow; this is when you need to go into deficit. This is when you need to devalue your currency so you can once again export. But you are chained like a prison sentence to the Deutsche mark, which is called the euro right now. You are forced to accept Germany's currency, which makes Greece and its economy overpriced.So the way that your economy is balanced is by reducing wages rather than by reducing the value of your currency, and that's disastrous in many ways, because it's a death spiral. The fact that money is being sliced out of your gut to pay off bondholders-- to me that is not a sign of health, that is not a sign of recovery: that's a sign of jackals and vultures chewing at the national economic corpse....Argentina was tied to the dollar. Right now they're going through another fight with international financial vultures, and they're holding strong, and their economy has not only recovered, but they've roared ahead like a rocket, with high employment, and huge increases in national wealth and huge increases in salary in the past decade and a half while they were resisting the IMF diktats. So that's the path for Greece, I mean: Follow Brazil; follow Argentina; follow Ecuador. They did it, they said no. You can't beg your way out of this problem.Michael Nevradakis: Sticking with what you've just said about Argentina in particular, you've done extensive investigative reporting on the activities of so-called vulture funds and how they have targeted countries such as Greece or such as those in Latin America or Africa. One individual in particular, Paul Singer, has been at the heart of your investigations, and is tied both to Greece and to Argentina. Who is Paul Singer and what does he have to do with the cases of these two countries?Greg Palast: Well, if you read my book Vulture's Picnic, which should be coming out in Greek quite soon, these vulture funds-- and I didn't give them the name vulture funds, that's what they called themselves for many years-- they buy up debts of nations when there's a crisis like in Greece, when you can buy up the debts at pennies at the dollar, at a fraction of their face value, and then after a deal has been worked out with everyone else, they are the final holdouts and they demand, in the case of Greece for example, you had creditors who accepted a large cut in the principal of the bonds; the bonds were revalued downward, interest rates were cut-- Singer and one of his associates were the holdouts, and they not only didn't take a loss on their bonds, they were paid multiples and earned something in the area of 200 to 300 percent profit on their bonds. The Greek government made exceptions and paid them additional money.What they do is they hold your nation ransom. They're doing the same thing in Argentina, but Argentina has said, the president of Argentina Christina Fernandez Kirchner, said "I do not pay ransom, I will not pay vultures." And they are simply refusing to pay these creditors. They're simply not going to pay ransom. Other nations have fought these vultures, and in fact, their activities. The people who have been attacking Greece like Paul Singer, the vulture, his activities have been outlawed in, for example, the British Commonwealth . . . England, Canada, and throughout the British Commonwealth. These are rogue financiers, their activities are banned and are criminal or quasi-criminal in some parts of the world, but these are the people who are dictating to your economics ministers.Michael Nevradakis: Sticking on the topic of Paul Singer and his activities, there have been certain very notable cases, such as the examples of Peru and also the Congo, where he basically shook these countries down for large amounts of money . . .Greg Palast: Right. I did a story for BBC television . . . If you go to my website, gregpalast.com, you can see my reports from the Congo. Paul Singer effectively grabbed the money that was set aside to fight a cholera epidemic in the Republic of the Congo. These are not nice guys. Other creditors, the treasuries of the United States or Europe, are used to help bail out countries that are in trouble, whether it's Greece or the Congo or Peru, and after the taxpayers of the US and Europe put up funds to help nations recover, Paul "The Vulture" Singer and his vulture fund friends - remember, they called themselves vultures until recently; they are proud of it - they swoop down, and they say, "Well, now that you've been given money by Europeans and Americans, now we're going to take your resources." And they have seized oil shipments on the high seas; they've seized metal resources, they're basically quasi-illegal pirates, and in fact, they actually seized a pirate ship, no kidding, one old, masted pirate ship they seized from the Argentine Navy, but Argentina got it back.Michael Nevradakis: How has the Argentine government responded to the recent court decision that came out of the United States which led to the country's "default," and to the continued demands and pressure from Paul Singer?Greg Palast: What's happened is that the Argentine government, because it told the IMF to go to hell and it told its creditors to go to hell back in the year 2000-2001, under the current president's husband . . . that allowed Argentina time to recover. And in return, while Argentina, 15 years ago, defaulted on its bonds deliberately, it did say that "we will pay back this money eventually, but only when we recover." And in effect, banks were given stock in the economy of Argentina. As the economy grew, they were paid off. So Argentina actually ended up paying the banks $165 billion, but then Singer said, "I don't want what everyone else has," because that would give him only a 300 percent profit. Instead, he's demanded a 3,000 percent profit on the old bonds he holds. And he found some crazy, 84-year old judge in the United States to not only order Argentina to pay him, but ordered Argentina to stop paying its other creditors, banks such as the United Bank of Switzerland, Citibank, the Bank of New York. George Soros was one of the bankers that was being paid by Argentina and had accepted its terms. So literally, a judge ordered Argentina to stop paying its creditors, and therefore, technically the nation has gone into default. Yet still, Argentina said "that's too bad, we'd rather be in default than pay ransom to vultures . . . we'd rather be in default than let our people starve or allow these pirates to seize our economy."Once again, part of the way that they recovered was by getting rid of the US dollar as their currency, just as, at the moment, Greece is tied to the German currency, and that's just insane. People in Greece are so used to having the euro, they're told that the sky will fall if you step out of the euro. Well the sky has already fallen on Greece. You can't do worse. And if you had your own currency, if you freed yourself from the bondage of German currency, you would be able to begin to restore your economy. And then you could declare that you would pay your creditors in your own currency. The drachma was good enough for Plato, I'm sure it's good enough for you today.
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