Greece is a smokescreen to hide the mother of all bank bailouts
The terms of the European 'bailouts' - the severe public spending cuts, the onslaught on public ownership – all reflect the experience of the developing world in the 1980s and ’90s. By Nick Dearden.
Eurozone finance ministers who sat in Brussels and decided Greece’s future on Monday should have attended yesterday’s well-timed University of London conference on learning lessons from Latin America.
The central lesson is of urgent importance: that the economic policies pushed on Latin America in the early 1980s were an excellent way of helping US banks out of crisis, but an appalling way of resolving Latin America’s debt crisis, instead creating two decades of more debt, poverty and inequality.
Of course, this was the precise purpose of these policies – to shift the burden of financial crisis from the financial system and onto developing nations.
The International Monetary Fund and World Bank lent money to dozens of countries which would otherwise have defaulted, in order to keep the debt repayments flowing back to the banks of the rich world who had created the crisis by their own reckless strategies.
Then, those countries, which benefited not at all from these ‘bailout’ funds, were told to implement structural adjustment policies which saw industry privatised, money freed from government control and markets ripped open to competition with well-subsidised companies from the US and Europe. Poverty boomed, inequality soared and finance was proclaimed king.
The same logic lies barely concealed behind the Greece ’bailout’ agreed by European finance ministers yesterday. There is not even a pretence that Greece’s people will benefit from these funds.
It is recognised that what Greek unions call the ‘barbaric’ additional austerity measures Greece has to implement in order to receive these funds will lead to stagnation and unemployment detrimental to repaying debt. By 2020 Greece’s debts will still represent an unsustainable 120% of the country’s GDP – and that’s if things go very very well.
The slashing of pensions by another 13% and the minimum wage by 22%, and the large reduction in spending with concomitant public sector job losses, can only make the depression longer and deeper. Even the Credit Ratings Agencies have recognised the futility of forcing countries into ongoing stagnation.
So what’s the point of the ‘bailout’? To keep the money flowing into the European financial system. Indeed the likely creation of an escrow account will mean that Greece’s people are bypassed entirely – money will be lent from European institutions, ultimately taxpayers’ money – and flow out into the coffers of European banks. It is a bank bailout on a gigantic scale.
But the good news for the banks doesn’t end there. By forcing Greece to speed up its €50 billion privatisation programme, all sorts of goodies – from airports, ports and motorways to water and sewerage systems – will come up for sale to be snatched up by the financiers of the countries imposing the policies.
The ‘bailouts’, the severe public spending cuts, the onslaught on public ownership – all reflect the experience of the developing world in the 1980s and ’90s. The result was two lost decades of development.
Up until this point it was unusual for countries to go backwards in terms of their income levels. But during the 1990s 54 countries went backwards in terms of per capita income and the numbers in extreme poverty increased by 100 million – not because of war or natural disaster but debt and structural adjustment.
Human welfare was sacrificed to the diktats of the financial system. The increased rates of murder, suicide and HIV in Greece today paint a similar picture.
There are alternatives which Europe could learn from.
After the Second World War Germany received massive debt cancellation and its repayments on the remaining debt were explicitly linked to the country’s growth.
But the Greek people have to wait on European largesse. While there is no pain-free answer to a debt crisis, when governments stand up to the power of their creditors by defaulting, by auditing their debts or by insisting on their own terms for repayment – from Argentina to Ecuador to Iceland – they have fared markedly better.
Moreover, they have made some attempts at regaining their sovereignty from the whims of an unstable financial system.
These solutions seem beyond the vision or courage of European governments, but they are solutions increasingly being looked to by the people of Europe.
No wonder that Germany’s finance minister has put forward the idea both that a ‘Commissar’ is appointed to oversee the Euro protectorate of Greece or, failing that, that democracy be indefinitely suspended. This is the logical conclusion of viewing people primarily as an obstacle to the repayment of your banks.
We propose a different logic: when debt cannot be paid we need to stop punishing the people least responsible and start looking at changing the rules governing those who are responsible.
Nick Dearden is director of the Jubliee Debt Campaign. www.jubileedebtcampaign.org.uk
This article was originally published on Left Foot Forward. Republished with permission.
Image top: odysseasgr.