By Leonidas Vatikiotis

The provocative intervention of the European Commission (indication of their great discomfort over the decision of the Court of Appeal), which continues to treat Greece as an occupied country without sovereign rights, was via the Commission’s spokesperson Annika Breidthardt, who invoked the independence of the statistical services. In essence, the mouthpiece of Brussels if anything she asked was the unaccountability of the Eurostats’ favorites, even at the expense of their country, as was repeatedly done by A. Georgiou. In addition, as rightly highlighted in the announcement of the Union of Judges and Prosecutors on August 3rd, the unequal treatment of the European Commission creates two classes of citizens. Narratives of creditors were reproduced by mainstream Press (FAZ, FT, Politico, Bloomberg, et. al.) which appeared A. Georgiou, who now lives in Maryland, as a victim.

Needless to say, that the venal and loafer bureaucracy of Brussels would have never reached the point of showing its teeth by interfering with such frequency, if the so-called left-wing government of SYRIZA (which governs with the extreme-right party of ANEL) had not given them the right. Going as far as to accept in the prerequisites of the last instalment, the acquittal of A. Georgiou (proof of the inability of his acquittal through the lawful way), as well as paying his legal costs (just for humiliating them), the message sent out by the government is that the rule of law will have the fate of the welfare state: sacrificed at the altar of Memoranda!

The judgement of the Court of Appeal may once again have angered the parasites in Brussels, but it abstained from the proposal of the Prosecutor, Mr. Lambros Patsavellas, who, in his speech, asked for the conviction of Georgiou for all three offences, which did not concern the data falsification, as this will be trialled in the Criminal Court.

Specifically, the former President of ELSTAT, A. Georgiou, was accused of the following: First, because he simultaneously occupied two critical posts (one as a President of ELSTAT and another as deputy division chief in the IMF) – for this he was acquitted. Secondly, because he did not call for the BoD meetings – for this he was acquitted. And, thirdly, because he sent the 2009 deficit figures all by himself, without ELSTAT taking knowledge – for this, he was found guilty. The contradicting fact that he was acquitted for not calling for the BoD and then convicted because he sent the data to Eurostat by himself (because he did not call for the BoD to approve them!), is utterly blatant!

Let take a look one by one the above mentioned accusations. 

Servant of Two Masters!

The position of the President of ELSTAT is a dedicated full-time position (as provided by article 15, par. 1, sentence b of the 3832/2010 law). However, when on June 29, 2010, A. Georgiou passed by the approval of the Conference of Presidents of the Greek Parliament, he concealed that he had not resigned from the IMF but had taken an unpaid leave. His direct dependency on the IMF was apparent on the e-mail he sent to the representative of IMF in Greece, Paul Thomsen, urging him to intervene on the government, via Brussels, in order to change the law on the statistical service.

Georgiou, concealed his professional relationship with the IMF because if made known, he could not even be a mere member of the Board, as the only parallel position allowed, is that of a faculty member at a University. However, Georgiou, is not a professor! He is not even a statistical scientist, since he has no relevant studies. Even at the IMF, he was not working as a statistician, but as a simple economist. It seems, that in the case of statisticians there is a constant tradition which was first pointed out by the American economist and Nobel laureate Joseph Stiglitz: The IMF, recruits, second and third-class scientists to make the dirty job.

Georgiou was concealing the truth that he serves two Masters for more than a year (from July 2010 to September 2011). Thus, along with the position of President of ELSTAT he also held the post of Deputy Chief of the IMF Statistical Service, where admittedly resigned on July 16, 2010, but he only put in into effect on November 10, 2010. The fraud was uncovered by MPs and journalists, so Georgiou had to admit it. Even then, he pretended the naive, stating that he did it in order to secure his pension. The question which subsequently arises is why didn’t he wait until November 10, 2011, to complete his pensionable years at the IMF and then move to Greece? Obviously, his highly lucrative relationship of dependency with the IMF served the hateful organization who wanted to have its own people in key positions in Greece…

What if there was an evident conflict of interest between lender and borrower? A contradiction which was also described by the prosecutor himself, who in the end was applauded by dozens of ordinary people who had flooded the Court of Appeals to watch the trial …

For the offense of holding simultaneously two positions, the Court of Appeal decided that Georgiou is innocent.

ELSTAT, One Man’s Principle

From November 2010 to September 2011, Georgiou refused to convene a meeting between the other 6 members of ELSTAT (N. Logothetis, G. Georgantas, A. Philippou, G. Simiyiannis, St. Balfousia and K. Skordas) who consisted the seven-member collegial body of the independent Authority.

In order to leave no doubt regarding the motives of the BoD members we should state that (according to article 12 of law 3832 / 9.3.2010) its seven members are defined as follows: Four members (of which one is appointed as chairman and another as vice-chairman) are elected by the Presidents of the Parliament, on the recommendation of the Minister of Finance, following a public notice by a majority of 4/5 of its members. One member is nominated by the Governor of the Bank of Greece, one member by the Minister of Finance and another member by the Workers’ Association. As a result, they were not representatives of the protestors of Syntagma square, nor representatives of grass-roots unions … Thus, Georgiou, acted behind their back, as his illegalities were so blatant that they could not be accepted by employees who did not have the psychology of a gauleiter nor of a man in special mission who knows that whatever his actions may-be, his contractors, will cover for him.

His argument, that there was no trust between the members, and that is why Georgiou did it all by himself, was overturned by the prosecutor, who argued that if Georgiou did not trust them, he could entrust the vice-president to convene a BoD. So, why didn’t he request it from N. Logothetis?

Georgiou (who never missed a chance to insult Greece) to further strengthen his position he was issuing press releases in Greek and English. In these press releases the Board members were being presented as politically animated, with unionist-like and “abnormal” behaviour!

For the offence of the non-convergence of the BoD, the Court of Appeal decided that Georgiou was innocent.

Guilty of the 2009 Deficit

Of particular importance, however, is the decision of the three-member Court of Appeal, to convict Georgiou in two years’ imprisonment, with a three-year suspension, for the irregular transmission of the 2009 data of budget deficit. This decision angered the creditors and the neoliberal establishment in Greece. In particular, A. Georgiou he was convicted because he did not put into account ELSTAT as a collective body and because the latter did not consent on the transmission of the data, in violation of Article 10, par. 2(f) I of Law 3832/2010. More specifically, it states that “ELSTAT in particular: a. Prepares and executes the annual statistical program and produces and publishes with the status of the “national statistical office” as defined in para. 1 of article 5 of Regulation (EC) No 1782/2003. 223/2009, the official, national and European statistics of the country.”

Georgiou, however, chose to forward only the data for the 2009 deficit. Thus, in a completely unmonitored way, he predicted the 2009 deficit at 11.9%, first, later 13.6% of GDP later inflated it even more at 15.4% and shortly thereafter even higher: at 15.8%!

Georgiou, who was found guilty of this offense without being granted any extenuation and with the maximum penalty, violated the principles that are strictly followed in all statistical services of Europe.

The court’s decision to convict Georgiou for the arbitrary transmission of the 2009 deficit figures paves the way for revealing and putting into question the scheme that trapped Greece in order to enter the era of Memorandums under the eye of the EU-IMF and of course of the domestic economic elite. If the creditors were having a say on which of the three charges the IMF official, Georgiou, must not be convicted, they would choose this particular one, as the rejection of the way that the data of the 2009 deficit was transmitted (as much as it contradicts Georgiou’s acquittal for the non-convergence of the BoD) paves the way for the pending trials which question the 2009 deficit itself! Τhis a decision may not was the best possible, but eases the way of proving that the deficit was formed by the creditors’ orders in order to justify the literature of fiscal derailment.

The current phase of litigation about false Greek Statistics started only a few days after the last disbursement of the 7.7 million tranche, on July 7, and after the SYRIZA-ANEL government had implemented every single claim of the European creditors and the IMF. Then they realized that an unpleasant surprise was awaiting them. These included the acquittal of three members of the Hellenic Republic Asset Development Fund S.A. (this is the super-fund of privatizations) from Italy, Spain and Slovenia and of the former President of the ELSTAT (Hellenic Statistical Authority), Andreas Georgiou, who in 2009 inflated the deficit so that Greece be placed under the Memoranda status quo. They even ratified his claim for 100.000€ compensation for his legal costs, which is an unparalleled act of political humiliation.

The surprise which followed the disbursement was related to the objection on behalf of the Prosecutor of the Supreme Court, Xenis Demetriou against the Decree of the Counselors Appeal (No. 969/2017) issued on May 26, 2017, where Georgiou was relieved from the accusations that he artificially inflated the budget deficit. With this particular Decree, proposed by the Prosecutor of the Court of appeal, Mr. John Koutras, and adopted by the majority (only the Prosecutor Christina Romesi voted against) decided not to be referred to the three-member Athens Court of Appeal, George and two of his associates (Konstantinos Molfetas and Athanasia Xenaki) for the accusation of false attestation in criminal complicity at the expense of the Public under the particularly aggravating circumstance of the extreme high value of the object of the crime.

It should be noted that this was the second time that the Mr. George and his co-defendants were exempted by Decree of the Council of the Court of appeal. An identical discharge decision (1149/2015) from the accusation for falsification to a felony degree was preceded.

Georgiou was Never Acquitted!

Consequently, those who argued that Mr. Georgiou has been acquitted twice so far make a broad interpretation of the Decree. They turned the exculpatory acts into acquittals with apparent objective to present Mr. Georgiou as a victim of persecution. And instead of apologizing for his inability to prove his innocence to the court hearing, as any accused is obliged to do, he appears as a victim of political squabbles, when the only political conspiracy in progress aims at his acquittal.

The rage of the EU, who treats Greece as a Banana Republic, making use the slavish attitude of Tsipra’s government, is fully understandable on the basis of the possible consequences a final court decision will have for all the countries that voted for Greece’s lending in 2010, which will conclude that Georgiou and Eurostat altered fraudulently the financial figures of Greece. Hundreds of deputies across the EU have therefore been deceived with non-existent economic data in order to save the French-German banks. That being the case, the EU is now trying to not only save her valuable associate in Athens, who in fraudulent ways and in violation of not just the scientific ethics but also of laws, paved the way for the steamroller of the Memoranda, but also to conceal its own responsibility in the falsification of statistical data. That is, not to open the Windbag of Aeolus and reveal the great robbery organized by the EU and IMF at the expense of the people, using the excuse of “rescues” …

In order to better show how provocative and against of any concept of law is the intervention of the creditors on putting an end on the Georgiou chapter, it is worth a small flashback on the very serious accusations against the former powerful man of the ELSTAT who paved the way for the then Finance Minister, G. Papaconstantinou, to compare Greece with Titanic as a self-fulfilling prophecy, paving the way to the speculators…

It is worth to stand in three specific examples which demonstrate the cooking in the data of the ELSTAT that took place under Georgiou’s responsibility, so that the 2009 budget deficit would initially reach 11.9% and later 15.8% of GDP. They also show why the creditors, the pro-Memorandum governments (social-democratic PASOK, the so-called technocrats of L. Papadimou, the right-wing New Democracy and the current SYRIZA-ANEL) do not want the case before the hearing.

The “creative accounting” was used in the data of: First, hospitals, second, 17 DEKOs (Public Companies of General Interest) and hundreds of legal entities (around 500) and third the famous swap of the former Prime Minister, Kostas Simitis, who were “cooked” with the help of Goldman Sachs so that the budget deficit to rise in high levels in order to launch the “shock therapy” in 2010.

Statistical Alchemies

The amount that the ELSTAT sent as hospital debts as part of a consistent recurring process in October 2009 in order to establish the tables with the financial data of the EU Member States was “just” 2.3 billion euros. However, somehow in the notification that arrived a few weeks later at Eurostat, dated October 21st, 2008, the amount had increased by an additional 2.5 billion euros, reaching at 4.8 billion euros. Then it was considered that even this amount was not sufficient enough to get the deficit to a convenient for their purpose, therefore the Greek government added an extra 1.8 billion euros, justifying this decision with a “technical report on the review of the obligations of Hospitals” which was sent on February 3, 2010. Thus, the 2.3 billion were magically become by the “Wizard” Georgiou 6.6 billion euros! They were so determined (because of the guarantees that they certainly had outside Greece) that they did not take into account even the Court of Auditors, which, out of the alleged 6.6 billion, approved only 1.2 billion euros. They did not even “lower” the 6.6 billion when one and a half month after the unlawful increase in the budget deficit, the Finance Ministry demanded that hospital suppliers accept a 30% haircut for their unpaid services in 2005-2008. Thus, while public funds benefited from this cut, this discount was never recorded in the fiscal figures.

It is worth to underline another fundamental dimension, which was emphasized in the first report of the Truth Debt Committee in June 2015 under the aegis of Greek parliament (here is the full text) with aim to show that Greek debt was illegal and odious: “This statistical practices, which were used to calculate the liabilities of hospitals, clearly violate both the ESA95 European regulations (see . ESA95, par. 3.06, EC no. 2516/2000 Article 2 of Commission Regulation EC no. 995/2001) as well as the Code of Practice of the European Statistical System (European Statistics Code of Practice), particularly as regards the principles of independence of the statistical measurements, statistical objectivity and credibility” (page 24).

Thus, assurances of anonymous sources in Brussels, which are being republished as a whole and without criticism assuring that specific methodologies were used so Eurostat guarantees the reliability of the data are… nonsense.  They are just pulling the wool over the people’s eyes! Nowhere, the ESA95 and ESA2010 regulations indicate this recording process. The fact that the assurances of Brussels are arbitrary is obvious from the fact that even eight years later different sources of Eurostat show a different levels of deficit…So Eurostat should first decide on the level of the 2009 deficit which in every opportunity shows off the very bad quality of the data it publishes (on the contrary, with the US counterpart), and then they can issue firmans in order to put a tombstone on a debate that has a long future.

All In…

In violation of the international regulations, 17 DEKOs and hundreds of legal entities from the non-financial corporations in the General Government sector were also included in order to inflate the deficit. These entities included from ETHEL (Thermal Bus Company), ILPAP (Electric buses of Athens and Piraeus), ISAP (Urban Rail Transport SA) and OSE (Hellenic Railways Organisation) to the Center for Renewable Energy Sources, the Industrial Property Organization, the University Research Institute for Communications and Computer Systems and the Varvakeios Market of fresh meat and fishes.

The result of this actions was to raise the public debt by at least 18.2 billion EUR. In order for A. Georgiou to be able to pass this change, which was implemented without the slightest studies, he canceled the Service Board of Directors and turned it into one man’s authority. Moreover, his “daring” exploits include his effort to deceive the Parliament, where in order to justify the reclassification, he submitted 74 files that supposedly contained the relevant documentation. In fact, they did not contain studies as they should, but questionnaires, balance sheets and a multitude of other documents that were totally unprocessed.

Only pizza and souvlaki menus were missing from these files, knowing that such records are hardly even opened, not to mention… read!

The last trick that Georgiou and his associated recruited to inflate the deficit was the sinful swaps by Kostas Simitis. Specifically, the debt swap agreements signed by the Greek government with Goldman Sachs in order to hide the public debt. Instead of revealing the alchemy used for Greece’s accession to the eurozone and hold account the financial staff of K. Simitis (L. Papademos then governor of central bank and later appointed by Troika prime minister, G. Stournaras then chief of economists and now governor of central bank, etc.), these very alchemy were once again used against Greek people, as Georgiou arbitrarily AGAIN decided to allocate the € 21bn swap within the years 2006-2009, increasing retroactively and in violation of EU regulations  the public debt. Why did he distributed it in previous years and not in the next, as he could do, this is something they never want us to know.

The Europeans tried to cover up the ELSTAT scandal invoking the famous independence of statistical institutes. The European Commission statement said in a nutshell that “if we find the data credible, it should be enough for you”. This is extreme political authoritarianism that shows that the independence … seriously hampers Democracy. Prohibits the democratic control, removes sovereign rights, facilitates poverty, and becomes a policy enforcement tool that no people have decided, nor approved. The independent authorities therefore cancel Democracy, just like the EU itself that uses every means to conceal the ELSTAT scandals!

Translation: FF.

Leonidas Vatikiotis is a Greek economist and analyst.

Source:https://www.counterpunch.org/2017/08/30/the-road-to-the-greek-hell-is-paved-with-false-eu-and-imf-statistics/

SYRIZA’s mild Keynesian programme has been gutted. Is a more democratic economic alternative possible within the framework of the EU?

SYRIZA’s victory in the Greek elections of 25 January raised a wave of hope across Europe.  The dominance of the austerity-oriented conservative and social democratic parties was at last challenged by the victory of a leftist anti-austerity party, signalling a possible change of course in Europe.

But one month into a SYRIZA-led administration, the prospects look much gloomier.  SYRIZA is committed to Greece remaining within the Eurozone, and that requires the agreement of several powerful institutions (EU, ECB, IMF) and the tolerance of the core economic elites of Europe.  This was not forthcoming.  The new Greek Government was quickly challenged by a liquidity blackmail originated by the ECB and supported by the German government and the EU leadership.  It soon became apparent that even mildly reversing austerity and prioritising the tackling of the humanitarian crisis – the main pillars of SYRIZA’s Keynesian programme – have no place in the EU as currently constituted.

In late 2014, the previous coalition government of conservatives and social democrats refused the EU Commission’s offer to extend the bailout programme until the summer asking an extension until the end of February instead.  In this way, the newly elected government faced an immediate liquidity danger and was forced into a negotiation with the EU under unfavourable terms.  After repeated Eurogroup meetings, the new government practically gave up on the bulk of its programme so as to buy some time (four months).  According to the common Eurogroup statement of 20 February, and the letter of the Greek Finance Minister Yanis Varoufakis of 23 February, with the first commitments the Greek government agreed to leave practically untouched all privatisations and the majority of the budget cuts of the last four years and practically committed not to intervene to the banking sector.  All the sovereign debt is recognised as payable.  The Troika’s labour market deregulation laws are to be carefully evaluated, and partly changed, but definitely not reversed.  The raising of the national minimum wage will be subject to the approval of the EU, while further wage cuts in the public sector are not excluded (without adjustment of the wage floors).  The government is committed to abandoning all possibilities of early retirement, meaning the neoliberal pension reforms remain, while the already-realised pension reductions and the implementation of the pay-as-you-go system of the previous governments must remain untouched.

The abolition of Troika’s ‘Memorandum of Understanding’ (MoU) was the most central element of SYRIZA’s political campaign since 2011, and is the basis of the mandate it received in the recent elections.  Yet the new Eurogroup agreement refers to the MoU as the ‘existing arrangement’.  Moreover, EU Commissioners and Eurogroup’s Chairman Jeroen Djisselbloem publicly claimed the deal is about the extension of the MoU.

The SYRIZA-led government managed to avoid, for the moment, some of the remaining demands of the Troika under the MoU – like further reductions in pensions and changes to the laws on strikes and the funding of unions – but failed to abolish the bulk of it.  It got an extension of the same loan agreement – without any renegotiation of its characteristics – and the MoU will be evaluated with Varoufakis’ aforementioned letter as the ‘starting point’.

Nothing prevents the EU from coming back and insisting on the implementation of all measures included in the MoU, even if they are not in Varoufakis’s list, whilst the IMF has objected that the Greek letter ‘is not conveying clear assurances that the Government intends to undertake the reforms envisaged in the Memorandum’.  It notes in particular the commitment in the MoU to pension and VAT reforms, to opening up of closed sectors and privatisations, as well as administrative and labour reforms, and it emphasises that the ‘completion of the review’ cannot ‘be successful […] within the policy perimeters outlined in the Government’s list’.

The text of the Eurozone deal itself includes major impediments to the implementation of SYRIZA’s manifesto of 2014, known as the Thessaloniki programme.[1]  But the worst is that it gives the EU and the IMF the right to veto any law or reform with any economic impact introduced in the next four months.[2] The following table compares SYRIZA’s most important electoral pledges (included in the Thessaloniki programme) with the Eurogroup’s deal, or the list of measures included in ‘Varoufakis’ letter’ accepted by the EU as ‘a valid starting point for a successful conclusion of the [MoU’s] review’:

The first pillar of the Thessaloniki programme was a €2 billion bill to deal with the humanitarian crisis.  This included free electricity and food support to 300,000 households living in poverty, free healthcare to all, and subsidised rent for tens of thousands of citizens to combat homelessness.  It also included the restoration of the so called thirteenth pension (end of year bonus) for pensions below €700.  Now any decision impacting on the budget can be vetoed by the EU.  On the top of that, the government has committed to paying €22 billion on servicing the debt this year and still coming out with more than a 1.5% budget surplus.  Each 1% of fiscal surplus means €1.8 billion less for humanitarian relief.  In addition, non-salary and non-pension government expenditures are to be ‘rationalised’.  In a second letter sent by Varoufakis to the Eurogroup on 6 March 2015, the cost of the programme is reduced to 200 million.  Free electricity will finally be provided to only half of the households programmed (150,000) while the provision of free healthcare and the ‘thirteenth pension’ have disappeared.  All the cost is supposed to be covered by cuts in the expenditure of government ministries and a new system of public tenders which is expected to save €140 million.[3]

The second pillar of the Thessaloniki programme was about ‘restarting the economy’ by halting the ‘tax repression’ of the economically active part of the population.  The backbone of this pillar was the plan to help citizens with tax debts by breaking them into small (100) instalments, writing-off about half of these debts for those that pay up to April, restoring the limit of tax free income to €12,000 a year and cancelling the housing tax for small housing properties.  However, the EU is expected to add many conditions to these measures, with which the government had estimated it would receive €3 billion in revenues in the first year.  In the second letter sent by Varoufakis, writing off parts of tax arrears is replaced by ‘strict payment discipline’ as in the similar programme that was put forward by the previous government and finally rejected by the Troika.  The likely beneficiaries are also reduced since whoever misses a payment is now excluded automatically from the programme.

The other flagship measure of the second pillar was the restructuring of ‘bad loans’ made by banks to households and businesses.  SYRIZA proposed creating a public body that would buy and restructure this debt (which amounts to €77 billion) using €3 billion from the Hellenic Financial Stability Fund (HFSF).[4]  But this proposal has already been killed off by the Eurogroup deal, which made clear these funds ‘can only be used for bank recapitalisation and resolution costs’.  In any case,  these funds have in fact already been returned to European Financial Stability Facility (EFSF)/ European Stability Mechanism (ESM) and Greek banks can apply directly to the ECB/SSM by the end of June to use them.  But even if the Greek government could use these funds, they would still be insufficient to deal with the volume of the bad loans.

The third pillar of SYRIZA’s programme is referred to as ‘re-conquering labour’, and is perhaps the one most fatally undermined by the Eurogroup deal and Varoufakis’s letter.  Since the government agreed to refrain ‘from any rollback of measures [...] that would negatively impact [...] economic recovery [...], as assessed by the institutions’, any re-establishment of the collective bargaining system and arbitration mechanism that was demolished by the Troika would surely be vetoed.  In the place of the old system, the Varoufakis letter talks about ‘a new “smart” approach to collective wage bargaining that balances the needs for flexibility with fairness’.

The creation of 300,000 new jobs and the provision of 300,000 new unemployment allowances are now out of question, especially given that the €3 billion expected from tax reforms will be lost to servicing the debt and achieving a budget surplus.  In line with the 2011 Euro plus pact, Varoufakis’s letter pledges that ‘changes in wages’ will be ‘in line with productivity developments and competitiveness’.  With no investments in sight to improve productivity, and no other factor to drive Greek capital’s competitiveness other than low wages, this effectively rules out any wage increases.

Prospects are bleak for the public sector workers as well.  Varoufakis’s promise to freeze ‘the public sector’s wage bill’ and deliver ‘wage distribution through productivity gains’ means any improvement in the €600 salary that newly appointed doctors and teachers now receive, forcing them below the poverty line, is unlikely.  The Greek public sector has lost more than 200,000 employees since 2010, resulting in the radical degradation of basic services to the people.  One of SYRIZA’s electoral pledges was to hire back around 4,000 people who were illegally fired by the previous government.  Now it says these people will be included in the 15,000 public sector jobs the previous government announced it would create.  The Greek public sector needs much more of a boost on recruitments to become functional again.

An indication on the direction of the compromises that were made by SYRIZA is given by the position of the Greek employers.  While SYRIZA enjoys massive support among the working class around the country, it was the Federation of Greek Employers (SEV) who saluted the measures in Varoufakis’s letter and called citizens to ‘support the government’s agenda with fortitude and faith’!

What comes after the four month period?

This four month programme extension will unfortunately not be the end of the EU’s tutelage over Greece.  According to the government, this is only a bridge programme to be replaced in June by a permanent ‘contractual agreement’.  Greece’s unsustainable sovereign debt will need fresh cash to be serviced, and European tax payers will once again be forced to contribute to this black hole.  There is little prospect that any new economic programme attached to a new loan will be a programme for growth and social justice as SYRIZA would like.  On the contrary, it will likely have the same characteristics as the existing austerity programme.  Within this framework, it is difficult to imagine any improvement in Greece’s most extreme socio-economic problems; namely the 1.3 million unemployed, the 60% of working people unable to make ends meet, the three million people with no access healthcare and the lack of public investment which has led to a lost generation and a generalised feeling of depression.  Since it is actually questionable whether the Thessaloniki programme would be enough to put an end this social and economic disaster, one can only imagine what the consequences will be now that even this programme has been gutted.

Lessons to be learned

If one thing has become clear, it is that the long-expected change of course in Greece and the EU more broadly, will not come just because SYRIZA has come to power.  The question that emerges is whether things could have gone, and can still go, differently.  Is it possible for a left government in an austerity hit country to apply even a mild Keynesian policy while remaining within the eurozone and the EU? The answer is simply NO!

The EU institutions under the leadership of Germany have used all the means at their disposal to force the Greek government to backtrack from its programme.  Without new loans, Greece can’t service its existing debt, and the ECB (acting on behalf of the EU) has already threatened to cut off liquidity to enforce harsh neoliberal reforms, as it did in negotiations with Italy, Ireland and Cyprus.

In addition to the financial ‘weapons of mass destruction’ (liquidity and debt), the EU has numerous tools to discipline governments deviating from austerity policies, even when it hasn’t bailed them out.  The rules of economic governance in the EU give the European Commission the ability to review the yearly budgets of the countries, and to demand changes and apply fines to countries that deviate from its recommendations.  They can also freeze the structural funds[5] for a country that does not follow their recommendations on reducing deficits and sanctions can now also be imposed on countries for not dealing with ‘a macroeconomic imbalance’ the way the Commission recommends.  One of the rules imposed is the capping of the growth of nominal labour unit cost[6] at 9% for Eurozone countries and 12% for non-Eurozone countries for three consecutive years.  This effectively bars the redistribution of GDP from capital to labour through wages.  Such rules of economic governance are based on hardline neoliberal principles, and their interpretation is at the discretion of the organs of the EU (i.e. the European Commission) which are not subject to any democratic control.  Legislation on ‘competition’ and liberalisation also prohibits treating energy, mass transport, telecommunications or finance as public services.  In this context, there is just no room for manoeuvre for even a mild Keynesian economic programme.

Opposition to the dominant EU project has been on the rise not just in Greece, but also in Spain, and to a lesser extent in other countries too, like Slovenia and Portugal.  Left-wing forces have invested politically in the idea of pushing for progressive reform of the EU.  However, the demands of the social movements that these forces seek to represent – for more democracy, more commons, less unemployment and precariousness, work with rights and a more decent life – are clearly in contradiction with the political, legal and institutional structure of the EU.  What strategy then should be followed vis-à-vis the EU by political and social forces that aim to break with neoliberalism?

Changing the legislation on economic governance and infrastructure liberalisation would require a ‘qualified majority’ in the Council, while overcoming the European Fiscal Compact and other treaties would require unanimity.  We can be sure the socio-political conditions will never be favourable for the radical left to form governments in 16 out of the 28 countries, representing 65% of the EU’s population.  Applying disobedience to current EU treaties and legislation, therefore, is the only way for left governments to follow different policies.  Moreover, several institutions with substantial financial and political power (the European Commission, the European Central Bank and the European Stability Mechanism) lie beyond any immediate democratic control, and will always be able to take action against any undesirable political change at the EU level.

The only way for (radical) left governments to overcome these constraints is to regain monetary power by introducing national currencies under democratic control.  This would also require abolishing the ‘independence’ of their central bank and re-appropriating the capacity to create their own liquidity.  Such a programme should also include the nationalisation of private banks and the introduction of capital controls to avoid capital flight and find resources for job-creation and public investment.  Finally, it would require an end to the servicing of sovereign debt and an invitation to creditors to negotiate on this basis.[7]

The necessary requirement for a left political programme to succeed is that the political power of the forces it represents must extend further than the government.  It must be deeply rooted in mass movements and have the active support of the people.  Left movements must go much further than trying to ease the suffering caused by neoliberal policies, and aim at building an economy orientated towards serving the majority of people, while respecting the planet and the needs of future generations.  For a programme to be successful, an alternative vision must take roots in the hearts and minds of people, and this can only happen if it is concretely put in place with grass-roots initiatives and cooperative local economies leading the effort.

Greece now has four months to decide whether it wants to continue under the austerity straightjacket imposed by Schauble, Dijsselbloem, Draghi, Juncker and Lagarde, or to show the rest of Europe that a different path is possible.  The Left all over Europe should take note of the severe constraints that a an anti-austerity government faces within the Euro and the Treaties.  Juncker has remarked that ‘there can be no democratic choice against the European treaties’ – if he is right, it follows that a genuinely democratic economic alternative will only be possible outside of the framework of EU.

Dimitris Pavlopoulos works as an assistant professor at the department of Sociology of the Free University of Amsterdam. His research concerns the socioeconomic consequences of flexible employment.

Yiorgos Vassalos is a political scientist specialising in interest representation in the EU. He worked for six years for Corporate Europe Observatory and is now writing his PhD on financial lobbying. He is also active in anti-austerity movements.

“They are pressing us to adopt policies that are crazy,” confided a senior government official as the finance minister, Yannis Stournaras, relaunched “intensive negotiations” with creditors over a looming budget black hole. “If we are forced to implement so much as half a measure more there will be a revolution in this country. Are they blind?”

In Brussels, another spokesman said: “It’s bad. It’s as if we are back in 2010 again.”

Prime minister Antonis Samaras’s fragile coalition now faces what insiders are calling its toughest month since assuming power in June 2012. With a wafer-thin majority, and an increasingly hostile anti-austerity opposition, the government must pass an array of highly controversial bills, starting with next year’s budget, to be presented to parliament on Thursday.

Votes on a new property tax – which will see farmers being faced with a levy on landholdings for the first time – and on lifting a ban on home foreclosures are also lined up. Visiting inspectors say abolishing the repossessions amnesty, which expires on 31 December, is crucial to rejuvenating the cash flow of banks and the moribund Greek property market.

Barely 10 days after narrowly surviving a no-confidence motion, it is far from sure that ruling MPs will vote the measures through. But it is the prospect of yet more spending cuts – in the form of reduced wages and pensions and increased taxes – that has unnerved Greek officials most.

Relentless rounds of belt-tightening, the price of rescue funds worth €240bn (£200bn) since the outbreak of the crisis, has resulted in the disposable income of Greeks being slashed by 40%, according to Samaras, who has resolutely refused to adopt more measures.

With the country having suffered a 25% slide in GDP – after pulling off the biggest postwar fiscal adjustment in western history – his deputy, the socialist leader Evangelos Venizelos, last week went further, insisting that Greece had now reached “breaking point”.

The human cost of reducing the budget deficit from 15.9% to around 3% of GDP this year had not only produced record levels of unemployment (at 27.2% the highest in the EU), but thrown Greece into prolonged recession, he said. “Our foreign friends have to understand that there can be no more measures.”

Economists, even those who have criticised the government for not moving fast enough with reforms, say further cuts could risk wrecking the fiscal progress the nation has made so far.

“There is no way the economy can stabilise if they keep pushing us to cut more and more,” said Prof Gikas Hardouvelis, who was in charge of economic policy under the previous, technocratic government. “In my view, the economy is about to stabilise and it could easily be undone if they keep insisting on more measures,” he added. “To maximize the possibility of lenders getting their money back and to guarantee stability and subsequent growth I firmly believe we need another loan of about €12bn.”

Another senior government aide highlighting mounting fears of political instability said: “What the troika [of lenders] don’t seem to believe, or understand, is that the government will fall if pushed too far,” said one. “At this point, after achieving so much, we deserve a bit more respect.”

But with the troika still at odds with the government over the extent of the shortfall – both the EU and IMF claim it will be near €3bn – the standoff over how to fix the fiscal gap is expected to continue into 2014.

“Four years into the crisis we are still being haunted by the same problems,” said the analyst, Giorgos Kyrtsos, adding that Greece’s debt-to-GDP level would reach about 179% this year compared with 120% when the country received its first bailout in May 2010. “It’s déjà vu all over again,” he said, “although this time with far less Greek drama because the rest of southern Europe has basically been stabilised. Greece remains the odd man out.”

Source: http://www.theguardian.com/world/2013/nov/18/greece-troika-lenders-anger-over-austerity

At the same time as we radical Marxist lefty academics were discussing all sorts of issues about capitalism, including the nature of the current crisis, the great and good economists and strategists of capital were doing the same at a conference under the auspices of the IMF in Washington with the very appropriate title, Crises, yesterday and today(http://www.imf.org/external/np/res/seminars/2013/arc/index.htm).  As at the HM conferences, lots of papers were presented on subjects such as capital controls, will the US and Europe stagnate like Japan has done?; important papers on central bank monetary policy to exit the depression (these are the ones that excited the financial markets); and what is happening in Latin America and Asia etc.

As the organisers put it: “Several years out from the global financial crisis, the world economy is still confronting its painful legacies. Many countries are suffering from lackluster recoveries coupled with high and persistent unemployment. Policymakers are tackling the costs stemming from the crisis, managing the transition from crisis-era policies, and trying to adapt to the associated cross-border spillovers.  Against this background, the IMF will take stock of our understanding of past and present crises.”

So what did they come up with?  Well, the answer is best summed in the keynote speech to the conference from the current head of the US Federal Reserve, the world’s most powerful bank, and the leading expert on the causes of the Great Depression, Ben Bernanke.  Bernanke is shortly to step down as head of the Fed to be replaced (subject to Congress approval) by Janet Yellen, very much in the same mould as Bernanke, in believing that active and massive injections of Fed liquidity (i.e ‘printing money’ in the old terminology) has worked to save the capitalist economy and will work to enable it to recover.

But what did Uncle Ben say (http://www.federalreserve.gov/newsevents/speech/bernanke20131108a.htm)?  For Ben, it was very clear: the global financial collapse and the ensuing Great Recession was very much “a classic financial panic”, no more and no less.  “I think the recent global crisis is best understood as a classic financial panic transposed into the novel institutional context of the 21st century financial system.” 

He likened it to the ‘financial panic’ of 1907.  This was triggered by speculative activity – in 1907 by “a failed effort by a group of speculators to corner the stock of the United Copper Company.” Similarly the 2008 ‘panic’ was “had an identifiable trigger–in this case, the growing realization by market participants that subprime mortgages and certain other credits were seriously deficient in their underwriting and disclosures.”  In both cases, a fire sale of bank assets and a collapse in the stock market led to a run on bank deposits and liquidity.  “In 1907, in the absence of deposit insurance, retail deposits were much more prone to run, whereas in 2008, most withdrawals were of uninsured wholesale funding, in the form of commercial paper, repurchase agreements, and securities lending. Interestingly, a steep decline in interbank lending, a form of wholesale funding, was important in both episodes.”  And in both 1907 and 2008, there was insufficient regulation of financial institutions to ensure that they were not up to their necks in risky dud assets.

In 1907, liquidity injections stopped the rot and “eventually calmed the panic. By then, however, the U.S. financial system had been severely disrupted, and the economy contracted through the middle of 1908.”  It was the same outcome in 2008. In 1907, extra ‘liquidity’ had to come from the stronger banks like JP Morgan.  The experience of 1907 led to the big banks deciding to form the Federal Reserve Bank in response, set up in 1913.  The Federal Reserve remains formally owned by the major investment and retail banks and is not owned by the taxpayer, although the Fed is a government-directed agency under the law.  So from the beginning, the Fed’s task has been to meet the interests of Wall Street first and the wider economy second.

Uncle Ben is very proud that the ‘lender of last resort’ and the provider of liquidity and monetary injection that stopped the 2008 financial collapse turning into meltdown was the Federal Reserve, led by him.  You might pause to ask Ben that if the Federal Reserve was such a successful institutions set up to avoid financial panics like 1907, why it failed to see the panic of 2008 coming and then stop it happening.

But let’s move on – at least the Fed under Bernanke acted to avoid a global financial meltdown and is now helping to avoid another. “Once the fire is out, public attention turns to the question of how to better fireproof the system”.  And Ben reckons, as in 1907, when the banks decided to set up the Fed, measures taken since 2008 in regulation of ‘shadow banking’ and capital ratios for the banks will ensure that another ‘financial panic’ can be avoided.  Really?  Did the setting up of the Fed avoid the 1929 crash and did it help then to avoid a meltdown?  Milton Friedman. the doyen of monetarist economics, reckoned that the Fed actually caused the ‘panic’ of 1929 by injecting too much credit into the economy and then subsequently taking it out too quickly and causing the Great Depression.  In 2002, Bernanke famously remarked that Friedman was right and he would not make that mistake with the Fed again.  And certainly since the panic of 2008 started, the Fed has been pumping in cash to the tune of $4trillion so far – although apparently to no avail in getting the economy going and unemployment back to pre-crisis levels.

Bernanke posed the problem for the strategists of capital at the conference: “Our continuing challenge is to make financial crises far less likely and, if they happen, far less costly. The task is complicated by the reality that every financial panic has its own unique features that depend on a particular historical context and the details of the institutional setting.”   What we need to do is to “strip away the idiosyncratic aspects of individual crises, and hope to reveal the common elements” of these ‘panics’.  Then we can “identify and isolate the common factors of crises, thereby allowing us to prevent crises when possible and to respond effectively when not.”

Indeed!  But that challenge does not seem to have been met by Bernanke and the other important participants at the IMF conference.  What are the common elements of these crises identified by Bernanke?  Well, that speculative investment in different forms of financial assets gets out of hand every so often and there is not enough regulation of what financial institutions are doing, so that a panic follows.  The common factors in capitalist crises thus appear to be that all crises are banking crises; and that they are due to excessive speculation and risk-taking by uncontrolled bankers.  There is nothing in Bernanke’s analysis to suggest that anything could be wrong with the capitalist mode of production itself: namely production for profit; or that recurrent crises ultimately originate in the productive sectors of the economy, even if they are ‘triggered’ in the financial or other unproductive sectors like real estate.

And yet there were such clues to this explanation in Bernanke’s own speech. He said: “Like many other financial panics, including the most recent one, the Panic of 1907 took place while the economy was weakening; according to the National Bureau of Economic Research, a recession had begun in May 1907″.  Exactly.  And Bernanke could have added that the 2008 recession was preceded by the credit crunch of 2007 and before that by a sharp fall in the mass of profits generated from early 2006 onwards.  It was the same story before the panic or crash of 1929 that led to the Great Depression.  A fall in profits and output had started a year before.  So there was a crisis in production underlying the financial ‘trigger’ of ‘excessive’ speculation in copper (1907); stocks (1929); real estate (2008).  Speculation was ‘excessive’ and ultimately ‘risky’ because the value generated to deliver gains on such investments did not materialise.  This is a much more coherent explanation of the recurrence of crises; namely the tendency for profitability in capitalist production to decline and eventually lead to an outright fall in profits.  Then a credit-fuelled boom turns into a speculative panic or crash.

At the end of the IMF conference, the great and good got together in a plenum and panel debate on whether there would be another financial crisis down the road.  Their conclusion was summed up by Larry Summers, former Treasury secretary under Bill Clinton, an economic guru and former top executive at Goldman Sachs, who was the favourite choice for the new Fed Chairman after Bernanke, but withdrew before selection.  Summers reckoned that another financial crisis was a long way away.  Some combination of complacency and euphoria has preceded all the major financial crises of the past, including the one that struck in 2008, he observed.  And “it feels to me like we’re a way away from complacency and euphoria.” Summers said:“So I think it’s going to be awhile, quite awhile before we have another financial crisis that will fit the pattern of the 2008 crisis, and others such as Japan in the late 1980s or the Great Depression. I think those type of crises are a long time off.”

That is a conclusion you might reach if you reckon crises of capitalism or financial panics are purely financial in origin and are caused by ‘excessive speculation’ as the IMF conference seems to have decided.  But bankers are always speculating: they never stop.  Sure, regulation is tighter, but only despite a barrage of criticism from bankers who rightly see this as a restriction on ‘business as usual’.  Bankers are always ‘naughty’.  This cannot explain why some of the time their activities appear to boost the economy and other times destroy it.

If crises are not generated by naughty bankers but are due to inherent flaws in the ‘profit economy’, then another slump is not so far away – in my view. Global capital, especially in the G7 economies, is still weighed down by unprofitable old stock and ‘inefficient’ firms, so that profitability remains below pre-crisis levels in most economies and the stock of financial and corporate debt especially in small businesses remains a huge burden, and indirectly for the taxpayer .  All this keeps investment at near lows, unemployment well above pre-crisis levels and delivers permanent damage to the productivity of labour and real GDP growth.

Capitalism needs another round of ‘cleansing’ in order reestablish higher profitability – just as it did in the Long Depression from the mid-1870s to the mid-1890s, when it took several slumps before there was a sustained boom, or spring period, for capitalism.  For now, the major economies remain in the doldrums and the Fed, the ECB, the BoE and BoJ have run out of ideas.

By Michael Roberts

Source: http://thenextrecession.wordpress.com/2013/11/11/why-the-crisis-and-will-there-be-another-imf-speaks/

Europeans know all about constitutional projects that have been pushed through despite being rejected by public referendum. They remember candidates who, having promised to renegotiate the terms of a treaty, then get it ratified without changing a comma. The people of Cyprus very nearly had a percentage of their bank deposits seized by the government (1). But this is a new milestone: the EC is washing its hands of the dismantling of the only Greek media not yet owned by shipping magnates, since this will make it possible to sack 2,800 workers immediately from the public sector, which the EC has always abhorred. It will also allow Greece to meet the targets for job cuts that the troika (2) has imposed on a country where 60% of young people are unemployed.

This misplaced zeal coincides with the publication in the US media of a confidential report in which the IMF concedes that the policies it has implemented in Greece over the last three years have resulted in “notable failures”. Were the errors due simply to over-optimistic growth forecasts? Probably not. According to the Wall Street Journal’s interpretation of this verbose document, the IMF admits that “an immediate restructuring [of Greece’s debt] would have been cheaper for European taxpayers, as private-sector creditors were repaid in full for two years before 2012 using the money borrowed by Athens. Greece’s debt level thus remained undented, but it was now owed to the IMF and Eurozone taxpayers instead of banks and hedge funds” (3).

The speculators have extricated themselves without losing one cent of the loans they made to Greece at astronomical interest rates. Obviously, such skill in robbing Europe’s taxpayers for the benefit of the hedge funds qualifies the troika to make the Greek people suffer. There are also hospitals, schools and universities that could be closed without any opposition. And not just in Greece: it’s only by making such sacrifices Europe that will be able keep its place in the triumphal progress towards a new Middle Ages.

Source: http://mondediplo.com/2013/07/01edito

Some read the recent IMF report on Greece as a mea culpa for its mistakes in the Greek bailout.

We see it differently. You can say sorry for an unintended mistake, a miscalculation. The case we have here is not an accident. IMF’s inhumane and otherwise ineffective policies are not, as IMF asserts, the result of a methodological error, simply the story of the wrong multiplier.

IMF failed because it is operating on the dogma of neo liberalism, and in mere defense of the capital. Blind by ideology, IMF got Greece wrong as they did with Argentina, or the Asian financial crisis. However, ideology on its own is not a sufficient explanation for the extend of the failure we experience in Greece. It’s the nondemocratic and unaccountable nature of IMF – a qualification that holds equally true for ECB and the Commission, the other two parties in the so-called Troika – and the arrogant and anti popular Greek ruling elite that allowed the IMF ideology to become a catastrophe for the Greek society.

With youth unemployment at 58.3% you don’t need the IMF to tell you there is a major blunder.

It’s high time IMF ceases to exist and the Greek government assumes its responsibility and resigns.

ReINFORM