Greece Passes New Austerity for New Loans
Bond holders, banks, and IMF bear responsibility for having made irresponsible loans to Greece, so it is not right for them to force yet more austerity on Greece, says Michael Hudson
Sharmini Peries: It’s the Real News Network. I am Sharmini Peries coming to you from Baltimore. The European Commission announced on May 2, that an agreement on Greek pension and income tax reforms would pave the way for further discussions on debt release for Greece. The European Commission described this as good news for Greece. The Greek government described the situation in similar terms. However, little attention has been given as to how the wider Greek population are experiencing the consequences of the policies of the TROIKA. On May Day thousands of Greeks marked International Workers Day with anti-austerity protests. One of the protester’s a 32-year-old lawyer perhaps summed the mood, the best when he said …
Speaker 2:”The current Greek government, like all the ones before it, have implemented measures that has only one goal, the crushing of the workers, the working class and everyone who works themselves to the bone. We are fighting for the survival of the poorest who need help the most.”
Sharmini Peries: To discuss the most recent negotiations underway between Greece and the TROIKA, which is a European Central Bank, the EU and the IMF, here’s Michael Hudson. Michael is a distinguished research professor of Economics at the University of Missouri, Kansas City. He is the author of many books including, “Killing the Host: How Financial Parasites and Debt Bondage the Global Economy” and most recently “J is for Junk Economics: A Survivor’s Guide to Economic Vocabulary in the Age of Deception”. Michael it’s been a while, good to have you back.
Michael Hudson: Good to be here.
Sharmini Peries: Michael, let’s start with what’s being negotiated at the moment.
Michael Hudson: I wouldn’t call it a negotiation. Greece is simply being dictated to. There is no negotiation at all. It’s been told that its economy has shrunk so far by 20%. It has to shrink another 5% making it even worse than the depression. It’s wages have fallen and must be cut by another 10%. Its pensions have to be cut back. Probably five to 10% of its population of working age will have to immigrate. The intention is to cut the domestic tax revenues because labor won’t be paying taxes and businesses are going out of business. The intention is to lower the government’s revenues by so much that Greece will have to sell off even more of it’s public domain to foreign creditors. Basically it’s a smash and grab exercise and the role of Tsipras is not to represent the Greeks because the TROIKA have said, “The election doesn’t matter, it doesn’t matter what the people vote for. Either you do what we say or we will smash your banking systems.” Tsipras’s job is to say, “Yes I will do whatever you want. I want to stay in power rather than falling in election.”
Sharmini Peries: Right. Michael you dedicated almost three chapters in your book “Killing the Host” to how the IMF economists actually knew that Greece will not be able to pay back its foreign debt but yet it went ahead and made this huge loans to Greece. It’s starting to sound like, you know the mortgage fraud scandal where banks were lending people money when they knew they couldn’t be paying it back to buy houses and so on. Is it similar?
Michael Hudson: Well, the basic principle is the same. If a creditor makes a loan to either a country or to a home buyer knowing that there’s no way in which the person can pay, who should bear the responsibility for this? Should the bad lender or irresponsible bond holder have to pay or should the Greek people have to pay? Well, IMF economist said, “Greece can’t pay under the IMF rules. We are not allowed to make loans to countries that have no chance of repaying in the foreseeable future.” The then president of the IMF, Dominique Strauss-Kahn said, “Well we are going to have a new rule and it’s a systemic problem rule. That is if Greece doesn’t repay this will cause problems for the economic system defined as the International Banker’s and Bond Holder’s and European Union Budget, then the IMF can make the loan. Well, this poses a question on international law. If the problem is systemic, not Greece, and if the system that’s been rescued, why should the Greek workers have to dismantle their economy.
Why should Greece a sovereign nation have to dismantle its economy in order to pay and rescue the banking system that is guaranteed to continue to cause more and more austerity, guaranteed to turn the Euro zone into a dead zone? Why should Greece be blamed for the bad male structured European rules? That’s the moral principle that’s at stake in all this.
Sharmini Peries: Michael, the New York Times has recently published an article titled, “IMF torn over whether to bail out Greece again”. It essentially describes the IMF as being sympathetic towards Greece in spite of the fact as you say, they knew that Greece could not pay back this money when it first lend it the money with the TROIKA. Right now, IMF sounds so rational and thoughtful about the Greek people. Is this the case?
Michael Hudson: Well, after the last two years Yanis Varoufakis, who was the finance minister under Syriza has said that every time he talked to the IMF’s Christine Lagarde and others, they were sympathetic. They said, “I am terribly sorry, we have to destroy your economy. I feel your pain, but we are going to destroy your economy. There is nothing we can do about it. We are only following orders.” The orders are including from Wall Street, from the Euro Zone that have bought pre-funds. Being sympathetic, feeling their pain doesn’t really mean anything if the IMF says, “Oh, we know it is a disaster. We are gong to screw you anyway, because that’s our job. We are the IMF, Our job is to impose austerity. Our job is to shrink economy, not help them grow. Our constituency are the bond holders and banks.” Somebody’s going to have to suffer. Should it the wealthy billionaires and the bankers or should it be the Greek workers? Well, the Greek workers had our constituency, “We feel your pain, but we’d rather you suffer than our constituency.”
This is the usual New York Times’ hypocrisy, pretending that the IMF really is feeling bad about what it’s doing. If it felt bad it would have done what the IMF European staff did a few years ago after the first loan, they resigned in protest. They write about it and go public and say, “This system is completely corrupt. The IMF is working for the bankers against the interest of its member countries.” If they don’t do that they are not really sympathetic at all. They are just hypocritical.
Sharmini Peries: Right. The I know that the European Commission is holding up Greece as an example in order to discourage other member nations in the periphery of Europe; so that they don’t default on their loans. Explain that to me and why is Greece being held up as an example here.
Michael Hudson: It’s being held an example for the same reason the United States went into Libya and bombed Syria. It’s to show that we can destroy you if you don’t do what we say. If Spain or Italy or Portugal seeks not to pay its debts, it will be … Its banking system will be destroyed, its currency system will be destroyed and basically the principle is that finance is the new form of warfare. You can now destroy a country’s economy not by invading it. You don’t even have to bomb it as you’ve done in the near east. All you have to do is withdraw all credit in the banking system, isolate it economically from making payments to foreign countries so that you essentially put sanctions on it. You’ll treat Greece like they’ve treated Iran or other countries.
We have life and death power over you. The demonstration effect is not only to stop Greece but to stop countries from doing what Marine Le Pen is trying to do in France: withdraw from this Euro Zone, which is basically: the class war back in business. The class war finance against labor, imposing austerity, imposing shrinking living standards, and lowering wages, and cutting back social spending. It’s demonstrating who’s the winner in this economic warfare that’s taking place.
Sharmini Peries: Then why is the Greek population still supportive of Syriza in spite of all of this, I mean, literally not only have they, as a population, been cut to no social safety net, no social security, and yet the Syriza government keeps getting supported, elected in referendums, and they seem to be able to maintain power in spite of these austerity measures. Why is that happening?
Michael Hudson: Well, that’s the great tragedy. They initially supported Syriza because they promised not to surrender in this war. They’ll actually fight back. The plan was not pay the debts even if this lead Europe to force Greece out of the European Union. In order to do this however, what Yanis Varoufakis and his advisors such as James Galbraith wanted to do was saying, “Look if we are going not to pay the debt we are going to be expelled from the Euro Zone. We have to have our own currency. We have to have our own banking system. And it takes almost a year to put in place your own physical currency, your own means of reprogramming the ATM machines so that people can use it, and reprogramming the banking system.
You also need a contingency plan for, if the European Union wrecks the Greek banks, which basically have been the tool of the oligarchy in Greece, the government is going to have to take over these banks and socialize them, and use them for public purposes. Unfortunately Tsipras never gave Varoufakis and his staff the go ahead. And ended up double crossing them after the referendum two years ago that said: don’t surrender. That lead to Varoufakis resigning from the government.
Tsipras decided that when it all cam down to things, he really wanted to be reelected, though he turned out to be just a politician, realizing that in order to be a politician you have to represent the invader, you have to become a client politician. His clientele is now the European Union, and the IMF and the bond holders, not the Greeks. What that means is that if there is an election in Greece his people are not going to vote for him again. He knows that. He is trying to prevent an election and we’ll know … I think later this month the Greek parliament is going to have to vote on whether or not to shrink the economy further and cut pensions even more.
If there are defections from Psipras’s Syriza party, there will be an election and he will out of office. I won’t say out of power, because he has no power whatsoever, then out of office, then there will probably have to be a new party created if there’s going to be any hope of withstanding the threats that the European Union is making to destroy Greece’s economy if it doesn’t succumb to the austerity program and step up its privatization and sell off even more assets to the bond holders.
Sharmini Peries: Finally, Michael, why did the Greek government remove the option of GREXIT from the table in order to move forward?
Michael Hudson: In order to accept the Euro Zone. You’re using its currency, you have to have your own currency. The reason it agreed to stay in was it had made no preparation at all for withdrawing. Imagine if you are a state in the United States. And you are saying we want to withdraw from the United States: you have to have your own currency. You have to have your own banking system. You have to have your own constitution. There was no attempt to put real thought behind what their political program was.
They were not prepared and still have not taken any steps at all to prepare for what they are doing and they haven’t made any attempt to justify non payment of the debt under International Law: the law of odious debt or give an actual reason why they are not paying. The Greek government has not said that no country should be obliged to disregard its democratic voting and to dismantle its public sector and give up its sovereignty to bond holders. No country should be obliged to pay foreign creditors if the price of that is shrinking and self destruction of that economy. They haven’t translated this political program of not paying into, what this means economically, what it means in practice to cede sovereignty to the Brussels bureaucracy, meaning the European Central Bank on behalf of its bond holders.
Sharmini Peries: All right Michael, we will keep an eye on this. It looks like it’s going to get more heated in Greece. At least the people and the movements are planning to protest this new deal. I thank you so much for joining us and I hope you can join us again. I understand you are on your way to Greece in a few weeks and we’ll be expecting a report back from you about what you find there. Thank You.
Michael Hudson:Thanks for having me on.
Sharmini Peries:Thank you for joining us here on the Real News Network.