By William K. Black

May 30, 2018     Bloomington, MN

The European Union’s (EU) leadership continues to prove our family rule that it is impossible to compete with unintentional self-parody. “EU leadership” is an oxymoron, largely composed of regular morons. Consider only two examples — European Commission (EC) President Jean-Claude Juncker and Commissioner and Budget and Human Resources Minister (one of the EC’s most powerful leadership positions) Günther Oettinger.

Juncker heads the EC because he led the most infamous EU tax giveaway to wealthy corporations as Luxembourg’s finance minister and then prime minister. Whistleblowers and the International Consortium of Investigative Journalists (ICIJ) eventually exposed the fact that for over a decade the wealthiest companies in the world created front companies in Luxembourg and met secretly with the finance minister to negotiate secret sweetheart deals allowing the companies to pretend to earn their income in Luxembourg – and to pay obscenely low tax rates. The secret deals “allowed some of them to pay effective tax rates of less than 1 percent on profits shuffled into Luxembourg.” Luxembourg is so tiny that even at these ridiculously low tax rates the covert deals made the country wealthy (at the direct expense of the public sectors of other EU nations and the United States). Juncker’s eagerness to aid plutocrats made him the EU’s longest-serving leader as Luxembourg’s PM until a different scandal brought him down. These sweetheart tax scandals led, not prevented, Juncker’s elevation to run the EC. In response to the exposure of the scandal, Luxembourg: greatly increased the number of sweetheart deals, prosecuted the whistleblowers and the investigative journalists, and took no action against Luxembourg’s “let’s make a deal” leaders or the plutocrats (which included Koch Industries).

As EC President, Juncker maintained his ethics-free approach. His defining statement, in the context of the EC’s actions devastating the Greek economy and populace: “When it becomes serious, you have to lie.” (Goldman Sachs made Juncker’s predecessor as EC president wealthy, as soon as the minimum time had run after his resignation, so Juncker was the perfect successor.) Juncker has assembled a right-wing EC leadership team that has often brought further shame to the EC.

Oettinger is an example of Juncker’s shameful EC leadership team. Oettinger is the EC’s Roseanne Barr. He shares her love of public display of bigotry (PDBs). Barr’s recent racist rant led Disney to cancel her very popular (and profitable) comedy show. Juncker rewarded Oettinger’s most infamous PDB with a major promotion to Oettinger’s current position as Budget Minister. Oettinger’s PDB displayed four different targets of his bigotry – the Chinese, gays, women, and Walloons. Oettinger’s racist rant was in a public speech recorded on video tape. Oettinger said that his racist rant provided no reason why he should apologize to the targets of his PDBs.

Oettinger called Chinese people “slant-eyes” (Schlitzaugen). That compound noun, in German (as in English) is unambiguously a racist insult. As to gays, Oettinger ‘joked’ that Europeans would soon disappear as EU governments mandated “gay marriages.”

‘Walloons’ is a complicated concept, but I will simplify the concept as Belgians who speak French as their mother tongue. The region populated primarily by Walloons is ‘Wallonia’ (in English). “Oettinger described Wallonia as a ‘micro-region ruled by communists’”. The EU’s principal offices are in Brussels, a city in which French speaking Belgians are a majority (many of whom identify as Walloons though Brussels is not located in Wallonia). Oettinger’s bigoted rant attacking Walloons was a particularly nasty insult, demeaning and attacking the EU’s hosts.

Oettinger’s attack on women was bold given that he is a senior ally of Germany’s Prime Minister Angela Merkel.

Describing a recent visit to Brussels by Chinese ministers in the speech, Oettinger said, “Nine men, one party, no democracy. No female quota, and no women – which follows logically.”

Yes, absent quotas requiring the inclusion of women, it “follows logically” that there would be no women in government or industry if such positions were awarded based on ability!

At the time he made his racist rant, Oettinger was the EC Minister for digital economy and society. Oettinger’s reputation in that position was for his incompetence and sleaze (involving pro-Russian allies of Hungary’s increasingly fascist leaders).

In the recent past, Oettinger has surprised his audience as even if the digital agenda is at the heart of the Commission’s priorities, the Commissioner responsible seems to be rather digitally illiterate, making the Spokespersons service and his cabinet replace his original remarks from a speech with tailored ones, that would cover his lack of knowledge of the digital world.

Disney cancelled Barr’s show within hours of her racist tweet. Juncker promoted Oettinger hours after his racist rant became public. (Disney, like Koch Industries, cut a secret sweetheart tax deal with Luxembourg, so we should not go overboard in our praise of Disney’s leaders.)

Oettinger, Italy, and Extortion by the Plutocrats

My readers will be shocked that Oettinger, after his big promotion to run the EC’s budget ministry, has found a way to make public the EC leadership’s inner incompetence and sleaze. The context was the Italian establishment’s anti-democratic actions against Italian voters’ preferred parties that I wrote about recently. Francesco Ronchi, a Wall Street Journal opinion writer, criticized Oettinger’s gleeful encouragement to the financial markets to crush the Italian economy and extort Italian voters to “toe the [German] line.” Merkel made the same threat.

The statement by Günther Oettinger, one of the most senior members of the European Commission, that “markets will teach Italians how to vote” is not a reassuring one. Likewise, German Chancellor Angela Merkel’s comparison between Italy and Greece is an unveiled threat: Italians had better toe the line, or they will not be spared what the Greeks have been going through.

The Italian establishment, strong allies of the German diktat that has repeatedly overturned democratic election results in Italy and Greece, scandalously joined Germany in hoping that the world’s largest banks would again successfully extort Italian voters.

Ronchi correctly warned that such anti-democratic actions were exacerbating the hostility of Italian voters towards German diktat and economic illiteracy.

This disdain for Italian voters is not only undemocratic but also dangerous. It fuels nationalism and anti-German sentiment in Italy. By appealing to national pride and the defense of democracy against external influences, populist parties are likely to increase their share of the vote in the next elections, which may take place in the next few months. Transforming these elections into a de facto referendum on eurozone membership would be another dangerous gamble in a climate of growing Euroskepticism.

James Mackintosh, a Wall Street Journal reporter, unintentionally demonstrated the grave risks, and blindness, that finance and German diktat pose. The context is the reporter’s hypothetical discussion of what would happen if Italy were to leave the euro and reissue the lira at a lower value (effectively producing a devaluation).

Economic chaos in Italy after a devaluation would be all but guaranteed, and surely hurt growth in the rest of Europe – although such chaos might persuade reluctant euro members that the pain of staying is worthwhile. Even worse from the point of view of markets would be if Italian euro exit went well, encouraging anti-Europeans in other countries to push for a repeat.

That passage is revealing. The reporter, in a purported straight news article, admits that his view is that “markets” have a “point of view” about what results are desirable. “Markets” are not people and they are incapable of having a “point of view,” so the reporter is actually projecting his neoliberal dogmas on the “markets.” His neoliberal dogmas are a nightmare and his lapses of economic analytics and logic are revealing.

I start with the reporter’s single most depraved statement – that the “wors[t]” outcome “from the point of view of markets” (really, his own neoliberal projection) would be “if Italian euro exit went well.” I can put that into plainer English. What the Italian euro exit “went well” means is that Italy’s still depression-level overall unemployment rate and even more obscene youth unemployment rate would decline rapidly as economic growth and exports expanded rapidly. Inflation would remain low or moderate and be driven primarily by increased import costs. The results would be wonderful for Italians, but also (net) desirable for other Europeans and even non-Europeans. Non-Italians would gain initially primarily because they could purchase Italian goods they desired at lower prices. Non-Italians would eventually gain even more as the Italian economy and incomes expanded and Italians purchased more imports. Conversely, the reporter admits that nations that remain within the eurosystem must continue to suffer the “pain of staying.”

Italy’s hypothetical success in exiting the euro is the worst outcome that a neoliberal journalist can conceive of. The hard right does not fear governmental failures. Its paramount fear is government successes that expose laissez faire lies. The reporter literally hopes that currency devaluation (a common and frequently successful means of reducing the severity and length of a severe recession) will fail and cause “chaos” so severe that no other nation will dare seek to escape the euro’s continuing “pain.”

The reporter’s statement is more depraved that I have explained, for his ultimate fear is that Italy’s successful re-adoption of the lira would prompt other eurozone nations to adopt similar successful policies. The worst possible result he can imagine is that multiple eurozone nations will successfully re-adopt sovereign currencies and improve greatly their economies and the overall EU economy. Here is his how he phrased this point: “encouraging anti-Europeans in other countries to push for a repeat.”

The reporter’s phraseology shows that he is also more dishonest than I have yet explained. Having a sovereign currency is not remotely “anti-European.” Producing stronger national recoveries through re-adoption of national sovereign currencies is not anti-European. Suffering recurrent “pain” due to the euro is not pro-European. The euro, and the oxymoronic Stability and Growth Pact that the EC claims is essential to the euro’s survival are the two greatest threats to a prosperous and stable Europe, the EU, and European democracy. There is no valid reason why an EU nation must adopt the euro.

Taken together, the euro and the Stability and Growth Pact eliminate the three most effective and least harmful means of responding to a severe recession. A eurozone nation cannot use meaningful fiscal stimulus to reduce severe unemployment because it would violate the Stability and Growth pact. It cannot devalue its currency because it no longer has a national currency. It cannot engage in monetary stimulus through its central bank because it cannot control the European Central Bank (ECB). Germany has preeminent, but not total, control over the ECB and economically illiterate right-wing pro-austerity dogma dominates the EC and the ECB. The only means left to Eurozone nations is to become a very large net-exporter without devaluation. A nation like Germany with extraordinary productivity can be a large net exporter without any heroic efforts. Other nations, with normal or below-average productivity, can only become major net-exporters by crushing wages. The result is a terrible combination of severe unemployment, reduced wages, bailouts for the richest bankers, and fierce political rage that will inevitably target German hegemony for special criticism.

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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.