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A financial coup d’etat in the making?

Marshall Auerback

It is said that the European Union is a remarkably inefficient organization in terms of organizing economic rescue packages, but when it comes to subverting democracy, they are as ruthless and efficient as a well-oiled crime syndicate.

Consider the following: in the space of less than 2 weeks, the eurocrats have managed to eliminate two troublesome elected leaders, whose actions dared to interfere with their broader objectives of finalizing the European

Project — a project which, to put it bluntly, is looking more and more like a financial coup d’etat.

First, Greece, which has in a sense provided the template: Prime Minister George Papandreou, had the audacity to seek the consent of his own people to decisions that would shape their lives via referendum. Well, judging from the petulant reactions of German Chancellor Angela Merkel and French President Nicolas Sarkozy, this clearly wouldn’t do. Blatantly interfering with the internal affairs of a fellow democracy (and an ostensible ally), both lobbied (and threatened) the Greek government, the end result being that Mr. Papandreou was duly shoved aside after backtracking.

And look who’s the new PM in Greece: Lucas Papademos, a former ECB official (naturally, with the requisite Goldman Sachs pedigree), in order to implement the latest set of structural reforms, which will almost certainly have the effect of deflating the Greek economy even further into the ground. Of course, the privatizations will go ahead and Greece’s rapacious tax evading oligarchs will scoop them up at distressed values (presumably with the cash they’ve already stashed offshore in the London property market, or Swiss banks), thereby consolidating their control of an increasingly dysfunctional Greek economy. The vast majority of Greeks will suffer horribly. They have no say, in a sense being left with the choice of shooting themselves or a firing squad. Still, it’s not a total loss: no doubt Goldman Sachs will reap substantial fees as it helps to auction off these very same state assets.

Across, the Adriatic, it appears as if the Merkozy tandem has also played its cards successfully for Round 2, this time successfully eliminating its troublesome nemesis, Italian PM Silvio Berlusconi. Say what you will about Mr Berlusconi, but in this instance he was right to object to a crude political ploy being foisted on him by the ECB, the French and Germans to accept an irrational and economically counterproductive fiscal austerity program in exchange for support from the likes of the IMF. Ask any Argentinean what IMF support entails.

All Berlusconi had to do was cast his eyes toward Athens to see the likely effect of a renewed assault on the Italian welfare state. But the markets euphoric reaction to his resignation was surreal: akin to turkeys voting for Thanksgiving.

In Rome, this Franco-German powerplay is being overseen by a canny ex- Communist, President Giorgio Napolitano, who is in the process of engineering life-long eurocrat, Mario Monti, as the next PM in Italy. Look at Monti’s background: Impeccable credentials: a virtual lifer within the European Union’s technocratic governing structures, mingled with some private sector experience as a director of entities such as Coca Cola and, of course, an international advisor to Goldman Sachs.

What is taking place is nothing less than a financial coup d’etat by the Eurozone’s rentier class. And it is one of history’s sad ironies that, at least in the case of Italy, this is all being engineered by an ex-Communist, who likely

would have been chased out of the Italian Government (a la Juan Berlinguer) by a Cold War-driven CIA had this taken place but 30 years earlier.

How have we come to this pass within the EU? It is hard to point to one person. We have seen this vast project moved along by a handful of unelected bureaucrats for several decades or more. Jacques Delors was a truly seminal figure, but he did not act alone. The whole of the European project has been increasingly driven by these unelected tenured eurocrats, who have rotated in and out of various positions within the EU’s governing structures and spent a few years’ getting the requisite private sector training at a place like GS or JP Morgan.

You could make the case that this started when then French President Francois Mitterrand came to power in the early 1980s, and tried to implement a genuinely fresh progressive economic direction for France. He was promptly undermined until he learned to “play ball” with the powers behind the throne. Since then, the game plan has largely remained the same: European Commissioners set up multiple diktats, rules, regulations, minus – of course – any real kind of democratic recourse when they encounter popular resistance. You start small and build up gradually and create fait accomplis everywhere. When there is democratic backlash via a referendum, the setback is only temporary. Countries, such as Ireland, which dare to vote the wrong way in a national referendum, do not have their result respected. EU officialdom has generally responded, not by reflecting on a popular expression of democratic will, but by ignoring the results until the silly peasants realize the egregious errors of their ways and re-vote the right way.

If it takes two, or even three, referenda, then so be it. Politically, the interpretation of any aspect of the Treaties relating to European governance have always been largely left in the hands of unelected bureaucrats, operating out of institutions which are devoid of any kind of democratic legitimacy. This, in turn, has led to an increasing sense of political alienation and a corresponding move toward extremist parties hostile to any kind of political and monetary union in other parts of Europe. Under politically charged circumstances, these extremist parties might become the mainstream.

The one figure who emerges as a tragic figure here is George Papandreaou. However ineffectually, Papandreou had been deeply committed to making the October deal work. But as Harvard economist (and Greek government advisor) Richard Parker has noted, Papandreou faced a firestorm on multiple fronts: competitors in his own party who wanted his job; parliamentarians in his party who threatened to bolt over new austerity measures; the wholesale intransigence of Samaras and New Democracy; to say nothing of economy that was deflating into the ground before any real help had arrived. Calling for a referendum became his only instrument to put out multiple fires at once by forcing Greek politicians and their powerful backers to back down and by forcing European leaders back to the table immediately to finalize a workable rescue plan in final form.

Of course, he was bound to fail, given the powerful opposition behind him. The Greek PM was being punished on the one hand by his “allies” in the EU, who have imposed collective punishment on the Greek people because of decades of embedded corruption in the system, in spite of the fact that this particular Prime Minister had come clean. Making Greece a proper functioning democracy was Papandreous raison d’etre for in getting into Greek politics.

And, on the other side, the parasite Greek oligarchs themselves, who saw his actions as frontal attack on their control of the Greek economy, fought to destroy him politically and in effect moving Greece one step closer to a failed state.

And now Greece has provided a most convenient model. You’ve now manufactured a crisis (that EASILY could have been solved by the ECB years ago – Greece is around 2.5% of Europe’s GDP), which is now spreading, but providing ample opportunity to get rid of troublesome politicians who don’t do what they are told (effectively embrace this “stability culture” that the Germans bleat on about, but which in reality is nothing more than consolidation of the rentiers’ control of the various governments).

Similarly in Italy, the European Central Bank has been buying Italian bonds, but in very half-hearted fashion and certainly not enough to stem the relentless rise in rates. The ECB’s new chief, Mario Draghi (also an ex- Goldman man), kicked off his term with a blunt warning that Europe’s central bank would not act as a lender of last resort (hiding behind dubious legal technicalities) and thereby put his fellow countryman in a position where his resignation was the only course of action to salvage the country from an immediate financial crisis.

Berlusconi was also an easy target, given his colourful and dubious private history. And his likely replacement, Mario Monti, is a perfect bagman for the financial oligarchs of Europe. He is, indeed, part of what one can rightly refer to as a financial mafia that has wrecked the world economy since 2008. These hatchet men of this murky and opaque financial world are now being appointed to implement austerity on poor working households to save the financial sector from a debt deflation — an artificial crisis created because of the architecture of the Euro system, which as we know these same financial markets so much celebrated when the euro was launched in 1999. Sadly, a large number of Italians still see the euro as their saviour from a corrupt past, which many associate with the Italian lire and high interest rates, even if the corrupt Berlusconi has been himself intimately linked to the same Euro elite. And Draghi himself has a dubious past: as I noted in a recent post, historically, Italy actively exploited ambiguity in accounting rules for swap transactions in order to mislead EU institutions, other EU national governments, and its own public as to the true size of its budget deficit.

It seems indeed fitting that Draghi is now the man forced to deal with the consequences of this national accounting fraud. But it’s hardly just for the people of Europe, all of whom will continue to get crushed under the boot of yet more fiscal austerity, by an increasingly detached and democratically unaccountable elite. No wonder the streets of Madrid, Athens, Rome and elsewhere are beginning to burn.

Source: New Economic Perspectives

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