I missed this story last week, and it’s an important one. If you want evidence that Disaster Capitalism – the termed coined by Naomi Klein in her brilliant book “The Shock Doctrine” is still the dominant tactic of free market militants, look no further than what is being proposed in Greece. Klein proposed that prominent free market capitalists use disaster, ‘either real or perceived’ to ram through extreme free market reforms that the public would otherwise reject, and it looks like the European Central Bank, the IMF and the European Commission is trying to do just that. From Business Insider:

Greece’s eurozone creditors are demanding that the government in Athens introduce a six-day working week as part of the stiff terms for the country’s second bailout.

The demand is contained in a leaked letter from the “troika” of the country’s lenders, the European commission, European Central Bank, and International Monetary Fund. In the letter, the officials policing Greece’s compliance with the austerity package imposed in return for the bailout insist on radical labour market reforms, from minimum wages to overtime limits to flexible working hours, that are likely to worsen the standoff between the government and organised labour in Greece…..

The letter, sent last week to the Greek finance and labour ministries, orders the government to extend the working week into the weekend.

“Measure: increase flexibility of work schedules: increase the number of maximum workdays to six days per week for all sectors.

“Increase flexibility of work schedules; set the minimum daily rest to 11 hours; delink the working hours of employees from the opening hours of the establishment; eliminate restrictions on minimum/maximum time between morning and afternoon shifts; allow the consecutive two-week leave to be taken anytime during the year in seasonal sectors.”

The reforms are of course targeted at those least able to resist them – the poor and struggling middle class, while the rich are being left alone. This is a typical misdirection tactic used by free market capitalists who insist on free markets for the poor while refusing to acknowledge the heavily subsidized and protected existence of the rich. Conversely, the rich are given more benefits during times of crisis, ostensibly because they will reinvest their money back into the economy (despite the evidence showing that they don’t).

The reforms being proposed by the EC, IMF and ECB are simply another attempt by bankers to permanently disenfranchise huge sectors of the population from the economy and make them more beholden to the owners of society – ie. themselves. The proposals are basically to create giant flexible labor markets that work exclusively for the interests of the rich, and not themselves. They want Greeks to worker longer and harder for less money, while they continue to force them to pay back loans at excessive interest rates that they will never be able to afford. The result? More debt and no way out. It’s incredibly transparent, and given Greece’s tradition of trade unionism and strong protection of worker rights, thankfully it’s not going to go down very well.

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Angela Merkel feels the urgency (Photo credit: Wikipedia)

Germany and European Union officials are urgently exploring ways to rescue Spain’s debt-stricken banks although Madrid has not yet requested assistance and is resisting being placed under international supervision, European sources said on Wednesday.

Spain, the euro zone’s fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.

The European Central Bank dashed investors’ hopes of an easing of monetary policy or another flood of cheap liquidity for banks despite saying that the euro zone money market has again become “dysfunctional”. The ECB left interest rates on hold at 1 percent at its monthly meeting.

The move raised pressure on EU political leaders to outline a solution to the bloc’s festering debt crisis at a summit later this month.

Spanish Economy Minister Luis de Guindos said after talks at the European Commission on Wednesday there were no immediate plans to apply for a bailout. Spain would await the results of an IMF report and an independent audit of the banking sector, both due this month, before taking decisions on how to recapitalize the banks, he said.

ECB President Mario Draghi said financial markets were not wrong to be worried about the future of the euro zone but they underestimated the political commitment backing the single currency. He welcomed EU leaders’ agreement to step up work on a long-term vision for a full economic and monetary union.

“Some of the problems in the euro area have nothing to do with monetary policy,” he told a news conference. “I don’t think it is right for monetary policy to fill other institutions’ lack of action.”

Acknowledging that the rate-setting governing council’s decision was not unanimous, he said “a few members, I would say not many” had wanted a rate cut on Wednesday.

Asked whether the central bank would take supportive action if the EU summit agreed to move towards a fiscal and banking union, he said there was no such “horse-trading” but the ECB would monitor developments and stood ready to act.

Read more at Reuters…

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Not a good day for Europe

Traders fearful of a rupture in Europe’s financial system retreated Wednesday from risky investments. They punished stocks and fled to the safety of U.S. bonds, pushing the yield on the benchmark 10-year Treasury note to a record low.

Major U.S. stock indexes fell more than 1 percent. European stocks fell even more, and the euro dropped to a nearly two-year low against the dollar. Borrowing rates for Italy and Spain, both of which are seen as the next problem cases in Europe’s debt drama, rose sharply as traders dumped bonds issued by those governments.

Rising demand for low-risk, easily tradable securities pushed the yield on the 10-year Treasury note to 1.64 percent from 1.74 percent late Tuesday. German government bond yields, also seen as safe, turned lower.

The Dow Jones industrial average plunged 147 points to 12,433. The Dow has had a miserable May. It’s down 5.9 percent for the month, putting it on track this week to end its first losing month since September.

Concerns about Europe seemed to lurk around every corner: the European Commission said consumer confidence fell sharply in the region last month. Spaniards withdrew money from their banks, spreading fear about that nation’s ability to go on without bailouts. Spain’s main stock index fell two percent.

An opinion poll in Greece showed that the far-left Syriza party is gaining support ahead of key elections. Syriza opposes the system of bailouts and sharp budget cuts that have kept Greece afloat but also punished its economy. If the party wins, Greece may be forced to exit the euro currency. The shockwaves could topple nations that have received bailouts, like Portugal, and those that might need them, like Italy.

Amid the tumult, Europe’s executive branch called on the 17 nations that use the currency to create a “banking union” that can centrally oversee and — if needed — bail out the sector.

Read more at BusinessWeek.com

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