Paul Krugman weighs in on the latest round of insane German/Euro demands on beleaguered Greece:
Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for….what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line.
The lengths to which Germany and the Eurogroup is going in order to punish the Greeks for their defiance earlier this month really is extraordinary. The Greek public voted against the Euro proposal for a bailout, and as a result now have a new offer that analyst Marc Ostwald of ADM Investor Services called “worse than the 1919 Treaty of Versailles”.
If ever there were a clearer moment to see who runs the world, this would be it. We are witnessing the erosion of a nation’s sovereignty by gigantic financial institutions right in the heart of western democracy, and there appears to be little Greece can do to prevent it. To receive the desperately needed bailout package, Greece is being forced to ram through extreme austerity measures and give up fiscal autonomy, making the concept of national sovereignty a complete farce.
This absurd punishment of the Greek people for the sins of bankers and corrupt government officials is sadly business as usual for giant financial institutions and their political spokespersons. When banks take risks and lose out, the public is simply expected to pay for their mistakes. We saw this in 2008 in America with the multi trillion dollar bailout of Wall St after it recklessly sold mortgages they knew no one could possibly pay back. The public was saddled with the debt while the banks rebounded and grew ever more powerful. After Germany, the ECB and the IMF lent a succession of Greek governments money it could not pay back, the Greek public is now on the line for the money. As former Greek finance minister Yanis Varoufakis wrote recently:
A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.
To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
Germany’s motivations are complex, but holding Greece over a barrel like this makes clear that Germany is looking to reinforce its status as the powerhouse in Europe. Not only does debt give Germany huge leverage over Greece, it serves as a powerful warning to other EU members. As Varoukis noted from his experience negotiating with European bureaucrats:
Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.
This fairly obvious power play has been largely ignored by the media as it inadvertently toes the line that he Greek crisis as one of their own making. The Greeks are routinely berated for being ‘irresponsible’ by the media, and the easily disprovable lie that austerity measures are the only way to salvage Greece’s economy is repeated without question.
It isn’t, and if anyone should know this, it is Germany.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.