Daedalus and Icarus: Defla­tion­ary Spiral

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. (The flash drive includes the anti-fascist books avail­able on this site.)

Listen: MP3 Side 1 | Side 2

NOTE: This pro­gram descrip­tion con­tains infor­ma­tion not included in the orig­i­nal broadcast.

Intro­duc­tion: Exam­in­ing the Greek fis­cal cri­sis and its impli­ca­tions for Europe and the U.S., the pro­gram notes the role Ger­many has played in this drama. Incor­po­rat­ing Greece in an eco­nomic union that real­ized Friedrich List’s blue­print for Ger­man eco­nomic hege­mony over Europe and the World, Ger­many has advo­cated poli­cies that will hurt Greece and help Ger­man corporations.

The broad­cast notes that:

• Greece enjoyed a trade sur­plus with Ger­many prior to adopt­ing the Euro.
• Ger­man cor­po­ra­tions ben­e­fit­ted hand­somely from access to Greek mar­kets afforded them by the Euro­pean Mon­e­tary Union.
• Greece’s adop­tion of the Euro has pre­vented that coun­try from stim­u­lat­ing its econ­omy by revalu­ing its currency.
• The “aus­ter­ity” imposed on Greece at Ger­man behest has actu­ally exac­er­bated Greece’s dif­fi­cul­ties, increas­ing unem­ploye­ment and bud­get deficits.
• Ger­man cor­po­ra­tions stand to ben­e­fit from the pro­posed pri­va­ti­za­tion of Greek assets, a step being demanded by Germany.
• Greece is being threat­ened with an unprece­dented loss of sov­er­eignty, with its tax rev­enues being col­lected by out­side interests.
• The “aus­ter­ity” being pro­posed for Greece by Ger­many is also being pro­posed for the United States by the GOP right.
• Euro­pean intel­lec­tu­als are see­ing a pat­tern of Teu­tonic hege­mony in Germany’s behav­ior toward other EU states fac­ing bud­get crises.
• The “Euro­pean street” is also begin­ning to rebel, see­ing Europe’s loss as Germany’s delib­er­ate gain. EU nations are reject­ing plans to impose manda­tory retire­ment ages on their respec­tive populations.
• The social dis­lo­ca­tion pro­duced by the eco­nomic suf­fer­ing grip­ping Europe is lead­ing to xeno­pho­bic, racist and fas­cist sentiments.

Of para­mount impor­tance, here, is analy­sis of the Euro­pean Mon­e­tary Union as the embod­i­ment of the Third Reich’s plans for Euro­pean eco­nomic inte­gra­tion fol­low­ing Ger­man con­quest. Indeed, the real­i­ties of the Euro are the real­i­ties writ­ten about by Dorothy Thomp­son in The New York Her­ald Tri­bune in May of 1940, in which she set forth the para­me­ters of a “Europa Germanica.”

Imme­di­ately fol­low­ing the events dis­cussed in this broad­cast, Greek fas­cists were incor­po­rated into the pro­vi­sional Greek gov­ern­ment. The incor­po­ra­tion of the Greek neo-Nazi party into that country’s gov­ern­ment was accom­plished with­out input from the Greek citizenry!

(Although not dealt with at great length in this pro­gram, under­stand­ing the Bor­mann cap­i­tal net­work and, in turn, that organization’s place in the cartel-dominated inter­na­tional eco­nomic sys­tem is essen­tial to under­stand the forces dri­ving the ele­ments under exam­i­na­tion here.)

As the GOP right pro­posed dra­con­ian cuts in spend­ing that will increase unem­ploy­ment, increase cit­i­zens’ depen­dency on gov­ern­ment social wel­fare pro­grams and decrease tax rev­enues, the Greek tragedy may well be played out in the United States or the world stage. (In FTR #747, we com­pare the GOP’s agenda for Amer­ica with the CIA/corporate blue­print for the desta­bi­liza­tion of unco­op­er­a­tive for­eign governments.)

Not­ing GOP rhetoric com­par­ing the United States–inaccurately and unfairly–with Greece, Nobel-Prize win­ning econ­o­mist Paul Krug­man warns of the dan­gers of pur­su­ing the pol­icy being advo­cated for Greece by Ger­many and the U.S. by the Repub­li­cans and the Tea Party.

Pro­gram High­lights Include: Slovenia’s rejec­tion of a German-led ini­tia­tive to raise the retire­ment age as a budget-balancing con­sid­er­a­tion; Deutsche Telekom’s sig­nif­i­cant stake in the Greek tele­phone com­pany [poised to assume an even greater share of the Greek oper­a­tion, Deutsche Telekom is con­trolled by the Ger­man gov­ern­ment]; sus­pi­cions by Euro­pean crit­ics that Germany’s grow­ing trade with China and Asia will lead it to aban­don the Euro as no longer use­ful; Germany’s use of bud­get deficits and other eco­nomic dif­fi­cul­ties to deride coun­tries man­i­fest­ing them as ’”infe­rior;” Ger­man finance min­is­ter Wolf­gang Schauble’s attack on the U.S.

1. The pro­gram begins by not­ing that the aus­ter­ity mea­sures cham­pi­oned by Ger­many have exac­er­bated, not helped, the Greek finan­cial crisis.

In the run-up to deci­sions to be taken at the EU sum­mit, to begin tomor­row in Brus­sels, Greek eco­nomic devel­op­ment shows the Euro cri­sis man­age­ment in a mis­er­able light. Athens, which, since last year, has been strictly apply­ing the aus­ter­ity pro­grams being demanded mainly by Berlin, has been reg­u­larly con­fronted with pop­u­lar protests. Jour­nal­ists and employ­ees of the local pub­lic trans­porta­tion sys­tem in Athens went on strike just last week. The cuts in wages and pub­lic spend­ing are dri­ving the coun­try ever deeper into the reces­sion. Just tak­ing the period from the first to the third quar­ter of 2010 — the period from the begin­ning of EU cri­sis inter­ven­tion to its first effects — the rate of shrink­age of the Greek national econ­omy increased from 0.7 to 5.7 per­cent. Simul­ta­ne­ously, unem­ploy­ment increased sig­nif­i­cantly. There is a dis­as­trous devel­op­ment of the national debt. Because of its enor­mous pro­por­tions — about 125 per­cent of the gross domes­tic prod­uct — Berlin and Brus­sels have imposed aus­ter­ity mea­sures. The cri­sis mea­sures, mod­eled on Ger­many, are forc­ing up the national debt to nearly 150 per­cent of the gross domes­tic prod­uct. How this is sup­posed to sta­bi­lize Greece and the Euro is a mys­tery.
Con­ces­sions
The Greek cri­sis was most recently on the agenda of the March 10 EU sum­mit. At that meet­ing, Greece was able to extract a relax­ation of the con­di­tions for the emer­gency credit, needed to have avoided national bank­ruptcy in 2010. The cri­sis credit pro­vided Athens by the EU and the IMF amounted to 110 bil­lion Euros. Brus­sels pro­longed the period of repay­ment from three to 7.5 years. Athens, in addi­tion, was able to nego­ti­ate a reduc­tion of one-percent in the inter­est rate, down to five per­cent. Thanks to these more advan­ta­geous con­di­tions, Greece will be able to save six bil­lion Euros, declared Greece’s Prime Min­is­ter, Gior­gos Papandreou.[1]
Pri­va­ti­za­tions
As always, Brus­sels’ con­ces­sions came with strings attached. Athens had to oblig­ate itself to impose even more aus­ter­ity mea­sures and exten­sive pri­va­ti­za­tions — demands raised repeat­edly espe­cially by Berlin. On the eve of the Brus­sels sum­mit, Chan­cel­lor Angela Merkel laid out, to the Europe Com­mit­tee of the Ger­man Bun­destag, under which con­di­tions Berlin would be in agree­ment to grant “Ger­man sup­port” to Greece.[2] Athens would have to sell pub­lic prop­erty and under­take exten­sive pri­va­ti­za­tions, if it is to be granted a lower inter­est rate for its EU credit. The pri­va­ti­za­tion pro­gram, being demanded by Berlin and Brus­sels is sup­posed to bring Athens’ national bud­get 50 bil­lion Euros by 2015.[3]
Risky
The chan­cel­lor defended these con­ces­sions in the boule­vard press with the argu­ment that it is dan­ger­ous to insist on rapid repay­ment. “If we (...) had insisted, it would have only led to new turbulence.“[4] Numer­ous hard­lin­ers in Berlin have crit­i­cized this con­ces­sion sharply. Volker Wiss­ing, for exam­ple, the FDP’s finance polit­i­cal spokesper­son, announced resis­tance to the exten­sion of the repay­ment period. “Again buy­ing time, with­out a per­spec­tive of a solu­tion, does not instill con­fi­dence,” said Wissing.[5]
No Con­sol­i­da­tion
At the same time, Greece is devel­op­ing into the clas­sic exam­ple of a coun­try that is being dri­ven into a renewed debt cri­sis through its repeated aus­ter­ity pro­grams’ dis­man­tle­ment of social wel­fare mea­sures and cut­backs in gov­ern­ment spend­ing. The cut­backs, forced on the Greek pop­u­la­tion by Brus­sels and Berlin, have done absolutely noth­ing to con­sol­i­date their national bud­get. In spite of a com­pre­hen­sive social overkill, which has repeat­edly pro­voked hefty protests, the Greek bud­get deficit was at around nine per­cent of its GDP at the begin­ning of this year, even though a national deficit of 7.4 per­cent was the objec­tive for 2011. This has resulted from the drop in state income, which, at the begin­ning of the year, was 9.2 per­cent less than one year ear­lier. At the same time, the state’s expen­di­tures, in spite of all of the cuts, rose by 3.3 percent.[6]
Reces­sion Spi­ral
The government’s sink­ing income from taxes has actu­ally been caused by the seri­ous reces­sion Greece is now suf­fer­ing, with 2011 prob­a­bly being its third year. In May 2010, the Greek par­lia­ment passed a ruth­less aus­ter­ity pro­gram aimed at low­er­ing the bud­get deficit from around 14 per­cent in 2010 to 2.6 per­cent by 2014. The pro­gram con­tained pro­posed cuts of some 30 bil­lion Euros — or eleven per­cent of the annual eco­nomic activ­ity. In Greece, this has set an eco­nomic vicious cir­cle in motion, where the aus­ter­ity mea­sures have led to a reduc­tion of domes­tic demand — lead­ing to the per­pet­u­a­tion of the reces­sion. The con­tin­ued loss in gov­ern­ment income in taxes makes, in its turn, even more aus­ter­ity mea­sures nec­es­sary. These con­di­tions make a bud­get con­sol­i­da­tion nearly impos­si­ble. It is already pre­dictable that due to the con­tin­ued reces­sion, this year’s tar­get of com­ing down to 7.4 per­cent will not be reached.
Down­ward Spi­ral
Over the past few months, the reces­sion in Greece has been becom­ing even more acute. The Greek social eco­nomic prod­uct has already been shrink­ing for nine quar­terly peri­ods. Dur­ing the last quar­ter, the coun­try reg­is­tered a drop of 6.6 per­cent of its GDP, in com­par­i­son to the same quar­ter the pre­ced­ing year — a neg­a­tive record in recent eco­nomic his­tory. Dur­ing the first quar­ter of 2010, the Greek econ­omy dropped only 0.7 per­cent, in the sec­ond quar­ter — the EU’s cri­sis mea­sures were already get­ting started — the drop was already at 5.1 per­cent and dur­ing the third quar­ter of 2010 the down­ward spi­ral was at 5.7 per­cent (always in com­par­i­son to the same quar­ter one year ear­lier).
Drops in Wages
This seri­ous col­lapse of the econ­omy has — in inter­ac­tion with the cuts in gov­ern­ment spend­ing — led to a seri­ous regres­sion in wage lev­els. Dur­ing the third quar­ter of 2010 alone, real employee salaries in Greece sank by an enor­mous 11.02 per­cent in com­par­i­son to the same period the pre­ced­ing year. The cri­sis, which is becom­ing more dynamic, is also lead­ing to a rapid rise in unem­ploy­ment. Greece’s rate of unem­ploy­ment was already — in Novem­ber 2009 — at a double-digit 10.6 per­cent. In Novem­ber 2010 the Sta­tis­ti­cal Office in Athens recorded unem­ploy­ment at 13.9 and in Decem­ber 2010 at 14.8 per­cent — an increase of nearly one per­cent within the course of one month.
Retailer Crash
The col­lapse in the domes­tic demand, brought on by the reces­sion and the aus­ter­ity mea­sures, is also tak­ing on dra­matic pro­por­tions. Retail sales in Greece dropped in Decem­ber 2010 in com­par­i­son to the pre­vi­ous year by a breath-taking 19.2 per­cent, mark­ing also the most seri­ous slump in the recent eco­nomic his­tory of the coun­try. In com­par­i­son to March 2008 — the eve of the eco­nomic cri­sis — Greek retail sales have even sank 27 per­cent. This too is accom­pa­nied by dra­mat­i­cally sink­ing tax resources, pro­pelling the state even deeper into the cri­sis. As a mat­ter of fact, the Greek state’s com­pos­ite debt at the end of 2010 was at 340.2 bil­lion Euros, rep­re­sent­ing a level of indebt­ed­ness at 248.3 per­cent of the Greek GDP. At the begin­ning of the cri­sis, Greek national debt was “only” at about 125 per­cent of its GDP.
Ben­e­fi­ciary
The threat of a new Greek debt cri­sis explains the mar­ginal con­ces­sions toward Athens, to which Ger­man Chan­cel­lor Merkel declared her agree­ment — against resis­tance from mem­bers of her own coali­tion gov­ern­ment. With these con­ces­sions, Berlin is seek­ing to pre­vent the loom­ing “new tur­bu­lence” in the Euro­zone, because of Athens’ imple­men­ta­tion of the dras­tic cut­backs imposed by Ger­many. In the inter­me­di­ate term, sales from the pub­lic sec­tor, within the frame­work of the announced wave of pri­va­ti­za­tions, are sup­posed to pro­hibit a new bud­getary emer­gency in Greece. It will not be the Greek nation, but, more than any­one else, the com­pa­nies — prob­a­bly also Ger­man — that will be the main ben­e­fi­cia­ries, of this forced pri­va­ti­za­tion. They will be able to pur­chase what had pre­vi­ously been Greek pub­lic prop­erty, that Greece now is forced to sell.

“From the Cri­sis, Into the Cri­sis”; german-foreign-policy.com; 3/23/2011.

2. Germany’s attempted impo­si­tions upon the soverignty of other EU mem­bers has drawn strong crit­i­cism from Euro­pean intel­lec­tual cir­cles. Note that some see Ger­many as los­ing inter­est in Europe, as its exports to Asia and China increase, a loss of inter­est indi­cat­ing that the Euro was a vehi­cle of tem­po­rary eco­nomic and polit­i­cal util­ity to the Ger­mans, not as a real key to Euro­pean integration.

A Span­ish gov­ern­ment advi­sor has sharply crit­i­cized Ger­man dic­tate in the Euro cri­sis. In a recent press arti­cle, José Igna­cio Tor­re­blanca, direc­tor of the Madrid office of the Euro­pean Coun­cil on For­eign Rela­tions (ECFR), declared that some states, “led by Ger­many” are using the cri­sis to impose their eco­nomic model on other sov­er­eign EU mem­bers. If this con­tin­ues, the Euro­pean Union will end up being, in the eyes of many Euro­peans, what the Inter­na­tional Mon­e­tary Fund was for many Asian and Latin Amer­i­can coun­tries in the 1980s and 1990s: a tool for the impo­si­tion of socially dev­as­tat­ing eco­nomic mea­sures, risk­ing the “end of Europe.” The Ger­man chancellor’s demand, yes­ter­day, that Greece and other South­ern Euro­pean coun­tries sig­nif­i­cantly raise their retire­ment ages, serves as a con­fir­ma­tion of Torreblanca’s crit­i­cism. The expert in Madrid expressed the sus­pi­cion that in light of its boom­ing busi­ness, par­tic­u­larly with China, the south of Europe is seen as a hin­drance to eco­nomic growth, that Berlin is no longer against throw­ing over­board. Tor­re­blanca warns against a “new Ger­many,” whose elites are in the process of los­ing their pre­vi­ous inter­est in Europe.
Torreblanca’s arti­cle was pub­lished in the week­end edi­tion of El País, Spain’s largest daily and an Eng­lish trans­la­tion is also available.[1] Tor­re­blanca is a pro­fes­sor at Madrid’s Uni­ver­si­dad Nacional de Edu­cación a Dis­tan­cia (UNED); he has headed the Madrid office of the Euro­pean Coun­cil on For­eign Rela­tions (ECFR) since 2007 and, pre­vi­ous to this appoint­ment, was employed at the Span­ish capital’s renowned Elcano Royal Insti­tute for Inter­na­tional Affairs. In his arti­cle, he shows a great deal of sym­pa­thy for Euro­pean inte­gra­tion — and warns that a pol­icy, such as is pro­moted by Ger­many, would be seri­ously detri­men­tal to the EU.
Admi­ra­tion and Jeal­ousy
Tor­re­blanca recalls that a mere ten years ago, Euro­pean inte­gra­tion was still in a pow­er­ful upswing. With the Euro, a com­mon cur­rency was intro­duced. With the Lis­bon strat­egy, Brus­sels sought, within a few years, to become the most dynamic eco­nomic region in the world. A com­mon for­eign pol­icy was ini­ti­ated; even in the realm of domes­tic pol­icy, fur­ther steps were ini­ti­ated toward com­mu­ni­ta­riza­tion, includ­ing the incor­po­ra­tion of East­ern and South­east­ern Euro­pean nations, as well as Cyprus and Malta into the EU. All these activ­i­ties were sup­posed to be crowned with an EU Con­sti­tu­tion, which, even with minor con­ces­sions, but essen­tially iden­ti­cal to the Lis­bon Treaty, could finally be passed. At that time, talk of Europe did “not pro­voke weari­ness or indif­fer­ence, but rather admi­ra­tion and even, in Wash­ing­ton, Bei­jing and Moscow, uncon­cealed jealousy.“[2]
Bla­tently Racist
Tor­re­blanca con­sid­ers that the pre­vi­ous euphoric mood has turned com­pletely sour. In numer­ous Euro­pean coun­tries, recently for exam­ple in Swe­den and Fin­land, xeno­pho­bic forces have gained ground in elec­tions; some have crossed the line from xeno­pho­bia to a bla­tantly racist dis­course. Tor­re­blanca uses the exam­ple of “Thilo Sarrazin.“[3] In the dis­course intro­duced by Sar­razin, one speaks of the “infe­rior intel­li­gence of Mus­lims” dan­ger­ously evok­ing mem­o­ries of how “the Nazis spoke of Jews, blacks and Slavs as ‘Unter­men­schen’” (infe­rior human beings). The “val­ues of tol­er­ance and open­ness” are in doubt or even in retreat. The Euro­pean response, in the face of the expul­sion of Roman­ian Gyp­sies from France, was just as weak as that to the excesses regard­ing free­dom of the press in the Hun­gar­ian Con­sti­tu­tion or the “harass­ment of irreg­u­lar immi­grants in Italy.” One can “expect lit­tle” from the EU in the form of human­ism.
The IMF Image
Tor­re­blaca sharply crit­i­cizes Berlin, in par­tic­u­lar. Some states, “led by Ger­many” are using the Euro cri­sis to impose their eco­nomic model on other sov­er­eign EU mem­bers. Those coun­tries hard­est hit are to be forced to com­ply with strin­gent aus­ter­ity mea­sures. These “solu­tions” are “pre­sented hand-in-hand with mor­al­iz­ing and con­de­scend­ing preach­ing” — as if the deficit or sur­plus of a coun­try reflected the “moral supe­ri­or­ity or infe­ri­or­ity of a whole group of human beings.” This ver­sion of the cri­sis must be con­tested, writes Tor­re­blanca, it “risks the end of Europe.” It threat­ens not only to totally stran­gle the national economies in ques­tion (german-foreign-policy.com reported [4]) but also dam­age the con­cerned population’s per­cep­tion. Because, if the Euro­pean Union only imposes aus­ter­ity pro­grams, it will end up being in the eyes of many Euro­peans, what the Inter­na­tional Mon­e­tary Fund was for many Asian and Latin Amer­i­can coun­tries in the 1980s and 1990s: a tool for the impo­si­tion of socially dev­as­tat­ing eco­nomic mea­sures that lack any demo­c­ra­tic legit­i­macy. It could be that this method “works,” but the EU will suf­fer from “a severe demo­c­ra­tic and iden­tity deficit,” warns Tor­re­blanca.
Pure Colo­nial­ism
As if to pro­vide con­fir­ma­tion of this warn­ing, the Ger­man chan­cel­lor announced Wednes­day that the coun­tries of South­ern Europe must imme­di­ately raise their retire­ment ages. “It is not only a ques­tion,” declared Merkel, “that peo­ple in coun­tries such as Greece, Spain, Por­tu­gal should not go on retire­ment ear­lier than in Ger­many, but also that every­one must make the same effort.“[5] Berlin has decided to raise the retire­ment age in Ger­many from 65 to 67. The coun­tries in South­ern Europe, accord­ing to Berlin, must fol­low suit. Hefty protests are being raised over this most recent Ger­man med­dling. “That is pure colo­nial­ism,” the pres­i­dent of the Por­tuguese CGTP trade union con­fed­er­a­tion is quoted as hav­ing said.[6] At the same time, the Greek gov­ern­ment is giv­ing in to Ger­man pres­sure — and has com­mis­sioned the Deutsche Bank to “advise” it in the pri­va­ti­za­tion of Greek state prop­erty. Greece has been forced, pri­mar­ily under Ger­man pressure,[7] to pri­va­tize 50 bil­lion Euros worth of state prop­erty by 2015.
A New Ger­many
Tor­re­blanca expressed the sus­pi­cion that the “new Ger­many” is los­ing inter­est in Europe, not least of all because of its boom­ing busi­ness rela­tions with Asia, par­tic­u­larly with China. This is rel­a­tiviz­ing the role of the EU — exports to China are on the verge of sur­pass­ing exports to France [8] — and, in Ger­many, is pro­mot­ing the image of south­ern Europe being a “hin­drance to growth.” Whereas one usu­ally is con­fronted with Euro-skeptical ten­den­cies among the pop­u­la­tion, in the case of Ger­many, there is also, what could be called “a rebel­lion of the elites,” where the EU no longer plays its pre­vi­ous role in their plans. “Can Europe break apart?” asks Tor­re­blanca and answers: “yes, of course it can.” The Span­ish gov­ern­ment advi­sor leaves no doubt about his hold­ing Berlin, in par­tic­u­lar, respon­si­ble for whether a break-up occurs or not. Ger­many, which had pur­sued Euro­pean inte­gra­tion as long as it had served as an instru­ment for attain­ing global player status,[9] will decide whether this instru­ment is still use­ful — or if it can be eas­ily discarded.

“Rebel­lion of the Elites”; german-foreign-policy.com; 5/19/2011.

3. Increas­ingly, Ger­man hege­mony has become the focal point of broad-based Euro­pean dis­sent. Note Slovenia’s rejec­tion of Ger­man pres­sure to raise its retire­ment age. Note, also, the view­point on the part of many Euro­peans that the EU and the IMF were being seen as play­ing anal­o­gous roles in Europe and the Third World, respectively.

The Ger­man aus­ter­ity dic­tate is meet­ing grow­ing resis­tance within the EU. Fol­low­ing the mass protests in Spain and the most recent hun­dreds of thou­sands demon­strat­ing in Greece, fur­ther activ­i­ties have been announced, which are explic­itly aimed at the so-called EU Growth and Sta­bil­ity Pact. A new devel­op­ment can be observed par­tic­u­larly in Greece. The Greek cri­sis is the result of a struc­tural imbal­ance in the Euro­zone, which has degraded Greece to a sales mar­ket for Ger­man prod­ucts. There­fore Berlin is, to a grow­ing extent, becom­ing the focus of the protests. Accord­ing to the German-Greek Cham­bers of Indus­try and Com­merce, the pop­u­lar opin­ion that “the Ger­mans are liv­ing at the expense of the Greeks” is wide­spread. Struc­turally, Por­tu­gal and other coun­tries are suf­fer­ing from the same prob­lem as Greece. Accord­ing to Ger­man media, there is a dan­ger that Berlin’s new pub­lic aus­ter­ity demands could foment “anti-German sen­ti­ments from Greece to Por­tu­gal.” Just recently, a Span­ish polit­i­cal advi­sor warned that if Berlin con­tin­ues with its dic­tates, the EU will soon have a rep­u­ta­tion sim­i­lar to that of the IMF, to be an instru­ment for impos­ing com­pul­sory eco­nomic mea­sures.
Mass Demon­stra­tions
The grow­ing resis­tance to Ger­man hege­monic pol­icy is embed­ded in the rein­vig­o­rated social protests in numer­ous Euro­pean coun­tries. The protests in Spain are cur­rently draw­ing most atten­tion, with their hun­dreds of thou­sands par­tic­i­pat­ing in protest camps, and far more than 100,000 tak­ing to the streets on May 15 alone. Numer­ous demon­stra­tions have since fol­lowed in many Euro­pean cap­i­tals, for exam­ple at the Place de la Bastille in Paris, in Brus­sels, Lon­don, Rome, Prague and in Berlin. Strong protests have again been reported also in Greece, where on May 25 alone, approx. 50,000 peo­ple demon­strated at Athens’ Syn­tagma Square. Last week­end the num­ber of demon­stra­tors had risen to 100,000 and accord­ing to some reports even to sev­eral hun­dred thou­sands. More protests have already been announced, for exam­ple, a demon­stra­tion against the so-called EU Growth and Sta­bil­ity Pact on June 19 in Spain.
Rejected
The exam­ple of Slove­nia, where last week­end a ref­er­en­dum was held on three draft laws, includ­ing a retire­ment reform bill, demon­strates that not only does resis­tance to this social overkill enjoy wide­spread sup­port, it occa­sion­ally achieves polit­i­cal results. Accord­ing to this bill, the retire­ment age is to be raised — from cur­rently 61 (women) and 63 (men) — to 65. Both Berlin and Brus­sels sought to influ­ence the results. Jean-Claude Junker, cur­rent pres­i­dent of the Coun­cil of the Euro­pean Union, called the step “unavoid­able” and Euro­pean Coun­cil Pres­i­dent Her­man Van Rompuy went to Slove­nia two days before the ref­er­en­dum in sup­port of the “yes” camp. Berlin also openly inter­vened in Sloven­ian decision-making. The Slove­ni­ans had taken note of what the Ger­man chan­cel­lor had said ear­lier about peo­ple “not going on retire­ment ear­lier (...) than in Ger­many in coun­tries such as Greece, Spain, Portugal.“[1] The Ger­man gov­ern­ment also made known in Slove­nia that it con­sid­ers a higher retire­ment age a “sen­si­ble step towards sus­tain­able financ­ing of social insurance.“[2] Yet Slovenia’s pop­u­la­tion has resisted Berlin’s bla­tant inter­fer­ence: in their ref­er­en­dum, nearly three-fourths have rejected the retire­ment reform.
At Greeks’ Expense
In Greece, in par­tic­u­lar, social protests are linked to explicit expres­sions of hos­til­ity towards the Ger­man hege­monic pol­icy. Over the past few years, it was Ger­many, more than any other coun­try, which had prof­ited from trade with Greece. In fact, up until the intro­duc­tion of the Euro, Athens had main­tained a pos­i­tive trade bal­ance with Ger­many. Only after adopt­ing the Euro, which robbed Greece of its option of a mon­e­tary deval­u­a­tion, and thereby the pro­tec­tion of its enter­prises vis à vis the more pow­er­ful Ger­man com­pe­ti­tion, was this rela­tion­ship fun­da­men­tally trans­formed. The press openly declares that in the Euro­zone, with its “struc­tural imbal­ance” there are states, such as Greece and Por­tu­gal today “that are hardly (...) more than sales mar­kets for the export-oriented and high-performance mem­ber states of North­west­ern Europe.“[3] In fact, the Ger­man trade bal­ance sur­plus in com­merce with Greece had already risen to more than 6 bil­lion Euros in 2008. The Greek pub­lic is well aware of these facts, which has trans­formed their expen­di­tures into Ger­man prof­its. The admin­is­tra­tive direc­tor of the German-Greek Cham­ber of Indus­try and Com­merce in Athens admits: “Kostas Nor­mal Con­sumer, in the mean­time, is con­vinced that the Ger­mans are liv­ing at the expense of the Greeks.“[4]
Anti-German Sen­ti­ments
Greek resent­ment toward the Ger­man aus­ter­ity dic­tate is grow­ing, since Berlin and Brus­sels have forced Greece to pri­va­tize a large part of its state prop­er­ties — par­tic­u­larly to the advan­tage of Ger­man companies.[5] Over the past few days, t-shirts dis­trib­uted by employ­ees of the OTE tele­phone com­pany bear­ing a swastika and slo­gans against Ger­man hege­mony, have been mak­ing head­lines. The Ger­man com­pany Deutsche Telekom owns a large por­tion of OTE, and Athens has now offered to sell even more. Ger­man media have begun to warn that Berlin’s new, too obvi­ous aus­ter­ity demands are apt to “foment anti-German sen­ti­ments from Greece to Portugal.“[6] Some Greek com­men­ta­tors are refer­ring to the Ger­man chan­cel­lor as a “neo-colonial despot.“[7] A rever­sal of this trend is nowhere in sight.
Col­lab­o­ra­tion and Resis­tance
Only recently, a Span­ish polit­i­cal advi­sor warned that if Berlin con­tin­ues with its dic­tates, the EU will soon have a rep­u­ta­tion sim­i­lar to that of the IMF: to be an instru­ment for impos­ing com­pul­sory eco­nomic measures.[8] But even more dan­ger­ous for Berlin is that par­tic­u­larly in Greece, the pop­u­lar anger is no longer directed solely at the EU, but to a grow­ing degree at Ger­many. In the long run, the hege­monic power will have dif­fi­culty avoid­ing this devel­op­ment in areas under its con­trol. Anger in many Latin Amer­i­can coun­tries is sim­i­larly directed at the United States, which, until now, has been able to main­tain its exclu­sive pre­dom­i­nance in large areas of its “back­yard” with the help of coop­er­a­tive cir­cles in the Latin Amer­i­can elite. The cur­rent cri­sis will show whether wide­spread pop­u­lar crit­i­cism of Ger­many, along­side coop­er­a­tive domes­tic elites in the coun­tries of the periph­ery will lead to the devel­op­ment of par­al­lel struc­tures in Europe.

“In the Focus of Protests”; german-foreign-policy.com; 6/10/2011.

4. Paul Krug­man held forth on the dan­gers of defla­tion and the Greek sit­u­a­tion. Again, note that the GOP and the Tea Party are advo­cat­ing for the U.S. what Ger­many is advo­cat­ing for Greece, and that it will not work here, any more than it did in Greece.

The debt cri­sis in Greece is approach­ing the point of no return. As prospects for a res­cue plan seem to be fad­ing, largely thanks to Ger­man obdu­racy, ner­vous investors have dri­ven inter­est rates on Greek gov­ern­ment bonds sky-high, sharply rais­ing the country’s bor­row­ing costs. This will push Greece even deeper into debt, fur­ther under­min­ing con­fi­dence. At this point it’s hard to see how the nation can escape from this death spi­ral into default.

It’s a ter­ri­ble story, and clearly an object les­son for the rest of us. But an object les­son in what, exactly?

Yes, Greece is pay­ing the price for past fis­cal irre­spon­si­bil­ity. Yet that’s by no means the whole story. The Greek tragedy also illus­trates the extreme dan­ger posed by a defla­tion­ary mon­e­tary pol­icy. And that’s a les­son one hopes Amer­i­can pol­icy mak­ers will take to heart.

The key thing to under­stand about Greece’s predica­ment is that it’s not just a mat­ter of exces­sive debt. Greece’s pub­lic debt, at 113 per­cent of G.D.P., is indeed high, but other coun­tries have dealt with sim­i­lar lev­els of debt with­out cri­sis. For exam­ple, in 1946, the United States, hav­ing just emerged from World War II, had fed­eral debt equal to 122 per­cent of G.D.P. Yet investors were relaxed, and rightly so: Over the next decade the ratio of U.S. debt to G.D.P. was cut nearly in half, eas­ing any con­cerns peo­ple might have had about our abil­ity to pay what we owed. And debt as a per­cent­age of G.D.P. con­tin­ued to fall in the decades that fol­lowed, hit­ting a low of 33 per­cent in 1981.

So how did the U.S. gov­ern­ment man­age to pay off its wartime debt? Actu­ally, it didn’t. At the end of 1946, the fed­eral gov­ern­ment owed $271 bil­lion; by the end of 1956 that fig­ure had risen slightly, to $274 bil­lion. The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up, roughly dou­bling in dol­lar terms over the course of a decade. The rise in G.D.P. in dol­lar terms was almost equally the result of eco­nomic growth and infla­tion, with both real G.D.P. and the over­all level of prices ris­ing about 40 per­cent from 1946 to 1956.

Unfor­tu­nately, Greece can’t expect a sim­i­lar per­for­mance. Why? Because of the euro.

Until recently, being a mem­ber of the euro zone seemed like a good thing for Greece, bring­ing with it cheap loans and large inflows of cap­i­tal. But those cap­i­tal inflows also led to infla­tion — and when the music stopped, Greece found itself with costs and prices way out of line with Europe’s big economies. Over time, Greek prices will have to come back down. And that means that unlike post­war Amer­ica, which inflated away part of its debt, Greece will see its debt bur­den wors­ened by deflation.

That’s not all. Defla­tion is a painful process, which invari­ably takes a toll on growth and employ­ment. So Greece won’t grow its way out of debt. On the con­trary, it will have to deal with its debt in the face of an econ­omy that’s stag­nant at best.

So the only way Greece could tame its debt prob­lem would be with sav­age spend­ing cuts and tax increases, mea­sures that would them­selves worsen the unem­ploy­ment rate. No won­der, then, that bond mar­kets are los­ing con­fi­dence, and push­ing the sit­u­a­tion to the brink.

What can be done? The hope was that other Euro­pean coun­tries would strike a deal, guar­an­tee­ing Greek debt in return for a com­mit­ment to harsh fis­cal aus­ter­ity. That might have worked. But with­out Ger­man sup­port, such a deal won’t happen.

Greece could alle­vi­ate some of its prob­lems by leav­ing the euro, and devalu­ing. But it’s hard to see how Greece could do that with­out trig­ger­ing a cat­a­strophic run on its bank­ing sys­tem. Indeed, wor­ried depos­i­tors have already begun pulling cash out of Greek banks. There are no good answers here — actu­ally, no non­ter­ri­ble answers.

But what are the lessons for Amer­ica? Of course, we should be fis­cally respon­si­ble. What that means, how­ever, is tak­ing on the big long-term issues, above all health costs — not grand­stand­ing and penny-pinching over short-term spend­ing to help a dis­tressed economy.

Equally impor­tant, how­ever, we need to steer clear of defla­tion, or even exces­sively low infla­tion. Unlike Greece, we’re not stuck with some­one else’s cur­rency. But as Japan has demon­strated, even coun­tries with their own cur­ren­cies can get stuck in a defla­tion­ary trap.

What wor­ries me most about the U.S. sit­u­a­tion right now is the ris­ing clamor from infla­tion hawks, who want the Fed to raise rates (and the fed­eral gov­ern­ment to pull back from stim­u­lus) even though employ­ment has barely started to recover. If they get their way, they’ll per­pet­u­ate mass unem­ploy­ment. But that’s not all. America’s pub­lic debt will be man­age­able if we even­tu­ally return to vig­or­ous growth and mod­er­ate infla­tion. But if the tight-money peo­ple pre­vail, that won’t hap­pen — and all bets will be off.

“Learn­ing from Greece” by Paul Krug­man; The New York Times; 4/9/2010.

5. The pro­gram reviews the Euro­pean Mon­e­tary Union as the real­iza­tion of the the­o­ries of Pan-German the­o­reti­cian Friedrich List.

Writ­ing in 1943, Paul Win­kler fore­saw that the Prusso-Teutonics would real­ize their goals through the cre­ation of a German-dominated cen­tral Euro­pean eco­nomic union (bear­ing a strik­ing resem­blance to today’s Euro­pean Mon­e­tary Union.) One of the prin­ci­pal influ­ences on List’s think­ing was the “con­ti­nen­tal” con­cept of Napoleon, who attempted to eco­nom­i­cally unite Europe under French influence.

“Charles Andler, a French author, summed up cer­tain ideas of List in his work, The Ori­gins of Pan-Germanism, (pub­lished in 1915.) ‘It is nec­es­sary to orga­nize con­ti­nen­tal Europe against Eng­land. Napoleon I, a great strate­gist, also knew the meth­ods of eco­nomic hege­mony. His con­ti­nen­tal sys­tem, which met with oppo­si­tion even from coun­tries which might have prof­ited from such an arrange­ment should be revived, but, this time, not as an instru­ment of Napoleonic dom­i­na­tion. The idea of united Europe in a closed trade bloc is no longer shock­ing if Ger­many assumes dom­i­na­tion over such a bloc—and not France. [Empha­sis added.] Bel­gium, Hol­land, Switzer­land, will­ingly or by force, will enter this ‘Cus­toms Fed­er­a­tion.’ Aus­tria is assumed to be won over at the out­set. Even France, if she gets rid of her notions of mil­i­tary con­quest, will not be excluded. The first steps the Con­fed­er­a­tion would take to assure unity of thought and action would be to estab­lish a joint rep­re­sen­ta­tive body, as well as to orga­nize a com­mon fleet. But of course, both the head­quar­ters of the Fed­er­a­tion and its par­lia­men­tary seat would be in Ger­many. [Empha­sis added.]”

(The Thousand-Year Con­spir­acy; by Paul Win­kler; Charles Scribner’s Sons [HC]; 1943; pp. 15–16.)

6a. The Lis­t­ian model was put into effect by the Third Reich, as can be gleaned by read­ing Dorothy Thompson’s analy­sis of Germany’s plans for world dom­i­nance by a cen­tral­ized Euro­pean eco­nomic union. Ms. Thomp­son was writ­ing in The New York Her­ald Tri­bune on May 31, 1940! Her com­ments are repro­duced by Tetens on page 92.

. . . . The Ger­mans have a clear plan of what they intend to do in case of vic­tory. I believe that I know the essen­tial details of that plan. I have heard it from a suf­fi­cient num­ber of impor­tant Ger­mans to credit its authen­tic­ity . . . Germany’s plan is to make a cus­toms union of Europe, with com­plete finan­cial and eco­nomic con­trol cen­tered in Berlin. This will cre­ate at once the largest free trade area and the largest planned econ­omy in the world. In West­ern Europe alone . . . there will be an eco­nomic unity of 400 mil­lion per­sons . . . To these will be added the resources of the British, French, Dutch and Bel­gian empires. These will be pooled in the name of Europa Germanica . . .

“The Ger­mans count upon polit­i­cal power fol­low­ing eco­nomic power, and not vice versa. Ter­ri­to­r­ial changes do not con­cern them, because there will be no ‘France’ or ‘Eng­land,’ except as lan­guage groups. Lit­tle imme­di­ate con­cern is felt regard­ing polit­i­cal orga­ni­za­tions . . . . No nation will have the con­trol of its own finan­cial or eco­nomic sys­tem or of its cus­toms. [Ital­ics are mine–D.E.] The Naz­i­fi­ca­tion of all coun­tries will be accom­plished by eco­nomic pres­sure. In all coun­tries, con­tacts have been estab­lished long ago with sym­pa­thetic busi­ness­men and indus­tri­al­ists . . . . As far as the United States is con­cerned, the plan­ners of the World Ger­man­ica laugh off the idea of any armed inva­sion. They say that it will be com­pletely unnec­es­sary to take mil­i­tary action against the United States to force it to play ball with this sys­tem. . . . Here, as in every other coun­try, they have estab­lished rela­tions with numer­ous indus­tries and com­mer­cial orga­ni­za­tions, to whom they will offer advan­tages in co-operation with Germany. . . .

Ger­many Plots with the Krem­lin; T.H. Tetens; Henry Schu­man [HC]; 1953; p. 92.

6b. The Euro­pean Eco­nomic Com­mu­nity was for­mally artic­u­lated by Reich offi­cials dur­ing the war, with the clear design to extend and amplify the arrange­ment after the war. Below, we quote Gus­tave Koenigs, Sec­re­tary of State at a 1942 con­fer­ence about the Euro­pean Eco­nomic Community.

. . . At the moment the so-called “Euro­pean Eco­nomic Com­mu­nity” is not yet fact; there is no pact, no organ­i­sa­tion, no coun­cil and no Gen­eral Sec­re­tary. How­ever, it is not just a part of our imag­i­na­tion or some dream by a politi­cian — it is very real. . . .

. . .  Its roots are in the eco­nomic co-operation of the Euro­pean nations and it will develop after the war into a per­ma­nent Euro­pean eco­nomic community. . . .

Europais­che Wirtschafts Gemein­schaft (Euro­pean Eco­nomic Community–translation).

7a. Com­pare the poten­tial loss of Greek sov­er­eignty with Ms. Thompson’s pro­jec­tions from 1940.

Euro­pean lead­ers are nego­ti­at­ing a deal that would lead to unprece­dented out­side inter­ven­tion in the Greek econ­omy, includ­ing inter­na­tional involve­ment in tax col­lec­tion and pri­vati­sa­tion of state assets, in exchange for new bail-out loans for Athens.

Peo­ple involved in the talks said the pack­age would also include incen­tives for pri­vate hold­ers of Greek debt vol­un­tar­ily to extend Athens’ repay­ment sched­ule, as well as another round of aus­ter­ity measures. . .

“Greece Set for Severe Bail-Out Con­di­tions” by Peter Spiegel, Quentin Peel and Ralph Atkins; Finan­cial Times; 5/29/2011.

7b. Inter­est­ingly, the Ger­man finance min­is­ter (Wolf­gang Schauble) has attacked U.S. eco­nomic pol­icy, quan­ti­ta­tive eas­ing in particular.

Ger­many has put itself on a col­li­sion course with the U.S. over the global econ­omy, after its finance min­is­ter launched an extra­or­di­nary attack on poli­cies being pur­sued in Washington.

Wolf­gang Schauble accused the U.S. of under­min­ing its pol­icy mak­ing cred­i­bil­ity, increas­ing global eco­nomic uncer­tainty and of hypocrisy over exchange rates. The U.S. eco­nomic growth model was in a “deep cri­sis,” he also warned over the weekend. . . .

“Ger­many Attacks US Eco­nomic Pol­icy” by Ralph Atkins in Frank­furt; Finan­cial Times; 11/7/2010.