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FTR #746 Greek Tragedy

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.)

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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.

5a. 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.)

5b. List’s doctrine was in full swing during Germany’s prosecution of the First World War:

EXCERPT: . . . . This is a direct trans­la­tion of [Ger­man Chan­cel­lor] Bethman-Hollweg’s inter­nal memo on Germany’s war aims, from Sep­tem­ber 1914. . . .

“. . . . We must cre­ate a cen­tral Euro­pean eco­nomic asso­ci­a­tion through com­mon cus­toms treaties, to include France, Bel­gium, Hol­land, Den­mark, Austria-Hungary, Poland and per­haps Italy, Swe­den and Nor­way. This asso­ci­a­tion will not have any com­mon con­sti­tu­tional supreme author­ity and all its mem­bers will be for­mally equal, but in prac­tice will be under Ger­man lead­er­ship and must sta­bi­lize Germany’s eco­nomic dom­i­nance over ‘Mid­dle Europe’ . . .”

“WW1 Cen­te­nary — His­tor­i­cal Revi­sion In British Gov­ern­ment Cir­cles”; Ger­many Watch; 6/11/2013.

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.


Discussion

14 comments for “FTR #746 Greek Tragedy”

  1. Interesting program as always, Dave.
    BTW, are you going to cover the problems in Syria anytime soon? Things are starting to look bad over there……. =(

    Posted by Steven | June 27, 2011, 9:47 pm
  2. dave-you were railing against the creation of the ‘euro’ TEN years ago. looks like things have come home to roost-just as you said.

    Posted by steve i | June 28, 2011, 2:26 am
  3. Dave Emory is one of the very few humans that I respect and one of the very few that I look up to. His dedication to disclosure and making the truth available to all is honorable beyond measure.

    Posted by Joshua Laudermilk | July 3, 2011, 12:40 pm
  4. @Josh: I feel the same way. If only there were more like him, more people would know the truth about how things are run in the world today……….

    Posted by Steven | July 3, 2011, 1:34 pm
  5. […] et monétaires qui ont lieu à l’intérieur de l’Union Européenne. Écoutez cette dernière émission du chercheur anti-fasciste Dave Emory pour vous en rendre compte. J’en profite aussi pour […]

    Posted by La dernière idiotie en date d’Amir Khadir: Israel dominerait la Grèce grâce à un chantage financier… | lys-dor.com | July 10, 2011, 6:35 pm
  6. […] of Dave Emory’s last shows deals with the Greek tragedy, the modern one, related to its financial and economical situation. […]

    Posted by Greek Tragedy and the Rape of Europe: When myth and reality collide | lys-dor.com | July 25, 2011, 10:14 am
  7. Great show Dave! You and your listeners may find this of interest:

    http://www.brugesgroup.com/eu/german-economic-policy-and-the-euro-1999-2010.htm?xp=mc

    Why the Euro cannot survive with Germany at its centre
    German Economic Policy and the Euro 1999 – 2010

    Draws some of the same conclusions as your programme.

    “The Euro has effectively become a German currency empire which is draining the resources of the Eurozone’s smaller economies.”

    Posted by ce399 | September 7, 2011, 4:02 pm
  8. Posted by ce399 | October 4, 2011, 3:33 pm
  9. […] FTR #746 Greek Tragedy […]

    Posted by Compendium of Information on Greece the Corporate and Fake Left (@democracynow @TheNation) Media Ignore « ce399 | research archive (fascism) | February 14, 2012, 9:09 am
  10. Another Mission Accomplished!!:

    News Analysis
    Portugal’s Debt Efforts May Be Warning for Greece
    By LANDON THOMAS Jr.
    Published: February 14, 2012

    LISBON — As debt-plagued Greece struggles to meet Europe’s strict terms for receiving its next round of bailout money, the lesson of Portugal might bear watching.

    Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.

    And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.

    The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by next year is expected to reach 118 percent.

    That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking. And economists say the same vicious circle could be taking hold elsewhere in Europe.

    Two other closely watched countries on the debt list, Spain and Italy, also have rising debt-to-G.D.P. ratios — even though they, like Portugal, have adopted the budget-slashing and tax-raising measures that the European officials and the I.M.F. continue to prescribe.

    And on Tuesday, new figures showed that the Greek economy shrank even more than expected last year, as Greece struggles under ever heavier austerity demands by its European lenders.

    ….

    Posted by Pterrafractyl | February 14, 2012, 8:42 pm
  11. “We have a new kind of occupation in Europe by the Germans” – Zoe Georganta

    “We have a new kind of occupation in Europe by the Germans,” Georganta told Real FM radio, adding that German officials at Eurostat put pressure on the government to inflate the 2009 deficit to justify harsh austerity measures.

    http://www.reuters.com/article/2011/09/16/greece-statistics-idUSL5E7KG25O20110916

    “Unfortunately for all of us, Greece’s deficit in 2009 was 15.4 percent of GDP as was officially announced by Eurostat and ELSTAT,” Papaconstantinou said in a statement.

    “Let’s understand the dire situation the country faced instead of fabricating cheap and easy conspiracy-type excuses for the absolute fiscal derailment we experienced,” Papaconstantinou added.

    Posted by MK-OPRAH | June 16, 2012, 12:51 pm
  12. It may not be particularly surprising, but it’s still shocking: The eurozone’s “bailout” strategy for Cyprus appears to involve inducing bank runs:

    Seeking Alpha
    Cyprus Seizure Is Dawn Of European Bank Run
    Nicholas Pardini
    Mar 18 2013, 05:01

    The big news over the weekend was that European Union officials forced a tax on deposits of 6.75 percent on all bank accounts with amounts less than 100,000 euros and 9.9 percent for accounts above that. There will also be a banking holiday for the next two days on the island. Although Cyprus’s economy is a tiny fraction (0.25%) of the European economy, the precedent set from this deposit is catastrophic to the stability of the eurozone. Bank runs within Europe and the collateral damage caused by this will be enough to restore the European debt crisis along with its adverse effect on markets.

    More importantly than the actual amount of money seized from the measure is the precedent set by the willingness of Europeans to retroactively tax deposits to protect bondholders. As of the writing of this column, there is still a chance that the Cypriot parliament may soften or reject this levy entirely. However, any reversal of this policy in the near term hardly makes a difference. By even considering the option of direct wealth taxation, Brussels has shattered the confidence of the European banking system.

    Why would any depositor risk holding their money in a euro-denominated bank? Interest rates do not offer any real yield and with the high debt levels on sovereign balance sheets and undercapitalized banking systems, there is no reason to assume that any country’s bank is safe from deposit confiscation. Individuals’ risk of losing 6-10% of savings without notice far outweigh any convenience of a domestic bank account. In addition wealthy individuals can easily move enough money to US dollar, pound, or Swiss franc denominated bank accounts who do not have the same currency contagion risks.

    On top of this, Brussels is looking to pass laws that force struggling countries to accept bailouts. If problems with Italy or Spain’s banking system persist beyond a point acceptable to German creditors, similar bailout terms to Cyprus can be thrust onto these people without any recourse.

    It’s also worth reminding ourselves that Cyprus’s financial crisis is directly linked to its banking sector’s holdings of Greek bonds. If at first you don’t succeed, try, try again.

    Posted by Pterrafractyl | March 18, 2013, 3:59 pm
  13. With the proposed tax on Cypriot bank depositors to finance a bailout continuing to make waves around the eurozone’s financial markets, here’s an unfortunate reminder that the junk economic theories that dominate Germany’s political discourse have bipartisan support for damaging bailouts:

    Financial Times
    March 18, 2013 6:32 pm
    Cyprus shows German line is hardening

    By Quentin Peel in Berlin

    When news of the Cyprus bailout trickled through to Berlin on Saturday morning, bearing with it the potentially alarming news that bank depositors would be “bailed-in” to share the cost, the German reaction was very positive.

    Politicians from both left and right agreed that without such a deal, the rescue would not have a hope of winning approval in the Bundestag. Wolfgang Schäuble, finance minister, had done a good job, they admitted.

    At €10bn, it is a far smaller programme than previous ones for Greece, Ireland and Portugal. But the German body politic is pretty well united in insisting that a bail-in of creditors must be part of any bailout by taxpayers.

    Some misgivings have now emerged about the burden falling on savers in Cyprus, and not just on the big depositors with more than €100,000 in the bank. But the underlying principle of burden-sharing is not in question.

    This time round, however, it is the opposition Social Democratic party that has been making the running in setting tough conditions for the rescue programme, and not hardline members of Angela Merkel’s ruling centre-right coalition.

    The idea of a “haircut” for uninsured depositors came from the SPD. It also insisted that corporation tax should be increased from the minimal rate of 10 per cent, and Cyprus should join Germany, France and other eurozone countries in introducing a financial transaction tax.

    On Monday, Sigmar Gabriel, SPD chairman, ruled out once again any use of the €500bn European Stability Mechanism to recapitalise Cypriot banks directly – the only real alternative to the levy on deposits. It would be “illegal” according to the ESM law approved in the Bundestag, he said. Only once a fully fledged banking union was in effect, with strict common banking supervision, might any change in the law be contemplated.

    It is electioneering, up to a point. Previously, Ms Merkel has won broad popular support by combining a pro-European stance with strict insistence on bailout conditions to protect German taxpayers: solidarity in exchange for solidity. It has left no room for manoeuvre for the SPD.

    In 2011, Peer Steinbrück, now SPD challenger for Ms Merkel’s job, and Frank-Walter Steinmeier, parliamentary leader, published a joint article in the Financial Times calling for limited use of eurozone bonds to ease the debt crisis. Last year, Mr Gabriel backed a similar idea for “mutualising” debt, by setting up a debt redemption fund.

    If the election were to produce a “grand coalition” of SPD and Ms Merkel’s Christian Democratic Union in September – still mathematically the most likely outcome – the future government is not likely to ease any bailout conditions for its partners. Solidarity in exchange for solidity will still be the national slogan.

    And here’s a reminder that the potential of a worsening Cyprus banking crisis that could spread to the larger eurozone resulting from the proposed “depositor tax” is still high:

    The Daily Beast
    Cyprus on Fire? Blame the German Bullies.
    by Daniel Gross Mar 19, 2013 3:58 PM EDT
    The island nation desperately needs a bailout, and Germany’s harsh terms are only making things worse. Daniel Gross on the euro zone’s cruel and unusual punishment

    Over the weekend, the country seemed poised to grab a chunk of every bank depositors’ account to help fund a bailout from the European Union and the IMF. Cypriots, not surprisingly, reacted with fury. On Tuesday, the country’s Parliament rejected the measure, and the finance minister resigned—except his resignation wasn’t accepted. In a scene out of what may be Nicolas Cage’s next movie, England sent a military plane loaded with one million euros in cash to dispense to U.K. military personnel on the island. Russians, whose deposits helped Cyprus’s formerly Lilliputian banking system to swell to Brobdingnagian proportions, flew south to visit their money.

    There are so many culprits to blame for Cyprus’s fiscal disorder: Cypriot bankers and government officials, Russian depositors, European banking regulators, and Greece. (Cyprus banks are suffering in part because they own a lot of now-devalued Greek government debt and because they made loans to Greek companies.) But in casting blame, we shouldn’t hesitate to look north as well.

    This script has been followed, with subtle variations, in Ireland, Greece, and Spain. In the case of Cyprus, Germany’s disregard for some pretty fundamental principles of banking insurance and fairness is glaring. “Fate of island depositors was sealed in Germany,” read the headline on a great tick-tock piece in the Financial Times on Monday by Peter Spiegel. Before a crucial summit meeting last Friday night, Cyprus’s leaders had apparently agreed in principle to Germany’s demand that bank depositors should foot some of the bill for the rescue—depositors with under 100,000 euros would pay a 3.5 percent levy, while those with more than 100,000 would pay 7 percent. But German Finance Minister Wolfgang Schauble reportedly insisted on a significantly higher level. And if Cyprus refused to do so, it would find it nearly impossible to access emergency funding for its struggling banks. That led to the proposal of a 6.75 percent levy on accounts under 100,000 euros and a 9.9 percent tax on accounts above 100,000 euros—which was rejected today.

    Posted by Pterrafractyl | March 19, 2013, 2:29 pm
  14. […] In so many posts and pro­grams, we have dis­cussed and ana­lyzed the EMU/EU as the embod­i­ment and real­iza­tion of Ger­man plans for Euro­pean and world con­quest. It is beyond the scope of this arti­cle to […]

    Posted by Telling It like It Is: VERY Powerful, Accurate Words from Former Moody’s Vice-Chairman about German “Clausewitzian” Economic Policy toward Europe | The Freedom Report | July 30, 2013, 2:03 pm

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