Europe Sows Austerity and Reaps Default


The Greeks have made their decision by a wide
majority. What happens now is anyone’s guess. That will no doubt be framed by
ego and nailed to the wall of face-saving, but
it need not be that way
.
 

Greece presents an
enormous opportunity for the European Union and European growth and stability,
if only they recognize it for what it is.
The big question for the EU, ECB and IMF is precedent. What the hell happens if we change precedent? How frightening and we do not want to be frightened. What are the
ramifications to Spain, Portugal, Italy and the demonstrably weaker southern
nations of the Union?

It scares them to
death. It need not. The present
system of austerity (at any price) is weakening Europe and driving its members
apart. Britain is a prime example of a (relatively) strong nation wanting to be
elsewhere. Angela Merkel’s Germany is the last guy standing in a field of the
28 politically-economically strung together members.
Strung together is an
apt term—gallows-humor, as in “we either
hang separately or all together
.” Hanging by a thread (or by your thumbs,
depending upon circumstance) is not where individuals or nations want to be.
So, let’s discuss a solution.
In my mind there are two types of debt. One
is to patch over failing social programs and corrupt governments. It comes at
increasingly high interest-rates and very little with which to service that
debt—a death spiral within which Greece and a number of other nations suffer.
The second is investment to finance actual stuff—things that remain of enduring value after the money is long
gone. Infrastructure, research and development centers, small-business
financial support and the undoing of government red-tape that stifles
entrepreneurs are all examples of investment
rather than loans.
A discussion of investment begs the definition of investors.
Governments and
private capital invest in job production. A product
comes from that. The product may be happiness, security and hope on family and
educational levels. It may be result in greater international competitiveness,
but it is no less a product for that.
The investor
community
, which I define (for simplicity here) as world-wide stock and
bond traders, simply gamble for profit. Their purchases and sales add
absolutely nothing to an economy other than their personal or institutional
profit or loss. They are amoral (as distinguished from immoral), having no skin
in the game because a sense of moral standards or principles is not a balance-sheet item. The money
in which they deal could be replaced in an instant at zero interest by
governments (or communities of governments).
The European Central Bank
(ECB) is indeed a bank and has ignorantly
(but understandably) made banks well at the expense of citizens. It’s
president, Mario Draghi chose ‘quantitative easing’ for European banks in lieu
of development funds—another example of paying off banks’ bad debt at the
expense of citizens.
It seemed to have worked in America,
although both Nobel economists (Joe Stiglitz and Paul Krugman) argue otherwise.
The US stock markets did double, so
Draghi (having no brighter idea) came in five years too late to rescue his own banks. Greece, Portugal, Italy
and Spain be damned—they got the same reward as the American taxpayer.
The International Monetary
Fund, an organization that has destroyed more international economies than any
national banking system, is a driver of Greek austerity as well. The IMF, currently
headed by Christine Lagarde, is a rat-fuck of financial pressure by wealthy international
members to keep their poorer members poor. Their current target is Europe and
they are doing very well at their appointed task.
And then there’s
Germany under the straitlaced and stone-faced Angela Merkel. One wonders if
Merkel fears any EU country challenging Germany’s status as their cumulative
headmaster.
Lagarde, Draghi and Merkel have a
once-in-a-century opportunity at their command—to bring Europe out of lingering
recession and make of it an international powerhouse.
Greek premier Alexis Tsipras and his newly
resigned Finance Minister, Yanis Varoufakis, do not want Greece to remain as it was. By overwhelming victory in
the ‘No’ vote, Greeks agree with
them. Greece is willing as never before to be changed, but not to be destroyed
by unending austerity and despair. How the Troika chooses to deal with this
will set a template for the very existence of the European Union.
Merkel, Draghi and
Lagarde can choose to open the gates
of investment in Europe and close it off from the shriveling power
of investors. It will take energy,
imagination, foresight, clarity of purpose, a stand-down of former publicly
held opinions and very close cooperation with
Alexis Tsipras and whoever he chooses
as Finance Minister. 
That’s a tall order—more
the territory of statesmen than politicians. Unfortunately for history, each
member of this aptly named Troika is a devoted and skilled politician.
I rather expect that in the weeks, months and
years ahead, the Troika will continue to be powered by these three horses—all
straining at the bit in diverse and self-serving directions. Under those
circumstances, Europe is bound to follow Britain into obscurity—victim of its
own form of failed colonialism.

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