Tag Archives: troika

The Austerity Beatings of Greece Will Continue Until Its Morale Improves

By William K. Black
April 17, 2016     Bloomington, MN

The old joke, that conveys a critical truth, is the poster that says “The daily floggings will continue until morale improves around here.”  The troika misses the irony in the poster, for it thinks that the answer to the eurozone nightmare problems caused by austerity is more austerity.  The latest example is three IMF stories that ran contemporaneously.  The IMF, again, lowered global growth forecasts.  Two, the IMF is calling for fiscal stimulus rather than austerity.  Three, the eurozone wants to inflict more severe austerity on Greece, purportedly to make the IMF happy.  If you sense a logical disconnect, you are right. Continue reading

Austerity, Greece’s Debt Crisis, and the Death of Democracy: A Book about Greece and Much More

The Eurozone is an instrument of the globalization process that is setting financial elites over all nations of the world, including the democracies. The situation in Greece exposes the true nature of the Eurozone institutions as a naked fact, beyond spinning, for all to see. They are popular sovereignty-thieves and democracy-killers, with the power necessary to shut democratic governments down.

The architectural flaw in the Maastricht Treaty: that the nations of Europe were giving up their monetary sovereignty, was immediately recognized as fatal by acute economists, and many predicted failure. But, what was not seen clearly were the political implications of giving the ECB, the ability to deny liquidity to the banking systems of nations, and, in so doing to perform, essentially, coups rendering elected governments of democratic nation states powerless to enact policies they were elected to pass. This “theft of democracy” contradicts the EU’s commitment to advance democracy. It steals what was so hard won from the peoples of Europe. Continue reading

The New York Times Urges the Troika to “Make an Example of Greece”

By William K. Black
Quito: July 7, 2015

It is often the moral and economic blindness of New York Times articles about the EU crisis that is most striking. The newest entry in this field is entitled “Now Europe Must Decide Whether to Make an Example of Greece.” That is a chilling phrase most associated in our popular culture with a Consigliere and his Don deciding whether to order a mob “hit.” It is, therefore, fitting (albeit over the top) as a criticism of the troika’s economic, political, and propaganda war against the Greek people. Except that the article is actually another salvo in that war.

Let’s start with the obvious – except to the NYT. “Europe” isn’t “decid[ing]” anything. The troika is making the decisions. More precisely, it is the CEOs of the elite German corporations and banks that direct the troika’s policies that are making the decisions. The troika simply implements those decisions. The troika consists of the ECB, the IMF, and the European Commission. None of these three entities represents “Europe.” None of them will hold a democratic referendum of the peoples of “Europe” to determine policies. Indeed, they are apoplectic that the Greek government dared to ask the people of Greece through a democratic process whether to give in to the troika’s latest efforts to extort the Greek government to inflict ever more destructive and economically illiterate malpractice on the Greek people.

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BBC Propaganda War v. Greece Reaches New Low After “No” Vote

By William K. Black
Quito: July 6, 2015

If you want to know why economic policy has gone insane in the UK you simply have to read the work of the BBC’s “Economics editor,” Robert Peston. I showed one example of his failed effort to terrify the Greeks into voting “Yes” in favor of continuing the self-destructive policies that have forced Greece into worse-than-Great Depression levels of unemployment in my most recent column. Peston argued that the Greeks had to submit to the troika’s demands that it make these policies even more economically illiterate and self-destructive because the troika would otherwise ensure that Greece’s economy was “utterly crippled.” As you know, the EU stands for “ever closer union.”

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Greece Proves Again Why Democracy is the Criminal Classes’ Great Fear

By William K. Black
Quito: July 5, 2015

The people of Greece have just shown great courage, and even greater common sense, in voting “No” in overwhelming numbers against the troika’s war on the Greek people and labor throughout the EU. In recent days we have seen the spectacle of the major media shamelessly lying globally about the referendum and the Greek government – cheered on by the troika. The troika openly sought to depose a second Greek head of state for the high crime of favoring a democratic vote on the troika’s economic malpractice and effort to extort the Greek people by threatening to destroy their economy. The tone and content of the propaganda were extraordinary – and reversed reality.

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The BBC’s Inept but Revealing Attempt at a Game Theoretic View of Greek Crisis

By William K. Black
Quito: June 25, 2015

The BBC came up with a good “hook” for a story on the troika’s assault on the Greek economy and people. “Yanis Varoufakis, the Greek finance minister, spent his academic career … studying game theory.” Professor Marcus Miller, a UK economist (U. Warwick) wrote an article for the BBC premised on how Varoufakis would apply game theory to Greece’s negotiations with the troika (the IMF, ECB, and the European Commission). Miller is a colleague of the great Robert Skidelsky and has co-authored with him an article explaining the economic illiteracy and self-destructive nature of the troika’s (and UK’s) infliction of austerity in response to the Great Recession.

The BBC, however, is such a great fan of austerity that one rarely reads why the vast majority of economists think that using austerity to respond to a Great Recession is akin to the quackery of bleeding a patient to make him healthier. Miller’s article in the BBC about game theory has the wrong title (recall that the author often does not get to choose the title), the wrong game, the wrong concept, and the wrong payoffs. The title of the article is: “Can game theory explain the Greek debt crisis?” The article does address that issue. It is limited to the issue of the new Greek government’s negotiations with the troika concerning a crisis that they inherited.

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Greek debt disaster bodes ill for daily life

By Pavlina Tcherneva
Cross posted from Al Jazeera

“There are red lines in the sand that will not be crossed,” Greek Prime Minister Alexis Tsipras said just weeks ago as he began the long negotiations process with creditors.

Some of these lines included no more pension cuts or value-added tax (VAT) increases, and a debt restructuring deal that incorporates renewed economic assistance from Europe. Tsipras has been working to complete the previous government’s austerity commitments, without any guarantee of a meaningful debt reprieve in the future.

Yet on Monday, he crossed his own previous red lines and offered a round of fresh austerity measures worth 7.9 billion euros ($8.9 billion) — the largest to date — which in turn prompted mass protests at home.

Crafted by the Greeks, an agreement seemed close at hand, but was nevertheless rejected by the International Monetary Fund and Greece’s euro partners at the European Commission and European Central Bank. The fiscal tightening that is currently being discussed is on the order of 2 to 3 percent of gross domestic product (GDP), comparable to that at the peak of the crisis in 2010.

Read the rest of the post here.

The IMF “Defense” of it Actions against the Greeks is an Unintended Confession

By William K. Black
Quito: June 15, 2015

The IMF, the heedless horseman of the troika that announced it would stop negotiating with the Greeks and go home, has attempted to justify its position through Olivier Blanchard, its “Economic Counsellor and Director of the Research Department.” Blanchard entitled his defense “Greece: A Credible Deal Will Require Difficult Decisions By All Sides.” That is a “serious person” title, but it is also economically illiterate – and no one knows that better than Blanchard. After all, it is the IMF’s deeply neo-liberal economists whose research has confirmed that the IMF’s austerity policies are self-destructive responses to the Great Recession and that fiscal stimulus programs are even more effective than economists had predicted.

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EU Decides Not to Target Investments to Help Nations It Forced into Great Depressions

By William K. Black
Quito:  March 10, 2015

Sometimes there’s a news story that captures the madness perfectly.  The latest is by Rebecca Christie and Rainer Buergin in Bloomberg entitled “EU Backs Investment Plan With Pushback on Help for Hardest Hit.”

“European Union finance ministers agreed to press ahead with a proposed 315 billion-euro ($338 billion) investment plan, while reminding crisis-hit nations that it won’t offer them special assistance.”

The numbers in the EU’s supposed “investment plan” are a grossly inflated public relations effort.  At first blush, the plan is simply a way of subsidizing huge, private firms to increase their profits.  When we look more closely we can see it is actually malignant.  The public funding, relative to the EU’s overall need for investment is deliberately trivial.  Relative to the private firms that the EU will subsidize with those funds, however, the EU public funds represents a 6.67% subsidy.  That is a material addition to corporate profits.

“[EU Commission President Jean-Claude] Juncker’s plan envisages using 21 billion euros of EU seed money to mobilize 15 times as much investment in cooperation with private investors. To gain financing help, projects must show private-sector backing and evidence that they will offer a return on investment.”

Juncker is notorious for his long-standing role in turning Luxembourg into the “magical fairyland” by implicitly creating enormous subsidies for large foreign corporations through secret deals to dramatically reduce their taxes.  He is ultra-conservative, one of the most virulent of the troika’s austerity supporters, and a fierce proponent of the troika’s war on EU workers.  His selection as head of the EU Commission demonstrates the ultra-conservative domination of that body.

At one level, Juncker’s plan is only a modestly clever propaganda gambit.  The EU spends virtually nothing but is credited, e.g., in the first sentence of the Bloomberg article, with a “315 billion-euro investment plan.”  This makes it sound as if the plan, while grossly inadequate, is at least not a farce.

The initial obvious question is why the EU does not give direct aid to those in the greatest need, which would provide them with the ability to increase their expenditures to purchase the goods and services they most need.  This would raise effective demand and cause manufacturers to increase production, which would lead them to hire workers and reduce unemployment.  It is more costly, more inefficient, and more unjust to subsidize for-profit firms to make “investments.”   Major corporations are sitting on piles of cash in an amazingly low interest rate environment in which (under Juncker’s own economic theories) the “hurdle” rate to make a productive investment should be at a modern low and new productive investments as a percentage of GDP should be at an all-time high.  The troika implicitly created a massive subsidy for the liability-side of corporate balance sheet – by reducing the interest rates corporations must pay to borrow funds nearly to zero.  Juncker’s plan adds a material (6.67%) subsidy to the asset-side of corporations’ balance sheets.

On its face, the Juncker plan, therefore, is a disgrace.  It expands the troika’s shameful corporate welfare policy while refusing to aid the 100 million EU citizens in Spain, Greece, and Italy (roughly one-third of the EU’s total population) who live in nations unnecessarily forced into Great Depression levels of unemployment by the troika’s insistence of inflicting austerity on economies already suffering from inadequate demand.  It is also designed to be a stealth privatization program.  Private companies will end up with majority ownership of vital infrastructure such as roads, tunnels, and bridges.

The EU leadership’s continuing, stunning indifference to the citizens of the EU suffering from the troika’s economically illiterate “bleeding” of already sick economies is triply exposed by the Juncker plan.  First, the plan is yet another provision by the EU of corporate welfare to for-profit corporations through public subsidies rather than the EU’s citizens who are suffering the most.  Second, the firms that are the recipients of this corporate welfare will not be targeted so as to help the EU citizens most in need.  Third, the recipients of the corporate welfare are allowed to increase unemployment instead of reducing it.  They are free to use the public subsidy to help fund investments that will result in the corporation firing large numbers of workers even if those workers are in nations already suffering Great Depression levels of unemployment.  .

The express decision, over the protests of many of the EU’s smaller nations with the greatest needs for increased infrastructure investments, to refuse to target the investment to the nations with the greatest need tells you nearly all you need to know about what Germany and its ultra-conservative allies’ oxymoronic definition of the word “union” when they conceive of the “EU.”  The other thing you need to know is that the EU has been the most aggressive and economically illiterate member of the troika It takes stunning economic malpractice to gratuitously force Spain, Italy, and Greece into Great Depression levels of unemployment – nearly seven years after Lehman’s bankruptcy triggered the initial collapse.

It isn’t simply that Juncker deliberately crafted his plan to ensure that investment funds were not made available wherever possible where they were most needed.  As the Bloomberg authors report, the EU’s hard-right leadership expects the overwhelming bulk of the public funds to (1) go to subsidies for wealthy, large corporations in the wealthiest EU nations and (2) expects the infrastructure projects funded to be disproportionately built in the wealthiest EU nations.

Juncker’s Plan Opens a New Front in the Troika’s War on Workers

Read carefully the EU leadership’s own words explaining why and how it deliberately designed the “investment plan” to ensure that it would not direct aid to the citizens of the EU who are suffering the most from the EU’s infliction of self-destructive austerity.

“EU Commission Vice President Jyrki Katainen said the plan must resist pressure to steer help to needy regions or nations. Such quotas are ‘exactly what we have wanted to avoid’ when designing how the plan could offer loans or guarantees to spur private investors, he said.

‘It’s up to the member states to create the right certainty and surrounding for investment,’ Katainen said. ‘No one can co-finance investment if there is no private company who would like to invest in some particular country.’”

The quoted passage constitutes an admission by the EU leadership that their “investment plan” isn’t a public investment plan.  Indeed, they admit that their paramount priority in designing the Juncker plan.  It was drafted “exactly” to ensure that it did not “steer help to needy regions or nations.”

We must decode the phrase “no one can co-finance investment if there is no private company who would like to invest in some particular country.”  The EU “investment plan” is the “carrot” designed to induce right-wing political leaders of the EU periphery, in league with corporate allies, to use a bigger “stick” against their workers.  If, and only if, the nations of the EU periphery makes it far easier to fire workers without cause, to slash their pay and benefits, and to increase their taxes will they find “private companies” who will take the EU subsidies and invest in the nation that “wins” the race to the bottom of workers’ wages and rights.  The Juncker plan is only the latest in a long line of troika demands that, cumulatively, were crafted to extort EU workers to engage in a competitive race to cut wages in order to attract investors and expand exports.

But the Juncker plan has related, subtle advantages in pursuing the troika’s war on the workers.  Consider the arguments that the ultra-conservative coalition dominating the European Commission made in favor of Juncker’s latest corporate welfare plan.

“Germany, the Netherlands and the U.K. led calls for the plan to resist political influence so the fund could seek out projects that are most deserving of help.”

The return to dominant power of the (oh so aptly named) modern “Juncker” class of wealthy, landed aristocrats, is so advanced that Juncker and his allies publicly deride the concept that EU decisions might be made by democratic means – “political influence” over public expenditures must be “resist[ed].”  And they control the European Commission, the place where that “political influence” would have to be successful!  Even in a chamber in which they are dominant the Junckers fear having to defend in the European Commission their corporate welfare plan designed (1) to ensure that it did not go to the EU citizens most in need, and (2) to intensify the war on workers.

The revived Juncker-class has brought back the concept of the “deserving” poor and unemployed, as distinct from the undeserving.  And what a convenient concept it is, for the “deserving” nations will be chosen by the private, for-profit recipients of Juncker’s latest corporate welfare.  (Pause to recall that Juncker does not require the firms receiving his latest form of corporate welfare to be “deserving.”)  The corporate welfare recipients will (under the Junckers’ own theories) invest in the nations whose war on their workers is most successful in driving down wages, for that will maximize their profits.  The corporate welfare recipients’ political cronies will have great deniability.  They, after all, did not decide that the subsidized investments would go to those least in need.  If the investments do not go to Greece, for example, the revived Junckers are asserting in advance that this will prove that the Greeks are “[un]deserving.”  To become “deserving” a nation must be a leader in the intensity of its war on its own workers.  The EU leadership has made this clear:  “It’s up to the member states to create the right certainty and surrounding for investment.”  That “right certainty and surrounding” is code for winning the war against the workers’ wages and rights.

And the EU Adds a Lagniappe to the Corporate Welfare Queens

There is a tradition in New Orleans restaurants to add an unexpected treat to the diners’ meals, a lagniappe.  Juncker knew the perfect little something extra that corporate welfare queens would most appreciate – relaxing those pesky laws against cartels that so upset criminal CEOs.

“The Brussels-based commission will aim for a ‘light touch’ when it considers how to apply the competition rules, Katainen said.”

“Light touch” is an EU euphemism for allowing elite white-collar criminals to commit their crimes with impunity.  The phrase was made infamous in the run-up to the financial crisis.  The infamous three “de’s” – deregulation, desupervision, and de facto decriminalization became so extreme due to the regulatory race to the bottom that finance became an exceptionally criminogenic environment.  “Light touch” was a major factor creating the most destructive financial fraud epidemics in history – the epidemics that drove the financial crisis in America and the eurozone.  The Juncker plan, of course, is being promoted as a (sloth like) response to the crisis made possible by “light touch” invitations for corporations to commit crimes with impunity.  Naturally, Juncker decided that the solution was to gut enforcement of the anti-trust laws and invite (via “light touch”) publicly-subsidized for-profit corporations to conspire together to form cartels.  To Juncker, corporations are “deserving” of public subsidies, government wars on workers’ wages, and the ability to commit crimes with impunity.  The unemployed are undeserving parasites.

Irish-Style Banking Inquiry into the 2008 Financial Crisis

NEP’s Bill Black on The Real News Network discussing his recent testimony in Ireland for a banking inquiry and the challenges the country faces in acknowledging its financial crisis. Video is below. For the transcript, click here.