Posted Under: Economy,European Union,Uncategorized
Athens has begun to burn. Since 2008, Greece has sacrificed everything – up to and including its multi-party democracy – in order to ensure that French and German banks can continue to recieve tribute on their loans, and that the Euro can go on in its present form. On sunday night, a people with little left to give boiled over with anger at the sight of even more being taken from them.
It is perhaps unsurprising to see some Greek activists drawing a connection between the German government, which has effectively colonised the Greek treasury, and the German government of the 1940s. Yet perhaps a better comparison might be made with the role played by the United Kingdom during its heyday as a commercial and financial hegemon.
Like Germany today, Britain in the late 19th and early 20th century was a creditor nation. It ran a current account surplus, selling far more to the rest of the world than it bought. The flipside of this was that, like contemporary Germany, its banks were a source of loans and investment funds for the rest of the world.
And Britain, in its position as a creditor nation, faced the same potential vulnerabilities that Germany does today. As a major exporter it needed to keep markets open to its goods. Meanwhile, the outward flow of loans and investment funds meant that its banks built up assets abroad that somehow needed to be protected. How could they stop British-owned businesses abroad being nationalised, or foreign debts to British financiers being repudiated?
As it turned out the gunboat proved rather useful in these respects. When China closed its markets to our goods we shelled them. We shelled Greece to ensure they compensated Don Pacifico for the many shares and bonds he allegedly lost when a Greek mob burnt his home. We invaded Egypt when they appeared unable to pay their debts, and, in the early 20th century, shelled Caracas for similar reasons.
Germany of course, has not had to resort to such unsubtle measures in order to protect its trade and foreign assets. And that’s because, in the Euro and ECB, it has a more powerful gunboat than Britain could ever hope to possess. Here in Britain, the government is inflating away some of its debts. The Bank of England is printing money and fuelling inflation, which in turn reduces the real value of the national debt. The bondholders have little choice but to such it up.
This is, however, not a luxury enjoyed by the heavily indebted governments of Southern Europe. They can’t print more money, because their money is printed by the German-dominated European central bank. Even at the cost of higher unemployment, and a deeper European recession, the ECB has kept money tight and interest rates relatively high. This keeps inflation down and protects the value of the debts owed by Southern European govenrments to French and German banks. Meanwhile the potentially cataclysmic costs of exiting the Euro have proven sufficient to whip into shape any government that dares considers defaulting on its debts (under normal circumstances, it would be madness for a government in Greece’s position to consider any option other than default).
Yet of most importance is the political power wielded by the EU over its member states. Even the most potent structural adjuster at the IMF must have been creaming in his pants to see the ease with which the EU helped to depose the government of Papandreou, before its apparatchiks parachuted in the bailiff regime of Papademos – a veteran of the European Central Bank, whose sole mandate is to keep the cuts going, and the interest payments flowing.
And as though this were not enough, the EU’s Economic chief has back German andFrench proposals to set up a seperate account that will manage a portion of the Government’s revenues, in order to ensure debt payments. The EU will, in effect, be given the right to directly tax the Greek population. The basic, longstanding, democratic principal of “no taxation without representation” – the idea the people may be taxed by none but their elected representatives – is to be torn aside for the benefit of the bondholders, and the European banking system. As an international debt collection agency, the EU really is second to none.
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