Category Archives: Germany

this is the EU — so take it or leave it… #5. Greece and the tyranny of Brussels

“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

“It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”. [Bold highlight added]

— Lord Mervyn King, former Governor of the Bank of England. 1

“The Greek people have been living through hell during the last six years, and unfortunately they trusted that Tsipras [PM] would put an end to the extreme austerity measures, which are combined with a total undemocratic regime. Unfortunately, instead of putting an end, he put his signature to a third memorandum, which is even worse than the previous two…

“People are back on the streets protesting for their rights and dignity because right now they’re being asked to pay taxes which amount to almost the totality of their revenue. They’re asked to give up their homes… They’re asked to surrender public property, which is privatized at very, very low prices. And, they’re also asked to give up democracy”

— Zoe Konstantopoulou, lawyer and former Speaker of Hellenic Parliament. 2

*

On 13th July [2015], the democratic elected Greek government of Alexis Tsipras was brought to its knees by the European Union. The “agreement” of 13th of July is in fact a coup d’état. It was obtained by having the European Central Bank close down the Greek banks and threaten never to allow them to open up again, until the Greek government accepted a new version of a failed program. Why? Because official Europe could not stand the idea that a people suffering from its self-defeating austerity program dared elect a government determined to say “No!”.

So begins the call for “A plan B in Europe” put together by a group of prominent European left-leaning politicians from Parti de Gauche (France), Die Linke (Germany), Red Green Alliance (Denmark), Socialist Party (SP) (Ireland), Bloco de Esquerda (Portugal), and Syriza (Greece). Top of the bill is Yanis Varoufakis (a principle author, I imagine, given some of the polemical flourishes within this signed but otherwise uncredited page-long call to action).

The piece continues:

We must learn from this financial coup. The euro has become the tool of economic and governmental dominance in Europe by a European oligarchy hiding behind the German government, delighted to see Mrs Merkel doing all the « dirty work » other governments are incapable of undertaking. This Europe only generates violence within nations and between them: mass unemployment, fierce social dumping and insults against the European Periphery that are attributed to Germany’s leadership while parroted by all the “elites”, the Periphery’s not excluded. The European Union has thus become an agent of an extreme right wing ethos and a vehicle for annulling democratic control over production and distribution throughout Europe. 3

Click here to read the full statement.

*

Now let us go back nine months – back to the eve of the Greek referendum during the dog days of last summer, and just before the extraordinary ‘oxi’ vote which momentarily reverberated across our western hemisphere.

Yanis Varoufakis [3:45 mins in]: Let me tell you something which is probably unknown. Ever since we declared the referendum and we incensed our European partners we had the most interesting proposals coming from Brussels. Perhaps this referendum and the impasse it represents concentrated several minds in Brussels and we’ve had some really good proposals – proposals we would sign on the dotted line for.

Paul Mason: You have a proposal you would sign on the dotted line for?

Varoufakis: Yes, we do.

Mason: Where is it?

Varoufakis: Well, I’m not going to tell you. It’s somewhere in this building. But the crucial part of the story is that before this proposal becomes a genuine negotiating document which we can sign off on Monday, the people have to empower us with a “no”.

From the Channel 4 news interview embedded above broadcast on July 3rd 2015 that is also available here.

You can find the same clip here on Varoufakis’ blog.

Shortly thereafter [July 5th] the people of Greece, perhaps in light of Varoufakis’ advice, went to the polls and voted overwhelming in favour of rejecting the Eurogroup deal with its demands for increasing doses of “austerity” and ‘Washington Consensus’-style ‘conditionalities’ — the enforced privatisation of public services and other forms of so-called ‘deregulation’. To which the response from Brussels was to immediately double down by issuing still harsher neoliberal demands. With this, the mask of European social democracy fell away completely.

Nobel laureate economist, Paul Krugman, was one who helped to promote the hashtag #ThisIsACoup when he wrote in the New York Times:

This Eurogroup list of demands is madness. The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Left Unity (which has a loose alliance with political parties Syriza and Podemos) also sent a message of support to the Greeks:

The people of Greece have resisted every threat, every piece of establishment propaganda telling them a No vote would mean ruin, and asserted their democratic rights. This will be a No heard around the world.

Now is the time to celebrate – and to step up our solidarity ahead of the Troika’s next move. Come along to what will now be a victory rally at the TUC’s Congress House, organised by Greece Solidarity Campaign.

And the Greeks had indeed empowered their government with a resounding ‘no’, but instead of fighting on, Syriza under Tsipras’ leadership swiftly capitulated in what must be one of the fastest political U-turns of all time. In response, Varoufakis resigned, refusing to criticise his friend Tsipras, and also declining an invitation to join a small breakaway faction who hoped to restore the party’s anti-austerity ticket on which Tsipras and Syriza had stood little more than six months previously.

So there is a mystery here that remains. Varoufakis, who prides himself on openness, has simply never explained what actually happened during those most momentous days in early July. Specifically, what became of that proposal from Brussels he was so keen “to sign on the dotted line”. Surely he owes the Greek people a fuller explanation.

Moreover, while Varoufakis was quick to attribute blame for the Eurogroup failures on the inflexibility of Wolfgang Schäuble and fellow German Karl Lamers, he has to a large extent absolved other key players including, most notably, President of the ECB, Mario Draghi for their part in “the coup” (his words).

I have consistently defended Varoufakis and Tsipras and been scathing of others on the left for being too hurried in passing judgement and unduly hypercritical (as many earlier posts testify). Caught up in the drama, like others hoping Syriza’s election signified the beginning of truly revolutionary reforms, I confess that I became a cheerleader for both.

With the benefit of hindsight it is clear that Syriza and Varoufakis were both tremendously guilty of an over-reliance on the efficacy of “reasonableness” (more here), because ‘reasonableness’ only ever makes headway when it engages with opposition that is principled and reasoned. Against the irrational, it is blunt, and against the unscrupulous it becomes a danger to itself. Yet Syriza and Varoufakis seem incapable of learning this simple lesson. This is what Varoufakis wrote in the abstract to his “Confessions of an Erratic Marxist” [December 2013]:

Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. 4

Throughout the crisis, he and the party he once represented at the Eurogroup meetings have been chewed up and spat out time and again and yet his response has been to remain unruffled and reasonable in his continued fight (hardly the right word) “to save European capitalism from itself”.

Today Varoufakis leads a parallel campaign Democracy In Europe 2025 made up of lecture tours and larger academic-style conferences making speculative calls for a Plan B in Europe. Beyond the well-meaning rhetoric, the movement is entirely bereft of strategy. And my immediate question to Varoufakis is actually this: why must we wait until 2025 to bring democracy (a gift of the ancient Greeks) back to Europe? After all he knows better than most that a week in politics is an exceedingly long time – so a decade might as well be an aeon.

Here then, to redress the balance of earlier posts (at the risk of angering readers and friends alike), I present the condemnatory appraisal courtesy of political commentator James Petras, who in March 2015 (a mere two months after Syriza were elected) wrote the following:

The vast majority of Greeks, who voted for Syriza, expected some immediate relief and reforms.  They are increasingly disenchanted.  They did not expect Tsipras to appoint Yanis Varoufakis, a former economic adviser to the corrupt neo-liberal PASOK leader George Papandreou, as Finance Minister. Nor did many voters abandon PASOK, en masse, over the past five years, only to find the same kleptocrats and unscrupulous opportunists occupying top positions in Syriza, thanks to Alexis Tsipras index finger.

Nor could the electorate expect any fight, resistance and willingness to break with the Troika from Tsipras’ appointments of ex-pat Anglo-Greek professors.  These armchair leftists (‘Marxist seminarians’) neither engaged in mass struggles nor suffered the consequences of the prolonged depression.

Syriza is a party led by affluent upwardly mobile professionals, academics and intellectuals.  They rule over (but in the name of) the impoverished working and salaried lower middle class, but in the interests of the Greek, and especially, German bankers.

They prioritize membership in the EU over an independent national economic policy.  They abide by NATO, by backing the Kiev junta in the Ukraine, EU sanctions on Russia, NATO intervention in Syria/Iraq and maintain a loud silence on US military threats to Venezuela! 5

[bold highlight added]

Click here to read the full article by James Petras.

*

By latest estimates total Greek debt is 384 billion euros, or US$440 billion. That’s approaching nearly twice the size of Greece’s annual GDP.  A decade ago, in 2007-08 before the global crash, Greek debt was roughly half of what it is today, in terms of both total debt and as a percent of GDP.  Greek debt was actually less than a number of Eurozone economies.  So Greece’s debt has been primarily caused by the 2008-09 crash, Greece’s six year long economic depression [that] followed, the extreme austerity measures imposed on it by the Troika during this period which has been the primary cause of its long depression, and the Troika’s piling of debt on Greece to repay previously owed debt.

Contrary to European media spin, it’s not been rising Greek wages or excessive government spending that has caused the US$440 billion in Greek debt. Since 2009 Greek annual wages have fallen from 23,580 to less than 18,000 euros. Government spending has fallen from 118 billion euros to 82 billion.

writes Jack Rasmus in an extremely detailed overview of the state of the Greek crisis in light of the recent parliamentary vote (passed by a narrow margin of 153 to 145) to implement the latest demands of “the Troika” in order to ensure another tranche of unpayable loans. “Bailouts” that, as Rasmus explains at length, are then returned directly to the creditors:

As a recent in depth study by the European School of Management and Technology, ‘Where Did the Greek Bailout Money Go?, revealed in impeccably researched detail, Greek debt payments  ultimately go to Euro bankers. For example, of the 216 billion euros, or US$248 billion, in loans provided to Greece by the Troika in just the first two debt deals of May 2010 and March 2012, 64 percent (139 billion euros) was interest paid to banks on existing debt; 17 percent (37 billion euros) to Greek banks (to replace money being taken out by wealthy Greeks and businesses and sent to northern Europe banks), and 14 percent (29 billion euros) to pay off hedge funds and private bankers in the 2012 deal. Per the study, less than 5 percent of the 216 billion euros went to Greece to spend on its own economy. As the study’s authors concluded, “ the vast majority (more than 95 percent) went to existing creditors in the form of debt repayments and interest payments”.  And that’s just the 2010 and 2012 Troika deals. Last August’s third deal is no doubt adding more to the totals. 6

[bold highlight added]

Click here to read Jack Rasmus’ full article published in Counterpunch.

The cycles of debt-repayment might literally be never-ending, because Greece will never be able to fully repay all of its (odious) debts. It is a situation compounded because Greece’s already floundering economy is completely suffocated by the Troika’s imposed “austerity” regime.

But this disastrous situation is no accident. The trap in which Greece finds itself satisfies two neo-liberal objectives. Firstly, Greece becomes so impoverished that it is forced to sell state assets at rock-bottom prices. Secondly, the sustained wealth transfer from the pockets of the ordinary Greeks into the hands of the bankers helps to prop up a failed financial system.

Setting the bizarre academic justifications aside, and overlooking the deeper reasons Greece became so indebted in the first place, what we see is how the Troika – two thirds of which is the EU – has put the sanctity of debt repayment far above the sanctity of human well-being. So whenever Greece comes up gasping for air, the IMF and the EU repeatedly pushes it back under again:

The media persists in calling the looting of Greece a “bailout.”

To call the looting of a country and its people a “bailout” is Orwellian. The brainwashing is so successful that even the media and politicians of looted Greece call the financial imperialism that Greece is suffering a “bailout.”

writes former Assistant Secretary of the Treasury for Economic Policy and former Associate Editor of the Wall Street Journal, Paul Craig Roberts in a recent article entitled “We Have Entered The Looting Stage of Capitalism”. In the piece, Roberts explains the EU’s role and the IMF’s apparent policy shift as follows:

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion.

The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks.

The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. […]

The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF.

As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients. […]

In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt. All that the IMF has been given by so-called “creditors” is unspecific “pledges” of an unspecified amount of debt writedown two years from now.

The newspaper headlines are nothing but fluff that provide cover for the IMF to succumb to pressure and violate its own rules. The cover lets the IMF say that a (future unspecified) debt writedown will enable Greece to service the remainder of its debt and, therefore, the IMF can lend Greece the money to pay the private banks. […]

We have entered the looting stage of capitalism. Desolation will be the result. 7

Click here to read Paul Craig Roberts’ full article.

The overarching agenda of the EU – a plan rarely mentioned above a murmur – is to fuse its member nations under unelected technocratic governance for the benefit of a few corporations and the oligarchs who own them. So the notion that sticking by the EU is some sense an act of European solidarity is extremely misguided. Having already sold many of its people down the river, however, we are rapidly approaching a critical and perilous moment.

The far-right is now on the rise in many parts of Europe – Greece being an example, although thankfully Golden Dawn remains very much a minority party. And this swing towards ring-wing extremism is a direct consequence of the EU’s savage economic policies combined with its abject failure to save refugees and resolve the so-called “migrant crisis” (more in a later piece). As this alarming political shift occurs, the EU does next to nothing to address it. No debt relief for Greece or the other struggling member states. No let up on enforced “austerity” or privatisation. Neo-liberalism to the bitter end. But then, after Greece was collectively punished for the insolence of its ‘oxi’ vote last summer, only the most dewy-eyed believers can remain in serious doubt of the EU’s callous indifference towards the plight of its poorest citizens.

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1 Quote taken from “Euro depression is ‘deliberate’ EU choice, says former Bank of England chief” written by Mehreen Khan, published in The Telegraph on March 1, 2016. http://www.telegraph.co.uk/business/2016/03/01/europes-depression-is-deliberate-eu-choice-says-former-bank-of-e/ 

2 Quote taken from an article entitled “The Ugly Truth Behind the Greek Bailout” written by Robert Hunziker, published by Counterpunch on May 10, 2016. http://www.counterpunch.org/2016/05/10/the-ugly-truth-behind-the-greek-bailout/ 

3 From a statement entitled “A plan B in Europe” from Plan B for Europe. https://www.euro-planb.eu/?page_id=96&lang=en. The statement continues:

It is a dangerous lie to assert that the euro and the EU serve Europeans and shield them from crisis. It is an illusion to believe that Europe’s interests can be protected within the iron cage of the Eurozone’s governance “rules” and within the current Treaties. President Hollande’s and Prime Minister Renzi’s method of behaving like a “model student”, or in fact a “model prisoner”, is a form of surrender that will not even result in clemency. The President of the European Commission, Jean-Claude Juncker, said it clearly: « there can be no democratic choice against the European treaties ». This is the neoliberal adaptation of the « limited sovereignty » doctrine invented by the Soviet leader Brezhnev in 1968. Then, the Soviets crushed the Prague Spring with their tanks. This summer, the EU crushed the Athens Spring with its banks.

We are determined to break with this “Europe”. It is the basic condition needed to rebuild cooperation between our peoples and our countries on a new basis. How can we enact policies of redistribution of wealth and of creation of decent jobs, especially for the young, ecological transition and the rebuilding of democracy within the constraints of this EU? We have to escape the inanity and inhumanity of the current European Treaties and remould them in order to shed the straightjacket of neoliberalism, to repeal the Fiscal Compact, and to oppose the TTIP.

We live in extraordinary times. We are facing an emergency. Member-states need to have policy space that allows their democracies to breathe and to put forward sensible policies at the member-state’s level, free of fear of a clamp down from an authoritarian Eurogroup dominated by the interests of the strongest among them and of big business, or from an ECB that is used as a steamroller that threatens to flatten an “uncooperative country”, as it happened with Cyprus or Greece.

4 From “Confessions of an Erratic Marxist in the Midst of a Repugnant European Crisis” written by Yanis Varoufakis, published on December 10, 2013. http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-erratic-marxist-in-the-midst-of-a-repugnant-european-crisis/ 

5 From an article entitled “Lies and Deceptions on the Left: The Politics of Self Destruction” written by James Petras, published by Global Research on March 22, 2015. http://www.globalresearch.ca/lies-and-deceptions-on-the-left-the-politics-of-self-destruction/5438105

6 From an article entitled “Greek Debt Negotiations: Will the IMF Exit the Troika?” written by Jack Rasmus, published in Counterpunch on May 26, 2016. http://www.counterpunch.org/2016/05/26/greek-debt-negotiations-will-the-imf-exit-the-troika/ 

7 From an article entitled “We Have Entered The Looting Stage Of Capitalism” written by Paul Craig Roberts, published on May 25, 2016. http://www.paulcraigroberts.org/2016/05/25/we-have-entered-the-looting-stage-of-capitalism-paul-craig-roberts/ 

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Filed under analysis & opinion, austerity measures, Germany, Greece, neo-liberalism

Whoops austeritypocalypse! or why unbounded economic reasonableness runs into such trouble…

Q: At the onset of the crisis, the former Finance Minister Papaconstantinou likened the Greek economy to the “Titanic” heading straight for the iceberg. Do you also feel as if you are standing on the bridge of the “Titanic”?

A: No. The “Titanic” sank a while ago. We’re steering the lifeboat and throwing lifebelts to those drowning around us.

This was the response Greek Prime Minister, Alexis Tsipras, gave in an exclusive interview to German magazine Stern1

*

“austerity”, what is it good for…?

As the economies of the western world continue to flounder, with Germany too (Europe’s last remaining industrial powerhouse) reeling just a little from the greater crisis, debt reduction is still regarded as the key component to any recovery programme. To meet these ends, all our governments have been overseeing huge cuts in public services, welfare payments especially gouged, in concerted efforts to reduce their deficits. This death of our societies by a thousand cuts of “austerity” being the recommended cure which mainstream economists have called for, and though alternative voices have no less insistently pointed out that “austerity measures” are inherently counterproductive (since they reduce tax revenues), these dissenting voices continue to be marginalised.

A few years ago Thomas Herndon stepped forward. Herndon, a university student and thus less rigid in his outlook, caused quite a rumpus – as a consequence, he has since been rewarded with his own wikipedia entry. This sudden burst of fame coming after he inadvertently stumbled upon grievous errors in an influential paper entitled Growth in a Time of Debt (published 2010), authored by eminent Harvard professors, Carmen Reinhart and Ken Rogoff – Rogoff, a former chief economist at the IMF.

In their paper, Reinhart and Rogoff had purported to show that whenever national debt is in excess of 90% of GDP, growth is “roughly cut in half”. This correlation had subsequently been quoted by policy-makers across the world, as well as routinely served up as empirical proof that there was simply no viable alternative to our continuing “austerity” programmes. Most notably, perhaps, former EU Commissioner for Economic and Monetary Affairs, Olli Rehn, leant rather heavily on Reinhart and Rogoff’s work.

But then doubting Thomas Herndon decided to check their figures for himself. And, to his own astonishment, discovered that one of the most frequently cited justifications for the imposed “austerity” strategy actually rested upon a few careless mistakes on a spreadsheet!

[Herndon had] spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

Herndon and his professors found other issues with Growth in a Time of Debt, which had an even bigger impact on the famous result. The first was the fact that for some countries, some data was missing altogether. 2

Click here to read more in this BBC news article.

Taken aback by this unexpected challenge from a novice, Reinhart and Rogoff felt obliged to issue a response:

We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future.

Confessing to their blunder, but keen also to defend their professional reputation, they casually added:

We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.

There has since been no halt to the economic gouging and scourging of Europe. Despite the more immediate evidence coming out of Greece, Spain, Portugal, and every other place where such “measures” have been most strongly administered, that prove “austerity” isn’t working. And even when all other factors, social and human factors, are set aside, and success or failure is judged within the exceedingly narrow terms of its proponents, we see that the sovereign debt burdens in all these countries have continued to rise. 3

Given such a lack of success, the response is obviously to double-down. Apply more stringent “austerity”; if the original cuts have failed, then they needed to be deeper. In former times the doctors would just have ordered more leeches, or the priests would have demanded a tightening of the cilice. Tougher love. Just too bad if the supposed antidote is the worst of the poison, because orthodoxy asserts that, poison or not, it is the best and only remedy. The really important thing is to never let mere facts (especially incalculable costs like human misery) get in the way of a damned fine economic theory!

*

 whose debt is it anyway…?

But how did these sovereign debt burdens arise in the first place? Or put another way, the related question might be asked, to whom are the debts actually owed? This second question is rarely broached, but in 2013 award-winning business journalist, Harald Schumann, sought a direct answer to precisely this question. He journeyed across the stricken eurozone countries and poised the question to those working inside the so-called “Troika” (IMF, European Central Bank and EU Commission) as well as significant politicians, economists, lawyers, journalists and even the occasional central banker. The result, a brilliantly constructed documentary entitled The Secret Bank Bailout, is embedded below:

I highly recommend watching the documentary in full, but would also like to offer a brief overview.

Schumann asks which parties were actually rescued by the bailouts, and finds that contrary to what ordinary Germans were led to believe (this is a German documentary originally titled Staatsgeheimnis Bankenrettung) the people living in the poorer eurozone states received barely a penny of this apparent ‘foreign aid’ – our own media perpetuates the self-same falsehood.  Because rather than letting the creditors and the banks absorb their speculative losses, these financial institutions were deemed “too big too fail” and protected. So the bailouts were never used to support the governments, but always passed on to the creditors of major banks, especially ones in Germany and France, who had taken the unwise risks that caused the crisis – the original losses often due to property bubbles in places like Spain and Ireland. (The whole notion of “too big too fail” is, of course, a contravention of even the most basic tenets of free market capitalism.)

And who have been the ultimate recipients of all this bailout money? Well, that has remained a closely guarded secret. We ought to be asking why, of course, which Schumann’s documentary does. He also seeks to penetrate the secret itself.

In the next sections, I will present a further overview comprising highlights of Schumann’s discoveries, and following the same route (then a little beyond it) as he investigated country by country, across the blighted eurozone.

*

 Ireland

The Irish people have been forced to take on 70 billion euros of additional debt to pay off foreign creditors.

Stephen Donnelly, independent Irish MP, says that the ECB held the Irish government virtually at gunpoint:

“The suspicion is that European Central Bank said ‘You will continue to pay these bondholders [the mainly foreign creditors] to whom you owe nothing or we will pull the emergency funding out of your banking system, thereby collapsing your banking system, thereby collapsing your economy.’ To me that is gunboat diplomacy… [with a little prompting] or blackmail. It is a very, very serious threat for a central bank to have made in actually forcing a sovereign nation to surrender its sovereignty to bailout an independent group of investors. Was the ECB acting illegally?”

Brian Hayes, Irish Deputy Minister of Finance:

“Of course that was a position that was foisted on the Irish people as a result of the decisions taken… It was the majority view of the ECB that this money had to be paid back.”

And where did the Irish bailout money go? A full breakdown of the bondholders of Anglo Irish bank is available here. (The list was publicly released by blogger Guido Fawkes.)

Germany has the most with 15 of the bond holders. Who between them hold 5.3 trillion euros.

France is next with 10 bond holders.  Who have an estimated 4 trillion.

Britain is third with 9 who have around 3 trillion.

The Swiss have 6 but who have about 8.5 trillion.

America has only three and hold only a trillion.

Other nations include, Spain, Belgium, Portugal, Holland Finland, Norway, Sweden, Poland, South Africa and Italy.

The bondholders include some of the world’s largest banks: Deutsche, Soc Gen, Barclay’s, PNB Paribas, UniCredit (who don’t appear on the list but own Pioneer Investments) and Wells Fargo (also not on the list but who own European Credit Management). There is also Goldman Sachs and Rothschild Group4

As Harald Schumann says “It’s like a Who’s Who of the financial world.”

Back to Stephen Donnelly:

“No country on earth in history has ever paid that amount of money back without having its own monetary policies… you gradually bleed, year on year on year. And now you really do depend on Europe. There was a quote by Nelson Mandela where he said something like: ‘It is the greatest tragedy of the human condition that we must endure so much pain before arriving at a compromise that we always knew was going to be needed.’”

The first lesson, therefore, is that the solution – any practicable solution – has to include debt cancellation.

*

 Spain

The Spanish people have been forced to take on 40 billion euros of additional debt to pay off foreign creditors.

Harald Schumann confronted Luis De Guindos, Spanish Minister of Finance, with advice he was given Stephen Donnelly that they would be better to let (some of) the banks fail because “banks have to be allowed to fail”. But Luis De Guindos disagrees:

“I think that the Irish situation is totally different from the Spanish situation. As I have said before, the size of the balance-sheet of the Irish banks in comparative terms with the GDP of Ireland was three times larger than the case of Spain. So I think that while in the case of Ireland the cost of recapitalising the banks has been above 20% of the Irish GDP, in the case of Spain we are talking 4% of GDP. So it’s a totally different situation and it’s not comparable at all.”

But economist Juan Rallo disagrees with De Guindos, and beginning with the figures themselves: “The real figure is not 40 billion, but 80 or 90 billion…”

And who are the creditors of the Spanish banks (particularly Bankia)? When Schumann manages to get hold of a list (thanks to “friendly people that help me”) he discovers that Deutsche Bank again features prominently.

Juan Moreno is a lawyer working with the 15M protest movement, who filed the lawsuit for the closure of Bankia to save the Spanish taxpayers from a bailout. When asked if the system would have collapsed, Moreno says:

“If you were to drop Bankia it would probably lead to the collapse of other banks, but not the big banks like BBVA, Santander, La Caixa, [Banco] Sabadell, or [Banco] Popular.”

Back to Luis De Guindos:

“A money market economy with fiat money is unstable. And we have an example that we let the banks go down… it was the Great Depression. It was the worst depression we had over the last century.”

Juan Moreno’s response:

“It’s all scaremongering. I don’t want that, I want numbers. I want to know what would really happen if they were to go bankrupt… With what we know now we would say this bank is beyond saving. We can’t continue to pour billions of euros into it. The creditors must take losses…

“The trial uncovered that the bank figures were falsified by upper management, but now we discover that the same had happened at the lower management levels. So a banking culture developed where employees were rewarded with bonuses so that the upper level did not realise how bad things were at the local branch level… The judge said that there was indeed public control of the bank, but the government supervisors played along. Letting the fox guard the hens is good for nothing.

“They’re all criminals: those in charge of Bankia and the public supervisors. If they’d let the savings banks go bankrupt, we would have found out what the politicians did with the money. Much of the debt that cannot be repaid is money that went to political parties, to city administrations, for work in the autonomous southern regions to companies connected to the government. These revelations would have made the political class disappear.”

So what is Moreno’s advice to the Germany citizens who are paying to prop up this corrupt system…?

“Numbers. The balance-sheet. It’s simple. You have to know the facts and apply the laws.”

*

 Cyprus

Meanwhile, depositors in Cypriot banks (savers as opposed to taxpayers) had more than 6 billion euros seized overnight in a so-called bail-in to pay off foreign creditors. This has crippled many businesses and stifled economic growth in a different way.

Panicos Demetraides, Governor of the Central Bank of Cyprus:

“It’s a change from past bailouts that we have had to bail-in on this occasion [from] uninsured depositors in the two big Cypriot banks. The burden of this bail-in has been borne partly by non-residents, but also partly by residents, Cypriot companies and households. About two-thirds of the burden has been borne actually by non-residents and one-third by residents.”

But as German MP Gerhard Schick (Green Party) explains:

“The European Central Bank allowed the Cypriot Central Bank to give money to banks in Cyprus even though they were insolvent. That’s a real mistake because then non-functioning structures are upheld and taxpayers’ money – and that’s what we’re talking about with a central bank – is endangered. In this way the ECB slowed down the rescue programme and made it possible for many creditors to withdraw their money and invest it elsewhere… The ECB was a creditor acting in self-interest to protect its own money. This conflict of interest should never have been allowed to happen, but it did because central bank money was put into bad banks.”

Back to Panicos Demetraides:

“Certainly the delays offered more informed investors [the chance] to protect their own investments. And they put the less informed investors at a disadvantage.”

Does this mean the ECB allowed other European banks time to withdraw their money? That must be some sort of rumour, says Demetraides. It is a rumour that must persist until there is an independent investigation, but as Gerhard Schick points out:

“The problem is that the ECB is a closed shop, and neither the European Parliament nor national parliaments are really able to call it to account when it breaks the rules.”

Harris Georgiades, Cypriot Minister of Finance:

“For us it was a take it or leave it situation. A decision that we accepted under pressure, and with no time to negotiate extensively. Essentially both of our kneecaps have been broken, and now we are asked to run.”

*

 Greece

Greece entered the crisis with a debt-to-GDP ratio of 110% and with around 10% unemployment. It was then put through an “austerity programme” supposedly designed to tackle the debt. Five years and several thousand suicides later, unemployment currently stands at 30% and debt-to-GDP is at around 180%.

This tremendous spike in debt remains in spite of ‘haircuts’ known as the Greek “Private sector involvement” or PSI, the first announced in July 2011, and quickly followed by PSI Mk2 (after PSI Mk1 failed), which involved a impressive sounding 50% reduction in the face value of Greek government bonds (GGB). 5 But then, as Yanis Varoufakis, current Greek Finance Minister, but as then a lowly Professor of Economics, wrote soon after:

In short, and so as not to overlabour the point, PSI Mk2 is dead in the water. The shenanigans of the shadow banking sector (which, lest we forget, includes not only the hedge funds but also, remarkably, the ‘proper’ banks shady Special Vehicles) plus the predictable deterioration of the Greek economy have put paid to it. The negotiations may go on for a little while longer, the announcement of a brilliant agreement may be made but, in truth, the idea that the Greek haircut will put Greece’s debt-to-GDP ratio back on a course towards 120% has sunk without trace. And if you need hard evidence for this, the European Summit of 9th December provided it even before 2011 was seen off: Officially, Europe’s great and good announced the end of PSI as a policy of the new ESM; Europe’s future central, permanent bailout fund. It had all been a mistake, they seemed to confess. 6

Greece has never been bailed out, only the European banks (well over 90% of the bailout money returning to them), and likewise the ‘haircut’ actually caused more problems than it solved. In particular, it permitted the looting of social security and public pension funds that are mandated by law to invest in government bonds – the following is taken from a special report published by Reuters:

Greece’s pension funds – patchily run in the first place, say unionists and some politicians – have been savaged by austerity and the terms of the international bailout keeping the country afloat.

Workers and pensioners suffered losses of about 10 billion euros ($13 billion) just in the debt restructuring of March 2012, when the value of some Greek bonds was cut in half. That sum is equal to 4.6 percent of the country’s GDP in 2011.

Many savers blame the debacle on the Bank of Greece, the country’s central bank, which administers three-quarters of pension funds’ surplus cash. Pensioners and politicians accuse it of failing to foresee trouble looming, or even of investing pension fund money in government bonds that it knew to be at high risk of a ‘haircut’ – having their value reduced. 7

Click here to read the full Reuters report.

In June 2014, Yanis Varoufakis was interviewed by Harald Schumann. Excerpts would feature in another collaboration between Arpad Bondy and Schumann; their follow-up documentary The Trail Of The Troika (in German, Macht ohne Kontrolle – Die Troika), which plotted another route across the continent in order to show how “austerity measures” have utterly failed to rescue the eurozone economies, and how in the process “the Troika” has also flagrantly breached its own European treaty regulations. Unfortunately, an English version of this more recent documentary is at present unavailable on youtube or elsewhere (so far as I can ascertain – but I will certainly embed a version as and when I find one). Meanwhile, uploads of the various interviews filmed during its making are now freely available, and embedded below is Schumann’s unabridged interview with Varoufakis, of which I have again selectively transcribed some of the answers he gave last summer:

What was the bailout for? The bailout was not in order to bail Greece out. Greece was never bailed out. The bailout loan that was extended in May of 2010 had a very singular, simple purpose. It was to transfer banking losses from the asset books of banks, not only Greek ones, but also French ones and German ones, onto the shoulders of the taxpayers. Initially the Greek taxpayers – because they knew that these shoulders were too weak to bear those losses, eventually it was always part of the plan to transfer them onto the shoulders of the German, and the French, and the Dutch and the Finnish taxpayers. And “the Troika” is here supervising this sinister transfer. [5:45 mins]

Smart people in Brussels, especially in Frankfurt, and of course Berlin, knew in May 2010 that Greece would never be able to repay its debts. They knew that again in the Spring of 2012 when they extended the second loan. They know it again now. In their minds they have already written off a very large bulk of the billions and billions that was given to the Greek state to give to the Greek banks and to give to the rest of the banks. All other things being equal, of course, “the Troika” would much rather more money was repaid than less money. But all other things are not equal. At this very moment in time, as we speak, while the Greek banks have huge black holes that we all know, even though they are not being admitted to, something similar is happening in the rest of the eurozone. Deutsche Bank, Finanzbank, BNP Paribas are skating on thin ice. They will never admit to it. And part of the angst and of the anxiety of the powers in Brussels, in Frankfurt, in Berlin, is how not to admit to the German, to the French, to the Dutch, to the Finnish people, that their banking sector was never really put back on an even keel. 8 [7:15 mins]

In 2010, what they had done was this: they lied to the Greek people and to the German people. They said to the Greek people: We have avoided bankruptcy. And they said to the German people that the Greeks, they were waivered, now we are going to punish them with austerity. But we will lend them the money because European solidarity demands that. In reality, what they were doing was transferring banking losses from the bankers – the European bankers, all of them – onto the shoulders first of the Greek taxpayers and eventually onto the German taxpayers, because the Greek taxpayers could not shoulder all of this money.

So they had lied to the German taxpayers. They said: We are not going to haircut the Greek debt. They were always going to haircut the Greek debt. They knew it. What they did with first bailout loan was to shift that big bulk, a 110 billion, from the bankers’ loss book onto the shoulders of Europe’s taxpayers. And then, after that had been effected, of course then they had to haircut – to do what they said they were never going to do – and who did they haircut? They haircut the small bondholders and the pension funds… So the PSI, the second bailout, the haircut of the private sector, was part of the original process of shifting the burden of adjustment and the cost of the crisis from the shoulders of those who caused it, onto the shoulders of those who didn’t cause it in Greece and in Germany. And all that in the name of European solidarity. And then they wonder why right-wing parties of the extreme part of the spectrum are winning power – or, at least, winning seats in the European Parliament. [21:30 mins]

Asked whether he thought the 2008 crisis had been caused as a result of incompetence or due to a more deliberate act of conspiracy, Varoufakis replied:

It wasn’t a conspiracy. It was a very simple operation: How do we stay in power? Mr [Jean-Claude] Juncker said it. Once he admitted: we know what needs to be done, we just don’t know how to do it and remain in power. Now don’t forget that before 2008, 2010, all parties of government, whether they were Christian-Democratic, Social-Democratic, it doesn’t matter. They had developed this extremely close relationship with the financial sector. They had looked at the financial sector as the cow that would bear the milk from which they would feed all, not only their political parties and careers, but also the welfare state – from the point of view of the Social-Democrats.

There was a kind of Faustian bargain between our politicians and bankers. We will let you do what you want, and you pay us a small amount proportional in order to fund our states. So when the crisis hit – which was completely unexpected for them – they had neither the analytical power nor the moral authority to go to these bankers and say: You know what, you’re out. You’re bankrupt, we’re taking over the banks… 9 [24 mins]

Finally, here was what Yanis Varoufakis, the economist (and not yet Finance Minister) said when asked for “any realistic proposal [to] how the dire economic situation in Greece can be improved”:

Well, we have to stop doing what we are doing and do something quite diferent. And there are two levels at which you should see this, because let’s not forget that once we have a monetary union you can’t talk about the overcoming of the crisis in one part of it in isolation to the others. It would be like talking about how South Dakota would escape the Great Depression in 1933 without the rest of the United States going through the New Deal. So we need a New Deal for Europe… 10 [32:30 min]

But, I have to insist: The solution must be European, because the crisis is European. And there are things we can do within two weeks to end this euro-crisis without violating any of the European Union treaties as long as we have the political will to do it. 11 [34:30 min]

*

there is a better alternative… (and always was)

Q: Your Finance Minister Varoufakis said that he is not afraid of an Armageddon.

A: He said in parliament: if you enter into negotiations, you are not seeking a breakup. But you have to keep a breakup in mind as a contingency. I share this view.

 

Q: So you have a Plan B in case Greece does decide to exit from the single currency?

A: We don’t need a contingency plan because we will stay in the eurozone. But we won’t achieve this objective at the expense of the weak – like our previous government.

 

– Alexis Tsipras in same interview published in Stern magazine.

On April 16th, Varoufakis was invited to speak at a press conference hosted by the Brookings Institute which is based in Washington. In answer to a question about being trapped in a position where the Greeks are left with little alternative but to default, Varoufakis replied:

I would willingly, eagerly and enthusiastically accept any terms offered to us if they made sense. I would have no problem with the Memorandum of Understanding if it was founded upon a reform programme that attacked the worse cases of rent-seeking in Greece, and made the reforms that were necessary in order to enhance efficiency and social justice. If it came for the planet Mars, if it came from Berlin, if it came from Brussels, if it came from Portugal, from Slovakia, I don’t care which, I would have embraced it. The problem we have with these conditions – you know, the take it or leave it conditions – is not so much the authoritarianism, it is that fact that we’ve tried that medicine and it hasn’t worked…

It is almost precisely three years ago since I wrote a post entitled ‘austerity’ or ‘Grexit’: is there really no better alternative for Greece? There have since been more than two and a half years of unrestrained “austerity” (prior to Syriza’s victory), a “take it or leave it” Hobson’s choice, which has deepened the crisis not only in Greece but across the entire eurozone. ‘Grexit’ has never been a realistic alternative, and as Syriza have maintained from the outset, they have no intention whatsoever of ditching the euro. So ‘Grexit’ becomes ‘Grexident’, in other words, an impossibility. Because any accidental Greek exit can only occur if it is accidentally on purpose, and that would mean ‘Grexpulsion’ – a term the mainstream has yet to adopt for obvious reasons.

In Washington, Varoufakis was once again unequivocal about Syriza’s position:

“Toying with ‘Grexit’, which is something we don’t do – we are refusing to discuss it, because as I have said before even worrying about it is like worrying about being hit by a comet in a universe in which comets are attracted to you if you are worried about them – toying with ‘Grexit’ and ideas of amputating Greece is profoundly anti-European because anybody who claims that they know what the effect of a ‘Grexit’ is, are deluded.” [52 mins]

*

Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Well, the answer to that question actually depends upon what you value. If you think that all debts are sacrosanct, then it necessarily follows that the Greeks must go on paying the banks to their bitter end. That the debt is unpayable doesn’t matter. That the debt is the consequence of so much ineptitude and malfeasance within the banking system doesn’t matter either. The Greeks must cough up because otherwise the chaos will worsen (or so we are again constantly given to believe). But if you value human life above money, and recognise that debts that cannot be repaid will never be repaid, then you can begin to think more constructively. In fact, the alternative becomes immediately and blindingly apparent. Since a debt cancellation will inevitably come sooner or later, the only real question is how much longer must the Greeks be punished in the meantime.

A way-out of all this mess is entirely possible. It doesn’t involve “austerity” and does not necessarily require a Greek exit from the eurozone. What is needed is simply an end to the bottomless banker bailouts and then new money being made available for reconstruction projects and other productive enterprise within Greece, Spain and elsewhere. Such a ‘New Deal’ injection is unlikely to be offered by the IMF, and neither will it be supported by the likes of Angela Merkel. But it can be fought for by the Greek people themselves, and in this battle to stop the wanton destruction of their nation, as fellow Europeans we should stand with them, recognising that the same aggressive financial interests that have already eviscerated Greece, will be pillaging our own lands soon enough.

The paragraphs above are taken from the post I wrote three years ago – yet so little has significantly altered that it remains pertinent enough to repeat it.

Back to Varoufakis who puts flesh on those barest of bones regarding the ‘New Deal’ option for Europe (and presenting the way ahead without any recourse to deficit spending by governments – so heretical to the neo-liberals):

Europe as a whole, the eurozone as a whole, is typified not only by a mountain of great private and public debts, which we do have. But there is another mountain hiding behind it: a huge mountain of idle savings with nowhere to go. And it should be our joint project to energise, to motivate, those idle savings, to help them overcome their great fear that keeps them idle, and channel them into productive investments – not investments into assets, but investments into real productive capacity. Now, how do we do this? Well, we have the European Investment Bank [EIB] that could do this. And we have the European Central Bank which is embarking on quantitative easing. Well, why can’t the EIB fund a major ‘New Deal’ for Europe, that channels investment to the private sectors of the countries and regions within countries that have a major output gap? [44 mins]

The whole of Varoufakis speech at the Brookings Institute and the subsequent Q+A session is embedded below:

*

last frenzy of reasonableness…?

Just days after Syriza were swept to election victory on January 26th, economist and former US Assistant Secretary of the Treasury for Economic Policy under Reagan, Paul Craig Roberts, published an article entitled “Is Democracy Dead In The West?” which began:

We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

Roberts, once known as the “Father of Reaganomics” but more recently a repentant neo-liberalist and outspoken opponent of the financial elites, continues:

The new [Syriza] government wants to moderate the agreements made by previous Greek governments that sold out the Greek people. The new government wants to stop giving away at bargain prices Greek public assets to clients of its creditors, and the new Greek government wants to raise the Greek minimum wage so that the Greek people have enough bread and water on which to live.

However, for the private bank creditors, for Merkel’s Germany that stands behind the banks, for Washington which could care less about the Greeks, for the Greek elites who see themselves as “part of Europe,” Syriza is something to be rid of.

Adding that:

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. 12

Click here to read Paul Craig Robert’s full article.

The question is, who is actually right here? Certainly we ought to acknowledge that elements in Paul Craig Roberts’ more conspiratorial outlook are irrefutable, recognising that Goldman Sachs did indeed deliberately help to hide previous government debt in order to extend credit to Greece. The Greeks were set up; this has been established – details of Goldman Sachs involvement can be found in this previous post.

Varoufakis is diplomatic, arguably too diplomatic. But then, is Paul Craig Roberts unduly pessimistic when he says that Syriza can now do “very little”, and, in either case, is the very moderate and rather modest approach of Varoufakis a good one, pragmatically speaking? Extending a hand of friendship being unlikely to impress “the powerful rich interest groups that rule the West [who] could not care less about the people over whom they rule” (to quote Roberts again, who knows them well, of course). Yet it may be effective in another way, such relentless persuasion and his “frenzy of reasonableness” at least winning the more public battle for hearts and minds. My own view is that Varoufakis (and Syriza) have adopted a sensible stance, which is in fact evidenced by the harsh criticism they have received from both extreme flanks. Appearing too flexible has made him a target for derision from the more radical (and Communist) left-wing, whereas standing his ground irritates his more powerful opponents working within the establishment (who lash out publicly whenever Varoufakis is out of earshot).

Meanwhile, ‘Grexident’, German Finance Minister Wolfgang Schäuble’s own portmanteau neologism (I gather), is now trending on twitter – not literally, of course, because it doesn’t have a celebrity angle. But the hashtag certainly exists and the tweets that include it are mostly German and Greek, alternating like a stack of incomprehensible post-it-notes. And sadly, the word ‘Grexident’ isn’t the only eurozone nonsense currently trending:

Academic-turned-finance minister Varoufakis was called “a time-waster, a gambler and an amateur”, a source privy to the closed-door talks told the news service Bloomberg.

This is according to a Guardian article published on Friday [April 24th] and entitled “Time is running out for Greece, says Eurogroup chief”. The article continues:

Jeroen Dijsselbloem, head of the eurogroup of finance ministers, told reporters in Latvia it was a “highly critical” meeting as Greece had still not agreed a comprehensive and detailed list of reforms.

Although there were positive signs, there remained “wide differences to bridge on substance”, he said.

“We are all aware that time is running out … too much time has been lost.” […]

Dijsselbloem warned on Friday that after the lack of recent progress it would be very hard to consider a new programme for Greece to cover its funding needs beyond June. He ruled out giving Greece an early slice [of] bailout cash. […]

ECB president Mario Draghi also betrayed his exasperation and warned that central bank could impose tougher conditions in return for keeping Greek banks afloat.

Weeks ago, the Riga meeting had been pencilled in as the moment when the eurozone could sign off an aid payment for Greece, but in the event ministers vented their frustration with Varoufakis for Greece’s failure to bridge the gap with creditors.

Just to remind you, Mario Draghi is not only the former vice chairman of Goldman Sachs – directly implicated in bringing the crisis to Greece – but serves as a trustee of the Brookings Institute13

So watching Varoufakis descend into the belly of the beast that is the Brookings Institute and to receive such a warm welcome and nonjudgmental reception, I must confess that I was instantly reminded of the film, Goodfellas, Martin Scorsese’s gangster classic, and of one scene in particular:

“If you’re part of a crew, nobody ever tells you that they’re going to kill you. It doesn’t happen that way. There weren’t any arguments or curses like in the movies. So your murderers come with smiles. They come as your friends, the people who have cared for you all of your life, and they always seem to come at a time when you’re at your weakest and most in need of their help.”

But Varoufakis is not easily daunted, and so, as the Guardian piece describes:

Varoufakis said the talks [in Latvia] were “intense”, but remained confident that the two sides will resolve their differences in time.

“We agreed that an agreement will be difficult but it will happen and it will happen quickly because that is the only option we have,” he told a press conference.

Varoufakis later declared: “We want an agreement and we are willing to make compromises to achieve this … The cost of not having a solution would be huge for all of us, Greece and the eurozone”. 14

In saying so, he is quite correct. Not only the Greeks, but the Germans too, whose major banks are set to carry the heaviest losses in the event of default, ought to be aware of the extreme dangers of such brinksmanship. A basic instinct for self-preservation is what Varoufakis is relying on, but for so long as the banks and other financial institutions remain confident of receiving further bailouts, it is the German taxpayers who ought to worry – as should the rest of us – because so long as they remain “too big too fail” (i.e., untouchable) then bankers like Mario Draghi and co really have nothing at stake. For once the Greeks are unable to shoulder the debt burden, as Varoufakis reminded us last summer, it will be passed on to the shoulders of the Germans and the French.

Indeed, the people of Europe stand to lose enormously if this so-called ‘Grexident’ (in reality ‘Grexpulsion’) leads to ‘Grexit’ and then to ‘Grextagion’ as it will be doubtless be called; as idiotically named as it will have been idiotically contracted and spread. Because, if no compromise can be reached in spite of Varoufakis’ tireless efforts, then sooner then we imagine we may all be standing in the Greek people’s shoes.

*

Update:

A weekend can be a very long time in politics…

Unbeknownst to me, on Sunday 26th [the day before I posted this article] Yanis Varoufakis had put out a tweet in which he quoted the words of Franklin D Roosevelt, who famously said “They are unanimous in their hate for me; and I welcome their hatred”, adding simply “A quotation close to my heart (& reality) these days”:

This would be one of his final acts as chief negotiator at the Eurogroup meetings:

Greece moved to inject fresh momentum into problem-plagued talks with creditors on Monday, reshuffling its negotiating team to try and defuse tensions over its outspoken finance minister. […]

In a bid to ease tensions with lenders, the Syriza party-led coalition said the minister of international financial relations, Euclid Tsakalotos, would take over the coordination of the new team. The appointment will see the economics professor, who was raised in the UK, assuming a more active role in face-to-face negotiations with creditors.

So writes Helena Smith in the Guardian [April 27th], her report released a mere two hours after I posted.

Varoufakis told us that before he took the job he had written a pre-prepared resignation letter to carry around with him at all times, just in case he ever found himself sounding too much like a politician. Hopefully this will not be needed, and news that he has been “removed” is perhaps a little exaggerated:

[However,] one well-placed Athens official insisted that Varoufakis’s role had been upgraded “in many ways”. The official added: “To make him resign would be to retreat and the government would never do that.”

Three months after his elevation to power, prime minister Alexis Tsipras has come under extraordinary pressure to remove Varoufakis. Yet last night Tsipras said that his finance minister “is an important asset for the government, and [with creditors] he speaks their language better then they do”. In a wide-ranging interview aired on Greek TV, Tsipras rejected suggestions that his government had any intention of sacrificing the politician. Now that negotiations with creditors were in the final straight, Greece had to reorganise its negotiating team, the PM said. […]

But insiders insisted that the politician still enjoyed Tsipras’ confidence, even if the young premier was now reaching out to the German chancellor Angela Merkel in an effort to reach a political solution.

With his high popularity ratings at home, Varoufakis is credited with internationalising the country’s debt problem and raising questions over austerity economics.

“They [creditors] couldn’t counter his economic arguments rationally so they went for him claiming he didn’t understand eurozone rules and regulations, that his reforms weren’t good enough,” said one official. “Tsipras knows this is not about Varoufakis, but his government, because it has dared to take on the system that is Europe’s neoliberal doctrine. He knows that if one goes the other goes too, which is why Varoufakis is here to stay.”

I very much encourage Tsipras to stick by Varoufakis, certainly in the capacity of his chief economic advisor, if not within government itself. We so very seldom see anyone of such intelligence, integrity and courage in public office. The world needs more politicians like Varoufakis, not less.

Please note that I corrected this update after mistakenly believing that Varoufakis had stepped down from his role as Greek Finance Minister. Apologies for posting the incorrect original version.

*

1 From an interview published as “Give us six more months, and we will be another country”, written by A. Albes, F. Batzoglou, A. Petzold, published by Stern on February 18, 2015. http://www.stern.de/politik/ausland/interview-with-greek-primeminister-alexis-tsipras-give-us-six-more-months-and-we-will-be-another-country-2174273.html

2 From an article entitled “Reinhart, Rogoff… and Herndon: The student who caught out the profs” written by Ruth Alexander, published by BBC news on April 20, 2013. http://www.bbc.co.uk/news/magazine-22223190

3 Here are some interesting graphs taken from an wikipedia article entitled “European sovereign-debt crisis”, which show the rise in the levels of Greek, Spanish and Portuguese debt since 1999 as compared to the average of the eurozone:

 

 

 

All three graphs (and others including those for Ireland and Cyprus) show a marked turning point around 2007–8, providing further evidence not only that “austerity” hasn’t worked (even within its own terms of debt reduction), but that the western world is actually faced with a systemic banking crisis that flared up at that time. The debt-to-GDP ratios have flattened towards the end, but even so the downturn is mostly in the projected regions.

And this is from an article written by Tyler Durden and posted on zerohedge from February 18, 2013:

“Beleaguered Prime Minister Mariano Rajoy just broke another record. As if a plague of corruption scandals was not enough, Spain’s debt-to-GDP has now reached levels not seen in over 100 years. As El Pais reports, Spanish debt levels rose at an alarming EUR 400 million per day in 2012 making for the largest annual increase in debt in the nation’s history – all the while proclaiming austerity.”

And here’s another helpful graph that goes along with the article, showing once more that rather than reducing the nation’s debt, “austerity measures” are more closely correlated to the growth of that debt:

 

 

http://www.zerohedge.com/news/2013-02-18/chart-day-spanish-debt

4 These details of a summary of more detailed notes complied here: http://www.golemxiv.co.uk/2010/10/who-are-the-bond-holders-we-are-bailing-out/ 

5 Based on figures taken from an article entitled “Greece’s PSI is Dead on Arrival: An error in search of a rationale but also a failure that may prove a harbinger for the Modest Proposal” written by Yanis Varoufakis, published on January 11. 2012:

Back to the drawing board, our European leaders came up with a deeper haircut in October 2011. They called it PSI Mk2 and even had the foolish Greek PM fall on his sword, to be replaced by a hitherto loyal ECB functionary, so as to ensure that PSI Mk 2 would become Greece’s new light on the hill; a beacon of the last glimmer of hope for a desperate nation. PSI Mk 2 envisaged an impressive sounding 50% reduction in the GGBs’ face value which, in present value terms, would result in a haircut no less than 60% (since the interest rates charged on the new bonds, that would be swapped with the old ones, could not exceed the interest rates charged by the ECB and the EU for the original bailout funds). In other words, holders of GGBs would be hair-cut in two ways: a 50% reduction in face value and an interest rate less than 5% which would cut further into the present value of the old GGBs.

http://yanisvaroufakis.eu/2012/01/11/greeces-psi-is-dead-on-arrival-an-error-in-search-of-a-rationale-but-also-a-failure-that-may-prove-a-harbinger-for-the-modest-proposal/ 

6 Ibid.

7 From a special report entitled “Greeks rage against pension calamity” written by George Georgiopoulos & Lefteris Papadimas, published in Reuters on November 30, 2012. http://www.reuters.com/article/2012/11/30/us-greece-crisis-pensions-idUSBRE8AT0CV20121130

8 Varoufakis adds:

“The one thing if I were, I am not, but if I were the CEO of Deutsche Bank, I would be very wary of the dangers from “the Troika” in Athens that is casting a critical gaze into what is happening to Greek banks. Because if “the Troika” takes a keen interest, it will have to declare that the Greek banks are beyond salvation. And the only possible outcome of that would be nationalisation of these banks.”

9 Varoufakis  adds:

“There is no doubt that there was a great deal of incompetence. Our leaders, and I have to say most of my profession – speaking as an economist – had become steadily lobotomised since the late 1970s. We didn’t have leaders who understood macroeconomics… You just let the markets perform their triumphant trick and everything will be fine. Politicians were convinced of that, their careers went swimmingly, their cosy relation with the financial sector was working out for them beautifully. When the whole thing, this bubble, collapsed, they were found wanting analytically – they didn’t understand what happened – they believed their own rhetoric and when they started realising the truth, at that point they had already misled parliaments and electorates to such an extent that they would much rather die than confess to the sins of omission and commission.” [25:45 min]

10 Varoufakis offers the following example:

Regarding the Greek situation, the Greek debt, for instance. What we need to do is, we need, since the German government is going to find it politically very difficult to go to the parliament in Berlin and say: Well, it was all a mistake, we have to write off their debt. What you can do is you can create euphemisms – you can create what Keynes referred to as bisque bonds, GDP-related bonds. The Greek government could issue particular bonds that it exchanges for the debt that the ESF [European Social Fund] holds. And those bonds could specify that they can last 30 years let’s say. In 30 years they become extinct whether they have been repaid or not. And that the coupons, the repayments, on a year to year basis depend on the level of growth in Greece. So if growth is more than 3% then it specifies particular payment. That way Mr Schäuble will be able to look at his parliamentarians and say: We haven’t haircut it, but the extent to which the Greek debts will be repaid will be linked to our success in helping Greek growth. So you make them partners in Greek growth as opposed to bailiffs who come in and take your furniture away and throw you out on the street. [33:15 min]

11 The details go as follows:

Three things: The first thing we need to do is deal with the banking sector troubles throughout the eurozone. And the way I would do it – because we know we have declared this banking union which is really a term confirms there is no banking union – so what we should do about banks is this: Banks that are found out by the ECB in September (when the ECB assumes the role of the single supervisor of the banking system) to be wanting in terms of recapitalisation to have bad assets that have not been declared so far, they should accept money from the ESM – from the European stability mechanism – directly, not through the governments, directly. And the ESM should get shares, the shareholders should be wiped out and the ECB should appoint a new board of directors – hopefully not from within the country in which the bank is domiciled. This way you Europeanise these banks. In 6 months, 12 months, you resell them – you will resell them with a profit because those shares will be purchased by the ESM at very low prices. And then the ESM gets money back, the European taxpayers get their money back, TARP-like. And you do it step by step. You don’t Europeanise all 6,000 banks. The banks that are in trouble…

The second thing you do is to deal directly with the public debt, which is getting worse everywhere – except in Germany because of the low, low interest rates due to the fact that the crisis is proceeding. The European Central Bank should make a simple announcement tomorrow morning that will cost it nothing, zero. And the announcement is this: From now on, every time a government bond matures, the ECB will service, will pay, for the proportion of that bond that corresponds to the country’s Maastricht compliant legal debt. So in the case of Italy it will be half of it. So the European Central Bank will pay for this, not the Italian government. Now I said it won’t cost the European Central Bank anything, so how can that be if it pays half of it? The answer is the ECB issues its own bonds and sells them to the Chinese, to the Russians, to whoever wants to buy them at very, very low interest rates – because the ECB is such a sterling institution – and immediately opens a direct debit account for Italy. And says to Italy: Look, within ten years, this amount of money has to go in there in order to repay the Chinese. So in other words, what I’m suggesting is that the ECB should play a management role for public debt in Europe that costs nothing, that doesn’t require printing a single euro, and does not violate any treaty. Because ths is not a bailout…

And then we have the big problem of growth. Of investment. We have an amazing dearth of investment in Europe, both in the north and in the south. Even in Germany. So what we need is really a Roosevelt-like New Deal – a very large investment programme. I am not talking about a 100 million here and a 100 million there. We need something between 8 and 9% of eurozone GDP to be invested in productive activities… That would be what we need in order to avert deflation and in order to restart growth in Europe. Now we have the European investment Bank in Europe. The European Investment Bank is three times the size of the World Bank. It could very easily effect such a large scale investment-led recovery programme in Europe. The reason why it doesn’t do it, is because the convention is that 50% of every project is funded from a nation state. The nation state is bankrupt. Waive it. And what should we do instead? We should have either the ECB issuing more bonds in order to support the EIB bonds or something simpler than that. Everyone now, including Mr [Mario] Draghi and Mr [Jens] Weidmann [President of German Bundesbank], are speaking about the need for quantitative easing in Europe. Or at least they are considering it. Now we do not want American-style or British-style quantitative easing because this simply inflates bubbles… Mr Draghi’s worried about quantitative easing because he doesn’t know which assets to buy. German assets? Italian, you know, we are going to start arguing like children amongst ourselves, as to whose assets should be purchased. Bu the European Investment Bank issues European bonds, EIB-bonds. Why not have the EIB effect quantitative easing by purchasing EIB-bonds to such an extent that the EIB ca start a New Deal for Europe programme of 8–9% of eurozone GDP with the ECB buying only its bonds, which are European bonds?  And also they are triple-A bonds. Now that a combination of those three measures would deal with the banking sector crisis, it would create a rational way of managing the Maastricht compliant and legal part of the debt… and you have a massive investment-led recovery programme.

12 From an article entitled “Is Democracy Dead In The West?” written by Paul Craig Roberts, published on January 29, 2015. http://www.paulcraigroberts.org/2015/01/29/democracy-dead-west-paul-craig-roberts/ 

13 From Bloomberg Business (bold highlight added):

Mr. Mario Draghi has been the President of Executive Board and President of European Central Bank since November 2011. Mr. Draghi served as Governor of Banca d’Italia SpA since December 29, 2005 until November 01, 2011. He served as Managing Director of The Goldman Sachs Group, Inc. until January 2006. He served as Director-general of Italy’s treasury. He served as an Adviser to the Bank of Italy, an Executive Director of the World Bank and as a member of the Group of Seven deputies. He served as the Chairman of Financial Stability Board. He has been a Director at Bank For International Settlements since June 2012. He serves as a Trustee of The Brookings Institution. He has been Member Of Governing Council of European Central bank since January 16, 2006. He served as a Member of Governing Board at Banca d’Italia SpA and served as its Member of General Councils. He served as Member of Board of Governors – Italy of Asian Development Bank until November 2011. He served as Director of Bank For International Settlements from September 2011 to November 01, 2011. Mr. Draghi has a Doctorate in Economics from the Massachusetts Institute of Technology.

http://www.bloomberg.com/research/stocks/private/person.asp?personId=13154633&privcapId=5774394

14 From an article entitled “Time is running out for Greece, says Eurogroup chief” written by Graeme Wearden, published in the Guardian on April 24, 2015. http://www.theguardian.com/business/2015/apr/24/time-is-running-out-for-greece-says-eurogroup-chief-jeroen-dijsselbloem

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Filed under analysis & opinion, austerity measures, Cyprus, debt cancellation, did you see?, Germany, Greece, Ireland, neo-liberalism, Spain

another day, another atrocity: may I speak freely?

Freedom is always the freedom of dissenters 1 — Rosa Luxemburg

As the mad men of ISIS find ever more vile ways to defile the faith they profess to, I am sickened. Sickened by reminders of the depths of savagery and depravity to which some human beings are capable. Sickened by the fact that the country I live in is one of those that has been deliberately supporting these monsters as they spread their obscene medievalism like a cancer across the Middle East and into Africa. And here is the unspeakable John McCain cavorting with a few of them during a sneak visit to Syria in May 2013:

Furthermore, I am outraged to see our leaders prostrating themselves once more before the House of Saud from whom this fundamentalist sickness of Wahhabism  was first contracted. And then we have the other side of all of this. We have the fanaticists at home.

*

When I first heard reports of the attacks in Paris, and then the more recent attack in Copenhagen, the news came like another deadening dose of something expected and horrendous. More rampages of mass killing. And my condolences to the many survivors of these latest atrocities and to families and loved ones of those who were gunned down in cold blood; all of whose lives are now shattered.

I was also braced, of course, like many others, for that different chorus of voices to pipe their own variations to that well-worn theme known as the “clash of civilisations”. But then, and before we had any real chance to draw collective breath, a protest was in full swing with the soon familiar black banners declaring “Je suis Charlie” already fluttering as dusk fell across the world. Right-minded people were gathering together beneath them, and linking arms to show solidarity with the victims. And who amongst us would not stand up and raise the same banner in name of free speech?

Well, I confess that I did not join those gathered in the streets and watched from afar as the “Je suis Charlie” banners were unfurled. Now, after a respectful silence, here are some reflections on the response, both public and media (it was hard to tell them apart), in the immediate aftermath of the murders in Paris. An already ghastly sense of dismay, revulsion and alarm, suddenly compounded.

*

Clash of civilisations

How absurd men are! They never use the liberties they have, they demand those they do not have. They have freedom of thought, they demand freedom of speech. — Søren Kierkegaard

It was coming, of course, and it really didn’t very take long at all. Within only a few hours of the murders, Channel 4’s Jon Snow was one of the better known journalists who reacted without pause or delay by responding with the demanded clichés. He tweeted:

Paris: brutal clash of civilisations: Europe’s belief in freedom of expression vs those for whom death is a weapon in defending their beliefs. [bold highlight added]

Is that so? Well, no – this is nothing more or less than reconstituted, unadulterated neo-con claptrap. Reconstituted from Samuel P. Huntington as a matter of fact.

I shall return to consider Huntington in a moment, but meanwhile, would like to offer a more thoughtful journalistic response, posted by Guardian correspondent, Homa Khaleeli, also on the day of the massacre. She begins:

It’s hard to admit to a reaction other than sadness to the murder of 12 people, especially when it takes place in a city that feels so close by. The images of sprawling bodies and masked assailants on familiar-looking streets gives the tragedy an extra edge of horror.

Yet in the moments after the news broke about the Charlie Hebdo massacre, I found it impossible to ignore a sinking feeling: the recognition that we were being pulled further into a cycle of distrust and division.

It grew as I read through the responses online. The straightforward reaction from far-right extremists was the hashtag #killallmuslims, which would have been easy to ignore as empty words if it hadn’t reminded me of the firebombing of mosques after the Lee Rigby murder.

She then responds directly to all those who, like Jon Snow, were so quick to pull out Huntington’s dog-whistle and press it to their lips:

Less violent but still divisive was the way the attack was depicted as a battle between Islam and freedom of speech, or between Muslims and satire – a clash-of-civilisations argument that splits the world neatly into “them” and “us”, by ignoring the staggering death toll of terrorist attacks abroad (most recently the massacre of schoolchildren in Pakistan). 2

In an extended article published by Counterpunch, economist and political analyst, Ismael Hossein-Zadeh, also helped to put the so-called ‘theory’ of the “clash of civilisations” into context in the light of the Paris attacks. He writes:

Huntington’s theory of “the clash of civilizations” is essentially a subtle version of Richard Perle’s strategy of “de-contextualization.” Perle, a leading neoconservative militarist (and a prominent advisor of the Likud party of Israel), coined the term “de-contextualization” as a way to explain both the desperate acts of terrorism in general and the violent tactics of the Palestinian resistance to occupation in particular. He argued that in order to blunt the widespread global criticism of the Israeli treatment of Palestinians, their resistance to occupation must be de-contextualized; that is, we must stop trying to understand the territorial, geopolitical and historical reasons that some groups turn to terrorism. Instead, he suggested, the reasons for the violent reactions of such groups must be sought in the arenas of culture and/or religion—in the Islamic way of thinking. Like the “clash of civilizations” theory, de-contextualization strategy has been part of a well-orchestrated effort to divert attention from the root causes of terrorism, and attribute it to “pathological problems of the Muslim mind.”

As Hossein-Zadeh explains in his piece, following the fall of the Soviet Union, Huntington’s “clash of civilisations” provided the Anglo-American warmongers with an essential surrogate enemy which might be used to disguise and justify its own neo-imperialist pursuit of control of territory and resources:

The theory, initially expounded by Samuel Huntington in the early 1990s, sets out to identify “new sources” of international conflicts in the post-Cold War world. During the Cold War years, major international conflicts were explained by the “threat of communism” and the rivalry between the two competing world systems.

In the post-Cold War era, however, argue Huntington and his co-thinkers, the sources of international rivalries and collisions have shifted to competing and incompatible civilizations, which have their primary roots in religion and/or culture. 3

Of course, Huntington’s “clash of civilisations” is really no less nonsensical than Fukuyama’s now laughable ‘flat earth’ theory that we have somehow already reached the “End of History”. For where is this great Islamic civilisation that the West is supposed to be in opposition to? There is none. There are just fanatics who thanks to our recent assistance have spread their backwardness into more unfortunate pockets of the world. Beyond these benighted corners, the same fundamentalism is supported only by a powerful few in Saudi Arabia and other despotic Gulf States, and these are not in opposition to the West, they are instead our close allies. So the fact that Huntington’s notion persists at all is entirely due to the needs of the war party helped along by voices in the media who, like Jon Snow (someone I once respected), appear to have become utterly incapable of thinking for themselves. (Please Jon, you did some excellent reporting from Gaza, but you need to get a grip again.)

*

Freedom of expression

I may not agree with you, but I will defend to the death your right to make an ass of yourself. — Oscar Wilde

Best response to #CharlieHebdo attack – other than catching and punishing the killers – is to escalate blasphemous satire

Or so tweeted Jacob Weisberg, editor of Slate magazine. I heard similar sentiments from friends, responding as if blasphemy was in deficit in the western world. As if breaking all taboos is an unimpeachable good per se. And as if the secular western world was already free from every restriction on what is and isn’t permissible to speak about. But it isn’t so… None of this is really true:

Here is a thought experiment: Suppose that while the demonstrators stood solemnly at Place de la Republique the other night, holding up their pens and wearing their “je suis charlie” badges, a man stepped out in front brandishing a water pistol and wearing a badge that said “je suis cherif” (the first name of one of the two brothers who gunned down the Charlie Hebdo staff). Suppose he was carrying a placard with a cartoon depicting the editor of the magazine lying in a pool of blood, saying, “Well I’ll be a son of a gun!” or “You’ve really blown me away!” or some such witticism. How would the crowd have reacted? Would they have laughed? Would they have applauded this gesture as quintessentially French? Would they have seen this lone individual as a hero, standing up for liberty and freedom of speech? Or would they have been profoundly offended? And infuriated. And then what? Perhaps many of them would have denounced the offender, screaming imprecations at him. Some might have thrown their pens at him. One or two individuals — two brothers perhaps — might have raced towards him and (cheered on by the crowd) attacked him with their fists, smashing his head against the ground. All in the name of freedom of expression. He would have been lucky to get away with his life. 4

That was an excerpt from a short article written by Oxford philosopher and founder member of the Jewish Forum for Justice and Human Rights, Brian Klug. It is entitled simply “The moral hysteria of Je suis Charlie”.

There are lots and lots of things I hate (including, since you may ask, religious fundamentalism) but for a variety of reasons I prefer to keep many of those opinions to myself or share them with my closest friends (and sincere apologies to those who regularly put up with the worst of my ranting).

For instance, I thoroughly dislike the Royal Family. To put it politely, they are an unwelcome anachronistic throwback. Many in Britain feel likewise, but most will rarely say so.

Way back in the year 1977, in the midst of the Silver Jubilee festivities, the Sex Pistols had caused a tremendous brouhaha after they released “God save the Queen – it’s a fascist regime”. It was banned by the BBC, of course, but since then, as the impact has inevitably worn off, this blast from the past is fully defused and assimilated. A sample was even included in the pop montage played at the London Olympics opening ceremony in the presence of HRH. Yet, nearly forty years on, if I were to find a spot in the middle of Sheffield city centre and sit there earnestly defacing portraits of the Queen by doodling swastikas across her face (in tribute to the Sex Pistols obviously!) Or if, heaven forfend, I were to deface pictures of the late Queen Mother (God rest her soul), do you suppose that my act of performance art could fail provoke a rather hostile reaction from many of the passersby? Truth is that I wouldn’t dare try such a stunt.

And there are far stricter taboos than this in our ‘Cool Britannia’. For even in a swanky modern secular society like ours, a few things remain completely sacrosanct. Indeed, to offer an incendiary example, suppose that someone (not me) decided to urinate on poppies on Remembrance Day. Well, the fact is that just a few years ago a drunken student did precisely this and it happened in my home city of Sheffield. Caught on camera, the young man in question was publicly shamed. The media had a field day. Even after it had transpired that this piss-artist was so staggeringly drunk that he had no memory of the events of the evening whatsoever, he was still faced with the very real prospect of imprisonment. Given his contrition, however, the judge exercised leniency and sentenced him to a mere 250 hours of community service. 5

And then do you remember the furore when this happened:

 

It was not so much the spray painting of a national icon as his turf mohican that generated the greatest public consternation after the May Day anti-Capitalism demonstration of 2000. And though the more deliberate artist on this occasion turned out to have been ex-soldier, James Matthews, who had served with the Royal Marines in Bosnia, he was subsequently jailed for 30 days. In his defence, Matthews had told the court:

“I thought that on a day when people all over the world are gathering to express their human rights and the right to freedom of speech, I would express a challenge to an icon of the British establishment.”

However, the magistrate was unmoved, saying:

“Your actions caused great affront to many British people”. 6

Doubtless, it was the effrontery far more than the minor criminal damage that cost Matthews his freedom. So we see that even within our notionally free society there are extremely tight restrictions when it comes to “freedom of expression”. Some of these are legally enforced codes of conduct (and they include some of the strictest libel laws anywhere in the world) but there are other limits set by whatever is deemed socially tolerable behaviour. But then “freedom of speech” can never be an absolute in any society; you just need to know where to look to discover its inviolable boundaries.

In any case, to always say precisely what you like with total disregard for the feelings of others isn’t the least bit honourable. In fact, it is Tourettes – and I mean absolutely no offence to those who suffer from the medical syndrome. So let’s return to Paris and rethink the “Je suis Charlie” outcry, but now taking the viewpoint of an already fearful and oppressed minority.

The following is an excerpt from an impassioned article by investigative reporter Chris Hedges entitled “A Message From the Dispossessed”:

The cartoons of the Prophet in the Paris-based satirical weekly Charlie Hebdo are offensive and juvenile. None of them are funny. And they expose a grotesque double standard when it comes to Muslims. In France a Holocaust denier, or someone who denies the Armenian genocide, can be imprisoned for a year and forced to pay a $60,000 fine. It is a criminal act in France to mock the Holocaust the way Charlie Hebdo mocked Islam. French high school students must be taught about the Nazi persecution of the Jews, but these same students read almost nothing in their textbooks about the widespread French atrocities, including a death toll among Algerians that some sources set at more than 1 million, in the Algerian war for independence against colonial France. French law bans the public wearing of the burqa, a body covering for women that includes a mesh over the face, as well as the niqab, a full veil that has a small slit for the eyes. Women who wear these in public can be arrested, fined the equivalent of about $200 and forced to carry out community service. France banned rallies in support of the Palestinians last summer when Israel was carrying out daily airstrikes in Gaza that resulted in hundreds of civilian deaths. The message to Muslims is clear: Your traditions, history and suffering do not matter. Your story will not be heard. Joe Sacco had the courage to make this point in panels he drew for the Guardian newspaper. And as Sacco pointed out, if we cannot hear these stories we will endlessly trade state terror for terror. 7

*

I am not Charlie

This Humanist whom no belief constrained/ Grew so broad-minded he was scatter-brained. J.V. Cunningham

Nothing justifies an assassination, all the more a mass murder committed in cold blood. What has happened in Paris, the beginning of January, constitutes an absolutely inexcusable crime.

To say that involves nothing original: millions of people think and feel likewise on this account. However, in the light of this appalling tragedy, one of the first questions that occurs to me is the following: in spite of the profound disgust experienced by the murders, is it obligatory to identify oneself with the victims’ actions? Must I be Charlie because the victims were the supreme incarnation of the ‘liberty of expression’, as the President of the Republic has declared? Am I Charlie, not only because I am a secular atheist, but also because of my fundamental antipathy towards the oppressive roots of the three principal Western monotheistic religions?

In these opening remarks to another article published by Counterpunch, Shlomo Sand speaks out for many who suddenly found that their own voices were being restricted. But then Sand, who is a professor of history at Tel Aviv University, is no stranger to controversy. Not since he released a book entitled The Invention of the Jewish People in 2008, and then followed it up more recently in 2013 with How I Ceased to Be a Jew. Works in which Sand had set about undermining the foundations of Zionism and then, more personally, interrogating the question of what it means to be non-practising and atheistic (as he is), yet to still be identified as a Jew:

“I wrote [The Invention of the Jewish People] for a double purpose. First, as an Israeli, to democratise the state; to make it a real republic. Second, I wrote the book against Jewish essentialism.”8

That was what Sand had told Guardian reporter Rafael Behr back in January 2010. Five years on, and in aftermath of Paris, he says he identifies with another more famous Charlie:

At the moment, and particularly after this terrible massacre, my sympathy goes to the Muslims who reside in ghettos adjacent to the metropolises, who are at considerable risk of becoming the second victims of the murders perpetrated at Charlie Hebdo and at the Hyper Casher supermarket. I continue to take as a reference point the ‘original Charlie’: the great Charlie Chaplin who never mocked the poor and the little-educated.

Earlier in the article, which is entitled “A Fetid Wind of Racism Hovers Over Europe”, Sand writes:

It has been affirmed that Charlie, impartially, lays into all religions, but this is a lie. Certainly, it mocks Christians, and, sometimes, Jews. However, neither the Danish magazine, nor Charlie would permit themselves (fortunately) to publish a caricature presenting the prophet Moses, with kippah and ritual fringes, in the guise of a wily money-lender, hovering on a street corner. It is good that in the society these days called ‘Judeo-Christian’ (sic), it should no longer be possible to publically disseminate anti-Jewish hatred, as was the case in the not-too-distant past. I am for the liberty of expression while being at the same time opposed to racist incitement.

I admit to, gladly, tolerating the restrictions imposed on Dieudonné from expressing too far and wide his ‘criticism’ and his ‘jokes’ against Jews. On the other hand, I am positively opposed to attempts to restrain him physically. And if, by chance, some idiot attacks him, I will not be very shocked … albeit I will not go so far as to brandish a placard with the inscription: ‘je suis Dieudonné’. 9

However, by far the most stinging criticism of Charlie Hebdo comes from a former member of its own team, Olivier Cyran, who had worked at the magazine from 1992 to 2001 before he quit, angered by what he described as “the dictatorial behaviour and corrupt promotion practices” of its editor at the time, Philippe Val. The following extracts are taken from an article that he first published in December 2013 as a response to an opinion piece in Le Monde that was signed by Charb (Stéphane Charbonnier, one of the murdered cartoonists) and Fabrice Nicolino. He begins as follows [the original footnotes are retained]:

Dear Charb and Fabrice Nicolino,

“We hope that those who claim, and will claim tomorrow, that Charlie is racist, will at least have the courage to say it out loud and under their real name. We’ll know how to respond.” Reading this rant at the end of your opinion piece in Le Monde[1], as if to say “come say it to our face if you’re a real man”, I felt something rising within me, like a craving to go back to fighting in the school playground. Yet it wasn’t me being called out. Which upright citizens you hope to convince, moreover, is a mystery. For a good long while, many people have been saying “out loud” and “under their real name” what they think about your magazine and the effluent flowing out of it, without any one of you being bothered to answer them or to shake their little fists.

A little later, Cyran explains how the magazine was reframed in the aftermath of the attacks of 9/11:

Racist? Charlie Hebdo was certainly no such thing at the time when I worked there. In any case, the idea that the mag would expose itself to such an accusation would have never occurred to me. There had, of course been some Francocentrism, as well as the editorials of Philippe Val. These latter were subject to a disturbing fixation, which worsened over the years, on the “Arabic-Muslimworld”. This was depicted as an ocean of barbarism threatening, at any moment, to submerge the little island of high culture and democratic refinement that was, for him, Israel. But the boss’s obsessions remained confined to his column on page 3, and overflowed only rarely into the heart of the journal which, in those years, it seemed me, throbbed with reasonably well-oxygenated blood.

Scarcely had I walked out, wearied by the dictatorial behaviour and corrupt promotion practices of the employer, than the Twin Towers fell and Caroline Fourest arrived in your editorial team. This double catastrophe set off a process of ideological reformatting which would drive off your former readers and attract new ones – a cleaner readership, more interested in a light-hearted version of the “war on terror” than the soft anarchy of [cartoonist] Gébé. Little by little, the wholesale denunciation of “beards”, veiled women and their imaginary accomplices became a central axis of your journalistic and satirical production. “Investigations” began to appear which accepted the wildest rumours as fact, like the so-called infiltration of the League of Human Rights (LDH) or European Social Forum (FSE) by a horde of bloodthirsty Salafists[2]. The new impulse underway required the magazine to renounce the unruly attitude which had been its backbone up to then, and to form alliances with the most corrupt figures of the intellectual jet-set, such as Bernard-Henri Lévy or Antoine Sfeir, cosignatories in Charlie Hebdo of a grotesque “Manifesto of the Twelve against the New Islamic Totalitarianism”[3]. Whoever could not see themselves in a worldview which opposed the civilized (Europeans) to obscurantists (Muslims) saw themselves quickly slapped with the label of “useful idiots” or “Islamoleftists”.

Then he provides some specific examples of the kinds of xenophobia that the magazine has seen fit to publish:

I remember a full-page article by Caroline Fourest which appeared on June 11 2008. In it, she recounted her friendly meeting with the Dutch cartoonist Gregorius Nekschot, who had gotten some grief for representing his Muslim fellow-countrymen in a particularly hilarious way. Judge for yourself: an imam dressed as Santa Claus buggering a goat, with the caption: “We have to share our traditions”. Or an Arab, slumped on a couch and lost in thought: “The Qur’an doesn’t say if you have to do anything to be on the dole for 30 years.” Or even the “monument to the slavery of white indigenous taxpayers”: a Dutch person in foot shackles, carrying a black person on his back, arms crossed and sucking on a pacifier. Foul racism? Oh come on, it’s freedom of expression!

And of how this culture of bigotry outlasted the toxic influence of both Caroline Fourest and editor Philippe Val:

After Val and Fourest left in 2009, called to higher things – one as head of a public radio network, the other to the podiums of official anti-racism – we might have wondered if you would continue to follow their lead in their absence. The least we can say is that you have remained faithful to their line. You’ve absorbed it down to the core, it seems.

Today, those flies which Tignous never fails to add buzzing round the heads of his “beards” are more than ever attracted to your imagination, as soon as you “laugh at” Muslims. In a video posted on the Charlie Hebdo website at the end of 2011, we saw you, Charb, imitate the Islamic call to prayer, to the rapt giggles of your little buddies. What a hilarious new version of the Qur’anic recitation for your magazine’s deadline; Michel Leeb [famous French impressionist] could not have done better. What collective poison would you have had to stew in to get to this point? From what psychological depths did you drag up the nerve to “laugh” at a cartoon representing veiled women baring their buttocks as they bow in prayer towards “Mecca-relle” [a pun on maquerelle, the madam of a brothel]?  This pathetic stream of crap isn’t even shameful; its stupidity embarrasses you, even before it reveals your state of mind, your vision of the world.

As well as the wider effects on French society:

The obsessive pounding on Muslims to which your weekly has devoted itself for more than a decade has had very real effects. It has powerfully contributed to popularising, among “left-wing” opinion, the idea that Islam is a major “problem” in French society. That belittling Muslims is no longer the sole privilege of the extreme right, but a “right to offend” which is sanctified by secularism, the Republic, by “co-existence”. And even – let’s not be stingy with the alibis! – by the rights of women. It’s widely believed today that the exclusion of a veiled girl is a sign, not of stupid discrimination, but of solid, respectable feminism, which consists of pestering those whom one claims to be liberating. Draped in these noble intentions that flatter their ignorance and exempt them from any scruples, we see people with whom we were close, and whom we believed mentally healthy, abruptly start to cut loose with a stream of racist idiocies. […]

But your throne is overlooking a swamp. Charb, for whom I once voiced my esteem, and  Fabrice, whose intellectual rigour I appreciated[13]: I hold you, you and your colleagues, co-responsible for the increasingly rotten atmosphere. After September 11, Charlie Hebdo was among the first in the so-called leftist press to jump on the bandwagon of the Islamic peril. Don’t deprive yourself of receiving your own share of the shit, at a moment when the number of Islamophobic acts is breaking records: 11.3% higher in the first 9 months of 2013 compared to the same period in 2012, according to l’Observatoire national de l’islamophobie. They worry about a “new phenomenon” of violence, marked by at least 14 attacks on veiled women since the start of the year.

Don’t worry, I’m not saying that reading Charlie Hebdo automatically unleashes a craving to bucket a mosque with pig’s blood or to rip the veil off a supermarket shopper, as happens here and there. You’ve pointed out the targets, but you wouldn’t want some poor guy to attack them for real, because you’re against violence and against racism. As are, most certainly, your readers. They have no prejudice against Muslims. It’s just that they break out in whole-hearted laughter at that Charb cartoon where an Arab with a big moustache stops in front of a prostitute, while a bearded preacher sermonizes: “Brother! Why would you pay 40 euros for a single shag when for the same price you could buy a wife!” In the 1930s, the same gag – with Jews instead of Muslims – would have gone down a treat, except that, at the time, its teller would surely not have had the idea to wave around a certificate of anti-racism.

There is a great deal more. Olivier Cyran is incensed and this attack on his former colleagues is boiling over with vitriol. But if you accept that Charlie Hebdo is just harmless fun then ask yourself, as Cyran does, whether or not a magazine devoted to publishing similarly provocative caricatures of Jewish figures would be so lightly laughed off. As Cyran points out (just as others have):

Have you forgotten the Siné incident…? A proven report of Islamophobia, and you burst out laughing. A misleading accusation of anti-Semitism, and someone gets fired.

The incident he is referring to occurred in 2008, when another of Charlie Hebdo’s cartoonists, Siné, was sacked:

Maurice Sinet, 80, who works under the pen name Sine, faces charges of “inciting racial hatred” for a column he wrote last July in the satirical weekly Charlie Hebdo. The piece sparked a summer slanging match among the Parisian intelligentsia and ended in his dismissal from the magazine.

“L’affaire Sine” followed the engagement of Mr Sarkozy, 22 [son of then-President Nicolas Sarkozy], to Jessica Sebaoun-Darty, the Jewish heiress of an electronic goods chain. Commenting on an unfounded rumour that the president’s son planned to convert to Judaism, Sine quipped: “He’ll go a long way in life, that little lad.”

A high-profile political commentator slammed the column as linking prejudice about Jews and social success. Charlie Hebdo’s editor, Philippe Val, asked Sinet to apologise but he refused, exclaiming: “I’d rather cut my balls off.” 10

Olivier Cyran has since added the following postscript to his Article 11:

[T]o all those who think that this article was validation in advance of the shameful terrorist attack against Charlie Hebdo (that they were asking for it), the editorial team of Article 11 would like to give a hearty middle finger to such vultures. To make things absolutely clear, please see this text.

Click here to read a full version of Olivier Cyran’s Article 11, entitled “’Charlie Hebdo’, not racist? If you say so…” translated by Daphne Lawless and reprinted by Lenin’s Tomb with the relevant offending cartoons interspersed throughout.

Wagging the dog

Why does the dog wag its tail?
Because the dog is smarter than the tail.
If the tail were smarter, it would wag the dog. 

— Caption from the film Wag the Dog

The “Je suis Charlie” campaign had as its main slogan the famous adage “the pen is mightier than the sword”, which meant that pens, or better yet, pencils, became imbued with renewed symbolic potency. The pencil-wavers suddenly popping up all around:

Here, for instance, was the scene in Congress during Obama’s State of the Union address on Wednesday 21st. Whilst in Britain, that well-known bastion of free speech, the Daily Mail, reported on the incident as follows:

There are 534 members of Congress, including the 100 senators who shoehorned themselves into the crowded hall. (One seat was vacant after former New York Rep. Michael Grimm’s resignation.)

At 4pm on Tuesday, Mr Harris said that nearly three dozen members of Congress had confirmed they would be participating in the Charlie Hebdo salute, which was broadcast live on television.

Continuing (without a hint of irony):

The pencils were deliberately unsharpened due to security concerns. 11

So one moment the humble pencil is adopted as the embodiment of free expression and the next second, it is being mistaken for a deadly weapon. The pencil may indeed be mightier than the sword, but surely the Members of Congress recognise that this might isn’t in any way intrinsic to the rapier-like sharpness of its tip. Boy, it’s a mad, mad, mad, mad world, ain’t it?

As an aside, do you too recall the carefree pre-9/11 era when it was permissible to board a flight carrying almost any object barring the obvious exclusion of actual deadly weapons? Immediately afterwards, of course, a ban was imposed on sharp objects like scissors, and then further bans and hindrances after plots (whether or not the plots were subsequently proven) involving the deployment of exploding liquids, or shoes, or underpants. So will we now be required to leave our pencils at home? (Perhaps in a safe for heightened security!)

Going back to the goon show… Did you see all of the pictures of that “unity in outrage” march which took to the streets the following Sunday? Out in front Francois Hollande, David Cameron, Angela Merkel, and the rest of the politerati, quite literally linking arms with Bibi Netanyahu, who had muscled his way to the head of the barmy army… and then, after a wide security gap of several hundred yards… the rest of the cortège… an entourage of plebs (a word forbidden by those who appear to have mistaken it for a swear word, and one I am endeavouring to reclaim) marching far behind (as we do). Solidarity – ha, ha, ha, ha!

Frankly, I can’t see how any protest movement could ever be headed by around 40 world leaders and maybe a hundred or more other dignitaries who regard the whole event as a splendid jolly and another photo op:

“Je Suis Charlatan” as satirical magazine ‘Private Eye’ captioned it

Incidentally, if you have never watched the satirical film Wag the Dog, starring Dustin Hoffman and Robert De Niro, then, and if only to understand how media focus can be reframed and public opinion manipulated, I thoroughly recommend it. Without wishing to give too much away, I will simply draw attention to the film’s centrepiece, which revolves around the skilful construction and orchestration of a protest movement. A public relations stunt which flashed to mind (and doubtless the minds of many others) soon after the “Je suis Charlie” banners were unfurled and the pens held aloft. In the film, the tributes are for a soldier called “Good Ol’ Shoe”, and here is a short clip showing how De Niro and Hoffman set about priming the pump for their own PR masterpiece:

*

The Pen is Mightier… (so beware!)

As I look ahead, I am filled with foreboding; like the Roman, I seem to see “the River Tiber foaming with much blood.” — Enoch Powell

It seems to be taken for granted by some that if there is real truth to the adage “the pen is mightier than the sword”, then this is unreservedly a good thing. The presumption being that not only is the pen – here a metonym for speech or expression of ideas – the more potent force, but that it is additionally, and without any exception, a beneficent tool. But when we stop to consider this for a moment, it is evident that not all speech (in the broadest sense) is for the betterment of mankind. In fact, the single word “propaganda”, which only surprisingly recently has become sullied, shows how dangerous ‘speech’ can also be. For speech itself can be filled with bile and hatred, or else a more subtly contrived means for misdirecting and coercing the unwitting. It is a potent instrument not only for delivering truth but also for spreading rumours, stirring up hostility, inflaming tensions and aggravating divisions.

Thus far, all of the quotes selected to mark the beginning to each of these sections have been ones I subscribe to. All, that is, except for the one I have quoted above. Taken out of context it is inoffensive and seemingly appropriate, but it is also the most notorious sentence extracted from what in full remains the most deplorable speech ever made by a British mainstream politician during my lifetime.

Full of pious concerns for the condition of the “quite ordinary working man”, Enoch Powell’s racist bigotry was thinly veiled as he outspokenly called for “re-emigration” of the “negroes”. To most twenty-first century readers, this vocabulary alone betrays him, but back in 1968 it wasn’t the language that upset people so much, as his desire to impose an apartheid solution on what he saw as the problem of immigration from Commonwealth countries. Powell declaring that ‘rivers of blood’ would soon flow because “the black man will have the whip hand over the white man” 12.

The modern bigot is rather less inclined to lean too overtly on the importance of colour as a discriminating feature. Things have moved on, and in this regard racism is no exception. In Britain, the far-right English Defence League (EDL) provide us with a helpful illustration of this on-going shift. For it is rather less common nowadays to hear the unguarded opinion that there are too many “Pakis” around, whereas all-too common to hear that the main problem the country faces comes from the number of “Muslims”. So in response, the EDL have formally abandoned the politics of race in favour of the politics of “religious intolerance”:

“If you look at the pictures of the stage you can see a St George’s flag,” said Robinson, who was speaking before the attack on the offices of Charlie Hebdo in Paris, adding that the man had travelled there “to offer them support and discuss what the next steps are for them and all of us, because what’s happening is a European problem”.

That extract is drawn from a report published in Newsweek and the Robinson in question is the former leader of the EDL, Tommy Robinson. He was answering questions regarding his thoughts on altogether less savoury anti-Islam “solidarity marches” which had been taking place in Germany, and he continues:

“I would have been in Germany in a minute if I could have been”

Adding:

“When the state starts calling [the people on the march] fascists and they know they’re not – that’s the kind of problems the EDL had. In Germany they know they’re just normal people but the state are lying to everyone. I know what will happen because they did the same to the EDL – the state will slander and campaign, everything will get thrown at them.” 13

Robinson was talking about protests run by a group that calls itself Patriotic Europeans against the Islamisation of the West (Pegida). The group was founded as recently as October last year by ex-professional footballer and ex-convict Lutz Bachman, who looks like this:

His idea of a joke by the way

Now, I am fully aware that many of those who did venture out to support the smaller “Je suis Charlie” vigils in Sheffield were totally horrified to find that they were standing side-by-side with members of the EDL. But my open question to them is: why the big surprise? Who else would you expect to be standing in solidarity with…?

It was Voltaire who is most credited (perhaps wrongly) with saying “Though I may disapprove of what you say, I will defend to the death your right to say it.” And very few with a liberal outlook would argue with that sentiment. However, too frequently overlooked is that whoever respects this laudable position is merely defending the right to speech, and not necessarily the content of what is said. Indeed, implied within this famous remark lies the very principle that one ought to be feel free to speak out against anyone whose words are thought repugnant or offensive. In this spirit, no-one stands immune from criticism.

It is an admirable principle, I believe, to defend the rights of Enoch Powell and Tommy Robinson to speak in ways that we find detestable. And it is a measure of the strength of our democracies that such open discussion is permitted. But if Powell or Robinson were assaulted for what they said, then although we might decry the assault, this does not mean that we are somehow obliged to leap to the defence of what they have said. The cartoons of Charlie Hebdo are no different. The murder of the cartoonists does not alter their message. If we feel that the message is a racist one, then we are not merely justified in saying so, but in the same liberal spirit, we are obliged to say so.

*

Mistakes were made…

Every man has a right to utter what he thinks truth, and every other man has a right to knock him down for it. 14 — Samuel Johnson

For the last two decades and more, the Western powers (most especially Britain and America) have been making a rod for their own back. Having embarked upon an endless campaign of neo-imperialist aggression, we have been covertly supporting the very enemy that we are simultaneously hunting out to destroy. For make no mistake, what started out with Operation Cyclone, the clandestine Cold War programme to arm the Mujahideen in Afghanistan against the Soviet Union, still goes on in many other ways. With the backing of militant Islamists, including air support, when we wished to see the overthrow of Gaddafi in Libya, and providing further assistance when attempting the decapitation of the Assad regime in Syria. The West has no qualms at all about fighting dirty, or about choosing sides as and when it suits our purposes.

Sometimes this leads to blowback, as when the forces we have been supporting turn full circle to bite the hand that was feeding them. But on other occasions, the blowback comes more indirectly. For the West’s deplorable foreign adventuring breeds resentment both home and abroad. And just as the “freedom fighters” abroad (later rebranded “terrorists”, which they were all along of course) were quietly co-opted to become unwitting allies of convenience against foes who stood in the way of a greater neo-imperialist agenda, the blowback that takes the form of domestic terrorism can also be profitably finessed. As Adolf Hitler is credited with saying (and whether he said it or not, it remains self-evidently the case): “Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death.”15

Yes, terrorism is a potent, since terrible, tool for mass persuasion, and frequently less helpful to the cause of the terrorists themselves than to the authorities they seek to weaken. After all, each fresh atrocity opens up the possibility for revenge in the form of new collective punishments. The war party licks its slavering chops and prepares to send more drones with Hellfire missiles. Meanwhile, back on the domestic front, we can be more easily nudged when asked to accept a tightening of control all around: infringements of privacy, restrictions on civil liberties, and violations of human rights are always easier to justify when there exists a climate of fear. And restrictions on freedom of speech and expression are yet another part in this sacrifice of our freedom for “security” – truly a bargain with the devil.

In fact, the erosion of freedom of speech started long ago, although the growth in legislation that prohibits it actually helps to make the prohibition itself appear more respectable. For in spite of the Freedom of Information Act, there is plenty that remains above top secret in Britain, with documents routinely withheld as classified on the grounds of “national security”. And aside from being one of the most secretive nations, Britain also has some of the strictest libel laws in the world; laws that ensure the worst indiscretions of rich and the powerful (not only individuals but corporations too) are rarely exposed to full public scrutiny. Not that freedom of speech has any real teeth without freedom of the press, and this has been a wishful fantasy both in Britain and America for decades. Almost the entire mainstream media of the West having been privately captured, so that, as a general rule, those who work within its bounds dare not offend their plutocratic owners or corporate sponsors.

Thus, at the present time, the more significant restriction of freedom of speech has been the narrowing, not so much of what it is legal to say, as what is permissible. This is how western media censorship can be rampant but insidious.

Journalists who are brave enough to report in ways that transgress the bounds of the officially sanctioned narrative can expect to be given short shrift, and so very few actually dare to try. Seymour Hersh is one of the rare exceptions, and yet in spite of his outstanding credentials, no major newspaper has been prepared to publish any of his well-documented articles whenever he has risked straying too far from the reservation. For instance, when he questioned who was behind the release of the deadly sarin gas in the Damascus suburb of Ghouta, or when he later reported on the CIA’s “rat line” which enabled the transfer of armaments from Libya to support al-Qaeda fighters in Syria. Speak too freely on such controversial matters as these and irrespective of your standing, you put your reputation in jeopardy. Repeat offending and there is a danger of being branded a “conspiracy theorist”, which is the modern-day equivalent of landing up on a blacklist.

As someone who does not have an editor to rein me in (not always a blessing), or advertisers to please, I am at liberty to ask tougher questions and altogether disregard the official line. So there is little to hamper me, for instance, when it comes to asking why it was that the suspects in both of these terrorist attacks (in Paris and Copenhagen) were well known to the authorities.16  In the case of the Charlie Hebdo massacre, we might also inquire how an arsenal of powerful weapons could be accessed in an unarmed country like France, as well as how was it that these assassins encountered little to no resistance when they assaulted such a high profile target. On her show Breaking the Set, Abby Martin put one of those questions to journalist Chris Hedges – almost by accident – whilst they were discussing the background to the attacks. The subsequent conversation went as follows [from 23 mins]:

Martin: I also want to get your comments on some questions Julian Assange raised when talking about the recent attacks. As we know the French authorities were already monitoring the Kouachi brothers. Why do you think that surveillance against these men didn’t stop the deadly attack?

Hedges: Um [sustained pause] Well, that’s a good question. I know, having covered al-Qaeda in France, that they have very heavy phone wiretaps. I remember from a Ministry of Interior official telling me that there are twenty-three different dialects of Arabic in Algeria and in real time they have the ability to translate every single one of those dialects. So these people are heavily monitored and that’s a good question, but, you know, somebody from inside France’s security service would have to answer that one.

Their full discussion is embedded below (and well worth listening to):

But it is not only those inside French security services who should be interrogated, because there is a clear pattern which is difficult to overlook. In all of the recent terrorist attacks I can think of (and I invite the reader to offer counter examples) the suspects were known to the authorities, and in many instances, were not only tracked by the security services, but had been approached or actively recruited to act as informants. Take, for instance, last December’s siege in a Sydney cafe. The gunman, Man Haron Monis, was already a wanted man in Iran (and the Iranian government had tried but failed to extradite him in 2000) long before he was “flagged up on the Australian Security Intelligence Organisation’s watchlist in 2008 and 2009”. When Australian Prime Minister, Tony Abbott, was asked about these security lapses, he replied feebly, “I don’t know why he dropped off the watch list in those days, I really don’t.”17

And today, we have the case of Mohammed Emwazi, the alleged ISIS executioner who is better known by the absurd sobriquet “Jihadi John” (a nickname that manages to both simultaneously ridicule and glorify him). But it now transpires that Emwazi wasn’t only on a watchlist as a “subject of interest” (SOI), but that he was actively pursued by MI5 who were wishing to recruit him as an informer. Likewise, Michael Adebowale and Michael Adebolajo, the two men who brutally attacked and killed Fusilier Lee Rigby outside Woolwich Barracks, “had already been on the radar of MI5 and the police for years by the time they committed their savage murder.” The Intelligence and Security Committee (ISC) later produced a report that pointed to repeated ‘failures’ by MI5, MI6, GCHQ, as well as the police.18

This theme of security agencies latching on to, but then losing their ‘SOI’s, people we subsequently learn these agencies were “trying to turn”, is repeated again in the case of the Chechen Tsarnaev brothers, suspected of carrying out the Boston Marathon bombings. On this occasion the older brother, Tamerlan Tsarnaev, was certainly known to the FBI and the CIA after both agencies were tipped off by the Russian intelligence agency FSB who suspected him of terrorist involvement at home.19 Another perhaps more startling example is Mohammad Sidique Khan, the alleged leader of the 2005 London tube suicide bombers. Khan was yet another on the MI5 radar, and it turns out that he had been under suspicion prior even to the 9/11 attacks.20 And then lastly (in this exceedingly reduced summary), there are the 9/11 suspects themselves. It has been well-established that the US security services dropped the ball many times prior to 9/11, and here I will refer the reader to an earlier post on whistleblower Sibel Edmonds, but also direct you to the 28-pages that we now know were redacted from the official report of the Joint Congressional Inquiry:

(You might also like to read my own extended post on issues left unresolved by the 9/11 Commission inquiry. I have also written posts on the inconsistencies in the case of the so-called “underwear bomber”, Umar Farouk Abdulmutallab, that you can read here.)

I note that Conservative MP and former shadow Home Secretary, David Davis, published an article in last Friday’s Guardian that raises the same issue. He writes:

It has also been reported that MI5 tried to recruit Emwazi after it was suspected that he was attempting to join a Somali extremist group. Somehow, despite supposedly being unable to leave the country, he was still able to make his way to Syria and join Islamic State in 2013.

These failures are part of a worrying pattern. Prior to the 9/11 attacks on the World Trade Center at least two of the hijackers, Khalid al-Mihdhar and Nawaf al-Hazmi, were known to the American authorities, and known to have entered the country before the attacks.

Similarly, one of the 7/7 London bombers, Mohammad Sidique Khan, had been scrutinised, bugged and monitored by MI5. Unfortunately, it was determined that he was not a likely threat, and he was not put under further surveillance. And prior to the 2008 Mumbai attacks, the intelligence agencies of Britain, the US and India had all picked up signs of an imminent terrorist assault, and even had some of the terrorists under surveillance.

The Kouachi brothers, responsible for the Charlie Hebdo massacre, were part of the “Buttes-Chaumont network”, well known to the French authorities and kept under surveillance, on and off, as far back as 2005.

Michael Adebolajo, one of the men who brutally beheaded Fusilier Lee Rigby in broad daylight in Woolwich, was also known to the security services. He too was supposedly a recruitment target for our intelligence agencies. After he was arrested, his family claimed he had been “pestered” by MI5, which wanted to make him an informant infiltrating radical Islamic extremist groups.

Given the numbers who appear to have slipped through the net, it is legitimate to ask: how many more people must die before we start to look more closely at the strategy of our intelligence services?

Finishing his piece as follows:

Whether it is the ISC’s review of the intelligence on the London terrorist attacks of 7 July 2005, which required a second report to deal with the first’s failings; its inability to detect the UK’s complicity in torture; its failures to correct Tony Blair’s dodgy dossier; or its lack of insight, let alone oversight, into the surveillance programmes revealed by the Snowden revelations – the ISC has been too timid and unwilling to criticise.

The time has come to learn from the pattern of failures across the globe and apply the appropriate lessons: namely that we need to prosecute, convict and imprison terrorists, and that all our policies should be bent firmly towards that end. We should use “disruption and management” only as a very poor second choice.

As the US experience shows, this policy is both safer for citizens in the short term and more effective at destroying terrorist organisations in the long term.21

I applaud David Davis for speaking out so frankly (although I fail to see why he praises the US example given their similarly poor record).

*

Strategy of tension

Let us never tolerate outrageous conspiracy theories 22 — George W. Bush

The quote reprinted above is taken from a notorious speech given by George Bush Jnr at the United Nations in the immediate aftermath of the 9/11 attacks. Just a few months later, of course, the very same George W. Bush was himself conspiring. Together with Tony Blair, they settled on a false pretext to launch illegal war against Iraq. And it was the same George Bush who also gave secret clearance for kidnap and torture of “enemy combatants”, a term that was quickly redefined after 9/11 to include anyone alleged to be a member of al-Qaeda or the Taliban. The trouble is that our media has allowed him to succeed in these outrageous conspiracies. The war went ahead, the “black sites” remain open, and still no-one has been prosecuted.

It is a disgustingly bitter pill, and one that many people, especially those who live in the West, find almost impossible to swallow, but what we can say with certainty is that we are constantly lied to, and not only by obvious villains such as George W. Bush and Tony Blair. The really sickening truth is that these lies are endlessly perpetrated and recycled and especially so when pressure grows for war. As a consequence, so long as we choose to remain silent, then we clear the way for permanent war, and, in parallel with this, a never-ending attrition of our freedoms. This is why it is the duty of serious investigative reporters not to unthinkingly restate the official story, but to scrutinise the available details of every case and to demand answers wherever discrepancies appear. Here is the most important reason for protecting our rights to freedom of speech.

*

There were two words that flashed through my own mind when I first watched the dreadful news from Paris. Words that I know sprang into the minds of many others, but who afterwards perhaps said nothing for reasons of not wishing to sound too alarmist or provocative. The words were these: Operation Gladio.

Below I have embedded (again) a youtube upload of a three-part BBC Timewatch documentary made in the pre-Hutton years (first aired in 1992). If you have never seen this documentary before then I very much encourage you to do so – the quality of reproduction may be a little grainy, but it remains one of the most remarkable pieces of investigative journalism ever broadcast on British TV. For what it is reveals is extremely shocking:

“You had to attack civilians, the people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the State to ask for greater security. This is the political logic that lies behind all the massacres and the bombings which remain unpunished, because the State cannot convict itself or declare itself responsible for what happened.”

These are the words of right-wing terrorist Vincenzo Vinciguerra, who is one of many to testify in this film:

For the majority of us, negligence in the workplace results in charges of misconduct, dismissal and the possibility (depending upon our occupation) of a criminal prosecution. Yet, in the aftermath of the atrocities detailed above, no-one in charge of any of the relevant agencies has been brought to book for their failure to protect us. The agencies themselves have instead been rewarded in spite of their negligence, with powers extended to permit snooping on everyone. Post-9/11,  we are all guilty until proven innocent.

Meanwhile, the government inquiries into these terrorist attacks have apportioned only broad-brush culpability, having refrained from holding individuals accountable, whilst both governments and the agencies themselves have subsequently issued hollow apologies constructed around the ‘don’t blame us, it’s a difficult job’ refrain, which ends: “we must move forward and learn from our mistakes.” And even as the police state grows, the terrorists, many of whom are extremely well-known to our authorities, are somehow still able to slip between the cracks.

We may never know the final truth regarding what happened in Paris, in Copenhagen, or in other recent terrorist attacks, but given the historical precedent of the Operation Gladio so-called “strategy of tension”,  we are fully justified in holding our security services to account for their failures, and for interrogating those in power to try to establish it.

 *

Additional:

On the morning of attack on Charlie Hebdo, France’s best known contemporary author, Michel Houellebecq, was about to launch his latest and perhaps most controversial novel, Submission. Its central story, involving a mix of real and fictional characters, foretells the coming to power in 2022 of an Islamist and pro-EU (strange combination) French President after the discredited Socialists and Conservatives form an alliance to keep out Front National leader Marine Le Pen.

The following extracts are drawn from a short review by Lara Marlowe and published in The Irish Times in the hours immediately prior to the Paris atrocities – given the timing, her views are undoubtedly less guarded than they might otherwise have been. The article starts rudely:

With his wispy, greying hair, dark-circled eyes and sempiternal anorak, Michel Houellebecq looks like a scarecrow, or one of the amoral, sex-obsessed characters who people his controversial novels. His books are about the profound alienation of French society. They feature masturbation in peep shows, sex tourism to exotic countries, and murderous Muslims.

Marlowe continues:

Before it was even published, Submission became a cause célèbre, winning praise from the right and condemnation from the left. Jérôme Béglé of the conservative weekly Le Point sees the book as an attack on “the blindless, silence, passivity and complicity of centre left media and intellectuals” regarding the rise of political Islam. […]

By portraying the “UMPS” [left-right coalition] in cahoots to hand France over to Muslims, Houellebecq validates one of Le Pen’s favourite conspiracy theories. The publication of his novel “marks the return of extreme right-wing theories to French literature”, writes Laurent Joffrin, the editor of Libération. “It warms up a seat for Marine Le Pen in the [famous literary] café de Flore.”

She finishes her piece saying:

Submission is the English translation of the Arabic word “Islam”. It’s meant to designate man’s submission to Allah, but in Houellebecq’s profoundly misogynistic novel, it’s really about the submission of women.

The strange coincidence of the release of Submission on the day of the attacks is compounded by a caricature of Michel Houellebecq which featured on the front cover of that week’s edition of Charlie Hebdo. Houellebecq depicted as a dishevelled magician with the caption “The Predictions of Wizard Houellebecq”:

This article published in The Telegraph, also from the day of the attacks, explains more:

Submission, by celebrated French author Michel Houellebecq, was featured on the front cover of this week’s Charlie Hebdo, the magazine attacked by terrorist gunmen on Wednesday.

Speaking prior to the terror attack on the magazine’s Paris headquarters, in which at least 12 people were killed, Houellebecq said the book “was not taking sides”.

He denied that the novel – which has triggered furious debate prior to its release over whether it is Islamophobic – was a “Christmas present” to Marine Le Pen, the far-Right Front National leader. […]

In an interview on state TV channel France 2’s flagship evening news programme, Houellebecq said his political scenario was not implausible.

“It is a possibility – not in as short a term as in the book, not in 2022. But it’s a real possibility,” he said.

Following the attacks, Michel Houellebecq briefly went into hiding. He returned to Paris to break his silence over the murders, saying “Je suis Charlie”.

*

Update:

We had been noting, in the wake of the Charlie Hebdo attacks in France, how the country that then held a giant “free speech” rally appeared to be, instead, focusing on cracking down on free speech at every opportunity. And target number one: the internet. Earlier this week, the Interior Minister of France — with no court review or adversarial process — ordered five websites to not only be blocked in France, but that anyone who visits any of the sites get redirected to a scary looking government website, saying:

You are being redirected to this official website since your computer was about to connect with a page that provokes terrorist acts or condones terrorism publicly.

Click here to read the full article from techdirt.com published on March 18th.

*

1 Literally “Freiheit ist immer Freiheit der Andersdenkenden” and generally translated as quoted here.

2 From an article entitled “After the Charlie Hebdo attack, we must resist the clash-of-civilisations narrative” written by Homa Khaleeli, published in the Guardian on January 7, 2015. http://www.theguardian.com/commentisfree/2015/jan/07/charlie-hebdo-clash-civilisation-terrorism-muslims

3 From an article entitled “Making Sense of the Paris Terrorist Attacks” by Ismael Hossein-Zadeh, published in Counterpunch on January 16–18, 2015. http://www.counterpunch.org/2015/01/16/making-sense-of-the-paris-terrorist-attacks/

4 From an article entitled “The moral hysteria of Je suis Charlie” written by Brian Klug, published by Mondoweiss on January 11, 2015. http://mondoweiss.net/2015/01/moral-hysteria-charlie

5 

The CCTV images caused national outrage, and the judge said that he had been sent many letters about the case before sentencing.

“I said to you when you last appeared that the image of your urinating over the wreath of poppies at the city war memorial was a truly shocking one. That was no understatement,” he said. “There you are, a young man of 19, urinating on the war memorial erected to honour the memory of so many other young men.

“You have understandably had the wrath and indignation of the public heaped upon you and your family, but I am required to decide your sentence on the basis of the facts of the case and principles of law alone.”

His parents left through the public exit and his mother said: “He’s sorry. He’s very, very sorry.”

From an article entitled “Student who urinated on war memorial spared jail” written by Martin Wainwright, published in the Guardian on November 26, 2009. http://www.theguardian.com/uk/2009/nov/26/student-urinated-war-memorial-sentenced

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An ex-soldier has been sentenced to 30 days’ imprisonment for defacing the statue of Winston Churchill during May Day demonstrations in central London. […]

There was widespread outcry from MPs and the press after the statue of the former prime minister was defaced with red paint and the Cenotaph was sprayed with graffiti during rioting at the anti-capitalism demonstration.

The figure, which stands in Parliament Square, was made to look as though blood was dripping from its mouth.

Graffiti was sprayed on the plinth and a turf mohican was added to the statue’s head. […]

Although he admitted defacing that statue, he denied any involvement in graffiti sprayed on the Whitehall Cenotaph during the May Day demonstrations.

The ex-soldier said it was “a monument to ordinary soldiers and I was an ordinary soldier”.

From an article entitled “Churchill graffiti man jailed” published by BBC news on May 9, 2000. http://news.bbc.co.uk/1/hi/uk/740524.stm

7 From an article entitled “A Message From the Dispossessed” written by Chris Hedges, published by Truthdig on January 11, 2015.  http://www.truthdig.com/report/page2/a_message_from_the_dispossessed_20150111

8 From an article entitled “Shlomo Sand: an enemy of the Jewish people?” written by Rafael Behr, published in The Observer on January 17, 2010. http://www.theguardian.com/books/2010/jan/17/shlomo-sand-judaism-israel-jewish

9 From an article entitled “A Fetid Wind of Racism Hovers Over Europe” written by Shlomo Sand, published in Counterpunch on January 16–18, 2015. http://www.counterpunch.org/2015/01/16/je-suis-charlie-chaplin/

10 From an article entitled “French cartoonist Sine on trial on charges of anti-Semitism over Sarkozy jibe”, written by Henry Samuel, published in The Telegraph on January 27, 2009.  www.telegraph.co.uk/news/worldnews/europe/france/4351672/French-cartoonist-Sine-on-trial-on-charges-of-anti-Semitism-over-Sarkozy-jibe.html

11 From an article entitled “Members of Congress wave yellow pencils in the air during State of the Union address as they pay tribute to Charlie Hebdo victims” written by Jane Evans and David Martosko, published in the Daily Mail on February 21, 2015. http://www.dailymail.co.uk/news/article-2919442/Members-Congress-wave-yellow-pencils-air-State-Union-address-pay-tribute-Charlie-Hebdo-victims.html

12 Here Powell is relating words from a conversation he had with a constituent. In fuller context the man says to him: “I have three children, all of them been through grammar school and two of them married now, with family. I shan’t be satisfied till I have seen them all settled overseas. In this country in 15 or 20 years’ time the black man will have the whip hand over the white man.” And Powell’s very sympathetic response to this man’s remarks goes as follows:

“I can already hear the chorus of execration. How dare I say such a horrible thing? How dare I stir up trouble and inflame feelings by repeating such a conversation?

“The answer is that I do not have the right not to do so. Here is a decent, ordinary fellow Englishman, who in broad daylight in my own town says to me, his Member of Parliament, that his country will not be worth living in for his children.

“I simply do not have the right to shrug my shoulders and think about something else. What he is saying, thousands and hundreds of thousands are saying and thinking – not throughout Great Britain, perhaps, but in the areas that are already undergoing the total transformation to which there is no parallel in a thousand years of English history.”

A full transcription of Enoch Powell’s “Rivers of Blood” speech was reprinted by The Telegraph on November 6, 2007. http://www.telegraph.co.uk/comment/3643823/Enoch-Powells-Rivers-of-Blood-speech.html

13 From an article entitled “Anti-Isam Marches Will Come to Britain, Says Former EDL Leader Robinson” written by Lucy Draper, published by Newsweek magazine on January 8, 2015. http://www.newsweek.com/anti-islam-marches-will-come-britain-says-former-edl-leader-robinson-297257

14 As quoted in James Boswell’s The Life of Samuel Johnson, Vol. 1 (1791), p. 335.

15 According to wikiquote, it is unclear whether this is apocriphal or not.

16 In the case of the last month’s Paris attacks, the suspects were the usual ones. Both of the Kouachi brothers were well-known for their jihadist sympathies. Chérif Kouachi had previously been convicted of terrorism in 2008, and sentenced to three years in prison. Saïd Kouachi had received direct terrorist training from al-Qaeda in Yemen in 2011. The suspected gunman in Copenhagen, however, Omar el-Hussein, was more of a petty hoodlum. Indeed, he had only been released from prison a fortnight prior to the attacks, after completing a two year sentence for grievous bodily harm following a knife attack. The question asked now is had el-Hussein been radicalised in prison? And the answer to that question is that we will almost certainly never know for sure. Instead of facing a criminal investigation and trial, as with the Kouachi brothers before, el-Hussein was himself shot dead.

17 From an article entitled “Sydney cafe gunman Man Haron Monis ‘dropped off watchlist’ and Australia refused Iran’s request to extradite him, Tony Abbott says”, written by Adam Withnall, published in The Independent on December 17, 2014. http://www.independent.co.uk/news/world/australasia/sydney-cafe-gunman-man-haron-monis-dropped-off-watchlist-and-australia-refused-irans-request-to-extradite-him-tony-abbott-says-9930073.html

18 From an article entitled “Lee Rigby murder report: How MI5 latched on to – and lost – the man who later murdered soldier”, written by Kim Sengupta, published in The Independent on November 25, 2014. http://www.independent.co.uk/news/uk/home-news/lee-rigby-report-how-mi5-latched-on-to–and-then-lost–the-man-who-later-murdered-the-soldier-9883135.html

19 Read more in a Reuters report entitled “Russia warned U.S. about Boston Marathon bomb suspect Tsarnaev: report” published March 25, 2014.  http://www.reuters.com/article/2014/03/26/us-usa-explosions-boston-congress-idUSBREA2P02Q20140326

20 More details on the failures and mistakes of MI5 can be read in an article entitled “7/7 inquest; Mohammed Sidique Khan on MI5’s radar before 9/11”, written by Duncan Gardham, published in The Telegraph on May 6, 2011.  http://www.telegraph.co.uk/news/uknews/terrorism-in-the-uk/8497204/77-inquest-Mohammed-Sidique-Khan-on-MI5s-radar-before-911.html

For instance, the article details how:

“Sidique Khan had been photographed at Toddington Service station on the M1 after he was followed on his return from the meeting in Crawley, West Sussex, along with fellow bomber Shezhad Tanweer and another associate.

The photographs from the service station were taken at close range and in full colour, clearly showing Sidique Khan and Tanweer standing in front of a Burger King takeaway and a fruit machine.

But an MI5 desk officer cropped the photographs so that the background could not be identified before sending them to America, the inquest into the 52 deaths was told.

Hugo Keith QC told a senior member of MI5: “I am bound to observe, if you will forgive me, one of my children could have done a better job of cropping out that photograph.”

Tanweer was missing half his nose and face and Sidique Khan was so badly cropped that he was missing half his head and the majority of his body and picture was not sent to America.”

21 From an article entitled “If MI5 sticks to outdated tactics, Emwazi won’t be the last British security failure” written by David Davis, published in the Guardian on February 27, 2015. http://www.theguardian.com/commentisfree/2015/feb/27/mi5-mohammed-emwazi-security-failures-terrorists-free

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“We must speak the truth about terror. Let us never tolerate outrageous conspiracy theories concerning the attacks of September the 11th; malicious lies that attempt to shift the blame away from the terrorists, themselves, away from the guilty. To inflame ethnic hatred is to advance the cause of terror.”

From George W. Bush’s address to the United Nations on November 10, 2001.

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Greece’s new Finance Minister Varoufakis tells German counterpart Schäuble to “expect a frenzy of reasonableness”

On the latest leg of his whistle-stop European tour, Greek Finance Minister, Yanis Varoufakis, today met with his German counterpart, Wolfgang Schäuble, in Berlin to continue talks on Greece’s debt. This was an extraordinary occasion and the press conference that followed their historic meeting can be watched on the video embedded below.

Varoufakis begins his main statement at 23:30 mins. In it, he outlines the forgotten reasons why Greece has been in an economic crisis for the last five years and highlights the serious implications were his government to fail in bringing about the urgent and radical economic reforms that are necessary to save the nation. But his tone throughout is very much one of reconciliation and so, for instance, he explains at some length why Tsipras’ decision to visit the war memorial immediately following his victory should not be misconstrued in petty nationalist terms (as so many in the media were quick to do) but understood correctly as “an act of defiance against the resurgence of Nazism” in Greece:

Here is my own transcript of Yanis Varoufakis’ full statement:

Ladies and gentlemen,

This morning – earlier today – I had the opportunity, the pleasure and the joy to outline to Minister Schäuble our government’s priorities for a functioning Greece in a prospering democratic European economic and monetary union. As Doctor Schäuble said, we didn’t reach an agreement, it was never on the cards that we would. We didn’t even agree to disagree from where I’m standing – from where I’m standing we agreed to enter into deliberations as partners with a joint orientation towards a European solution for European problems. A solution that is going to put, first and foremost, the interests of Europe at the helm. We didn’t discuss Greece’s debt schedule for repayments. We didn’t discuss a haircut. We set the scene for deliberations that will lead an approach that will put an end to this never-ending – seemingly never-ending – crisis that began in Greece then unfortunately spread out to the rest of the Eurozone.

Greece’s economic woes have been occupying the headlines for far too long. They have been begetting indignity in my nation, and frustration in this country as well as across Europe. It is time to draw a line. To put an end to it. My fellow Greeks wish nothing more than to end the gross indignity, and I’m sure that the people of Germany too would like to get on with concerns other than how to negotiate the latest twists and turns of the Greek saga. Some in Europe are tempted to imagine that the solution lies in separation. Thankfully, today I did not just visit the Finance Minister of Europe’s powerhouse economy, above all else I visited a European statesman for whom European unity is a lifelong project, and whose work and efforts to unify Europe I have been following with great interest since the 1980s.

Today my message to Minister Schäuble was that in our government – in this government – he has a potential partner in the search for European solutions to a variety of problems afflicting not only Greece, but the Union more broadly. Starting at home where one ought to start, our government will stop at nothing to combat not only corruption, tax evasion, tax immunity, inefficiency and waste, but also a whole political economy underpinning the ethos and the conventions of crippling rent seeking. In this endeavour, I told the minister, we need our partners’ technical, moral, political and institutional support.

Over the last five years, since Greece’s flimsy business model broke down, too much time, and too many hopes, lives even, have tragically been wasted. In 2010, Greece and Europe missed the splendid opportunity to come to terms with the facts. Instead, we treated an insolvency issue as if it were a problem of illiquidity. Therefore, the largest loan in history was granted to the most insolvent of European nations on condition that it shrinks its income. And to sell this grand error to voters in Greece, to voters in this country, in every corner of Europe, a list of reforms was announced that was just a fig leaf for in the end reforming very little that mattered. This could not end well. It is the reason we are here. It is the reason why the Greek people swept over the dominant parties in Greece and elected us. It is why we have been on the road in the last few days deliberating with our partners for the purpose of forging a common and European plan for putting things first – for putting things right.

My message to my German counterpart and to the people of Germany is simple. From our government you can expect a frenzy of reasonableness. You can expect proposals that are aimed, not at promoting the interests of the average Greek, but of promoting the interests of the average European: the average German, Slovak, Finn, Spaniard, Italian and so on. You can expect from us an unwavering commitment to telling it as it is, without any tactical stratagems or subterfuge. You can expect from us sound macroeconomic analysis and a readiness to implement efficient microeconomic reforms that work. These are our commitments. We are a government that hasn’t even been sworn in yet. What we request at this stage is perhaps the most precious of commodities: time. A short space of time during which our government can present to our partners, to the International Monetary Fund, to European Central Bank, to the European Commission, comprehensive proposals as well as a roadmap for the very short term – we call this “a bridging programme” – for the medium term, and indeed for the long term.

Europe is I believe at a crossroads. Europe must strike a balance between continuity and a need for respecting European agreements, and the necessity of evolving the rules. We must respect established treaties, agreements and processes, without crushing the fragile flower of democracy with a sledgehammer that takes the form of statements such as “elections do not change anything”.

When I visited Paris the other day I said that we were returning to one of Greece’s spiritual homes. Today we returned to another one of our spiritual homes. For almost two centuries the land of Goethe, Beethoven, Hegel, Kant has been a source of inspiration to Greeks whether they are rightists, leftists, centrists or simply intellectually curious Greeks. But there is more than that to the bonds binding our nations. As finance minister in a government facing, from day one, emergency circumstances caused by a savage debt deflationary crisis, I feel that the German nation is the one nation in Europe that can understand us better than anyone else. No-one understands better than the people of this land how a severely depressed economy combined with a ritual national humiliation and unending hopelessness can hatch the serpent’s egg within its society. When I return home tonight I shall find myself in a parliament in which the third largest party is not a neo-Nazi party, it is a Nazi party.

When our Prime Minister laid the wreath at the iconic memorial site immediately after his swearing in, that was an act of defiance against the resurgence of Nazism. German must and can be proud of the fact that Nazism has been eradicated here. But it is one of history’s most cruel ironies that Nazism is rearing its ugly head in Greece, a country which put up such fine struggle against it. We need the people of German on our side. We need the people of Germany to help us in the struggle against misanthropy. We need our friends in this country to remain steadfast in Europe’s post-war project that is: never again to allow a 1930s-like depression to divide proud European nations. We shall do our duty in this regard, and I am convinced that so will our European partners. Thank you.

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Additional:

Back in 2011, Yanis Varoufakis presented a very interesting TEDx talk entitled “A Modest Proposal for Transforming Europe” in which he outlined his own vision for a new kind of decentralized system that will be needed to transform the European Union before it crashes altogether:

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On February 7th, the Keiser Report returned to the victory of Syriza, warning Greece to beware bureaucrats and bankers bearing bailouts. In the second half, Max Keiser spoke with Kerry-Anne Mendoza about her new best-selling book, Austerity: The demolition of the welfare state and the rise of the zombie economy:

Click here to watch on the Russia Today website

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Filed under analysis & opinion, debt cancellation, Germany, Greece, Max Keiser

Gold Diggers of 2013

We are now in the midst of what can only be described as a gold rush. Of course some countries, China being the shining example, have been rapidly expanding their gold reserves for many years – the full amount of Chinese gold being a closely guarded secret although most analysts anticipate a full disclosure of Chinese gold reserves in the relatively near future, and based on an accumulation rate of slightly less than 1,000 tons per year, it is widely believed that China may already be the second largest holder in the world, which, as zerohedge noted back in November, means “surpassing Germany’s 3,395 tons and [becoming] second only to the US.”

Meanwhile, other countries are suddenly asking for the repossession of their own physical reserves that have been stored in vaults around the world during many decades. About a year ago I reported on Hugo Chavez’s retrieval of Venezuela’s physical gold reserves, and more recently we hear how, for instance, the Dutch and German governments are increasingly eager to get their hands on their own gold. Here is part of a report from Dutch News published in late November:

Questions have been asked in parliament about the location and value of the country’s gold reserves, most of which is said to be in foreign vaults, news agency ANP reports on Wednesday [Nov 28th].

The Netherlands is said to have 612 tonnes of gold, with a value of some €24bn. Just 10% of it is held at the central bank headquarters in Amsterdam. The rest is in bank vaults in the US, Canada and Britain.

Socialist and Christian Democrat MPs are now asking if it is sensible to keep the gold abroad and want to know how pure the gold bars actually are. 1

Anyone would think they don’t trust us or something – although when I mean us, I actually mean our central bankers obviously, and frankly who does trust them? Indeed, it turns out that the Germans had started repatriating their own reserves shortly after the launch of the euro and around the time of Brown’s Bottom, which was more then a decade ago:

The report [I’ll come back to this in a moment] claimed that the Bundesbank had slashed its holdings in London from 1,440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by air freight.

The revelation has baffled gold veterans. The shift came as the euro was at its weakest, slumping to $0.84 against the dollar. But it also came as the Bank of England was selling off most of Britain’s gold reserves – at market lows – on orders from Gordon Brown. 2

Click here to read the full article in the Telegraph.

The report in question, which had been produced by the German court of auditors (Bundesrechnungshof), is now demanding a complete audit of the nation’s gold reserves:

Germany’s gold bars, stored in the United States, Britain and France “have never been physically checked by the Bundesbank itself, or other independent auditors, regarding their authenticity or weight,” reveals a report prepared by the Federal Auditors’ Office. Instead, the Bundesbank relies on a “written confirmation by the storage sites.” […]

Concerns about Germany’s gold reserves arose this year after a group of German federal lawmakers wanted to check gold bars stored at the Banque de France in Paris. But they were turned away by local officials who said there were no facilities to visit the vaults, Deutsche Welle reported. […]

The Bundesbank has reportedly decided to ship 150 tons of gold from the New York Federal Reserve to Germany, according to German daily Bild. After returning to Germany the gold will be melted down to test the overall purity of each consignment before being re-cast into standard gold bars. 3

Click here to read the full report published by Russia Today in late October.

So why this accelerating rush to acquire gold, as in the case of China, or, as in the cases of Germany and Holland, to repatriate their gold reserves? What can it all portend…?

An article simply entitled “Are Fiat Currencies Headed for a Collapse?” published by CNBC back in July 2012 offers a concise assessment of the situation:

A fiat currency derives its worth from the issuing government – it is not fixed in value to any objective standard. That means central banks can print as much money as they want. If an economy is struggling, injecting more notes into the system juices activity but lowers the value of the currency in question.

With major central banks all desperate to stimulate their economies, some say currencies have entered a dangerous new phase often described as a race to the bottom.

Mark Mobius, Executive Chairman of Templeton Emerging Markets Group, says investors will soon start to demand fiat currencies be backed by gold or other hard assets.

“It’s already happening, you’re beginning to see that trend with central banks stocking up on gold. The estimate is that at least half of the buying is central bank buying. They are looking to the day when they can say okay, our currency is backed by gold and therefore we’re a strong country,” Mobius told CNBC Asia. 4

Of course, such rumours of widespread currency collapse have been with us ever since the financial panic of 2007/8 – rumours that were quickly given extra legs thanks to the enormous bank bailouts and the multiple rounds of quantitative easing (QE) both in the US and in Europe – all this money printing being the immediate way that the derivatives Ponzi scheme, the original cause and the deep root of the crisis, could be propped up. Yet, in spite of such vast injections of new money, the more serious catastrophe predicted by many has not (as yet) come about. So does this mean, as our governments wish to persuade us, that the crisis has been brought under control, or does it simply mean that they’ve managed to kick the can just a little further down the road than most of the economic pessimists could have imagined?

Undoubtedly such rampant money printing without anything like commensurate economic growth does mean, and however cunningly it may be have been disguised, that the money we hold has undergone and continues to undergo a rapid devaluation. So prices in the longer term must be expected to rise since inflation is already baked into the quantitatively-eased cake: the only legitimate questions being not if, but when, and importantly, how sharp the eventual decline in our purchasing power turns out to be.

In Britain, for instance, prices of goods and services are certainly rising quickly, and well above the skillfully massaged Consumer Price Index (CPI) figure of less than 3%, whilst at the same time wages remain flat (falling in real terms and thereby magnifying the impact of inflation for most people), but, on the face of it at least, there is little indication of any kind of hyperinflationary collapse coming around the corner. However, there is one outstanding factor to be considered here: that the newly printed money has largely been hoarded by the banks that received it, and for so long as the banks are reluctant to lend, little to none of this issuance flows back out into the money supply. For this reason, most of the coming inflation remains as yet in the pipeline.

So are we about to see a protracted devaluation of our currencies involving many decades of relatively low inflation at survivable rates (although perhaps as high as ten or twenty percent), or ought we to expect a sudden leap to genuine hyperinflationary levels? Put differently, are the western economies going to continue to more slowly but inexorably sink or, alternatively, is the genuine ‘fiscal cliff’ of a currency collapse nearing? The simple answer is that I don’t know – I’m not an economist and I don’t pretend to understand the deeper complexity here; and when it comes to economics, pretending to understand and then making lousy predictions is far better left to the professionals! What is clear is that so long as the imposed ‘solution’ to this still deepening financial crisis relies upon the deadly cocktail of “austerity measures” mixed with money printing, the prospect of eventual hyperinflation looms not merely as a worst-case scenario, but a worst-case that appears increasingly likely.

Why do I say this? Well, because at the same time as “austerity” is destroying growth, the endless rounds of QE are effectively reducing the value of our money by repeatedly diluting it. So maintaining this combination of imposed “austerity” and sustained money printing is just about the most perfect recipe for creating not mere inflation, but stagflation – which is precisely what we are already seeing.

But then outright hyperinflation is always a result of political choices, rather than simply an outcome of economic failures. It happens whenever a government decides (or, very often, feels coerced) to flood the economy with currency in an increasingly desperate attempt to keep up with repayments on unsustainable debts and so to survive. And for dramatic effects, this tail-chasing exercise has to go on and on and on…

So here’s what I think we can most certainly expect in the immediate future – even given a best-case scenario. Undoubtedly our economies will continue to shrivel away under the imposed “austerity measures”, bringing mass unemployment in the wake of economic decline, and that rise in joblessness, in turn, generating a frenzied competition for the remaining jobs, and forcing down ordinary wages still further (when wages have already, certainly in real terms, substantially fallen since the crisis began).

In the meantime, attacks of QE are continually eating into our earnings and savings, and in terms of devaluation, it hardly matters whether one decides to stuff their money under the mattress or deposit it in a savings scheme, given the poor rates of return on offer. But let’s also keep in mind that all of this is being done merely to serve and protect the interests of the major banks: the ones long-since deemed “too big too fail”. Institutions not only operating outside of the law, but tacitly encouraged to carry on doing so (as the lack of prosecutions following the fixing of Libor and the more extraordinary scandal involving HSBC goes to show).

And now the increasing desire shown by governments and central banks (not to mention many of the richest individuals) to suddenly acquire gold and, perhaps even more importantly, to hold on to it, offers clues beyond the competing economic theories as to what the “money masters” themselves are actually anticipating. Needless to say, it does not bode well for the majority of us.

The steadily rising price of gold is at the same time, of course, a key indicator (alongside the rising price of other commodities like silver and copper) of how much our currencies have already been debased. During the past five years, both gold and silver have approximately doubled in their value, equivalent to an annual inflation rate of slightly less than 15% (which is obviously far higher than the CPI’s paltry 3%) – I offer a more detailed analysis of these trends as a footnote.5 And these rises have happened in spite of the fact that the price of gold and silver, like everything else in our supposedly ‘free market’ system, is subject to manipulation by the major financial players, who, having “invested” so heavily in varieties of paper, have a clear interest in keeping the value of precious metals down – and the Ponzi scheme up and running.

Meanwhile, the continued appliance of tough “austerity measures” in spite of so much damning evidence of ineffectiveness in rescuing any ailing economies, anywhere, ever (either during this crisis – to judge by the effects on Greece, Spain and elsewhere – or earlier ‘interventions’ in Latin America, Africa and in the aftermath of the break-up of the Soviet Union) proves only that there is still very much a political will to enforce such neo-liberal “shock therapy”.

“Austerity” kills the poor and the weak and is already doing precisely this in places like Greece. It cannot provide any cure for what is an intrinsically systemic failure. Instead, such tight restrictions on government investment in welfare and infrastructure during a depression is like telling a starving person that it might help if they were to eat their own stomach. A brutal approach that is nothing short of criminal lunacy. And the same goes for the bailouts – the banks are fundamentally broken, indeed the entire financial system is in a state of ruin, and repeatedly bailing them out means simply throwing good money after bad… ad infinitum.

During the depression years of 1930s, there was another famous rush for gold. It eventually led to US President Franklin Roosevelt signing the notorious Executive Order 6102 in April 1933, “forbidding the hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States”. An order that was supposed to apply to every individual, partnership, association and corporation, and making possession “of gold or silver coin or bullion or currency” a criminal offence. It was the same year that Warner Bros. released the first of a string of popular musicals: Gold Diggers of 1933; quickly followed up with Gold Diggers of 1935 and … of 1937. These sugary confections, mostly remembered now for their lavish and dreamy choreographed sequences put together by the great Busby Berkeley, are ‘rags to riches’ tales with guaranteed happy endings that had helped to keep the public’s pecker up.

This time around we are perhaps still a long way off any equivalent to FDR’s Executive Order, though it is always wise to keep history in mind. Back on the entertainment front, and with the depression looking set to move up through the gears once more, we are offered the rather grittier and altogether more worthy distraction of a big screen release for Victor Hugo’s grand epic turned Broadway musical, Les Misérables – Surely the producers aren’t trying to plant the seeds for revolution?!!!

I can think of no better way to finish such a gloomy article than with a song. And what better than Noël Coward’s wonderfully sardonic ditty “There Are Bad Times Just Around The Corner” (albeit written during the rather more solvent 1950s). Here’s a chorus:

There are bad times just around the corner
The horizon is gloomy as can be
There are black birds over
The greyish cliffs of Dover
And the rats are preparing to leave the BBC
We’re an unhappy breed and very bored indeed
When reminded of something that Nelson said
And while the press and the politicians nag, nag, nag
We’ll wait until we drop down dead

You can enjoy a complete performance embedded below – Is there any better national anthem for these turbulent times?

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Update:

It seems that the story had already moved forward before I released the post – so here’s the part I missed: “Germany bring home gold stored in US, France,” released by Associated Press (published by The Wall Street Journal on Wednesday Jan 16th):

In what sounds like the setup for a stylish Hollywood heist movie, Germany is transferring nearly 700 tons of gold bars worth $36 billion from Paris and New York to its vaults in Frankfurt.

The move is part of an effort by Germany’s central bank to bring much of its gold home after keeping big reserves outside the country for safekeeping during the Cold War.

Click here to read the full story.

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1 From an article entitled “Are the Netherlands’ gold reserves real? MPs want answers” published by Dutch News on November 28, 2012. http://www.dutchnews.nl/news/archives/2012/11/are_the_netherlands_gold_reser.php

2 From an article entitled “Bundesbank slashed London gold holdings in mystery move” written by Ambrose Evans-Pritchard, International business editor, published by the Telegraph on October 24, 2012. http://www.telegraph.co.uk/finance/financialcrisis/9631962/Bundesbank-slashed-London-gold-holdings-in-mystery-move.html

3 From an article entitled “Germany orders a check on its gold reserves” published by Russia Today on October 29, 2012. http://rt.com/business/news/germany-gold-reserves-check-472/

4 From an article entitled “Are Fiat Currencies Headed for a Collapse?” written by Lisa Oake, published by CNBC on July 27, 2012. http://www.cnbc.com/id/48349503/Are_Fiat_Currencies_Headed_for_a_Collapse

5 As I write, the price of gold is $1687 per oz and silver stands at $31.7 per oz. Over the last five years this compares to lows and highs of $709 and $1900 for gold and ranging between $8.92 and $48.5 for silver. In other words, the current values are still below the high peaks that were reached in 2011. However, if you judge from the trend rather than from spot values then both graphs are very clearly climbing throughout the 5 years – and in that period (a period which approximately coincides with the length of the current crisis) gold has almost doubled in value (being around $900 in January 2008) and silver likewise (from just over $15 in January 2008). A doubling of prices over five years would equate to an inflation rate of very slightly under 15%. Click on the links to see price charts over 5 years for gold and silver.

Copper is a little different. The price of copper as I write is $3.6 per pound. If you study the price over the last 5 years then there has been a more modest rise compared to gold and silver (beginning with a price already a little over $3 in January 2008, before sharply falling by December 2008 and then recovering again in late 2010). But the trend for copper is very much more interesting when considered over ten years. Back in 2003, silver was still in a dip at around $0.7 but in early 2004 it sudden began to rise spectacularly, reaching $3.5 by mid 2006 – an incredible five-fold increase. It has more or less maintained this high price ever since, flattening off in recent years, although as the chart below shows, the overall trend remains modestly upward:

Historical Copper Prices - Copper Price History Chart

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