Important note: It is well past the period spanning the end of May and beginning of June when Bilderberg meetings are ordinarily scheduled, so it should be observed that the home page of the official Bilderberg website still declares in bold capitals:
THE MEETING 2020 IS POSTPONED.
It does not say for how long.
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This is the fifth of a sequence of articles based around the ‘key topics’ at last year’s Bilderberg conference discussed here in relation to the prevailing political agenda and placed within the immediate historical context.
This piece focuses on issues relating to the European project:
A schematically enhanced version of last year’s ‘key topics’
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Class interests and the ‘democracy deficit’
“The European Union doesn’t suffer or the Eurogroup from a democratic deficit. It’s like saying that we are on the moon and there is an oxygen deficit. There is no oxygen deficit on the moon. There is no oxygen, full stop.”
“The EU is the denial of democracy, the idea that there is a domain – the economy – that stands above popular sovereignty. This is the doctrine of ordoliberalism, as if the economy were not first and foremost a social relation, as if we – the workers’ movement and our historical traditions – had not been born by creating trade unions to change it…
“I want a Europe that proposes the language of freedom, equality and brotherhood to everyone, and which speaks a universal language to all peoples – a good wage, a good welfare system, a good education”.
here's Andrew Adonis arriving at #Bilderberg 2019 in Switzerland. #Brexit is on the agenda, and Baron Adonis of Remainia will find plenty of sympathetic ears at the Montreux Palace Hotel. pic.twitter.com/cjAgXqWkEX
Europe’s nations should be guided towards the super-state without their people understanding what is happening. This can be accomplished by successive steps each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.
In fact, these weren’t [founding father of EU, Jean] Monnet’s words at all – but those of the Conservative politician and author, Adrian Hilton, in The Principality and Power of Europe, published in 1997. Yet this is almost by the by. That so many have ascribed the quote to Monnet is because so many have been so shocked at what the European project has since become.
The ECSC [European Coal and Steel Community] morphed first into the Common Market, then the EEC. Britain joined in 1973, and its public approved membership by two to one in the 1975 referendum: where recently elected Tory leader, Mrs Thatcher, campaigned passionately for a ‘Yes’ vote. But what the public were sold then – a mutually beneficial club based on free trade and nothing more – was not remotely what would transpire; and gradually, the penny began to drop.
This is an excerpt from an extended article by political commentator Shaun Lawson that was published shortly after the 2015 General Election. Looking forward to the prospect of Cameron’s promised EU referendum, he wishes to, as he puts it, “challenge[s] my fellow travellers on the left to do what they have so often neglected: to scrutinise the EU’s very many failings, think long and hard, and ask yourselves: is staying in really worth it?”
In the piece Lawson goes into close detail about how the European project has been steadily manoeuvred from free trade area towards full political union, reminding us that consolidation has happened absent not merely democratic scrutiny but in utter disregard to overwhelming popular dissent. The British electorate was never permitted any vote on the European Constitution and when other nations rejected it, the EU simply changed the title of the treaty and proceeded:
[I]n places where referenda were held – in France, the Netherlands, or (twice) in Ireland – rejections of the Nice Treaty, European Constitution, or Lisbon Treaty were met with studied indifference on the part of EU leaders. Their project was now such a runaway express train that no mere member state could be allowed to derail it; so the Constitution was turned into the Lisbon Treaty, and when the Irish people – the only national electorate anywhere in the EU to be allowed a vote on the most far-reaching, seismic piece of legislation in its history – vetoed this, they were simply asked to vote again. Democracy? What democracy?
Why was Lisbon so important? In amending and consolidating the Treaties of Rome and Maastricht, it:
Moved the Council of Ministers from requiring unanimous agreement to qualified majority voting in at least 45 areas of policy
Brought in a ‘double majority’ system: which necessitates the support of at least 55% of European Council members, who must also represent at least 65% of EU citizens, in almost all areas of policy
Established a more powerful European Parliament, which would now forms part of a bicameral legislature along with the Council of Ministers
Granted a legal personality to the EU, enabling it to agree treaties in its own name
Created a new long term President of the European Council and a High Representative for Foreign and Security Policy
And made the Charter of Fundamental Rights, the EU’s bill of rights, legally binding.
Whether you agree with these changes or not is beside the point. The point is: the peoples of Europe were never given a vote on it. Instead, all this was just pushed through over the European public’s collective head. In the twenty-first century, how can such profound constitutional changes – which impact on all Europeans, whether they realise it or not – be allowed without democratic consent?
Lawson continues:
In any polity, if leaders or legislators do not accede to their position through the ballot box, this lack of accountability breeds out-of-touch, unanswerable governance about which the public can do nothing. Yet that is the reality of the European Union. The President of the Commission is approved by the Parliament; except this happens unopposed. All Commissioners – who together, comprise the executive of the EU – are nominated by member states.
The President of the European Council – that is to say, the de facto President of Europe, the EU’s principal representative on the global stage – is chosen by the heads of government of the member states. And even the European Parliament, whose members are all directly elected by the public, (1) has overseen constant falling turnout ever since the first elections in 1979 (of below 50% at each of the last four European elections, and a miserable 42.5% in 2014); (2) cannot formally initiate legislation; (3) does not contain a formal opposition.
In terms of genuine democracy, most of the above is unrecognisable. If more and more people believe that powers are shifting away from their hands and national legislatures towards a group of illegitimate, unelected bureaucrats and apparatchiks, that’s probably because they’re right. 3
Click here to read the full article written by Shaun Lawson and published in September 2015 by OpenDemocracy.
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Bilderberg and the European project
“For Bilderberg, as for Goldman Sachs, the idea that there might be any kind of push-back against globalisation is a horrific one.” — Charlie Skelton 4
In the days immediately prior to the EU referendum, Bilderberg reconvened in Dresden and topping their agenda was the discussion of potential repercussions. As Charlie Skelton reported:
The Bilderberg Group has been nurturing the EU to life since the 1950s, and now they see their creation under dire threat.
“A disaster for everyone” is how Henri de Castries [Chairman of the Bilderberg Steering Committee], the boss of AXA and a director of HSBC, describes Brexit. But in particular, it is a disaster for his banking and big business colleagues at Bilderberg. Thomas Enders, the CEO of Airbus, who [also] sits on Bilderberg’s steering committee – the group’s governing body – said, in a recent interview with CNBC, that his industry would be “lobbying” against Brexit.
Enders said: “Long-term it would not be positive certainly for the industry. This why the aerospace industry – I think amongst others – will lobby… for a [Remain] vote of the British electorate on the EU.” 5
Concluding:
An integrated EU, with the City at its centre, is a key building block in a globalised world, and its potential loss is a huge concern for “the high priests of globalisation”, as Will Hutton called the members of Bilderberg. The prospect of Brexit “frightens me”, admit Ken Jacobs, the head of Lazard, and another member of Bilderberg’s inner circle. Not much frightens these people. Only two things: sunlight and Brexit.
Click here to read his full report published by the International Business Times.
Charlie Skelton was interviewed by Jason Bermas on the eve of last year’s conference:
“I spoke a few years ago to a former very senior official at the European Commission… this was around the time of the Greece collapse, you know, I said ‘What happens if Greece leaves the EU?’ And she was like ‘It doesn’t really matter’. I said ‘Well what if Britain leaves the EU?’ And she went ‘Oh, it would be catastrophic.’” — Charlie Skelton [from 10:20 mins]
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Kingmakers of the EU
One month on following last summer’s Bilderberg confab, European leaders were required to put forward nominations for the EU’s top jobs. BBC News reported on the new appointments describing them only as ‘surprising’ before going on to highlight and praise the positive gender balance, as if this is somehow a sign of the EU’s overall tip towards greater equality:
The surprise choice of German Defence Minister Ursula von der Leyen to replace Jean-Claude Juncker came after the main front-runners were rejected.
IMF chief Christine Lagarde has been nominated as the first woman to head the European Central Bank (ECB). 6
What the BBC completely fails to mention is that, of the four nominees, three have been long-standing Bilderberg affiliates. Nominated as President of European Commission, Von der Leyen, the unpopular German Defence Minister (since December 2013), had been a Bilderberg regular since at least 2016 (Dresden), returning in 2018 (Turin) and also featuring in the 2019 list of participants. [please note: no reference to any attendance at Bilderberg is provided by her Wikipedia entry]
In step with predecessor Jean-Claude Juncker, Von der Leyen is a vocal advocate for a future “United States of Europe”, and again like Juncker, she has been quite clear about the need for a fully-integrated European defence union:
Jean-Claude Juncker told the ‘Welt am Sonntag’ Sunday paper that forming an EU army would be one of the best ways for the bloc to defend its values, as well as its borders. […]
Defense Minister Ursula von der Leyen said last month, for instance, that a form of EU army should be a long-term goal for the block. Von der Leyen said that she was convinced about the goal of a combined military force, just as she was convinced that “perhaps not my children, but then my grandchildren will experience a United States of Europe.” 7
it’s a good day for women… it’s an even better day for #Bilderberg.
Ursula von der Leyen: 2019, 2018, 2016, 2014 Christine Lagarde: 2017, 2016, 2014, 2013, 2009 Charles Michel: 2018, 2016, 2015https://t.co/VDL8XPpOnt
Von der Leyen was eventually confirmed as the European Council’s choice on July 16th. Emmanuel Macron, one of the keenest proponents of her appointment, is well-known for his outspoken criticism of the rise of nationalism and yet, as Serge Halimi has pointed out, when it finally came to the confirmatory vote at the European Parliament later the same day:
In the end, Von der Leyen was elected president with a majority of only nine votes, by a coalition including 13 Hungarian MEPs with allegiance to Orbán and 14 Italian populists from the Five Star Movement (M5S), then allies of Salvini. 8
Click here to read Serge Halimi’s full article entitled “The EU’s Ursula von der Leyen: Who Voted for Her?”
Note that: Francois Fischer, Head of the Intelligence Analysis Division, European Union Intelligence and Situation Centre, has been candid in his view that irrespective of Brexit, the UK will continue to be bound in European military alliance:
“First of all, in the security and intelligence sector, the UK will not leave…. it may be a secret, but you will not leave.”
Meanwhile, current head of the IMF, Christine Lagarde, who oversaw the imposition of crippling austerity measures on Greece and the other ‘PIIGS’ in response to the so-called ‘debt crisis’, was newly nominated to head the European Central Bank. For the record, Lagarde attended Bilderberg in 2013 (Watford), 2014 (Copenhagen), 2016, (Dresden) and 2017 (Chantilly) all during her tenure as Managing Director of the IMF [Wikipedia only references her participation in 2013]
Lastly, ex-Prime Minister of Belgium, Charles Michel, the newly selected President of the European Council is another frequent guest at Bilderberg. He was invited as Belgium PM in 2015 (Telfs-Buchen) and 2016 (Dresden), and also attended last year’s meeting in Turin. [once again, there is no reference at all to Michel’s Bilderberg attendance on Wikipedia]
As Charlie Skelton chides: “It’s a good day for women… it’s an even better day for Bilderberg.”
Click here to read more of my thoughts on the relationship between Bilderberg and its sister event at Davos, the World Economic Forum (WEF).
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List of western leaders previously groomed by Bilderberg:
Gerald Ford attended Bilderberg 1964, 1966 appointed as US President 1974
Margaret Thatcher attended Bilderberg (at least 1975, 1977, 1986) became Prime Minister 1979
Bill Clinton attended Bilderberg 1991 became US President 1993
Tony Blair attended Bilderberg 1993 became Prime Minister 1997
Paul Martin attended Bilderberg 1996 became Prime Minister of Canada 2003
Stephen Harper attended Bilderberg 2003 became Prime Minister of Canada 2006
Angela Merkel attended Bilderberg 2005 became Chancellor of Germany (Nov) 2005
Emmanuel Macron attended Bilderberg 2014 became President 2017 9
Note that: If Stacey Abrams is picked as Joe Biden’s running mate then that’s another one bagged by Bilderberg who invited Ms Abrams to last year’s meeting in Montreux. Add her name to the roll call above.
Screenshot of BB official website list of participants at last year’s event with Stacey Abrams listed top
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A European Army?
Although the question of the formation of a European Army is repeatedly dismissed as “just a conspiracy theory”, the title of this section is drawn verbatim from the subheading of a recent Royal United Services Institute (RUSI) Workshop Report. The report in question offers a résumé of its half-day workshop in collaboration with the Friedrich-Ebert-Stiftung (FES) after they had “brought together leading UK and German parliamentarians with leading security and defence experts from both countries to discuss the most salient threats to European security.”
The paragraph beneath “A European Army?” reads as follows [with footnote retained]:
The subject of a European army dominated much of the open discussion. While it is a topic that received passing mentions in previous RUSI–FES engagements, 10 the concept received greater explanation from Bundestag members present, and scrutiny both from UK MPs and subject experts.
With the goal of achieving ‘strategic autonomy’ for Europe, some participants suggested that European states should look to form a joint command structure that would allow the EU to deploy forces both within and beyond Europe’s borders. It was strongly suggested that the US can no longer be regarded as a ‘reliable partner’ and that Europe ought to take responsibility for its own defence mechanisms. Additionally, at present European states do not believe that there are any democratic means to hold NATO accountable. Any actions taken by a European army would be subject to the checks and balances of the European Parliament and thus under the scrunity [sic] of elected representatives. 11
The meeting in question proceeded under Chatham House Rules and the names of participants including those of our “leading UK and German parliamentarians” are not disclosed, so we are left in the dark in this regard. Returning to the text, however, and the passage that most rings alarm bells is surely this:
… some participants suggested that European states should look to form a joint command structure that would allow the EU to deploy forces both within and beyond Europe’s borders.
The response to the Yellow Vests protests has been the recent deployment of French troops on the streets of Paris, whereas the Catalan Independentists have been faced with Guardia Civil forces moved in from Madrid. Suppose instead that troops could be moved in from say Hungary or Poland, somewhere the military personal have no national allegiance to the protesters; how much more brutal might the subsequent crackdown have been?
Arguably the greatest single threat posed by the formation of “a European Army” is that it could enable a deployment of troops within Europe’s borders, and yet found within a document released by one of Europe’s most influential think tanks – “the world’s oldest independent think tank on international defence and security” as it describes itself – is just such a proposal.
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Additional: The snubbing of Václav Klaus
In the same article quoted at the beginning, Shaun Lawson also reminds us of the disdain the EU has shown to elected European leaders, citing the example of Václav Klaus, then President of the Czech Republic:
In December 2008, Klaus met with the leaders of various European Parliamentary groups at Hradcany Castle, overlooking Prague. His country had yet to sign the Lisbon Treaty. You might imagine this would have been a convivial meeting, with full respect shown towards a democratically elected head of state. Quite the reverse.
Daniel Cohn-Bendit, leader of the European Greens, complained bitterly that the EU flag was not in evidence above the castle, and plonked his own flag down on the table. He then informed the Czech President: “I don’t care about your opinions on the Lisbon Treaty”.
After the appalling Hans-Gert Pöttering, President of the EU Parliament, weighed in on Cohn-Bendit’s behalf, it was the turn of the Irish MEP, Brian Crowley: who fulminated against Klaus’ apparent support of the successful ‘No’ campaign in the recent referendum. When Klaus replied: “The biggest insult to the Irish people is not to accept the result”, Crowley bawled: “You will not tell me what the Irish think. As an Irishman, I know it best.”
If this was bad, it would get worse. Far worse. Two months later, Klaus was invited to speak to the European Parliament as head of a member state. Europe’s MEPs – supposed servants of the people – were clearly very unused to being told anything other than how wonderful and important they all were. Instead of engaging in the standard empty platitudes, Klaus took the opportunity to deliver perhaps the most important speech ever made in the continental legislature:
Are you really convinced that every time you vote, you are deciding something that must be decided here in this hall and not closer to the citizens, ie. in the individual European states?… In a normal parliamentary system, a faction of MPs supports the government and a faction supports the opposition. In the European Parliament, this arrangement is missing. Here, only one single alternative is being promoted and those who dare think differently are labelled as enemies of European integration.
As if to prove Klaus right, jeers and whistles now began to ring out around the chamber. Undeterred, the President continued, reminding his audience of his country’s tragic recent history under Communist rule: “A political system that permitted no alternatives and therefore also no parliamentary opposition… where there is no opposition, there is no freedom. That is why political alternatives must exist”.
At length, Klaus arrived at the coup de grace. In a few softly spoken paragraphs, he not only punctured the pomposity of the delegates as no-one ever had before; he also set out exactly what was wrong with the European Union, and why this fundamental problem could not be resolved:
The relationship between a citizen of a member state and a representative of the Union is not a standard relationship between a voter and a politician, representing him or her. There is also a great distance (not only in a geographical sense) between citizen and Union representatives, which is much greater than it is inside the member countries.
Lawson adds:
Since there is no European demos – and no European nation – this defect cannot be solved by strengthening the role of the European Parliament either. This would, on the contrary, make the problem worse and lead to an even greater alienation between the citizens of the European countries and Union institutions.
This distance is often described as the democratic deficit; the loss of democratic accountability, the decision-making of the unelected – but selected – ones, the bureaucratisation of decision-making. The proposals… included in the rejected European Constitution or in the not much different Lisbon Treaty would make this defect even worse.
There followed a quite extraordinary spectacle. Unable to bear the laser guided truth missiles raining down upon them from the lectern, 200 MEPs rose to their feet and walked out. In a dispiriting sign of just how impervious the British left had become on the whole question of the EU, many of those doing so were Labour MEPs. As demonstrations of the farce that is European ‘democracy’ go, it will never be bettered. 12
Click here to read the full article by Shaun Lawson and published September 2015 by OpenDemocracy.
Q: Hello. My question is for Mr. Chomsky. In the past you’ve been very critical of the way in which the West has engaged in political and economic imperialism around the world behind closed doors, kind of smoke and mirrors. How do you believe that transparency and democratizing the Eurozone—
NOAM CHOMSKY: And democratizing the Eurozone.
Q: How it will kind of affect or possibly deter this behavior?
NOAM CHOMSKY: Well, actually one of the things that Yanis discusses in his book is that the Eurozone—in the Eurozone, democracy has declined arguably even faster than it has in the United States. During this past generation of neoliberal policies there has been a global assault on democracy, that’s kind of inherent in the principles. And in the Eurozone it’s reached a remarkable level. I mean, even the Wall Street Journal, hardly a critical rag, [laughter] pointed out that no matter who gets elected in a European country, whether it’s communist, fascist, anybody else, the policies remain the same. And the reason is they’re all set in Brussels, by the bureaucracy, and the citizens of the national states have no role in this, and when they try to have a role, as in the Greek referendum, they get smashed down. That’s a rare step. Mostly they are sitting by passively as victims of policies over which they have nothing to say, and what Yanis said about the Eurogroup is quite striking. This is a completely unelected work group. Not in any remote way related to citizens’ decisions, but it’s basically making the decisions, the choices and decisions. That’s even beyond what happens here. Here it’s bad enough, but that’s more extreme.
YANIS VAROUFAKIS: Let me add to this just to clarify something. Actually I will go further than Noam about Europe. The European Union doesn’t suffer or the Eurogroup from a democratic deficit. It’s like saying that we are on the moon and there is an oxygen deficit. There is no oxygen deficit on the moon. There is no oxygen, full stop. [laughter] And this is official in Europe.
At my first Eurogroup, as the rookie around, I was given the floor to set out our policies and to introduce myself, which is nice, and I gave the most moderate speech that I thought it was humanly possible to make. I said, “I know that you are annoyed I’m here. Your favorite guy didn’t get elected, I got elected, I’m here, but I’m here in order to work with you, to find common ground, there is a failed program that you want to keep insisting on implementing in Greece, we have our mandate, let’s sit down and find common ground.” I thought that was a pretty moderate thing to say. They didn’t.
And then after me, after I had expounded the principle of continuity and the principle of democracy, and the idea of having some compromise between the two, Doctor Wolfgang Schäuble puts his name tag forward and demands the floor and he comes up with a magnificent statement, verbatim I’m going to give you what he said, “Elections cannot be allowed to change the economic policies of any country.” [laughter] At which point I intervened and said, “this is the greatest gift to the Communist Party of China, because they believe that too.” [laughter]
2 From an interview with Jean-Luc Mélenchon conducted by David Broder for The Tribune, published under the title: “Everyone should know – I am very dangerous” [I am currently unable to find an upload of this piece]
In 2003, the British government published a Defence White Paper entitled “Delivering Security in a Changing World”. Chapter 3 was headed “Further Requirements for Defence”; it opens as follows:
There are currently no major conventional military threats to the UK or NATO – but the threat from proliferation and international terrorism remains very real and in the worst case could result in serious casualties and significant disruption to the national economy and our way of life.1
[bold emphasis added]
However, more recently, following Nato’s deployment of thousands of troops to the Baltics and Poland, Nato Secretary General Jens Stoltenberg defended his decision telling German newspaper Bild, “[it] is an appropriate response” to Russia’s “aggressive actions”:
“We want to show our partners that we are there when they need us. And we want to show potential attackers that we react when they threaten us.” 2
[bold emphasis added]
To understand this extraordinary and troubling volte-face from “no major conventional threats” (2003) to the current ‘new Cold War’ hostilities and Russia singled out as a “potential attacker”, it is helpful if we retrace the steps just a little further again. Back to the early ’90s as the rubble of the Berlin Wall lay strewn and the dust had barely settled.
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Nato’s chequered retreat
Once the Cold War ended (officially at least), Nato’s raison d’être was inevitably thrown into question. If it was to re-establish its role in the world, then it urgently needed to rediscover a purpose. The breakdown of Yugoslavia and the ongoing civil war between the republics perfectly served these ends. Nato became the peacemaker.
With UN Security Council Resolution 816 calling for the enforcement of “a no-fly zone” over Bosnia-Herzegovina, Nato entered the conflict in April 1993. For the first time in its history, it was directly engaged in combat. (Note the bold highlight – it will be repeated later.)
The Bosnian War (1992–1995) happened during an unprecedented period of modern history. In the immediate wake of the West’s “victory” in the Cold War, anti-imperialist voices were at their weakest. Consequently, with anti-war opposition stifled, there was almost nothing by way of countervailing analysis or commentary.
By the time of the Kosovo War (1998–1999), the silencing of dissent became more intense again. The proclaimed success of Nato’s earlier intervention ending the Bosnian War with the negotiated settlement of the Dayton Accords had engendered an atmosphere in which anti-war sentiment had been completely marginalised and opposition voices were quiescent.
As in Bosnia, Nato’s campaign in Kosovo was presented as a purely “humanitarian intervention” – a phrase that pre-Iraq and -Libya did not possess such a deathly, hollow ring. It was a propaganda line that would be adopted as an article of faith, particularly, it seemed, within ranks of the liberal left. And those who protested too loudly against the bombing were judged to be appeasers – there was little outcry at the time.
One journalist who spoke up against the official narrative was John Laughland. The following extract is taken, however, from a later article published in 2007 by the Guardian: it is Laughland’s response to the now largely forgotten verdict of the International Court of Justice (ICJ), after it ruled that Serbia was not guilty of the massacre Bosnian Muslims at Srebrenica in 1995. 3
In the piece, Laughland challenges some of the half-truths that had inculpated the Serbs and their leader, “the Butcher of the Balkans”, Slobodan Milošević:
The international court of justice (ICJ) did condemn Serbia on Monday for failing to act to prevent Srebrenica, on the basis that Belgrade [Milošević] failed to use its influence over the Bosnian Serb army. But this is small beer compared to the original allegations. Serbia’s innocence of the central charge is reflected in the court’s ruling that Serbia should not pay Bosnia any reparations – supplying an armed force is not the same as controlling it. Yugoslavia had no troops in Bosnia and greater guilt over the killings surely lies with those countries that did, notably the Dutch battalion in Srebrenica itself. Moreover, during the Bosnian war, senior western figures famously fraternised with the Bosnian Serb leaders now indicted for genocide, including the US general Wesley Clark and our own John Reid. Should they also be condemned for failing to use their influence? 4
This is Noam Chomsky, another critic of the Kosovo war, answering questions regarding the guilt or otherwise of Milošević and the Serbian forces:
Investigative journalist John Pilger was another who spoke out strongly at the time and continues to do so now:
Milosevic was the victim of war propaganda that today runs like a torrent across our screens and newspapers and beckons great danger for us all. He was the prototype demon, vilified by the western media as the “butcher of the Balkans” who was responsible for “genocide”, especially in the secessionist Yugoslav province of Kosovo. Prime Minister Tony Blair said so, invoked the Holocaust and demanded action against “this new Hitler”. David Scheffer, the US ambassador-at-large for war crimes [sic], declared that as many as “225,000 ethnic Albanian men aged between 14 and 59” may have been murdered by Milosevic’s forces.
This was the justification for Nato’s bombing, led by Bill Clinton and Blair, that killed hundreds of civilians in hospitals, schools, churches, parks and television studios and destroyed Serbia’s economic infrastructure. It was blatantly ideological; at a notorious “peace conference” in Rambouillet in France, Milosevic was confronted by Madeleine Albright, the US secretary of state, who was to achieve infamy with her remark that the deaths of half a million Iraqi children were “worth it”.
Albright delivered an “offer” to Milosevic that no national leader could accept. Unless he agreed to the foreign military occupation of his country, with the occupying forces “outside the legal process”, and to the imposition of a neo-liberal “free market”, Serbia would be bombed. This was contained in an “Appendix B”, which the media failed to read or suppressed. The aim was to crush Europe’s last independent “socialist” state.
Once Nato began bombing, there was a stampede of Kosovar refugees “fleeing a holocaust”. When it was over, international police teams descended on Kosovo to exhume the victims of the “holocaust”. The FBI failed to find a single mass grave and went home. The Spanish forensic team did the same, its leader angrily denouncing “a semantic pirouette by the war propaganda machines”. The final count of the dead in Kosovo was 2,788. This included combatants on both sides and Serbs and Roma murdered by the pro-Nato Kosovo Liberation Front. There was no genocide. The Nato attack was both a fraud and a war crime.
All but a fraction of America’s vaunted “precision guided” missiles hit not military but civilian targets, including the news studios of Radio Television Serbia in Belgrade. Sixteen people were killed, including cameramen, producers and a make-up artist. Blair described the dead, profanely, as part of Serbia’s “command and control”. In 2008, the prosecutor of the International Criminal Tribunal for the Former Yugoslavia, Carla Del Ponte, revealed that she had been pressured not to investigate Nato’s crimes. 5
Click here to read John Pilger’s latest article [August 23rd] in full.
For an alternative perspective on Nato and the West’s involvement in the breakup of Balkan states of the former Yugoslavia, I also recommend Boris Malagurski’s controversial Canadian documentary The Weight of Chains which is embedded below – although the style is light, the content is serious and, on the whole, well-documented:
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The West’s about-turn
But then came the attacks of September 11th, which presented the Nato alliance with a fresh threat – purportedly of existential proportions. Overnight, everything was changed. Indeed, on September 12th, Nato met in emergency session and, for the first time in its history, invoked Article 5 of the Washington Treaty, which states that an attack against one is an attack against all.
The “Global War on Terror” was thereby launched with Nato at the helm, although during the early stages of Operation Enduring Freedom in Afghanistan (OEF-A), of course, only America and Britain sent out forces to overthrow the Taliban. The other Nato allies looked on and waited. Meanwhile, Canadian and US forces were jointly mobilised under Operation Noble Eagle (ONE) around the North American continent.
It was later, in October 2003, under the mission title International Security Assistance Force (ISAF) when Nato forces stepped fully into the fray. Here is how BBC news had then reported the story:
Nato is repositioning itself for a future as a key force in the “war on terror”, according to its US ambassador, Nicholas Burns.
The organisation has been struggling to define its role in the world since the collapse of the Soviet Union, the threat from which was the basis of its foundation. […]
Questions have been asked about Nato’s role in the world since the collapse of the Soviet Union in 1991.
Although the alliance intervened in Kosovo, it did not formally operate in the military campaigns in either Iraq or Afghanistan. […]
“Nato’s purpose is to be on the front lines, to fight the war on terrorism for Europeans, and for Americans and Canadians.
“That’s where we’ve turned the organisation, that’s how we’ve transformed it over the last two years.”
In particular, Mr Burns stressed the role the newly-established rapid response force would play.
The force is designed to be able to deploy within days to anywhere in the world if needed, with between 20,000 and 30,000 troops.
Mr Burns refuted suggestions that it would merely be a tool of American foreign policy. 6
[bold emphasis in original]
A decade on and, after the 2014 Wales Summit, that same Nato Response Force (NRF) has been enhanced with the formation of a “spearhead force” or Very High Readiness Joint Task Force (VJTF) within it. And the prime target is no longer “terror”, but Russia instead (already by 2014, history had turned full circle):
At the 2014 Wales Summit, NATO agreed the Readiness Action Plan (RAP) to ensure the Alliance is ready to respond swiftly and firmly to new security challenges. This is the most significant reinforcement of NATO’s collective defence since the end of the Cold War. The RAP addresses risks and threats from the east and the south. […]
Due to the changed security environment on NATO’s borders, the RAP includes ‘assurance measures’ for NATO member countries in Central and Eastern Europe to reassure their populations, reinforce their defence and deter potential aggression.7
This is taken from Nato’s official release on its Readiness Action Plan (RAP) and note that references to Russia remain oblique throughout – although you certainly don’t need to be a mind-reader to understand the real message, which goes on as follows:
To facilitate readiness and the rapid deployment of forces, the first six NATO Force Integration Units (NFIUs) – which are small headquarters – were inaugurated in Central and Eastern Europe. Two more NFIUs are being set up in Hungary and Slovakia. Headquarters for the Multinational Corps Northeast in Szczecin, Poland and the Multinational Division Southeast in Bucharest, Romania were also established. In addition, a standing joint logistics support group headquarters is being set up.
And whereas Nato (at least in their public documents) are timid when it comes to mentioning the name of their latest (and oldest) enemy, the closely-affiliated think tank Atlantic Council is altogether brazen:
Firstly, the VJTF’s size does not pose a credible deterrent to Russia, particularly with regard to the Baltic States, which are widely viewed as the flash point for any potential NATO-Russia confrontation. Russia has undertaken massive impromptu military exercises involving up to 100,000 troops along its borders with the Baltic States. It would be difficult for a NATO force of 5,000 to deter Russia from afar. […]
The VJTF should be high on the agenda of the Alliance’s seminal Warsaw Summit in July, and for good reason. Russia has become emboldened by its military forays in Ukraine and Syria. In the unlikely event it sets its sights on NATO territory next, NATO must ensure its spearhead force is sharp enough to respond. 8
Likewise, following a meeting of Nato ministers of defence last February, Nato released this more coded announcement:
“NATO Defence Ministers agreed on an enhanced forward presence in the eastern part of our Alliance,” Secretary General Jens Stoltenberg said. The enhanced forward presence will be “multinational, to make clear that an attack against one Ally is an attack against all Allies, and that the Alliance as a whole will respond,” he stressed. 9 [bold highlight added]
Stoltenberg is thus invocating Article 5 of the Washington Treaty – Nato’s call to arms.
In short then, the “War on Terror” has allowed Nato’s existence to be kept on ice. Ready for when the Cold War could begin again in earnest.
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Nato and the EU pincer
At last month’s Warsaw summit [on July 8th], Nato issued a official joint declaration with the EU for the first time in its history. The declaration begins:
We believe that the time has come to give new impetus and new substance to the NATO-EU strategic partnership.
Continuing:
Today, the Euro-Atlantic community is facing unprecedented challenges emanating from the South and East. Our citizens demand that we use all ways and means available to address these challenges so as to enhance their security.
Now let us unpick this opening statement. Firstly, notice the fig-leaf of democratic legitimacy. After all, “our citizens” did not get a vote on the actions of the long-standing Nato-EU strategic partnership and we certainly have no say whenever it comes to Nato’s long-standing meddling in “the South and East”.
In fact, contrary to this official statement, “the Euro-Atlantic community” (presuming this uncertain label attaches to the people of Europe and America) has been consistently opposed to the post-9/11 spate of wars. Our only consistent and clear demand having been for a cessation to hostilities. Yet in spite of the wishes of the “Euro-Atlantic” majority, a perpetual “Global War on Terror” is ravaging Central Asia, the Middle East and (though rarely if ever reported upon) many territories in North Africa. This extended warzone – reduced in the Nato-EU lexicon to ‘the East and the South’ – involves multiple interconnected battles which spill over into each other causing incalculable misery to some of the poorest people on earth, and very much to the detriment of our own western security.
We read on:
The substantial cooperation between NATO and the EU, unique and essential partners, established more than 15 years ago, also contributes to this end.
In light of the common challenges we are now confronting, we have to step-up our efforts: we need new ways of working together and a new level of ambition; because our security is interconnected; because together we can mobilize a broad range of tools to respond to the challenges we face; and because we have to make the most efficient use of resources. A stronger NATO and a stronger EU are mutually reinforcing. Together they can better provide security in Europe and beyond. [bold emphasis added]
This post-Brexit statement signed by Presidents of the European Commission and European Council, Jean-Claude Junker and Donald Tusk, and Secretary General of Nato, Jens Stoltenburg, is all about a deepening collaboration between the two organisations. An arrangement that, amongst other things, will involve “Facilitat[ing] a stronger defence industry and greater defence research and industrial cooperation within Europe and across the Atlantic.”
Is this the same EU that proponents say brings peace in our times?
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James Baker’s booby trap
For those puzzled by the relationship between Nato and the EU, here are a few vital statistics – encyclopaedic background details. Firstly, the EU and Nato individually comprise 28 member countries. Of these countries, 22 are joint members of both bodies. A club of nations including many that once fell behind the Iron Curtain: Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, plus the formerly occupied Baltic States of Latvia, Lithuania and Estonia. 10
As Soviet satellites under Moscow’s thumb, these states were once the buffer zone between the USSR and the West. Today there is no buffer.
And here is another piece of the historical geostrategic jigsaw, albeit a forgotten one – at least in the West – that Nato membership of every one of these former Eastern Bloc countries is in contravention to Western promises made shortly after the fall of the Berlin Wall; a deal (declared though never formally signed) that if Russia acceded to the reunification of Germany then the old Eastern Bloc would remain non-aligned:
What the US secretary of state [James Baker] said on Feb. 9, 1990 in the magnificent St. Catherine’s Hall at the Kremlin is beyond dispute. There would be, in Baker’s words, “no extension of NATO’s jurisdiction for forces of NATO one inch to the east,” provided the Soviets agreed to the NATO membership of a unified Germany. Moscow would think about it, Gorbachev said, but added: “any extension of the zone of NATO is unacceptable.” 11
The West’s double-dealing, though a dusty footnote in the West, is very well-remembered in Russia. The loss of twenty-four million lives during the Second World War (one third of the total fatalities) gives Russians good reason to fear an invasion – especially one from the west – its concerns about Nato’s eastward expansion are perfectly understandable.
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Encirclement
During the last seven decades of the post-war nuclear age, a fragile peace held out. Just. As much, if not more, by sheer luck than judgement. Indeed, our world very narrowly escaped all-out thermonuclear obliteration on numerous occasions – two of the best known incidents remembered in an earlier post. Here is a more detailed overview titled “Close Calls: We Were Much Closer to Nuclear Annihilation Than We Ever Knew” written by Gunnar Westberg and published in Counterpunch.
We did not need hindsight to see that the first Cold War was an era of astonishing madness, but with the aid of hindsight we do know that the madness itself was premised on a wholly non-existent threat of Soviet invasion. The Kremlin had no plans to launch an attack and there never had been a “missile gap” of any kind. Instead, the USSR was mainly preoccupied with quelling dissent amongst its own downtrodden population (or crushing those desperate to flee the occupation of its Eastern Bloc satellites).
Yet, in spite of the lack of an authentic communist threat, the superpowers repeatedly went to the brink of Armageddon, and had it not been for the remarkable courage and cool-headed reason of (at least) two men (both Russians – or, more accurately, Soviets) who held their nerve during moments of extreme crisis, there would be little that remains of our wonderful and shared European heritage besides a few smouldering mounds of rubble.
So what of Russia today? Is it planning to invade the West? Let us consider the evidence as dispassionately as we can.
Eighteen months ago it was widely reported (and believed by most in the West) that Russian battalions and, even more crucially, columns of tanks had begun crossing into Eastern Ukraine. At one point, Poroshenko held up Russian passports as evidence – there were six. 12 The principle claims, however, turned out to be completely bogus, though retraction by our media has been understandably muted. Russia did not invade Ukraine, and there is literally no evidence that it had any intention of doing so. (Crimea was not invaded, and though the territory was annexed following a referendum that was never legally sanctioned, the majority of Crimeans evidently welcomed the return of their territory to Russia – the reason there was no bloodshed.)
It is undeniable that Russia has covertly aided the ‘rebels’ in Eastern Ukraine (or the ‘separatists’ – both labels are propagandistically skewed and there is no absolutely neutral alternative), just as America has provided military assistance to Kiev. However, when the ‘rebels’ held a referendum of their own, the Russians ignored the results. They preferred not to be dragged directly into a war with Kiev. Meanwhile, while some Russians did indeed cross the border to fight, so did many westerners – individuals in fact joined the armed factions on both sides in the conflict.
Perhaps more revealing was Russia’s judicious response when Turkey shot down one of its jet fighters flying close to the Syrian border last winter. Was their jet violating Turkish airspace? The Russians said it didn’t; the Americans said it did – no evidence was ever released to prove the Russians guilty:
Either way, if Russia was wishing to spark a wider war, then what better provocation could The Kremlin find? In refraining from a retaliatory strike, however, Russia was careful to avoid a potential tripwire and an escalation into a full-blown war against a Nato member.
By contrast we have recently seen Nato forces, with the EU’s mutual aid and consent, engaged in one of the largest military exercises since the end of the first Cold War:
For more than 10 days, 30,000 troops backed by large numbers of vehicles, aircraft and ships will be deployed in one of the biggest exercises on NATO’s eastern flank since the end of the Cold War, a move likely to put further strain on the already-tense relations between the Kremlin and the West.
The Anakonda-16 exercise, which includes manoeuvres such as a night-time helicopter assault and the dropping of US paratroopers to build a temporary bridge over the Vistula river, is being held one month before a NATO summit in Warsaw that will approve more troops to be stationed in eastern Europe. 13
Stretched out for 450 miles across the length of Poland, more than 30,000 troops from 24 nations played out war games on Russia’s borders. These forces actually included German tank divisions; the first to move in sight of Russia’s border since 1941. According to The Independentarticle quoted above, this sent out a “clear message to Russia”.
Is there also a clue in the name of this “clear message” too? After all, an anaconda is a snake, but not just any old snake, the largest snake in the world – and it kills its prey by constriction.
At the same time, Nato formally switched on the first stage of its $800 million state of the art “missile defence” shield in Romania and broke the ground on a sister site in Poland. Ostensibly to protect Europe against Iranian nukes, which are, of course, non-existent, the system is rather blatantly directed against Russia’s security. Understood in terms of the twisted but unavoidable logic of nuclear deterrence, this becomes a far greater provocation than mere tanks rolled up to the Russian border. For if Russia’s deterrent is effectively defused, then, rendered defenceless, Russia is de facto under attack.
Indeed, to better navigate the geopolitical landscape of today, rather than hastily dismissing the Russian outlook as deeply paranoid (as we are encouraged to view it), we might try to step into their shoes for a moment. Suppose, for instance, a potentially hostile power – let’s say China – deployed thousands of troops to Ireland. Would Britain raise any concern? Or suppose China built bases in Mexico… there are none but that doesn’t stop the howls of red scare rumour-mongering. And we do not even need imagine the response were Russia to install its latest “regional missile defence system” in Cuba… Another missile crisis, anyone?
But then, Russia is routinely portrayed as the aggressor by the western media, so now consider these further incontestable facts:
Russia has two bases in the Middle East and a handful in Central Asia. The U.S. has 662 bases around the world and Special Forces (SOF) deployed in between 70 and 90 countries at any moment. Last year SOFs were active in 147 countries. The U.S. is actively engaged in five wars and is considering a sixth in Libya. Russian military spending will fall next year, and the U.S. will out-spend Moscow by a factor of 10. 14
On July 6th Sibel Edmonds’ alternative outlet ‘Newsbud’ broadcast a discussion with Montenegrin author, political activist and university professor, Filip Kovacevic, who had recently authored a piece published by ‘BoilingFrogsPost’ in which he analyses “The Travels of NATO Chief Jens Stoltenberg”.
Here Kovacevic explains why he believes Nato’s influence is undergoing serious decline, and the danger this poses of more widespread international conflict:
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America über alles
The Russian army can outgun British troops on the battlefield, according to a shock Ministry of Defence report.
So begins a flabbergasting article even by Daily Mail standards entitled perhaps even more hilariously “Shock Ministry of Defence report warns Russian forces could defeat us on the battlefield… [blah, blah, blah]”
This same piece continues:
The leaked assessment warns that rocket launchers and other weapons at Moscow’s disposal were superior to ours – while its mastery of electronic warfare technology was ‘game changing’. 15
Well, I say “blah, blah, blah” although the headline actually reads “… as Theresa May bids to thaw relations with Vladimir Putin”.
If true, then surely that represents a move to the good? Or is the Daily Mail and the MOD proposing that Britain might one day wish to test its relative might on the battlefield against Russia?
The peace we have enjoyed in Europe is becoming extremely fragile again. Outside Europe, after two decades of sustained neo-imperialist adventuring, we have destroyed lives and devastated ancient civilisations, spreading only chaos and pandemonium. The havoc we have wrecked is certainly coming back to haunt us, both directly and indirectly. But far more dangerous to the West is the immediate threat we pose to Russia. If Russia fights back, then everything is lost.
To prevent the unthinkable, there has to be a rollback. Our perpetual meddling in “the South and East” is already generating a crisis close to Russia’s borders. If this meddling moves along to Iran (as is being mooted again), then Russia will be directly drawn into conflict against the West.
Equally pressing, however, is the requirement to normalise diplomatic relations with Russia. Sanctions historically are a precursor to war, but surely even the biggest warmongers cannot seriously contemplate war with Russia. So why inflict such counterproductive damage on our own European economies when this tactic of isolation achieves nothing except to serve the vested interests of neo-cons in Washington? There has to be rapprochement with Russia.
With relations between Russia and Europe (or, better still, the West) restored, the resolution of many conflicts and international disputes becomes foreseeable again. It also becomes possible to end the overwhelmingly dire threat of thermonuclear exchange, accidental or otherwise. Such a genuine commitment to multilateral disarmament could and should have happened long ago – shortly after the fall of the Berlin Wall and the official ending of Cold War hostilities. Instead, as we know, Nato and the West opportunistically pressed eastward.
Nato was inaugurated to confront a perceived communist threat – a threat, largely imagined, that has since been vanquished altogether. In light of this irreversible change in international relations, Nato’s dissolution ought thereafter to become a final peacetime objective. For what function does Nato serve in any truly post-Cold War world? To ensure its own survival it will always look for enemies elsewhere.
In an extended piece recently published in The Atlantic arguing the case for Nato, former Fulbright Professor of Political Science at Moscow State University and ardent globalist, Ira Straus, writes candidly that:
The main, but unstated, reason the U.S. has troops in Europe nowadays is not for the defense of Europe but because it is a cheaper, more convenient location for getting to the Mideast than the continental U.S. It costs us more, not less, when we keep all our troops at home.
We have an irrationally small number of troops in Europe today (64,000). It would be cheaper for us if we put three times as many of our troops in Europe.
Under the heading “The [American] people support NATO as a plus for American power, and they’re right”, Straus continues:
Most people have the common sense to support their own society and their own power. NATO is the greatest extension that America has in the world. It is a kind of Greater America (and so is its informal additional wing in the Pacific). Trump likes American greatness and building big. This is the place for it.
The Alliance is what has preserved America’s greatness no matter how weak or incompetent its leaders. 16
So yes, Nato is “a kind of Greater America” although in reality they operate together as a sort of ‘good cop, bad cop’ team. America lost its reputation long ago and is less squeamish about getting its hands bloodied. Nato generally turns up afterwards and mops up.
Meanwhile, the more soft-spoken but firm Atlanticist alliance between Nato and the EU, with neighbouring HQs in Brussels and joined-at-the-hip foreign policy agendas (EU foreign policy is totally reliant on Nato), has also been instrumental in expanding post-9/11 Western influence militarily into Afghanistan, Pakistan, Iraq, Libya, Yemen, throughout many other regions of North Africa, into Syria, and within Ukraine. And whatever the EU may have dreamed of becoming — no matter how many Nobel Peace Prizes it receives! — it is no longer tenable to claim that it is in the business of making peace.
Ties between the EU and Nato ought now to be loosened rather than strengthened, as is actually happening. Last month’s joint statement supplying further proof, if any were needed, that the EU is really just a different arm of our aggressively expanding military-industrial complex:
A stronger NATO and a stronger EU are mutually reinforcing.
Is this the Europe we were hoping to build?
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Additional:
Afshin Rattansi spoke with John Pilger in an extended interview broadcast on RT’s Going Underground on August 31st. The subjects covered included the last days of the Obama presidency, the race between Sanders, Clinton and Trump, and the looming threat of global conflict. Pilger says:
“The United States is in a frenzy of preparation for conflict of some kind. And conflict of some kind can lead to war of the real kind – against China and against Russia – on two fronts. The greatest build-up of forces since the Second World War has happened in Eastern Europe and in the Balkan states.” [from 9:00 mins]
“The full American so-called “interest” has gone to a country [Ukraine] that means ‘borderland’ and through which the Germans invaded the Soviet Union in the early 1940s at the cost of something like 27 million lives. Imagine – and this is something that we’re not allowed to imagine – imagine the equivalent in the United States. The border with Mexico. The border with Canada. Well, we can imagine it because it happened when the Russians unwisely put missiles into Cuba, and we almost had then World War III.
“But I think what is striking in a country like the United States which has constitutionally the freest media in the world. These war preparations against Russia and against China have not been mentioned. A great silence covers them.
“When China is mentioned it’s about its aggressive moves in the South China Sea. It’s very interesting to see how the American public is being primed to accept so-called “aggressive moves” by China when in fact they are clearly defensive moves. The United States has something like 400 major bases encircling China like a great noose. Well, actually it’s an arc: it starts in Australia, it goes all the way through Asia – the Philippines (where they’re back – were thrown out a few years ago, but they’re back now), Thailand, Japan and Korea.
Looking straight at Shanghai is Okinawa. Okinawa has 32 American military installations. Japan has 130 in all. Okinawa is interesting – it’s about the size of Long Island. If you imagine Long Island as a Chinese base looking straight at New York, that’s the equivalent. [from 10.50 mins]
THE HAGUE, Feb. 26 — The International Court of Justice on Monday for the first time called the massacre of Bosnian Muslims at Srebrenica in 1995 an act of genocide, but determined that Serbia itself was not guilty of the enormous crime.
Nonetheless, it faulted Serbia, saying it “could and should” have prevented the genocide and, in its aftermath, should have punished the Bosnian Serbs who systematically killed close to 8,000 men and boys in July 1995.
The ruling resulted from a civil lawsuit Bosnia had brought against Serbia, the first in which one country sued another for genocide. […]
The ruling appeared to give some satisfaction — and frustration — to both sides. It freed Serbia of the stigma of being a genocidal nation and absolved it from having to pay war reparations, as demanded by Bosnia.
At the same time, Bosnia obtained what it said it wanted from the outset: a recognition of Serbia’s guilt.
Slobodan Milosevic was posthumously exonerated on Monday when the international court of justice ruled that Serbia was not responsible for the 1995 massacre at Srebrenica. The former president of Serbia had always argued that neither Yugoslavia nor Serbia had command of the Bosnian Serb army, and this has now been upheld by the world court in The Hague. By implication, Serbia cannot be held responsible for any other war crimes attributed to the Bosnian Serbs.
The allegations against Milosevic over Bosnia and Croatia were cooked up in 2001, two years after an earlier indictment had been issued against him by the separate international criminal tribunal for the former Yugoslavia (ICTY) at the height of Nato’s attack on Yugoslavia in 1999. Notwithstanding the atrocities on all sides in Kosovo, Nato claims that Serbia was pursuing genocide turned out to be war propaganda, so the ICTY prosecutor decided to bolster a weak case by trying to “get” Milosevic for Bosnia as well. It took two years and 300 witnesses, but the prosecution never managed to produce conclusive evidence against its star defendant, and its central case has now been conclusively blown out of the water.
Of course there was a promise not to expand NATO “as much as a thumb’s width further to the East,” Mikhail Gorbachev, the Soviet president at the time, says in Moscow today. However, Gorbachev’s former foreign minister, Eduard Shevardnadze, speaking in the Georgian capital Tbilisi, says that there were no such assurances from the West. Even the dissolution of the Warsaw Pact, the Eastern military alliance, “was beyond our imagination,” he says.
For years former US Secretary of State James Baker, Shevardnadze’s American counterpart in 1990, has denied that there was any agreement between the two sides. But Jack Matlock, the US ambassador in Moscow at the time, has said in the past that Moscow was given a “clear commitment.” Hans-Dietrich Genscher, the German foreign minister in 1990, says this was precisely not the case.
After speaking with many of those involved and examining previously classified British and German documents in detail, SPIEGEL has concluded that there was no doubt that the West did everything it could to give the Soviets the impression that NATO membership was out of the question for countries like Poland, Hungary or Czechoslovakia.
A fortnight after the violent overthrow of Viktor Yanukovych, Europe Editor for Channel 4 news, Matt Frei, interviewed Dmytro Yarosh, the leader of Ukraine’s Pravy Sektor [Right Sector] militia, who Frei introduces as “the hard men of the barricades, the masters of the Molotov cocktails, and now they’ve earned their place at the table of power” [1:45 mins]:
Behind closed curtains and surrounded by armed guards, Frei timidly asks whether it is right to “describ[e] people like you as neo-Nazis, as fascists, as anti-semites” adding “this is the pretext that [Russia] are using to occupy your country.” [from 2:10 mins]
Now you would be hard-pressed to think up a more softball question; “pretext” after all implies, by definition, that such allegations are evidently false and unfounded. Whereas these allegations are very evidently the case. Because Yarosh isn’t just any old fascist; he is the founder and leader of an undisguised and boastful neo-Nazi organisation. And Matt Frei and Channel 4 news know all this, but play dumb.
They gloss over the ugly truth because, after all, the official story is about a Euromaidan – “a revolution” inspired by dreams of EU membership that will bring “democracy and freedom” to Ukraine. A story built around obfuscation, denial and outright lies… 1
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On the very same day as Matt Frei’s interview, March 5th 2014, a phone call between the EU Foreign Affairs Chief, Catherine Ashton, and Estonian Foreign Minister, Urmas Paet, was leaked:
In the call, Paet, having just returned from a trip to Kiev, tells Ashton [from 8:20 mins in]:
“And what was quite disturbing, this same Olga [Bogomolets, the main doctor of the Maidan mobile clinic] told as well that all the evidence shows that the people who were killed by snipers from both sides, among policemen and then people from the streets, that they were the same snipers killing people from both sides”
“So that she then also showed me some photos she said that as a medical doctor, she can say that it is the same handwriting, the same type of bullets, and it’s really disturbing that now the new coalition, that they don’t want to investigate what exactly happened. So that there is now a stronger and stronger understanding that behind the snipers, it was not Yanukovych, but it was somebody from the new coalition.”
Ashton’s response to this revelation is muted and muffled. She begins: “I think they do want to investigate” But then hesitates and finishes: “I mean I didn’t pick that up… Gosh.”
Paet then repeats the opinion that the incident is “disturbing” and concludes that “it already discredits from the very beginning this new coalition”.
However, Ashton and Brussels were not about to be sidetracked in their determination to press ahead with negotiating an EU-Ukraine Association Agreement with the new powers in Kiev. Although, unsubstantiated rumours that Yanukovich was behind the massacre were the strong grounds to run him out of the country, these alternative if better substantiated allegations that “it was somebody from the new coalition” were less welcome. For Brussels, it was a lot more convenient simply to ignore them.
Indeed, on this very same day, March 5th 2014, the European Commission released a memo in support of the new Ukrainian government in which it offered financial assistance to the tune of “at least €11 billion over the coming years from the EU budget and EU based international financial institutions (IFIs) in addition to the significant funding being provided by the IMF and World Bank.” 2
The memo continues:
“All these measures should be seen as the Commission’s contribution to a European and international effort at providing a sustainable way out of Ukraine’s difficult economic situation and to support its economic and political transition.”
Then, only a few weeks later on March 26th, the European Council issued a press release following the EU-US Summit in Brussels which begins:
Recent events in Ukraine have confirmed that strong cooperation between the European Union and the United States on peace and security is of critical importance.
Under the heading “Economy and global challenges” the press release then continues as follows:
Reinforcing economic growth and job creation remains central on both sides of the Atlantic. The EU and the United States have taken important steps to stabilise financial conditions and overcome the crisis. The EU remains committed to building a deep and genuine economic and monetary union, including a banking union. […]
The EU and US leaders renewed their commitment to a strong Transatlantic Trade and Investment Partnership (TTIP). this should go beyond a free trade agreement and reaffirm Europe and the United States’ shared values of democracy, individual freedom, the rule of law and human rights, and a common commitment to open societies and economies.
[Bold highlights maintained from original source]
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In fact, Kiev began negotiating an agreement to extend Europe’s free trade zone in early 2012, although there never was an invitation for Ukraine to join as a member state. Full integration has probably never been on the table, although to encourage those gathered in the so-called Euromaidan protests, there was certainly a deliberate misrepresentation of this key fact.
On March 3rd of this year, President of the European Commission, Jean Claude Juncker, in a (failed) effort to urge the Dutch to vote ‘yes’ in their recent referendum on the Association Agreement with Ukraine (the Netherlands remains the only EU state still to ratify), made the situation quite plain:
I have not come to the Netherlands to say: listen here; you should do this and that. This is not how things are done, most certainly not in the Netherlands.
It is no laughing matter, however. If the Dutch vote ‘no’, Europe will have a problem. That problem is destabilisation. We need to bear this in mind, because Ukraine expects Europe to stick to what was agreed. We should not fall into the trap of thinking that this is about Ukraine joining the EU. Many Dutch people I talk to in Brussels – ordinary people, not Commission officials – make that mistake. In reality, it is about trade and trade agreements. I can hardly imagine an old, successful trading nation like the Netherlands rejecting a trade agreement with a country, like Ukraine, that is so important for European stability. So let me repeat: we need to explain to people that it is not about EU accession. Ukraine will not join the EU during my term of office. In any case, I have said – rather bluntly – that there will be no new members over the next five years, because I do not believe any of the countries in waiting will fulfil the conditions in that time frame.
Then reiterating and upping the ante, presumably to assuage any lingering doubts:
We have rushed things in the past when it comes to enlargement. I am also guilty, because I thought it was an historic event and that we had to reunite European history and geography. Hence the accession of the ‘new’ Member States (in 2004). In some cases, though, we jumped the gun, and we will not make the same mistake again. Ukraine will certainly not join the EU in the next 20 to 25 years.Nor will it join NATO, Secretary-General. I actually wanted to talk about the Dutch referendum, not lecture the Ukrainians, but I know many Dutch people are very worried that this will be the first step to Ukraine joining the EU.But we can definitely say that is not the case. [bold highlights added] 3
Note: you can read more about the Netherland’s April 6th referendum in the addendum.
In other words, the EU doesn’t want Ukraine to join our club – not now and not in the foreseeable future. What it unquestionably does want, however, is to secure access to its plentiful energy resources and to the richest agricultural land anywhere on earth. And the signing of TTIP alone will open the way for major western corporations to profit from unfettered access to both. However, in light of the Dutch vote on April 6th, it is a deal that remains on hold. Perhaps the Ukrainians might consider themselves lucky (at least in this).
Click here to read more about how US corporations and the European Union are hoping to exploit Ukrainian resources in an earlier post entitled “never let a good Ukrainian crisis go to waste”.
Two years after the Euromaidan, the government in power is no more popular or less corrupt than the one it replaced. Still on the brink of outright economic ruin, today’s Ukraine is a country fractured by civil war, where human rights abuses are an everyday reality and where the extreme right is stronger than ever before. But you won’t see very many reports about this on Channel 4 news or elsewhere in the western media, because (as detailed here) today’s Ukraine is too much of a political embarrassment.
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Addendum: Dutch vote on Ukraine, April 6th
Dutch voters forced a referendum on the ratification of the Association Agreement between the EU and Ukraine after a successful campaign led by GeenPeil, which managed to collect more than 425,000 signatures demanding a vote. The treaty was rejected by 61% to 38%.
In the run up to the vote, unsubstantiated claims were made that Russia was funding the ‘no’ campaign. On the other hand, George Soros’ Open Society Foundations, had announced to the Nederlandse Omroep Stichting, NOS [trans: Dutch Broadcast Foundation] that it would spend €200,000 on the ‘yes’ campaign:
A Russia banned non-profit organization of billionaire George Soros is co-sponsor of the Dutch campaign for a ‘yes’ in the referendum Ukraine in April. The Stem voor Nederland [trans: Vote for the Netherlands] campaign will receive 200,000 euros from the Open Society Foundations. […]
On April 6, the Dutch population must decide in a referendum on the Dutch support an EU association treaty with Ukraine. Russia is fiercely opposed to the treaty. “Russia will see this as confirmation of what it believes anyway: that George Soros has political motives in this referendum,” said David Jan Godfroid, NOS correspondent in Russia.
The same article published by NOS continues:
A British newspaper recently reported that Russia may have interfered with the referendum. GeenPeil, the driving force behind the referendum, denies this. “If only it were so!” says Thierry Baudet of Forum voor Democratie [trans: Forum for Democracy], one of the initiators, smiling. “We have never seen a penny,” he says. “This nonsense is coming out of thin air,” says Bart Nijman of GeenPeil. “I have no idea where this came from.”
Incidentally Baudet wonders how serious it would be if other countries money was funding the campaign. “It is absolutely normal practice for countries such as Israel, the United States and Germany to provide funds,” said Baudet. “Very strange that there is so much attention to the fictional Russian support.”
The EU Citizens’ Committee is another group campaigning for a ‘no’. We “have not received a ruble” from Russia, says Pepin van Houwelingen. “That’s a real fantasy story. We rely on donations,” he says. 4
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1 Nor is it the case that Matt Frei was simply too afraid to confront Yarosh squarely – although given the extreme circumstances of the interview, he had every reason to fearful. However, the tone of the whole piece is the giveaway. Skilfully contrived to distract the viewer from the truth, he goes out of the way to divert attention from the glaring fact that the Maidan had been spearheaded by fascist brigades. Channel 4 news and the rest of the corporate media simply chose to look away. You can find the same video unloaded on the Channel 4 news website:
3 From the official transcript of the 14th Norbert Schmelzer lecture entitled “The European Union – a source of stability in a time of crisis” delivered by Jean-Claude Juncker at The Hague, Netherlands on March 3, 2016. http://europa.eu/rapid/press-release_SPEECH-16-583_en.htm
Een in Rusland verboden non-profit-organisatie van miljardair George Soros is medefinancier van de Nederlandse campagne voor een ‘ja’ bij het Oekraïne-referendum in april. Stem voor Nederland krijgt voor die campagne 200.000 euro van de Open Society Foundations. Dat bevestigt de organisatie aan de NOS. Wie in Rusland zaken doet met OSF kan zes jaar celstraf krijgen.
Op 6 april moet de Nederlandse bevolking zich in een referendum uitspreken over de Nederlandse steun aan een Europees associatieverdrag met Oekraïne. Rusland is fel tegenstander van dat verdrag. “Rusland zal dit zien als bevestiging van wat het toch al denkt: dat George Soros politieke motieven heeft bij dit referendum”, zegt David Jan Godfroid, NOS-correspondent in Rusland. […]
Russische bemoeienis
Onlangs meldde een Britse krant dat Rusland zich mogelijk heeft bemoeid met het referendum. GeenPeil, de drijvende kracht achter het referendum, ontkent dat. “Was het maar zo!”, zegt Thierry Baudet van Forum voor Democratie, een van de initiatiefnemers, lachend. “We hebben nooit een cent gezien”, stelt hij. “Uit de lucht gegrepen onzin”, zegt ook Bart Nijman van GeenPeil. “Geen idee waar dit vandaan komt.”
Overigens vraagt Baudet zich af hoe ernstig het zou zijn als andere landen geld steken in een campagne. “Het is volstrekt normale praktijk dat landen als Israël, de Verenigde Staten en Duitsland fondsen aanbieden”, aldus Baudet. “Heel vreemd dat er nu zo veel aandacht is voor de verzonnen Russische steun.”
Ook het Burgercomité EU, dat campagne gaat voeren voor een ‘nee’, heeft “geen roebel” gehad uit Rusland, zegt Pepijn van Houwelingen. “Dat is echt een fantasieverhaal. We leunen op donaties”, zegt hij. Volgens de tegenstanders van het verdrag is het een eerste stap naar toetreding van Oekraïne tot de Europese Unie, en leidt het tot miljarden aan subsidies voor dat land.
Zowel GeenPeil, Forum voor Democratie, Stem voor Nederland als het Burgercomité heeft 50.000 euro subsidie aangevraagd bij de Nederlandse overheid om een campagne te kunnen voeren.
As the EU and the ECB back Greece into a corner yet again, Finance Minister Yanis Varoufakis has issued the following statement and a full copy of his presentation to the Eurogroup meeting.
If there is a default at the end of June followed by Grexit (meaning Grexpulsion), then no-one can seriously claim that Varoufakis and Syriza did not try in every way to prevent it. Indeed, one wonders if compromise was ever possible given how it now appears that the technocrats heading the ECB and the EU care nothing for Greece and surprisingly little for the future of the EU itself. But Syriza should also beware that they do not compromise too much; for that would be the worst defeat of all.
The only antidote to propaganda and malicious ‘leaks’ is transparency. After so much disinformation on my presentation at the Eurogroup of the Greek government’s position, the only response is to post the precise words uttered within. Read them and judge for yourselves whether the Greek government’s proposals constitute a basis for agreement.
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 Stern. 1
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“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
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!
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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.
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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 Group. 4
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.
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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.”
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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
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]
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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:
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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 Institute. 13
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”:
FDR, 1936: "They are unanimous in their hate for me; and I welcome their hatred." 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 reportreleased 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.
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:
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.
“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.”
“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]
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]
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.
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.
wall of controversy 