How a Policy of Debt Cutting and Tax Reform Would Revive the Greek Economy
Jessica Desvarieux: If you’re in Greece this
week, good luck trying to go to the bank. Greek banks are closed all
week after news broke that the country will be holding a referendum vote
on whether to accept the bailout measures offered by international
creditors. But if the Greek population decides to vote yes for the
bailout deal, does this mean that they will be handing creditor banks a
bailout?
Now joining us to give us their take on the issue are our two
guests. Joining us from Quito, Ecuador, is Bill Black. Bill is an
associate professor of economics and law at the University of Missouri
Kansas City. He’s a white collar criminologist and a former financial
regulator, and author of the book The Best Way to Rob A Bank is to Own One.
And also joining us from Germany is Michael Hudson. Michael is
distinguished research professor of economics at the University of
Missouri, Kansas City. His latest book is Killing the Host: How
Financial Parasites and Debt Bondage Destroyed the Global Economy.
DESVARIEUX: Bill, I’m going to start off with you. Can you just
explain to our viewers who’s actually getting bailed out in this deal.
Are creditor banks the ones benefiting at the end of the day?
BLACK: The same people getting bailed out that have been getting
bailed out from the beginning of the Greek crisis, and that is foreign
banks. So this money just moves in sort of an elaborate circle from the
Troika, which is the European Commission, the European Central Bank, and
the IMF, through the Greek government, through the Greek banks, and
then they pay the foreign creditors. And they pay them just enough that
they don’t have to recognize a loss for accounting purposes.
As Michael will explain, of late the big investors tend to be
American hedge funds, as opposed to what used to be primarily French
banks.
DESVARIEUX: Okay. Michael, I want to ask you about the role of
French banks in all of this. Can you just speak to this, give us a sense
of how they even got entangled in Greek debt.
HUDSON: Today’s problem with the debts really stem back from 2010 and
2011 when Greece obviously couldn’t pay. When Greece joined the
Eurozone, it falsified its debt figures. The head of its central bank
worked with Goldman Sachs to make complicated derivatives to hide it
all, and that was Lucas Papademos.
In 2010 right after the PASOK party came to power in Greece, they
revealed the fact that their figures had been fudged all along, and that
the debt was so large that Greece couldn’t pay. So the International
Monetary Fund, which hadn’t been making loans–almost had no customers in
the world, had its European staff calculate. And the staff unanimously
said, Greece can’t pay these debts. These are fraudulent debts that are
all way beyond the ability to pay. They’ve got to be written down. And
the board of directors agreed.
But Dominique Strauss-Kahn, who was the head of the IMF when he
wasn’t going to the sex parties, wanted to run for president of France.
And he talked to Sarkozy, and Sarkozy said, wait a minute, French banks
are the largest holders of Greek debt. If Greece doesn’t pay and writes
them down, the French banks will go under. And German banks are the second largest. But then at the G8 meetings in 2011, President Obama went over along
with Tim Geithner and said, our big campaign contributors are on Wall
Street, and they’ve made huge bets that Greece can pay. If Greece
doesn’t pay, then all these gamblers and derivative players are going to
lose their bets. You’ve got to sacrifice Greece and you’ve got to drive
it into poverty, and lend the Greek government the money to pay the
bond holders so that our Wall Street banks won’t lose money.
So the European Central Bank told the IMF if you want to be a player,
you’ve got to ignore what the stats said, and they did. And the
European Central Bank and the IMF paid over 100 billion Euros to the
bond holders. So Greece, instead of owing private bond holders, owed the
IMF and the European Central Bank.
Now the European Central Bank wants to get paid, but the debts can’t
be paid. So the central bank says, okay Greece: Sell us your islands.
Sell us your ports. Sell us your lands. Sell us your raw materials. This
is foreclosure time. And if you can’t pay, we want everything in the
public domain. And you also have to impose austerity. You have–only 20
percent of your population has emigrated. You only have a 60 percent
unemployment rate for youth. You’ve got to increase the unemployment
rate to 80 percent, double the emigration, in order for us to make the
loans to your government that will turn right around and pay us.
DESVARIEUX: But Michael, there really could be real consequences.
You mentioned obviously financial markets. There’s some real
consequences for them. But what about everyday people? I’m thinking of
those folks who might have their money in banks, in the banking system.
And if this bank is insolvent, what would happen to them?
HUDSON: There need not have been any consequences for the people of
Greece for not paying the IMF and not paying the European Central Bank,
because this money was all paper money created to begin with. It’s just a
book loss. But the Europeans said something else, that although we
don’t need the money, we will bankrupt you and we will cause a bank
crisis if you don’t comply with what we want. So it’s either austerity
or we will smash and grab, take your pick.
DESVARIEUX: Bill, I’m going to ask you the same question. What do
you do if you’re a person who’s going to be facing that referendum
vote? Do you vote no for this bill, or do you say yes and hope for the
best?
BLACK: Well, I would definitely vote against the bankers. Michael is
correct, but on top of that, the Troika said it’s not enough that 60
percent of your pensioners are in poverty. We want to push it that so 70
or 80 percent of your pensioners are below the poverty level as well.
And privatization, this is what made, depending on the poll, Mexico’s
Carlos Slim the richest or the second-richest person in the world.
They’re sold on sweetheart terms to cronies, and this is crony
capitalism. People are familiar with Indonesia under Suharto. It’s very
similar.
What you do is, as Michael said, the normal thing that has been done
in the past: write down the debts when they can’t be paid. That is done
all the time routinely in the commercial world, and it was done with
Latin America back in the debt crisis in the ’70s and ’80s, with what
became known as the Brady Plan. So you can’t keep a country–or at least
there’s no economically rational basis for doing so, and of course it’s
completely inhumane– in a condition where it constantly be in ever
greater debt. And that’s precisely what the Troika wants to do.
And as Michael has said, German politicians have openly demanded that Greece begin selling islands. In other words, selling the nation. Just a complete destruction of sovereignty.
DESVARIEUX: We were talking about alternatives to the deal that’s
being presented to the Greek people in this referendum vote. Michael,
lay out some specifics. What are some alternatives that would be in the
interest of everyday Greek people?
HUDSON: What Bill was describing in the first half is really finance
as war. What they want is the same thing that warfare wants. They want
the land, and they want a tribute in the form of interest. Basically,
the Eurozone went to Greece and said: look, we’re going to–as in case
Spain’s Podemos party or other countries who want to not pay their
debts–we’re going to use you as an example and we’re going to wreck you.
And it’s begun to backfire this week, because what they show is that
remaining in the Eurozone itself is pretty hopeless, financially. And
the leaders of the Syriza party have said, look, we’re not only fighting
for Greece, we’re fighting for all of Europe. And what we want to do is
save Europe from austerity. And we want to save Europe by having a real
central bank whose role is to create money, to spend money into the
economy. We want a central bank that doesn’t give money to banks. We
want a central bank that pays for government spending and rebuilding the
Greek economy. And we need to be out of the Eurozone in order to do
that.
DESVARIEUX: Wouldn’t they also have to reform their tax system, or enforcement, at least, of that tax system?
HUDSON: Yes. I mean, they’re talking about what–a lot of debts are
going to be canceled. Not only to the European banks, but we’re talking
about a domestic debt holiday very much like Germany’s economic miracle,
in the 1948 Allied monetary reform, where they canceled all the
internal German debts except for the debts that employers used for
wages. We’re talking about a huge debt write off. But you don’t want to
have real estate owners suddenly owning their property free and clear.
So we need a tax system that is going to stop the tax evasion by the
oligarchs who have used the banks to avoid it.
We’re going to take away the tax deductibility of interest payments,
so that they can’t pretend to expense all their profits and interest,
and we’re also going to have a rent tax. For what we’ve privatized
already, we’re going to tax the economic rent to recover for the country
what these owners didn’t create, like the phone systems that Carlos
Slim made in Mexico which Bill mentioned before. We’re going to collect
the economic rent fully through a tax system. So financial reform is
going to go hand-in-hand with tax reform, and that’s what terrifies the
Europeans. Because they say, wait a minute, all of the money that you
call profits is actually rent extraction. It’s all exploitation. You
can’t stop exploitation, that’s what our financial system is all about.
DESVARIEUX: But Bill, I could imagine people who are in the elite
are going to say, hold on a minute. You want to raise taxes, you want
to create new taxes. I’m going to leave. I’m going to another
country to set up shop. What do you make of that argument?
BLACK: First, all their money has already left. They’ve been evading
taxes for years, so them leaving will have next to no effect.
But yes, I mean, forget them. What the Troika has done throughout
huge expanses of Europe, roughly nations with half the population of
Europe, their leading export these days is their college graduates. As
soon as you get your degree, you leave. And that isn’t just the southern
periphery, the so-called Mediterranean. That’s also the Baltic states
as well.
There’s an incredibly insipid article in the New York Times recently
about Bulgaria that says, Bulgarians have no sympathy for the Greeks.
But it turns out this is a hard-right government that has welcomed
austerity and produced the usual problems. And, of course, their
government would fail within 24 hours, as would the Spanish government,
if they ever admitted that Austerity was economically illiterate. The
equivalent of bleeding a patient to make them better.
So all of these nations and the Troika are locked into this position and they can never admit the truth.
DESVARIEUX: Michael, I know you’re going to be headed to
Brussels, you’re giving a speech to the Euro parliament on Thursday on
the Greek situation and the IMF. Can you just quickly lay out for us,
what are you going to be advocating for?
HUDSON: WFirst of all, for treating the debt claims of the IMF and
the European Central Bank as odious debts. This means they shouldn’t
have been put in place to begin with, and the debts, the money that was
lent to Greece went right through Greece to pay the French banks and the
German banks, and to enable the American Wall Street banks to make a
killing.
The Wall Street banks made whole reputations of buying bonds at 30
cents on the dollar and suddenly they went up to 100 cents on the
dollar. The market basically said Greece couldn’t pay in 2010. The
market priced its bonds very low. Right now Greece bonds are yielding 33
percent. So the market says Greece can’t pay.
And so when Europe is saying, we want to impose a market economy,
everything the European Central Bank and IMF is doing is against the
market. They’re not recognizing what any real market analyst realizes,
that the debts can’t be paid. We want to create a real market economy by
getting rid by getting rid of the exploitation, by writing off the bad
debts, by reforming the tax system.
A few years ago the IMF’s Christine Lagarde provided a list to Greece
of Greek tax evaders that had 50 billion Euros in Switzerland. This 50
billion Euros was enough to pay all of Greece’s debts. And the
technocratic leader that the financial interests installed, Lucas
Papademos, the very man who falsified all of the Greek payments and debt
statements in 2001, didn’t do anything at all with the list. He refused
to move against the oligarchs.
So what you have is, is really a combination of treason and criminal
behavior. Now that there is a crisis in Greece this enables Syriza to
get the support of the people to throw the bad guys in jail. I’d like to
say to throw the lawbreakers in jail, but they don’t have any laws
against that kind of crime taking place. So they have to draw up a whole
new set of laws to make Greece a fair economy, instead of the unfair
system that the IMF and the European Central Banks have turned it into.
Jessica Desvarieux is a producer at the Real News Network, where this interview aired. Source: CounterPunch
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