Greece’s Fascist Finance

Jul 20

Greece’s Fascist Finance

Posted by: George Grundy

You’ll know this, of course. The seeds of Nazi Germany were sown in the 1920’s, when the huge financial reparations inflicted on that broken country caused financial disaster and hyper-inflation – suddenly wheel-barrows filled with money were still not enough to buy a loaf of bread. German society collapsed, and when a strongman leader with an unusual moustache took charge and finally started to sort the place out, a lot of people thought he might at least be an improvement.

In 1946, following six further years of devastating war, the US and other victorious Allies took the wise decision to forgive Germany huge tranches of national debt, not out of compassion, but so Germany could stand on it’s feet again, and not fall into the sort of financial crises that engendered the rise of Hitler.

In fact, Germany was the biggest ‘debt transgressor’ of the 20th Century, with at least four major restructurings. Between 1947 and 1953 German debt worth 280% of GDP was forgiven.

So it is ironic, to say the least, that Germany now is the most intractable opponent of any form of debt forgiveness to Greece.

Greece argues that it’s debts are now so massive that they can never be repaid. This makes the country essentially bankrupt and, as the word suggests, the banks are now closed. The loans made to Greece since their troubles began have almost exclusively been used to repay the debt – kind of like the bank lending you more money so you can catch up on your mortgage – in the end, that makes no difference if you’re flat out of cash.

Greece’s economy has contracted around 30% since 2010, a staggering collapse, so of course it’s tax receipts are down, making it all but impossible to make repayments on the ever-increasing debt. It’s a vicious cycle, and everyone – including EU economists – agrees that Greece has no possible way out.

The leftist party Syriza was elected specifically on a platform of ending the austerity measures which the troika (the ECB, EC and IMF) have inflicted. The referendum just a week ago was a specific endorsement of that mandate, and yet Prime Minister Tsipras has just done the opposite and taken more money to pay impossible debts. No wonder there are riots in the streets.

From the lenders perspectives, the Greeks got themselves into this mess, it’s their responsibility to get out of it. Angela Merkel represents German tax-payers (and banks) – from her perspective, debt relief to Greece would mean Germans having to pay for Greece’s fecklessness.

As ever, there’s more to this than meets the eye. Greece’s debt levels are in part a product of their spending far too much on the military. Guess who sold them most of the arms – that’s right, Germany.

There is a symbiotic relationship between borrower and lender. If I borrow too much and can’t pay it back, it’s my fault. But if the bank lends me money far and beyond that which I can repay, they too are fools. In the case of Greece, both sides bear responsibility, not just one.

If Greece leaves the Euro (a ‘Grexit’) then the country implodes. The banks go bust, and the government has to manage a period of chaos, whilst someone prints a warehouse full of drachmas (part of the conditions for entering the Euro is that you have to destroy your money printing machines). But if they make it through the first 12 months OK, and get back on their feet (as did Argentina not so long ago) it will provide an incentive for other struggling Eurozone nations to reconsider their membership of the currency.

This is why Greece can’t be forgiven any debt, must be punished, and forced to take unbearably tough societal measures. After all, they say, if we forgive Greece part of their debts, what’s to stop Portugal, Ireland or Italy asking for debt relief too.

It’s a mess. All options are bad. Syriza were elected to paint their country blue and the EU have offered them a bucket of red paint. It just doesn’t work.

But what the bureaucrats don’t factor in is the social costs of seeing a Western democracy implode. Walk a mile in their shoes. I don’t have to think too hard to imagine what I would do if my local chemist didn’t have stock of the insulin my diabetic son requires, because of a banking crisis. Within 24 hours I would be in the street with a brick, or a gun. And so would you.

We have seen before the effect of social collapse in Europe, and it is not pretty. Greece’s ‘Golden Dawn’ neo-Nazis currently command 15% in the polls. Disaster in Greece will only push that higher. Greece was a military dictatorship from 1967-74. A proper collapse will lead almost inevitably to the army taking over on one level or another. Troops on the streets of Athens. Surely that’s not what we want.

So, why should we care about this small nation? Sure, our shared humanity means we must feel sorry for the Greek people, but some would question why we should care any more about the Greeks than any other country in strife.

The answer, is contagion. Plenty of other European nations were in extremely perilous situations through 2008-2010, and are scarcely much better positioned now. Portugal and Ireland might not concern you either, but Spain’s economy is not much short of a basket case either. Italy’s public debt is more than 2.2 trillion Euros. And whilst EU lenders have Greece over a barrel, their power is illusory. They do not control the market, nor the record low interest rates that these wobbly countries can thank for keeping them able to make repayments and stay solvent. If Greece declares bankruptcy and leaves the Euro, the markets and speculators will blink for a second, then turn their attention to other sovereign debts that suddenly look less of a certain bet.

Here’s the thing. Greece really is bankrupt. It can never repay it’s debts, and everything in the news right now is just kicking the can a little further down the road. Either Greek debt is substantially forgiven, or it has to leave the Euro, and contagion is inevitable. The lenders, politicians, bureaucrats and Greek ministers all know this, although they virtually never say they do.

And people in Greece can’t take much more of this. Banks that won’t open mean within weeks you are trading furniture for a loaf of bread, or for life-saving insulin. Courageous decisions need to be taken, and soon. There is no sign of this happening.

A couple of news items have caught my eye this last week. First, a broad consensus of scientists have said they consider catastrophic rising sea levels to be inevitable, even if we stopped emitting all CO2 here, now, today. The Western sheet of the Antarctic is showing signs of collapse. Sea rises of metres, not centimetres, will take place within our lifetimes, displacing hundreds of millions of people. Manhattan will be submerged. This story was on about page six of the paper.

Second, economists have said that they now believe the total funds stored by the world’s rich in off-shore tax havens is between US$ 20-30 trillion – more than the GDP of Japan and the US, combined. Given the prevalence of debt in our daily discourse, it’s wistful to imagine the impact this money, if released, could have on the lives of hundreds of millions of people. But that’s not going to happen – it has been secreted away specifically to avoid having governments getting their greasy hands on the lucre.

It’s my belief that the global financial collapse of 2007-08 was not just another blip, it was the beginning of the end for globalised capitalism. Banks that were ‘too big to fail’ were rescued with over a trillion dollars of public funds, and now carry on as if nothing happened. But soon we face the prospect of countries that are too big to save, and the enormous social risks that their collapse will cause.

So when the day comes that global financial collapse or ecological disaster finally strikes, perhaps in the form of Euro financial contagion or a catastrophic collapse in Antarctic ice, you can be sure that those with the money will be faced with a collective choice of enormous social upheaval – perhaps the disappearance of democracy as the system used by Western nations, or handing back their fabulous wealth. We’re not getting the money back, and they won’t care what the repercussions will be, the money is staying hidden.

Which is why I’m so interested in poor Greece’s death-throes. And why I am so concerned about the US election in just 16 months. Because the US has, through the NSA’s surveillance programs (as exposed by Edward Snowden), built the most efficient apparatus for dictatorship and fascism in the history of humanity. US democracy has been badly set back by the actions of it’s government since the questionable events of September 11th, there is no reason further degeneration cannot take place.

Don’t ever let them tell you that we’re short on money. All the issues we face could be solved by the richest people in the world giving up the majority of their money – money no human being could ever spend. Because there is no hope of that ever happening, we lack the resources to save Greece, to stop contagion, or to invest in renewable energy at a level that allows seven billion of our species to be viable on this planet.

Monies stored off-shore in tax havens are now at such a level that they represent a clear and present threat to democracy and to humanity’s survival. Greece is bankrupt, and must be forgiven a large portion of it’s sovereign debt. But it won’t be. So Greece will exit from the Euro, and it will be messy to say the least. Greece will probably be followed by Portugal, then Spain, and then Italy. The Euro will retreat to a series of North European countries. But all this is just money. The social costs will out-weigh the financial, and European history is replete with examples of how that ends very badly.