The moral implications of bail outs and austerity

Morally bankrupt.

Bankrupt?

How little we have seen of the human impact of the ongoing financial crisis in the Europe.

Of course we have seen reportage of the human reaction, be they stern faced Ministers assembling around large oak tables, shooing away the clucking throngs of news journalists awaiting any shred of carrion to be tossed from the wreckage, or the gathering crowds of unhappy protestors, waving banners before being strewn with rubber bullets by an equally unhappy, yet duty bound police.

And yet then, when we read on, we learn that Greece has asked for that, despite being reprehensible for having committed such and such an oversight, while doom laden Spain is sure to encounter this in their fate leaving it to Germany to propose that, and so forth.

As such the anthropomorphic labelling of whole countries is enabling both journalist and reader to be removed from what should be the real news story of the unfolding Eurozone disaster, the true cost to the everyday citizen. The people angle.

But it has suited the European Union to convey this image and the largely national-leaning print press to extenuate it. Define the problem as an entire country’s fiscal profligacy and then the only tool for debt solution is the EU's favoured austerity that must be shouldered by all. In Brussels it allows for a convenient bypass of democratic wont in order to transact further powers within their scope, while for national governments and newspapers, it conjures a sense of national unity  by lauding an "all-in-this-together" sermon that allows the weakest in society to be most heavily burdened, despite being the furthest removed from the causes of the crisis. What is so ironic is that while in Brussels, Barroso readily condemns the very notion of nationalistic, populist barriers to deepening European integration, he relies upon it implicitly to sell the Troika imposed programme of cuts to a nation. Everyone must do their bit.

Mr Barroso, it was your fiscal policy and foolhardy adherence to a single currency, placing political will before economic sense, that both caused the problem and continues to prolong it, so why must Senor Garcia be forced to work until his joints are ground to dust while his children will be taxed for the ills committed by their predecessors? I am sure when the concept of a single currency without unified fiscal policy was being drawn up he wasn't consulted.

Every country that found itself in the same position as the Eurozone after the credit crunch in 2008 was able to find a solution. In Iceland, the economy hit such a wall that the country defaulted and devalued the Krona. Iceland is now recovering very quickly and is borrowing again on the world markets as a creditworthy entity.

You see the debate that has raged in newspapers across Europe about what to do with a problem like Greece depends heavily on viewing each and every man, woman and child on an Athenian controlled island as both part of the problem and therefore responsible for its solution.

If a person borrows money, they receive the amount directly and must pay it back according to the terms and conditions. If a country borrows money, the citizens are unlikely to be informed of the loan, its purpose and certainly not its terms and conditions. How then does central government, let alone the government of a third country, morally justify imposed austerity?

Yet the personification of Greece as the naughty member of the Eurozone allows the EU to paint the picture of the reckless neighbour who, finding themselves unable to pay for their mortgage, appeals to the bank for help to keep their house. They are relucantly granted a reprieve on condition of some very stern, and of course wholly warranted, terms and conditions. Therefore if Greece gets a bail out at the cost of imposed spending cuts and strict austerity measures, then Spain would have to subscribe to the same punitive conditions if their economy is also to be rescued. Of course Senor Garcia cannot see why his benefits are being stripped when he has done nothing but work hard all his life. Meanwhile Germany, who does not find herself in such a financial mess, can bang the fist on the table and make demands which will affect the retirement age of Kirios Papadopoulos. Of course when I say Germany I mean Merkel and her cronies and their Brussels-based counterparts.

In 1995 Germany strongly opposed an IMF bail out of Mexico arguing moral hazard in giving a €17.8 billion loan as it essentially worked out as a rescue package for the American investors who had shored up so much Mexican short-term debt. Now the boot is on the other foot and it is German banks facing losses if Greece is allowed to go under, with as much as €22 billion of Greek public debt held by German investors. Suddenly Frau Merkel repeats the tune of solidarity for Greek and EU ears, but will happily pour scorn on Athens as and when it will placate her own people.

It may suit Brussels, political leaders, newspapers and ministers to talk about Greece, Spain, Germany, Portugal and Ireland as if they are characters in philosophical problem. But the real moral debate is not who should be paying the debt, but how.

A knock on your door from Barosso can mean only one thing...

It's getting rather tiring talking about the same topics, week in week out.
But they simply cannot be ignored.
As soon as they disappear from newspapers, they are simply simmering under the surface of a fast-track primordial swamp waiting to evolve and re-emerge a more fearful beast.
More than £30billion of value of British companies was obliterated  by news that Spain, as predicted, will likely need a national, as well as the already agreed, banking bail out. And if the Eurozone's fourth largest economy is sucked into the mire, well, I've said it before and will say it again. The EU is screwed.
In fact the Global economy is going to be up the creek without a paddle. World stock markets fell by 2% in the wake of the news.
British banks with billions tied up in Spanish loans are now in a precarious position while the credit ratings of the Netherlands, Luxembourg and Germany are all set for a downgrade, which ultimately will compound the problem, making the powerhouse economies of the single currency face higher rates of borrowing.
Italy is also heading towards a bail out with public debt totalling almost £1trillion.Ten Italian cities are on the verge of bankruptcy.
Currently Spain has been granted a bail out of up to £80 billion to shore up its banks, which are sitting on £122 of dodgy loans. But the latest news that the state also need an urgent cash injection adds an eyewatering £250billion onto that amount. Throw Italy into the mix and in total the Eurozone looks like it may need the previously predicted €2 trillion to get through to the end of the year. The bail out fund that took months to agree has only €700billion to it's name.
Let's see what that looks like as a number...

€2,000,000,000,000,000,000

Yikes!

Meanwhile the Troika, (IMF, ECB and EU) are about to arrive in Greece to turn the knife a little more and make sure their hugely unpopular and unsuccessful austerity measures are being obeyed to the letter.
Greece is likely to suffer much deeper recession that previously thought, with expectations that the economy will shrink by 7% ratehr than the forecast 5% demonstrating the swingeing cuts are driving the economy into the ground. But without progress, Greece is being threatened with not receiving the final part of its bail out of €31.5billion. Reports suggest the IMF will now refuse any further calls for aid.
I was surprised to learn that despite his pontificating from Brussels, Commission President Jose Manuel Barosso hasn't even set foot in Greece, the country he has overseen being brought to its knees, since 2009.

I'm not one for conspiracy theories but...

Today the European Commission will announce a 6.8% increase in budget - equivalent to €138 billion extra.

This is truly extraordinary when the majority of member states (25 out of 27, excluding the Czech Repubic and the UK who refused to sign up to the latest 'non-EU treaty' financial pact) are under mandate to enforce austerity measures imposed by Brussels. How then can the EU defend such an enormous hike in its own budget?

The swingeing austerity measures laid out by Brussels are crippling European economies, not saving them, with the constant cutting and adherence to the single currency project proving disastrous for the EU and global economy as a whole.

Today the ONS announced that the British economy shrunk over the last two quarters, plunging us back into recession, with the ongoing Eurozone crisis to blame.

Add to that the news that the UK will pay another £10 billion to the IMF ["It won't prop up the single currency, honest!"] and you've got to begin to wonder, what is going on?

It would appear that Brussels are the very deliberate architects of economic freefall in Europe. 

It cannot be simply a mistake that the financial crisis is continuing. Perhaps by creating financial disaster in Europe, while copious amounts of money fill up the EU coffers,  fiscal control is able to be diverted to the EU. Where there's money, there's power.

At one point commentators suggested the Eurozone crisis could spell the end for the EU. Far from it. 

If anything, the incredible transfer of power and money to Brussels over recent years as the crisis has taken hold has actually increased the dependence of the majority of member states upon the European Union and its associate bodies, such as the European Central Bank, European Investment Bank and so forth.

Which brings me on to the IMF.

It is shocking to witness the supposedly independent International Monetary Fund supporting the EU programme.

I do not only mean the financial impetus, including the recent call for an extra $430bn (£247bn), to which British taxpayers will contribute an extra £10 billion. 

There is the very tricky matter of the IMF, the EU and the ECB, forming a so-called Troika to effectively run the economies of disaster stricken member states. 

Part of the rules and regulations laid down by the Troika include setting up separate accounts for incoming bail out funds to ensure money is used only to save the Euro through debt repayment and is not spent structurally, in effect, helping the suffering population by a real injection of cash into the national economy.

What we are witnessing is mass unemployment spreading across Europe and a number of economies falling apart, led by an institution designed to "promote high employment and sustainable economic growth, and reduce poverty."

Instead of actually providing financial aid to Greece, Italy, Portugal and so on, the IMF is instead driving funding into bank accounts set up to support the Euro, and thus EU ideology in Europe, while co-authoring regulations which perpetuate the ongoing crisis.

Even the USA has now refused to contribute any more to the IMF, saying they no longer supported the failing efforts to sustain the Eurozone.

What on earth is going on?

It is increasingly apparent that the IMF, led by the former French Finance Minister Christine Lagarde is by no means independent. Of course Lagarde came in after the rather inglorious departure of Dominique Strauss Kahn. It is by no means implausible that his downfall and thus removal from power was all too easy to set up, given the man's penchant for promiscuity. Perhaps that is one conspiracy theory too many - but there are many out there who claim that what happened in that New York hotel room was a deliberate trap.  

Strauss Kahn may just have been a dirty dog who met his inevitable end. Or perhaps he needed to be removed in order to parachute in Lagarde, who would get the job done.

Despite calls from across the global financial sector to dismantle the single currency, instead the IMF have come out and warned against any member state leaving the Euro. It is interesting to point out that France is next in line to enter economic turmoil if the single currency crisis is not tempered. Perhaps the IMF and Christine Lagarde want to evade French financial freefall. But if that was the case, why is the IMF authoring and imposing the austerity measures that are keeping the crisis alive?

It is interesting that while the UK Government publicly vetoed the pact for financial regulation (again, not an EU treaty-despite the 'pact' involving the European Commission, 25 member states, the ECB...- as an EU treaty would have meant referenda across the continent, whose results would likely have seen the democratic obstruction of the pact's political intentions evident to the world stage). However the UK have recently agreed to pay an extra £10 billion to the IMF while our own economy has fallen back into recession, with the single currency to blame for contraction over the last two quarters.

Perhaps my imagination is too creative.

Has Britain, behind closed doors, agreed to support the federal unification of Europe by continuing to fund the bizarre operation being carried out by the EU and the IMF - as long as we can remain on the outskirts?

After all, the money being poured into the Eurozone from the IMF is helping Brussels to actuate these intentions, by breaking down the economies of  member states through destructive austerity measures, and then sweeping to their rescue by promising bail outs in return for  fiscal control by the EU and its related bodies. 

The Eurozone financial crisis is, in effect, enabling the final push for federalism to be made.

Of course in order to achieve this, Brussels needs money to uphold bogus bail outs in exchange for obeisance to their own fiscal mandate. Thus they contrinue to increase the EU budget, but that would not be enough.Brussels needs the IMF to extract money from the global economy to support the operation. After all, financially ruining economies in order to swoop in and take control by offering a golden handshake is an expensive business. So how is the IMF managing to continually pass the collection plate and get other countries to pour money in? Well the ongoing Eurozone crisis is not only a threat to the member states involved. In this hugely interlinked global marketplace, ongoing crisis in the Eurozone is a threat to economies across the world. Perhaps other countries are party to some sort of plan - or perhaps they simply have no choice, as a financial collapse in Europe would mean a heavy toll upon many countries' economic security. Now America has managed to get back on its feet, incidentally by doing the direct opposite of what is being carried out in Europe by providing stimulus rather than imposing austerity, they no longer want to be a part of what is going on in Europe. Although Obama has always championed a more deeply integrated EU, so it may just be that America is turning a blind eye but is unwilling to co-finance the operation any more.

I am sure many readers will be thinking 'what on earth is he on about?'

I am merely playing Devil's advocate -  asking the unanswered questions.

Why is the world allowing this mess to continue?

How is what the EU and IMF are doing not being condemned by the international community - and by this I mean what is overtly taking place, not my conspiratorial postulations.

The formation and fiscal controls of the Troika are perpetuating economic crisis, while 25,000 people in Greece are begging for food, yet no one on the world stage is saying anything.

Europe is not the developing world. It is not an impoverished continent with (manifestly) corrupt governance and (manifestly) tyrannical rule. It is a first world group of countries who should by now be well in the clear after the credit crunch that hit almost five years ago.

This furore has gone beyond a catastrophic mess and incompetent governance.

It is now so absurd that there is a distinct smell of conspiracy about it.

If Britain Were Greece

Just watched an excellent comparitive piece on the BBC Website
If Britain were Greece.

The journalist has assimilated the facts and statistics of Greece's swinging austerity measures imposed by the Troika of the EU, IMF and ECB into a British context.

Here's a summary below:

Unemployment would have hit 7 million

Half of all young would be out of work

Minimum wage would be cut from £6.08 per hour to £4.74 per hour, or for under 18s, be reduced from £4.98 to £3.39 per hour.

100,000 public sector workers would be waiting redundancy with their salaries meanwhile cut by 40%

1 million public sector workers would be sacked by 2015

All public sector workers salaries would not just be frozen but cut sharply

VAT would go up 24%

Solidarity levy would account for 5% of income

Alcohol and tobacco prices would be increased by 1/3

Diesel and petrol would rise to around £2 per litre, meaning it would cost £120 to fill the tank of family saloon

State and public sector pensions above £800 a month would be cut by 20%

Anyone with a pension above that rate would see it cut by no less than 40%

The equivalent increase in retirement age would see many Brits working well into their 70s

All state benefits would be slashed and strictly means-tested

Defence budget would be slashed by a fifth, meaning the loss of many personel and the likely merge of the army, navy and air force

NHS spending would be cut bu a sixth, leading to tens of thousands of job losses for medical staff

There would also be the closure of numerous schools, meaning thousands of teachers unemployed.

The outlook for Greece is ghastly and is certainly not set to improve any time soon. And all to protect the common currency project that props up the European Union.

Horrifying, isn't it?

The Most Expensive Sticking Plaster in the World

It’s been labelled the most expensive sticking plaster in the world.

Greece has been granted the biggest bail out in history. An eye watering €130 billion Euros will be put into a separate piggy bank for Greece to spend on debt repayment.

But such an exorbitant gift comes at a high price.

The Eurogroup (Finance Ministers of member states of the single currency) announced that the second bail out would ensure debt sustainability and restore competitiveness. In short, the second bail out will pay for the loan repayment due on the first bail out. Come 20^th March Greece is due to pay back €14.4billion on a bond repayment, so one would hope the recent rescue package will ensure that Greece does not submit to a disorderly default and drag the entire Euro area into disarray.

But in order to save the Euro, Greece cannot be seen to be saving themselves. Taking one for the team is probably not the attitude of the Greek people, who have already seen a 22% reduction in salary bringing the minimum monthly wage down to €751 (£630), 150,000 cuts in public sector jobs and the country’s constitution rewritten to ensure that the top Government spending priority would be on debt repayment, not public services.

Imagine those same conditions being imposed here and you can start to feel a bit of empathy for the Greeks.

All of this will in theory (although unlikely in practise) achieve rewriting Greek debt down to 120% of GDP by 2020. So essentially, they will still be spending a load more on debt repayment than they will ever have in their coffers.

There will also be permanent monitors from the Troika of the IMF, EU and ECB to make sure these spending cuts are implemented, with suggestions that the upcoming elections be suspended to ensure former Deputy President of the European Central Bank retains his role as Prime Minister after he usurped the throne from the democratically elected former leader last year.

However the Greek economy will remain in freefall. The 120,000 soon to be unemployed won't exactly be contributing much to the economy (bearing in mind the total population of Greece is 11 million it's a large number to throw out of work) and neither will the once relatively affluent workers who are now not even making enough money to pay rent and buy food.

The rescue package merely buys the Eurozone more time to get their ducks in a row, at the cost of throwing real lives into the dustbin of economic despair.

By Summer the EU are hoping to have shored up €700 billion in their bail out fund to potentially rescue the economies of Spain and Italy if required.

Meanwhile the people of Greece are being squeezed again and again which does not create growth, merely sends a signal to lenders that the euro will be saved at any cost, even if that cost is a very human one.

Of the total costs for this latest crisis-stalling measure (for that is all it is - in time Greece will be back on the precipice of collapse once more) we can be proud that every family in the UK has effectively contributed £500. But don’t fancy that this money will be buying a few thousand cans of soup for the now destitute. It is simply being pumped into the blackhole of debt and stockpiled reserves for paying off debt that simply ensure the single currency is kept afloat.

In essence, UK taxpayers money diverted to Greece via the IMF has been spent on saving the flagship single currency project which is the keystone of the European Supranational dream in which we decided long ago we were unwilling to take part.

It's about time we started sensibly looking at how to return Greece to its own currency, where it can control interest rates and stimulate growth and spend the €130billion on helping those most in need (it would work out as around €100,000 each) rather than throwing money at vacant ideology.

I would sooner support a charitable hand out from the UK to Greece rather than watch the government fund autocratic tyrannical rule in Athens by a group of Eurocrats with a penchant for continental domination while ordinary people suffer.