EU: Democracy Incompatible with Debt Collection

By Michael Hudson

Democracy Now Nov 3 2011

AMY GOODMAN: World leaders are gathering in Cannes for the opening of the Group of 20 summit today. That’s the G20 summit. On the top of the agenda is Greece and the European debt crisis. The Greek prime minister, George Papandreou, is coming under intense criticism from European leaders for allowing the Greek people to decide if they want to accept the conditions of a $179 billion E.U. bailout. Papandreou has announced the referendum will take place in early December, but it now looks like his government is in danger of collapsing before then. He faces a vote of no confidence tomorrow. According to polls, most Greeks are opposed to the bailout plan, and there have been protests across the country against deepening austerity.

Papandreou addressed a press conference following a crisis meeting with eurozone leaders in Cannes.

PRIME MINISTER GEORGE PAPANDREOU: The essence is that it is—this is not a question only of a program; this is a question of whether we want to remain in the eurozone. That’s very clear. That should be clear to everyone. I believe that this will be a positive outcome. I believe the Greek people want us to remain in the eurozone. And I believe that this referendum will show so.

REPORTER 1: Are you confident—

REPORTER 2: If they say no, do you have a plan, if they say no?

PRIME MINISTER GEORGE PAPANDREOU: I want to say that we—we will have a “yes.”

AMY GOODMAN: Meanwhile, the leaders of Germany and France said Greece would not receive another cent in European aid until it decides whether it wants to stay in the eurozone. Head of the Eurogroup, Jean-Claude Juncker, said Greece will likely miss out on billions of euros of aid as a result of the scheduled referendum on the bailout plan.

PRIME MINISTER JEAN-CLAUDE JUNCKER: [inaudible] is depending on the “yes” or “no” to the question which will be submitted to the Greek people. So Greece has lost—Greece had eight billion. Greece has lost eight billions after having made the decision to put all these questions to referendum.

AMY GOODMAN: Jean-Claude Juncker is prime minister of Luxembourg and head of the Eurogroup of 17 eurozone finance ministers.

To talk more about this, we’re joined by Democracy Now! video stream from Germany by Michael Hudson, who’s been closely following the Greek crisis. Professor Hudson is president of the Institute for the Study of Long-Term Economic Trends, distinguished research professor of economics at University of Missouri, Kansas City, author of Super Imperialism: The Economic Strategy of American Empire.

Welcome to Democracy Now!, Michael Hudson. What is happening right now? The significance of Obama being in the south of France at the G20 meeting, and the possibility of the Greek prime minister being thrown out?

MICHAEL HUDSON: Well, you’ve asked about three questions there. Obama is here to represent the interests of the American banks. And the Europeans are very angry that a few weeks ago Tim Geithner, the bank lobbyist, came over and insisted that Europe not forgive Greece’s bank loans, not let Greece write down the loans, and indeed that it not even claim that Greece should do what Argentina is and write down the loans as a premise.

Mr. Geithner explained to the Europeans that the largest insurers of the Greek debt are American money market funds and hedge funds. And he said American hedge funds and banks would lose money and actually would crash the U.S. economy, if Europe made a concession to Greece to bring debts down to the ability to pay. So, instead of a debt write-down or a haircut, the banks said, “OK, we will agree with what the Americans are insisting on, and we will ask for a voluntary write-down by the banks on the Greek debt they hold.” Obviously, European banks who are not part of the credit default swaps have disagreed with this. So the Americans are putting immense pressure on Europe, saying, “We will wreck your economy, if you don’t wreck Greece’s economy.”

Because of the problem in Greece you have had the riots in the street, you have had the demonstrations. The demonstrations in Athens are much like the Occupy Wall Street demonstrations here, and similar ones in Iceland. They were to show that the Greek people were not behind the bailout, and to let the international banks know that if the so-called rescue operation—that is, the German and European rescue of the French banks and the German banks and the American banks that hold the Greek bonds, not the rescue of Greece—were to go through, this was unpopular. Under international law this meant that the Greeks could repudiate the debt. So, you heard on Monday, Mr. Papandreou said: “We’re going to have a referendum on whether to go along with the austerity plan or not.” The principle is the same that the president of Iceland said earlier this year: if you’re going to plunge an economy into a decade of depression and force much of its population to leave the country to find jobs, the population has to have a vote.

But the clip that you played just a few minutes ago at the beginning of the program was something quite different. Yesterday, when Mr. Papandreou met with Angela Merkel and Sarkozy in France, they said: “Look, all the opinion polls show that the Greeks are going to vote against the referendum, so let’s think of something nice. Would they rather be human beings or monkeys? What would they rather do?” And they came up with another question: Do the Greeks want to be part of Europe or not?

Polls report that 66 percent of the Greeks do want to stay in the eurozone. They want to stay in the euro. So, by trying to rephrase the question in a way that will get a “Yes” vote, they avoid asking the really important question: Do you Greeks want to push yourselves into a decade of depression and impose austerity? Do you vote to sell off the public domain, sell off the Athenian water supply, sell off your islands, sell off your mineral rights in the sea, sell off even the Parthenon—do you want to do that so that French banks and American bond insurers will not lose money?

Phrased this way, this obviously would get a “No” vote. So there is some kind of semantic trickery going on here. Nobody knows exactly how the referendum will be worded, or right now whether there even will be a referendum, because, as you also noted earlier, the other politicians in Greece are now jockeying for position and are trying to get rid of Papandreou and to replace him, in a very opportunistic mood, to prevent any kind of a referendum happening at all.

Yesterday, the headline in the Frankfurter Zeitung was “Democracy is Junk.” The meaning was the financial sector was saying that democracy is incompatible with collecting debts and, when debtors can’t pay, with foreclosing on the public domain and privatizing a country. You can’t have democracy when debts grow beyond the ability to pay and the IMF imposes austerity, like it used to do in third world countries. So, what’s at stake is whether Europe—Greece and other countries—are going to be democratic, or whether they’re going to be run by a financial oligarchy via the E.U. bureaucracy, basically the European Central Bank. It is neoliberal, anti-labor, anti-government, and in the pockets of the most predatory bank ideologues.

AMY GOODMAN: And what does it mean if Papandreou is out?

MICHAEL HUDSON: It could mean a number of things. Either it means that other members of his party—the finance minister, who is against the referendum—will come in and not hold a referendum at all, and try to keep Greece on the austerity plan, or there will be a fall in the government, a no-confidence vote, and people will presumably vote for the Conservative Party, which is very much like the Republican Party in the United States.

The reason there have been all of these demonstrations is the same reason that the Occupy Wall Street movement is in New York and the rest of the United States. The frustration is not only at the financial overhead, the debt overhead; it’s at the political fact that there is no choice. Both the Conservative Party and the Socialist Party in Greece, just like the Republicans and Democrats here, are both taking the side of the banks. So people don’t even have a chance to express a democratic alternative to essentially being ground down by debt peonage and letting the economy polarize even further between creditors and debtors.

AMY GOODMAN: And the significance of President Obama being there, and what this means—the meeting of the G20, what is happening in Greece—for the United States?

MICHAEL HUDSON: He’s making the threat that Europe has to cut its own throat in order to save the United States hedge funds and banks from taking a loss on the Greek bonds that they’ve insured. One of the reasons that people have been willing to buy Greek bonds is they bought credit insurance. And the European banks, mostly—maybe not Barclays or Deutsche Bank, but most banks—are not willing to write credit insurance, because everybody at the Böckler Foundation conference here in Berlin, every single economist says there is no conceivable way in which Greece can pay its debts. But the American hedge funds and bankers have come in and said, “We’ll write a guarantee.” Then they lean on President Obama and Tim Geithner to tell the Europeans: “You have to make Greece pay, so that we win the bets that we’ve made, because if we lose the bets, then we go under and the stock market crashes, and a lot of people can’t collect on their money market funds.” So this is just naked brute force that Mr. Obama is doing. He’s basically telling Europe, “Don’t go the democratic route. Support Wall Street.”

AMY GOODMAN: Michael Hudson, economist, president of the Institute for the Study of Long-Term Economic Trends, distinguished research professor of economics at University of Missouri, Kansas City, author of Super Imperialism: The Economic Strategy of American Empire.

We’re going to go to break. When we come back, we’re going to talk about a related issue. What happened with MF Holdings? How is related to Greece and to the United States? Its head, Jon Corzine, was both a senator and governor from New Jersey. Stay with us.

–

AMY GOODMAN: I wanted to bring Michael Hudson, the economist, back in to relate what we’re seeing with MF Global to what’s happening in Greece and in Europe right now. Michael?

MICHAEL HUDSON: I was discussing that earlier this morning with a German investment banker, and their belief is that, so far on Wall Street, Wall Street’s been able to have the attorney general they want, Eric Holder, who has refused to prosecute any financial crime on Wall Street at all, as my colleague Bill Black has pointed out. But now, the investment banker told me, it’s very much like The Godfather. Even the Mafia once in awhile has to get rid of one of its own members and sacrifice its own members for the common good. And the European told me that in Europe, it’s really a no-no to use customer funds for your own—to gamble with that at all, that this is so criminal that if there is no criminal prosecution of Corzine, if it turns out that he did take the money, then that is going to lead the European capital markets to withdraw their money from the American capital markets, because the whole — the whole of Wall Street would turn out to be gangsters, without any prosecution, without any rule of law at all.

So, this is the moment of decision.

Is Mr. Holder going to continue to refuse to prosecute any financial criminal and saying, “Crime is us,” or is he finally going to do—enforce the rule of law on America? Nobody knows over here.

AMY GOODMAN: William Cohan, your response?

WILLIAM COHAN: Well, I think Professor Hudson is a little extreme in comparing Wall Street to the Mafia and gangsters.

MICHAEL HUDSON: I didn’t compare it. That was the Wall — that was the German banker.

AMY GOODMAN: And Michael Hudson, we just got this word, breaking news, that the Greek prime minister, George Papandreou, is expected to offer his resignation within the next half-hour of this broadcast, sources in Athens have just told the BBC. Your response?

MICHAEL HUDSON: Well, I think the issue is—

AMY GOODMAN: We’ve got five seconds.

MICHAEL HUDSON: —what the man just said: what kind of capitalism are we going to have? Will it be industrial capitalism—

AMY GOODMAN: We’re going to leave it with that question. I want to thank you so much, Michael Hudson, because we just got a report in from Oakland, the general strike, the first in more than a half a century.