Home » 2014 » From Washington to Berlin Consensus (Brussels, March 8, 2014)

From Washington to Berlin Consensus (Brussels, March 8, 2014)


DEU Europa Verfassungsgericht ReformvertragI ‘ll try to answer the subject of the panel (“Who profits from debt and the debt crisis?”) using the dramatic experience of Greece of the last years.

  • The first who benefits from debt crisis and the restructuring of debt is the financial system which caused this crisis, both Greek and financial banks. I stress three different facts:

    • According to data from the Bank of International Settlements, investements of European banks (especially German and French) on greek bonds on 31 of December 2009, were 122,6 bn. euros. Two years after, and two months before the haircut, those banks were holding 65 bn. In other words, they used the first two years of rescue to get rid of the greek bonds, knowing that at the end of the day haircut was unavoidable or a matter of time. Meanwhile, the greek bonds were bought by the ECB, helping in this way: first, speculation and second, the transfer of the burden to the official side, the side of EU tax-payers, which a bit later refused the haircut for these titles.

    • Greek banks have been compensated for 100% of their investments on Greek bonds, while greek public pension schemes, universities and even hospitals lost up to 95% of their mandatory deposits in Bank of Greece. Social security schemes alone lost 14 bn. Euros. Consequently, the bailouts to the countries are really back door bailouts to the big banks. The bailouts werenot about sustainability of sovereign debt but of banks.

    • The biggest achievement of financial sector was the nationalization of sovereign debt. In 2009, a much smaller debt of 299 bn euros (or 129% of GDP) was owned by private sector by a percentage of 75%. Now after the restructuring of 2012, which was the biggest one in recent history (bigger than that of Argentina), public debt has not only increased, reaching 321 bn euros (or 175% of GDP) but, the most serious is that a share of 76% is on the hands of official sector (EU governments, IMF, ECB, national central banks, EFSF, ESM).

  • The second factor who has been benefited from debt restructuring is the ruling – not financial – capitalist class who keeps producing, selling, etc. A strict term of the second memorandum (which accompanied the second “rescue” loan of 2012) was the horizontal reduction of wages by 22%. According to official statistics, these four years of crisis, available income has been shrinked by 34%. By another term of Memorandum, the collective bargaining system between trade unions and employers unions has been dismantled. Now, government decides and announces the height of salaries. It’s obvious that these violent changes have been proved the last nail in the coffin of trade unions.

  • The second way the capitalist class has been benefited by debt crisis and restructuring is privatizations. The sell-off of public property (from real estate and airports to water and energy companies) was included in every Memorandum as an aim to reduce public debt because the revenues are going directly, by law, to the servicing of debt. Profitable opportunities are created for European corporations to take over vital infrastructures and Greek businessmen to join as minor partners.

  • Among those who have been benefited from debt crisis are also the hegemonic states of European Union, or core countries of eurozone and most of all, Germany. They have earned in two ways. First, economically because, among others, since 2009 they are borrowing in much better terms. According to an answer of Finance minister Wolfgang Schauble these earnings (of “fly to the quality” as they called) were 41 bn. Euros. Also, EU governmnets profit from bailouts because they lend money with an interest rate that is two – three times higher than what they borrow at. The second way is political. The typical equality among the member states belongs definitively to the past, while Germany shows again its imperialistic, hegemonic face, transforming the crisis-hit periphery to rogue states. Economic governance and banking union provisions are very telling on this respect.

All these reasons, in my opinion, justify the demand of imminent and unilateral cessation of payments of public debt. An audit of the public debt can help to legalize its abolition. In this struggle we have nothing to wait from ECB, or EU, which have been proved much more aggressive than IMF, servicing creditors’ interests.

Greek debt audit believes that cancellation of debt must begin from Troika’s debts, which are a percentage of 66% of total debt. Loans of mechanism are a very clear case of “odious debt”, as Eric Toussaint has shown. Following Alexander Shakh’s definition, first, the two greek governments of Papandreou and Papademos that signed the two loan agreements (5.2010 and 3.2010) had no legitimacy to do it. Second, those loans don’t serve Greek people’s interests. According to a recent report of Attac 77% of Troika’s money has gone to creditors for the servicing of debt and financial institutions, only 23% went to state budget. Third, creditors knew about all those. Consequently, “rescue mechanism’s” loans can be characterised as odious, as a means to cancel them. It’s a matter of political willing.

From another point of view the above-mentioned are confirmed, answering another question: “Who has lost the last years from debt crisis and restructuring?”. Well, who have lost:

  • Greek taxpayers who have seen every kind of tax burden to be increased. Only real estate taxes have been increased by more than 700%. At the same time Troika and Greek political elite agree to tax reductions on capital.

  • Greek working class who is payed with wages of 480 euros a month, while 1 in 3 is unemployed, and among those who are lucky keep working 1 in 3 isn’t paid.

  • Cypriots normal citizens-depositors who lost even 47% of their bank accounts. The same will happen in Greece too, while EU in meantime decided officialy the bail-in on April of 2013.

  • Greek and Cypriot youth which immigrates massively to North Europe, USA and Middle East. As a result in the periphery of eurozone we observe the brain drain we saw on 80’s and 90’s in Latin America, with the only diference that in the seat of USA now sits Germany, The Netherlands, etc.

  • National sovereignty of periphery countries that is into question, like never before in the post war period.

  • Most permanently, on the camp of losers from debt crisis are the peoples of Europe who suffer from Stability Pact, Euro Plus Pact, two and six pack that form the cornerstones of Berlin Consensus. The most modern and dangerous version of Washington Consensus, that rised from the ashes of current debt crisis. 

(Speech at the conference, Alternative solutions to the debt crisis, organised by Rosa Luxemburg Stiftung and European Network on Debt and Development, 6-8 March 2014, Brussels)

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