Mick Wallace (Wexford, Independent) | Oireachtas source

It is interesting to hear the different takes on what is happening. It is not surprising that we see things differently. The world would be a boring place if we all thought the same. The Greeks must be confused, however, as to who their friends are. Before last year's election in Greece, the unelected President of the European Commission, José Manuel Barroso, declared that Greece must respect its commitments. By commitments he meant the package of pulverising privatisations, tax rises and cuts in jobs, pay and services demanded by the EU and IMF in exchange for loans that cannot be repaid and are reducing the country to beggary. Knowing most Greeks rejected spiralling austerity but wanted to stay in the euro, Europe's political class ratcheted up the fear of forced exit meltdown.

The eurozone problems are not only the result of a cock-eyed one-size-fits-all currency structure which was always going to buckle and fracture under pressure. It is also the product of the wider crisis of neoliberal capitalism which first erupted in the banking system about five years ago and has since caused massive problems for public finances, jobs, services and living standards throughout the western world.

The Greek Government predicted a 25% fall in GDP by 2014. Recently, the Greek Finance Minister, Mr. Yannis Stournaras, said:

A decline in tax revenues and rising unemployment is deepening the recession. The economy is being undermined by the draconian austerity programme, early debt repayments and high interest rates on its loans. There is a great risk of prolonging the negative consequences for the economy and society. There is too much emphasis on short-term austerity and not enough on improving the country's long-term prospects. If the economy misses targets more austerity is applied which causes a continued fall in GDP followed by another failure to meets its target.

As a member of the troika in Greece the IMF is a part of this self-defeating approach, yet it said recently the first lesson is that fiscal consolidation efforts need to be complemented by measures that support growth. That is not what is happening there.

It is also upsetting to see that the Greeks are still spending too much money on arms. The former MEP, Dimitrios Papadimoulis, has said that well after the economic crisis had begun, Germany and France were still trying to seal lucrative weapons deals, even as they were pushing the Greeks to make deep cuts in areas like health. Some 15% of German and 10% of French arms exports go to Greece. Even though there has been a reduction of late, in 2012 the Greek military budget accounted for almost 4% of national output. This compares with the eurozone average of 2%. This defies logic.

A Greek writer, Maria Margaronis, recently wrote about Greece staring into the abyss. She says Europe must choose. She writes:

The misery to which Athenians have been reduced, the soup kitchens, the homelessness, the depression, the suicides, the rising tide of poverty that is swallowing the middle class and the feeling of disorientation and lost identity that comes with the collapse of the assumptions people live by is all adding to serious disillusionment.


When you ask people in the street if they would rather Greece went bankrupt than submit to further measures many now point out that it is already bankrupt, that the public sector workers have gone unpaid for months, hospitals are short on supplies and the poor are being wrung dry in order to pay the banks. Many say, "Let us get it over with", knowing it is impossible to know what a default might bring.

Maria Margaronis argues that is it not just Greece's identity that is at stake but Europe's. She says:

All eyes are fixed on Athens, but the way out of the crisis requires a choice of what kind of Europe we want. The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology coming from neoliberalism protects neither democracy nor human rights. Stiff necked and punitive, it prefers to eat its children.

Some people say there is no alternative. I do not agree. When an economy is struggling to breathe while the Government says there is only plan A, we should not accept that. There is always an alternative. Cutting the deficit is vital and it has to be done, but at the right time and in the right way. Otherwise it will make things worse. Austerity squeezes the life out of an economy at the very moment it needs more oxygen. Only growth puts money into the national coffers. If that means short-term borrowing, so be it. After all, we are borrowing plenty and so is every other country in Europe.

The troika assumed the Greek economy would shrink by 4.3% in 2012, hold steady in 2013 and grow at 2% per year thereafter. It is hard to credit where those figures came from. The Greek economy actually contracted by 6.5% in 2012, which was not a big surprise. Is it holding steady in 2013? I do not think so.

Austerity, as we know, has an ideology behind it. It is not just about balancing budgets. It means reducing wages, deregulation of the labour market, low public spending and tax exemptions for capital. It is not necessarily the way to go.

Bank bailouts are strange things. I was looking at the words of the then Minister for Finance, the late Brian Lenihan, on the night of 30 September 2008, when he said:

The Government's purpose and the objective of this legislation is to reinforce the strength of the Irish economy, the financial sector and especially to protect the long-term interests of the taxpayer. Maintaining a stable banking system is at the heart of the functioning of our economy and the daily lives of everyone living in our country. This legislation is not about protecting the interest of the banks. It is about the safeguarding of the economy and everyone who lives and works in this country.

He went on to say:

I stress that the provisions we are asking the House to approve are in no way a bailout for the financial system. The granting of guarantees to individual institutions will be subject to specific terms and conditions for each institution, including appropriate remuneration of the benefits of the guarantee. This is important to ensure the implementation conforms to EU state-aid and competition law requirements. The guarantee provided by the State is not intended to insulate the shareholders of these financial institutions from the risks attached to the investments they have made, as much as they may have benefited from significant rewards over the years.

In that context, I want to make two crucial points. The guarantee is not free and the taxpayer who ultimately underwrites this support will be remunerated for the value of the support provided. The terms and conditions on which the guarantee is provided will ensure the taxpayer gets value for money.

A very good article by Matt Taibbi, was recently published in the United States. It is called Secrets and Lies of the Bailout: One Broker's Story. He says:

It has been four long winters since the federal government, [through] Treasury Secretary, Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you'd think the bailout was the best thing to hit the American economy since the invention of the assembly line.

It was all a lie - one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in - only temporarily, mind you - to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. [...]

But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in official feature of the financial rescue. Money was not the only thing the government gave Wall Street - it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. [...]

Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.

Today, what few remember about the bailouts is that they had to approve them. It wasn't like Paulson could just go and unilaterally commit trillions of public dollars to rescue Goldman Sachs and Citigroup from their own stupidity and bad management ... At one meeting to discuss the original bailout bill - at 11 a.m. on September 18th, 2008 - Paulson ... told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action and the world economy would collapse "within 24 hours". [...]

The White House and leaders of both parties actually agreed to this preposterous document but it died in the House when 95 Democrats lined up against it. For an all-too-rare moment during the Bush administration, something resembling sanity prevailed in Washington.

So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 million of troubled mortgages from the banks and modify them to help struggling homeowners. Section 109 of the act ... specifically empowered the Treasury secretary to "facilitate loan modifications to prevent avoidable foreclosures." With that promise on the table [the Act was passed].

But within days of its passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favour of the direct injection of billions in cash into companies like Goldman and Citigroup. [...]

[In January 2009] Larry Summers, the senior economic adviser to ... Obama ... who had been forced out as Harvard president for suggesting women lack a natural appetite for math and science [...] laid out a five point plan in which the bailout was pitched as a ... giant populist programme to help ordinary Americans. Obama, Summers vowed, would use the money to stimulate bank lending to put people back to work. He went so far as to say the banks would be denied funding unless they agreed to "increase lending above baseline levels." He promised that "tough and transparent conditions" would be imposed on bailout recipients, who would not be allowed to use bailout funds [to enrich shareholders or executives]. As in the original TARP bill, he pledged that bailout money would be used to aid homeowners in foreclosure [and] promised that the bailouts would be temporary - with a "plan for exit of government intervention" implemented "as quickly as possible."

Sadly, from originally giving $700 billion towards looking after those with distressed mortgages, the figure was reduced to $50 billion, then $30 billion and by November 2012, the total figure that had been allocated to helping people struggling with distressed mortgages was $4 billion, less than 1% of the $700 million. The article continues:

But even before Summers promised Congress the banks would be required to increase lending as a condition for receiving bailout funds, officials had already decided not to even ask the banks to use the money to increase lending. In fact, they'd decided not to even ask banks to monitorwhat they did with the bailout money. Barofsky, the TARP inspector, asked Treasury to include a requirement forcing recipients to explain what they did with the taxpayer money. He was stunned when the TARP administrator Kashkari rejected his proposal, telling him lenders would walk away from the program if they had to deal with too many conditions. [...]

In the end, there was no lending requirement attached to any aspect of the bailout, and there never would be. Banks used the hundreds of billions of dollars for almost every purpose under the sun [except] lending to homeowners and small businesses in the cities they had destroyed. [...]

Moreover, instead of using the bailout money as promised - to jump-start the economy - Wall Street used the funds to make the economy more dangerous. From the start, taxpayer money was used to subsidize a string of financial mergers, from the Chase-Bear Stearns deal to the Wells Fargo Wachovia merger to Bank of America's acquisition of Merrill Lynch. Aided by bailout funds, being Too Big to Bail was suddenly Too Good to Pass Up. [...]

They Lied About The Health Of The Banks.

The main reason banks didn't lend out bailout funds [was] simple: [they] needed the money ... to survive. [That led] to another ... broken promise - that taxpayer money would only be handed out to "viable" banks. [...]

Congress had approved the $700 billion to buy up toxic mortgages but $250 billion was now shifted to direct capital injections for banks. This new ... portion of the bailout was called the Capital Purchase Program ... [In announcing this] Paulson ... promised that they would be stuffing cash into "healthy and viable" banks. This ... was the entire justification for the bailout: That the huge infusion of taxpayer cash would not be used to rescue individual banks, but to kick-start the economy by helping healthybanks start lending again.

This did not happen. It turned out that nine of the major banks that got most of the money were in serious trouble at the time and would not have survived without Government money, which in some cases they got for as little as 0.01% interest. The Government did conduct regular stress tests on some of these banks but that was a joke. If the wrong results came in, the figures were changed. The article goes on to state:

This episode underscores a key feature of the bailout: the government's decision to use lies as a form of monetary aid. State hands over taxpayer money to functionally insolvent bank; state gives regulatory thumbs up to said bank; bank uses that to ... sell stock; bank pays cash back to state. [There are too many similarities between what happened in America, Europe and here.] This is a virtual repeat of the financial crisis, in which a wave of greed caused bankers to ... chase yields everywhere, to the point where lowering lending standards became the norm. Now the government, with its Implicit Guarantee, is causing exactly the same behavior - meaning the bailouts have brought us back to where we started. [There has never been a better time to be too big to fail.]

[W]hat ... did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even [bigger], increases risk, discourages sound business lending and punishes savings by making it easier and more profitable to chase high-yield investments than to compete for small depositors. [...]

Other than that, the bailout was a smashing success.

See this speech in context