Citizen Action Monitor

The eurozone is waging financial war on Greece to teach it a lesson, says Michael Hudson

Foreign banks want to bleed Greece when a policy of debt cutting and tax reform would revive the economy

No 1385 Posted by fw, July 2, 2015

“Now the European Central Bank wants to get paid, but the debts can’t be paid. So the central bank says, okay Greece. Sell us your islands. Sell us your ports. Sell us your lands. Sell us your raw materials. This is foreclosure time. And if you can’t pay, we want everything in the public domain. And you also have to impose austerity. You have–only 20 percent of your population has emigrated. You only have a 60 percent unemployment rate for youth. You’ve got to increase the unemployment rate to 80 percent, double the emigration, in order for us to make the loans to your government that will turn right around and pay us.”Michael Hudson, The Real News

In an interview on the Real News, Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri, begins by filling in some significant gaps in the Greek Debt Crisis, typically ignored by the Network News. Included among Hudson’s key revelations are these — how Greece, with help from Goldman Sachs, falsified its debt in order to get into the eurozone; why France, Germany, Obama and Geithner opted to rescue bond holders, sacrificing Greece to the wolves; and the impossible demands levied on Greece, amounting to financial warfare. Hudson concludes with some “what next” advice.

Although the Real News originally presented a two-part interview of Michael Hudson and Bill Black appearing together, the abridged transcript in the repost below focuses exclusively on Hudson’s remarks for parts 1 and 2. As well, the abridged transcript features added subheadings, hyperlinks, highlighted text, and a few corrections. Embedded versions of the two videos are not included in the repost.

To access both parts of the interview, including both videos along with complete transcripts, click on the following linked title.

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US Hedge Funds Get Bailed Out If Greeks Pass Bailout Referendum by The Real News, June 30, 2015

Foreign banks want to bleed the patient when a policy of debt cutting and tax reform would revive the Greek economy 

ABRIDGED TRANSCRIPT

Part 1 ~ [Michael Hudson highlights how Greece became entangled in debt] ~

Circa 2001, Greece falsified debt in order to get into the eurozone

Well, today’s problem with the debts really stem back from 2010 and 2011 when Greece obviously couldn’t pay. When Greece joined the eurozone [in Jan. 2001], it falsified its debt figures. The head of its central bank, [Lucas Papademos], worked with Goldman Sachs to make complicated derivatives to hide it all.

In 2010, truth about Greece’s fudged debt revealed

In 2010 right after the PASOK party came to power in Greece, they revealed the fact that their figures had been fudged all along, and that the debt was so large that Greece couldn’t pay.

IMF calculated Greece’s true debt, concluded they couldn’t repay, recommended write-down of Greece’s debt

So the International Monetary Fund, which hadn’t been making loans — almost had no customers in the world — had its European staff calculate [the debt]. And the staff unanimously said, Greece can’t pay these debts. These are fraudulent debts that are all, that are way beyond the ability to pay. They’ve got to be written down. And the board of directors agreed.

French and German banks, as largest holders of Greek debt, balked at a write down

But Dominique Strauss-Kahn, who was the head of the IMF when he wasn’t going to the sex parties, wanted to run for president of France. And he talked to Sarkozy, and Sarkozy said, wait a minute, French banks are the largest holders of Greek debt. If Greece doesn’t pay and writes them down, the French banks will go under. And German banks are the second.

In 2011, Obama and Geithner, protected Wall Street holders of Greek, nixed write-off, said Greece must be sacrificed

But then at the G8 meetings in 2011, President Obama went over along with Tim Geithner and said, our big campaign contributors are on Wall Street, and they’ve made huge bets that Greece can pay. If Greece doesn’t pay, then all these gamblers and derivative players are going to lose their bets. You’ve got to sacrifice Greece and you’ve got to drive it into poverty, and lend the Greek government the money to pay the bond holders so that our Wall Street banks won’t lose money.

European Central Bank (ECB) and IMF paid off private bond holders, Greece left on hook to ECB and IMF

So the European Central Bank told the IMF if you want to be a player, you’ve got to ignore what the stats said, and they did. And the European Central Bank and the IMF paid over 100 billion Euros to the bond holders. So Greece, instead of owing private bond holders, owed the IMF and the European Central Bank.

ECB demands that cash-strapped Greece sell off its public assets to pay down debt – islands, ports, lands, raw materials

Now the European Central Bank wants to get paid, but the debts can’t be paid. So the central bank says, okay Greece. Sell us your islands. Sell us your ports. Sell us your lands. Sell us your raw materials. This is foreclosure time. And if you can’t pay, we want everything in the public domain.

As well, if you want more loans to repay us, impose austerity, increase unemployment rate to 80%, double emigration

And you also have to impose austerity. You have–only 20 percent of your population has emigrated. You only have a 60 percent unemployment rate for youth. You’ve got to increase the unemployment rate to 80 percent, double the emigration, in order for us to make the loans to your government that will turn right around and pay us. [Crosstalk].

Europeans refused to take a book loss for debts that can’t be paid, instead gave Greece an ultimatum – austerity or face our smash and grab

There need not have been any consequences for the people at all of Greece not paying the IMF and not paying the European Central Bank, because this money was all paper money created to begin with. It’s just a book loss. But the Europeans said something else, that although we don’t need the money, we will bankrupt you and we will cause a bank crisis if you don’t comply with what we want. So it’s either austerity or we will smash and grab, take your pick.

Part 2 ~ [The eurozone wages financial war on Greece] ~

Eurozone is waging financial war on Greece to teach it and other indebted member countries a lesson

Well, what Bill [Black[ was describing in the Part 1 is really finance as war. What they want is the same thing that warfare wants. They want the land, and they want a tribute in the form of interest. Basically, the eurozone went to Greece and said, look, we’re going to — just in case Spain’s Podemos party or other countries want to not pay their debts — we’re going to use you as an example and we’re going to wreck you.

Greece’s needs to show countries in Europe and beyond how to create a viable economic alternative to crippling austerity

And it’s begun to backfire this week, because what they show is that remaining in the eurozone itself is pretty hopeless, financially. And the leaders of the Syriza party have said, look, we’re not only fighting for Greece, we’re fighting for all of Europe. And what we want to do is save Europe from austerity. And we want to save Europe by having a real central bank whose role is to create money, to spend money into the economy. We want a central bank that doesn’t give money to banks. We want a central bank that pays for government spending and rebuilding the Greek economy. And we need to be out of the eurozone in order to do that.

Greece needs a “domestic debt holiday” and a fair and equitable tax system to prevent oligarchs from using banks to avoid taxes

[What Greece is] talking about [is] a lot of debts are going to be canceled. Not only to the European banks, but we’re talking about a domestic debt holiday very much like Germany’s economic miracle. In 1948 the Allied monetary reform, where they canceled all the internal German debts except for the debts that employers used for wages. We’re talking about a huge debt write off. But you don’t want to make real estate owners suddenly owning their property free and clear. So we need a tax system that not only is going to stop the tax evasion by the oligarchs who have used the banks to avoid it.

End tax deductibility of interest payments, increase taxes for profits made, for example, from mining of non-renewable resources

We’re going to take away the tax deductibility of interest payments, so that they can’t pretend to expense all their profits and interest, and we’re also going to have a rent tax. For what we’ve privatized already, we’re going to tax the economic rent* to recover for the country what these owners didn’t create, like the phone systems that Carlos Slim made in Mexico. We’re going to collect the economic rent fully in a tax system. So financial reform is going to go hand-in-hand with tax reform, and that’s what terrifies the Europeans. Because they say, wait a minute, all of the money that you call profits is actually rent extraction. It’s all exploitation. You can’t stop exploitation, that’s what our financial system is all about. [*economic rent is defined as “extra returns that firms or individuals obtain due to their positional advantages.”]

Moving forward, Michael Hudson is going to be advocating debt write-off

Well first of all, for treating the debt claims of the IMF and the European Central Bank as odious debts. This means they shouldn’t have been put in place to begin with, and the debts, the money that was lent to Greece, except it went right through Greece to pay the French banks and the German banks, and to enable the American Wall Street banks to make a killing.

The Wall Street banks made whole reputations of buying bonds at 30 cents on the dollar and suddenly they went up to 100 cents on the dollar. The market basically said Greece couldn’t pay in 2010. The market priced its bonds very low. Right now Greece bonds are yielding 33 percent. So the market says Greece can’t pay.

And so when Europe is saying, we want to impose a market economy, everything the European Central Bank and IMF is doing is against the market. They’re not recognizing what any real market analyst realizes, that the debts can’t be paid. We want to create a real market economy by getting rid of the

[incompr.], by getting rid of the exploitation, by writing off the bad debts, by reforming the tax system.

With the support of the people, Syriza should throw the “bad guys” like Lucas Papademos in jail

A few years ago Christine Lagarde provided a list to Greece of Greek tax evaders that had 50 billion Euros in Switzerland. This 50 billion Euros is enough to pay–was enough to pay all of Greece’s debts. And the technocratic leader that the financial interests installed, Lucas Papademos, the very man who falsified all of the Greek payments and debt statements in 2001, didn’t do anything at all with the list. He refused to move against the oligarchs.

So what you have is, is really a combination of treason and criminal behavior. Now that there is a crisis in Greece this enables Syriza to get the support of the people to throw the bad guys in jail. I’d like to say to throw the lawbreakers in jail, but they don’t have any laws against that kind of crime taking place. So they have to draw up a whole new set of laws to make Greece a fair economy instead of the unfair economy that the IMF and the European Central Banks have turned it into.

SEE ALSO

A New Mode of Warfare: The Greek Debt Crisis and Crashing Markets by Michael Hudson, Information Clearing House, June 29, 2015 – Michael Hudson’s articles tend to be more concise and coherent than his talks. Although this article covers much the same ground as his, at time, tongue-tripping interview on the Real News, readers may find this piece a helpful supplement.

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