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False Dilemmas A critical guide tothe Euro Zone Crisis by Corporate Watch First published 2014 by Corporate Watch Corporate Watch is an independent, not for profit research and publishing cooperative that investigates c/o Freedom Press the social and environmental impacts of corporate Angel Alley power. Since 1996 Corporate Watch has been 84b Whitechapel High Street publishing corporate critical ‘information for action’ in the form of books, reports, investigative articles, London E1 7QX briefings and magazines. www.corporatewatch.org This publication is part of Corporate Watch’s Series Demystifying the Financial Sector and the Banking on Crisis project. Contact us if you’d like to request or organise a workshop or presentation, or keep an eye Written by Christina Laskaridis on our website for details of upcoming events. Corporate Watch is run on a tight budget and we need Edited by the Corporate Watch collective your support to keep going. We do our best to avoid Illustration and design by Ricardo Santos dodgy funding, and we provide all our work for free online. If you like our work, please consider helping us Printed on 100% recycled paper. with whatever you can afford, by visiting the donate page on our website. Even small amounts will help us stay independent and sustainable. This work is under the Creative Commons Attribution 4.0 Acknowledgements: International License. Special thanks to Rosie, Naomi and Gina for the http://creativecommons.org/licenses/by/4.0/ guidance that kept this project moving; Adam Burton for his help and patience with the original design; Spyros Marketos, Claire Fauset, Sergi Cutillas, Please use the material, adapt it for your own purposes, Leonidas Vatikiotis, Andy Story, Nuno Teles, distribute it if you think it is good, and let us know Andreas Chatzidakis for valuable comments and feedback and comments so we can improve it. feedback; and the Corporate Watch cooperative for the opportunity to work on this project and the [email protected] assistance given to complete it. British Library Cataloguing in Publication Data. A catalogue record for this book is available from the British Library. ISBN: 978-1-907738-10-4 Key Messages Based on myths and false dilemmas, the mainstream narrative around the crisis still dominates discussion. Breaking away from this, this guide shows that: • The process of European integration facilitated a transfer of wealth and power from poor to rich countries through debt instruments and trade relations. Economic imbalances between countries were widened due to the euro area structure and the response to the crisis. • Private sector debts were nationalised creating huge problems for public fi- nances; yet myths were spun to justify a ‘solution’ that involved ever increasing amounts of sovereign debt whilst imposing widespread unemployment and dramatic reductions in living standards. • A step towards social and economic justice would be for these debts to be can- celled and those responsible both nationally and internationally to bear the burden of cancellation. This guide compiles arguments and evidence to chal- lenge debt repayment. • While banks and other financial institutions are responsible for countries’ in- debtedness and have helped create the crisis, at the same time they have profi- teered from it in numerous ways, such as betting against countries’ default, and then benefiting from the latter’s bailouts. • Future profitability is ensured by reorganising the institutional landscape to promote private corporate business opportunities. This report shows who is profiting from the crisis and reveals how and why grassroots mobilisations are rising up against the European establishment. This guide argues for opposition to the EU that is not based on discrimination or prejudice, to reclaim the space that has so far been dominated by far right movements. • The crisis has cast aside any pretence of democracy; the kind of changes insti- tuted are only possible with broad, general use of force, violence and appeals to nationalism and xenophobia. The guide documents the far reaching impacts of austerity politics and presents the main social, economic and political arguments to counter it. Contents Introduction 6 Part 1: Background economics and institutions 10 Chapter 1: Introducing the actors 12 Chapter 2: Basic background to relevant economics 18 Part 2: Why has all this happened? 30 Chapter 3: The importance of understanding causes 32 Chapter 4: Let’s bust the myths! 34 Chapter 5: Taxation policy’s role in the crisis 39 Chapter 6: The euro zone crisis is a continuation of the global financial crisis 42 Chapter 7: Digging deeper 44 Part 3: What have the authorities done? 54 Chapter 8: Bailouts: What are they and where does the money come from? A look at EFSF, EFSM, Greek loan facility, ESM, IMF and the bank bailouts 57 Chapter 9: Austerity does not repay debts, it destroys people 69 Chapter 10: The European Central Bank’s actions and responses to the crisis 78 Chapter 11: Changes in EU structures: using the crisis as an excuse 83 Chapter 12: New bodies: authorities chasing their own tails 86 Country Overviews: Greece, Ireland, Portugal, Spain, Cyprus 94 Part 4: Who Profits from the Crisis? 102 Chapter 13: Back-door bailouts for core country banks 105 Chapter 14: The troika benefits from the bailouts 108 Chapter 15: The ECB’s role 109 Chapter 16: Vulture funds and other financial institutions 111 Chapter 17: Privatisation: daylight robbery 113 Part 5: Groundswell 118 Chapter 18: Respect existence or expect resistance 119 Chapter 19: Turbulence in Greece 120 Chapter 20: Details of debt resistance 126 Conclusion 135 Glossary 136 In the nightmare of the dark All the dogs of Europe bark, And the living nations wait, Each sequestered in its hate; W.H Auden, 1939 This guide examines some of the oppressive financial tool to extract prof- common assumptions surround- its for the institutions that dominate the ing the crisis, providing evidence financial system. Meanwhile, EU and na- and economic facts to refute the tional officials implement policies which myths and highlight some alter- Introduction are ruinous for people’s lives while hiding native and critical perspectives of under the pretence of working in the the situation. Those who created ‘public interest’. This is despite the fact the crisis and baptised it as a sov- that it is clearer than ever that their in- ereign debt crisis, eagerly ignored terests are diametrically opposed to those the fact that from 2002 to 2010 This guide provides a comprehensive over- of the 99%. The horrific consequences of Spain, Portugal and Ireland had view of the key features and events of the prioritising debt repayment over all other less of a sovereign debt problem euro zone crisis. Aiming to provide a window concerns amplifies the urgent call heard in relative terms than Germany into this complicated topic, it brings togeth- throughout Europe: “we do not owe, we and France.1 Highlighted at every er all the relevant issues so that those with will not pay”. Debt resistance in Europe, stage in the guide is concrete or without prior knowledge of this issue can and around the world, shows we have information to understand the understand the many dimensions of the cri- both the imagination and the means to magnitude of what is at stake. sis. We explain the key events and themes, refuse payment, and find an alternative. What we often call a ‘debt crisis’, critically examine the official narratives it is at the same time a lot more and debates, and explore what alternative The main argument presented in this than this. The crisis is a time perspectives are out there. Much has been guide is that the euro crisis is distorted by where everyone is pitted against written and debated about the euro zone what can be called ‘false dilemmas’ which each other, and where every com- crisis, yet amidst so much media and official are put forward by the media and official munity is divided. Harsh distinc- obfuscation, it often seems too complicated accounts, and which polarise discussion. tions are made between ‘local or to get to grips with. The false dilemmas are presented as opposites: ‘austerity or default’, or ‘euro foreigner’, ‘employed or unem- We hope to show how debt has been used as versus drachma’, ‘unemployment versus ployed’, ‘violent or non-violent’; a lever to pass through extremely socially immigration’. They serve to frame the this constitutes a divide-and-rule harmful policies, euphemistically called public discourse in such a way that dis- strategy to exculpate those who fiscal adjustment, by holding entire coun- torts the reality, and manipulates people’s caused and continue to gain tries to ransom. Debt has been used as an interpretations and activities. from the crisis, by blaming the 6 but a return to the idealised ‘business southerners, the migrants, the public as usual’ of before. Examining how the sector, the claimants, the youth, the economy works – in both boom and in protesters... all of us. For instance, to bust - will entail questioning the idea facilitate privatisation, private sector of economic growth upon which our employees are turned against public crisis-ridden economic system is based. sector employees while the rights and Although a deeper account and explana- working conditions of both deteriorate. tion for the recurrent booms and busts Furthermore, history shows that the Such false dilemmas obscure the reasons is not the object of this guide, the per- benefits of economic recovery are in- for the poverty and misery that many are spective taken is that the contemporary variably not experienced by all. experiencing, at the same time pushing economy has been transformed into a financialised, debt-based economy. It us all further down the economic and Proposed solutions to the crisis that has been aptly summarised by political political dead end.

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