An open letter to the leaders of Europe: Abandon the Euro's 'gold fetters'

(Image source: Bloomberg Businessweek)

I am posting below my latest contribution to openDemocracy published on May 28.  In an open letter to the leaders of Europe, I argue that they need to abandon the fetters that chain them to the interests of private wealth, and threaten European disintegration:

“On May 15th, in what can only be described as an act of coercion, an impoverished and effectively insolvent Greece acceded to the handover of a bond payment – €436 million – to private financial ‘vulture funds’. The Greeks had little choice. However, in acquiescing to this handover – facilitated by its paymasters,‘the Troika’ – impoverished Greeks protected reckless private wealth from the consequences of their risks. Namely: losses and bankruptcy, and the discipline of market forces. Continue reading… ›

The architects of the Euro hung by their own petard

With acknowledgements to the Economist: front cover 26 November, 2011

Dear readers…posted this last night, but  failed to add links…so have updated this morning….And now at 12.54 on 28 Nov, following revelations from Bloomberg, am adding in a reference to the extent that Morgan Stanley was bailed out in 2008.

A petard, I am reliably informed by the Web,

“was a bell-shaped metal grenade typically filled with five or six pounds of gunpowder and set off by a fuse. Unfortunately, the devices were unreliable and often went off unexpectedly. Hence the expression, where hoist meant to be lifted up, an understated description of the result of being blown up by your own bomb.”

Correct or not, this is a helpful analogy for the crisis of the Euro. The grenade that is the Euro has a fizzing fuse that threatens to explode imminently, causing visible panic in markets, in parliaments and treasuries across the world. Mainstream economists are either dodging the bullets and like the cowards they are, pretending that ‘it’s nothing to do with me guv’.  Or else they’re panicking in ways that are crass and unhelpful, banging their heads against the brick wall that is the Bundesbank and ECB, and demanding that someone, somewhere defuses the bomb.

The Economist has a dramatic leader this week (“Is this really the end?”) warning of grave threats and offering Chancellor Merkel and other EU leaders ways of avoiding a comet-like crash. Like many others, leader writers on the Economist, somewhat belatedly, want the ECB to act as a central bank, and to  provide liquidity to sovereign members of the Eurozone.

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The game is up: the age of liberal finance over. The Left's Plan B?

By Ann Pettifor. An edited version of this piece was published on Left Foot Forward, 14 September, 2011. This original, longer version posted 19 September, 2011. 

The game is up. The 2007-9 private banking crisis that started with the unpayable debts of the US sub-prime sector, was never over. The crisis has now moved on to include the unpayable debts of sovereigns owed to private European bankers. It is increasingly clear that there is declining political and institutional support for further private bank bailouts. The dramatic resignation on Friday 9th September of Jürgen Stark, architect of Europe’s equivalent of the Gold Standard – the Growth and Stability Pact – marks an important step in the resistance to bailouts by the ECB; in the inevitable collapse of the Maastricht Pact, and with it, the utopian vision of the neoliberal Euro.

And so the age of liberalised, de-regulated finance appears to be over – at least in Europe. That is the conclusion of investors in both Wall St and the City of London and explains the collapse of confidence in banks and the volatility of stock markets as investors rush for the exits, transferring speculative gains into the safety of government bonds.

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Argentina/Greece: De-fault lines?

So, five of the world’s biggest central banks have decided on co-ordinated action to bail out – once again – the European private banking sector. In other words, central bankers are hoping to shore up private bankers, help their defer their losses, and prevent them being disciplined by market forces for their reckless lending to EU sovereigns.

Shareholders and investors in these banks must be delighted. Once again, reckless speculation and lending has paid off. Once again the world’s taxpayers have ridden to the rescue.

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An open letter to the people of Greece: restore the Drachma


Unemployment poster ‘jobless men keep going, we can’t take care of our own’, 1931.

We write to encourage you – to urge you on in your resistance.

In your defiance, you understand Greece is slave to the interests of private wealth.

You must understand too that it is private wealth that needs Greece. Greece does not need private wealth.

As is obvious to you – if not to EU finance ministers – Greek and other EU taxpayers are asked to shore up the immense wealth and reckless lending of private French, German, British and American banks.

Without your taxes, your sacrifices, the privatisation of your government’s assets, these bankers once again face Armageddon – as they did in autumn of 2008.

Just as then, so now they have rushed behind the ‘skirts’ of their defenders at the IMF and the EU. On their behalf, these unelected officials and some elected politicians demand that Greek and EU taxpayers shield private sector risk-takers from the consequences of their risks. The very antipathy of market principles.

In the process, the European Union is torn apart. Politicians, backed by officials, now defy the founding goals of the Community and, in the interests of private wealth, set the peoples of Europe against each other.

On 20 June, 2011 the acting Head of the IMF called for “immediate and far-reaching structural reforms, privatization, and the opening of markets to foreign ownership and competition.”

Which proves our point: private wealth needs Greece. Greece does not need private wealth.

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Bankers: draining funds from taxpayers courtesy of finance ministers

Irish Finance Minister Noonan and Luxembourg Treasury Minister Frieden attend an EU finance ministers meeting in Brussels. Image source: www.reuters.com

I find it hard to write about the crisis in Greece….because the tragedy unfolding there is so reminiscent of the tragedies that unfolded in Africa, Latin America and South East Asia in the 80s and 90s – and I was very close to those. Seeing the same economic mismanagement replicated in well-armed Europe is scary. Watching as tensions rise between the peoples of Europe…given our bloody history….is frightening.  So I have been silenced by rage.

But my outrage boiled over today, because of what the FT wrongly calls a ‘subtle’ change unveiled by EU finance ministers to the terms of the massive Eurozone bailout fund – a fund backed by European taxpayers. This is how the FT explains it:

Any bonds issued in future by the eurozone’s new €500bn rescue fund on behalf of Ireland, Greece or Portugal will not enjoy “preferred creditor status” – an alteration to the fund intended to help those nations return more swiftly to private capital markets.

For those who do not dabble much in sovereign debt, let me explain. Common to the whole of the international financial architecture/system for sovereign lending, there is one principle that overrides all others. That the IMF/World Bank are ‘preferred creditors’. Just as when a company goes bankrupt, the supplier that sold it widgets, is ranked lower than the bank that provided the overdraft – so in international ‘law’ – taxpayer-backed lending from the IMF and World Bank is ‘preferred’ when it comes to repayment – over all private commercial lending. And it is preferred because it is public money.

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Crisis? What crisis?

Apropos the last post: we dissidents are not alone. Have belatedly come across David Malone’s  excellent post (written earlier but somehow missed by me) on the same theme –  the airbrushing of the financial crisis from all political discourse. David goes further and highlights the implications for democracy and the rule of law.  I hope he does not mind if I reproduce a few paragraphs for the benefit of those that have not already read it.

It really is very good.

“The official narrative today is that the plan of recovery is working. The narrative focuses on the rise of the stock markets to almost pre-crash heights. The failure of housing or commercial property markets to recover and the fact that unemployment is hideously high is simply no longer part of the recovery narrative. These things have been dropped. What has been added has been the ‘shocking’ level of public, national debt. In the new narrative the cause of the ballooning of public debt has been steered away from facts about the cost of the bail outs or how the disintegration of the speculative bubble caused a subsequent collapse of real economic activity. The new story is that the debts we have now are nothing to do with the banks and their temporary difficulties. They are due to a deeper incontinence in public spending.

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Does Greece have a Tea Party?

26th April, 2010

Dear readers….this is my latest Huffington Post.

“The humiliating surrender of Greece’s economic autonomy came just last Friday, 23 April, 2010. The democratically elected Prime Minister, George Papandreou transferred to unelected officials in Brussels and Washington the power to determine Greece’s fiscal policy. In other words, decisions about taxation, and how tax revenues should be spent.

In a 26 April interview with the Financial Times on the island of Rhodes, the Prime Minister, George Papandreou admitted his country had accepted “a partial surrender of sovereignty”.
“Our struggle” he went on to say, “will be to recover our autonomy and liberate Greece from the surveillance imposed by the forces of conservatism”.

Back in 1765 Bostonians such as James Otis and Samuel Adams regarded “taxation without representation as a form of tyranny”.

Today, a nation that served as the cradle of western democracy will effectively be governed by remote, invisible and unaccountable officials. Continue reading… ›

Why the EU’s leaked document has got me in a rage

By Ann Pettifor – Posted March 16th on Labour List

Together with the Prime Minister of Greece, Mr. George Papandreou, I am going to give evidence to the EU’s Special Committee on the Financial Crisis in Brussels this Thursday, March 18th.

So today’s leaked report from the EU, arguing that Labour’s plans for cuts to public spending are not “ambitious enough”, has got me really het up.

Labour, it appears, is just not ambitious enough about its goals for cutting investment and exacerbating unemployment. It does not have punitive enough targets for cutting benefits to the poor and services for the mentally ill and frail.

In the “imbecile idiom” (to quote Keynes) of today’s financial fashion, the EU, it seems, would prefer for unemployment to rise, for people to live in hovels, and for government “to shut out the sun and the stars” – so that we conform to an arbitrary number set in Frankfurt by a group of bankers, under a pact unwisely signed by an earlier British government.

Continue reading the article…

After Iceland’s Referendum, What Next?

4th March 2010

With Saturday’s Iceland referendum due in just a couple of days (6th March), Advocacy International’s directors have an op-ed article critical of the UK and Netherlands governments in today’s Morgunbladid, Iceland’s main daily newspaper.

English version> Icelandic version> Press release>

Full text of the article:

So the negotiations have broken down, British and Dutch “bullying” (FT 27 February, 2010) continues and the referendum goes ahead. What next?

We emphasize that this is not a sovereign debt crisis, even if the British and Dutch want us to think it is.

It is a crisis of EU regulatory failure, and of the Anglo-American economic model.

The people of Iceland have a deep democratic tradition, and through the referendum have the opportunity to assert their sovereignty and autonomy.

Their leadership and example will encourage people in other democracies to reject harsh cuts in public services and living standards made at the behest of the very people and institutions responsible for the crisis. For through the wholesale nationalisation of private losses, we are all – not only in Iceland – asked to pay the price of private, reckless risk-taking. Continue reading… ›