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After Elections, Greece Will Be in Race Against Time

Πηγή: New York Times
Jan 11 2015

The possibility of a bank run is Greece’s Achilles’ heel.

The country probably won’t be forced out of the euro. But there is a scenario in which this could happen. If Syriza, the radical-left party, wins the coming election, then runs out of time before it can perform the U-turn necessary to keep its creditors happy, depositors might panic.

Syriza is the clear favorite in the elections on Jan. 25. If it emerges victorious, it could be heading for a clash with its eurozone creditors. The party has promised to cut Greece’s debt and increase public spending, but it will not be able to get an agreement to do this.

Germany, which drives eurozone policy, is not too afraid of financial contagion if Greece defaults on its debts and quits the euro. Berlin is more worried about the political contagion if it cuts Athens too much slack. Other countries, especially France and Italy, might then go slowly with their own economic overhauls.

This is not to say that Greece does not deserve some form of extra debt relief if it keeps up its overhaul efforts. Encouragingly, Syriza has promised much-needed crackdowns on tax evasion and oligarchs. The snag is that it will be politically almost impossible for its creditors to cut the headline debt level.

The obvious compromise — the rough parameters of which have already been discussed between the current government and the eurozone — is to fix the interest rate at extremely low levels and extend the grace period before any of the loan has to be repaid.

Could Syriza accept such an approach to the debt? Could it also agree to refrain from a spending splurge?

Possibly, given enough time. But there is no doubt that it would involve a somersault, or what the Greeks call “kolotoumba.” Many of its activists would view this as a betrayal of everything they stand for.

What is more, Syriza thinks it can play hardball. A common theory is that because Greece now has a budget surplus before counting interest rates, Athens could default unilaterally on its debt and keep the show on the road.

Doing so would be a dangerous folly. While the government could indeed fund itself if it refused to pay its debt, a default could provoke panic among bank depositors. In such a scenario, the European Central Bank would no longer provide liquidity to Greek banks — making a bank run rational.

Indeed, the central bank fired a warning shot last week, saying effectively that it would no longer act as a lender of last resort to the country’s banks after the end of February, unless Athens secured an extension of its current bailout program, which runs out then.

Greece’s own central bank may still be able to supply what is known as “emergency liquidity assistance” if needed. But the E.C.B. would probably veto this too if a new government were not at least seriously negotiating an extension of the program.

If there were a bank run without a safety net, the government’s only option would be to impose capital controls. Unless it then appealed to its creditors for mercy, it would have to bring back the drachma.

Athens’ own finances are also stretched because it has not agreed to the latest demands of its creditors, and so it has not received the last dollop of bailout cash. Unless it can scrape together cash from somewhere, it will run out of money by the end of February.

All this means that if Syriza wins the upcoming election, it will immediately be under extreme time pressure. Its first priority, to form a government, will not be easy because it is unlikely to have an overall majority. Syriza would have to secure a coalition, and its most obvious partner, the centrist To Potami movement, is adamant that it won’t agree to a deal that could put Greece’s membership of the euro at risk.

To Potami should stick to its hard line. Among other things, this would mean insisting that Syriza ask nicely for an extension of the bailout plan. To get this, it would have to agree in broad terms to the program that it has spent years denouncing.

This would require a rapid kolotoumba from Syriza’s leader, Alexis Tsipras. That is why it is quite possible that there will be no coalition deal, and a second election will be called for late February or early March.

By that stage, the heat would really be on. The end-of-February cutoff of E.C.B. support would either have passed or already be looming. Deposit flight could also have taken off, if the experience of 2012, when a bank run started between that year’s two elections, is anything to go by.

If there is a second election this time, the priority of the caretaker government that would run the country in the intervening period should be to ask for at least a short extension of the program until a proper government was formed.

But the top priority now is for the eurozone creditors and the moderate elements in Syriza to put out feelers to one another to work out how the party could perform a kolotoumba without too much of a loss of face. The creditors should indicate that they would extend the bailout deal so long as Syriza asked for one nicely. After all, it is in nobody’s interest for Greece to be driven out of the euro.

Hugo Dixon is editor at large of Reuters News.


Russia Weighs Response as U.S. and EU Add More Sanctions

Germany's foreign Minister Frank-Walter Steinmeier, center, arrives for an informal..
Πηγή: Bloomberg
By James G. Neuger, Daryna Krasnolutska and Ilya Arkhipov
Sept 12 2014

Russia threatened retaliation to a U.S. and European Union decision to stiffen sanctions against Moscow over Ukraine and may ban some imports including clothing and used cars.

The EU added 15 companies, including OAO Gazprom Neft, OAO Rosneft and OAO Transneft, and 24 people to the list of those affected by its sanctions against Russia. European companies and taxpayers “will have to pick up the costs” for the penalties, Dmitry Peskov, a spokesman for Russian PresidentVladimir Putin, told Interfax yesterday. President Barack Obama said yesterday the U.S. will also “deepen and broaden” its measures against Russia’s financial, energy and defense industries.

The moves raise the level of confrontation and follow reprisals last month, when the Russian leader banned a range of food imports after an earlier round of U.S. and European penalties. Putin denies any involvement in the fighting that broke out after he annexed Crimea in March in what has become the worst crisis between Russia and its former Cold War adversaries since the fall of the Berlin Wall.

“The current political risks, various restrictions and barriers are worsening the situation,” Putin said today in Dushanbe, Tajikistan. “They directly harm the global business climate and reduce trust in international trade and the financial system.

New Penalties

Under the new penalties published today in the Official Journal, the EU extended a ban on share or bond sales with a maturity of more than 30 days to the three energy companies and three industrial producers -- Oboronprom, Uralvagonzavod and United Aircraft Corp. Nine defense companies are subject a curb on the import of dual-use technology.

The targeted individuals include Rostec Corp. Chief Executive Officer Sergei Chemezov and Vladimir Zhirinovsky, a lawmaker in Russia’s lower house of parliament, as well as eight members of eastern Ukraine separatist groups and two Crimean officials.

Russia’s Economy Ministry drafted a list of goods that may be banned, including automobile imports, particularly used cars, as well as textiles and clothing, state-run RIA Novosti reported, citing Kremlin economic aide Andrei Belousov yesterday. The country was also weighing restrictions on overflights to the Asia-Pacific as a response to sanctions against Aeroflot’s low-cost unit Dobrolet.

Thousands Killed

The ruble weakened to a record for a second day. The currency retreated as much as 0.6 percent to 37.7265 per dollar before trading 0.4 percent lower at 11.35 a.m. in Moscow, bringing this week’s loss to 2 percent. Ten-year local-currency bonds retreated for a fifth day, sending the yield up two basis points to 9.78 percent.

The fighting in Ukraine has killed more than 3,000 people and driven more than 1 million from their homes, according to the United Nations. The Sept. 5 cease-fire continued to show signs of strain, with the separatists firing at checkpoints and the Donetsk airport overnight, Ukrainian military spokesman Oleksiy Dmytrashkovskyi said today.

Although Ukrainian authorities said separatists continued to fire on government positions, President Petro Poroshenko said Russia is beginning to withdraw troops from the border conflict zones.

The 28-member EU is offering to ease the restrictions once the Kremlin makes a good-faith effort to end the conflict.

Reversing Measures

“We have always stressed the reversibility and scalability of our restrictive measures,” EU President Herman Van Rompuy said in a statement from Brussels. A review of the cease-fire in eastern Ukraine by the end of September may lead to EU “proposals to amend, suspend or repeal the set of sanctions in force, in all or in part.”

The EU won’t spell out what it wants to see on the ground to justify an easing or lifting of sanctions, according to an official from the bloc who spoke on condition of anonymity. It also won’t predict exactly when this decision will be made. The review will cover all sanctions now in force.

The latest sanctions and the ones adopted in July run until end-July 2015, the official said. A unanimous decision by all 28 EU government will be required to renew them.

EU governments first voted for the sanctions on Sept. 5, laying bare the bloc’s divisions over Russia by putting the curbs on hold as the cease-fire between Ukraine and Russian-backed separatists kicked in. Some countries had argued that rushing ahead with the restrictions now would give the Kremlin a pretext to restart the fighting.

“It is certainly a difficult situation because every further set of sanctions can lead to counter reactions that we don’t know today,” Austrian Finance Minister Hans Joerg Schelling said today before the meeting of euro-area finance ministers in Milan, Italy.

How Greece Has Fallen Victim to "Economic Hit Men"

"My sin was ripping off people around the world," said John Perkins, author of "Confessions of an Economic Hit Man," at Transitions Bookplace in Chicago, on February 3, 2006. (Photo: Peter Thompson / The New York Times)
Πηγή: Truthout
By Michael Nevradakis
Sept 11 2014

John Perkins, author of Confessions of an Economic Hit Man, discusses how Greece and other eurozone countries have become the new victims of "economic hit men."

John Perkins is no stranger to making confessions. His well-known book,Confessions of an Economic Hit Man, revealed how international organizations such as the International Monetary Fund (IMF) and the World Bank, while publicly professing to "save" suffering countries and economies, instead pull a bait-and-switch on their governments: promising startling growth, gleaming new infrastructure projects and a future of economic prosperity - all of which would occur if those countries borrow huge loans from those organizations. Far from achieving runaway economic growth and success, however, these countries instead fall victim to a crippling and unsustainable debt burden.

That's where the "economic hit men" come in: seemingly ordinary men, with ordinary backgrounds, who travel to these countries and impose the harsh austerity policies prescribed by the IMF and World Bank as "solutions" to the economic hardship they are now experiencing. Men like Perkins were trained to squeeze every last drop of wealth and resources from these sputtering economies, and continue to do so to this day. In this interview, which aired on Dialogos Radio, Perkins talks about how Greece and the eurozone have become the new victims of such "economic hit men."

Michael Nevradakis: In your book, you write about how you were, for many years, a so-called "economic hit man." Who are these economic hit men, and what do they do?
John Perkins: Essentially, my job was to identify countries that had resources that our corporations want, and that could be things like oil - or it could be markets - it could be transportation systems. There're so many different things. Once we identified these countries, we arranged huge loans to them, but the money would never actually go to the countries; instead it would go to our own corporations to build infrastructure projects in those countries, things like power plants and highways that benefitted a few wealthy people as well as our own corporations, but not the majority of people who couldn't afford to buy into these things, and yet they were left holding a huge debt, very much like what Greece has today, a phenomenal debt.

And once [they were] bound by that debt, we would go back, usually in the form of the IMF - and in the case of Greece today, it's the IMF and the EU [European Union] - and make tremendous demands on the country: increase taxes, cut back on spending, sell public sector utilities to private companies, things like power companies and water systems, transportation systems, privatize those, and basically become a slave to us, to the corporations, to the IMF, in your case to the EU, and basically, organizations like the World Bank, the IMF, the EU, are tools of the big corporations, what I call the "corporatocracy."

And before turning specifically to the case of Greece, let's talk a little bit more about the manner in which these economic hit men and these organizations like the IMF operate. You mentioned, of course, how they go in and they work to get these countries into massive debt, that money goes in and then goes straight back out. You also mentioned in your book these overly optimistic growth forecasts that are sold to the politicians of these countries but which really have no resemblance to reality.

Exactly, we'd show that if these investments were made in things like electric energy systems that the economy would grow at phenomenally high rates. The fact of the matter is, when you invest in these big infrastructure projects, you do see economic growth, however, most of that growth reflects the wealthy getting wealthier and wealthier; it doesn't reflect the majority of the people, and we're seeing that in the United States today.

For example, where we can show economic growth, growth in the GDP, but at the same time unemployment may be going up or staying level, and foreclosures on houses may be going up or staying stable. These numbers tend to reflect the very wealthy, since they have a huge percentage of the economy, statistically speaking. Nevertheless, we would show that when you invest in these infrastructure projects, your economy does grow, and yet, we would even show it growing much faster than it ever conceivably would, and that was only used to justify these horrendous, incredibly debilitating loans.

Is there a common theme with respect to the countries typically targeted? Are they, for instance, rich in resources or do they typically possess some other strategic importance to the powers that be?
Yes, all of those. Resources can take many different forms: One is the material resources like minerals or oil; another resource is strategic location; another resource is a big marketplace or cheap labor. So, different countries make different requirements. I think what we're seeing in Europe today isn't any different, and that includes Greece.

What happens once these countries that are targeted are indebted? How do these major powers, these economic hit men, these international organizations come back and get their "pound of flesh," if you will, from the countries that are heavily in debt?
By insisting that the countries adopt policies that will sell their publicly owned utility companies, water and sewage systems, maybe schools, transportation systems, even jails, to the big corporations. Privatize, privatize. Allow us to build military bases on their soil. Many things can be done, but basically, they become servants to what I call the corporatocracy. You have to remember that today we have a global empire, and it's not an American empire. It's not a national empire. It doesn't help the American people very much. It's a corporate empire, and the big corporations rule. They control the politics of the United States, and to a large degree they control a great deal of the policies of countries like China, around the world.

John, looking specifically now at the case of Greece, of course you mentioned your belief that the country has become the victim of economic hit men and these international organizations . . . what was your reaction when you first heard about the crisis in Greece and the measures that were to be implemented in the country?
I've been following Greece for a long time. I was on Greek television. A Greek film company did a documentary called "Apology of an Economic Hit Man," and I also spent a lot of time in Iceland and in Ireland. I was invited to Iceland to help encourage the people there to vote on a referendum not to repay their debts, and I did that and encouraged them not to, and they did vote no, and as a result, Iceland is doing quite well now economically compared to the rest of Europe. Ireland, on the other hand: I tried to do the same thing there, but the Irish people apparently voted against the referendum, though there's been many reports that there was a lot of corruption.

In the case of Greece, my reaction was that "Greece is being hit." There's no question about it. Sure, Greece made mistakes, your leaders made some mistakes, but the people didn't really make the mistakes, and now the people are being asked to pay for the mistakes made by their leaders, often in cahoots with the big banks. So, people make tremendous amounts of money off of these so-called "mistakes," and now, the people who didn't make the mistakes are being asked to pay the price. That's consistent around the world: We've seen it in Latin America. We've seen it in Asia. We've seen it in so many places around the world.

This leads directly to the next question I had: From my observation, at least in Greece, the crisis has been accompanied by an increase in self-blame or self-loathing; there's this sentiment in Greece that many people have that the country failed, that the people failed . . . there's hardly even protest in Greece anymore, and of course there's a huge "brain drain" - there's a lot of people that are leaving the country. Does this all seem familiar to you when comparing to other countries in which you've had personal experience?

Sure, that's part of the game: convince people that they're wrong, that they're inferior. The corporatocracy is incredibly good at that, whether it is back during the Vietnam War, convincing the world that the North Vietnamese were evil; today it's the Muslims. It's a policy of them versus us: We are good. We are right. We do everything right. You're wrong. And in this case, all of this energy has been directed at the Greek people to say "you're lazy; you didn't do the right thing; you didn't follow the right policies," when in actuality, an awful lot of the blame needs to be laid on the financial community that encouraged Greece to go down this route. And I would say that we have something very similar going on in the United States, where people here are being led to believe that because their house is being foreclosed that they were stupid, that they bought the wrong houses; they overspent themselves.

The fact of the matter is their bankers told them to do this, and around the world, we've come to trust bankers - or we used to. In the United States, we never believed that a banker would tell us to buy a $500,000 house if in fact we could really only afford a $300,000 house. We thought it was in the bank's interest not to foreclose. But that changed a few years ago, and bankers told people who they knew could only afford a $300,000 house to buy a $500,000 house.

"Tighten your belt, in a few years that house will be worth a million dollars; you'll make a lot of money" . . . in fact, the value of the house went down; the market dropped out; the banks foreclosed on these houses, repackaged them, and sold them again. Double whammy. The people were told, "you were stupid; you were greedy; why did you buy such an expensive house?" But in actuality, the bankers told them to do this, and we've grown up to believe that we can trust our bankers. Something very similar on a larger scale happened in so many countries around the world, including Greece.

In Greece, the traditional major political parties are, of course, overwhelmingly in favor of the harsh austerity measures that have been imposed, but also we see that the major business and media interests are also overwhelmingly in support. Does this surprise you in the slightest?

No, it doesn't surprise me and yet it's ridiculous because austerity does not work. We've proven that time and time again, and perhaps the greatest proof was the opposite, in the United States during the Great Depression, when President Roosevelt initiated all these policies to put people back to work, to pump money into the economy. That's what works. We know that austerity does not work in these situations.

We also have to understand that, in the United States for example, over the past 40 years, the middle class has been on the decline on a real dollar basis, while the economy has been increasing. In fact, that's pretty much happened around the world. Globally, the middle class has been in decline. Big business needs to recognize - it hasn't yet, but it needs to recognize - that that serves nobody's long-term interest, that the middle class is the market. And if the middle class continues to be in decline, whether it's in Greece or the United States or globally, ultimately businesses will pay the price; they won't have customers. Henry Ford once said: "I want to pay all my workers enough money so they can go out and buy Ford cars." That's a very good policy. That's wise. This austerity program moves in the opposite direction and it's a foolish policy.

In your book, which was written in 2004, you expressed hope that the euro would serve as a counterweight to American global hegemony, to the hegemony of the US dollar. Did you ever expect that we would see in the European Union what we are seeing today, with austerity that is not just in Greece but also in Spain, Portugal, Ireland, Italy, and also several other countries as well?
What I didn't realize during any of this period was how much corporatocracy does not want a united Europe. We need to understand this. They may be happy enough with the euro, with one currency - they are happy to a certain degree by having it united enough that markets are open - but they do not want standardized rules and regulations. Let's face it, big corporations, the corporatocracy, take advantage of the fact that some countries in Europe have much more lenient tax laws, some have much more lenient environmental and social laws, and they can pit them against each other.

What would it be like for big corporations if they didn't have their tax havens in places like Malta or other places? I think we need to recognize that what the corporatocracy saw at first, the solid euro, a European union seemed like a very good thing, but as it moved forward, they could see that what was going to happen was that social and environmental laws and regulations were going to be standardized. They didn't want that, so to a certain degree what's been going on in Europe has been because the corporatocracy wants Europe to fail, at least on a certain level.

You wrote about the examples of Ecuador and other countries, which after the collapse of oil prices in the late '80s found themselves with huge debts and this, of course, led to massive austerity measures . . . sounds all very similar to what we are now seeing in Greece. How did the people of Ecuador and other countries that found themselves in similar situations eventually resist?

Ecuador elected a pretty remarkable president, Rafael Correa, who has a PhD in economics from a United States university. He understands the system, and he understood that Ecuador took on these debts back when I was an economic hit man and the country was ruled by a military junta that was under the control of the CIA and the US. That junta took on these huge debts, put Ecuador in deep debt; the people didn't agree to that. When Rafael Correa was democratically elected, he immediately said, "We're not paying these debts; the people did not take on these debts; maybe the IMF should pay the debts and maybe the junta, which of course was long gone - moved to Miami or someplace - should pay the debts, maybe John Perkins and the other economic hit men should pay the debts, but the people shouldn't."

And since then, he's been renegotiating and bringing the debts way down and saying, "We might be willing to pay some of them." That was a very smart move; it reflected similar things that had been done at different times in places like Brazil and Argentina, and more recently, following that model, Iceland, with great success. I have to say that Correa has had some real setbacks since then . . . he, like so many presidents, has to be aware that if you stand up too strongly against the system, if the economic hit men are not happy, if they don't get their way, then the jackals will come in and assassinate you or overthrow you in a coup. There was an attempted coup against him; there was a successful coup in a country not too far away from him, Honduras, because these presidents stood up.

We have to realize that these presidents are in very, very vulnerable positions, and ultimately we the people have to stand up, because leaders can only do a certain amount. Today, in many places, leaders are not just vulnerable; it doesn't take a bullet to bring down a leader anymore. A scandal - a sex scandal, a drug scandal - can bring down a leader. We saw that happen to Bill Clinton, to Strauss-Kahn of the IMF; we've seen it happen a number of times. These leaders are very aware that they are in very vulnerable positions: If they stand up or go against the status quo too strongly, they're going to be taken out, one way or another. They're aware of that, and it behooves we the people to really stand up for our own rights.

You mentioned the recent example of Iceland . . . other than the referendum that was held, what other measures did the country adopt to get out of this spiral of austerity and to return to growth and to a much more positive outlook for the country?
It's been investing money in programs that put people back to work and it's also been putting on trial some of the bankers that caused the problems, which has been a big uplift in terms of morale for the people. So Iceland has launched some programs that say "No, we're not going to go into austerity; we're not going to pay back these loans; we're going to put the money into putting people back to work," and ultimately that's what drives an economy, people working. If you've got high unemployment, like you do in Greece today, extremely high unemployment, the country's always going to be in trouble. You've got to bring down that unemployment, you've got to hire people. It's so important to put people back to work. Your unemployment is about 28 percent; it's staggering, and disposable income has dropped 40 percent and it's going to continue to drop if you have high unemployment. So, the important thing for an economy is to get the employment up and get disposable income back up, so that people will invest in their country and in goods and services.

In closing, what message would you like to share with the people of Greece, as they continue to experience and to live through the very harsh results of the austerity policies that have been implemented in the country for the past three years?
I want to draw upon Greece's history. You're a proud, strong country, a country of warriors. The mythology of the warrior to some degree comes out of Greece, and so does democracy! And to realize that the marketplace is a democracy today, and how we spend our money is casting our ballot. Most political democracies are corrupt, including that of the United States. Democracy is not really working on a governmental basis because the corporations are in charge. But it is working on a market basis. I would encourage the people of Greece to stand up: Don't pay off those debts; have your own referendums; refuse to pay them off; go to the streets and strike.

And so, I would encourage the Greek people to continue to do this. Don't accept this criticism that it's your fault, you're to blame, you've got to suffer austerity, austerity, austerity. That only works for the rich people; it does not work for the average person or the middle class. Build up that middle class; bring employment back; bring disposable income back to the average citizen of Greece. Fight for that; make it happen; stand up for your rights; respect your history as fighters and leaders in democracy, and show the world!

The podcast of the original interview as it aired on Dialogos Radio is available at

John Perkins "Confessions of an Economic Hitman"Extended Interview 2008