Elections and the Euro Leper Colony
By Greg Palast for το χωνί (Greece)
is stunned, and bankers aghast, that the new
party of the Left, Syriza, won Sunday's
parliamentary elections in Greece.
Syriza won on the promise
that it will cure Greece of leprosy.
Oddly, Syriza also
promises that it will remain in the leper
colony. That is, Syriza wants to rid Greece
of the cruelty of austerity imposed by the
European Central Bank but insists on staying
in the euro zone.
The problem is, austerity
run wild is merely a symptom of an illness.
The underlying disease is the euro itself.
For the last five years,
Greeks have been told that, if you cure your
disease—that is, if you dump the euro—the
sky will fall. I guess Greeks haven’t
noticed, the sky has fallen already. With
unemployment at 25%, with doctors and
teachers eating out of garbage cans, there
is no further to fall.
In 2010, when unemployment
was a terrible 10%, a year into the crisis,
the “Troika” (the European Central Bank,
European Commission and the International
Monetary Fund) told the Greeks that brutal
austerity measures would restore their
economy by 2012.
Ask yourself, Was the
There is a saying in
America: Fool me once, shame on you. Fool
me twice, shame on
Can Greece survive without
the euro? Greece is already dead, but the
Germans won’t even bother to bury
the corpse. Greeks are told that if they
leave the euro and renounce its debts, the
nation will not be able to access world
capital markets. The reality is, Greece
can’t access world markets now: no one
lends to a corpse.
There’s a way back across
the River Styx. But it’s not by paddling on
There’s Life after
Many nations do quite well
without the euro. Sweden, Denmark and India
do just fine without the euro—and so does
Turkey, which had the luck to be excluded
from the euro-zone. As long as Turks stick
to the lira, even Turkey’s brain-damaged
Islamo-fascist President Tayyip Erdoğan
cannot destroy their economy.
Can Greece just dump the
euro? They have happy precedents to
follow. Argentina was once pegged to the US
dollar much as Greece is tied to the euro
today. In 2000, Argentines, hungry and
angry, revolted. Argentina ultimately
overthrew the dollar dictatorship, the IMF
diktats and the threats of creditors, and
defaulted on its dollar bonds. Free at
last! In the decade since, the
Argentine economy soared. Yes, today,
Argentina is under attack by financial
vultures, but that is only because the
nation became so temptingly wealthy.
I was in Brazil when its
President Luiz Inácio Lula da Silva told the
IMF to go to hell—and rejected privatization
of the state banks and the state oil
company, rejected cutting pensions and
thumbed his nose at the rest of the
austerity nonsense. Instead, Lula created
the bolsa familia, a massive
pay-out to the nation’s poor. The result:
Brazil not only survived but thrived during
the 2008-10 world financial crisis.
Despite pressure, Brazil never ceded control
of its currency. (It is a sad irony that
Brazil is only now faltering. That’s the
fault entirely of Lula’s successor,
President Dilma Rousseff, who is beginning
to dance the austerity samba.)
Religion, Not Economics
The euro is simply the
deutschmark with little stars on it. Greece
cannot adopt Germany’s currency without
adopting Germany’s finance minister,
Wolfgang Schäuble, as its own.
And Schäuble has
determined that Greece must be punished. As
my homey Paul Krugman points out, there is
no credible economic theory that says that
austerity—that is, cutting government
spending, cutting wages, cutting consumer
demand—can in any way help a nation in
recession, in deflation. That’s why, in
2009, Obama ordered up stimulus, not a
But austerity has nothing
to do with economics. It is religion: the
belief by the stern Lutheran Germans that
Greeks have had too much fun, spent too much
money, and spent too much lazy time in the
sun—and now Greeks must pay a price for
Oddly, I hear this
self-flagellating nonsense from Greeks
themselves: we are lazy. We deserve our
punishment. Nonsense. The average
Greek works more hours in a year than
any other worker in the 34 nations of the
OECD; Germans the least.
The Euro’s Father
Describes his Little Bastard
Alexis Tsipras, the leader
of Syriza, would like to pretend that
austerity and the euro are two different
things, that you can marry the pretty girl
but not invite her ugly sister to the
wedding. Apparently, the Syriza chief is
blissfully ignorant of the history of the
euro. The horror of austerity is not the
consequence of Greek profligacy:
it was designed into the
euro’s plan from the beginning.
This was explained to me
by the father of the euro himself, economist
Robert Mundell of Columbia University. (I
studied economics with Mundell’s buddy,
Milton Friedman.) Mundell not only invented
the euro, he also fathered the misery-making
policies of Thatcher and Reagan, known as
“supply-side economics” – or, as George Bush
Sr. called it, “voodoo economics.”
Supply-side voodoo is the long-discredited
belief that if a nation demolishes the power
of unions, cuts business taxes, eliminates
government regulation and public ownership
of utilities, economic prosperity will
The euro is simply the
other side of the supply-side coin. As
Mundell explained it, the euro is the way in
which congresses and parliaments can be
stripped of all power over monetary and
fiscal policy. Bothersome democracy is
removed from the economic system. “Without
fiscal policy,” Mundell told me, “the only
way nations can keep jobs is by the
competitive reduction of rules on business.”
Greece, to survive in a
euro economy, can only revive employment by
reducing wages. Indeed, the recent tiny
reduction in unemployment is the sign that
Greeks are slowly accepting a permanent
future of low wages serving piña coladas to
Germans on holiday cruises.
It is argued that Greece
owes Germany, the IMF and the European
Central Bank for bail-out-billions.
Nonsense. None of the billions in bail-out
funds went into Greek pockets. It all went
to bail out Deutsche Bank and other foreign
creditors. The EU treasuries swallowed 90%
of its private bankers’ bonds. Germany
bailed out Germany, not Greece.
Nevertheless, Greece must
pay Germany back, Mr. Tsipras, if you want
to continue to use Germany’s currency, that
Greece’s ruin began with
secret, fraudulent currency swaps, designed
a decade ago by Goldman Sachs, to conceal
Greek deficits that exceeded the euro zone’s
3%-of-GDP limit. In 2009, when the truth
came out, Greek debt holders realized they
had been cheated. These debt buyers then
demanded usurious levels of interest (or, if
you prefer, a high “spread”) to insure
themselves against future fraud. The
compounding of this interest premium brought
the Greek nation to its knees. In other
words, the crimes committed to join and stay
in the euro, not Greek profligacy, caused
The USA, Brazil and China
escaped from depression by increasing their
money supply and government spending and
taking control of currency exchange
rates—crucial tools Greece gave up in return
for the euro.
Worse, once the Trojan
hearse of the euro entered Athens, tourism,
Greece’s main industry, drained to Turkey
where hotels and souvenirs are priced in
cheap lira. This allowed Dr.
Mundell’s remorseless wage-lowering machine,
the euro, to do its work, to force Greece to
strip all its workers of pensions and power.
Greece fell to its knees,
with no choice but to beg Germany for mercy.
But there is no mercy. As
Germany’s Schäuble insists, democracy, this
week’s vote, means nothing. "New elections
change nothing in the accords struck with
the Greek government,” he says. “[Greeks]
Ah, but they do, Mr.
Schäuble. They can tell you to take your
euro and shove it up your Merkel.
Greg Palast's book,
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story of the financial collapse, will soon
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