The New York Times Urges the Troika to “Make an Example of Greece”

July 8th, 2015
in Op Ed

by William K. Black, New Economic Perspectives

It is often the moral and economic blindness of New York Times articles about the EU crisis that is most striking. The newest entry in this field is entitled "Now Europe Must Decide Whether to Make an Example of Greece.

Follow up:

"That is a chilling phrase most associated in our popular culture with a Consigliere and his Don deciding whether to order a mob "hit."

It is, therefore, fitting (albeit over the top) as a criticism of the troika's economic, political, and propaganda war against the Greek people. Except that the article is actually another salvo in that war.

Let's start with the obvious - except to the NYT. "Europe" isn't "decid[ing]" anything. The troika is making the decisions. More precisely, it is the CEOs of the elite German corporations and banks that direct the troika's policies that are making the decisions. The troika simply implements those decisions. The troika consists of the ECB, the IMF, and the European Commission. None of these three entities represents "Europe." None of them will hold a democratic referendum of the peoples of "Europe" to determine policies. Indeed, they are apoplectic that the Greek government dared to ask the people of Greece through a democratic process whether to give in to the troika's latest efforts to extort the Greek government to inflict ever more destructive and economically illiterate malpractice on the Greek people.

Second, the troika has been "mak[ing] an example of Greece" for at least five years. It extorted Greece to inflict the economic malpractice of austerity in response to a Great Recession. The result was just what economists warned - Greece was forced, gratuitously, into worse-than-Great Depression levels of unemployment that persist today seven years after Lehman's collapse. In this process, the troika blocked a prior referendum proposed by Greece's Socialist Prime Minister George Papandreou in late 2011 and forced him to resign for daring to propose democratic decision-making. Read the Guardian's risible account of the 2010 coup that the troika engineered in Greece for an unintended insight as to how the UK's "New Labour" Party has become an anti-labor party of austerity and "aspirational" hostility to efforts to contain the City of London's criminal culture.

Third, the troika and a host of heads of state that have caused grave harm to workers in their nations responded immediately to the election of the anti-austerity Syriza party in Greece in January 2015 by shouting their increased eagerness to "make an example of Greece" for daring to elect Syriza. The government of Spain, for example, is desperate for the troika to double-down and "make an example of Greece" by crushing its economy in order to stave off the newly created and surging Podemos anti-austerity party that won key municipal elections in Spain. Prominent German elected officials have made explicit their desire to force Syriza (and Greece) to fail because they oppose its politics.

The NYT article, as is the norm in the media, refers to Syriza as "the left-wing Greek government." As is also the norm for the media, it uses such labels only for Syriza. Members of other parties, who could aptly be described as "ultra-right wing" or "know nothings" on the subject of austerity have no modifiers attached. This is one of easiest "tells" that one is reading propaganda. I ask the obvious question of the author. Did you do this intentionally or was it the product of a bias you were unaware of and will now publicly correct?

The troika's greatest desire is what they perceive as the ideal "win-win" - they discredit Syriza (and Podemos) by successfully extorting the Greek leaders to betray their anti-austerity campaign promises (and the Greek people) and instead inflict even more self-destructive increases in austerity on the Greek people. (The troika follows the same strategy in seeking to force Syriza to betray its campaign promises and the Greek people by pushing anti-labor measures designed to further reduce Greek wages - cynically called "labor reforms" - and demanding that Syriza sell Greek infrastructure and even islands to wealthy foreigners at fire sale prices.) The second "win" is that the Greek economy would then continue to be crushed because of the increased austerity and unsustainable debt. The people of Spain and other nations would learn from the example that the troika made of Greece that if they dared to support progressive parties the troika would target their economies for destruction. Of course, the troika's ideal "win-win" requires the Greek people to continue to lose even worse, but the troika is run by and for elite German and French bankers and CEOs, not the people of the eurozone.

The Greek "bailout" was a bailout of foreign EU banks, primarily French and German - not the Greek government or people. That bailout of the eurozone's largest banks is funded by eurozone taxpayers. The muted reaction of the commercial markets to the Greek "No" vote is largely attributable to the fact that the bailout of French and German banks by eurozone taxpayers has been completed. The remaining loss exposure of the large eurozone banks on the loans they made seven or more years ago to Greek banks is tiny. The reason EU elected officials are so apoplectic to the Greek "No" vote is that the eurozone taxpayers are on the hook because they bailed out the (primarily) French and German banks. If the eurozone taxpayers suffer losses in the range of one hundred billion euros those taxpayers might turn on those EU elected officials who represent the interests of elite bankers at the expense of the peoples of the eurozone. The NYT article ignores all this and, without any analysis, treats the bailout as if it were a bailout of the Greek people.

The NYT, moreover, ignores this long history of the troika causing immense suffering to the Greek people by "making an example of the Greek." Instead, it spins the EU politicians as the victims of nasty attacks by Syriza.

The European creditors are exasperated by the Greek leaders, who cast aside many of the niceties of intra-European diplomacy in pursuing an aggressive negotiating style. (Hint: If you are negotiating with Germany seeking debt relief, bringing up Nazi war reparations, as Mr. Tsipras has,isn't the most effective idea).

Right, it isn't fair in a discussion of unsustainable debt to bring up history and evaluate what policies work. It isn't fair to note that if Germany had paid for the damage it did to Greece and the Greek people Greece would not be in this problem. It isn't fair to note that Germany was granted debt forgiveness - even though its case for debt forgiveness was vastly weaker than Greece's case. It isn't "diplomatic" to criticize hypocrisy by German leaders because everyone knows that Germany's corporate elites control the EU and the ECB. Fortunately, Eduardo Porter shares my non-diplomatic approach to history in an article in the NYT about forgiving Germany's debt. It is diplomatic to simply accept German diktats. Alas Germany's leaders, so thin-skinned about criticism of their hypocrisy, so upset to be reminded of that hypocrisy, and encumbered by a native language that doesn't even have a word for their realpolitik policies.

(Yes, irony. Think French and entrepreneur.)

The NYT could have, in fairness, noted that long before Syriza was even created a wide-range of German politicians made a regular practice of demeaning the Greek people in terms that are so bigoted that they would be a scandal in the U.S. leading to widespread demands for the resignation of those officials if the same comments had been made here about Latinos or blacks. Think of dozens of Donald Trumps - but in positions of great power - and you will begin to understand Germany. One then must add the German media, which often competes to insult the Greek people.

From an American perspective, if you want to get a feel for how much of the German media treats the Greek people, think of Murdoch's increasingly embarrassing rag, the Wall Street Journal. It ran a column today explaining that the Greek people are congenitally lazy. The subtitle of the article is "A people who want wealth without work will have neither." This is the Ayn Rand trope common to all bigots. Blacks, Jews (Arbeit Macht Frei), Catholics, and innumerable other despised groups are all supposedly lazy by nature. The fact that this bigoted meme has never been true of any of these ethnic groups and is not true about non-wealthy Greeks is no barrier to haters. The WSJ does not even try to muster data to support its ethnic slur of the lazy Greeks.

In Germany, there are a half dozen major media outlets that rival Murdoch's WSJ in repeatedly attacking the supposed character defects of the Greek people. From the American perspective, one would think that elite German politicians and media would be the last people in all of Europe to renew a discourse based on the supposed inherent character defects of various ethnic groups. The great irony is that two nationalities that are often unfriendly rivals - the Greeks and Turks - share a common characteristic. They are the two nationalities that far too many Germans despise and rage against.

The only two groups of Europeans that European elites treat as socially acceptable targets for this form of racism (Europe has a long, nasty habit of treating nationality as a "race") are both anti-austerity groups - the Scots and the Greeks. (These bigoted European elites do not consider Turks to be Europeans.) I have written in a prior column about the fact that even the once respectable Economist used an ethnic slur in its title against Scots to describe the success of the anti-austerity SNP in the recent election. It is inconceivable that the Economist would use the "N" word in a title to disparage black people, but many European elites think it is socially respectable to use crude slurs about the Greeks (and far too many Brits are addicted to using slurs about Celts)..

The NYT then concedes that domestic German politics, not rational economics drive all the EU politician's decisions about inflicting self-destructive economic policies on Greece.

German leaders genuinely believe that a new deal along those lines would be bad economic policy for Greece. Many economists at the International Monetary Fund and American officials would argue it is entirely sensible. The fact is that the time for those debates is over for now; we're in a realm of power politics, not substantive economic policy debates.

The choice for leaders of Germany, France and the rest of Europe will look something like this:

If they tolerate the Greek government's demands, they will be setting a bad example for every other country that might wish to challenge the strictures of the European Union, telling voters in Portugal and Spain and Italy that if they make enough fuss, and elect extremist parties, they too will get a much sweeter deal. It would send the signal that a country can borrow all it likes, walk away from those debts and make the rest of Europe pay the bill, as long as it is intransigent enough.

If they refuse the Greek government's demands and cut off funds, the Greek banking system will collapse and the country will no longer be part of the eurozone, sending a signal that the European Union is deeply fragile. Greece would sidle closer to a hostile Russia. A modern European democracy - indeed, the original democracy - could well collapse into something chaotic and unstable. Oh, and all this may end up costing the rest of Europe more money than even the most generous of bailouts, as Greece would default on its obligations outright rather than merely restructure them.

The author, of course, has no way of knowing what "German leaders genuinely believe." The author does know:

  • That economists overwhelmingly believe on the basis of theory and experience that austerity in response to a Great Recession constitutes economic malpractice akin to bleeding a patient until it restores him to health.
  • That austerity has caused, as predicted, a human catastrophe in Greece
  • That austerity and the oxymoronic "labor reforms," by reducing wages and the safety net throughout the eurozone, the bailout of German banks, and the sale of Greek infrastructure and islands to wealthy Germans at fire sale prices are very much in the interests of the elite German corporate and banking CEOs that dominate domestic German politics, the Germany economy, and the troika
  • That when a debtor has unsustainable debts, the normal and desirable response is to negotiate a troubled debt restructuring (TDR) to reduce the debt to a level that can be repaid. Even the IMF, the mother of monstrous austerity, admits that the Greek debt is unsustainable.
  • That a TDR was done for German, which was essential to its economic recovery. (I hope I am not perceived as being "undiplomatic" for pointing out this German history of hypocrisy.
  • Oh, and all of this is being done in the name of "ever closer union." Can anyone say that phrase without cringing?

Note that the author says we must disregard economic reality and assume conclusively that if Syriza's proposed policies - no more increases in austerity and negotiating a TDR - would constitute "a bad example for every other nation." But it is insane to disregard economic reality and to define what would be a superb example as a "bad example." The NYT author thinks that it would show an impossible degree of "tolerance" by the German elites if the EU were to adopt rational economic policies that would speed recovery and vastly reduce suffering. I fear he thinks I am being un-"diplomatic" when I note that it should not be difficult for Germans to "tolerate" a policy that was extended to Germany and which was essential to their economic recovery.

German and other leaders such as Spain's are demanding that the troika "make an example of Greece" and destroy the Greek economy precisely because they fear that the policies will work as economists predict and serve as a superb example for speeding the recovery of the entire eurozone. That would put the lie to the ideology of austerity and remove the mask and reveal the troika's radical program to run the eurozone through and for the CEOs of elite German corporations and banks.

Austerity in response to a Great Recession only seems to be wahnsinnig (senseless) if one comes from a conventional economic perspective. But the CEOs of the elite German corporations and banks are not economically illiterate. They have knowingly crafted a "race to the bottom" of wages, worker protections, and the safety net throughout the eurozone. They done this not simply through specialized austerity regimes for Greece and using the troika as their economic "hit men," but also through the EU's oxymoronic "Stability and Growth Pact." That pact inflicts a "rule" mandating the economic malpractice of austerity. As a result, it is the leading source of "instability" and the leading barrier to "growth" for the EU and the eurozone. So, most discourse becomes - you are violating the "rule" - which is treated as intolerable. The rule, however, is the problem because it mandates pointlessly inhumane economic malpractice while "violations" of the rule are the solution.

The German business elites have knowingly crafted a program to force other nations to sell them their crown jewels (airports, telecommunications, key infrastructure, even entire islands). Better yet, they have shaped the troika as a weapon of extortion to ensure that those sales are at fire sale prices. The financial stakes for these foreign CEOs in these "privatization" programs are stupendous. The "Washington Consensus" was the infamous test bed for fire sale privatizations that the German CEOs have now optimized. Few Americans have ever heard of Carlos Slim. He is, depending on the day, the wealthiest or second-wealthiest person in the world - because of the privatization of the Mexican telephone systems pursuant to the dictates of the Washington Consensus. The German CEOs who, behind the scenes, crafted and wield the troika as a weapon of extortion to produce privatization in Greece at fire sale prices drool at the prospect of becoming the next Carlos Slim.

Indeed, the troika's real rage is at what it views as the "slow pace" of Greek privatization. Even before the election of Syriza, the Greek government officials have been so shocked and enraged at the fire sale prices offered by wealthy foreigners trying to acquire Greece's "crown jewels" that they have refused to betray the nation by accepting the offers. The troika is enraged that Greek officials of the prior, deeply conservative, Greek government said "no" to fire sale prices. They are demanding rapid sales of vast amounts of Greek assets. As anyone who owns a home knows, that is a sales strategy sure to result in a terrible result for the seller. Again, "revealed preferences" show us what the elite German CEOs that run the troika believe - far better than a naïve reporter accepting on faith that what a politician tells him in an interview represents what the politicians "genuinely believe." The CEOs use the troika to place Greece in a position where it is constantly extorted to sell its assets at fire sale prices.

In the case of Greece, the CEOs of the elite French and German bank saw an additional opportunity. They used their political power to cause the troika to knowingly craft a program to use the eurozone taxpayers' money to bail out their reckless and/or criminal lending to Greek banks - and to blame this on the Greek government and people. As I explained above, this bailout has been immensely successful for the CEOs of the primarily French and German banks. Many of these elite French and German banks would have had to report that they were insolvent or severely under-capitalized but for this eurozone taxpayer bailout.

The dishonesty of one the paragraphs I quoted above is so total and so deliberately crafted that it requires repetition and extended discussion.

If they tolerate the Greek government's demands, they will be setting a bad example for every other country that might wish to challenge the strictures of the European Union, telling voters in Portugal and Spain and Italy that if they make enough fuss, and elect extremist parties, they too will get a much sweeter deal. It would send the signal that a country can borrow all it likes, walk away from those debts and make the rest of Europe pay the bill, as long as it is intransigent enough.

Recall that the NYT author admits that economists overwhelmingly support Syriza's twin economic policies that are at issue here. (Further, if he would violate the NYT rule for its reporters who write about the EU and read Paul Krugman he would know that the small group of economists that oppose fiscal stimulus in response to a Great Recession has proven consistently wrong in its predictions about the United States. But why would NYT reporters read a Nobel Laureate in economics with the relevant expertise in macroeconomics? Knowledge would get in the way of treating as reality the Brussels BS that the NYT relentlessly regurgitates.)

The first Greek demand is an end to inflicting increasing austerity on the Greek people and economy. That Greek demand would benefit Greece and the entire eurozone (but not the CEOs of the elite German banks and corporations). Austerity is a self-destructive response to a Great Recession, as the eurozone has once again proved. At best, it causes immense, pointless human suffering and slows the economic recovery. At worst, as in Greece, Italy, Spain, and Portugal it can cause Great Depression levels of unemployment that persist for many years.

The Greek government's second demand is a reduction in Greece's unsustainable debt. Greece is unique in the eurozone. It has unsustainable debt (in part because it gave up its sovereign currency and joined the euro). The centrist answer to unsustainable debt is to do a TDR, as the most conservative businesspeople routinely do thousands of times every day in the commercial sphere. This is not in dispute. A TDR was also done for Germany, and doing so was essential to its recovery. Did Germany set a "bad example?" No, it set a superb example that it ought to follow in the case of Greece.

Note that the NYT author does not even attempt to explain why it is desirable to try to force a nation (or for that matter an individual or corporate debtor) to repay an unsustainable debt. It cannot work. It is guaranteed to cause immense misery and a perpetual crisis that ruins growth prospects. The "fresh start" concept at the heart of bankruptcy is simply one of many recognitions of this fact.

Note that the author quickly retreats to the "rules" (the oxymoronic "strictures of the European Union") that I explained above are the greatest threat to the eurozone's "stability and growth." But the author has conceded that economists have long warned that those rules constitute economic malpractice in the context of a recession. So, it would be wonderful, not "bad" if Greece led the EU to end its economic malpractice that caused such senseless human suffering. The author might also note that the two nations (France and Germany) that crafted those economically illiterate rules promptly violated them (which, of course, caused zero harm to their economy or the eurozone's economy). France remains in violation of those rules - which has reduced economic damage to France's economy and the eurozone.

So, on the two key matters at issue between Greece and the troika, Syriza is the sole non-extremist in the negotiations. Syriza is correct on the substance of both key issues and its position is supported by the center of economic thinking.

The author fails to recognize the reality that "Portugal, Spain, and Italy" have already "elect[ed] extremist parties." Indeed, the troika also orchestrated a coup in Italy to ensure the unelected appointment Mario Monti as prime minister. Monti was chosen because he was an economically extremist patron of austerity from Goldman Sachs (which engineered the debt scam years ago with Greece's then far-right government to hide Greece's true debt levels). Because the result was getting rid of the personally odious Silvio Berlusconi this coup created little push back. The deeply corrupt, pro-austerity, and anti-worker policies that dominate each of these three nations are ultra-extremist and dedicated to economic malpractice precisely because it enriches the politicians' wealthy party patrons at the expense of the workers. The party in Spain espousing centrist anti-austerity policies from the perspective of economists is Podemos (modeled in part on Syriza).

Note the author's tone. When a new government is elected in Greece because the Greek people have been senselessly forced to suffer great harm that includes being forced into worse-than-Great Depression levels of unemployment and the leaders explain (correctly) why austerity is self-destructive, they are simply "intransigent" "extremist[s]" "fuss[ing] at the poor troika to get a "sweeter deal." I'm tired to the bone of NYT reporters covering the eurozone crisis dismissing the suffering of human beings in this cavalier tone. Roughly 100 million Europeans are suffering and sometimes dying unnecessarily because of the economic malpractice we are discussing. The job of government officials is to fight, and sacrifice their public careers if necessary (as Yanis Varoufakis has just done), against the people who (as the NYT author concedes) for purely "political" reasons are trying to make their elite corporate sponsors wealthy by harming the public. There is nothing "sweet" about "deals" the troika has inflicted on the Greek people. The troika has insisted on deals that have crushed the Greek economy and cause great suffering to the Greek people.

"Intransigent" gets the issue exactly reversed. As the troika has witnessed its policies causing a catastrophe in Greece it has relentlessly doubled-down and demanded ever increased austerity. In the most recent negotiations the troika stated that it did not care how Greece raised revenue and cut spending - it only cared about the bottom line number. Greece responded with a plan to cut military spending and increase tax collection from the wealthy (who typically engage in tax evasion). The troika responded by rejecting the plan because it opposed the tax collection from the wealthy and cuts in military spending.

The troika's neoliberal agenda will continue to grow insatiably if its power is not checked. The CEOs of the elite German corporations and banks that determine the troika's policies define the concepts "extremist" and "intransigent." They believe they should rule Europe in accordance with von Hayek's anti-democratic and anti-worker vision of a legislature ruled by elite business leaders who are middle-aged or beyond.

The last sentence of the above quotation is deliberate propaganda. "It would send the signal that a country can borrow all it likes, walk away from those debts and make the rest of Europe pay the bill, as long as it is intransigent enough. No one is talking about Greece being released from all its debts, as the author knows full well. (The German TDR was far more generous than what Greece is seeking, but there I go being non-"diplomatic" again.) The request is that the debts be reduced to the level that would make them sustainable and leave Greece in perpetual economic chaos. Honoring that request would help the people of the eurozone as well as the Greek people. That is why U.S. bankruptcy laws offer a "fresh start." It is good not simply for the debtor, but for society. (I don't expect NYT reporters who cover the EU - and religiously avoid reading Krugman and other economists - to understand debt and sovereign currencies or how the ECB could be transformed into an institution that would end even this propaganda scenario, but the troika's economists know it can be done.)

I end by discussing the missing aspect characteristic of the NYT's coverage of the troika - ethics and humanity. To pick a mob "hit man" theme ("make an example of Greece) should have immediately alerted the author to the central moral issue. How did an organization supposedly devoted to "ever closer union" get perverted into a device of extortion that according to the author is likely to destroy not only Greece's economy but also its democracy? Note that the suffering of the Greek people is simply ignored in the article. And how did that extortion become devoted to making the wealthiest and most politically powerful German corporate and banking elites even wealthier and more powerful at the direct expense of eurozone workers?

Oh, and the NYT reporters might consult their paper's coverage of the copious frauds that characterize those elite German corporations and banks. Yes, wealthy Greeks are famous for tax evasion and corruption, but they are pikers compared to German elites when it comes to corruption, tax evasion, and leading "control frauds." German elites tend to bribe government officials in other countries such as Greece (think Siemens) and help criminals and terrorists in other nations breach international sanctions to the tune of billions of dollars (think Siemens, Commerzbank, and DeutscheBank - a bank that committed so many massive frauds and crimes that there is not enough space in a parenthetical to list the multiple links).

As a final aside, if readers ever wondered what white-collar criminologists think of Transparency International's "Corruption Perceptions Index" that purports to reflect how corrupt each nation is, there is a four-word answer: "German is No. 12." TI claims that German is the twelfth least corrupt nation in the world - and the least corrupt of any major economy.

Transparency International (TI) was created by Germans in Berlin. The leader was a World Bank official. The World Bank is controlled by "first world" leaders and is very corrupt, but the TI founder had worked in East Africa and he focused TI on "third world" corruption. The TI "index" uses a methodology that everyone consider farcical. It reliably produces results such as showing Germany as the least corrupt major economy. Germany's corruption rating is considered hilarious by people who actually study and struggle against corruption. Of course, Wall Street and the City of London remain the most corrupt and corrupting sites in the world. Germany's largest banks are spectacularly recidivist in their massive crimes, but Frankfurt is not close as a financial center to the magnitude of Wall Street and the City of London.

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