Photo From www.occupy.com
Countries mired in a debt death spiral all want out. That happens when the amount one has to pay on ones debts is so large, that there is not enough money left over to drive a growing economy, which then shrinks. That means that the debtor country has to borrow more to keep it afloat. And of course with now higher debt, (all things being equal) comes higher debt payments which tends to make its economy shrink even more, necessitating yet more debt and so on.
The bankers and their wholly owned bureaucrats in the Eurozone, (the 19 countries using the Euro) want their money. And they want the people of the debtor country to tighten their belts and accept a lower standard of living so they can pay their debts. But of course the lower the incomes of the people in the debtor country, the less consumer demand. With less consumer demand, businesses let workers go or ask them to accept lower wages, which furthers damages the country’s economy into the death spiral.
The Bankers, their fully owned politicians, bureaucrats and media call this “austerity”.
Leftest parties like Podemos in Spain and the newly elected Syriza in Greece simply want an end to the “austerity” that their people are suffering under. Rightest parties most notably the FN in France and UKIP in the UK, want out of the Eurozone and EU bureaucracies altogether, which have stripped sovereignty from their countries. The FN wants to get our of the Euro, reestablish the French Franc as the national currency and empower again its own central bank. UKIP wants the UK to get out of the EU altogether.
The strength of what the rightest parties want is obvious on its face. That is, if elected the countries’ leaders can quit the Euro or the EU all by themselves. They do not have to ask anyone’s permission in Brussels. There doesn’t need to be a Eurogroup, (the 19 finance ministers from Eurozone countries) meeting, or a vote in the EU legislative process. In this case France and the UK are sovereign states and what sovereignty they loaned to Brussels in the first place they are now taking back.
When the leftest parties run on a campaign against “austerity” however, if they were to take power as Syriza has done, there is nothing much they can do to fulfill this key campaign promise. That is because “austerity” is not being imposed by Athens, but by the Troika, (IMF, ECB and European Commission) as an agreed upon condition of the loans that were handed over to the country.
And as long as Greece, or any debtor nation is addicted to Euros, (which their central bank cannot create) then they are at the mercy of the Eurozone as to how much or how little austerity their people will have to live with. By living in Euros these countries have effectively surrendered their financial autonomy.
If Greece, (or any of these countries in the Euro) want less “austerity” all they can effectively do is beg the Eurogroup, (and the bankers behind them) to be kind. Bankers are not known for their kindness. It is not factored into their business models. So getting on your knees in front of them is not likely to be very helpful.
If however, the leftest parties also demand that they want money, but will not accept any new debts, well that is a horse of a different color. When they simply demand free money, (with no strings) all they do is invite the scornful laughter of the bankers and their flunky bureaucrats. They after all have the power to cut off Euros to the bankrupt country. And since it has no other currency, by doing so they can throw it into chaos. “How dare these dead beat ingrates demand money for nothing”?
In the end however the approach of the right and left, which seems so different is less different than it looks. Of course if on the left, a government like that of Syriza only begs for less “austerity”, they won’t get it and their political leaders will be publicly humiliated.
But simultaneously if the Left government informs the Eurozone, that they want new money and will take on no new debt, (effectively money for nothing) then that challenges the Eurogroup ministers to cut them off with no new funding. Of course for a left government to do this they better be prepared for such a cutoff to happen.
Since a cutoff of Euros, when that is the only currency a country uses would throw it into financial collapse and chaos, the leadership must have prepared the country before hand for a seamless transfer into the old currency, which would then act as a safety net to brake the fall of a Euro collapse.
For a left leadership to challenge the Euro Group in such a way, is not much different than a right leadership simply dumping the Euro. The latter is like a spouse who simply walks out on what they feel is an untenable relationship. The former is like a spouse who will allow the relationship to go on, but only by making demands that they know their partner doesn’t want to accept. In the first case you leave them. In the second you give them the opportunity to kick you out.
But there is an underlying issue that is the same whether you want to negotiate for an end to austerity and an end to increasing indebtedness, or whether you simply want to dump the Euro and return to your own currency.
That is because neither position in this left- right divide, addresses the underlying issue of the debt itself.
No matter If one returns to living in Drachmas or French Francs, the country still owes so many hundreds of billions of Euros to the banksters. What then can be done about the debt?
Tomorrow we will address that issue in Part 2, “Euro Debtors Vs Bankers- Changing The Narrative”