The European debt crisis and the media

Written by brucewilsonwriter.com on September 7th, 2011

Here is an article I wrote for the Writers’ Guild of Alberta newsletter.

European debt crisis and the media

As I write this, European Union (EU) leaders and financial elites are meeting in Brussels to discuss a “rescue plan” for Greece which appears certain to default on its €340 billion dollar debt. Over the past several months, the mainstream media has focused primarily on the complex financial solutions being proposed by these powerful elites in order to bailout Greece, often portrayed as the poor kid of Europe and an incompetent spendthrift. At this point, the plan appears to allow for some form of selective default while shoring up the banks and preventing contagion to the so-called “PIIGS” of the EU periphery – Greece, Italy, Spain, Portugal, and Ireland. The ongoing mantra reported in the mainstream press is that the eurozone must not only be preserved but strengthened at all cost lest further defaults occur. Reporters are keen to remind us that if they do occur, Europe – and the world – could be thrown into another deep recession similar to the one that followed the 2008 global credit crash.  In the end, the taxpayers will take the brunt of it in the form of ongoing debt payments and more austerity measures.

How did it come to this? How did the debt get so out of control? And who is to blame? If you follow the corporate media, especially the financial media, you get a very different story than what’s reported in the alternative press, and by progressive economists, analysts, and activists.

The Path to Crisis

The eurozone was formed in January, 1999, with the purpose of creating a monetary union and common currency among EU countries. Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland were the first to adopt the euro, followed by Greece in 2001, and  Slovenia, Cyprus, Malta, Slovakia, and Estonia in later years. According to The Telegraph, Greece “admits it lied” to get into the euro as its deficit was more than the 3% of GDP allowed by the European Monetary Union. (It was discovered later that US investment giant Goldman Sachs helped Greece hide $1 billion of its debt by arranging a cross-currency swap with fictional exchange rates, earning a cool $300 million in fees and more profit when it shorted the debt on a sale back to Greece.

Greece’s plunge into deep debt started in 2004 after the Olympics, which went some €2.4 billion over budget.Austerity measures were taken the following year in attempts to get public finances back on track. In November, 2009, the global financial crisis hit Greece very hard, and the country went even deeper into debt. In April, 2010, ratings agencies downgraded Greece to junk status.

In May 2010, Greece was on the verge of defaulting on its more than €300 billion debt and was given a €110 billion bailout by the “Troika” – the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB). Part of the deal was that Greece impose severe austerity measures as well as a massive sell-off of public assets to private interests. On the “for sale” list are the Athens International airport, several major national utilities, ports, and some of the country’s finest real estate. The Financial Times reports, “it is evident that the sale will attract foreign buyers by the planeload. And some of the biggest names in European merchant banking are advising on these sales: Rothschild, Crédit Suisse, BNP Paribas, and the London branch of Deutsche Bank.”

In effect, Greece’s sovereignty is being sacrificed to the highest bidder with banks as the brokers. The imposition of harsh austerity on an already poor population led to massive protests in the streets of Athens in May and June. These follow on earlier protests in Spain, Portugal, the UK and Ireland, all deeply indebted to the financial elites of Europe.

 

Placing the Blame on the Greek People

 To explain the Greek crisis, the mainstream media largely blames the “immorality” of Greek society, ignoring or downplaying the neoliberal agenda of the IMF, the EMF, and the EU to create a free market within Europe that would favour large corporations and financial elites. The story is that Greece is an endemically corrupt and lazy society, all too willing to sponge off its richer neighbours to the north while vast numbers of workers loaf away in public service jobs, take long vacations, early retirements, and other perks. On May 6, 2010, CNN host Jack Cafferty described Greece as “a world-class welfare state. People retire in their 50s. They’re accustomed to government handouts at every turn.” The Washington Post blamed the financial crisis on the “generous work rules and social welfare programs” established by “unions and socialist movements” in Southern Europe. The same article quotes the opinion of the IMF, which is that Greece is “one of the most inefficient economies in Europe because of the patchwork of rules governing its labor markets – including the public sector’s ‘employment for life’ practices; the syndicates that keep control over pharmacies, law offices and other professions; and the array of early-retirement rules that drive up pension costs.” The implication is that the imposition of austerity measures is the proper and deserved discipline for those spoiled, self-entitled Greeks.

Perhaps the most damning – and hyperbolic – account of Greek society is told by Michael Lewis in his 2010 Vanity Fair article, Beware of Greeks Bearing Bonds. The article tells of a culture of rampant corruption, where everyone evades taxes, publicly paid healthcare workers leave their jobs with “arms filled with paper towels and diapers and whatever else they can plunder from the supply closets”; and professions such as hairdressers, radio announcers, and musicians classify their work as “arduous” so they retire early and collect a generous pension “shovelled out” by the state. According to Lewis, Greeks distrust all other Greeks and “everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate.” He writes that “the epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families….  The structure of the Greek economy is collectivist, but the country, in spirit, is the opposite of a collective. Its real structure is every man for himself. Into this system investors had poured hundreds of billions of dollars. And the credit boom had pushed the country over the edge, into total moral collapse.”

Widely disseminated across the net, especially on financial sites and investor blogs, the article paints a picture of complete moral decay in Greek society. Lewis is praised by financial journalists for telling it like it is and exuding “a wonderful sense of moral outrage at the state of modern Greece.”  In other words, the Greek people and only the Greek people are to blame for the mess they are in. In Lewis’s phrase, “In Greece the banks didn’t sink the country. The country sank the banks.”

Even the most progressive commentators admit that Greek politicians and senior officials are corrupt. As Peter Prontzos writes in the Georgia Straight, the political and economic elites of Greece “run the country as if it were their own personal fiefdom.” But to extend this culture of corruption to an entire society is nothing more than racism. In a lengthy article published in the London Review of Books, British journalist and novelist John Lancaster corrects some of these misconceptions of “lazy Greeks on the take.”  Writing of his experiences in Ireland, Iceland, and the UK, he tells of a “sense of alienation and incomprehension and done-unto-ness” among the people who live within a country facing default. A feeling of outrage prevails because the people are often unaware of the backroom deals that led to the crisis, and yet are told by their leaders that “we ate the money together.” As for those cushy public service jobs that Greek slackers so willingly fill in order to sponge off the state, Lanchester writes,

The very existence of those jobs may well be a symptom of the three c’s, ‘corruption, cronyism, clientelism’, but that’s not how it feels to the person in the job, who was supposed to do what? Turn down the job offer, in the absence of alternative employment, because it was somehow bad for Greece to have so many public sector workers earning an OK living?” Where is the agency in that person’s life, the meaningful space for political-economic action? She is made the scapegoat, the victim, of decisions made at altitudes far above her daily life – and the same goes for all the people undergoing ‘austerity’, not just in Greece. The austerity is supposed to be a consequence of us all having had it a little bit too easy (this is an attitude which is only very gently implied in public, but it’s there, and in private it is sometimes spelled out). But the thing is, most of us don’t feel we did have it particularly easy. When you combine that with the fact that we have so little real agency in our economic lives, we tend to feel we don’t deserve much of the blame.

 

Reality Check

The progressive media provides a good source for journalists looking for the alternative story underlying the European debit crisis, beyond the opinions of investment gurus, right-wing political pundits, financial analysts, and sensationalistic journalists.

In Yes! magazine, sociologist Walden Bello provides one of the best analyses of the crisis yet published. He writes that the Greek crisis “essentially stems from the same frenzied drive of finance capital to draw profits from the massive indiscriminate extension of credit that led to the implosion of Wall Street…. Like the Third World debt crisis of the early 1980s and the Asian financial crisis of the late 1990s, the so-called sovereign debt problem of countries like Greece, Europe, Spain, and Portugal is principally a supply-driven crisis, not a demand-driven one.” In other words, in the banks’ drive to raise more profits from lending, they poured approximately $2.5 trillion into the most troubled economies of Europe.  Although it was clear that these countries were at high risk of default because of their enormous debt, it didn’t matter to the banks because they knew that in the event of a crisis, they could persuade public authorities to force taxpayers to bail them out to save the eurozone and the euro.  As Bello writes, “by having the markets bet against Greece and raising its cost of borrowing, the banks knew that the eurozone governments would come out with a bailout package, most of which would go toward servicing the Greek debt to them. Promoted as rescuing Greece, the massive €110 billion package, put together by the dominant eurozone governments and the IMF, will largely go toward rescuing the banks from their irresponsible, unregulated lending frenzy.”

The same scenario was played out during the Third World debt crisis of the 1980s and the Asian financial crisis of the 1990s. Lending binges by banks and speculators led to debt defaults, followed by severe austerity measures to protect the interests of the financiers. The solution is always the same, says Bello: “Pin the blame on the victims by characterizing them as living beyond their means, get public agencies to rescue you with money upfront, and stick the people with the terrible task of paying off the loan by committing a massive chunk of their present and future income streams as payments to the lending agencies.” While the world follows this “living beyond their needs” narrative perpetuated by the corporate media – banks continue to deflect the pressures for financial regulation. As long as the banks get their way and austerity measures continue, the economies of Greece and the peripheral countries of Europe will continue to stagnate and the people will suffer.

 

A Solution for Greeks, not the Banks

Enraged by the stereotypes portrayed in the media, Greek documentary film-makers Katerina Kitidi and Aris Hatzistefanou produced Debtocracy, an account of the true roots of the Greek debt crisis and how to resolve it. In the documentary – which was crowd-funded by the Greek public – economists and experts unaffiliated with the financial industry present a penetrating analysis of the Greek situation, one that is ignored in the mainstream media.

The story of Greek debt goes back to the revolution of 1821 and continued throughout the 20th Century, lending money only once – by force – to the Nazis during the German occupation. University of London economist Costas Lapavitsas tells of an unfair disadvantage when Greece joined the eurozone – the country was never competitive and was poised from the beginning to go deeper into debt. The situation was made worse when the global economic crisis hit in 2009. In the words of Egyptian economist Samir Amin, “the eurozone destroys the immune system of the peripheral countries, leaving them exposed to the global crisis.”

The alternative narrative told in the documentary is of a corrupt Greek political and business class pandering to the Troika to serve their own interests, while the Greek people – who actually work much harder than commonly portrayed – are held captive by forces over which they have little control.

The experts in the film recommend a radical solution, similar to that applied to Ecuador in 2006. Deeply in debt due to the same IMF-approved predatory lending practices that have occurred in Greece, Prime Minister Rafael Correa formed a debt audit commission to examine the legitimacy of the debt.  They declared the debt illegitimate, that is, it was an “odious debt” created by rapacious international lenders and corrupt politicians to enrich themselves without the permission of the people and at the cost of the national economy. In 2008, Ecuador defaulted on its payments and dedicated the funds to rebuilding the country’s economy. In the end, Ecuador was able to save about $7 billion by rejecting the demands of the banks.

The solution is radical and risky, but Lapavitsas says it is the best scenario for Greece. He says, “there is no other choice, in the coming decades, than to default on the debt because it is based on neoliberalism. Neoliberal behaviour was a crime against humanity. No one is obliged to pay this debt because it was accumulated through the vicious workings of the market.”

 

Conclusion

The media focus on the inaccurate “lazy Greeks on the take” narrative and de-emphasis of lender irresponsibility is no accident. The corporate media have a vital interest in protecting neoliberal principles of free markets, globalization, and corporate growth, despite the widespread damage it causes to common working people. As Herman & Chomsky point out, it is a form of propaganda – the banks must prevail, the eurozone must be preserved, and austerity must be enacted. In Margaret Thatcher’s words, “there is no alternative.” But the failure of the media to accurately report the full situation only leads to public consent for an immoral, corrupt and criminal system that erodes society and destroys lives. In today’s New York Times, columnist Paul Krugman offers an old quotation: “You do not know, my son, with how little wisdom the world is governed.”  The same is true for how the world is reported.

 In researching this article, I found the following sites and books to be great sources for the alternative story of the debt crisis and the world economy in general:

 

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3 Comments so far ↓

  1. Jan Ake Johnsson says:

    Hi Bruce,

    I can certainly agree with some of the arguments you are describing in the Greek debt crisis. As you conclude, to save the euro zone austerity must be enacted; “there is no alternative”. However, I don’t agree when you are saying that media (depending of course which media you are talking about) is failing to report the full situation. The problem is that when the immoral, corrupt and criminal system seems to be in favor of common working people, no one is interested to listen.

    Greece, in spite of probably being the inventors of modern democracy, has elected their own politicians from both left and the right often with more interest to achieve unrealistic benefits (like, for example, 120-150% pensions before 60 years of age) and to avoid taxpaying than to strive for a fresh, equitable and sustainable society. The worst crime committed by the politicians during the last generations is that they have failed to train and educate a community-conscious, critical and democratic knowledgeable population.

    Being a Lutheran from the comparatively cold Sweden in northern Europe, I had to learn to be laborious and rational to survive. However, having lived for a couple of decades in southern Europe (Spain) I have become acquainted with a different lifestyle and culture in which it is not as natural to be high-performing to survive. They are not lazy; they are genuinely irrational. The respect for and control of the public authorities does not exist in the same way as in Northern Europe. To deceive and cheat the authorities is like a game, and it is the most comprehensive and appreciated by all actions, and I am then talking about everybody including poor laborers, artisans and so on further up the ladder.

    The lifestyle I am talking about has been strengthened and made possible by the fact that Greece, Spain, etc. are tourist countries. That kind of business is very difficult to control and is closely related to corruption, black money and tax evasion. Therefore, hell becomes so much worse when the rich countries find themselves in crisis, and their inhabitants spend less on tourism and housing in Greece and Spain, etc. An example: The citizens of the rainy British islands have currently a currency that has lost 25% of it’s value to the euro.

    Finally, Greece has not like Argentina, a decade ago, a stable base industry to develop and thus, with tourism at a very low, the alternative voluntarily to go for bancruptcy (unofficially they are under forced administration from EU) estimations are pointing at a further reduction of the standard of living with another 25-40%.

    Let ut hope that the Greeks learn of this current dilemma, to be more realistic and allow themselves to be represented y political representatives who stand for fair and lasting values. The problem is often that a poor man’s votes, due to neurotic reasons, do not go where his needs can be realized.

    Jan Johnsson

  2. Nate says:

    A solid analysis, but does leave out the fact that rampant tax evasion, by all social classes in Greece, has left government coffers bare.

    http://www.newyorker.com/talk/financial/2011/07/11/110711ta_talk_surowiecki

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