New Model of Governance in Bailout Europe: Silence, Lies and Evasion

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01/02/2014 by Don Quijones

Recent events in Spain have left me in even more a fog of confusion than usual. Here’s why: a little over a month ago, just before Christmas, it was announced to the loudest possible fanfare that Spain had finally fulfilled all its bailout obligations. 

Its work done, the Troika was withdrawing its troops. After 18 long, arduous months of economic belt-tightening, Spain had finally regained its independence, its government and people liberated from the shackles of neo-colonial economic rule.

Personally speaking, I had my reservations. But even I, a seasoned skeptic, never imagined that the Troika’s shock troops would be back quite so soon. On Thursday morning, while scrolling the home page of El Diario, the following headline caught my eye.

IMF Technocrats Do Not Deign To Explain Their Reforms in Spain

The technocrats in question were two chief economists from the IMF’s European Department, Martin Schindler and Jasmin Rahmen, and two assistants from the same department, Helge Berger and Antonio Spilimbergo.

They were in Madrid for the express purpose of present their latest study, “Employment and Growth: Supporting European Recovery” — a title that proves, if nothing else, that the “Fund of Funds” hasn’t lost its sense of humour. The study contained the standard, all-familiar IMF recommendations: greater labour mobility (i.e. make it easier for companies to fire and hire workers, the former of which is definitely no longer a problem in Spain), lower salaries (always nice coming from unelected officials earning fat, tax-free, all expenses-included salaries) and, of course, less union involvement in collective bargaining agreements.

Things got interesting, however, at the end of the presentation when the small gathering of journalists began launching questions at the four IMF employees, to which Antonio Spilimbergo had one solitary response: “we will not be taking any questions on the specifics of the Spanish situation.”

And there you have it: the perfect summation of how our new technocratic system of governance functions in Europe today. A small clique of four empty suits rides into town, announces “recommendations” for economic reforms — reforms that will continue to suck the life-blood out of the Spanish economy –, refuses to answer even the most innocent question on said reforms, and then rides back to wherever it came from.

In this new model of governance, difficult questions must never be asked. If they are asked, they must never be answered — for the simple reason that the IMF, the ECB, and the European Commission do not have plausible answers to such questions. In this video Klaus Masuch, a European Central Bank official, mumbles, stumbles, and squirms his way through a steady onslaught of probing questions from a seasoned Irish journalist. At the end of his merciless interrogation, the Irish journalist says:

This isn’t good enough. You people are intervening in this society causing huge damage while requiring us to make payments not for the benefit of anyone in Ireland but for the benefit of European financial institutions. Now could you explain why the Irish people are inflicted with its burden?

A damn good question, and one that merits an answer, but instead was met with a wall of silence, followed by all manner of evasive tactics.

Biting Austerity

Like Spain, Ireland was recently proclaimed cured. It had exited from the bailout program and, as The Guardian put it, recently made a “strorming return” to the international bond market. Yet while the country may be returning to a semblance (for that is all it is) of normality in macro financial terms, the cold, hard frost of austerity continues to bite on the ground.

In October last year, Irish premier Enda Kenny announced another round of austerity cuts in the government’s (read: Troika’s) budget for 2014. Among many other things, health costs will soar, medical cards will be withdrawn from 35,000 people over 70, welfare rates will be cut for job seekers and maternity benefits will be reduced.

The results are plainly visible for all to see. In Ireland, as in Spain, the poverty rate keeps rising, opportunity becomes a thing of the past for more and more young workers, the brain drain continues its onward march, the suicide rate is going up up and public services are gradually deteriorating to the point where they no longer serve the public — cue: privatisation.

Ditto for Portugal, ditto for Italy, and the less said about the tragic fate of Greece, the better. Soon, even Europe’s core countries will be invited to join the eternal race to the bottom.

To paraphrase the Roman historian Tacitus, “They make an economic desert and call it progress.”

The markets raucously cheer and applaud from the sidelines, rewarding the respective national governments’ noble efforts to impoverish their own citizens with slightly higher bond prices, healthier-looking risk premiums and more debt — always more debt! In October, the continent’s Banking Union will be consummated, granting exclusive supervision of the continent’s banking system to unelected, unaccountable apparatchiks of the European Central Bank. And with it, another hefty chunk of our national sovereignty will disappear.

Yet if someone dares to ask any of the Troika’s three horsemen of Europe’s economic apocalypse just why such drastic steps and their brutal social, economic and political fallout are necessary — something that most representatives of the fourth estate seem strangely loath to do — all you are greeted with is silence, more lies and evasion.

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8 thoughts on “New Model of Governance in Bailout Europe: Silence, Lies and Evasion

  1. pacemaker says:

    Why they are doing it? It is fairly simple. Since in the EU there is a common currency you cannot devalue on a national level any longer. So the alternative is to produce the effects of a currency devaluation by other means to regain competitiveness. Image that the country printed money what would be the effect? Lower salaries, high cost for imported goods, etc. The problem is in a currency devaluation debts in that country denomination would fall at the same rate. While the Troika is doing the exact opposite. That is the real problem.

    • pacemaker says:

      IMO they are doing this because in a currency devaluation scenario people’s debts contracted in their national currency would tumble as the currency devaluated but the creditors, read the banks, have mostly borrewed from foreign countries. IMO what they are doing is attempting to fleece as much money as possible in order to insure their own creditors don’t go insolvent.

    • pacemaker says:

      We all know who controls the European Commission. It has never been any of those nations in a problem right now. The fact that the commissioners cannot be elected without Germany and France approving of them is enough.

      The Comission needs to be more directly accountable to the electorate and they need to have term limits. Or the EU needs to vanish from the face of the Earth as an institution. It is like looking at the Politburo.

      • Don Quijones says:

        Some interesting points, Pacemaker. There can be no doubt at this stage of the crisis that the whole game revolves around saving the TBTF creditors (that is, banks) at every else’s expense — despite the fact, as David Malone pointed out in one of his great blog posts (unfortunately can’t find the link), the respective debt held by Europe’s biggest creditors more or less cancels out each country’s obligations.

        As for the comparison you draw between the European Commission and the Politburu, it’s a point that Vladimir Konstantinovich Bukovsky, a former Soviet dissident, nuerophysiologist and political activist, made a few years ago in a video recently featured here:

        http://ragingbullshit.com/2014/01/20/is-the-eu-the-new-soviet-union/

  2. Albizu says:

    And have not the EU and Draghi made it very clear that EU member labour costs (and one supposes to some degree welfare costs ) are to fall in order to make Europe competitive against Asia – while Asian costs rise? Ireland is the poster child for this: look at those benefit cuts.

    • Don Quijones says:

      Indeed, Albizu, indeed. The great levelling is under way — one area where we won’t be seeing much levelling is at the top of the earnings pyramid.

      By the way, great to hear from you, it’s been a while!

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