By Lynn Parramore. Cross posted from Alternet
Lately, European elites have been congratulating themselves for averting disaster in the eurozone. But who, exactly, is breaking out the champagne?
The Banks Got Bailed Out
If you read the mainstream media reporting, you will learn that the European Central Bank (ECB) has “eased pressure” and “given breathing room” to the banks and financial markets, including the markets for sovereign debt. Translation: the bankers in the eurozone were sitting around biting their fingernails as holders of eurozone bank debt headed for the hills at the prospect of default by Greece and other countries. So the ECB gave them a sweetheart deal that allowed them to borrow more than €1 trillion for three years at just 1 percent interest. The banks got bailed out and will continue their irresponsible and in some cases criminal activity unchecked. Hooray!
Meanwhile, you will hear that the Italian and Spanish 10-year government bond yields have fallen below 5 percent, which is supposed to be another positive development. What you will not hear: having been given money very cheaply, the banks went on a spending spree. They bought government bonds that they will eventually unload at a handsome profit. Great! For them.
In the long run, it is doubtful that the real crisis has been averted. The economies of the eurozone are still not growing, and the Greek default has probably not been averted. But the bankers and financiers, and the politicians that back them, are feeling good for the moment.
Meanwhile, the full brunt of the crisis falls on the ordinary citizens of vulnerable countries like Spain, which has now emerged as the most worrisome of the so-called PIIGS countries (Portugal, Ireland, Italy Greece, Spain). For them, the present is grim and the future is dark. For those already enduring hardships, life has become a nightmare. Austerity measures, also known a “fiscal discipline” may have saved the euro and the banks. But they have not solved the underlying economic problems, because European elites are acting from two misguided notions. They refuse to recognize that Spain’s fiscal difficulties are a consequence of the economic crisis, not the cause. There’s a big difference, but this false narrative works to the advantage of the 1%, who would like to see the population in dire straits so that the plundering of the commons and shredding of labor protections and the social safety net can proceed unimpeded.
European elites also fail to acknowledge what Marshall Auerback and Ed Harrison have pointed out repeatedly: the structure of the eurozone is deeply flawed and creates damaging and unsustainable relationships between member countries that share a currency. In the United States, member states like New York and Mississippi have very different economies, but because they are part of the same political structure, part of the riches of one state will be transferred to make up the shortfall caused by the less robust economies of the poorer neighbors. That’s accepted as the price of keeping a country together. In the eurozone, on the other hand, you’ve got a shared currency but little sense of shared political purpose, so a country with a stronger economy, like Germany, resents aiding its poorer neighbors and therefore focuses on imposing misguided “discipline” on the poorer country as if that will solve the problem. What if New York imposed “discipline” on Mississippi? Pretty soon, a poor state would be even poorer, and its population would experience unrest and possibly descend into chaos.
The Rest Got Sold Out
Which brings us to Spain. At the moment, unemployment is above 23 percent and one young person in two is out of work. The economic crisis has created widespread hardship, which means that the need for state assistance for people who can’t find work or have health problems or other emergencies is rising just at the moment when drastic budget cuts are being imposed. We’re talking about cuts to health care, cuts to education, and cuts to other services that are not frills, but vital to any kind of chance for people to have a stable, decent life. In some areas, hospitals have been shut down. School children have been left to attend class without heating or toilet paper. A banker is breaking out the champagne while a child nearby is shivering. This Dickensian scenario is what elites are currently crowing about.
And it goes on. In a recent article, “Spain’s safety net frays as care workers go unpaid,” Reuters reports that nurses, streetcleaners, and caregivers of the mentally ill and others in desperate need of help are being laid off. Sick people can’t get medication. The human costs of austerity measures are cruel and startling.
The eurozone structure and the austerity madness has exacerbated the gap between the more robust northern economies and shrinking southern ones, which is a recipe for growing social unrest. As regular people and workers get increasingly squeezed, protests are bound to follow. Social critics warn of a whole “lost generation” with no hope and nothing to lose.
Even Martin Wolf of the Financial Times (not exactly the paper of record for the 99%) calls this situation “insanity”:
One definition of insanity is to do the same thing over and over again and expect different results. Germany’s determination to impose a fiscal hair shirt on its eurozone partners did not work in the “stability and growth pact”. Is it going to work in the “treaty on stability, co-ordination and governance” agreed last week? I doubt it. The treaty reflects the view that the crisis was due to fiscal indiscipline and that the solution is more discipline. This is far from the whole truth. Rigorous application of such a misleading idea is dangerous.
There is a madness stalking Europe. And it’s not the “fiscal irresponsibility” of ordinary citizens. It’s the greed and short-sightedness of elites who don’t seem to mind that innocent children are made to pay for their excesses. That is surely another definition of insanity.