Posts Tagged austerity

JP Morgan to eurozone periphery: “Get rid of your pinko, anti-fascist constitutions”

At times, I do marvel how antiseptic, bland even, that the language of the most wretchedly villainous documents can be.

Last week, the European economic research team with JP Morgan, the global financial giant, put out a 16-page paper on the state of play of euro area adjustment. This involved a totting up of what work has been done so far and what work has yet to be done in terms of sovereign, household and bank deleveraging; structural reform (reducing labour costs, making it easier to fire workers, privatisation, deregulation, liberalising ‘protected’ industries, etc.); and national political reform.

The takeaway in the small amount of coverage that I’ve seen of the paper was that its authors say the eurozone is about halfway through its period of adjustment, so austerity is still likely to be a feature of the landscape “for a very extended period.”

The bankers’ analysis probably otherwise received little attention because it is a bit ‘dog bites man‘: Big Bank Predicts Many More Years of Austerity. It’s not really as if anyone was expecting austerity to disappear any time soon, however much EU-IMF programme countries have been offered a relaxation of debt reduction commitments in return for ramping up the pace of structural adjustment.

The lack of coverage is a bit of a shame, because it’s the first public document I’ve come across where the authors are frank that the problem is not just a question of fiscal rectitude and boosting competitiveness, but that there is also an excess of democracy in some European countries that needs to be trimmed.

“In the early days of the crisis, it was thought that these national legacy problems were largely economic: over-levered sovereigns, banks and households, internal real exchange rate misalignments, and structural rigidities. But, over time it has become clear that there are also national legacy problems of a political nature. The constitutions and political settlements in the southern periphery, put in place in the aftermath of the fall of fascism, have a number of features which appear to be unsuited to further integration in the region. When German politicians and policymakers talk of a decade-long process of adjustment, they likely have in mind the need for both economic and political reform.” [Emphasis added]

Yes, you read that right. It’s in dry, banker-ese, but the authors have basically said that the laws and constitutions of southern Europe are a bit too lefty, a product of their having been written by anti-fascists. These “deep-seated political problems in the periphery,” say authors David Mackie, Malcolm Barr and friends, “in our view, need to change if EMU is going to function properly in the long run.”

You think I’m perhaps exaggerating a smidge? They go into more detail in a section describing this “journey of national political reform”:

“The political systems in the periphery were established in the aftermath of dictatorship, and were defined by that experience. Constitutions tend to show a strong socialist influence, reflecting the political strength that left-wing parties gained after the defeat of fascism.”

All this is a load of historical horse-lasagna anyway. Italy for example never went through a process akin to Germany’s denazification, and in Spain, the democratising king, Juan Carlos, played a major role in the transition. Only in Greece and Portugal were there popular socialist insurrections that resulted in or contributed to the overthrow of the regimes: the Athens Polytechnic Uprising played a key role in the Metapolitefsi or ‘polity change’ (although much, much more than the crushed student protests were involved here, including a failed coup d’etat and the Turkish invasion of Cyprus), and in Portugal a proper left-wing rebellion, the Revolução dos Cravos or Carnation Revolution, brought down the Estado Novo regime. Although it is true in the case of the latter three countries that their late-in-the-day construction of welfare states in the 70s and 80s was largely carried out by social democratic forces, the architects of the Italian post-war state were the Christian Democrats, who dominated government for 50 years.

“Political systems around the periphery typically display several of the following features: weak executives; weak central states relative to regions; constitutional protection of labour rights; consensus building systems which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo. The shortcomings of this political legacy have been revealed by the crisis. Countries around the periphery have only been partially successful in producing fiscal and economic reform agendas, with governments constrained by constitutions (Portugal), powerful regions (Spain), and the rise of populist parties (Italy and Greece).”

Let’s parse that paragraph, shall we? Weak executives means strong legislatures. That should be a good thing, no? Let us remember that it is the parliament that is sovereign. The executive in a democracy is supposed to be the body that merely carries out the bidding of the legislature. There is a reason why liberal democracy opted for parliaments and not a system of elected kings.

Oh, and we want strong central states. None of this local democracy nonsense, please.

JP Morgan, and presumably the EU powerbrokers they are ventriloquising for, finally are being honest with us: they want to do away with constitutional labour rights protections and the right to protest. And there has to be some way to prevent people electing the wrong parties.

Thankfully though, the authors note, “There is a growing recognition of the extent of this problem, both in the core and in the periphery. Change is beginning to take place.”

In particular, they highlight how Spain has begun “to address some of the contradictions of the post-Franco settlement” and rein in the regions.

But other than that, sadly, the process of de-democratization (okay – I’m calling it that. They call it “the process of political reform”) has “barely begun”.

Well, the JP Morgan paper may have been written in English, but there is a venerable Spanish phrase that that all good anti-fascists right across the eurozone periphery know and is probably the simplest and best response to such provocation: ¡No pasarán!

NO PASARÁN poster-8x6

Poster from the Spanish Civil War: ‘They shall not pass!’

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Draghi’s Super-Secret Secret Squirrel show

SECRET SQUIRREL COLOR 3

Mariano Rajoy (L) and Mario Draghi (R) in fancy dress at the Transparency International Winter Gala

 

The European Central Bank’s Darth Draghi descended upon Madrid on Tuesday for a pep talk, saying that Spain had successfully stabilised its banking system and that borrowers with top-notch credit ratings should be seeing an easing of the credit drought by the end of the year. He saluted new laws making it easier to fire workers and did his best Bill Clinton impression, feeling the pain of the almost 60% unemployed youth.

After a closed hearing before a select group of MPs in the Chamber of Deputies, he told reporters that “Spain is on the right track,” while darkly warning that all EU countries still had far to go and called on PM Rajoy to put together a “credible, detailed plan” on further spending cuts.

Nothing really new here. Typical ‘Good work, now cut more’ generalities.

So why was the meeting held as a closed session?

It was reported ahead of the meeting by El Pais that according to parliamentary sources, the central bank had requested the secrecy as Draghi had wanted a similarly restricted format to that which he used when he spoke to Germany’s Bundestag.

The decision to keep the meeting closed to the public, with proceedings to be issued in none of the normal formats, provoked an angry response from left-wing deputies, who announced that they would just “retransmit” Draghi’s comments by Twitter.

All opposition parties, including the Socialists, denounced the move (although one has to ask if PSOE would really have done any different). The Socialists’ spokesman, Valeriano Gómez filed a formal protest, while the Plural Left (United Left and Greens) described the efforts at a closed session as a “failure of democracy”.

Shockingly, in response, the Speaker of the House installed mobile-phone jammers to prevent deputies from live-tweeting. So left-wing deputies Alberto Garzón and Joan Coscubiela just sneakily filmed the session on their iPhones and later uploaded the videos to YouTube.

The kerfuffle prompted Draghi to subsequently deny that he had ever wanted a closed session and that he would have been perfectly happy for it to happen in the open, adding that no harm had been done by it being posted on YouTube. See, look, I’ll even post my speech up on the ECB website.

On the one hand, the Sith Lord’s speech was so full of austerian banalities that it makes you wonder why whoever it was requested the meeting be held in secret in the first place.

On the other hand, if Draghi’s comments really were going to be incendiary and have such import for the Spanish political economy, then such words – if Spain is still a sovereign democracy – need to be said publicly.

Particularly as the ECB has such form since the crisis with secret letters to governments ordering them to liberalise their economies or commanding them to take a bail-out, or quiet phone calls to domestic banking bosses directing them to turn off the taps, citizens have every reason to be frightened of Frankfurt’s preference for the shadows.

In 2011, when former Eurogroup chief Jean-Claude Juncker was at a small Brussels think-tank function, forgetting that reporters were present, he for once spoke quite frankly about the need for secrecy, saying: “I’m ready to be insulted as being insufficiently democratic, but I want to be serious.”

Economic policy discussions were simply too sensitive, he said, potentially putting “millions of people at risk”, to have them in public. “I am for secret, dark debates,” he joked at the time, adding that despite his Catholic upbringing, he had often “had to lie.”

In the end, Draghi’s comments appear to have been largely banal. But this is the point. European leaders have become accustomed to operating beyond the glare of parliaments and the public, both for discussions of great import and for the prosaic.

The demand for state secrecy in economic matters is expanding – a sharp turn away from principles of open government, which require that citizens have a right to access documents and proceedings of government to assure democratic, public oversight.

It should be obvious that limitations on state secrecy, a core principle of democrats since the Enlightenment, is also required to prevent corruption.

At a time when great swathes of the current Spanish and Greek political classes stand accused of protecting themselves and those close to them from the taxes that mere mortals are subject to – and Draghi himself is caught up in a similar scandal of his own, we must be especially vigilant and on guard against what increasingly appears to be unblushing criminality amongst our leaders.

Enough clumsy cloak and dagger, Draghi. At least talk pretty to our face before you screw us.

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For more details on Draghi’s Super-Secret Secret Squirrel meeting, just check the #openDraghi hashtag.

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This Charming Man – The dapper, cosmopolitan face of post-democracy

smithsAutocracy will return to Europe not dispatched by colonels atop tanks this time, but by cosmopolitan civil servants, economists and public intellectuals who as likely as not give money to Amnesty International and Medecins Sans Frontieres. Its partisans will be witty and dapper and subscribe to the RSS feed of The Sartorialist. And the passage to post-democracy will be unhurried but throughout, it will be tweetily endorsed and blogged about and the videos explaining why it is necessary will be uploaded to Vimeo, the ‘artisanal’ online video service, not just YouTube.

Currently on rolling release throughout Europe, there’s a slick new documentaryGirlfriend in a Coma, by Italian journalist Annalisa Piras and Bill Emmott, the natty former editor of The Economist, based on his 2012 book, Good Italy, Bad Italy, about the risible state the country finds itself in.

The film charts the decline of the country under the rule of Caligulean Berlusconism over the past two decades, and takes a broadly pro-Monti shock-therapy line. It takes its name from the song by seminal Eighties sensitive indie-boy (and allegedly David Cameron) favourites The Smiths and features the thinking girl’s (or boy’s) piece of crumpet, Benedict ‘Sherlock’ Cumberbatch, as the voice of Dante. It’s high-brow, art-house, but classical-liberal Michael Moore.

(Quite literally art-house, as it happens. The continental premiere in Brussels, which features a Q&A with both filmmakers, will be at the Italian Cultural Institute on Thursday (17th January) and is sponsored by one of the only two picture houses on the continent that shows silent films accompanied by a live pianist, the city’s Cinematek. And its UK premiere in December was at the Institute for Contemporary Arts – the fountainhead of Britain’s arts avant-garde).

The problems with the Montabulous package of austerity and structural-adjustment economics backed by the film’s authors – further public sector cuts, spending limits, flat taxes, privatisation and labour market deregulation – are actually not that interesting to me. They would of course be economically disastrous and unjust, hitting ordinary people hardest, but the filmmakers and other partisans of such liberalising policies are certainly within their rights to their position and to fight their corner.

What is much more worthy of being flagged is how the filmmakers even as they lament the dismantling of democracy under Berlusconi, they fawn over Mario Monti and effectively endorse the undemocratic shenanigans that it took to parachute him into power, as well as the ongoing democratically unorthodox manoeuvres that have been employed to achieve such policies both domestically and across Europe.

What is also striking is how Emmott and Piras have clearly learnt from the mis-packaging of shock therapy elsewhere, dropping the wooden-tongued language of troikas and European Council presidents, and instead talk of a risorgimento, or even rinascimento – a renaissance and transformation of Italian society. The Bunga-bungocracy of Berlusconi naturally has made this sort of discourse so much easier than elsewhere, allowing the filmmakers to focus as much on corruption, patronage, nepotism, tax evasion, defeating the mafia, media monopolies – and, crucially, the denigration of women – as they do on the alleged barriers to ‘success’ constructed by the usual villains: trade unions, the public sector, and ‘overspending’.

And it’s not supposed to be just a film – it bills itself as the “Campaign to Wake Italy Up”. It wants to be a movement, an Italian Spring, aiming to both convince foreigners of its authors’ narrative of events in the country and galvanise the young Italian diaspora – the million or so expatriate Italians outside the country, many of them graduates – into participating in a liberal transformation of the country. Viewers are encouraged to upload their own ideas to the film’s website, while the oven-ready hashtags #wakeitalyup and #italiandiaspora are waiting to go viral (albeit presumably only amongst those bilingual ex-pats).

I imagine it will be embraced by a number of my mates of the Italian disposition and otherwise in the Belgian capital too. A week ago, I wrote a piece entitled the Shepherding of Italian Democracy, critical of unelected technocrat Prime Minister Monti and his cowardice in not presenting himself and his ideas for election. A reader tweeted me, responding to the article and saying: “If Italians in the eurobubble could vote, Monti would easily get 70% of preferences.”

I don’t think everyone feels this way in the eurobubble. I know far too many people in Brussels – true believers in the European project – that are horrified by what Brussels (and Frankfurt and Berlin) is doing.

But there probably is a glint of truth to this figure. And these people are not natural conservatives. These are people who adore Obama and hated Bush. People who support gay marriage – who may even be gay. People who support EU justice commissioner Viviane Reding’s push to get more women in the boardroom.

And they’ll say that they of course support democracy – and think that they mean it. But at the same time, when you really push them, they say that they just don’t trust ordinary people to vote ‘the right way’. They support EU efforts to take fiscal decision-making out of the hands of parliaments, lest voters spend their way to oblivion. After a few drinks, they dismiss ‘most people’ as stupid. A few drinks more and they call them ‘the mob’.

It’s this lack of trust in regular people, this unacknowledged attitude that there is a group of experts who know better than everyone else, this belief that there need to be checks on democracy, that frightens. Girlfriend in a Coma‘s emphasis on the bright, young, hyper-educated Italian diaspora speaks volumes about the filmmakers’ lack of confidence in all other sorts of Italian voters.

The Erasmus-generation fans of this film will be hip. They’re crisply dressed. They like independent cinema and museums and all the right music. They’re friends of mine, and they’re a great laugh and multi-lingual and smart.

And they’re autocrats.

A quick word on what this blog’s going to be about.

Girlfriend in a Coma website: http://girlfriendinacoma.eu

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