Posts Tagged Eurogroup
One of the most frightening aspects of the crisis is how it appears that our leaders are increasingly at a complete loss as to what to do.
It’s common to come across popular spitting fury at the ‘banksters’ and ‘conmen’ who govern us, as though those with their hands on the levers of the European system are moustache-twiddling cartoon-mastermind villains of unbounded venality (cf. Matt Taibbi’s characterisation of Goldman Sachs as a ‘vampire squid wrapped around the face of humanity’).
But as we peer goggle-eyed and gap-jawed at the scale of the debacle of the Great Cypriot Bank Robbery and the blame game that has followed, it is manifest that we are so very, very far from being ruled by a cabal of cat-stroking Lex Luthors and Ernst Stavro Blofelds of finance. On the contrary – we are ruled by the Three Stooges of finance.
Each of the individuals involved in the negotiations last weekend has been eager to stress how he or she was not responsible for coming up with the idea of imposing the ‘stability levy’ on those with under €100,000 in deposits. All actors have been keen to seek out their preferred media outlet to plead their case.
(Although I should say here: Why isn’t anybody screaming “Hello? What’s with all the Kremlinology? Why do we have no choice but to report on decision-making of this import and impact on domestic laws and finances in essentially the same way that we report on the election of the Pope? Why does the Eurozone’s de facto legislature operate like a papal conclave?”)
The ECB’s Joerg Asmussen basically said: ‘It wasn’t us.’ Cypriot officials said: ‘It was Schaeuble.’ Schaeuble said: ‘It was the Cypriots, the Commission and the ECB.’ ‘Rehn started it.’ ‘No I didn’t.’ Unnamed officials darkly hint that the Cypriots care more about Russian oligarchs than they do their own people while Nicosia publicly accuses the ECB of blackmail. France says they never supported the plan. Fingers are pointed at the Finns, Slovaks and Dutch as bullies egging the big kids on.
But all we have to do is go read the press statements of Saturday morning to find very few dissenters from the arrangement. Even European Parliament President Martin Schulz, who had nothing to do with the crafting of the deal and should have been free to be more critical publicly if he really felt that way, as of Saturday had only timid concerns, agreeing that depositors should pay for some of the bailout, and only called for an exemption for those with sums under €25,000, however much he is now thundering at the injustice of what has happened.
The most enlightening nugget in the FT’s investigation is when we find out that a proposal to exempt low-level depositors ‘was only actively supported by Ramon Fernandez, the French treasury chief – a fact that supports [French finance minister Pierre] Moscovici’s claim to have been an early opponent of the levy on smaller savers. “The rest did not care.”’
That is to say they all, with the possible exception of France, share the blame.
Over in the UK, British Chancellor George Osborne’s scramble on Sunday to reassure UK depositors in Cyprus that they will be reimbursed (at a back-of-the-envelope cost of £138-200 million), reeks of something of an afterthought, not least because his deputies (underlings? henchmen?) later wobble, saying that only ‘most’ of any monies seized will be recompensed.
And the Eurozone’s conclave of necktied cardinals all quickly row back after the fury on the streets of Nicosia and the Cypriot parliament does its democratic duty and pushes back, rejecting the deal (the first domestic parliament in Europe brave enough to do so).
They all just seem so utterly at a loss as to what to do, other than to stick to the received consensus wisdom of TINA – There Is No Alternative.
Attempting to pin the blame on a particular actor misses the point. We have to remember that not just in the Cypriot case, but for each of the euro-crisis intensive-care patients, there is a role that the ECB plays, that the IMF plays, that the European Commission plays, that the Council of Ministers/Eurogroup/European Council plays, and that local elites play. Positions are often overlapping but conflicting, representing the different elite domestic and/or institutional interests to which a particular actor is most sympathetic.
Yet when we take a helicopter view, we see that the shock-therapy course is agreed by all, regardless of nationality, institution or party. Asmussen and Dijsselbloem are social democrats and Anastasiades is a conservative. Truly, anyone who still believes that there is any difference on economic questions between Europe’s social democrats and conservatives any more can only be a member of one of these two rapidly dwindling tribes.
So saying that the Cypriot debacle is all the EU’s fault or all Berlin’s fault may be incorrect, but saying that it’s all the local comprador elites’ fault is also incorrect. It is a complicated interplay of interests between these different actors, just as Greece’s late Pasok prime minister, George Papandreou may have been thrown under the bus by the Frankfurt Group for threatening a referendum on a second bailout – but ideologically he represented nothing different.
Russian vs European oligarchs
And as if the raid on bank account-holders with less than €100 large was the only egregious act performed in the wee hours of last Saturday in Brussels in any case. What about the 70-something couple for whom €120,000 maybe is their life savings? Or the small and medium-sized businesses for whom that sum represents a payroll account?
And if there really is the concern on the part of the rest of Europe about Russian oligarch accounts, could they not have been forfeited instead? Why are no senior bondholders – hedge funds or other holders of Cypriot sovereign debt even talked about as subjects for bearing some of the pain?
All those who signed off on Saturday’s deal endorsed once again a programme of austerity, privatisation (of utilities) and structural adjustment worth some 5.75% of GDP – the same recipe that has such a depression-beating success elsewhere. The record is broken. Beyond its injustice, the strategy plainly is not working. As elsewhere, an economy already in recession will be bludgeoned by additional austerity, likely meaning a second or third kick at the bail-out can somewhere down the line, in turn requiring still further austerity in a vicious cycle.
The focus on who is to blame also occludes the step change from private to public of threats of economic violence from Frankfurt and Berlin that has occurred in the wake of the Cypriot parliament disobedience. The threats aren’t new, but they have been made privately until now. And their wrath is something to behold. So now we have an ultimatum from the ECB that it will cut off its Emergency Liquidity Assistance, snuffing out the oxygen to Cypriot banks. They will collapse, with all the social dislocation that would bring.
Schaeuble, unused to being defied, roared: “The ECB has made it clear that without a reform programme for Cyprus the aid can’t continue. Someone has to explain this to the Cypriots and I think there’s a danger that they won’t be able to open the banks again at all.”
Someone has to explain this to the Cypriots. The same refrain we’ve heard throughout the crisis, but with added bile: Vote how you like, dum-dums, so long as it’s the right way.
And lest we think France somehow gets a gold star in all this, her representative on the Eurogroup Working Group, which comprises deputy finance ministers or senior treasury officials from the 17 eurozone members, as well as representatives of the ECB and Commission, has this to say as regards democracy in Cyprus: “The (Cypriot) parliament is obviously too emotional.”
Lastly, where is this sudden concern about tax havens and Russian oligarchs and organised crime coming from anyway? Leaving aside the bail-out cash that never actually lands in Greece but heads straight back to northern reckless lenders, the ‘oligarchs’ of core European finance, the chutzpah of a Dutch chair of the Eurogroup or a Luxembourgish finance minister making any noise about tax havens is breathtaking.
Ah, I hear you say, but European oligarchs aren’t quite like Russian oligarchs. They aren’t up to their tits in organised crime.
Well, let’s have a look at the shenanigans of UK multinational bank HSBC, ordered twice by US regulators in 2003 and 2010 to tighten its anti-money-laundering activities. Then in November last year, it was found that HSBC had set up offshore accounts in the Channel Islands tax haven of Jersey for suspected drug-dealers and other criminals, prompting Her Majesty’s Revenue and Customs to launch an investigation. The following month, HSBC was fined $1.9 billion for allegedly laundering some $881 million in drugs cash for cartels. The company turned a blind eye to Mexican drug cartels using its branches to launder millions, with staff also stripping identifying information off transactions from embargoed countries such as Iran and Sudan. The company has also been accused of laundering money for terrorist groups. But of course, as the aforementioned Rolling Stone journalist Matt Taibbi put it in his investigation of the case, HSBC is ‘Too big to jail‘.
There aren’t Russian oligarchs who are eeevil and European oligarchs who are saintly. There are just oligarchs.
And of course the useful idiots – the bungling stooges – who abet them.
The Greek Frankenstein’s monster of a coalition government – stitched together from the torso of the wounded conservative New Democracy and the decomposing, undead remains of centre-left Pasok and ex-eurocommunist Dimar – passed legislation last week raising taxes on ordinary Greeks and corporations and then this week approved another package of moves restructuring state assets for privatisation and expanding the powers of the finance ministry
I’ll not go into details of the problems with the legislation, termed ‘prior actions’, which was demanded by international lenders in return for the latest round of financing due this month. The imposition of suicidal and unjust economic policies in the European periphery is very much more ‘dog bites man’ these days than ‘man bites dog’. I’ll leave it to others to point out the errors.
Instead, what I find significant is that the different pieces of legislation have not been presented as proper bills, but as edicts in order to prevent debate, which would slow down the approval process.
The coalition felt it didn’t have time for the legislation to go through normal procedure as it wanted the bills to be already in the bag before finance minister Yannis Stournaras headed to the Eurogroup meeting (of finance ministers from the eurozone) on Monday, 21 January, where the first of three bail-out tranches worth €18 billion was to be considered and possibly approved.
Opposition parties, both the socialist Syriza party and the Independent Greeks – the anti-memorandum splinter from New Democracy – accused the government of bypassing parliament.
Their criticisms were – how should this be put politely? – let’s say ‘unvarnished’.
“You are introducing a new form of governing,” Syriza parliamentary spokesman Panayiotis Lafazanis said. “Ministers will issue edicts that will abolish parliament’s rights and will not be debated at all. You are responsible for turning a parliamentary democracy into a parliamentary junta.”
“We are observing a situation where parliament has essentially ceased working,” said Notis Marias of the anti-memorandum splinter from New Democracy, the Independent Greeks. “Your attitude is ‘Eurogroup uber alles.”
It seems strange to be talking about legislation by decree in the 21st Century. The words ‘decree’ and ‘edict’ evoke images of the Catholic Church releasing papal bulls, or absolute monarchs issuing proclamations changing the religion of a realm overnight.
The development of modern democracy placed great emphasis on ‘legislative supremacy’ (also known as ‘parliamentary sovereignty’). Whether called a parliament or congress or house, the deliberative assembly normally has exclusive authority to pass, amend or repeal laws, raise or lower taxes, regulate trade, and declare war. Western societies did not opt instead for a model of elected monarchs (athough Poland famously employed wolna elekcja, or royal elections, on occasion until the late 18th century).
Why did we do this? Well, it’s a long story and whole libraries could be and indeed are filled with discussions of theories of governance. But boiled down, the argument is that the executive branch – the body that enforces the law and carries out the day-to-day administration of the state – is the servant of the legislature, in order to ensure a separation of powers, which in turn serves as a sort of inoculation against tyrants.
By distributing power away from the executive, and maintaining the supremacy of the elected chamber, a polity is supposed to be protected against authoritarianism. In those places where there is little or no separation between executive and legislative branches, the different powers of government by definition are held by one person or one small group of people. (This situation, by the way – other than during times of national emergency, or ‘state of exception’ – is the very definition of despotism you will find in any dictionary)
Yet what happened in Greece this past fortnight is far from the first time that governments in the eurozone periphery have turned to the use of decrees to avoid parliamentary scrutiny. Indeed, though it has received little notice, the use of decrees, edicts and similar manoeuvres – a direct challenge to legislative supremacy – has been sharply on the increase in since the advent of the crisis.
Grand Duke Draghi of Frankfurt
Most controversially, the ECB’s humiliating ultimatum letter to Berlusconi in the summer of 2011 that was leaked to Corriere della Serra, the Italian daily, included not only a series of demands for legislation in return for central bank bond purchases, but the detailed timetable bills needed to be passed by and that they be imposed by edict, only later to be approved in a similar up/down fashion to this past fortnight’s Greek decrees. According to the letter, the package of austerity and structural adjustment bills had to be passed “as soon as possible with decree-laws, followed by parliamentary ratification by the end September 2011.”
The bulk of the shock therapy that unelected technocrat prime minister Mario Monti has applied to Italy have been performed by decree – the ‘Save Italy’ emergency decree, which took place days after Super-Mario took power; the ‘Grow Italy’ decree, the ‘Fiscal Simplification’ decree, the ‘Spending Review’ decree, the ‘Sustainable Development’ decree, and so on.
Some of the actions undertaken by decree any progressive could support; others decidedly less so. But whether one supports or opposes a move is immaterial – the method through which they are enacted is undemocratic.
Over in Spain, in May last year, Spain’s Mariano Rajoy used a decree to avoid parliamentary oversight of the decision to use public funds to bail out its drowning banks, offloading written-down assets into separate financial vehicles. Similarly, in February, Rajoy used the decree format to force banks to set aside certain amounts as cash buffers against losses. In March, there was a labour market deregulation decree in March, and in November an anti-tax-fraud decree and another delinking pensions from inflation.
After a woman killed herself when bailiffs tried to throw her out of her home and under pressure from protests, Madrid also passed a decree suspending home evictions for poor families with small children, the disabled and long-term unemployed. This action should certainly be welcomed, and probably did need to be instituted instantly for obvious reasons. But the question still remains, even for these sorts of measures – why is so much legislative activity now being done without parliamentary scrutiny?
By contrast, this past week, US President Barack Obama unveiled his gun control strategy. Alongside a series of legislative proposals, Obama announced 23 executive orders that are enacted immediately. Republican opponents and hyperbole-mongers have attacked the president for bypassing congress and ‘ripping up the constitution‘.
But in reality, every one of his gun control recommendations – criminal background checks for all gun sales, reinstating an assault weapons ban, a 10-round limit on ammunition magazines, outlawing armour-piercing bullets and providing mental health support services in schools – require congressional approval. The executive orders cover such matters as directing the Center for Disease Control to perform research into the causes of gun violence, requiring that federal agencies make relevant data available to the background check system, launching a national dialogue on mental health and starting a a national safe and responsible gun ownership campaign.
These are precisely the sort of relatively trivial moves that do not require parliamentary debate and oversight – the sort of direction from the directors of the executive branch of government to its officers and agents managing their operations or the appointment of senior civil servants. In France, these are called décrets (although the president may not rule by decree except during national emergencies) and in the UK Orders in Council. Not all executive actions need to be put through the legislative sausage factory.
But major policy changes with significant impacts, such as cutting pensions, radical overhaul of labour markets, bank bail-outs and so on certainly should indeed be looked over by parliaments with a fine tooth comb. And when they aren’t, if there is genuinely some sort of emergency requiring immediate executive action, there needs to be a bloody good reason, and it should be explained why this exception is necessary.
(If you want to be technical about this, what we’re talking about here is the distinction between primary legislation – crafted and approved by the legislative branch – and secondary or delegated legislation – laws made by an executive authority under powers transmitted to them by the primary legislation in order to carry it out)
Citizens’ ears should prick up every time they read that something is being passed by decree or edict. Nine times out of ten, it is a sure sign that democracy is getting a bit of a hair-cut. An historical wander through the textbook exemplars of the use of decrees are instructive for comparison.
Famously, George W. Bush enacted a whopping 262 executive orders, the preponderance of which were a clear usurpation of congress’s position as the legislative branch. In this way, he blocked funding for stem-cell research, sidestepped the Geneva Conventions protection from torture, and offered impunity to US corporations operating in Iraq.
Those for whom the origins of Russia’s current ‘managed democracy’ remain a mystery could do worse than read up on Boris Yeltsin’s privatisation by decree and ultimate disbanding of parliament and rule by decree in the autumn of 1993. Fantastic sums in public funds were transferred to banks owned by major figures in the Soviet state and the former Communist Party higher ups. These banks then spent the effectively embezzled funds to snap up state industries on the cheap in privatisation auctions they themselves conducted.
From 1972 to 2007, governance of Northern Ireland was carried out under what was known as ‘direct rule’ – in effect rule by decree. While the people Northern Ireland still technically elected members of parliament to the House of Commons, legislation administering the region was made through Orders in Council, a situation opposed by by both nationalists and unionists for its lack of democratic accountability.
Similarly, during the Algerian War of Independence, in 1956, the governor general of French Algeria, Robert Lacoste, abolished the Algerian assembly and ruled by decree to deal with the mounting political violence. Then in 1961, President Charles de Gaulle became the only French president to rule all of France by decree during a national emergency, employing ‘special powers’ he requested from the National Assembly in the wake of an abortive rightist uprising in Algiers. Over the course of five months from April to September of that year, De Gaulle enacted 16 decrees expanding police powers, enlarging the power of the courts, banning publications, dismissing civil servants for ‘encouraging subversion’, and establishing special military courts, amongst other measures.
Now, one of the difficulties in discussing Europe’s democracy-on-a-diet approach to the economic crisis is that when anyone suggests that there has been a hollowing out of democracy, the cry immediately goes up from defenders of the strategy: “Where are the tanks? Where are the gulags? Where is the police state?”
But this is a category error, a conflation of autocracy and totalitarianism, as there can of course be creeping autocracy without totalitarianism. The advance of rule by decree does not signify the imminent appearance of a Duce or Fuhrer but with a blue and yellow flag. Mario Draghi is not Kim Jong-un.
Cindy Skach, professor of comparative government at the University of Oxford and one of the world’s leading experts on constitutional design, has described precisely this sort of legislative atrophying phenomenon as ‘constitutional dictatorship’. It comes from the use of emergency powers over a prolonged period “during which authority is transferred to non-partisan, above-party sources, leading to a loss of substance in the democratic process.”
In her work comparing Weimar Germany and the French Fifth Republic, she offers a warning of what results from this overuse of decree: “Such periods are also characterised by opaque, nonaccountable decision-making in which the democratically elected institutions of the polity, such as the legislature, have lost their controlling capacity, as presidents become increasingly less accountable.”
Such descriptions will of course be familiar to anyone who has followed the steady transfer of fiscal powers out of the hands of democratically elected parliaments – both in EU-IMF programme countries and across the eurozone.
To be clear, I am not saying that Italy, Spain, Greece and other countries are being ruled entirely by decree, but a lot of the new rules do come in the form of decree.
This state of exception is becoming permanent.