Jul 192015
 

By Éric Toussaint, Rosa Moussaoui, CADTM, 99GetSmart

Éric Toussaint before the Greek Parliament on 17 June 2015, in the presence of Zoe Konstantopoulou, president of the Greek Parliament and several ministers

Éric Toussaint before the Greek Parliament on 17 June 2015, in the presence of Zoe Konstantopoulou, president of the Greek Parliament and several ministers

Éric Toussaint interviewed by Rosa Moussaoui, Special envoy in Athens for  L’Humanité

Has Athens really been subjected to a financial coup d’état over recent weeks as claimed by many Greek and foreign observers?

Éric Toussaint: Yes and no. What was decisive was the result of political decisions made by political institutions, though obviously complicit with financial interests. The coup d’état was not directly led by financial powers, but by institutions, the European Commission and the heads of State and Government of the Eurozone. Germany was not the only country involved. Mariano Rajoy in Spain, or Pedro Passos Coelho in Portugal, not to mention the Finnish, Latvian and other decidedly neoliberal governments clearly wanted to demonstrate to their respective populations that the options presented to the European peoples by the Syriza government were unworkable. So the primary motivation was political. Clearly though the private banking sector and the multinational corporations also wanted to show that it is impossible to turn away from austerity policies. However, it must be remembered that Greece’s principal creditors are public institutions; since 2012 when they managed to unload their Greek debt, private banks are not the most interested party. The debt restructuring that took place permitted them to comfortably withdraw. Today, despite the failure of the economic policies that have been imposed on Greece, the European Commission, the ECB and the Eurozone countries are adamant that Greece continues on the path of neoliberalism. Remember that the IMF is also a political institution.
Alexis Tsipras expected assurances for debt relief in return for his capitulation to the austerity policies. The creditors have merely acquiesced to a discussion scheduled for this year on a possible debt restructuring starting from 2022. Why this obstinacy, while the IMF itself now considers the debt as unsustainable?
Éric Toussaint: I think that a Debt Restructuring is feasible before 2022. The creditors will say “not before 2022” because they know that this plan will not work and that the debt payment will be unsustainable. They will restructure this debt provided the neoliberal reforms are pursued. Debt is a means of blackmail, an instrument of domination. Basically, in the Greek case, the creditors are not so much motivated by profit, pertinent as it is, as by teaching a lesson to their own people and the peoples of other peripheral countries that there is no question of deviating from the model. For Hollande to say, “Look, even Tsipras and the radical left cannot escape the economic stranglehold!” is a way of vindicating his own abdication in 2012 on the promise to renegotiate the European treaty on fiscal stability.

Did Tsipras have any other choice vis- à-vis the violent attacks from the creditors? Does the alternative boil down to an exit from the Euro?

Éric Toussaint: I don’t think so. The choice was not necessarily between Grexit and remaining in the Euro Zone equipped with a new austerity plan and continuing to pay the debt. It was possible to stay in the Euro Zone by disobeying the creditors through legal means. Human rights violations are at stake here. The Greek authorities should have suspended the debt payment; retrieved control over the Bank of Greece (Antonis Samaras appointed its CEO, who has not served the interests of the country); and created a complementary electronic currency that could have helped to cope with the liquidity crisis, whilst remaining within the Euro Zone.

The State should also have taken the following steps:
1. Organize an orderly liquidation of banks and transfer the assets to the public sector (guaranteeing deposits up to € 100,000) whilst ensuring the protection of small shareholders and recovering the cost of cleansing the banks from the wealth of major international shareholders.
2. Reduce VAT on goods and basic utility services; reduce direct taxes on low income and assets; and levy heavy taxes on the income and wealth of the richest 10% (particularly the richest 1%).
3. Stop privatization and reinforce public services.

After the Greek Parliament adopted the disastrous agreement of 13 July, the prospect of a voluntary exit from the Euro is obvious. That there is no favourable solution for the peoples within the Euro Zone is now evident to more and more Greek and other European people. In case of a voluntary exit from the Euro Zone, the above propositions remain fully valid and a redistributive monetary reform must accompany them (see Greece: Alternatives to the Capitulation).

The ECB, one of the masterminds of the coup, is flooding the financial markets with liquidity and boosting speculation. Can capital generation serve the real economy, social needs and human development?

Eric Toussaint: Of course but this not what the ECB has been doing! Mario Draghi is not “independent”. He is the interface between major private banks and the governments of the Euro Zone. The ECB has deliberately destabilized the Greek economy to suit its own as well as other creditors’ purpose.

Translation : Suchandra de Sarkar, Mike Krolikowski and Christine Pagnoulle

 

Eric Toussaint, Author

Eric Toussaint, Author

Eric Toussaint is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège. He is the President of CADTM Belgium, and sits on the Scientific Council of ATTAC France. He is the co-author, with Damien Millet of Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He is the author of many essays including one on Jacques de Groote entitled Procès d’un homme exemplaire (The Trial of an Exemplary Man), Al Dante, Marseille, 2013, and wrote with Damien Millet, AAA. Audit Annulation Autre politique (Audit, Abolition, Alternative Politics), Le Seuil, Paris, 2012. See his Series “Banks versus   the People: the Underside of a Rigged Game!” Next publication : Bankocracy Merlin Press, Londres, May 2015 (English version).

Since the 4th April 2015 he is coordinator of the Truth Commission on Public Debt.

 

Aug 072013
 

Posted by greydogg, 99GetSmart

* FIRST CONGRESSMAN ALLOWED TO READ SECRET TREATY SAYS, “THIS … HANDS THE SOVEREIGNTY OF OUR COUNTRY OVER TO CORPORATE INTERESTS”

By Tyler Durden, zerohedge

[…] Yesterday, Congressman Alan Grayson (who knows how to read legislation … he was a successful lawyer before he was elected to Congress, and has written and co-sponsored numerous bills himself including the bill to audit the Federal Reserve and – most recently – the “Mind Your Own Business Act” to stop NSA spying) announced that he had been allowed to read the text of TPP – and that it is  an anti-American power grab by big corporations:

Last month, 10,000 of us submitted comments to the United States Trade Representative (USTR), in which we objected to new so-called free trade agreements. We asked that the government not sell out our democracy to corporate interests.

Because of this pressure, the USTR  finally let a member of Congress – little ole me, Alan Grayson [anyone who’s seen Grayson in action knows that he is formidable] – actually see the text of the Trans-Pacific Partnership (TPP). The TPP is a large, secret trade agreement that is being negotiated with many countries in East Asia and South America.

The TPP is nicknamed “NAFTA on steroids.”  Now that I’ve read it, I can see why. I can’t tell you what’s in the agreement, because the U.S. Trade Representative calls it classified. But I can tell you two things about it.

1)    There is no national security purpose in keeping this text secret.

2)    This agreement hands the sovereignty of our country over to corporate interests.

3)    What they can’t afford to tell the American public is that [the rest of this sentence is classified].

***

I will be fighting this agreement with everything I’ve got. And I know you’ll be there every step of the way.

***

Courage,

Congressman Alan Grayson

Grayson also noted:

It is ironic in a way that the government thinks it’s alright to have a record of every single call that an American makes, but not alright for an American citizen to know what sovereign powers the government is negotiating away.

***

Having seen what I’ve seen, I would characterize this as a gross abrogation of American sovereignty. And I would further characterize it as a punch in the face to the middle class of America. I think that’s fair to say from what I’ve seen so far. But I’m not allowed to tell you why!

Remember that one of the best definitions of fascism – the one used by Mussolini – is the “merger of state and corporate power”. Our nation has been moving in that direction for a number of years, where government and giant corporations are becoming more and more intertwined in a malignant, symbiotic relationship.   TPP would be the nail in the coffin for free market economics and democracy.

Note to progressives who support public banking: This is a key battle.

Note to those who oppose to what they call “one world government” or a “new world order”: This is the big fight.

READ / VIDEO @ http://www.zerohedge.com/contributed/2013-06-19/first-congressman-allowed-read-secret-treaty-says-“-hands-sovereignty-our-cou

MORE INFO ON THE TRANS PACIFIC PARTNERSHIP AGREEMENT (TPP) @ http://99getsmart.com/?p=3715

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* 8 WAYS PRIVATIZATION HAS FAILED AMERICA

By Paul Buchheit, CommonDreams

Privatization is fascism repackaged

Privatization is fascism repackaged

Some of America’s leading news analysts are beginning to recognize the fallacy of the “free market.” Said Ted Koppel, “We are privatizing ourselves into one disaster after another.” Fareed Zakaria admitted, “I am a big fan of the free market…But precisely because it is so powerful, in places where it doesn’t work well, it can cause huge distortions.” They’re right. A little analysis reveals that privatization doesn’t seem to work in any of the areas vital to the American public.

Health Care

Our private health care system is by far the most expensive system in the developed world. Forty-two percent of sick Americans skipped doctor’s visits and/or medication purchases in 2011 because of excessive costs. The price of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany. Some of the documented tales: a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars; an $8,000 special stress test for which Medicare would have paid $554; and a $60,000 gall bladder operation, which was covered for $2,000 under a private policy. […]

Water

A Citigroup economist gushed, “Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.”

A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. A more recent study confirms that privatization will generally “increase the long-term costs borne by the public.” Privatization is “shortsighted, irresponsible and costly.” […]

READ @ http://www.commondreams.org/view/2013/08/05

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* A 280,000% MARK UP FOR … WATER? A LOOK INSIDE THE BOTTLED WATER INDUSTRY

By Tyler Durden, zerohedge

fijibottledwater-copy-62

Imagine there was a time when bottled water didn’t exist in our catalog of popular commodities. Perhaps the trend started in 1976 when the chic French sparkling water, Perrier made its introduction. There it was seductively bottled in its emerald green glass amongst the era of disco and the spectacle of excesses… who could resist right?! What could be more decadent than to package, sell and consume what most consider (in the western world) a common human right easily supplied through a home faucet! It’s absurd that the cost of designer water is at a “280,000% markup” to your tap water and it’s reaching record heights in consumption.

15 The Beginning of the Insanity

It wasn’t until the 1990s when bottled H2O became an everyday common sight and a symbol of our cultural desire towards fitness and “health-consciousness”. Even today health enthusiasts claim drinking water often helps to “detox and boost the metabolism!”

There have been controversies about chemicals leeching into the water from the soft plastic material of bottles, but the FDA determined the containers “do not pose a health risk to consumers.” IBISWorld reports that the “U.S. is the largest consumer for bottled water in the world, followed by Mexico, China, and Brazil”.

14 The Bottled Water Scheme 

Regular drinking water competes with itself in a bottle, but reviewing the cost difference, you’ve got to wonder why or how? As for the water piped into your home or work place, it costs less than one penny per gallon! Fairfax Water organization, (FCWA) states, “The average price of water in the U.S. is about $1.50 for 1,000 gallons.”

Let’s look at your favorite 20 oz. bottled H2O, it will run you up to $3 per bottle at the corner convenience store and up to $4 at a posh restaurant or nightclub. If you buy bulk at Costo or other markets, the price averages are .31 cents per bottle, but that still remains enormously expensive when compared to tap water. Granted many don’t like tap water quality, but modern technology allows for an array of water filters.

In the mid-1990s, soda companies found that the niche market for bottled water could be huge, why not? The profits were obvious! Pepsi and Coca-Cola jumped into a race with their brands Aquafina and Dasani; they led the way to making bottled water what it is today. […]

READ @ http://www.zerohedge.com/news/2013-07-29/280000-mark-water-look-inside-bottled-water-industry

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* BANKS: FUDGED HEALTH REPORT

By Eric Toussaint, CADTM

arton9330-dda55

Part 9 of the series : Series: Banks versus the People: the Underside of a Rigged Game! and follow up of Banks bluff in a completely legal way, published the 19 June available here.

Neoliberal euphoria and Basel II

The Basel II accords were drafted at a time of neoliberal euphoria when capitalist bankers had obtained the cancellation of the few prudential rules that still remained from the 1930 Great Depression.

Basel II coincided with Alan Greenspan, chairman of the Federal Reserve, the US central bank, |1| speechifying about the ability of financial markets to regulate themselves and recommending the suppression of any constraint that still shackled the said bankers’ ‘creativity’.

The Basel II accords were implemented in 2004-2005, just before the outbreak of the financial crisis in 2007, and are still valid in 2013-2014. The Basel III accords that were drafted in 2010 as the crisis was deepening, and revised in 2011, |2| are still only at the stage of interpretation and negotiation. They are not to be fully implemented until 2018-2019. This is why it is really worth beginning by taking the time to understand the Basel II accords, whereas most commentators focus on the Basel III measures as though they were already effective. Supervising authorities, governments in cahoots with major private banks, and most of the media attempt to convince citizens that constraints have been imposed on the finance industry. This is a lie. As we shall see even the Basel III measures will not really change the slack regulations that allow banks to act as they please. Indeed banks will still be able to cook their books and fiddle their health reports thanks to the system whereby their assets are weighted relative to the degree of risk. They will also be allowed to legally trade off the balance sheet, and thus be prompted to take more risks. These two facts alone are enough to undermine the array of small measures that have been widely and loudly advertised. To show how harsh the Basel III standards are, banks grumble and try to get the authorities to soften the measures or delay their implementation. This is just taking the public for a ride. Leaders and supervisory authorities show how complicit they are with large private banks.

Before we turn to Basel III, let us examine the Basel II accords that are currently effective. […]

READ @ http://cadtm.org/Banks-Fudged-health-report

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* REDISTRIBUTING WEALTH IS THE WRONG WAY TO FIX A RIGGED GAME

By Conor Friedersdorf, The Atlantic

don't cheat full flickr

In my review of Twilight of the Elites, Chris Hayes’s thoughtful critique of American meritocracy, I largely agreed with his contention that the current system is frequently rigged by those at the top.

How should that be fixed? I’d prefer a polity constantly attuned to abuses of power and committed to tweaking the rules of the game in a constant effort to make them as neutral, fair, and equitable as possible. With apologies for the violence a one-sentence summary necessarily does to a subtle, book-length argument, Hayes emphasized the need for affirmative action and redistribution of wealth. Discouraged about the prospects of remedying unfairness, he wanted to address its consequences, causing me to worry that alleviating the symptoms would make the disease easier to ignore.

As I put it at the time:

If rich Americans are gaming the system to illegitimately increase their wealth, if they are pulling up the ladder so that they can never be replaced as elites, if they are too socially distant from the people over whose lives they wield great influence, and if they aren’t even punished like regular people when they break the rules, surely there are urgent policy changes needed that are a lot more targeted to reforming the elite than ‘raise their taxes and spread the wealth.’

Better to eliminate ill-gotten gains than to redistribute them. […]

READ @ http://www.theatlantic.com/politics/archive/2013/08/redistributing-wealth-is-the-wrong-way-to-fix-a-rigged-game/278391/

Jul 012013
 

By Nilton Viana, CADTM

João Pedro Stédile Interviewed by Brasil de Fato

arton9257-a407bBrasil de Fato — It is time for the government to ally itself with the people or pay the price in the future. This is one of the evaluations of João Pedro Stedile, national coordinator of the Movement of Landless Rural Workers (MST) on the recent mobilisations across the country.

According to Stédile, there is an urban crisis installed in Brazilian cities, provoked by the current stage of financial capitalism. “For people, large cities have becoming a living hell where they lose three or four hours a day in transit, which they could instead be using to spend with their family, studying or participating in cultural activities”, he says. For the MST leader, reducing public transport fare prices was of great interest to all the people and this was what the Free Fare Movement got right by calling for mobilisation on behalf of the interests of the people.

In this exclusive interview with Brasil de Fato, Stédile talks about the character of these mobilisations, and puts a call out: we must be conscious of the nature of these protests and go all out onto the street to fight for hearts and minds and politicise this youth who have no experience of class struggle. “The youth are tired of this way of doing bourgeois and money-driven politics”, he notes. And he issues a warning: the worst thing is that the parties of the institutional left, all of them, have adapted to these methods. Old and bureaucratised. Popular forces and leftist parties need to put all their energies to going out onto the street, because in every city, in every protest, there is now an ongoing ideological dispute between different class interests. “We need to explain to the people who are the main enemies of the people.”

Brasil de Fato: What is your analysis of the protests that have shaken Brazil in the last few weeks? What are the economic roots of these events?

Joao Pedro Stédile: There have been many opinions as to why these protests occurred. I agree with the analysis of Professor Erminia Maricato, who is one of our best specialists in urban issues and has worked in the Ministry of Cities under Olivio Dutra. She defends the thesis that there is an urban crisis in Brazil’s cities, a result of the current stage of financial capitalism. Due to an enormous amount of housing speculation, rent and land prices have increased 150% in the last three years. Without any government control, financial capital has promoted the sales of cars in order to send profits overseas and transformed our traffic into chaos. And in the last 10 years there has been no investment in public transport. The housing program “My home, my life” has driven the poor out to the periphery of the cities, where there is no infrastructure.

joao_pedro_stedile_jose_cruz_abr-c57f4-2-670a8

All this has generated a structural crisis where for people, large cities have becoming a living hell where they lose three or four hours a day in transit, which they could instead be using to spend with their family, studying or participating in cultural activities. Added to this is the poor quality of public services, especially health and education, from the primary and secondary level, where children leave without being able to write. And university education has become a business, where of 70% of university students’ diplomas are sold on credit.

And from the political point of view, why did this occur?

Fifteen years of neoliberalism plus the last 10 years of a government of class conciliation has transformed politics into a hostage of capital’s interests. Parties became old in their way of functioning and have been transformed into mere acronyms that mainly bring together opportunists interested in winning public posts or fighting over public resources for their own interests.

All the young people who were born after the right-wing parties were no longer in government have not had the opportunity to participate in politics. Today, to compete for any public post, for example, to become a local councillor, a person needs to have more than 1 million reales; to become a deputy costs around 10 million. The capitalist pay and the politicians obey. The youth are tired of this way of doing bourgeois and money-driven politics.

The worst thing is that the parties of the institutional left, all of them, adapted themselves to these methods. Which is what has generated repulsion towards the way parties behave among the youth. Young people are not apolitical; on the contrary, they are so much so that they took politics to the streets, even if they were not conscious of what this signified. But what they were saying is that they no longer tolerate seeing these political practices on television, seeing peoples’ votes taken hostage by lies and manipulation.

And why did the protests only explode now?

It was probably more a product of diverse factors regarding the psychology of the masses, than the result of some pre-planned political decision. We have the climate created by everything I have talked about, as well as the denunciations of corruption in relation of the stadiums being built, which was a provocation for the people. For example: Red Globo received 20 million reales of public money from the state government of Rio and the mayor’s office to organise a show of barely two hours around the match draw for the Confederations Cup. The stadium in Brasilia cost 1400 million and there are no buses in the city!

It is an explicit dictatorship that FIFA has imposed and all the government have subordinated themselves to.

The reinauguration of the Maracaná was a slap in the face of the Brazilian people. The photos were clear, in the most important temple of world football, there was not a single black or mestizo person!

And the increase in bus fares was the straw that broke the camel’s back. It was the spark that set alight the generalised sentiment of revolt, of indignation. Finally, the youth have stood up.

Why has the working class still not come out onto the streets?

It’s true; the working class has still not come out onto the streets. Those who have come out onto the streets are the children of the middle class, of the lower middle class and some youth of what Andre Singer calls the sub-proletariat, who study and work in the service sector, who have improved their purchasing power, but who want to be heard.

Reducing the fare was of great interest to all the people, and therein lies the success of the “free fare” movement, which knew how to call protests that were held in the name of the interests of the people. And the people supported the protests, as was expressed in their level of popularity among the youth, above all when they were repressed.

The working class takes it time to mobilise, but once it moves, it directly affects capital. Something that has not happened yet. I believe that the organisations that act as mediators for the working class have still not comprehended the moment we are in and are a bit timid. But I believe that the class, as a class, is also willing to fight. Look at the number of strikes for wage increases which have returned to 1980s level. I think it’s just a question of time, and if the right demands are raised that can motivate the class to mobilise.

In the last few days, we have sensed that in some of the smaller cities and in the periphery of the larger cities, mobilisations with very localised demands have begun to emerge. And that is very important.

And the MST and campesinos also have not mobilised yet …

That’s true. In the capitals where we have settlements and farming families live close by, we are participating. Moreover, I witnessed the warm reception we received when we arrived with our red flag and our demand for land reform and cheap and health food for all. I believe that in the next weeks we could see even bigger numbers joining in, including through staging campesino protests in the streets and municipalities of the interior. Among our activists all of them are going crazy wanting to enter into the fight and mobilise. I hope they are able to move quickly …

What is your opinion as to the origins of the violence that has occurred in some of these demonstrations?

First, we should put this in context. The bourgeoisie, via its television stations, has used the tactic of scaring people by only broadcasting propaganda that shows troublemakers and rioters. They are a minority and insignificant in front of the thousands of people that are mobilising. The right wing has a vested interest in convincing people that all this simply amounts to chaos, and in the end, if there is chaos, put the blame on the government and demand the presence of the armed forces. I hope that the government does not commit the brutish crime of calling on the national guard and the armed forces to repress the protesters. That is exactly what the right is dreaming about!

The scenes of violence are being provoked by the way in which the military police are intervening. There are organised rightist groups that are focused on creating provocations and looting. In Sao Paulo, fascist groups are active in the protests. In Rio de Janeiro, the organised militias that protect conservative politicians are also involved. It is also evident that there is a layer of lumpens that turn up to any popular mobilisation, whether in the stadiums, carnivals, even church parties, and try to make the most of it for themselves.

ato_brasilia_Felipe-Canova-2-1edb6-2-84674

So we are faced with a class struggle in the streets or are we simply dealing with a youth that it demonstrating its indignation?

It is evident that there is a class struggle going on in the streets, even if for now it is at the level of an ideological dispute. What is worse is that the mobilised youth themselves, due to their class origins, are not conscious of the fact that they are participating in an ideological struggle.

Look, they are doing politics in the best way possible, in the streets. And they are writing on their placards: we are against parties and politics? That is why the messages on their placards have been so widely disseminated. In every city, in every protest, there is a permanent ideological dispute of struggle between class interests. There is a struggle to see if whether the ideas of the left or right will win over the youth. The ideas of the capitalists or the working class.

What are the objectives of the right and their proposals?

The ruling class, the capitalists and their ideological spokespeople whot appear on television every day have one big objective: wear down as much as possible the support for the Dilma [Rousseff] government, weaken the organisational forms of the working class, weaken the proposals for structural changes to Brazilian society and win the 2014 elections in order to reimpose their total hegemony over the command of the Brazilian state which is currently in dispute.

To achieve these objectives they are still testing, alternating their tactics. Sometimes they provoke violence in order to distract from the objectives of the youth. Sometimes they put messages on the placards of the youth. For example, in the demonstrations on June 22, even if small, in Sao Paulo it was totally manipulated by rightist sectors who put forward a sole focus on the struggle against PEC 37 [a proposal to amend the constitution and remove the power of the public ministry to investigate crimes], with the same placards … the exact same placards. No doubt the majority of the youth did not know what this was about. And it is a secondary issue with the working class, but the right wing is trying to raise the banner of morality, just like the National Democratic Union did in times gone by.

I have seen in the social media networks controlled by the right, that its banners are, as well as PEC 37: Expel Renan from the Senate, CPI [Commission of Parliamentary Inquiry] or transparency in spending on the World Cup; declare corruption to be a grave crime and put an end to the special protections for politicians. The fascist groups are already saying Dilma Out! and raising a number of accusations. Happily, these issues have nothing to do with the living conditions of the masses, even if the corporate media can manipulate them. And objectively, that are a shooting themselves in the foot. In the end, it is the Brazilian bourgeoisie, its business owners and politicians who are the most corrupt and corrupting. Who has appropriated the exaggerated spending on the World Cup? Red Globo and the contractor companies!

What are the challenges facing the working class, popular organisations and left parties?

There are many challenges. First, we must be conscious of the nature of these demonstrations and all go out onto the streets to fight for hearts and minds and politicise this youth that has no experience in the class struggle. Second, the working class needs to mobilise. Come out onto the streets, protest in the factories, farms and construction sites, as Geraldo Vandré would say. Raise their demands in order to resolve concrete problems of the class, from the political and economic viewpoint.

We need to take the initiative and guide public debate towards demanding the approval of laws to reduce the working week to 40 hours; demand that the priorities for public investment be health, education, land reform. But to do this the government must reduce interest rates and reallocate the resources from the primary surplus, those 200,000 million that each year go to only 20,000 rich people, rentiers and creditors of an internal debt that we never contracted, and reallocate them for productive and social investment.

It must approve an emergency decree so that for the next election a progressive political reform has been put in place, one that as a minimum institutes exclusive public funding for campaigns, the right to recall elected officials and the ability for the people to convoke popular referendums.

We need tax reform so that once again ICMS [a state sales tax] is paid on primary exports and the wealth of the rich is penalised while taxes are reduced for poor, who currently are the ones who pay more.

We need the government to suspend the auctioning off our oil and all private concessions for minerals and other public areas. There is no point investing all the royalties from oil in education if those royalties only represent 8% of the oil rent, and the remaining 92% goes to the transnational companies that will get control over the oil in these auctions!

A structural urban reform that once again prioritises quality and free public transport. It has already been proven that it will not be expensive or difficult to introduce free transport for the people in the capitals. And control housing speculation.

And finally, we need to make use of and approve a project for a national conference on media and communication, one that is broadly representative, to discuss democratising the media. To put an end to Globo’s monopoly, and ensure that the people and its popular organisations can have wide access to means for communication, to create their own media with public resources. I have heard from a diversity of youth movements that are organising the marches that perhaps this could be the one issue that unites them all: down with Globo’s monopoly!

But for these issues to reverberate more broadly in society and put pressure on the government and the politicians, we nee to mobilise the working class, this is the only way.

The social movements sent a letter asking to meet with President Dilma and she accepted and responded on television, what issues are you going to take to her?

I have faith that the meeting will happen soon. And there all of the social movements will send their young representatives that where in the streets, and will bring along a platform like the one I outlined. I hope that she has the sensibility to listen to the youth.

What should the government do now?

I hope that the government has the sensibility and intelligence to make use of this support, this clamour that is coming from the streets, which is simply a synthesis of a consciousness that exists more broadly in society that it is time to change. And change to benefit the people. For this, the government needs to confront the dominant class, in all aspects. Confront the rentier bourgeoisie, reallocating interest payments to investment in areas that resolve the problems of the people. Promote as soon as possible political and tax reforms. Sent in motion the approval of a law to democratise the media. Create mechanisms for massive investment in public transport, with the aim of making it free. Speed up land reform and a healthy food production plan for the internal market.

Guarantee the shift application of 10% of GDP towards public resources for education at all levels, from childcare centres in the big cities, quality primary education all the way to the universalisation of access to public university for young people.

Without this, people will feel deceived, and the government will have handed over the initiative over demands to the right, which will lead to new protests aimed at wearing down support for the government up until the 2014 elections. It is time for the government to align itself with the people, or pay the price in the future.

And what perspectives could these mobilisations bring for the country in the next few months?

Everything is still unknown. Because the youth and the masses are in dispute. That is why popular forces and leftist parties have to put all their energies towards coming out onto the streets. Protest, push to raise as banners of struggle demands that are in the interests of the people. Because the right will do the same, raising its conservative, backward demands of criminalisation and stigmatisation of the ideas of social change.

We are in the midst of an ideological battle, one which no one knows what the result will be. In each city, each protest, we need to fight for hearts and minds. And those that remain on the sideline, will be sidelined in history.

Translated for Links International Journal of Socialist Renewal by Federico Fuentes

Mar 182013
 

Posted by greydogg, 99GetSmart

* ALL THE CONDITIONS FOR A TOTAL DISASTER IN PLACE

By Charles Wyplosz, VOXeu

A supporter of the newly elected President of Cyprus Anastasiades waves a Cypriot flag amongst Greek ones during a proclamation ceremony in Nicosia

The Cyprus bailout package contains a tax on bank deposits. This column argues that the tax is a deeply dangerous policy that creates a new situation, more perilous than ever. It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself. Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors in Spain and Italy.

The decision to tax all Cypriot bank deposits has attracted massive attention (Spiegel 2013) – and rightly so. It is a huge blunder:

  • In the unlikely event that all goes well, the government will receive a bit of cash – but not enough to cover the loan generously offered by its European partners – and the Cypriot banking system will be history.
  • The alternative is a massive bank crisis in many Eurozone countries – a huge blow to the euro, maybe even a fatal one.

Not an emergency measure

Policymakers have been debating the Cyprus bailout for nearly a year; this cannot be classified an ’emergency action’. They engaged in a lively debate whether Cyprus is ‘systemic’ or not, the answer to which can only be ‘it depends’. It depends not on the size of Cypriot banks but on the way the Eurozone acts. They also debated the Russian deposits that apparently represent a sizeable proportion of bank liabilities. The debate turned around the issues of how dirty this money is and how to do the laundry. They also debated on the size of a possible loan to the Cypriot government. The government itself requested something to the tune of 100% of its GDP, why not? After all this amounts to 0.2% of Eurozone GDP.

Eurozone’s help: Suffocating solidarity

From what is known:

  • Cyprus will receive a loan of about half the requested size under the usual austerity conditions.
  • The gross public debt of Cyprus will rise from its current level of some 90% of GDP to about 140%, a level that is unsustainable and will eventually require some deep restructuring.

This debt trajectory is a forecast, of course, but well in line with experience.

The effects of this Eurozone austerity programme are now well known. Cyprus joins a distinguished list of countries that benefit from suffocating Eurozone solidarity (Wyplosz, 2011).

  • The program will impose tough austerity;
  • Its public-debt-to-GDP ratio will grow because deficits will not go away and because GDP will decline.
  • There will the need for more loans as economic predictions will be found to be ‘disappointing’ over and over again.
  • Unemployment will skyrocket, spreading intense economic and social suffering.

Who knows, populist parties could well be on the rise, adding political drama to economic pain. This technology is now well oiled.

The bank deposit ‘confiscation’

What is new is that bank deposits will be ‘taxed’. The proper term is ‘confiscated’. Like everywhere in the EU, bank deposits in Cyprus are guaranteed up to €100,000. Depositors have arranged their wealth accordingly, only to be told that the guarantee has been changed ex post.

Taxing stocks is optimally time-inconsistent (Kydland and Prescott, 1977). It is a great way of raising money but it has deep incentive effects as it destroys property rights. What is at stake is the credibility of the bank deposit guarantee system throughout Europe.

The system was shaken in 2008 but in the opposite direction. Followed by all other countries, Ireland offered a full guarantee in a successful effort to stem an impending bank run. The cost to the government was such that it triggered a run on the public debt that led to the second bailout after the Greek ‘unique and exceptional’ one.

That move has now been recognised as a mistake, which may explain how Cyprus is now being treated.

The Eurozone’s ‘corralito’

Because it is time-inconsistent, the decision to tax deposits has been preceded by a freezing of bank deposits. This is remindful of the Argentinean corralito of 2001, which led to economic dislocation, immense suffering and such anger that two governments fell (Cavallo 2011). Hopefully, the Cypriot corralito will not last too long.

The question is: how bank depositors will react in Cyprus and elsewhere? The short answer is that we don’t know but we can build scenarios:

  • The benign scenario is that depositors in Cypriot banks will accept the tax and keep their remaining money where it is. Depositors in other troubled countries will accept that Cyprus is special and remain unmoved.
  • A less benign scenario is that depositors in Cypriot banks come to fear another round of optimal, time-inconsistent levies. This is what theory predicts. After all, if policymakers found it optimal once, why not twice, or more?

Under the less benign scenario:

  • We will have a full-fledged bank run as soon as the corralito is lifted. Since bank assets amount to some 900% of GDP, there is no hope of any bailout by the Cypriot government.
  • Any new European loan would immediately translate into a run on the public debt.

Enter ECB, stage right

At this point in the scenario script, the ECB enters the play. Being the only lender of last resort, the ECB will have to decide what to do.

  • In principle, it could stabilise the situation at little cost as total Cypriot bank assets represent less than 0.2% of Eurozone GDP or 0.5% of the central bank’s own balance sheet.
  • But this would involve the risk that it could suffer losses – especially if the banks are badly resolved, i.e. the bankruptcies are badly handled.

This is not unlikely since the ECB does not control Cypriot bank resolution.

Remember that the current version of the banking union explicitly leaves resolution authority in national hands. In Cyprus, as almost everywhere else, national authorities are deeply conflicted when it comes to their banking systems. Powerful special-interest groups become engaged when banks go bust and governments decide who pays the price. Thus, it is a good bet that Cyprus’s bank resolution will be deeply flawed. The risk to the ECB is real.

Proper resolution under European control could have been part of the conditions for the loan just agreed. But this does not seem be the case. The omission most likely reflects a belief by policymakers that the Cyprus crisis has been solved successfully. The problem is that this belief is false: Cyprus’s predicament remains even under the benign scenario.

All the conditions for a total disaster are in place

The really worrisome scenario is that the Cypriot bailout becomes euro-systemic – in which case the collapse of the Cypriot economy will be a sideshow. This will happen when and if depositors in troubled countries, say Italy or Spain, take notice of how fellow depositors were treated in Cyprus.

All the ingredients of a self-fulfilling crisis are now in place:

  • It will be individually rational to withdraw deposits from local banks to avoid the remote probability of a confiscatory tax.
  • As depositors learn what others do and proceed to withdraw funds, a bank run will occur.
  • The banking system will collapse, requiring a Cyprus-style programme that will tax whatever is left in deposits, thus justifying the withdrawals.

This would probably be the end of the euro.

Conclusions

The likelihoods of these three scenarios – benign, less benign, and total disaster – are difficult to assess.

  • What is clear is that the Cyprus bailout has created a new situation, more perilous than ever before.
  • Once more a deeply dangerous policy action is decided apparently without any awareness of its unintended consequences.

It is also another violation of sound existing arrangements. We have a no-bailout clause in the Maastricht Treaty – a clause that was essential to the Eurozone’s stability. Putting it aside in the case of Greece was the heart of the today’s problem – the reason the crisis spread (Wyplosz 2010). This no-bailout clause has once again been put aside summarily.

We are now witnessing another radical change as a perfectly reasonable deposit guarantee is being undermined. Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors.

References

Cavallo, Domingo (2011). “Looking at Greece in the Argentinean mirror”, VoxEU, 15 July.

Kydland, F E and E C Prescott (1977), “Rules Rather than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy 85(3): 473-491.

Spiegel, Peter (2013). “Cyprus depositors’ fate sealed in Berlin”, FT.com, March 17 6:23 pm.

Wyplosz, Charles (2010). “And now? A dark scenario”, VoxEU.org, 3 May.

Wyplosz, Charles (2011). “The R word”, VoxEU.org, 29 April.[…]

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* THE “MUDDLE THROUGH” HAS FAILED: BCG SAYS “THERE MAY BE ONLY PAINFUL WAYS OUT OF THE CRISIS”

By Tyler Durden, zerohedge

dbpix-cyprus-bailout-tmagArticle

Denial. Denial is safe. Comforting. Religiously and relentlessly abused by politicians who don’t want nor can face reality. A word synonymous with “muddle through.” Ah yes, that “muddle through” which so many C-grade economists and pundits believe is the long-term status quo for the US and the world just because it worked for Japan for the past three decades, or, said otherwise, “just because.”

Well, too bad. As the following absolutely must read report, which comes not from some trader of dubious credibility interviewed by BBC, nor even from an impassioned executive from a doomed Italian bank, but from consultancy powerhouse Boston Consulting Group confirms, the “muddle through” is dead.

And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the sustainable threshold by the definition of “stable” debt to GDP of 180%. The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed’s relentless pursuit of inflating our way out this insurmountable debt load have been for nothing. The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world’s financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path. But not before the biggest episode of “transitory” pain, misery and suffering in the history of mankind. Good luck, politicians and holders of financial assets, you will need it because after Denial comes Anger, and only long after does Acceptance finally arrive.

First, let’s recap why BCG thinks all the alternatives have been exhausted …

We believe that some politicians and central banks – in spite of protestations to the contrary – have been trying to solve the crisis by creating sizable inflation, largely because the alternatives are either not attractive or not feasible:

  • Austerity – essentially saving and paying back – is probably a recipe for a long, deep recession and social unrest
  • Higher growth is unachievable because of unfavorable demographic change and an inherent lack of competitiveness in some countries
  • Debt restructuring is out of reach because the banking sectors are not strong enough to absorb losses
  • Financial repression (holding interest rates below nominal GDP growth for many years) would be difficult to implement in a low-growth and low-inflation environment […]

READ @ http://www.zerohedge.com/news/muddle-through-has-failed-bcg-says-there-may-be-only-painful-ways-out-crisis

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* NEWS BRIEFS: CYPRUS

Al-Jazeera reports:

Faced with a growing public backlash, Cypriot finance ministry officials began discussions with lenders on Sunday to lessen the blow for smaller savers.

A source close to the consultations told the Reuters news agency that authorities were hoping to cut the tax band for smaller savers with less than 100,000 euros to three percent from 6.7 percent.

The rate for deposits above that would then be increased to 12.5 percent from 9.9 percent.

The Cyprus Mail reports:

AKEL leader Andros Kyprianou described Cyprus’ treatment by the troika as “vindictive and neo-colonial,” adding that his party would discuss proposing the island’s exit from the eurozone.

“They are attempting to impose their political options on Cyprus, leading out country and people to conditions that are similar to those in other countries of the European south,” Kyprianou said. […]

Demetris Syllouris, the chairman of EVROKO, said the government would not have his support on the matter.

“If they have killed us once it does not matter if they kill us a second time. This is my reaction,” he said.

The Green party suggested that the measures included in the decision did not ensure the salvation of the economy.

“On the contrary, the consequences on common people and workers are expected to be tough, adding to the trials this people is already going through,” the Greens said.

 Reuters notes:

Approval in Cyprus’ fractious 56-member parliament is far from a given: no party has an absolute majority and three parties say outright they will not back the tax. A vote initially planned for Sunday was rescheduled to give more time to build a consensus.

Paul Krugman writes:

OK, I didn’t see that one coming. With all the problems in Greece, Italy, Spain, and Portugal I wasn’t watching Cyprus. But that’s where the big euro news is this weekend; in return for a bailout, Cyprus is supposed to impose a large haircut — that is, loss — on all depositors in its banks.

You can sort of see why they’re doing this: Cyprus is a money haven, especially for the assets of Russian beeznessmen; this means that it has a hugely oversized banking sector (think Iceland) and that a haircut-free bailout would be seen as a bailout, not just of Cyprus, but of Russians of, let’s say, uncertain probity and moral character. (I think it’s interesting that Mohamed El-Erian manages to write about this thing, fairly reasonably, without so much as mentioning the Russian thing.)

The big problem, however, is that it’s not just large foreign deposits that are taking a haircut; the haircut on small domestic deposits is a bit smaller, but still substantial. It’s as if the Europeans are holding up a neon sign, written in Greek and Italian, saying “time to stage a run on your banks!”

Tomorrow and the days immediately following should be very interesting.

In addition, Tyler Durden @ zerohedge.com has excellent coverage and daily updates on Cyprus.