The hopelessly corrupt structure of the Eurozone & the Eurogroup
Part of the problem of criticizing the “pan-European project” is that you have multiple bodies which overlap. And you also have some nations which are part of one, but not another. Or which pay into one body, but abstain from another.
A clear analysis is needed of the most important part of the pan-European project: the Eurozone. The Eurozone is the most important because it controls the money in the world’s largest macro-economy.
By comparison, the European Union is mainly a regulatory body, and their extremely modest annual budget – about the size of Denmark’s – reflects that.
There is a relentless focus among Western media on the European Union over the Eurozone, but this article hopes to put the emphasis where it should be: follow the money. But to examine the Eurozone, you have to bring up something which mainstream media likes to ignore – the Eurogroup.
The Eurogroup rules the Eurozone and its 19 member states. It also governs the “bailouts” to member nations like Greece.
Basically, if you find the EU to be undemocratic…well, you haven’t seen anything like the Eurogroup.
The Eurogroup: The banker cabal hidden in plain sight
I reviewed the fake-leftist book “And the Weak Suffer What They Must?” by former Greek Finance Minister Yanis Varoufakis. The analysis and proffered solutions from this self-declared “erratic Marxist” are not Marxist at all, but his eyewitness unveiling of the cartelized capitalist structure that is the Eurogroup has truly been an enormous contribution to European democracy.
The Eurogroup is, at face value, an informal monthly meeting of the finance ministers of the member countries. Ah, government representatives getting together for discussions and planning – sounds democratic, right? Hardly….
I will quote Varoufakis often, because his matter-of-fact condemnations will carry more weight than my own:
“Moreover, the Eurogroup, where all the important economic decisions are taken, is a body that does not even exist in European law, that operates on the basis that the ‘strong do as they please while the weak suffer what they must’, that keeps no minutes of its proceedings, and whose only rule is that its deliberations are confidential – that is, not to be shared with Europe’s citizenry. It is a set-up designed to preclude any sovereignty traceable back to the people of Europe.”
So there are no rules, no records, no democratic process and no democratic accountability…and this is what is in charge of the world’s largest economic engine.
These are appalling realities. They cannot be diffused widely enough or often enough.
Thanks to the whistle-blowing of Varoufakis, we also know that there is also essentially no discussion at Eurogroup meetings: The Troika (the IMF, European Central Bank and European Commission) initiates, dominates and outlines the terms…and then the finance minister-members vote. In short, the overwhelming majority of participants in the group which governs economic policy (and thus social policy) are bankers, former bankers or intimately tied to high finance. When bankers run economic policy, one shouldn’t be surprised if the resulting social policy is for the benefit of bankers.
As Varoufakis relates, maybe the finance ministers will speak, or maybe they won’t even be allowed to speak. Maybe finance ministers will be allowed to disseminate documents which support the positions taken by their democratically-elected governments, or maybe they won’t even be allowed to champion a differing position. Many will justifiably ask: What’s the point of voting in any politician if they have little to no chance of influencing policy at the highest level – the Eurogroup?
The Eurogroup is not an EU institution and cannot declare any legally-binding decisions. It can never be blamed for a bad decision, nor held accountable, because it is not answerable to any parliament or body politic whatsoever.
In short: it is the perfect cabal.
An undemocratic Eurozone produces only hopeless non-democracies
It is axiomatic that that when politics does not rule – where there is no law or regulation – the rich are the rulers. It is also axiomatic that in a climate of total deregulation, the richest nation will benefit the most.
Unsurprisingly, the US pioneered the concept of mass deregulation in the early 1980s, which they foisted on Europe as much as possible in order to ensure the status quo-dominance of US corporations. Washington may have even created a Frankenstein’s monster because the Eurogroup has achieved the American dream of total deregulation even more than in America.
We owe Varoufakis a debt of gratitude for extensively detailing the utter lack of democracy within the Eurogroup. What’s absolutely appalling is that most media do not hammer these facts repeatedly, but even seem totally unaware of them.
In this sense – critique of the status quo – Varoufakis’ book is essential reading for Europeans who want to know what principles their society really is based upon. For all the nonsense about “European work-life balance” and “third way politics”…that may have applied pre-Eurozone, it sure doesn’t apply anymore.
After all, what do you get when your leadership group has no democracy, no oversight and no records? You get anti-democratic oligarchy: the richer members controlling the poorer ones:
“…Dr. Schauble and the Eurogroup had succeeded in overthrowing our government by asphyxiating us enough for Prime Minster Tsipras to surrender…our newly elected government could choose any policy mix it liked as long as it was virtually identical to the calamitous one imposed by the Troika on previous Greek governments.”
The Eurozone is and has always been, from its inception as the European Coal and Steel Community in 1951, merely a cartel of high finance which wants only to preserve its economic dominance and monopolies. The Eurogroup is the most anti-democratic, the most brutal and the most hypocritical aspect of the pan-European project, and Varoufakis makes that clear in multiple appalling passages.
“When I asked a friend who played a central role in Greece’s induction talks how they had managed to convince Germany to let Greece into the Eurozone, his answer was fantastically unassuming: ‘We just copied everything the Italians had done, and a few tricks used by Germany itself. And when they threatened to veto our entry, we threatened them back that we would tell the world what Italy and Germany had been up to.”
“Give me a part of the action, or I rat you out.” Is that not the very definition of criminal collusion on the part of Greece’s 1% with the 1%-ers in other nations?
“Of course, the Maastricht Criteria’s real purpose was to allow into the Eurozone countries that did not meet these criteria and then force them to do whatever it demanded to meet them.”
Only France, Ireland and Denmark held referendums on Maastricht ratification, anyway.
“When it comes to countries like Germany and France, the rules are meant to be broken. But for countries like Greece the rules are the rules are the rules! Even if they are unworkable and unenforceable. The Greek state can default against the weakest of Greek and non-Greek citizens, against pension funds and the like, but its debts to the ECB are sacrosanct. They have to be paid come what may. But how?”
The loans are not meant to be repaid, of course, but to exist indefinitely so that the 1% can live in ease thanks to the curse of compound interest.
But who was the first country to break the EU fiscal deficit rules? France and Germany, in 2003, and they united their power to make sure they did not face sanctions (and certainly not the Troika). But in 2011, when countries like Ireland, Greece and others were loaded beyond economic recognition with (French and German) banker bailout debt, it was a totally different story.
Francois Hollande, notably, broke the fiscal deficit rules when France wanted to increase military spending after the Bataclan attacks. Military spending, of course, is always ok for the 1%, so the increase was approved.
France just announced that they will be under the fiscal deficit rule of 3% this year – one year early. Even if the “fiscal deficit rule” fig leaf has withered from overuse, no matter – austerity will continue anyway in 2018 with 16 billion euros of cuts. Housing and Job Ministries will be slashed, and the major cuts to social security will be paid for by slashing the already poverty-line incomes of the elderly.
These were just a handful of examples of Eurogroup’s hypocrisy/tyranny/treachery listed by Varoufakis, but rest assured that I could add many others.
Just for fun – remember Iceland?
And yet to be against the European project makes you a racist, jingoistic, hillbilly, deplorable….
Iceland – which we all looked at with horror in 2009, assuming they would be in debt for generations AND also living on what must be a frozen and lonely speck of an island – has just been declared the “3rdhappiest country” according to the UN.
I guess Iceland is a bunch of deplorable racists, because they cancelled their plans to join the EU. Well, Iceland has one thing which Marx valued perhaps above all: the right to determine their own destiny in order to fulfill their potential:
“‘Surely there is no room for small sovereign countries in this globalized world,’ I was told by another finance minister during a break in a Eurogroup meeting. ‘Iceland can never truly be sovereign,’ he concluded….However limited these choices might be, Iceland’s body politic retains absolutely authority to hold its elected officials accountable for the decisions they have reached within the nation’s exogenous constraints and to strike down every piece of legislation that it has decided upon in the past. In this sense, small, powerless Iceland continues to enjoy full sovereignty while the comparatively omnipotent European Union has been stripped of all forms of sovereignty.”
It’s a pretty bad scene when you can’t even stand up for yourself as much as an Icelander….
Can we combine the Eurogroup with a parliament? Not in real life….
What is clear is that the Eurogroup operates with even more power than the US Federal Reserve and the Bank of Japan because there is absolutely zero citizen accountability. Right now, the Troika steers the 19 national budgets the way they want, with Germany their public Rottweiler.
But now you say that you want Eurogroup citizen accountability? You mean, regarding the crucial questions of national budgets and if they are in line with the rules/sound economic thinking?
Ok then, a “leviathan” in Varoufakis’ words (or perhaps just a “Eurozone Finance Minister”) must be created to accept or reject the 19 national budgets. But you can’t just have an executive branch – you need a legislative branch as well. What is this, a state of emergency, where laws get made by decree and cops are the judges? Of course that’s unacceptable in the freedom-loving West, don’t be fatuous….
So there are 3 minimum conditions for this Eurozone Parliament:
1) The Eurozone Parliament can hire or fire the new “Eurozone Finance Minister”.
2) It must approve the final contents of every national budget.
3) The Parliament’s powers are clearly defined by a Eurozone Constitution.
This would move the Eurogroup from the current cabal system to 18th century bourgeois democracy; from the Dark Ages to the Enlightenment, but well short of the Industrial, Socialist and Digital Revolutions.
Regardless of how ultimately reactionary such an “improvement” would be, Varoufakis acknowledges that all of this speculation is a political impossibility:
“It is crystal clear that at least two of these conditions will not be met. Neither the German government nor the Parisian elites would countenance allowing the euro chamber to hire or fire the leviathan. Nor would they dare embark upon the writing of a euro constitution.”
This means it would take a true revolution in ideology and practice to even get these paltry bourgeois powers added to the Eurozone. And why would The People make a true revolution…and then be content with something so pathetically inadequate and unmodern?
In keeping with a historical theme I elaborated in the previous article of this 7-part series, France’s historic effort for an anti-austerity Eurozone, France in 2017 remains far more progressive than their slightly-more dominant neighbor to the east: Macron wants a finance minister, parliament and budget for the Eurozone…but he’s not going to get it. Merkel has only expressed tepid proposal for a Eurozone Budget Minister, and two things appear likely: he or she will be German, and Germany will insist that the post holds much less power than the other 18 Eurozone members would prefer. After all, why would Germany want to change the status quo? As that article discussed, Germany has been a rabidly anti-communist, pro-American, economically-imperialist country ever since the US decided shortly after WWII that West Germany was to be reindustrialized in order to become their main client state in Europe.
What does have a lot of support from France and Germany is a “European Monetary Fund”, which would simply codify the current bailout fund.
Democracy can wait, but safeguarding bank bailouts cannot, LOL….
The first rule of Eurogroup is: ‘You don’t talk about Eurogroup!’
Such facts make it clear why the Eurogroup cannot be considered compatible with democracy, and thus cannot be supported. Full stop.
You might support creating a new Eurozone or changes to the Eurozone structure, but supporting the current Eurozone is simply morally indefensible, and you don’t have to be an open communist like me to see that.
What will you get if you keep supporting it, like by voting for mainstream politicians or fake “outsiders” like Macron? You will get exactly what has occurred ever since the Eurozone project began in earnest after the fall of the Bretton Woods monetary system/gold standard in 1971 – crisis and austerity across the Eurozone:
“Each one of those heart-rending attempts at monetary union led to the same pattern: a promising beginning that soon degenerated into tears and recriminations as economic warfare erupted and recession impoverished the weakest Europeans.”
Hmmm, efforts at capitalism turned out typically-capitalist results…shocking.
The secret is out about the Eurozone’s false prosperity of the late 1990s and 2000s – it was all built on the ruses of high finance. But – and this actually really important right now – nothing has been fixed since the 2012 sovereign debt crisis:
“Since then it has been in a deep crisis reinforced largely by the European Union’s denial that there is anything the matter with its currency’s rules, as opposed to their enforcement.”
Should we be surprised that the banker cabal that is the Eurogroup has concocted a “recovery” which has only targeted the needs of bankers?
The Quantitative Easing that is the alleged “fix” has only gone to the 1% and fueled property price bubbles and stock bubbles; the Eurozone’s average growth rate – the “real economy” – since 2011 has been 0.8% – total stagnation.
What’s amazing is the mass denial – the real propaganda effort – that back in June a pathetic projected 1.7% growth rate for the Eurozone qualified as a “surprise recovery”. Jobs don’t even begin to be created until 1.5%…and unemployment is essentially stuck at record highs in multiple countries. This makes the projected growth rates of 1.8% and 1.7% for the next two years just as pathetically inadequate.
I can best describe the media hypnosis like this: If a bully punched you 10 times yesterday, but only 8 times today, I suppose you could say that “things are getting better”…I would hope that no one paid you for that analysis, however.
What’s certain is that QE has to stop soon, simply because they are nearly out of bonds to purchase.
There’s no reason why they should even be buying bonds from economically healthy, trade surplus Germany, LOL, but the ECB will reach their 33 percent limit of debt in Germany this spring, at the current rate. Germany gets paid first, of course, not the countries which actually need it – Greece is excluded from QE.
And what happens when Germany’s 1% can’t get free money? Well, I can tell you it’s not: they finally start playing nice.
I have another theory: High finance/financial media around the world (and not just Germany) has decided they are not reaping enough from the years of no-questions-asked free money – years of gutting Greece has them sharpening up their Troika tools for the tastier meals of Spain and Italy. Therefore, they are trying to dupe/pressure everyone into stopping QE – thus the crazy nonsense that 1.7% annual growth is a “recovery”.
So, given all these real facts and plausible theories I have listed, the reality is that ECB chief Draghi is expected to announce in October that “tapering” will begin.
I have repeatedly written that when high finance is no longer being placated by the free money of Quantitative Easing, they will go back to what they were doing in 2012: squeezing the national bond markets in Europe and provoking a crisis across the Eurozone.
Here is another, different case of willful blindness: the Eurozone is the same as the US. Many believe that just because the US had no major bond problems after they started tapering their QE, then the Eurozone won’t have any issues as well. One size fits all, right?
But they ARE very, very different regions! Firstly, the US isn’t dumb enough to be run by a Eurogroup.
Secondly, the risks in the national bond markets for Eurozone nations are not anywhere as secure in comparison with the United States. They weren’t as secure in 2012, and the Eurogroup’s policies have not corrected these differences in risk whatsoever in 2017. Nor has the Eurogroup strengthened the resilience of the “real economies” in their member nations – indeed, austerity policies and labor code rollbacks have worsened the real engine of the “real economy”: the People (everyday consumers for our capitalist readers).
So even if Draghi kicks the can down the road for a few months, a crisis is inevitable. For the reasons I’ve listed and because: this is capitalism.
And this is where Varoufakis’ lack of leftism – his failure to see capitalism as incorruptible pattern of guaranteed corruption – blinds him to the reality that the Eurozone should not be saved with his right-wing solutions, but scrapped completely in favor of central planning, safety nets, regulations on cabals: modern socialism.
The Eurozone is still as primed for collapse as ever, but that is the title of the next article in this series.
And as regards the Eurogroup…what else needs to be said?
These are our masters, and it is the IMF, ECB, and banker-loving, ex-banker finance ministers who pull the strings. All of us in the Eurozone must dance, even if these mobsters have already broken so many legs and backs.
This is the third article I have written in a 7-part series on today’s Eurozone which will combine some of Varoufakis’ ideas with my 8 years of covering the crisis first-hand from Paris.
Here is the list of articles slated to be published, and I hope you will find them useful in your leftist struggle!
The hopelessly corrupt structure of the Eurozone
The Eurozone: still as primed for collapse as ever
The Eurozone has likely entered its final calendar year, contraction coming
The English-speaking world’s fear of calling communism, ‘communism’
Forced recession as a tool of social war against the 99%
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.
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