Wednesday, 22 October 2014 / TRUTH-OUT.ORG

Imperial Germany and the Pillage of Europe's Indebted Mediterranean Region

Wednesday, 27 March 2013 09:41 By C.J. Polychroniou, Truthout | Op-Ed

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To read other articles by CJ Polychroniou or other author in the Public Intellectual Project, click here.

Not so long ago, imperial nations bent on punishing or destroying their economic rivals or pillaging other countries' resources did it the "natural" way: They engaged in naval blockades, ordered the landing of marines, or proceeded with the declaration of a war and then an outright invasion. The Muslim rulers of the North African Ottoman provinces had their wealth increased through attacks led by Barbary corsairs upon merchant shipping.

In today's neoliberal, antidemocratic and German-dominated European Union (EU), the pillage of wealth from the periphery to the core of the euro zone takes place in a physically nonviolent manner through "bailouts" and "bail-ins."

Following the outbreak of the euro zone debt crisis, an outcome caused primarily by the flawed architectural design of the European Monetary Union and intensified in turn by the uninspired policies implemented by the European leaders, Germany seized the opportunity to extend its economic domination over the euro zone. It adopted the same policy it had carried out toward East Germany after unification: the destruction of its industrial base and the conversion of the former communist nation into Berlin's satellite under a united Germany.

In our day, bank rescues masquerade as the rescue of nations, followed by the enforcement of unbearable austerity measures for the repayment of the "rescue" loans. Then comes the implementation of strategic economic policies aiming at reducing the standard of living for the working population and the shrinking of the welfare state, complete labor flexibility and the sale of public assets, including state-controlled energy companies and ports. This constitutes the context of a unified Germany strategy for the pillage of the economies of the Mediterranean region facing staggering debts.

After Greece, Portugal and Spain, it is now Cyprus' turn to take a dive into the abyss, courtesy of German solidarity to indebted euro zone member states. Faced with the dismal scenario of disorderly bankruptcy and the possibility of an exit from the euro zone because of its collapsed banking system, the Cypriot government accepted a few days ago an EU bailout deal which is essentially a German neocolonialist policy in action. In exchange for a 10 billion euro loan, Cyprus must raid depositors' bank accounts (a proposed 50% or even 60% "haircut" on deposits of more than 100,000 euros), shrink drastically its banking sector, reduce its budget, impose austerity measures, cut wages and pensions, and privatize public assets.

Following this deal, the small but until recently prosperous island at the edge of the Mediterranean basin will sink into a deep recession and will be condemned to long-term unemployment and growing poverty levels, while the prospects of reunification with the northern part of the island (which has been illegally occupied by Turkish forces since 1974) will simply be pushed away into the indefinite future. In addition, it will lose its status as a banking model for Russia and the rest of Europe. In this context, no matter how much recapitalization takes place, Cyprus' banks will fade into oblivion by virtue of having lost the confidence of their depositors.

While the bailout plan is simply catastrophic for Cyprus, it is quite advantageous for Germany and its banks and the treasuries of the core euro zone nations. First, as with the case of the four previous euro zone bailouts (Greece, Portugal, Spain and Ireland), the euro game goes on since so many vested interests are at stake and a chaotic dissolution of the euro zone might have apocalyptic consequences. Indeed, in spite of claims by the German ministry of finance to the contrary, even Cyprus' exit from the euro (Cyprus' economyamounts only 0.2% of the EU GDP)might have unintended consequences such as contagion.

Second, the "rescue" loans are quite secured, thanks to the implementation of extreme fiscal consolidation programs: They are paid back promptly by the indebted countries and with hefty interest. At the same time, the austerity and fiscal adjustment policies imposed by the international lenders actually increase rather than decrease the debt-to-GDP ratios for the indebted countries as they shrink economic activity and thus reduce state revenues, thereby keeping them in a vicious cycle of dependency.

Third, the collapse of the economies of the indebted nations produces a flight of capital that ends up mostly in Germany, which is increasingly seen as the safest place to park euros while the crisis in the euro zone rages on. (The net destruction of wealth in the euro zone is actually an ongoing process due to the distortions of the use of the euro as a single currency in a non-optimal currency zone: The euro is an undervalued currency for Germany, which allows it to have a comparative edge in the price of exports, while it is an overvalued currency for all other nations in the periphery, which cripples their export industries, making them overall highly noncompetitive.) The loss of funding for banks in Spain, Italy, Greece, Portugal and Ireland is astonishingly high, amounting to hundreds of billions of euros (which means those countries are net debtors to the European Central Bank), while Deutsche Bank and most other German banks are awash in cash.

Fourth, under the bailout schemes, the indebted countries surrender national sovereignty and are forced to sell public assets (mostly to northern invaders) at bargain-basement prices, while the reduction in labor costs because of suppressed wages opens up new opportunities for an increase in the rate of labor exploitation and speeds the process of the countries' conversion into banana republics.

It is clear that Germany is bent on imperial domination in the euro zone and that the euro has become an albatross around the neck of the southern Mediterranean economies. The only question now is how much longer will the political leaders and the citizens of the periphery of the EU tolerate Germany's imperial pursuits and the antidemocratic nature of the EE as they watch the economic and social devastation of their nations unfold.

If history is any guide, this whole euro zone business could end very badly.

Copyright, Truthout. May not be reprinted without permission of the author.

C.J. Polychroniou

C.J. Polychroniou is a research associate and policy fellow at the Levy Economics Institute of Bard College and a columnist for a Greek daily national newspaper. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism’s politico-economic project. He has taught for many years at universities in the United States and Europe and is a regular contributor to Truthout as well as a member of Truthout’s Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals and magazines. Many of his publications have been translated into several foreign languages, including Greek, Spanish, Portuguese and Italian.

The views expressed in this article do not necessarily represent those of the Levy Economics Institute or those of its board members.

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Imperial Germany and the Pillage of Europe's Indebted Mediterranean Region

Wednesday, 27 March 2013 09:41 By C.J. Polychroniou, Truthout | Op-Ed

Truthout doesn’t take corporate funding - that’s how we’re able to confront the forces of greed and regression, with no strings attached. Instead, we need your support: make a donation today by clicking here.

To read other articles by CJ Polychroniou or other author in the Public Intellectual Project, click here.

Not so long ago, imperial nations bent on punishing or destroying their economic rivals or pillaging other countries' resources did it the "natural" way: They engaged in naval blockades, ordered the landing of marines, or proceeded with the declaration of a war and then an outright invasion. The Muslim rulers of the North African Ottoman provinces had their wealth increased through attacks led by Barbary corsairs upon merchant shipping.

In today's neoliberal, antidemocratic and German-dominated European Union (EU), the pillage of wealth from the periphery to the core of the euro zone takes place in a physically nonviolent manner through "bailouts" and "bail-ins."

Following the outbreak of the euro zone debt crisis, an outcome caused primarily by the flawed architectural design of the European Monetary Union and intensified in turn by the uninspired policies implemented by the European leaders, Germany seized the opportunity to extend its economic domination over the euro zone. It adopted the same policy it had carried out toward East Germany after unification: the destruction of its industrial base and the conversion of the former communist nation into Berlin's satellite under a united Germany.

In our day, bank rescues masquerade as the rescue of nations, followed by the enforcement of unbearable austerity measures for the repayment of the "rescue" loans. Then comes the implementation of strategic economic policies aiming at reducing the standard of living for the working population and the shrinking of the welfare state, complete labor flexibility and the sale of public assets, including state-controlled energy companies and ports. This constitutes the context of a unified Germany strategy for the pillage of the economies of the Mediterranean region facing staggering debts.

After Greece, Portugal and Spain, it is now Cyprus' turn to take a dive into the abyss, courtesy of German solidarity to indebted euro zone member states. Faced with the dismal scenario of disorderly bankruptcy and the possibility of an exit from the euro zone because of its collapsed banking system, the Cypriot government accepted a few days ago an EU bailout deal which is essentially a German neocolonialist policy in action. In exchange for a 10 billion euro loan, Cyprus must raid depositors' bank accounts (a proposed 50% or even 60% "haircut" on deposits of more than 100,000 euros), shrink drastically its banking sector, reduce its budget, impose austerity measures, cut wages and pensions, and privatize public assets.

Following this deal, the small but until recently prosperous island at the edge of the Mediterranean basin will sink into a deep recession and will be condemned to long-term unemployment and growing poverty levels, while the prospects of reunification with the northern part of the island (which has been illegally occupied by Turkish forces since 1974) will simply be pushed away into the indefinite future. In addition, it will lose its status as a banking model for Russia and the rest of Europe. In this context, no matter how much recapitalization takes place, Cyprus' banks will fade into oblivion by virtue of having lost the confidence of their depositors.

While the bailout plan is simply catastrophic for Cyprus, it is quite advantageous for Germany and its banks and the treasuries of the core euro zone nations. First, as with the case of the four previous euro zone bailouts (Greece, Portugal, Spain and Ireland), the euro game goes on since so many vested interests are at stake and a chaotic dissolution of the euro zone might have apocalyptic consequences. Indeed, in spite of claims by the German ministry of finance to the contrary, even Cyprus' exit from the euro (Cyprus' economyamounts only 0.2% of the EU GDP)might have unintended consequences such as contagion.

Second, the "rescue" loans are quite secured, thanks to the implementation of extreme fiscal consolidation programs: They are paid back promptly by the indebted countries and with hefty interest. At the same time, the austerity and fiscal adjustment policies imposed by the international lenders actually increase rather than decrease the debt-to-GDP ratios for the indebted countries as they shrink economic activity and thus reduce state revenues, thereby keeping them in a vicious cycle of dependency.

Third, the collapse of the economies of the indebted nations produces a flight of capital that ends up mostly in Germany, which is increasingly seen as the safest place to park euros while the crisis in the euro zone rages on. (The net destruction of wealth in the euro zone is actually an ongoing process due to the distortions of the use of the euro as a single currency in a non-optimal currency zone: The euro is an undervalued currency for Germany, which allows it to have a comparative edge in the price of exports, while it is an overvalued currency for all other nations in the periphery, which cripples their export industries, making them overall highly noncompetitive.) The loss of funding for banks in Spain, Italy, Greece, Portugal and Ireland is astonishingly high, amounting to hundreds of billions of euros (which means those countries are net debtors to the European Central Bank), while Deutsche Bank and most other German banks are awash in cash.

Fourth, under the bailout schemes, the indebted countries surrender national sovereignty and are forced to sell public assets (mostly to northern invaders) at bargain-basement prices, while the reduction in labor costs because of suppressed wages opens up new opportunities for an increase in the rate of labor exploitation and speeds the process of the countries' conversion into banana republics.

It is clear that Germany is bent on imperial domination in the euro zone and that the euro has become an albatross around the neck of the southern Mediterranean economies. The only question now is how much longer will the political leaders and the citizens of the periphery of the EU tolerate Germany's imperial pursuits and the antidemocratic nature of the EE as they watch the economic and social devastation of their nations unfold.

If history is any guide, this whole euro zone business could end very badly.

Copyright, Truthout. May not be reprinted without permission of the author.

C.J. Polychroniou

C.J. Polychroniou is a research associate and policy fellow at the Levy Economics Institute of Bard College and a columnist for a Greek daily national newspaper. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism’s politico-economic project. He has taught for many years at universities in the United States and Europe and is a regular contributor to Truthout as well as a member of Truthout’s Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals and magazines. Many of his publications have been translated into several foreign languages, including Greek, Spanish, Portuguese and Italian.

The views expressed in this article do not necessarily represent those of the Levy Economics Institute or those of its board members.

Related Stories

Greece: The Crisis Behind the Crisis and the Challenges Facing the Left
By C.J. Polychroniou, Truthout | News Analysis

Hide Comments

blog comments powered by Disqus