September 20, 2012
As we know finance capital used the global financial crisis 2008 as an opportunity to panic the US and European states into taking all of the losses of the big gambling banks into the public balance sheet and to adopt the politics of austerity and unemployment. This drives down wages and working working conditions. Finance capital uses the legacy of public debt to privatise the public domain and dismantle public administration and welfare services.
We can see this debt-deflationary spiral with Greece. Greece's national income is projected to fall 25% by 2014 and its debt load still at a whopping 166% of GDP – despite banks and hedge funds and other private creditors accepting a massive writedown in the value of their Greek holdings. It is on the verge of a Great Recession becoming a 1930s-style Great Depression.
It has to sell off its islands, royal palaces, prime real estate, marinas, airports, roads, the state-owned gas company, lottery and post office--a firesale. We can imagine that e Greece becomes a protectorate with the euro as its only currency but with no functioning state, a derelict banking sector and a disheartened mafia-ridden society whose only export is its people plus tourism.
Yanis Varoufakis has argued that the primary reason why Europe was allowing a preventable debt crisis to engulf the Periphery had to do with the sorry state of the German banks and with the determination of the German government to do nothing that exposes their precarious condition. So we have large-scale transfer of ‘debt’ from the banks to the taxpayers, via the institutions of the Eurozone.
A core problem Varoufakis identifies is how to deal with the Periphery’s public debts without revealing the depth of the black holes in Germany’s (and, less so, France’s) private sector banks. What is needed is a banking union that succeeds in its main task: to de-couple the banking crisis from the crisis of national debt in the Eurozone’s Periphery.
The German banks are fighting to avoid a proper banking union (central supervision of banks) and a fiscal union--gradual federation. This is the path to more Europe. The German banks are fighting against the revelation of their interests and situation (e.g. their insolvency). They want to keep this out of sight of the ECB.