Troika Punches Panic Button on Greece and Spain

by Don Quijones, Wolf Street After four years of inflicting economic pain and misery on Europe’s semi-bankrupt periphery, the Troika (IMF, ECB and European Commission) is suddenly in a lather over the potential political consequences of its disastrous economic policies: “I wouldn’t like extreme forces to come to power. I would prefer if known faces show up,” said European Commission president Jean-Claude Juncker regarding the upcoming Greek elections. Speaking at a press conference in Pekin, the IMF’s Chief Economist Oliver Blanchard warned that unemployment in Spain remains too high, fueling a surge of support in “populist movements” and “political parties that do not want to form part of the euro.” Blanchard’s words were a barely veiled reference to the phoenix-like rise of Podemos, a stridently anti-establishment but far from Eurosceptic political party. In recent polls of voter intentions for the upcoming municipal elections (March) and general elections (September), the new party, now in its second year of existence, has consistently commanded between 25% and 30% of the votes – more than either of the two main parties. The fear among the political elite, both in Madrid and Brussels, is palpable. In the last few days, Prime Minister Rajoy dispatched his Vice-President, Soraya Sáenz de Santamaria, and Minister of Industry, José Manuel Soria, on a vital mission to persuade Spain’s biggest media conglomerate, Grupo Planeta, to adopt a more critical tone in its reporting on Podemos. In return the government will offer the broadcaster more licenses for more channels. Bienvenido a España! The Troika Effect It no longer matters what dastardly ploys the Rajoy government tries to pull off in its desperate bid to hold onto power; with the exception of hardcore PP voters, the Spanish electorate has had enough. Like Samaras’ party in Greece, all the Rajoy government can serve up is a continued diet of fear, lies, and distortion. Podemos, by contrast, offers the prospect of change, for better or worse. Senior business executives, small business owners, teachers, lawyers, doctors, nurses, civil servants, hijos de ricos en el paro (the unemployed children of rich parents), even their rich parents… all have told me that they intend to vote for Podemos in the upcoming elections. Their main reason? The current government’s naked corruption, criminality and its shameless resurrection of the ghosts of Spain’s Francoist past. The Troika’s austerity regime comes a close second. As in Greece, the people of Spain are tired and weary of paying for the excesses and failings of a corrupt, self-serving political and economic elite. The austerity measures the Troika has imposed on countries like Greece, Portugal and Spain – in return for bailout funds that in the main have gone toward buttressing Europe’s too-big-to-fail banks – have done nothing but exacerbate the underlying economic conditions on Europe’s periphery. In late 2011, Rajoy’s government took to austerity with barely concealed glee. Since then, unemployment has failed to budge under 24%; essential public services, drained of vital resources, are being amputated limb by limb; and wages in both the public and private sectors continue to slump. Meanwhile, the country’s public debt has increased by more than half, from 60% of GDP in 2011 to 92% today. So much for austerity! Naturally, the compound interest on that debt has also swollen: in 2007, the interest payments represented 4.4% of total public spending; by 2013 they had reached a whopping 9.3% – more than the government spends each year on education. What’s more, the amended version of Article 135.3 of the Spanish constitution – a prerequisite of the Troika’s 2012 bailout of Spain’s bankrupt saving banks – gives “absolute priority” to the payment of interest above all other areas of public spending. As for Greece, its total public debt has grown from an already staggering 126 percent of GDP in 2010 to 175 percent today – and that despite two de facto defaults and ruthless bond haircuts! More than three-quarters of that debt now consists of bailout loans from the Troika. In other words, both Greece and Spain remain on wholly unsustainable economic paths, despite all the economic misery and pain inflicted by the Troika’s economic shock therapy. Continue Reading>>>


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