Palast to Syriza: Don’t Lie, It’s Impossible to End Austerity Within the Eurozone

By Michael Nevradakis, Truth-Out Renowned investigative journalist and bestselling author Greg Palast explains why he believes Syriza cannot deliver on its economic platform while keeping Greece within the eurozone and why the euro is harmful for the Greek economy. This interview was conducted in late January 2015 and remains relevant because it reflects Greg Palast’s views regarding Syriza’s positions, how Syriza should respond to the demands of the troika and what other options might exist for Greece, including a possible “Grexit.” Renowned investigative journalist and bestselling author Greg Palast explains why he believes Syriza cannot deliver on its economic platform while keeping Greece within the eurozone and why the euro is harmful for the Greek economy. He also provides insights regarding the role of Goldman Sachs in perpetuating the Greek economic crisis, and on the proposed Transatlantic Trade and Investment Partnership (TTIP). Michael Nevradakis: There are many people both inside and outside of Greece who have placed their hopes for the end of austerity with Syriza, which is often characterized as a radical left-wing party. Yet, the party’s official platform, despite its promises for ending austerity and rolling back a lot of the measures that have been enforced, eliminates even the consideration of a Greek exit from the eurozone. What do you make of Syriza’s proposals? Greg Palast: Well, Syriza is of course the main voice against the madness of austerity, and that’s made them popular. I’m an economist by training, and 90 percent of economists think that austerity is religion, not economics. You don’t cut your budgets in the middle of a depression, which is what you have. The problem is that there is a consensus among the Greek elite, the European elite and the world financial elite that the sky will fall if Greece leaves the euro. If Greece exits from the euro, the “Grexit,” as they’re calling it, that’s doom and gloom, and therefore, Syriza is picking up the same language that “we’re not going to leave the euro because we can end austerity; we can tell the Germans and the troika to back off, and they’ll understand that austerity is self-defeating, but we’re not going to leave the euro if they don’t agree, and they’re not going to kick us out.” And that, of course, is fantasy island, because what, to me, Syriza misunderstands is that the euro is the disease; it is not the solution; it’s not the cure. In other words, they want to do two things: Syriza wants to do the impossible, which is to get rid of the austerity that comes with the euro, and yet keep the euro. They want to cure themselves of leprosy, but they don’t want to leave the leper colony, and that’s impossible. Let’s talk about the history of the euro. You’ve mentioned in past interviews and articles that you knew the founder of the euro, economist Robert Mundell. Tell us about the economic worldview of Mundell and what his views were in giving birth to the idea of the European common currency. Mundell, who taught at Columbia University, won the Nobel Prize for his writings on currency, and what’s interesting is that he won the Nobel Prize for the theory of optimum currency areas, the theory that nations should join currency unions when they have similar economies. Therefore, agriculture economies should have a joint currency; he thought the US and Canada [should] have two different currencies, east-west, not Canadian-American, but the western US should have one currency with Canada, and eastern Canada and the eastern US should have one currency. In other words, he believed that a combination, like putting Germany in the same currency zone as France and Spain, would be ridiculous; it’s a violation of his core theory through which he won the Nobel Prize. Why is this important? This is the very same guy who is the inventor, you could say, of the euro, which he called the “europa” – that there should be one single common currency for all of Europe, damn the optimum currency theory. Now why would someone suggest a currency that is exactly the opposite of everything he’s taught? I spoke to him about this, and he said that it has nothing to do with creating a good currency. It has everything to do with changing the politics of Europe. He was very, very right-wing. He is the creator of another economic theory, which wouldn’t get him the Nobel Prize; in fact, it’s called “voodoo economics,” supply-side economics. That is, the more you cut taxes, the more tax revenue you get. The more deregulation of business you get, the better your economy – and if you deregulated the banks, there would be less risk in the banking system. All of those supply-side systems, which we call “Thatcher economics,” “Reaganomics,” after Ronald Reagan, it’s all been discredited; it’s all called “voodoo economics,” and yet, that’s what the euro is. It’s an instrument of voodoo economics. By having one currency for Europe, and with it, a rule – remember, with the euro comes the rule that you cannot have more than a 3 percent deficit or 60 percent of debt compared to your gross domestic product. That means that no nation, because you don’t have your own currency, has any control over monetary policy or fiscal policy or currency exchange rates. Basically, you lose complete control of your financial system, and he said, “It gets rid of the meddling of parliaments and congresses and governments to fool around with fiscal and economic policy.” What he meant is that democracy gets in the way of good economics. So, what happens when you get rid of democracy? He says, “That leaves government only one choice,” the only choice when there’s a crisis, as we have now. When there is a crisis, governments will eliminate labor union power, will eliminate government regulation, will privatize industry, power companies, water companies, because they’ll need to pay off their debts, and basically, the power of government and labor unions, the working class, those powers will be eliminated, and wages will fall. In order to maintain employment, governments will allow wages to fall and regulations to die. In other words, this crisis, in Mundell’s terms, is what he had planned and what the creators of the euro had planned. Crisis is part of the euro plan, a crisis that would cause a realignment between business and labor in Europe, and that the welfare state of Europe will be destroyed, and that’s exactly what has happened. What you’re seeing now, with the collapse of the southern European economies, including Greece and Spain and Portugal, what’s happening here was part of the euro plan. This was not a mistake; this was not something that they tried to avoid. It is what they wanted to happen, a crisis that would cause a realignment of political power and the end of the European welfare state. By the way, the end of the European welfare state caused by a crisis is a quote from Mundell. That’s exactly what he told me and I have it on tape. We’ve heard a series of contradictory statements recently from German and European Union officials regarding whether a country can even depart from the eurozone or not. What is applicable, and does a country like Greece even need to worry about what official policy might be on this issue? Continue Reading>>>

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