By
Ellen Brown
July
1, 2012
German Chancellor Angela
Merkel (pictured at the 2007 World Economic Forum in Davos, Switzerland)
capitulated to changes to a permanent Eurozone bailout fund on Friday, June 29.
(Photo: Severin Nowacki / World Economic Forum)
On Friday, June 29th, German Chancellor
Angela Merkel acquiesced to changes to a permanent Eurozone bailout
fund—"before the ink was dry," as critics complained. Besides easing
the conditions under which bailouts would be given, the concessions included an
agreement that funds intended for indebted governments could be funneled directly to stressed
banks.
According to Gavin Hewitt, Europe editor for
BBC News, the concessions mean that:
[T]he eurozone's bailout fund (backed
by taxpayers' money) will be taking a stake in failed banks.
Risk has been increased. German
taxpayers have increased their liabilities. In future a bank crash will no
longer fall on the shoulders of national treasuries but on the European
Stability Mechanism (ESM), a fund to which Germany contributes the most.
In the short term, these measures will
ease pressure in the markets. However there is currently only 500bn euros
assigned to the ESM. That may get swallowed up quickly and the markets may
demand more. It is still unclear just how deep the holes in the eurozone's
banks are.
The ESM is now a permanent bailout fund
for private banks, a sort of permanent "welfare for the rich." There
is no ceiling set on the obligations to be underwritten by the taxpayers, no
room to negotiate, and no recourse in court. Its daunting provisions were
summarized in a December 2011 YouTube video originally posted in German, titled "The shocking truth of the
pending EU collapse!":
The treaty establishes a new
intergovernmental organization to which we are required to transfer unlimited
assets within seven days if it so requests, an organization that can sue us but
is immune from all forms of prosecution and whose managers enjoy the same
immunity. There are no independent reviewers and no existing laws apply.
Governments cannot take action against it. Europe's national budgets [are] in
the hands of one single unelected intergovernmental organization.
Here are some of the ESM's key provisions:
[Article 8] "The authorized capital stock shall be EUR 700 000 [700 billion Euros]."[Article 9]: "ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them . . . such demand to be paid within seven days of receipt."[Article 10]: "The Board of Governors . . . may decide to change the authorized capital and amend Article 8 . . . accordingly."[Article 32, paragraph 3]: "The ESM, its property, funding, and assets . . . shall enjoy immunity from every form of judicial process . . . ."[Article 32, paragraph 4]: "The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action."[Article 30]: " . . . Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents."
And that was before Merkel's recent
concessions, which allow this open-ended indebtedness to be funneled directly
to the banks.
WHY
DID MERKEL CAVE?
"Reactions back home were
devastating," reported der Spiegel.
"[T]he impression was that [Merkel] had been out-maneuvered by Italian
Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy."
As of June 21, 13 of 17 countries
still had not ratified the ESM; and the most important ratification needed was
Germany's, the largest economy in the Eurozone. Earlier, Angela Merkel had opposed using
the bailout fund to pump money directly into struggling European banks. But at
the EU summit that began on Thursday and dragged on well into the night, she
finally relented. Late Friday evening, German lawmakers voted 493-106 in favor
of the €700 billion ($890 billion) permanent bailout fund.
What caused Merkel to back down?
According to an article in The Economist, the late night was "filled with bluff and
bluster," in which
Mariano Rajoy, the Spanish prime
minister . . . , along with Italy's Mario Monti, had threatened to block any
agreement at the summit unless their demands were met. Mr. Rajoy obtained
satisfaction, but the same is not quite true of Mr. Monti, who had been the
most adamant of the two.
Mr. Monti declared himself satisfied,
but caused considerable irritation to partners. Among the deals he had blocked
was the "growth pact", a mixture of stimulus measures.
What Monti achieved by this maneuver
was not clear:
"Who needs the growth pact? Not
Germany," said one bemused participant. The euro zone's fiscal hawks say
the bond-buying mechanism will be little different from the existing system.
"Mario Monti raised a gun to his head and threatened to shoot himself. In
the end he wounded himself in the shoulder," said one scornful diplomat.
Maybe. Or maybe the bond-buying
mechanism was not what he was really after.
THE ITALIAN COUP D'ETAT
There is reason to suspect that
"Super Mario" Monti may be representing interests other than those of
his country. He rose to power in Italy last November in what critics called a
"'coup d'etat' engineered by bankers and the European Union." He was
not elected but stepped in after Prime Minister Silvio Berlusconi resigned
under duress.
Monti is not only an
"international advisor" to Goldman Sachs, one of the most powerful
financial firms in the world, but a leader in the Bilderberg Group and the
Trilateral Commission. In an article in The New American, Alex Newman calls
these clandestine groups "two of the most influential cabals in existence
today." Monti is listed as a member of the steering committee on the
official Bilderberg website and as the European Group chairman on the
Trilateral Commission website.
The Trilateral Commission was
co-founded in 1973 by David Rockefeller and Zbigniew Brzezinski, also
Bilderberger attendees. The Trilateral Commission grew from the thesis in Brzezinski's
1970 piece Between Two Ages: America's Role in the Technetronic Era that a
coordinated policy among developed nations was necessary in order to counter
global instability erupting from increasing economic inequality. He wrote in his 1997 book The Grand
Chessboard that it would be difficult to get a consensus on these issues
"except in the circumstance of a truly massive and widely perceived direct
external threat."
Naomi Klein calls it "the shock
doctrine" ~ an induced disaster forcing austerity measures on sovereign
nations. In desperation, they would come to heel, relinquishing the sovereign
right of governments to an unelected body of technocrats. And that is what the
ESM seems to achieve.
Rockefeller notoriously wrote in his
2002 autobiography,
"Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure ~ one world, if you will. If that's the charge, I stand guilty, and I am proud of it."
IMPLEMENTING
THE SHOCK DOCTRINE
In another bankers' coup last November,
former Goldman Sachs executive Mario Draghi replaced Jean-Claude Trichet as
head of the European Central Bank. The European Stability Mechanism quickly
followed. It was a permanent rescue facility intended to replace certain
temporary facilities as soon as the member states had ratified it, slated to
occur by July 1, 2012.
The ESM came to an initial vote in
January 2012, when it was passed in the dead of night with
barely a mention in the press.
The recent modifications were also
agreed to in the dead of night, ostensibly because Italy and Spain were
afflicted with onerously high interest rates. But there are other ways to bring
down interest rates on sovereign debt besides forcing whole countries into
open-ended pacts to bail out private banks for unlimited sums in perpetuity, in
the hope that the banks might bail the governments out in return.
The U.S. 2012 budget deficit is significantly
worse than either Italy's or Spain's, yet somehow the U.S. has managed to keep
interest rates on its debt at record lows. How has it pulled this off?
One theory is that JPMorgan's $57 trillion in interest rate swaps
have something to do with it. Another explanation, however, is that the Fed has
simply stepped in as lender of last resort and bought up any debt not sold at
the low rate set by the Treasury, using "quantitative easing" (money
created on a computer screen).
Between December 2008 and June 2011,
the Fed bought a
whopping $2.3 trillion of U.S. bonds in two rounds of quantitative easing. Why
can't the European Central Bank do the same thing? The answer is that there are
rules against it, but rules are just arbitrary agreements. They can be changed
by agreement ~ and often have been, to save the banks.
As the cynic quoted in The Economist
article above observed, the bond-buying mechanism for countries under the ESM
will be little different from the existing system. Mario Monti said the plan will support
government bond prices only in countries that comply with fiscal targets, and
that it will act as an incentive for governments to follow virtuous policies.
That means avoiding deficits, even it
if requires further austerity measures and selling of assets.
On the public level, that could mean
national treasures like the Acropolis.
On the private level, The New York
Times reported Friday that some desperate out-of-work Europeans were going so
far as to sell their kidneys to pay household bills. The shock doctrine, it
seems, has come to the doorsteps of privileged Westerners.
The German diplomats negotiating the
ESM did leave open some escape hatches,
including a request by Germany's highest court to the country's president not
to sign the treaties into law until a legal review can be completed.
At least 12,000
complaints are expected to be filed with the Federal Constitutional
Court regarding the ESM and the fiscal pact. The legal review could well
conclude that the ESM illegally hijacks taxpayer funds for private bank profit.
It is one thing to pool national resources
to bail out other sovereign governments, quite another to write a blank check
to bail out the profligate private banks that precipitated the global downturn.
Europe has a strong tradition of publicly-owned banks. If the people must bear
the costs, the people should own the banks and reap the benefits.
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2012 McClatchy-Tribune Information Services. Truthout has licensed this
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