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Blaming the Victim: Greece is a Nation Under Occupation
By: Andrew Gavin Marshall
17 July 2015
In the early hours of Thursday morning, July 16, the Greek Parliament passed a host of austerity measures in order to begin talks on a potential third bailout of 86 billion euros. The austerity measures were pushed onto the Parliament by Greece’s six-month-old leftist government of Syriza, elected in late January with a single mandate to oppose austerity. So what exactly happened over the past six months that the first anti-austerity government elected in Europe has now passed a law implementing further austerity measures?
One cannot properly assess the political gymnastics being exercised within Greece’s ruling Syriza party without placing events in their proper context. It is inaccurate to mistake the actions and decisions of the Greek government with those taken by an independent, sovereign and democratic country. Greece is not a free and sovereign nation. Greece is an occupied nation.
Since its first bailout agreement in May of 2010, Greece has been under the technocratic and economic occupation of its bailout institutions, the European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF). For the past five years, these three institutions known as ‘the Troika’ (though now referred to as ‘the Institutions’) have managed bailout programs in Greece and other nations of the eurozone. In return for loans, they got to dictate the policies and priorities of governments.
Behind the scenes, Germany rules an economic empire expanding across Europe, enforcing its demands upon debtor nations in need of aid, operating largely through the European Union’s various institutions and forums. Germany has consistently demanded harsh austerity measures, structural reforms, and centralization of authority over euro-member nations at the EU-level.
Greece has served as a brutal example to the rest of Europe for what happens when a country does not follow the orders and rules of Germany and the EU’s unelected institutions. In return for financial loans from the Troika, with Germany providing the largest share, Greece and other debtor nations had to give up their sovereignty to unelected technocrats from foreign institutions based in Brussels (at the European Commission), Frankfurt (at the ECB), Washington, D.C. (at the IMF), and with ultimate authority emanating from foreign political leaders in Berlin (at the German Chancellery and Finance Ministry).
The Troika would send teams of ‘inspectors’ on missions to Athens where they would assess if the sitting government was on track with its promised reforms, thus determining whether they would continue to disburse bailout funds. Troika officials in Athens would function as visiting emissaries from a foreign empire, accompanied by bodyguards and met with protests by the Greek people. The ‘inspectors’ from Brussels, Frankfurt and Washington would enter Greek government ministries, dictating to the Greek government and bureaucracy what their priorities and policies should be, with the ever-present threat to cut off funds if their demands were not followed, holding the fate of successive governments in their hands. Thus, unelected officials from three undemocratic and entirely unaccountable international institutions were dictating government policy to elected governments.
In addition to this immense loss of sovereignty over the past five years, Greece was subjected to further humiliation as the European Commission established a special ‘Task Force for Greece’ consisting of 45 technocrats, with 30 based in Brussels and 15 at an outpost in Athens, headed by Horst Reichenbach, dubbed by the Greek press as the ‘German Premier’. European and German officials had pushed for “a more permanent presence” in Greece than the occasional inspections by Troika officials. Thus, the Task Force was effectively an imperial outpost overseeing an occupied nation.
When a nation’s priorities and policies are determined by foreign officials, it is not a free and sovereign nation, but an occupied country. When unelected technocrats have more authority over a nation than its elected politicians, it is not a democracy, but a technocracy. Germany and Europe’s contempt and disregard for the democratic process within occupied (bailout) countries has been clear for years.
When Greece’s elected Prime Minister George Papandreou called for a referendum on the terms of Greece’s second bailout in late 2011, German Chancellor Angela Merkel, French President Nicolas Sarkozy, and Europe’s unelected rulers were furious. The economic occupation and restructuring of a nation was too important to be left to the population to decide. Europe’s leaders acted quickly and removed the elected government from power in a technocratic coup, replacing Mr. Papandreou with the former Vice President of the European Central Bank, Lucas Papademos. Thus, a former top official of one of the Troika institutions was put in direct control of Greece.
Papademos, who was not elected but appointed by foreign powers, had two major mandates from his German-Troika overlords: impose further austerity and conclude an agreement for a second bailout. Within a week of the coup, the EU and IMF demanded that the leaders of Greece’s two large political parties, New Democracy and PASOK, “give written guarantees that they will back austerity measures” and follow through with the bailout programs.
Troika officials and European finance ministers wanted to ensure that regardless of what political party wins in future elections, the Troika and Germany would remain the rulers of Greece. Troika officials threatened that unless political party leaders sign written commitments they would continue to withhold further bailout funds from being disbursed to Greece. So the leaders signed their commitments. The leaders of Greece’s two main political parties, Antonis Samaras (New Democracy) and Evangelos Venizelos (PASOK), which had governed the country for the previous several decades, “became reluctant partners, propping up a new prime minister.” In February of 2012, the new Greek government agreed to a second major bailout with the Troika and Germany, thus extending the economic occupation of the country for several more years.
Greece was set to hold elections in April of 2012 to find a suitable ‘democratic’ replacement for the ‘technocratic’ government of Lucas Papademos. But German Finance Minister Wolfgang Schauble was growing impatient with Greece, and publicly called for the elections to be postponed and to keep a technocratic government in power for longer. As the Financial Times noted in February of 2012, the European Union “wants to impose its choice of government on Greece – the eurozone’s first colony,” noting that Europe was “at the point where success is no longer compatible with democracy.”
But the elections ultimately took place in May of 2012, though Greece’s fractured political parties failed to form a coalition government, and thus set the country on course for a second round of elections the following month. The May elections were seen as a major rejection of the bailouts and the two parties that had dominated Greece for so long, marking the rise of the neo-Nazi Golden Dawn party on the far-right and Syriza on the left.
But with a second round of elections set for June of 2012, Europe’s leaders repeated their threats to the democratic process in Greece. The Troika threatened to withhold bailout funds until the next government approved the package of reforms demanded by the creditors. Jorg Asmussen, a German member of the Executive Board of the ECB, warned, “Greece must know that there is no alternative to the agreed to restructuring arrangement, if it wants to stay a member of the euro zone.” The German President of the European Parliament, Martin Schulz, said that, “The Greek parties should bear in mind that a stable government that holds to agreements is a basic prerequisite for further support from the euro-zone countries.” As Philip Stephens wrote in the Financial Times, “As often as Greece votes against austerity, it cannot avoid it.”
At a May meeting of the Eurogroup of finance ministers, it became clear that Europe’s rulers were increasing their threats and ultimatums to Greece. “If we now held a secret vote about Greece staying in the euro zone,” noted Eurogroup President Jean-Claude Juncker (who is now president of the European Commission), “there would be an overwhelming majority against it.”
When the second elections were held the following month, the conservative New Democracy party won a narrow victory over Syriza, forming a coalition with two other parties in order to secure a majority to form a new government. Upon the announcement of a new coalition government on June 20, 2012, Chancellor Angela Merkel of Germany warned that Greece “must stick to its commitments.” Antonis Samaras of New Democracy was the third prime minister of Greece since the bailout programs began in 2010, and led the country as a puppet of its foreign creditors until his government collapsed in late 2014 and he called for elections to be held at the end of January of 2015.
Upon the collapse of the government, Alexis Tsipras, the leader of Syriza, declared that, “austerity will soon be over.” German Finance Minister Wolfgang Schauble warned that new elections in Greece “will not change any of the agreements made with the Greek government,” which “must keep to the contractual agreements of its predecessor.”
Jean-Claude Juncker, who was the newly-appointed (unelected) President of the European Commission, warned that Greeks “know very well what a wrong election result would mean for Greece and the eurozone,” adding that he would prefer “known faces” to rule Greece instead of “extreme forces,” in a reference to Syriza. A couple weeks before the elections, the European Central Bank threatened to cut its funding to Greece’s banking system if a new government rejected the bailout conditions.
Syriza won the elections on January 25, 2015, forming a coalition government with the Independent Greeks, a right-wing anti-austerity party. Alexis Tsipras, who would become Greece’s fourth prime minister in as many years, declared “an end to the vicious circle of austerity,” adding, “The troika has no role to play in this country.” Christine Lagarde, the Managing Director of the IMF, warned, “There are rules that must be met in the eurozone,” while a member of the executive board of the ECB added, “Greece has to pay, those are the rules of the European game.”
Nine days after the election, the ECB cut off its main line of funding to Greek banks, forcing them to access funds through a special lending program which comes with higher interest rates. Mark Weisbrot of the Center for Economic and Policy Research suggested that following Syriza’s election victory, the strategy of European officials was “to do enough damage to the Greek economy during the negotiating process to undermine support for the current government, and ultimately replace it.” The ECB, under its President Mario Draghi, quickly took a hardline approach to dealing with Greece, increasing the pressure on Athens to reach a deal with its creditors.
In early March, the ECB added pressure on Greece by indicating that it would only continue lending to Greek banks once the country complied with the terms of the existing bailout. On 9 March, a meeting of the Eurogroup was held where ECB president Mario Draghi warned the Greeks that they must let Troika officials return to Athens to review the country’s finances if they ever wanted any more aid. The same message was delivered by officials of the European Commission and the IMF. The Greeks were forced to comply. As negotiations continued, it became increasingly clear that the unelected institutions of the IMF and ECB had immense power over the terms and conditions of the talks.
Negotiations were dragged out, and the economy continued its collapse. By mid-June, Prime Minister Tsipras accused the creditors of “trying to subvert Greece’s elected government” and encourage “regime change.” James Putzel, a development studies professor at the London School of Economics (LSE) noted that Greece was being forced to choose between more austerity and reforms under Troika demands, or being booted from the eurozone and losing the common currency (something which the Greek people did not want). “Greece’s creditors,” he wrote, “seem bent on forcing the demise of the Syriza government.” Robert H. Wade, a political economy professor at LSE agreed, referring to the strategy as a “coup d’état by stealth.”
In late June, as Greece was faced with an ultimatum to implement more austerity or be pushed out of the eurozone, Alexis Tsipras threw out the wild card option in a final attempt to gain a better negotiating position by calling for a referendum on the terms demanded by the Troika and creditors. Europe’s leaders reacted as they did the previous time a Greek Prime Minister called for a referendum, and moved to put the squeeze on the economy. The ECB froze the level of its emergency aid to Greek banks, forcing bank closures and capital controls to be imposed on the country, essentially cutting off the flow of money to, from, and within Greece.
Chancellor Merkel, French President Francois Hollande and Commission President Jean-Claude Juncker “coordinated how they would respond” to the Greek government’s call for a referendum. As Mr. Tsipras publicly campaigned for a ‘No’ vote (which would reject the terms of the bailout), Europe’s leaders pushed for a ‘Yes’ vote, attempting to redefined the terms of the referendum as not being about the bailout, but about membership in the eurozone, threatening to kick Greece out if they voted ‘No’.
As Paul Krugman noted in the New York Times, the ultimatum agreement that was delivered to the Greeks by the Troika was “indistinguishable from the policies of the past five years,” and was thus meant to be an offer that Tsipras “can’t accept, because it would destroy his political reason for being.” The purpose, wrote Krugman, “must therefore be to drive him from office.” Mark Weisbrot wrote in the Globe & Mail that, “European authorities continue to take steps to undermine the Greek economy and government, hoping to get rid of the government and get a new one that will do what they want.”
Europe’s leaders increased their threats to Greece in the run-up to the referendum, warning the country that voting ‘No’ would mean voting against Europe, against the euro, and result in isolation and further crisis. But Greece voted ‘No’ in a landslide referendum on July 5, 2015, in a massive rejection of austerity and the bailouts.
Mr. Tsipras made a gamble with the referendum, hoping that a further democratic mandate from the Greek people would give him a stronger hand in negotiations with the creditors. But the opposite happened. Europe’s leaders instead decided to completely ignore and dismiss the wishes of the Greek people and continued to put the squeeze on Greece, whose economy was pushed to the brink so far that Mr. Tsipras announced the country’s intentions to enter into negotiations for a third bailout program. On July 10, the Greek government submitted a formal bailout request to its creditors.
Europe, noted the Wall Street Journal, was “demanding full capitulation as the price of any new bailout.” The Greek government was betting that Europe wanted to keep Greece in the euro more than Greece wanted to get away from austerity, but Germany – and in particular, Finance Minister Wolfgang Schauble – were willing to back a ‘Grexit’ scenario in which Greece would be given a five-year “timeout” from the eurozone. As Paul Krugman noted, “surrender isn’t enough for Germany, which wants regime change and total humiliation.”
As Greek leaders negotiated with their European counterparts over the possibility of a new bailout, it became clear that Greece was in for a reckoning. The demands that were being made of Greece, wrote Krugman, went “beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief.” The lesson from the past few weeks, he added, was that “being a member of the eurozone means that the creditors can destroy your economy if you step out of line.”
Financial journalist Wolfgang Münchau wrote in the Financial Times that Greece’s creditors “have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union.” The eurozone was instead “run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.” With Germany threatening to kick Greece out of the euro for failure to capitulate entirely, this amounted to “regime change in the eurozone.” As Münchau wrote: “Any other country that in future might challenge German economic orthodoxy will face similar problems.”
After 22 hours of talks, Greece was forced to agree to the new terms. The Greek government would have to pass into law a set of austerity measures and reforms before Europe’s leaders would even begin talks on a new bailout. “Trust needs to be restored,” said Chancellor Merkel. A new fund would have to be established in Greece, responsible for managing the privatization of 50 billion euros of Greek assets. As the Wall Street Journal noted, the deal “includes external control over Athens’s financial affairs that no eurozone bailout country – even Greece until this point – has had to endure.” The Financial Times called it “the most intrusive economic supervision programme ever mounted in the EU.” Tony Barber wrote that the conditions set for the country were so strict that “they will turn Greece into a sullen protectorate of foreign powers.” One eurozone official who attended the summit at which Greece conceded to the German demands commented, “They crucified Tsipras in there.”
And so after six months of a Syriza-led Greece it is evident that Syriza does not rule Greece, Germany and the Troika do. What Syriza’s “capitulation” tells us is not that the party betrayed its democratic mandate from the Greek people, but that staying in the euro is a guarantee that no matter who is elected, they are little more than local managers of a foreign occupation government.
Blaming Mr. Tsipras and the Greeks for the current predicament is a bit like blaming a rape victim for getting raped. It doesn’t matter how they were ‘dressed’, or if they ‘could’ have fought back, because it’s ultimately the decision of the rapist to commit the crime, and thus, the rapist is responsible.
Syriza could become a party of liberation, of a proud, sovereign and democratic nation. But this is only possible if Greece abandons the euro. Until then, the Greek government has about as much independent power as the Iraqi government under American occupation. Syriza made several gambles in negotiations with the country’s creditors, most of which failed. But Greece was never on an equal footing.
Andrew Gavin Marshall is a freelance researcher and writer based in Montreal, Canada.
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Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe
By: Andrew Gavin Marshall
7 July 2015
“They just wanted to take a bat to them,” said former U.S. Treasury Secretary Timothy Geithner, referring to the attitude of European leaders towards debt-laden Greece in February of 2010, three months before the country’s first bailout. Mr. Geithner, Treasury Secretary from 2009 until 2013, was attending a meeting of the finance ministers and central bankers of the Group of Seven (G7) nations: the United States, Japan, Germany, France, Britain, Italy and Canada.
It was the first occasion he had to meet Germany’s new Finance Minister, Wolfgang Schauble, presenting an opportunity to pressure the Europeans to end the crisis. The Europeans, specifically Germany and the European Central Bank (ECB), always had the ability to end the crisis. Putting up enough money in a regional bailout fund or allowing the ECB to fund governments (acting as a ‘lender of last resort’) would provide enough reassurance to the markets that no country would go bankrupt and therefore the crisis would end. It was referred to as the ‘big bazooka’ option, but Mr. Geithner had no such luck in convincing the Europeans to act quickly, largely due to German resistance.
The Europeans arrived at the G7 meeting in the remote Arctic Canadian city of Iqaluit wanting “to teach the Greeks a lesson” and “crush them,” explained Mr. Geithner. The Treasury Secretary warned them, “You can put your foot on the neck of those guys if that’s what you want to do,” but they still had to take action to reassure markets that the crisis would not spread to other countries, or threaten the euro itself. “I thought it was just inconceivable to me they would let it get as bad as they ultimately did,” said Mr. Geithner.
As the United States and the rest of the world would learn, the European strategy for the debt crisis that began in Greece and spread across the eurozone would be dictated by Germany, “the undisputed dominant power in Europe.” More than five years later, the Americans are still pressuring the Europeans to resolve their debt crisis problems, but to little effect. The stakes are now even higher as the U.S. fears the possibility of losing Greece to Russia, a conflict in which Germany is increasingly involved.
The Americans would attempt to influence Europe’s crisis through extensive contact between Mr. Geithner and Mr. Schauble at the German Finance Ministry, Mario Draghi at the ECB, and Christine Lagarde at the International Monetary Fund (IMF). The Americans knew that for anything to get done in Europe, you needed the Germans and the central bankers on board. The U.S. spy agency, the NSA, was even wiretapping the phone calls of German Chancellor Angela Merkel, top officials of the Finance Ministry and the ECB, with a particular interest in economic issues and Greece.
Germany’s political strategy was to allow the debt crisis to spread, creating the pressure required to force eurozone nations to accept German demands of restructuring their economies in return for financial aid from the EU. The German magazine Der Spiegel described Frau Merkel’s overall European strategy: “the aim was to solve the debt crisis in a step-by-step fashion.”
“If the euro fails, then Europe fails,” said the Chancellor in May of 2010, shortly after the first Greek bailout program was agreed. “The euro is in danger. If we do not avert this danger, then the consequences for Europe are incalculable and then the consequences beyond Europe are incalculable.” Merkel worked closely with Mr. Schauble at the Finance Ministry and her Minister of Economics, Rainer Brüderle, to write a draft proposal outlining the changes Germany wanted in the European Union.
The German publication Der Spiegel was leaked a copy of the draft, and concluded: “Berlin is serious about taking the lead as the euro zone struggles with a suddenly weak currency.” Germany wanted a Europe where the European Commission had the power to suspend the voting rights of nations for violating the eurozone’s debt and spending laws, including plans for managing the bankruptcy of a member nation. “Europe,” said Angela Merkel, “needs a new culture of stability.” But that culture would be enforced through the destabilizing power of financial market crises.
The German bet was that the EU could outrun financial markets, using the crisis as an opportunity to advance fiscal and political integration and impose their demands upon the rest of Europe, while simultaneously preventing markets from creating a crisis so severe that it threatened the euro or the economies of the more powerful nations. Without the pressure of financial markets, the EU could not force its member nations to restructure their economies and societies. Chancellor Merkel would frequently describe the European debt crisis to her colleagues as a “poker game” between financial markets and politicians. The first to flinch would lose.
In 2011, Bloomberg noted that Merkel was “turning Europe’s sovereign-debt crisis into an opportunity to reshape the euro region in Germany’s image,” concluding that she had “pulled ahead for now in her battle to restore policy makers’ mastery over the market.” A biographer of Merkel explained, “It’s policy by trial and error.”
Merkel’s powerful Finance Minister, Mr. Schauble, was one of the chief architects of the German strategy for Europe’s crisis. In March of 2010, he wrote in the Financial Times that, “from Germany’s perspective, European integration, monetary union and the euro are the only choice.” But aid comes with strings attached and harsh penalties for violations. “It must, on principle, still be possible for a state to go bankrupt,” wrote Mr. Schauble. “Facing an unpleasant reality could be the better option in certain conditions.”
The German minister believed “the financial crisis in the eurozone is not just a threat, but an opportunity,” as markets would “force the most debt-laden members of the 17-nation currency union to curb their budget deficits and increase their competitiveness.” This would pressure governments to accept further integration into a “fiscal union” defined and shaped by Germany. “We need to take big steps to get that done,” Mr. Schauble said in 2011. “That is why crises are also opportunities. We can get things done that we could not do without the crisis.”
Financial markets were happy to oblige the German-EU strategy, as the crisis would force the reforms long demanded by banks as a solution to the irresponsible spending of governments: austerity and structural reform. From 2002 to 2012, Josef Ackermann led Germany’s largest bank, Deutsche Bank. In 2011, the New York Times described Ackermann as “the most powerful banker in Europe” and “possibly the most dangerous one, too,” standing “at the center of more concentric circles of power than any other banker on the Continent.”
When the financial crisis struck in 2008, Angela Merkel and Josef Ackermann established a close working relationship, though not without its ups and downs. “We have a cordial and professional relationship,” said Mr. Ackermann in 2011. The banker would advise Frau Merkel on her strategy through the financial and debt crises, also working closely with Jean-Claude Trichet, then-president of the ECB. From his “seat at the nexus of money and politics,” Ackermann was “helping to shape Europe’s economic and financial future.”
After he left Deutsche Bank in 2012, Ackermann delivered a speech to the U.S.-based think tank, the Atlantic Council, where he outlined Germany’s overall strategy for Europe’s crisis. When asked why Germany simply didn’t say that it would do whatever it took to protect the euro and eurozone nations from bankruptcy (thus ending the financial crisis), Ackermann explained that it was largely due to a “political tactical consideration.” While such an option would surely end the market panic and save the euro, it would be unacceptable to the German public, let alone the German parliament.
But another major problem, noted Mr. Ackermann, was that if Germany made such an announcement, other eurozone nations “would then say, well, why then go on with our austerity programs? Why go on with our reforms? We have what we need.” Thus, he said, “I think to keep the pressure up until the last minute is probably a – not a bad political solution.” However, “if it comes to the worst,” with the potential of a eurozone collapse, the banker had “no doubt” that Germany would come to the rescue.
If the eurozone collapsed, not only would an economic and financial contagion spread with drastic consequences for all its members and the world economy as a whole, but there was also a strong political element. “A fragmented Europe has no way for self-determination,” said Mr. Ackermann. “We will have to accept what the United States, China, India, Brazil and other countries will finally define for us.” But Germany was to define the future of Europe.
“My vision is political union,” said Chancellor Merkel in January of 2012. “Europe has to follow its own path. We need to get closer step by step, in all policy areas.” In the Chancellor’s Europe, Brussels (home of the European Commission) was to be given immense new powers over member nations. “In the course a long process,” she said, “we will transfer more powers to the Commission, which will then work as a European government.” Outlining the EU’s path to a federation of nations functioning like individual states within the U.S., Merkel said, “This could be the future shape of the European political union.” Further integration among eurozone nations was a major objective, she explained, “we need to give institutions more control rights and give them more teeth.”
As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and the world, with 7% of the world population, 25% of global GDP and 50% of world social spending, Europe’s economic system was unsustainable and uncompetitive in a globalized economy. Germany’s vision for Europe was aimed at introducing “rules to force Europe’s economies to become more competitive.” But competitiveness was defined by Germany, and thus, “the rest of Europe needs to become more like Germany.”
Germany wanted Greece and the rest of Europe to impose ‘budgetary discipline’ through austerity measures: cutting public spending in order to reduce the debt. But these are painful and highly destructive policies that depress the economy, impoverish the population, destabilize the political system, undermine democracy and devastate the wider society. If you live in a country where the government funds healthcare, education, social services, welfare, pensions and anything that benefits the general population, under austerity measures, now you don’t! Not surprisingly, austerity is always unpopular with the people who are forced to live through it.
Only in times of crisis can austerity be pushed through. When financial markets threaten to cut a country off from its sources of funding, it must to turn to larger nations and international organizations for financial aid. “The current strategy of the EU,” wrote Wolfgang Münchau in a November 2009 article for the Financial Times, “is to raise the political pressure – perhaps even provoke a political crisis – with the strategic objective that the Greek government might eventually relent.” And the government would have to relent to the diktats of Germany and “the Troika”: the European Commission, European Central Bank (ECB), and the International Monetary Fund (IMF), who collectively managed Europe’s bailout programs.
In early 2010, European banks held more than 141 billion euros of Greek debt, with the largest share being held by French and German banks. The first bailout largely went to bailout these very banks. Karl Otto Pohl, the former President of the German Bundesbank noted back in 2010 that the Greek bailout was about “rescuing the banks and the rich Greeks,” especially German and French banks. As the Troika bailed out the banks, these institutions took on the Greek debt.
The second bailout organized by the Troika largely went to paying interest on Greek debt owed to the Troika. Thomas Mayer, a senior adviser to Deutsche Bank, said, “the troika is paying themselves.” Between May 2010 and May 2012, Greece had received roughly $177 billion in bailouts from the Troika. A total of two-thirds of that amount went to payoff bondholders (banks and rich Greeks), while the remaining third was left to finance government operations.
In 2015, a study by the Jubilee Debt Campaign noted that of the total 252 billion euros in bailouts for Greece over the previous five years, over 90% ultimately went “to bail out European financial institutions,” leaving less than 10% for anything else. At the time of the first bailout in 2010, Greece had a debt-to-GDP ratio of roughly 130%. As a result of the bailouts and austerity, the debt ratio has risen to 177% of GDP at the beginning of 2015. Thus, after more than five years of supposed efforts to reduce its debt, that debt has grown substantially.
But the banks are no longer the largest holders of Greek debt. Today, the Troika owns 78% of the 317 billion euro Greek debt. Greece now owes the IMF, ECB, and eurozone governments a total of 242.8 billion euros, with the largest single holder being Germany with more than 57 billion euros in Greek debt. And now the Troika wants to be paid back. “In short,” wrote Simon Wren-Lewis in the New Statesman, “it needs money from the Troika to repay the Troika.”
The effects on Greece of more than five years of living under the domination of Germany and the Troika have been palpable. Greece is a ruined economic colony of the European Union. Austerity in Greece led to the creation of “a new class of urban poor” with more than 20,000 people being made homeless over the course of 2011, and dozens of soup kitchens and charities opening up to attempt to address the growing social and human crisis.
As austerity continued to collapse the economy, unemployment and poverty soared. By 2013, more than 27% of Greeks were unemployed and 10% of school-age children were going hungry. Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared, tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose, as did drug use with HIV infections doubling and a malaria outbreak was reported for the first time since the 1970s, while suicide rates increased by 60%.
By early 2014, more than a million Greeks were left without access to healthcare, accompanied by rising infant mortality rates. A charity director in Athens noted that, “Alcoholism, drug abuse and psychiatric problems are on the rise and more and more children are being abandoned on the streets.” By 2015, roughly 40% of children in Greece lived under the poverty line while the richest Greeks, responsible for roughly 80% of the tax debt owed to the government, were hiding tens of billions of euros in offshore accounts.
Unemployment has grown to 26% (and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired Greeks now live below the poverty line. Just prior to the Greek elections that brought his party to power in January of 2015, Alexis Tsipras wrote in the Financial Times that, “This is a humanitarian crisis.” Joseph Stiglitz, the Nobel Prize-winning former chief economist of the World Bank, wrote in late June of 2015 that, “I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences.”
Thus, the German-Troika strategy of prolonging the debt crisis to reshape Europe has resulted in a human, social and political crisis that threatens the future of democracy in Europe itself. Germany has, in effect, established an economic empire over Europe, largely operating through the Troika institutions, all of which are unaccountable technocratic tyrannies.
The first pillar of the Troika is the International Monetary Fund (IMF), based in Washington, D.C., just a few short blocks down the road from the White House and U.S. Treasury Department. The United States is the largest single shareholder in the IMF, and the only one of its 188 member nations with veto power over major Fund decisions. The Financial Times referred to the IMF as “a tool of US global financial power.”
In 1977, U.S. Treasury Secretary Michael Blumenthal described the IMF as “a kind of whipping boy” in a memo to President Carter. In return for a loan to a country in crisis, the Fund would demand harsh austerity measures and other ‘structural reforms’ designed to restructure the economy along the lines desired by Washington. “If we didn’t have the IMF,” wrote Blumenthal, “we would have to invent another institution to perform this function.”
In the early 1990s, the IMF was managing ‘programs’ in over 50 countries around the world, and was “long been demonized as an all-powerful, behind-the-scenes puppeteer for the third world,” noted the New York Times. In 1992, the Financial Times noted that the fall of the Soviet Union “left the IMF and G7 to rule the world and create a new imperial age.” Operating through the Troika, IMF Managing Director Christine Lagarde took a “tough love” approach to Greece, with the Fund being referred to as “the toughest” of the three institutions.
The European Central Bank (ECB) is another pillar of the Troika, run by unelected central bankers responsible for managing the monetary union, with its headquarters in Frankfurt, Germany, home to the German central bank (the Bundesbank) and Germany’s large financial sector. Throughout the crisis, Brussels has pushed to give the ECB more powers, specifically to oversee the formation and management of a single ‘banking union’ for the EU. The ECB has, in turn, advocated for more power to be given to Brussels.
The ECB played a central role in the debt crisis, pushing Greece into a deep crisis in late 2009, making “an example” of the country for the rest of Europe, blackmailing Ireland into accepting a Troika bailout program, then blackmailing Portugal into doing the same, and putting political pressure on Italy and Spain to implement austerity measures.
In late 2014, ECB President Mario Draghi rebooted efforts to advance integration of the economic and monetary union. When the anti-austerity Syriza government came to power in Greece in early 2015, the ECB was placed to be “the ultimate power broker” in negotiations between the country and its creditors. A member of the central bank’s executive board welcomed the democratic victory in Greece by warning, “Greece has to pay, those are the rules of the European game.”
The ECB took a hardline approach to dealing with Greece, increasing the pressure on Athens to reach a deal with its creditors, with The Economist referring to the central bank as “the enforcer.” This unelected and democratically unaccountable institution holds immense, undeniable power in Europe.
The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union. Throughout the crisis, the Commission has been given sweeping new powers over economic and spending policies and priorities of member nations.
Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run ‘fiscal union’ to match the ECB’s role in managing the monetary union. EU institutions would have “more powers to serve like a finance ministry” for all the nations of the eurozone, potentially with its own finance minister, “who would have a veto against national budgets and would have to approve levels of new borrowing,” said Mr. Schauble, the German Finance Minister.
In 2007, European Commission President José Manuel Barroso mused aloud during a press conference. “Sometimes I like to compare the E.U. as a creation to the organisation of empires,” he said. “We have the dimension of Empire but there is a great difference. Empires were usually made with force with a centre imposing diktat, a will on the others. Now what we have is the first non-Imperial empire.” Eight years later, it is clear that the EU is officially an imperial empire, using bailouts not bombs, choosing the Troika over tanks, Brussels over bullets, austerity instead of armies, advocating for consolidation instead of colonization.
Philippe Legrain, a British political economist, author, and adviser to President Barroso from 2011 to 2013 wrote that the debt crisis “divided the euro zone into creditor nations and debtor ones,” and the EU’s institutions “have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern ‘periphery’ to the northern ‘core’ in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.”
“In general,” wrote Gideon Rachman in the Financial Times in 2007, “the [European] Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective,” he concluded, “only when it is anti-democratic.”
Perhaps the greatest lesson of the past five years of crisis is that in a Europe under the rule of Germany and the Troika, the people and democracy suffer most. For democracy to survive in Europe, the technocratic tyranny of the Troika and debt-based domination of Germany must be challenged. Democracy is too important to be sacrificed at the altar of austerity. It is any wonder why Greeks voted ‘no’ to the status quo?
Andrew Gavin Marshall is a freelance researcher and writer based in Montreal, Canada.
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Global Power Project: Bilderberg Group and Europe’s Technocrat Titans
By: Andrew Gavin Marshall
10 February 2015
Originally posted at Occupy.com
This is the tenth installment in a series examining the activities and individuals behind the Bilderberg Group. Read the first, second, third, fourth, fifth, sixth, seventh, eighth and ninth parts in the series.
I previously examined the functions of the Bilderberg meetings; the composition and concentration of financial markets and the Mafiocracy that rules them; the nature of technocracy, and the role of finance ministers, central banks and the IMF in managing the European debt crisis. This installment takes a closer look at the top technocrats of the European Council and the European Commission.
The “Troika” of the European Central Bank (ECB), International Monetary Fund (IMF) and European Commission (EC) was largely tasked with managing the response to the debt crisis, organizing bailouts, imposing austerity and saving the banks at the expense of the populations of Europe. The Troika reported to the Eurogroup of 17 finance ministers who represented all of the countries that used the euro as their single common currency.
The European Union project evolved and expanded over decades since the end of World War II, and always with an elite-driven, technocratic structure. As the E.U. moves through the debt crisis, its solutions and actions invariably delegate more authority to both existing and new technocratic institutions that wield immense power over nation-states within the E.U. Sovereignty is increasingly transferred from the nation and its democratically elected leaders to the supra-national technocratic structure of the E.U., and the top bureaucrats and technicians who run it.
The European Council and the European Commission are the major centers of power within the E.U.’s political structure. The European Central Bank is equally if not more powerful, but it doesn’t answer to any political authority since it’s considered to be “independent” (aka exclusively in the service of private interests). The European Council groups together the heads of state (presidents and prime ministers) of all E.U. nations, comprising the supreme governing authority of the E.U. The Council is presided over by a permanent president. Over the course of the European debt crisis, that president was Herman Van Rompuy.
Herman Van Rompuy
Herman Van Rompuy was a prominent Belgian technocrat and politician. Trained as an economist, Van Rompuy worked for Belgium’s central bank from 1972 to 1975, thereafter going into politics where he rose through the ranks to become a budget minister in the 1990s. When Van Rompuy was asked by Belgian King Albert to form a coalition government in December of 2008, Van Rompuy became Belgium’s Prime Minister, described by Reuters at the time as “a budgetary hardliner.”
As European leaders were attempting to negotiate and horse-trade to fill key appointments in the EU apparatus in late 2009, Van Rompuy was considered a “dark horse” to occupy the first-ever permanent president of the European Council. Van Rompuy was relatively unknown outside Belgium and had only been the country’s Prime Minister for 11 months when he got the top job in the E.U.
Roughly a week before European leaders announced him as their selection, Van Rompuy attended a private dinner with members of the Bilderberg steering committee on Nov. 12, 2009. Van Rompuy was invited to the dinner by then-chairman of the Bilderberg meetings, Etienne Davignon, a former top E.U. technocrat, in order “to promote his candidacy” for the top job. At the dinner, which was attended by top industrialists, financiers and even war criminals like Henry Kissinger, Van Rompuy was able to impress the group with a speech and engage in “off-the-record” talks with the unelected oligarchs. At the dinner meeting, Van Rompuy reportedly raised the issue of E.U. financing, suggesting that a continental E.U. tax could even be envisioned.
Seven days later, Van Rompuy was announced as the final choice for president of the European Council. According to The New York Times, Van Rompuy’s selection was seen as the “result of backroom negotiations among [E.U.] leaders jockeying for future and more important economic portfolios that could be more powerful in the enlarged European Union” – in some ways a similar method as how the Chinese choose who sits in the top political positions of authority within the Communist Party and State.
The Financial Times celebrated the appointment of Van Rompuy to the top spot, noting that “the art of Belgian political leadership consists of bringing consensus to a broad and fractious coalition,” which is “exactly what the president of the European Council will have to do.” As the prime minister of Belgium, the paper wrote, Van Rompuy had “demonstrated an ability to bring a laser-sharp focus to a complicated political process.”
Together with the President of the European Commission, the ECB and the Eurogroup of finance ministers, Van Rompuy indeed played an important role in the management of Europe’s debt crisis. After attending the Bilderberg steering committee meeting in 2009, just prior to getting Europe’s top job, he later attended a Bilderberg meeting in 2011 while sitting as president of the European Council.
José Manuel Barroso
José Manuel Barroso finished his second term as President of the European Commission in late 2014, after serving in that post for the previous ten years. Prior to that, he served as prime minister of Portugal from 2002 to 2004. Barroso has attended numerous Bilderberg meetings: in 1994, 2003, 2005 and 2013. On top of that, Barroso has attended meetings of the Trilateral Commission, including the one that took place in Portugal in 2003 while Barroso was prime minister. He also attended the Commission’s annual meeting in 2007 that took place in Brussels while he was the European Commission president.
Barroso courted controversy in 2003 when he became one of only a few European heads of state to support George W. Bush’s “with us or against us” war on Iraq. His position put him in good standing with the U.K. and Italy, yet he also managed to maintain good ties with France and Germany, making him an effective choice to head the EC. Barroso was at the same time, however, “unpopular at home,” noted the BBC, because he implemented “an austerity program to reduce the country’s budget deficit.” But for European leaders, the fact that Barroso was able to hold together a political coalition of opposing parties “while driving through the unpopular reforms” made him an ideal candidate to function as “a consensus politician.”
The Economist reflected on Barroso’s short time as prime minister, noting the austerity program and commenting that he “has done a good job of running Portugal.” Barroso was chosen for one of the top spots in the E.U., overseeing the vast bureaucracy of the European Commission, through a series of “backroom deals, in which various other juicy EU jobs that are up for grabs are shared around.” Those who backed Barroso were doing so under the presumption that he would “hold his liberal economic line.”
A few months into his first term, in early 2005, the Financial Times reported that Barroso had “laid out pro-business plans to revive Europe’s economy,” which Britain’s E.U. Trade Commissioner Peter Madelson described as “proposing a program for Europe that we would describe as ‘New Labour’ in Britain,” and adding that “we are seeing the best chance in a decade to restore authority to the European Commission.” Apart from not giving business interests everything they wanted, the FT conceded that in many areas, “Barroso’s agenda is unashamedly pro-business,” including “a new drive for lighter regulation.”
Barroso’s program “put pressure on countries to make labour markets more flexible and cut back on welfare spending,” noted The New York Times. As people across Europe expressed fear that Barroso was “about to pursue an excessively liberal economic agenda,” Barroso began attempting to please his critics, speaking to trade unionists and declaring his intention to “fight against poverty,” stating that Europe would “maintain and reform our European social model.” That public relations campaign in turn worried business and financial interests, so the Commission president launched “a concerted campaign to attempt to show he remains firmly committed to pro-business economic reforms.”
A couple of weeks later, Barroso delivered a speech at the Spring meeting of the Institute of International Finance (IIF), whose membership is composed of top executives from hundreds of the world’s largest banks and financial institutions. Barroso began his speech noting that “your association has achieved a lot in the last two decades,” and continued:
“It has acted as an important market place for ideas [and] has provided a clear and influential voice for change in the fields of finance, economics and governance.” The world’s “stable financial order” was, Barroso declared, “in no small part thanks to the contribution of this institute.”
Barroso explained his understanding of the global economy to his esteemed audience, noting that the rapid growth in “emerging markets” was increasing global wealth, but also increasing competition for that wealth with countries like China and India able to better exploit cheap labor while the U.S. with its high-tech boom was leaving Europe behind.
“The status quo is no longer an option for the E.U.,” Barroso continued. The E.U. must change “in order for Europe to fully reap the benefits of ongoing globalization,” and the continent had to “increase the flexibility of markets” and strengthen its “productivity.” Translation: deregulate all markets, dismantle labor rights and protections, reduce living standards so as to create a cheaper labor force capable of competing with Asia, and increase finance for research and development to spur high-tech growth. Among the major “priorities” were making workers “more adaptable and labour markets more flexible.” No doubt, Barroso’s audience of bankers and financiers agreed with him.
It should be noted that the top leadership of the IIF are frequently Bilderberg members and participants, and that other speakers invited to the IIF’s Spring meeting included “senior government officials from Brazil, Chile, China, Slovakia, Spain and the U.K.,” as well as “leading international economists,” the managing director of the IMF, and the former president of Mexico.
In 2007, Barroso publicly commented on the unique nature of the European Union, referring to it as “the first non-imperial empire,” and explaining: “We are a very special construction unique in the history of mankind… Sometimes I like to compare the E.U. as a creation to the organization of empire. We have the dimension of empire.”
Barroso became a globally influential official in the spring of 2009, as the world grappled with the repercussions of the financial crisis and the heads of central banks, finance ministries, international organizations and leaders of the Group of 20 met to reshape the global financial and economic order. The focus at the 2009 meeting was to design “the future of financial regulation.” The Telegraph noted at the meeting that “Barroso and his team have had a quiet but immensely influential role in the whole process,” as many of the words and phrases adopted in the G20’s final communiqué were drafted in Barroso’s Commission office, which had drafted an earlier report on the subject. Barroso declared that “we need open, competitive, market economies… with effective regulation and supervision.” To accomplish this, “strong international institutions” (like his) were needed as well as “corporate governance,” a global reflection of today’s “economic culture of Europe.”
The next and final installment in the series examines Barroso’s continued role, and the role of the European Commission, from 2009 onwards.
Global Power Project: Bilderberg Group and the International Monetary Fund
By: Andrew Gavin Marshall
3 February 2015
Originally posted at Occupy.com
This is the ninth installment in a series examining the activities and individuals behind the Bilderberg Group. Read the first, second, third, fourth, fifth, sixth, seventh and eighth parts in the series.
In previous installments, this series has examined the historical role played by Bilderberg meetings in influencing major institutions and policies across North America and Western Europe over the past half century; the role of the meetings in supporting the rise of corporate and financial-friendly politicians to high office; the representation of interests from among the global financial elite, and the promotion of technocracy (particularly in Europe) and the representation of key technocratic institutions and individuals from Europe’s finance ministries and central banks, who’ve played important roles in the management of Europe’s financial and debt crises between 2008 and 2014.
This installment continues with an examination of Bilderberg’s role in facilitating the advancement of transnational technocracy in the EU, bringing in some of the top technocrats from leading European and international organizations to meet in secret with finance ministers, central bankers, politicians, corporate executives, bankers and financiers. The role of finance ministers and central banks has been the focus of the previous two installments in this series. Now we look at the IMF, which, together with the European Central Bank (ECB) and the European Commission (EC), functioned as the “Troika” tasked with managing the international response to the debt crisis, organizing the bailouts and imposing harsh austerity measures and structural reforms upon the nations and people of Europe.
The IMF: It’s Mostly Fiscal
In 1992, the Financial Times published a feature article by James Morgan, the chief economic correspondent of the BBC, in which he explained that with the fall of the Soviet Union, the Group of Seven nations (specifically their finance ministries and central banks) and the International Monetary Fund have come “to rule the world and create a new imperial age.” Morgan wrote that the “new global system” ruled by the G7, the IMF, World Bank and other international organizations “worked through a system of indirect rule that has involved the integration of leaders of developing countries into the network of the new ruling class.”
The IMF is designed to come to the “aid” of countries experiencing financial and monetary crises, to provide loans in return for the nations implementing austerity measures and key structural reforms, and to promote easy access for foreign investors (ie. banks and corporations) to buy up large portions of the local economy, enriching both domestic and foreign elites in the process.
Thus, a nation which gets a loan from the IMF must typically dismantle its social services, fire public sector workers, increase taxes, reduce benefits, cut education and health care, privatize state-owned assets and industries, devalue its currency, and dismantle labor protections and regulations, all of which plunges the population into poverty and allows for major global banks and corporations to seize the levers of the domestic economy and exploit the impoverished population as cheap labor.
The IMF was created near the end of World War II, tasked with managing the global “balance-of-payments” between nations: that is, maintaining the stability of global deficits and surpluses (the borrowing, lending and trading) between countries. However, as the post-War international monetary system collapsed in the early 1970s, the IMF needed to find a new focus. In the late 1970s, the New York Times noted that the “new mandate” of the IMF was “nothing less than rescuing the world monetary system – and with it, the world’s commercial banks.”
As the major Western commercial banks lent out vast sums of money to developing nations during the 1970s, they created immense liabilities (ie. risks) for themselves. As interest rates on debt began to rise, thanks to the actions of the Federal Reserve, heavily-indebted countries could no longer pay the interest on their loans to banks. As a result, they were thrust into financial and debt crises, in need of loans to pay down their debts and finance government spending. A key problem emerged, however, in that major commercial banks (who stopped funding developing nations) could not force them to implement the desired policies. What was needed was a united front of major banks, powerful industrial nations and international organizations.
Enter the IMF: controlled by the finance ministries of the majority of the world’s nations, with the U.S. Treasury holding veto power over all major decisions. The IMF was able to represent a globally united front on behalf of the interests of commercial banks. All funding from governments, international organizations and banks would be cut off to developing nations in crisis unless they implemented the policies and “reforms” demanded by the IMF. Once they signed a loan agreement and agreed to its conditions, the IMF would release funds, and other nations, institutions and banks would get the green light to continue funding as well.
The IMF’s loans, policy prescriptions and reforms that it imposes on other nations have the effect of ultimately bailing out Western banks. Countries are forced to impoverish their populations and open up their economies to foreign exploitation so that they can receive a loan from the IMF, which then allows the indebted nation to simply pay the interest on its debt to Western banks. As a result, the IMF loan adds to the overall national debt (which will have to be repaid down the line), and because the nation is in crisis, all of its new loans come with higher interest rates (since the country is deemed a high risk).
This has the effect of expanding a country’s overall debt and ensuring future financial and debt crises, forcing the country to continue in the death-spiral of seeking more loans (and imposing more austerity and reforms) to pay off the interest on larger debts. As a result, entire nations and regions are plunged into poverty and abusive forms of exploitation, with their political and economic systems largely controlled by international technocrats at the IMF and World Bank, mostly for the benefit of Western commercial banks and transnational corporations.
The IMF has amassed great power over the past few decades, and because its conditions and demands on nations primarily revolve around imposing austerity measures and “balancing budgets,” the IMF has earned the nickname “It’s Mostly Fiscal”. However, due to the effects of the fiscal policies demanded and imposed by the IMF, causing widespread poverty, increasing hunger, infant mortality, disease and inequality, many populations and leaders of indebted nations view the IMF as far more than “fiscal.” In fact, former Egyptian dictator Hosni Mubarak once referred to the IMF as the “International Misery Fund,” a sentiment shared by many protesters in poor nations experiencing the effects of harsh austerity measures.
The IMF and Bilderberg
As one of the world’s most important and influential technocratic institutions, the IMF has a keen interest in the goings-on behind closed doors at annual Bilderberg meetings, just as the group’s participants have a keen interest in the leadership and policies of the IMF. In fact, it is largely an unofficial tradition that the managing director of the IMF is frequently chosen from among Bilderberg participants, or in the very least, attends the meetings following their appointment. In a 2011 article about that year’s Bilderberg meeting, I commented on the race to find a new managing director of the IMF, noting that only Christine Lagarde, the French finance minister, had previously attended a Bilderberg meeting (in 2009), and therefore, she seemed a likely choice.
Lagarde began her career at a corporate law firm in the United States, becoming the first female chair in 1999. In 2004, at the request of the French Prime Minister, Lagarde joined the French government of President Jacques Chirac as a junior trade minister and began to rise through the ranks. When Nicolas Sarkozy became president in 2007, Lagarde took up the post of finance minister, a position that Sarkozy had also previously held. As Foreign Policy magazine explained, both Sarkozy and Lagarde had a similar vision for France: “free markets, less regulation, and globalization.” Together, they imposed various austerity measures and structural reforms in France, and due to Lagarde’s ideological allegiance to the American-brand of “market capitalism,” she was given the nickname, “The American.”
Throughout the financial crisis, and really from 2008 onwards, Lagarde was pivotal in brokering a major bailout deal between the G7 nations, working with her “close personal friend,” Hank Paulson, the U.S. Treasury Secretary (and former CEO of Goldman Sachs). Lagarde became a skilled operator at G7 and G20 meetings, and was a regular figure at World Economic Forum (WEF) meetings. As the [New York Times noted]( in late 2008, Christine Lagarde’s “biggest fans are business leaders and foreign finance officials who have seen her in action.”
In 2008, the Financial Times ranked Lagarde as the 7th best finance minister in Europe. In 2009, she was ranked as number one, with the Financial Times writing that she “has become a star among world financial policy-makers.” That same year, she was invited to the Bilderberg conference. The following year, Lagarde was ranked in third place, having “played an important role in the Eurozone debt crisis, helping overcome Franco-German differences on the bloc’s eventual rescue plans.”
In 2011, Christine Lagarde’s name was put forward as a possible replacement for then-IMF managing director Dominique Strauss-Kahn. The influential economist Kenneth Rogoff said that Lagarde was “enormously impressive, politically astute,” and was treated “like a rock star” at finance meetings all over the world. The New York Times noted that while Nicolas Sarkozy had a challenging relationship with German Chancellor Angela Merkel, Lagarde “nurtured a close personal relationship with Mrs. Merkel.”
Shortly after Lagarde officially began to campaign to become the head of the IMF, the German, British and Italian finance ministries endorsed her candidacy, with the main rival for the top spot being the governor of the central bank of Mexico, Agustin Carstens, who secured the backing of the Latin American nations as well as Canada and Australia. Lagarde then received the golden seal of approval when she was endorsed by the U.S. Treasury Department, the only veto power voter at the IMF. Then-Treasury Secretary Timothy Geithner commented that Lagarde would “provide invaluable leadership for this indispensible institution at a critical time.” While she was campaigning, Lagarde also managed to secure the backing of China, after she met for lunch with the Chinese central bank governor and deputy prime minister.
German Chancellor Merkel commented that “there are very few other women in the stratosphere of global governance.” As the publication Der Spiegel wrote, “[Lagarde] knows ministers and national leaders throughout the world, and she is on a first-name basis with most of them.” German finance minister Wolfgang Schauble was described as “her most important partner” in the EU and “her anchor in Germany.”
Gillian Tett, writing in the Financial Times in December of 2011, noted that “never before has a woman held such a powerful position in global finance,” and much like Chancellor Merkel, Lagarde now “holds real power.” Throughout the course of the European debt crisis, she used that power. Leading one of the three major institutions of the Troika, Lagarde played a central role in the organization of bailouts and enforcement of austerity across the Eurozone. A former top technocratic official in the IMF wrote an op-ed in the Financial Times in 2013 in which he explained that the IMF, alongside the European Commission and the ECB, are together “the troika running the continent’s rescues,” which “means political meddling had been institutionalized.”
The actions of these institutions were so damaging to the economies and societies – and social stability – of many European countries that a formal investigation into the activities of the Troika was held in the European Parliament in late 2013 and early 2014. The final report, produced by Members of the European Parliament (MEPs), concluded that the Troika’s structure and accountability resulted “in a lack of appropriate scrutiny and democratic accountability as a whole.” After all, the growth and empowerment of technocracy coincides with the undermining and decline of democracy.
Christine Lagarde, who has spent her career as a corporate lawyer and finance minister, has steered the IMF on its consistent path of functioning as a transnational technocratic institution concerned primarily with serving the interests of global financial markets. As such, her participation in Bilderberg meetings – in 2009, 2013 and 2014 – brings her into direct contact with her real constituency: the ruling oligarchy.
Global Power Project: Bilderberg Group and the Power of the Finance Ministry
By: Andrew Gavin Marshall
8 January 2015
Originally posted at Occupy.com
This is the seventh installment in a series looking at the activities and individuals behind the Bilderberg Group. Read the first part, second part, third part, fourth part, fifth part and sixth part in the series.
Throughout the course of the financial and debt crises in Europe, politicians played a supporting role to financial markets and financial technocrats – that is, the economists, academics, central bankers, finance ministers and heads of international organizations who articulate the interests of powerful financial and social groups in the technocratic language of “expertise,” and who enact policies, create and shape major institutions, and whose decisions affect the lives of hundreds of millions, even billions, of people.
A number of the world’s top technocrats between 2008 and 2014 have been members or guests of Bilderberg meetings. Most especially, European technocrats have been highly represented within the membership, and were among the most influential players throughout Europe’s financial and debt crises. This article examines the technocratic institution of the “Finance Ministry,” specifically as it relates to the European debt crisis and the Bilderberg Group.
The Ministry of Finance
Finance ministers and ministries have truly immense power in the modern world. They manage the finances – money and debt – and budgets of states, and are responsible for the allocation of funding to governments, their departments, and their policies. Depending on an individual nation’s power and governance system, finance ministries can often wield influence that dwarfs other top government officials, and occasionally even presidents and prime ministers. They are pivotal determining domestic and foreign policy, and most responsible for designing and implementing financial and economic policy.
The wealthier a nation, the more important its finance ministry, and the more powerful are its officials. In the United States, it’s the Treasury Department and its secretary; in the U.K. it’s the Treasury and the Chancellor of the Exchequer; in most European nations, and in Japan, it’s simply the Finance Minister.
In January of 1979, U.S. President Jimmy Carter met with the leaders of France, Britain and West Germany. The New York Times noted that Carter was the only leader in the group who had not previously served as a finance minister. The paper’s Frank Vogl wrote: “More former finance ministers are now occupying the top political offices in the leading industrial nations than ever,” with the addition of Japan’s new prime minister, Masayoshi Ohira. The leaders knew each other well, having spent years interacting at major conferences and coordinating policies as finance ministers before taking the top political spots. Collectively, they are key officials of “global economic leadership.”
The role of finance ministers in global economic leadership has only expanded in subsequent decades. They meet, discuss and coordinate global policies alongside central bankers at the G7, G8 and G20 meetings. The also hold shares in and are represented on the boards of international organizations like the International Monetary Fund (IMF), which manages the finances and economic policies of dozens of countries around the world.
Europe in Crisis
Europe’s finance ministers were pivotal in the management of the European debt crisis. These technocrats shaped the financial policies of powerful nations and international organizations, coordinated with central banks, created new transnational institutions, and pushed policies that have had profound effects upon the future of the European Union and the 500 million people who live within it. Many of the most influential finance ministers in Europe were also frequent participants in Bilderberg meetings over the period of time from the beginning of the financial crisis in 2008 and throughout the debt crisis until 2014.
Throughout the course of the European debt crisis, Germany was joined by what the Financial Times called “its two closest allies in the Eurozone,” the Netherlands and Finland, who shared the German hardline demands of austerity and structural reforms for countries in crisis. Together, the central banks and finance ministries of these three nations frequently coordinated actions and objectives.
The three countries were among the major creditors to the crisis-hit debtor nations, and thus their united response to the crisis guaranteed that they would be the most influential national bloc within the E.U. This gave them a great deal of leverage in shaping the policies of other major technocratic institutions, like the European Central Bank (ECB) and the European Commission (EC).
In 2008, the Financial Times ranked Finland’s Jyrki Katainen as the top finance minister in Europe, describing him as “part of a new wave of youthful center-right European leaders,” and one who could possibly become the future Finnish prime minister. In 2010, Katainen was again ranked on the top ten list of the best finance ministers in Europe, as determined by a group of judges who were mainly chief economists from major banks.
The Financial Times noted that Katainen, who had served as minister since 2007, led Finland “through its deepest recession since independence from Russia in 1917,” and that he was “a chief ally of Germany in the push for tougher European Union fiscal rules.” Katainen had attended Bilderberg meetings in both 2009 and 2010.
The following year, in 2011, Katainen took the top job as Prime Minister of Finland, forming a coalition government in which he appointed one of the opposition party leaders, Jutta Urpilainen, as the Finance Minister, the first woman to hold the post. The Financial Times noted that Urpilainen was “likely to take a tough stance on Eurozone policy,” committing herself and the government “to helping create a more stable Eurozone.”
In May of 2012, the Financial Times wrote that previously as finance minister and presently as prime minister, Jyrki Katainen had taken Finland on “a hard line over matters such as the Greek bailout and austerity, often exceeding the position even of Germany.” As part of this “hard line” abroad, Finland also employed it at home, with Katainen overseeing the implementation of successive austerity measures. In 2013, while Finland was entering its third recession since the financial crisis began – all under Katainen’s watch – the prime minister announced further budget cuts.
Finland’s hard line from 2011 on was pushed by its finance minister Jutta Urpilainen, “who took a more demanding position on the crisis.” Urpilainen attended Bilderberg meetings in 2012 and 2013. In 2011, the Financial Times ranked Urpilainen on the list of top ten European finance ministers, noting that she “demanded ailing fellow Eurozone economies provide collateral in return for aid… earning herself a reputation in Brussels as stubborn.”
She again earned a top ten spot in 2012, with the Financial Times commenting that she had “taken one of the toughest approaches on bailouts among her European counterparts,” and in doing so had “caused tension with her predecessor, Kyrki Katainen,” then serving as prime minister.
In the midst of the eruption of the Greek debt crisis in 2010, the Greek Finance Minister, George Papaconstantinou, who was responsible for negotiating the E.U. bailout, attended that year’s Bilderberg meeting. That same year, the Financial Times gave him a top ten ranking, noting that he had “stayed cool while negotiating harsh fiscal and structural reforms with the European Union and [IMF],” and that he cut the budget deficit “by a national record.” This, of course, had extremely negative consequences for the population of Greece.
In the midst of Italy’s exploding debt crisis in 2011, its finance minister, Giulio Tremonti, attended that year’s Bilderberg meeting having also earned himself a top ten ranking in 2009. A former Italian finance minister, Tomasso Padoa-Schioppa, had also attended Bilderberg meetings between 2008 and 2010.
In 2013, the Bilderberg meeting was attended by Bjarne Corydon, the Danish finance minister, as well as Anders Borg, the Swedish finance minister. Anders Borg ranked among the top ten finance ministers in all of the Financial Times surveys between 2008 and 2012, including holding the number one and number two ranking for 2011 and 2012, respectively. In 2010, the Financial Times noted that “Borg has had a good crisis,” as he “established himself as one of Europe’s most authoritative economic voices, and his reputation has been enhanced by Sweden’s rapid recovery from recession.”
In 2011, the Financial Times wrote that Borg, a former banker who had served as Swedish finance minister since 2005, “is a master at blending erudition with popular appeal,” noting that his criticism of bank bonuses “won voters’ hearts while his devotion to fiscal discipline [austerity] and sound public finances has endeared him to the markets.” Borg carries heavy weight in Brussels, headquarters of the European Union, earning a reputation as “the wizard behind one of Europe’s best-performing economies.”
Shortly after the democratically-elected governments of Greece and Italy were replaced with bankers and economists in a technocratic coup in November of 2011, the Financial Times reported that “Sweden has, in effect, had an unelected technocrat running its public finances for the past six years.” That technocrat, Anders Borg, previously “worked as a bank economist in the private sector and as an adviser to both Sweden’s central bank and the country’s Moderate party.”
Throughout the European debt crisis, meetings of the Eurogroup, composed of the finance ministers of the 17-member states of the single currency, played a key role doing “the heavy lifting on the bloc’s economic policy, from banking reforms to bailouts.” The “Troika” that was formed to manage the debt crisis – composed of the European Central Bank, the European Commission and the International Monetary Fund – would report directly to the Eurogroup of finance ministers on all important decisions related to the bailouts and austerity packages.
Finance ministers, together with Europe’s central bankers and other technocrats leading major EU and international organizations, were key to shaping the response and policies of the financial and debt crisis. At Bilderberg meetings, all of these officials were able to gather together, alongside captains of industry and top financiers, to discuss Europe’s problems and coordinate responses.
Andrew Gavin Marshall is a freelance writer and researcher based in Montreal, Canada.
Global Power Project: Bilderberg Group and the Tyranny of the Technocrats
By: Andrew Gavin Marshall
19 December 2014
Originally posted at Occupy.com
Bilderberg is an inherently technocratic institution. It brings together top “experts” and decision-makers from a number of important sectors to engage in off-the-record conversation, speaking a “common language” in order to help design and coordinate policies that more accurately represent the interests of concentrated power.
As such, Bilderberg not only serves a technocratic function, but it is also populated with a number of the world’s most influential technocrats who are members and invited guests: top officials of central banks, finance ministries, international organizations, think tanks, foundations and universities. Their participation in Bilderberg meetings provides them with a “private” forum in which to engage with the political, corporate and financial oligarchy. More concretely, Bilderberg meetings enable participants to promote the expansion and further institutionalization of technocracy. But to understand Bilderberg’s relevance to technocracy, let’s first define the concept.
What is Technocracy?
Technocracy is largely defined as “rule by experts,” or the exercise of power by “professionals.” As the Economist explained in 2011: “Technocracy was once a communist idea: with the proletariat in power, administration could be left to experts.” But the scientific management of society “was popular under capitalism too,” and the magazine noted there was even a prominent “Technocratic Movement” in the United States in the early 20th century.
The late 19th and early 20th century witnessed rapid industrialization, new oligarchies, mass migration, revolution, a clash of empires between old and new, emerging technologies and inventions, expanded literacy, new energy sources and novel forms of communication and transportation. It was an age of oligarchs and unrest. Many of the most powerful societies turned to technocracy to help manage the great transitions of the era. As the oligarchs sought to maintain their influence by institutionalizing it within society, they also while sought to manage the expectations and interests of the population: by engaging in social engineering with the objective of maintaining social control, or what the ruling class called “stability.”
Capitalist, Communist (or State-Socialist) and Fascist societies turned to technocracy and the rule of experts to transform the structure of modern civilization through a “scientific management” of human society – where oligarchic power is legalized and institutionalized, and the population gives its consent, or is at least its obedience, to the ruling structure.
The Chinese Communist Party and state is largely ruled by unelected technocrats, as are several military dictatorships and one-party states. On occasion, even Western “democratic” nations become ruled by unelected technocrats, though as the Economist noted, “only for a short time” and “in unusual circumstances.”
Recent examples include the imposition of technocratic governments in Italy and Greece, in late 2011 when democratically elected leaders were removed from power and replaced with economists and central bankers. Another recent example was in Ukraine, where, following the removal of the more pro-Russian president, the management of the government was handed to a former central banker.
Despite these exceptions of direct technocratic rule, there are technocratic institutions and individuals who oversee major parts of our society and determine important policies that have profound consequences for hundreds of millions, and often billions, of people around the world. Central banks, finance ministries, international organizations, think tanks, foundations and universities are all highly influential technocratic institutions, often managed by high-level technocrats and governed (or advised) by members of the financial and corporate oligarchy.
China’s Technocratic Tyranny
A November 2013 article in The Atlantic described Chinese politics as “a nightmare” for those who were “lovers of clear, concise language.” The author, Matt Schiavenza, cited the names of the top ruling body (Politburo Standing Committee), the major conference establishing policy and direction for the following years (Third Plenary Session of the 18th Party Congress), and the conference’s resulting document that promised to “comprehensively deepen reforms,” and argued: “Chinese politics are designed to attract as little attention as possible.”
The technicality and obscurity of the language serves to hide the exercise and effects of power behind an image of “expertise.” Only those who are experts in matters of law, finance, economics, political science, etc., are capable of understanding the language, and thus, the implications of its use. In China, the technocratic language of the Party and state hide the rule of not only the visible top technocrats, but of the powerful political and financial oligarchs and dynasties behind them.
China’s political and economic power is concentrated in the hands of a new aristocratic class of what are called “Princelings,” the descendants of Communist China’s revolutionary leaders. These leaders wielded formal political power, and after the turn to capitalism, from the late 1970s onward, the descendants of these families came to dominate the economic resources of the country. As Bloomberg noted, in China “wealth and influence is concentrated in the hands of as few as 14 and as many as several hundred families.”
For foreign businesses and banks to gain access to the Chinese market, the most effective means has been through the practice of hiring or establishing relationships with the Princelings. Major global banks, such as Deutsche Bank, Morgan Stanley, Goldman Sachs, Credit Suisse and others, frequently hire princelings in order gain access and influence within China’s leadership, since the relatives of princelings themselves govern the bureaucracies and state-owned industries, determining the flow of money through society.
JPMorgan Chase has been under investigation by the Securities and Exchange Commission (SEC) for its practice of hiring hundreds of princelings in China to gain access to its lucrative market. In the words of Bloomberg, these princelings have become China’s “new capitalist nobility.”
Wen Jiabao served as China’s prime minister for the decade leading up to 2012, and his family amassed billions in assets, a practice consistent for most (if not all) of China’s ruling political figures, including its new president, Xi Jinping. Almost all of the nine members of the ruling Politburo Standing Committee under the previous Chinese government were from families that amassed enormous fortunes and controlled entire areas of the economy, with corruption “more severe than at any time in history,” as the Financial Times quoted a veteran Communist Party member and journalist.
China is a one-party dictatorship with powerful military and security forces and high-tech surveillance. It is ruled by gangsters, oligarchs and technocrats. China is, essentially, a Mafiocracy. Yet the language of its technocratic form of governance obscures this reality behind the veneer of impartiality and expertise. Behind the scenes, gangsters rule and families feud.
This reality of Chinese politics was revealed in 2012 when one of China’s princelings and rising political stars, who was set to gain a seat on the Politburo Standing Committee in 2013, became the subject of a dramatic downfall worthy of the palace intrigue in ancient imperial China. Bo Xilai’s rise to power was turned into a life sentence in prison after his closest adviser sought asylum in a U.S. consulate, fearing for his life and telling the Americans that Bo Xilai’s wife had murdered a British banker in a hotel room with cyanide.
The fall of Bo Xilai and his family was not a subject the Chinese leadership wanted aired publicly. The popular attention and implications of the story were largely the result of social media being used by an increasing percentage of Chinese citizens. What was intended to be the behind-the-scenes factional power struggles of families vying for top-spots on the Politburo Standing Committee, spilled out into the public as the most dramatic news story since the Tiananmen Square massacre in 1989, and changed the course of Chinese politics.
It is also interesting to note that one of China’s top technocrats, Liu He, was invited to the Bilderberg meeting in 2014. In China, Liu He is one of President Xi Jinping’s top economic advisers, considered to be largely “pro-market” and seen as a prominent reformer. The Wall Street Journal described Liu He’s job as “nothing less than to craft an economic vision that will guide China for the decade to come.” He has also been referred to as “China’s Larry Summers.”
Technocracy in the West
Much like the powerful, dramatic and shocking figures and processes hiding behind the bland language of Chinese politics, the ambiguous language of global economics and finance hides its own ruthless realities. Behind the words and actions of central bankers, finance ministers and other top technocrats, we’re able to see countries collapse, governments overthrown, populations impoverished, societies destroyed, fascism and racism explode as people riot, rebel and revolt.
The language of “financial technocracy” belies a world of mass impoverishment, exploitation, domination and immense concentrations of power. These technocrats define and manage global financial and economic policy, construct the ideology the justifies the rule of the oligarchy, and implement policy which is intended to protect and expand the interests of that oligarchy.
As central bankers demand “fiscal tightening” and finance ministers implement “structural reforms,” the populations of Greece, Portugal, Ireland, Cyprus, Spain and Italy were plunged into crisis. Meanwhile, poverty and unemployment rise, fascist parties emerge, social unrest and riots in the streets become common, suicide rates increase, health and education systems come under strain and collapse, and governing political parties lose legitimacy and turn to police repression to control the crowds. Economic opportunity and political democracy become things of the past. Behind the technocratic language of economics lies a world of brutality.
Bilderberg’s structure, members and objectives that promote and expand the power of technocracy are inherently destructive to democracy. Europe’s debt crisis, and the technocratic institutions and individuals that managed it, have had profoundly negative consequences on the lives of hundreds of millions of people. The functions of technocracy and the actions of Europe’s top technocrats effectively serve the interests of concentrated financial and corporate power.
Super Mario Monti and the Dictatorship of Austerity in Italy
By: Andrew Gavin Marshall
The following is Part 2 of a two-part excerpt on ‘Italy in Crisis.’ These excerpts are rough-draft, unedited samples of a chapter on the European debt crisis to be featured in my upcoming book (as yet ‘Untitled’), to be done by the end of the summer. The book covers the following: the origins, evolution, and effects of the global economic crisis; the acceleration of international imperialism; the elite global social engineering project of constructing a system of ‘global governance’; emerging resistance and revolutionary movements (and elite attempts to co-opt, control, or crush them), including the Arab Spring, European anti-austerity protests, the Spanish Indignados, the Chilean student movement, the Occupy movement, the Quebec ‘Maple Spring’, and the Mexican student movement, among others. This sample allows you to see the research that is going into this book, and if you would like to see the book come to completion, please consider making a generous donation to The People’s Book Project. With a fundraising goal of $2,500 the Project has raised $810, and just $1,690 to go!
In Part 1 of this series (The Decline of the Roman Democracy and Rise of the ‘Super Mario’ Technocracy), I examined the Technocratic coup in Italy, which removed the democratically-elected Berlusconi and replaced him with an unelected technocrat, Mario Monti, an economist, Bilderberg member, former European Chairman of the Trilateral Commission, former European Commissioner for Competition, and a former adviser to Goldman Sachs International, was also on the board of the Coca-Cola Company, and founded the European think tank, Bruegel. Mario Monti was installed by the European elites with one purpose: punish the population of Italy through ‘fiscal austerity’ and ‘structural adjustment.’
The Technocracy of Austerity
Monti wasted no time in punishing the people of Italy for the crimes and excesses of Europe and the world’s elite. On December 2, 2011, Monti announced a 30 billion euro ($40.3 billion) package of austerity measures, which included “raising taxes and increasing the pension age.” Monti described the measures as “painful, but necessary.” He told a press conference that, “We have had to share the sacrifices, but we have made great efforts to share them fairly.” Monti, who is both Prime Minister and Economy Minister, said he had renounced his own salaries from those positions. Considering that he was – until taking those positions – an adviser to Coca-Cola and Goldman Sachs, among other prominent jobs, those salaries likely would not make much of a difference to Monti’s bank account, anyway. The Deputy Economy Minister Vittorio Grilli (who is still on the board of the Monti-founded think tank Bruegel), said that, “the package should ensure that Italy meet its target of a balanced budget by 2013.” The Welfare Minister Elsa Fornero broke down into tears as she announced an end to inflation indexing on many pension bands, which would essentially amount to “an effective income cut for many retired people.” Unions spoke out against the cuts, stating that they would “hit poorer workers and pensioners disproportionately hard.” Deputy Economy Minister Grilli said that 12-13 billion euros of the package would come from spending cuts, and the rest of the 30 billion euro package would come from tax increases. The minimum age for pensioners (that is, the retirement age) was set to be raised for both men and women to 66 by 2018, as well as providing “incentives” to keep people in the workforce until the age of 70.
The austerity package was passed by an undemocratic decree which Monti named the “Save Italy” decree, and while the union leaders denounced the package, the main business lobby in Italy, Confindustria, praised the package as vital “for the salvation of Italy and the euro.” As Elsa Fornero, the Minister for Welfare, began crying as she announced the austerity measures, she explained, “We know we are asking for sacrifices, but we hope they will be understood in the name of growth and to avoid collective impoverishment.” Of course, austerity is just that: “collective impoverishment.”
In response to the austerity package, Italy’s three largest labour unions began a week of strikes on December 12, with port, highway, and haulage workers stopping work for three hours on the 12th, while metalworkers, including employees of Fiat, put down their tools for eight hours. Printing press operators stopped working for a full shift, and most newspapers were expected to not publish the following day. Public transport strikes took place on December 15-16, and bank employees were set to stop work in the afternoon of December 16, while the public administration closed down for the entire day of December 19. Susanna Camusso, the head of the largest and most militant labour federation, CGIL, said, “We’re not giving up on the idea that the austerity package must be changed… It hurts workers, pensions and the country as a whole.” Mario Monti held a last-minute meeting with the union leaders to unsuccessfully attempt to stop the strikes that were set to begin the following day.
CGIL leader Camusso said that as a result of the austerity measures, “We see every risk of a social explosion.” CGIL, which represents six million members, half of whom are pensioners, stated that, “We are flexible in the face of the emergency but we are not willing to accept everything… You can’t ride roughshod over people.” With only 57% of Italians working, raising the retirement age, as dictated by the austerity package, would amount to “closing the door on the young unemployed,” warned Camusso, adding that Monti had done nothing for “young people and women who can’t find work, and when they do it is badly paid.”
In late December, the Italian Senate passed a vote of confidence on Mario Monti’s government when they approved the new austerity package. Monti commented: “Today this chamber concludes a rapid, responsible, complex job… on a decree that was passed in extreme emergency and that enables Italy to hold its head high as it faces the very serious European crisis.”
Prior to the European Summit held at the end of January 2012, Mario Monti was holding meetings with Angela Merkel, Nicolas Sarkozy, British Prime Minister David Cameron, and European Council President Herman Van Rompuy. Italy, wrote the Economist, “it seems fair to say, is back at the top table after being quietly shoved off under the leadership of Silvio Berlusconi.” Monti emphasized to Merkel, Sarkozy, and other leaders that the EU needs to not simply “enforce fiscal discipline,” but to stimulate growth. This would mean, according to Monti, “not only finding ways to lower interest rates, but encouraging liberalisation wherever possible.” Monti even suggested that Germany should “liberalize” (meaning: privatize) some of its services. Monti, in an interview with the Economist, stated that, “It is rather unusual for Italy to be at the forefront of pro-market initiatives,” but that he planned to undertake a major liberalization of Italy, saying: “I am convinced that it is also in Italy’s national interest.” Acknowledging that his government is “unelected,” Monti told the Economist that, “there was in Italy a hidden demand for a boring government which would try to tell the truth in non-political jargon.” Monti warned, however, that, “Austerity is not enough, even for budgetary discipline, if economic activity does not pick up a decent rate of growth… A lowering in interest rates does not depend only on Italy’s efforts but also, and essentially, on Europe’s ability to confront the crisis in a more decisive way.” Monti stated that Italy’s domestic political situation is getting problematic for the EU, with a growing appeal to ‘Euroscepticism,’ warning: “What I see now, week after week, in parliament is a widening of the spread of this attitude… The degree of impatience-cum-hostility to the EU, to Germany and to the ECB is mounting.”
Monti warned Merkel and other EU leaders that Italian sacrifices alone would not get Italy out of crisis, that Italy needed some form of outside support, without which, he warned: “a protest against Europe will develop in Italy, also against Germany, which is viewed as the ringleader of E.U. intolerance, and against the European Central Bank… I cannot have success with my policies if the E.U.’s policies don’t change.” In particular, he was referring to the need to bring down Italy’s interest rates, something that could likely only be achieved through the ECB purchasing large amounts of Italian bonds, which would increase “market confidence” in Italy and bring down interest rates. Otherwise, Monti lamented, the popular discontent of the people with the economic situation could push Italy to “flee into the arms of populists.” Spoken like a true unelected technocrat. Imagine that, a government which dares to serve the interests of the people over whom it rules! Not in the ‘New Europe.’
In late January, Philip Stephens, writing for the Financial Times, stated that, “Italy is back,” and that while Merkel “sits at the top of Europe’s power list,” and Sarkozy “can lay claim to be the continent’s most energetic leader,” it is Mario Monti who “is its most interesting.” Stephens declared that, “Mr. Monti’s fate may turn out to be Europe’s.” Barack Obama’s White House announced that in a future meeting between Obama and Monti, the two leaders would discuss “the comprehensive steps the Italian government is taking to restore market confidence and reinvigorate growth through structural reform, as well as the prospect of an expansion of Europe’s financial firewall.” Stephens translated this as: “Mr. Obama is behind Mr. Monti all the way – including when he puts pressure on Ms. Merkel.” Lamenting the Italy of Berlusconi, who was “shunned by his European Union peers,” though always embraced as a friend by Russia’s Putin, Stephens wrote that Monti, “a serious-minded academic with a serious plan, is different in every dimension.” He also noted that there was “a second Italian at the top table,” meaning Mario Draghi, the new President of the European Central Bank, “the other Mario,” who in terms of economic orthodoxy, “styles himself an honorary German.” Stephens wrote that Monti is so important because “it is in Italy that the euro’s long-term prospects will be decided,” as Italy is the euro-area’s third largest economy (after Germany and France), and if Italy “cannot chart a credible economic course, the euro does not have a future as a pan-European project.” While praising Monti’s austerity package, Stephens said that, “the real test will come in liberalizing the economy,” which “will not be easy,” but “the choices are unavoidable.”
Mario Monti, upon unveiling his “liberalization” plans in late January, stated: “Italy’s economy has been slowed down for decades by three constraints: insufficient competition; an inadequate infrastructure; and complicated administrative procedures.” Thus, Monti passed a decree opening the occupation of taxi drivers up to “competition,” prompting taxi drivers to block central streets in Rome. As liberalization brings in higher petrol prices (which were previously under more control), truck drivers and agricultural workers set up barricades in Sicily. One Italian paper (owned by the Berlusconi family) headlined: “Half of Italy is ready to wage war on the government.” Once decrees are issued, they go into effect immediately, but require parliamentary approval within two months. Monti’s liberalization decrees of January (following the austerity decrees of December) also targeted the gas and electricity markets, as well as the insurance sector and public services. Next in Monti’s target: the labour market. One analyst at Roubini Global Economics told the Financial Times: “Although structural reforms are necessary to boost long-term growth, they will take several years to bear fruit and, in a period of economic contraction and government retrenchment, will have an adverse effect on short-term output, deepening the recession which will last through 2013.”
In his first interview since resigning as Prime Minister, Berlusconi told the Financial Times in early February that he was “stepping aside” from frontline Italian politics and had no intention of running for prime minister again. Berlusconi gave his “strongest endorsement to date of the technocratic government led by Mario Monto,” specifically in “its intention to implement labour market reforms opposed by trade unions.” Berlusconi declared: “I have now stepped aside, even in my party.” He explained that he resigned the previous November because he had been attacked “by an obsessive campaign by the national and foreign media that blamed me personally and the government for the high spread of Italian state bonds and the crisis on the stock market.” Thus, he contended: “After having evaluated the causes of the crisis, which did not rest in Italy but in Europe and the euro, I believed that if I had stayed in government I would have damaged Italy as we would have had more terrible media campaigns… With a sense of responsibility, though having a majority in both houses of parliament… I stepped aside and with elegance.” One can always rely upon a politician to sing their own praises, especially if they are undeserving. He did suggest, however, that he would consider running for parliament, quipping: “I still have strong popular backing, almost twice as much as my colleagues Merkel and Sarkozy… In opinion polls, I personally have 36 per cent support. If I walk out in the street I stop the traffic. I am a public danger and I cannot go out to do the shopping.” Berlusconi concluded:
The hope is that this government, which is supported for the first time by the whole of parliament, will have the chance to propose great structural reforms, starting from the state’s institutional architecture, without which we cannot think of having a modern and truly free and democratic country.
Martin Wolf, perhaps the most influential financial columnist in the world, writing for the Financial Times in January of 2012, asked if the two Marios – nicknamed by the media as the “Super-Marios” – will be able to “save the eurozone?” Wolf wrote that they “bring sophisticated pragmatism to the table,” and hoped that they would “shift policy in a more productive direction.” Wolf referred to the ECB’s new long-term refinancing operation announced in December of 2011, which is essentially a bank bailout with a three-year yield at the ECB’s average interest rate (which stands at 1% currently). When the ECB began this new program, roughly 523 banks took 489 billion euros, described by Wolf as “a bold and cunning move by Mr. Draghi and probably the most he could get away with right now.” Wolf also referred to Monti’s willingness to argue that the creditor countries “do more to lower his country’s borrowing costs,” or interest rates, warning in the Financial Times against a “powerful backlash” among voters in the EU periphery states. Wolf wrote that, “Mr. Monti is in a strong position to make this argument,” as Monti “is a well-respected official with staunchly pro-European views and a strong sympathy for German attitudes to competition and fiscal and monetary stability.” Wolf explained that, “Draghi and Monti are addressing two interlinked fragilities: the vulnerability of the banking system and the unsustainable terms on which weaker countries can now borrow.” While praising the “Super-Marios,” Martin Wolf said that they alone could not save the eurozone, whose problems run very deep, and where even the ‘solutions’ to the crises felt by various EU states can make larger, structural reforms even more challenging. As Wolf correctly noted: “In Italy’s case, for example, the combination of high interest rates and vulnerable banks with fiscal austerity is likely to lead to a lengthy and deep recession and so to a rise in cyclical fiscal deficits [debt incurred during and because of the economic crisis at the time] as the structural deficit falls [the debt acquired by spending more than what is brought in through revenue].” Naturally, though, this simply means that the overall debt will increase. Wolf wrote, ultimately, that if “break-up [of the euro] is ruled out, one must choose reforms, however painful.” This is because, according to Wolf, “the costs of failure are so large that the possibility of domestic and eurozone reform must be kept alive.” On this, the “Super-Marios” can be leaders.
When the credit ratings agency Standard & Poor’s downgraded Italy’s debt in January by two notches to BBB, “with a warning of more to come,” Mario Monti stated that he “agrees with almost everything in S&P’s analysis,” and “jokes that he could almost have written it himself.” He told the Financial Times that, “If I ever dictated anything, it must have been what S&P had to say about domestic Italian economic policy,” and then laughed. As a result of the downgrade, Italy had the lowest credit rating of any eurozone country which did not receive a bailout, apart from Cyprus. Why was Monti so pleased with the downgrade? He quoted the report to the interviewer from the Financial Times, going through the risk factors associated with Italy, but adding: “Nevertheless, we have not changed our political risk score for Italy. We believe that the weakening policy environment at European level is to a certain degree offset by a strong domestic Italian capacity.” In other words: “Mr. Monti’s 60 days in office have been enough to convince the agency that his government is on a path of reform that could return the country to growth and shrink its debt levels, but that European Union mismanagement of the eurozone debt crisis is dragging down struggling countries, including Italy.” Mr. Monti stated, “I think I’m the only one in Europe not to have criticized the rating agencies.”
In discussing how his government came into existence, as in, not through democratic means, Monti told the Financial Times that he agreed that he could be helping to bring a “revolution,” referring to the number and extent of measures he intended to pass before democratic elections take place. He explained that if Italy’s borrowing costs (interest rates) fall, “the political parties will not dare stop the experiment [in technocracy] before it has to stop… And in my view the political parties will not dare go back to the acrimonious, superficial and tough confrontation that animated parliament. The image and style of public debate has changed.” He added: “If and when success comes, you will find us not really taking credit… My ambition is that Italy becomes a boring country, in relative terms. It is really in the hands of Europe.”
In February of 2012, Mario Monti gave an interview with PBS Newshour in which he continued to heap praise upon austerity measures, saying that because Greece’s debt had been so high, “it would have been hard – let’s face realities – to have a soft landing from those excesses of deficit without a recession.” He added, “I think there is a valid point if we say that Europe needed to be put under a safe place as regards the public finances of each member state.” Monti thanked “German and other pressures” for pushing countries in that direction of austerity. And now, he claimed, “the time has come to focus more energies on how collectively we can achieve more growth in Europe.” Growth, of course, simply means growth of profits for big banks and multinational corporations.
Super Mario’s ‘Structural Adjustment’: The Meaning of “Growth”
When Europe’s political and financial elite discuss “growth” in the current context as an added “solution” on top of austerity, what they really mean is to implement major structural changes: to liberalize the economy, privatize all assets, state subsidies, services, industries, and resources. This will allow corporations and banks to come in and purchase all of these assets and industries, and since this process takes place in the midst of a deep crisis, they are able to take control of all the assets for very cheap prices. This is called “foreign direct investment.”
The major corporations of Europe, of North America, and elsewhere, will be able to control directly a much larger share of the economy. Their purchases provide short-term funds for the state, thus increasing short-term revenue. However, since state industries are privatized and sold for pennies on the dollar, they are actually losing long-term revenue, but that isn’t mentioned. Markets respond to the short-term, not the long-term, and of course, we want to have our world and its social, political, and economic stability determined by forces that theoretically do not look more than a couple months ahead. The process of liberalization and privatization is also sold on the prospect of “creating jobs,” because the theory goes that corporations will enter the market with the ability to invest and thus, create jobs for workers. The reality is that the corporations buy up the industries, and generally shut them down to relocate elsewhere for cheaper labour. This means mass firings. This also means that unions and labour rights in general have to be dismantled and people have to be kept in line, under control.
Austerity measures are aimed at redistributing wealth from the mass of society to the very top percentiles, which is achieved through increased taxation, mass firing of public sector workers, cuts to social spending, health care, welfare, education and other areas. This, quite predictably, creates a massive social crisis. Many austerity packages – such as Monti’s in Italy – also include efforts to undermine labour and unions. This prepares the work force for the period and programs of “growth,” in which workers will be forced to submit to exploitative working conditions with no collective bargaining rights, or else the industries will simply fire them all, close up shop, and go elsewhere. This is why we hear all the Eurocrats and politicians in Europe and elsewhere explain that austerity and growth are not mutually exclusive, that they can and should co-exist together. Indeed, from the view of the ‘effects’ of these policies, a joint program of “austerity” and “growth” makes perfect sense: commit social genocide (through fiscal austerity), and exploit, plunder, and profit from the spoils of economic war (growth through structural adjustments).
In the ‘Third World’ over the past three decades, these policies were imposed by the IMF, World Bank, Western imperial powers, and Western banks and corporations. With the primary engine being the International Monetary Fund (IMF), countries in Latin America, Africa, and Asia, which were in the midst of a major debt crisis in the 1980s, were forced to sign what were called ‘Structural Adjustment Programs’ (SAPs) with the IMF and World Bank if they wanted to get any loans or aid from Western banks or institutions. The SAPs would be a set of conditions that the countries would have to adhere to if they were to get a loan, and the conditions included a mix of ‘fiscal austerity’ and ‘structural adjustment’: devalue the currency to make it cheaper to invest in the country (but which creates inflation and increases the costs of food, fuel, and other commodities, hurting the poor and middle classes); cut social spending to reduce the deficit (but which saw the destruction of education, health care, welfare and social programs, as well as mass firings from the public sector); trade liberalization, to allow for foreign countries and corporations to more easily invest in the country, and thus, bring in revenue (which meant dismantling all tariffs, trade barriers, price controls, state subsidies, and resulted in the easy exploitation and cheap purchase of the country’s wealth by foreign corporations and banks); and privatization, meant to encourage investment and allow for the market to make state-owned industries and asset more “efficient” (but which resulted in mass firings, closing of entire industries, mass corruption, and total control of the economy being handed to foreign banks and corporations).
The result of SAPs – the combination of “austerity” and “growth” – over three decades has been devastating: poverty has rapidly accelerated and expanded; wealth becomes heavily polarized, with a tiny minority owning the economy, and everyone else with next to nothing; the small elite become increasingly dependent upon and integrated with a global elite (based primarily in the West), and disassociated from their fellow citizens; mortality rates go up as health care and social services are dismantled or made incredibly expensive at a time of deepening poverty in which more people need the services more than ever before; social unrest and repression become rampant, as the people rise up against ‘Structural Adjustment,’ the state resorts to increasingly authoritarian and brutal measures to control or crush resistance to the programs and to protect the dominance of the tiny minority, locally and internationally.
This, essentially, is the fate of Europe and the rest of the industrialized world. Europe, simply being the most integrated region of the world (a trend which is accelerating everywhere in the world), is experiencing the brunt of this crisis before the rest of the industrialized nations of the world. So when politicians and financial elites say that Europe needs “growth” in conjunction with austerity, and this will lead to “recovery”, remember what “growth” means: exploitation, plundering, and profits. When you remember this, suddenly everything the politicians and pundits have been saying for years, suddenly makes sense.
When asked if he felt that there was a danger of “a backlash” in Italy against what people “may see as E.U. imposed changes to their way of life that are very, very painful,” Monti replied that, “there was such a risk of backlash,” but he explained: “I try to avoid that backlash by always presenting the necessary sacrifices that Italians have to go through not as an imposition from Brussels or Germany or the European Central Bank, but rather as a necessary step that Italians have to undertaking — to undertake also at the suggestion of Europe, but basically for their own interests, for the interests of ourselves and of future generations of Italians. This is precisely meant to avoid backlashes.” Interesting statement: saying that austerity is for the interests of Italians and “future generations” is done not to speak truth, but “to avoid backlashes” against the E.U. Monti emphasized that, “it is very, very important” to ensure that the single currency, “which was meant to be the culminating point of the European construction,” does not become, “through psychological negative effects, a factor of disintegration of Europe.”
In an interview with the Wall Street Journal in early February, Mario Monti publicly outlined his strategy for “growth” in Europe, which he proposed privately to other European governments the previous month, pushing Europe beyond austerity and suggesting “tougher European rules aimed at prying open member states’ national industries,” of course to “encourage economic growth and competition in the euro zone.” Monti explained that if this is not done, “Europe will not be a nice place to live in five years from now if we haven’t solved the problem of how to grow… We have to say what growth will look like in a fiscally compacted union.” His proposal “would speed up the process by which European authorities sanction nations that violate the tenets of the EU’s single market.” For Monti and other technocrats like himself, this “growth” does not include government spending. Since Italy is supposed to knock off 30 billion euros ($39.8 billion) – 2% of its GDP – from its public debt “every year for decades,” this means, explained Monti, that “any thought of budget-stimulated growth ideas will have to go away.” Instead, Monti suggested that the European Union “should back single markets more forcefully to support economic growth,” which instead of having Berlin sign off on the EU spending its way to prosperity, would mean “to push Germany to liberalize its own economy,” which, claimed Monti, “would have a trickle-down effect.”
Monti was undertaking various programs of “liberalization” in Italy, such as liberalizing major professions and sectors, such as pharmacies, taxis, and notaries. To handle Italy’s “unemployment” issue, which is significant to say the least, Monti was seeking to “introduce new measures aimed at making it easier for companies to hire and fire workers,” which, he said, “will increase the overall flexibility of the labor market,” meaning that it will allow for cheaper and more easily-exploited labour by corporations. Monti even stated that the changes he was making in the labour market were aimed at “reducing the segmentation of Italy’s labor market between those who are protected, sometimes hyper-protected, and those, particularly the young, who can’t really get into the labor market.” So, instead of having various work forces that are “protected” (or “hyper-protected” in Monti’s words), it would be better to simply bring everyone down to the same level to allow for “flexibility,” or in other words, easy exploitative capacity. For “Super Mario,” no protection is better than any protection when it comes to workers. Imagine if there were politicians who thought the same thing about bankers.
While Europe agreed to a ‘Fiscal Compact’ to ensure austerity, Monti felt that the EU should add to this a growth pact, and felt that the supranational and undemocratic European Union should have “an efficient mechanism to swiftly sanction countries that don’t open up their economies to competition,” meaning exploitation and plundering. Thus, the previous month, Monti submitted a proposal “aimed at giving the European Commission – the EU’s governing body – greater power over sanctioning member states.” This proposal, which had not been reported prior to this interview, “could speed up the process by years, by making it easier for the commission to impose rulings rather than having to take member states to court, as it often does now.” When asked what this has to do with growth, Monti replied: “A lot, because if you give more teeth to the commission to remove national obstacles to the functioning of the single market, we’ll create a large level playing field, which the business community always insists is a key component of growth.” Well that answers that: it will lead to “growth” because the business community says so. Thank you, Prime Minister.
Monti acknowledged that this creates obvious concerns, especially with countries like the U.K. and France which would likely oppose the proposal for fear of its encroachment on their sovereignty, and the existence of a “democratic deficit” which will continue “as member states gradually hand over more of their fiscal and economic policies to the central oversight of European institutions.” But for this, Monti has a solution: “Much of the reconciliation between more centralized governance and the scope for democracy will be resolved through an even stronger role of the European Parliament,” which is, in effect, utterly useless.
The Most Important Man in Europe?
In late February, Time Magazine published an article reporting on an interview they conducted with Monti in which they referred to him as “the most important man in Europe.” The article described Monti as “the tough taskmaster Italy so desperately needs,” though he “has the aura of a gentlemanly grandfather.” Time reported that Monti was “fixing a deadlocked democracy,” no doubt by ruling as an unelected technocrat, “and charging forward with greater European integration,” in a “wholesale overhaul of Italian society.” Monti told Time, “I believe that reforms will not really take hold if they do not gradually come into the culture of the people.” Time declared that for the problem of Italy’s partisan politics, “the solution was Monti.” Monti said that the request to rule came “at such a severe time of crisis for Italy that I could not refuse.” Thus, declared Time Magazine: “Today he reigns over Rome like a new Caesar.” In effect, “the democratic process has been suspended to allow an unelected technocrat to implement policies that elected politicians could not.” Monti himself refers to this as a “temporary mutual disarmament” of the left and right, a technocratic euphemism for “dictatorship of austerity.”
The publication praised Monti’s austerity package in December, his liberalization program in January, and his new plan to overhaul the labour market; then lamented that Monti is taking on “entrenched interest groups,” such as taxi drivers (no joke, the article referred to taxi drivers as “entrenched interest groups”), who staged strikes in Rome and other Italian cities, and pharmacists who were threatening to do the same thing, or truckers that blocked roadways in protest of a fuel-tax hike. The president of a national taxi union stated, “In Italy, the economy was more based on rules that used to be applied to create wealth for the general public… I don’t understand why suddenly the only solution is to get rid of the rules.” He added: “Monti has always lived in the salons… He really doesn’t know the problems of ordinary people.” To this, Monti replied, “Maybe they’re right,” but he felt this was an advantage: “Italy has piled up huge public debt because the successive governments were too close to the life of ordinary citizens, too willing to please the requests of everybody, thereby acting against the interests of future generations.” Monti earned a reputation – and the nickname “Super Mario” – back when he was an EU Commissioner, where he came into conflict with some major global corporations, such as blocking a merger between GE and Honeywell, which prompted the then-CEO of GE, Jack Welch, to refer to Monti as “cold-blooded.” Monti acknowledged that as he is more successful in pushing “reforms,” the effects of those reforms would put pressure on the political parties to abandon him, and make it more difficult for him to continue his programs before he leaves office in 2013. “The point,” explained Monti, “is how to keep this pressure even once the most visible elements of emergency hopefully are over.” This would largely be left to accelerating the process of European integration: “I think there is a genuine wish on the part of the E.U. and Germany and France to again play an active game with Italy for a relaunch of European integration… I think we will be seeing an acceleration of the good news.” Apparently, accelerating the integration and institutionalization of an undemocratic, technocratic, supranational structure is “good news.”
When Mario Monti went to visit Wall Street on the seventh floor of the New York Stock Exchange (to visit his actual ‘constituents’), he received a long, standing ovation when he entered the room with an audience of 200 people. Charlie Himmelberg, a managing director at Goldman Sachs, commented that, “It’s been impressive how quickly the sentiment has changed on Italy.” Blaise Antin, the head of sovereign research at TCW said, “It is a good thing Monti visits investors… But plenty will ultimately depend on the Italian parliament” in the tough choices ahead. Monti told the crowd of Wall Street financiers that, “What’s important is that this improved governance of the euro zone is almost there and the euro zone crisis is almost overcome, I believe.” Monti later reflected at a new conference in New York that he was “warmly greeted by the financial community” on Wall Street. No doubt.
Super Mario Wages War on Workers
After making the rounds in interviews, state visits, meeting Obama, and visiting his constituents at Wall Street, Mario Monti went back to Italy in late February to push forward on his “labour reforms” to undermine and destroy unions and workers’ rights. By March, the effects were being felt among Italians. Monti went to great pains to denounce what he described as Italy’s “two-tier labour market,” dividing generations and leaving the young out to dry. The New York Times wasted no time in supporting Monti’s calls to dismantle this system. Framing the discourse around the generational divide, in which “older workers came of age with guaranteed jobs and ironclad contracts granting generous pensions and full benefits,” the younger Italians, “the best-educated in the country’s history… are lucky to find temporary work, which offers few benefits or stability.” Thus, one of Monti’s “solutions” was to “make it easier for companies to hire and fire.”
Very typical of the neoliberal economic discourse, is to draw conclusions based upon these facts alone: older workers have benefits, younger workers have few opportunities; thus, older workers are destroying future generations with their “entitlements.” Solution: dismantle entitlements and benefits so all can work on an “equal playing field.” The discourse divides workers and people against each other, meanwhile, there is no mention of the fact that the reason why the youth have so few job opportunities has more to do with the lack of state and business investment, the deregulation and privatization of industries over the 1990s (while Mario Draghi was head of the Treasury), the effects of the euro (creating an economic hierarchy between the Northern nations of the EU and the Southern states), or the very obvious fact that Italy is in a severe crisis because its corrupt government colluded with global banks and suffered under the institutions and rules of the E.U., which promote elite interests and undermine democracy and self-determination. No, mentioning the massive – and elite-driven – causes for the crisis Italy faces, and the unemployment issues which are symptomatic of that crisis, is too inconvenient for the New York Times. Instead, it is simply easier and more acceptable in the popular discourse to pit workers against each other, in an effort to undermine them all, collectively.
An economist at Bocconi University, of which Mario Monti was president until he became Prime Minister of Italy, supported this discourse for Italy, arguing: “Reforming contracts, unemployment benefits and salary levels would permit labor productivity to rise, which would in turn permit the country to grow… It’s a central theme for improving a country like Italy.” Undertaking all of these labour “reforms,” in actuality, would allow for youth to enter the job market to a certain degree, as it would mean that other “hyper-protected” workers no longer have protection, and all of Italy’s workforce is left vulnerable to exploitation. Thus, youth could be hired as extremely cheap labour, since for them, some work – even horrible work with little pay – is better than nothing at all. If workers who had protections attempt to organize and salvage various labour rights, companies can simply fire them and hire cheap, young workers with no benefits as replacements. This is called “youth opportunity.” This is how sweatshops became so popular in the ‘developing’ world over the past several decades, which were also brought about through fiscal austerity and structural adjustment: undermine labour/worker rights for easy exploitation, and if they attempt to organize, strike, or obtain rights, foreign corporations can fire them all and hire cheaper labour, close their factories and outsource elsewhere, or ship in cheaper immigrant labour forces. This has the effect of bringing the standards and conditions of the entire work force, and indeed, the global labour market, down to a more easily exploitative position: equality of exploitation (what economists and bankers call “labour flexibility”).
Monti declared: “We have to get away from a dual labor market where some are overly protected, while others totally lack protection and benefits when unemployed.” Thus, he said, “equity and growth” would be the “watchwords” of his government. Since “growth” means profits, plunder, and exploitation, “equity” is a logical addition to this: equity in exploitation. The New York Times, reporting on a 33-year old graduate without job opportunities, said she would “welcome” such changes, as she, “like so many in her generation, feels thwarted, overly reliant on her parents and uncertain of her future.” Amazingly, in the same article, it was acknowledged that the two-tier labour system was not created by “entitlements,” but rather as a result of policies the government undertook nearly a decade previous (in facilitating Italy’s entry into the euro-zone), in which the state made it easier for Italian corporations “to hire younger workers on a range of temporary contracts and internships,” while many of the early-retirement benefits for older workers were put in place during the mass privatizations (undertaken by Mario Draghi), in order to facilitate the reduction of staff “and cutting costs in the period before Italy joined the euro zone.” The article then went on to blame the unions, claiming that “younger Italians have come to see them as part of the problem.”
One must actually pause in appreciation of the intellectual gymnastics displayed by the New York Times in publishing an article which quietly acknowledges that the causes of Italy’s two-tiered labour and employment issues were the result of demands and policies put in place in order to join the single-currency, yet still concluded that the main problem was “overly-protected workers,” and thus, that the solutions lie in undermining labour and workers’ rights. The article even acknowledged that the government’s policies of making it easy for Italian corporations to exploit youth labour were designed “to make the market more flexible,” yet does not question the logic in Monti’s program of solving the crisis brought on by this “flexibility” by implementing measures to make it “more flexible.” The Monti-logic, which the New York Times readily endorses, is to look at policies that didn’t work (in terms of what people were ‘told’ they were meant to achieve), and then to advance and accelerate those same policies in the hopes that it will have the opposite effect as to that which it has always had before. Einstein once said that the definition of insanity is doing the same thing over again, expecting different results. If we actually apply that definition, almost the entire discipline of economics – and most especially neoliberal economics – is absolutely insane. Either that, or they simply use coded rhetoric which sounds like one thing, means another, and is done so to promote a global social, political, and economic agenda which would otherwise be impossible to publicly justify: preserving and accumulating for a tiny minority, and exploiting and punishing the vast majority.
Right on cue, the effects of the economic crisis over the previous year, exacerbated by Monti’s labour reforms and austerity package, was being felt across Italy. In Naples, one of Europe’s poorest cities, by late March it was reported that child labour has returned, as “thousands of children are leaving school to help their families make ends meet,” an increasing trend in the country, in which children work in the black market or “are recruited for sinister purposes by the mafia.” The most common job for child workers is as a “shop assistant,” earning less than a euro an hour. This trend had been developing in Italy over a number of years, as one local government report in the Campania region revealed that between 2005 and 2009, more than 54,000 children left school to join the work force, with 38% of them under the age of 13. The deputy mayor of Naples, located in the Campania region, commented: “Of course, we were the poorest region in Italy. But we haven’t seen a situation like this since the end of the Second World War… At age 10, these kids are already working 12 hours a day, which is a clear breach of their right to development.” The succession of financial reforms put in place by the Italian government since 2008 introduced drastic cuts, and in June of 2010, the Campania region had to end its minimum welfare program, “plunging more than 130,000 families into poverty.” Children from poor families face three options: struggle to stay in school, drop out to work in the black economy, or “join the ranks of the Camorra, the Neopolitan mafia.” Since the beginning of the crisis, support for youth and their families has been cut by 87%, and roughly 20,000 educators in the Campania region had not been paid for two years. Perhaps this is what Mario Monti means by “labour flexibility.”
In late March, reported the Economist, as Mario Monti was engaged in talks with employers and unions, trying to get them to accept labour-market reforms, “when it became clear that unanimity was impossible, Mr. Monti declared the talks over and said his government would press ahead regardless.” It is quite appropriate, one must acknowledge, that for a government which was created through undemocratic means, it should only continue to act and rule undemocratically as well. Such is the path Mario Monti has taken with Italy. On March 16, the Italian parliament’s three largest parties endorsed Monti’s reforms, on the warning from President Napolitano that, “failure to agree would have serious consequences.” The main problem for Monti came from the largest union federation, the CGIL, an historic ally of the Democratic Party (PD), which had endorsed Monti and his austerity packages, leading one senior leader in the PD to suggest that the party leader, Pier Luigi Bersani, “could face a backbench revolt or a party split.”
The Wall Street Journal naturally congratulated Monti, in an article entitled, “Monti pulls a Thatcher,” for showing “political courage” in walking away from negotiations with Italy’s labour unions, announcing that he was “going to move ahead with reforming the country’s notorious employment laws – with or without union consent.” Italy had stringent rules regarding the ability of employers to fire workers, what the Wall Street Journal referred to as a “job-for-life scheme,” which Monti’s reforms will replace with a “generous system of guaranteed severance when employees are dismissed” for what are called, “economic reasons.” The Journal heaped praise upon Monti, as “standing up to Italy’s labor unions takes courage, and not only of the political sort,” noting how there was an economist ten years prior who was shot and killed “for his role in designing a previous attempt at labor reform.” Monti had been ruling by decree since December, but announced in late March that the labour reform proposals would be voted through the National Assembly. The WSJ wrote that as a former economics professor, Mario Monti “has a rare opportunity to educate Italians on the consequences of opposing reform,” to which the Journal suggested, they need only to look at Greece: “If that doesn’t scare them sober, then nothing will help.”
Within a week, Monti allowed for a very slight change to his labour reform bill, which would give judges “greater leeway in determining whether companies were justified in laying off a worker.” The Wall Street Journal then referred to this, in an article entitled, “Surrender, Italian Style,” as a “cave-in to the left side of his political coalition,” and noted that, “Monti was brought in as Prime Minister to retrieve his country from the edge of a Greek abyss,” and that this “labor bill is a surrender to those who are bringing” that abyss to Italy. For the WSJ, any capitulation – no matter how minor (and this particular one was very minor) – to unions and labour, is deemed an absolute “surrender” or “cave-in.” Monti defended himself in a letter to the Wall Street Journal in which he explained that this “surrender” was still a move in the right direction of reform, as it “introduces a more predictable [i.e., controllable] and speedier [i.e., systematic] procedure to handle dismissals for economic or other objective reasons.” He elaborated: “First, a fast, compulsory, out-of-court settlement procedure at local level; then, if conciliation fails, the worker can take the case to a judge as happens in other countries.” In “extreme cases” where the “economic or other reason” for firing the worker is deemed “manifestly inexistent,” the judge then has the ability to decide “for reinstatement instead of compensation.” When the “economic dismissal” is “not justified” in other cases (i.e., not an “extreme case”), compensation will be given with a cap at 24 months of wages. Monti said that it was a “complex reform” and deserves “serious analysis rather than snap judgments.” He then wrote: “I would suggest that perhaps the fact that it has been attacked by both the main employers association and the metalworkers union, part of the leading trade union confederation [CGIL], indicates that we have got the balance right.” This reform, claimed Monti, “will make the Italian labor market more flexible” which “lays the foundation for increase productivity, economic growth and employment.”
In mid-April, Italy’s major unions took to the streets of Rome in protest against Mario Monti’s pension-system reforms put in place in January, “saying it traps hundreds of thousands of workers in a legal limbo without retirement pay.” The reform that raised the retirement age affects those who are already retired. Bloomberg gave the example of Maria Dinelli, who had an early-retirement deal in 2008, in which her former employer provided benefits until her pension was to begin in 2015. Under Monti’s reforms, her pension won’t begin until 2017, upon which she commented, “I’ll be without a salary or pension for two full years before the retirement age, and will have to put money aside… You were told you had guarantees, then you lose it all because a new government takes power and changes the rules.” Tens of thousands of Italians took to the streets of Rome on April 13 as the Italian Labor Ministry said the night before that, “there are 65,000 Italians who may be left without support between when they leave work and when their pension kick in as the higher retirement age delays their payout,” while unions say the amount of people affected is five times that size, at roughly 300,000, prompting one union leader to state, “If these figures were correct,” referring to the Labor Ministry numbers, “then we’d have to say that the thousands of workers who’ve turned to the union for help are not real and just ghosts.” A labor law professor in Rome estimated the number may actually be as high as 450,000.
Monti referred to this plan as “cutting edge.” Well, it certainly ‘cuts.’ Meanwhile, Italians are facing increased taxes and record-high gasoline prices, thus producing a “slump in consumer demand” which pushed Italy into a deeper recession. Nicola Marinelli of Glendevon King Asset Management in London stated: “An overhaul of the pension system was unavoidable because the old scheme was too generous compared to the country’s possibilities and the European standards… That said, the protest of these workers may be a harbinger of future social tensions. I don’t think the younger workers have really realized they will have starvation-level pensions.” Just another “cutting edge” facet of Monti’s reforms. Interestingly, though perhaps not surprisingly, Monti’s reforms had not yet included “a heavy hand with the richest taxpayers,” prompting a labor law professor to opine, “I think it’s about time for those who have more to contribute to the needs of the country.” But such is not the nature of austerity.
In fact, in April it was reported that the political class in Italy, the “army of politicians and senior officials” who support Monti and his reforms in Parliament, “are clinging to fat salaries that far outstrip those of their peers abroad.” Monti had issued a decree which aimed to “prevent public servants earning more than U.S. President Barack Obama,” many of whom “earn considerably more.” Italy’s wealthy, however, not simply the top politicians and bureaucrats alone, “are hardly carrying their share of the burden.” One economist noted: “There has not been an equal distribution of sacrifices… In proportion to their salaries, higher incomes are paying less.” Italy has roughly 1,000 lawmakers across the nation, who earn more than their counterparts in the United States, with a base salary of 11,283 euros per month, while the lowest-earning households in Italy, “hurt most by rising fuel, property and sales taxes,” live “on less than 8,000 euros per year, or 667 euros per month, after taxes.” Between 2006 and 2010, Italy’s poorest families already lost almost 12 percent of their real income, according to data from the Bank of Italy. Unlike the political class, most Italian families are “traditionally thrifty,” however, under austerity in 2011, “households saved only 12 percent of their gross income, the lowest level since 1995.” That is the nature of austerity: when you need to save more than ever before, the ability to do so becomes harder than ever before. In March, a Moroccan worker in Italy set himself on fire in protest, and an Italian businessman did the same. Polls in Italy have shown that the people are “increasingly dissatisfied with the parties and politicians that led the country for the past two decades,” as more than 40% of respondents said that they wouldn’t vote for any of them if there were an election today.
Italy Under Austerity
The Wall Street Journal reported in early April that figures from the Italian Treasury revealed that Monti’s austerity measures were “stunting activity in the euro-zone’s third-largest economy,” and while “recent tax increases are helping Italy cut its fiscal shortfall,” they are also “pushing economic activity to contract even faster.” Industry Minister Corrado Passera stated: “With austerity one doesn’t grow.” The majority of tax increases are on the income of workers, though they also include taxes on consumption (such as Value Added Taxes – VAT) and on property assets. As Italy’s GDP contracted by 1% in the first quarter of 2012, yields on Italian government bonds rose, making it more expensive for Italy to borrow. Former prime minister Berlusconi commented: “The cure that the European Union has prescribed for our country is the one that has already caused a disaster in Greece and is beginning to do so again in Spain,” though he continued to throw his support behind the technocratic government. One businessman in Italy warned that, “Consumers have insurmountable obstacles ahead of them, with higher income-tax rates from March, higher property taxes as of June and a value-added tax increase in September.”
By late April, unemployment in Italy had reached nearly 10%, according to “official” statistics (meaning, it’s actually much higher), and in Sardinia, one in two young people were out of work. The construction industry in Italy has been hard hit, leading to one industry businessman killing himself, adding to a wave of “austerity suicides” across Italy, reaching 25 by April for the year of 2012.
In May of 2012, the Italian anarchist group which had claimed responsibility for shooting a nuclear engineering firm chief threatened to target Mario Monti. The group, referring to itself as the Olga Nucleus of the Informal Anarchist Federation – International Revolutionary Front, sent a statement to a newspaper in southern Italy, warning that “Monti was among seven remaining targets after Roberto Adinolfi, chief executive of Ansaldo Nucleare, was shot in the leg last week.” The statement read: “We say to Monti that he is one of the seven remaining and that the people have no interest in staying in Europe, saving the banks and helping to balance the accounts of a state that squandered money for its own interests.” The statement explained that any suicide connected to tax difficulties brought about by the austerity measures would be punished as a “state murder.” This referred to a series of suicides in Italy by businessmen and others, “despairing at the collapse of their livelihoods because of the crisis.” It was the same anarchist group that in the previous year, claimed responsibility for sending letter bombs to several banks, including to Josef Ackermann, the CEO of Deutsche Bank, while the director-general of Equitalia in Italy lost a finger opening one of the letter bombs in December. One of the members of the group, facing prosecution in court, “called for armed revolution… when asked about the Adinolfi shooting.”
Mario Monti had been pushing himself into European politics as a “mediator” between Germany and the weaker euro-zone economies, to seemingly “broaden” decision-making in Europe beyond the Franco-German axis. In the first few weeks of May, Monti’s technocratic administration had been “courting Berlin on two fronts,” trying to draw the parliaments of both countries closer together, and in term of ideology, they had been “trying to convince German officials – in both private meetings and public speeches – that the compromise solution to stoking growth in Europe’s weaker economies is investment in big public projects, such as transportation, Internet networks or electricity grids, while maintaining fiscal discipline.” Some spending, claimed Monti, should be “exempted” from fiscal austerity, something which Germany had long opposed. But with the French elections in early May getting rid of Nicolas Sarkozy and bringing in the Socialist President Francois Hollande, who favoured a strategy of spending on growth, Monti was seeking to find a common ground between Germany and France, but in a way that ultimately was supportive of the European Union, specifically. Nicholas Spiro, who heads a London-based sovereign debt consultancy, stated, “If there’s one European leader whose policies can appeal to both Chancellor Merkel and President-elect Hollande, it’s Monti.” The refined “growth” program promoted by Monti would be based on “creating bonds to fund European Union infrastructure projects and boosting the firepower of the European Investment Bank to fund public investments.” Thus, it would be based upon European spending, not individual nations spending, and so the debt would be pan-European, and controlled by the EU.
In late April, Mario Monti announced that he would be making more cuts to spending by the end of the year, “and appointed an expert from the private sector as a special commissioner to oversee the spending review.” The cuts, amounting to some 4.2 billion euros (or $5.6 billion), “would allow him to avoid proceeding with a plan to raise the national sales tax to 23 percent in October from 21 percent, a move that could hurt consumer spending and slow a return to growth,” reported the New York Times. Monti stated, “Today we are faced with the necessity of making up for the time lost… And not in years, but in months.” The new special commissioner from the private sector to review the process was Enrico Bondi, known as “Mr. Fix-it” for having successfully restructured the bankrupt Parmalat group. The change in austerity measures followed intense pressure from the business community in Italy to push the burden from increased taxation to more government spending cuts.
In mid-May, yields on Italian debt jumped up to nearly 6%, as evidence emerged that Italy was sliding into an even deeper recession, brought on by Monti’s austerity measures and ‘structural adjustments.’ The government in Italy was openly discussing using troops to protect various targets after a wave of violent actions, claimed by various anarchist groups, such as the shooting of the nuclear industry executive, as well as petrol bombs being thrown at tax offices in early May. An Italian banker warned that unless the European Central Bank was converted into a lender of last resort, Italy faces “massive devaluation, three to five years of hyperinflation, and unbearable unemployment.” Moody’s ratings agency downgraded 26 Italian banks in May, evoking the anger of the Italian Banking Association, which called the downgrade, “irresponsible, incomprehensible, and unjustifiable,” and said it was “an attack on Italy, its companies, its families and its citizens.”
Italy held a series of local elections in early May, in which the Italian comedian, Beppe Grillo, who is also leading a political party, the Five Star Movement, which “rode a wave of protest against austerity politics” and suggested, “We will see you in parliament.” Grillo had been increasingly critical of Monti’s tax hikes, and in one local election forced a run-off with the Democratic Party (PD), and managed to “trounce” Silvio Berlusconi’s Freedom People party in all the local elections, while the right-wing Northern League party, which has also criticized Monti’s reforms, “was humiliated at the polls.” The major Italian newspaper, Corriere della Sera, said, following the elections, “As of yesterday, it seems Monti is now more alone.”
In mid-June, police in Italy, Switzerland and Germany arrested 10 people suspected of involvement in “leftwing terrorist activity” in Italy and elsewhere over the previous three years, connected to one of two organizations, the Informal Anarchist Federation (FAI) and the International Revolutionary Front (FRI). A general in Italy’s semi-militarized Carabinieri police force said that, “the two groups were in contact with the Greek anarchist movement.” The individuals who were arrested, however, were not suspected of being involved in the major act associated with the groups, the shooting of Roberto Adinolfi in Italy, though the General claimed, “The origin is the same.” The arrests did, however, include suspected involvement in the failed letter bomb sent to former Deutsche Bank CEO Josef Ackermann.
In mid-June, as the G20 meeting unfolded in Mexico, Italian Prime Minister Mario Monti said that the euro area needs a “road map with concrete interventions to make the euro more stably credible,” as well as a “pro-growth plan,” stating, “the two things are strictly complementary.” Even though Monti had imposed his brutal austerity measures upon the people of Italy, the bond rates for the country remained high, prompting Monti to comment, “There must be something wrong if a country that complies still has such high interest rates.” Monti noted that through the European Financial Stability Facility (EFSF), the European bail out fund, Italy had supplied loans to Greece, Ireland and Portugal amounting to 31.5 billion euros, commenting, “Italy has not until now asked for loans… She has made a lot of them and every day that passes, is in fact subsidizing others with the high interest rates she pays in the market.”
In late June, following the G20 summit, Mario Monti announced a “growth decree” for Italy, which included “discount loans for corporate R&D [Research & Development], tax credits for businesses that hire employees with advanced degrees, and reduced headcount at select government ministries.” Also in late June, Italy, Germany, France and Spain agreed to a “growth pact” for Europe with the total value of 130 billion euros ($163 billion), noting that, “austerity alone will not be enough to pull the euro zone out of its deep crisis.” The total sum represents 1% of the European Union’s GDP. Also envisioned are “project bonds” which would be financed through the EU’s budget, and issued “for private-sector infrastructure projects,” or in other words, corporate subsidies.
At the end of June, it was reported that Italy’s economic crisis was deepening, due in large part to the austerity measures, but also as a result of the increasingly high yields (interest rates) on Italian bonds, as Italy had to pay the highest interest rates since December in a 5.24 billion euro auction of 5 and 10 year government bonds (meaning that the country pays high interest rates to the financial institutions which purchased these bonds until they expire in a 5-or-10 year term). The ten-year bonds sold at an average rate of 6.19 percent, while the five-year bonds were at an average rate of 5.84 percent. This, the Financial Times warned, “is the latest sign of a deepening double-dip recession in Italy and will add urgency to prime minister Mario Monti’s demands for short-term measures” to reduce interest rates (such as the ECB purchasing bonds on the market). An Italian business lobby, however, went on to praise the “huge steps, unthinkable only a year ago,” which were implemented by Monti’s technocratic government, though adding, “the process is far from being completed.”
In late June, a bickering Italian parliament passed Monti’s labour reform package, just ahead of the EU summit. Angela Merkel said that Italy had “taken the road towards solid public finances, growth, jobs and competitiveness.” The reform of the labour market has been a major demand of the European Commission and the European Central Bank, and thus, Brussels praised the passing of the reforms, and even the IMF chimed in to cheer on Monti. The reform package was passed in parliament as protests led by the labour unions, took place outside, with police helicopters overhead and demonstrators clashing with security forces blocking the way to the parliament building.
At the EU summit at the end of June, Italy and Spain forced leaders to remain at the summit overnight, forcing an agreement to restructure Spain’s 100 billion euro bank recapitalization plan (the Spanish bailout), allowing funds to be injected directly into banks in Spain, “meaning Madrid can sweep the burden of the bailouts off its sovereign books.” Though this, in turn, requires the “creation of a single banking supervisor to be run by the European Central Bank,” likely as a precursor to a European banking union. Italy also received concessions, though less than Spain received, yet was the main driving force behind the revised rules for the eurozone bailout fund – the EFSF (and later the ESM) – which would have it purchasing sovereign bonds in order to lower the borrowing costs, as it would increase confidence in Italian bonds and thus, lower the interest rates, Monti’s key demand in the previous months. The countries that have their bonds purchased by the bailout fund “will no longer be subject to Greek-style monitoring programmes,” but instead, “they would simply have to maintain their EU debt and deficit commitments.” Monti declared, “It is a double satisfaction for Italy.” For Angela Merkel, who had for months refused to support any short-term rescue measures, “the deal was a significant concession.” Though, of course, every concession comes with a condition: “a German-led group of northern creditor countries will gain more control over all of the eurozone banks through the new single supervisor,” the mechanism through which to establish the banking union.
Upon this news, Spanish and Italian government bond yields fell sharply, with a Deutsche Bank economist commenting, “There was so little expectation and since there was a breakthrough at least on bank recapitalizations, the markets salute that.” The German media reported that, “Italy and Spain broke the will of the iron chancellor by out-negotiating her in the early hours of Friday morning,” on June 29. Der Spiegel reported that, “Monti emerged from the late-night negotiations as a clear victor.” Merkel had to concede to Monti, and Spanish Prime Minister Mariano Rajoy, specifically on the issue of “demands” for the bailouts, as Merkel has been the reigning Queen of austerity. Faced up to Monti, however, the permanent European bailout fund – the European Stability Mechanism (ESM) – can loan to countries “which fulfill the budgetary rules laid down by the European Commission… without agreeing to tough additional austerity measures.” Thus, strict oversight by the troika – the European Commission, the European Central Bank, and the IMF – would no longer apply.
Monti’s uprising at the summit began at 7:00 p.m. on Thursday evening, when European Council President Herman Van Rompuy wanted to conclude the first working session and announce the growth pact to the press. Monti, furious, asked Van Rompuy where he was going, and then refused to agree to the growth pact until resolving the issue of establishing “concrete measures to fight the high interest rates on Italian government bonds.” Spanish Prime Minister Rajoy supported Monti, adding that he could not support the growth pact either until such an issue had been resolved. Danish Prime Minister Helle Thorning-Schmidt asked if the attendees “were now all hostages,” and Van Rompuy remained seated. After midnight, representatives from the ten non-euro EU countries left for their hotel rooms, while the 17 eurozone countries “remained in their seats and began a decisive round of negotiations.” After a few hours, Monti and Rajoy convinced Merkel “that countries would in the future be able to receive funds from the ESM without having to submit to troika oversight.” Thus, “only the European Commission’s annual targets will have to be met.” The session ended at 4:20 a.m. on Friday morning, with European Commission President Barroso and Council President Van Rompuy announcing it at a press conference.
This is not to say that austerity and structural adjustment would not be pursued, but simply that the ‘Troika’ (the EC, ECB, and IMF) monitoring and imposition of austerity would cede in favour of general targets set by the European Commission. Those targets, however, would still demand fiscal austerity and structural adjustment, but would not be subject to the same oversight or schedule with which the demands must be met. Ultimately, it was a deal that was not aimed at reducing the imposition and effects of austerity, but rather, was designed to institutionalize more effectively the domination of the European Commission itself (an unelected technocratic institution), as opposed to a more ad-hoc Troika system of oversight.
In the Italy of Mario Monti – and in the European Union at large – austerity is poverty, growth is plundering, labour reform is exploitation, and democracy… is Technocracy. Welcome to Italy, welcome to the new Europe in the age of austerity.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
Please donate to The People’s Book Project to help this book be finished by the end of summer:
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