Democracy Now's Amy Goodman talked to economist and co-director of the Center for Economic Policy Research Mark Weisbrot about what's going on in Greece right now and the massive protests against austerity measures that the IMF is seeking to get
June 30, 2011

Democracy Now's Amy Goodman talked to economist and co-director of the Center for Economic Policy Research Mark Weisbrot about what's going on in Greece right now and the massive protests against austerity measures that the IMF is seeking to get from that country before they agreed to loan the money to bail out their economy and what lessons we should be learning from what's happened there when it comes to austerity measures like raising taxes on the poor and the working class and cutting spending in the middle of a recession or worse as Greece is experiencing.

Sadly I don't think any of our politicians are getting this message any more than the ones in Greece are right now, who are more worried about placating the bankers who got us and Greece into this mess to begin with.

Greek Parliament Approves $40B Bailout; Some Economists Predict Vote Will Worsen the Recession:

AMY GOODMAN: For more on the Greek crisis and the appointment of Christine Lagarde as the IMF chief, we go to Washington, D.C. to talk to Mark Weisbrot, an economist and co-director of the Center for Economic Policy Research. He’s been writing on the situation in Greece and IMF policies for the Guardian and in other publications. Mark, talk about what we’re seeing right now. It was expected the vote would have taken place, but with the massive protests in the streets, shutting down Athens, it has not yet happened. Though the latest news is that one of the opposition politicians Elsa Papademetriou has said she intends to vote with the Government increasing the chances of victory for the government’s push for the austerity plan.

MARK WEISBROT: Well the vote may pass, but it’s not going to be the end of this struggle at all because as you can say, the people in the streets are really the constraint. The creditors are trying to squeeze as much as they can out of Greece, and they’re making the economy worse. There’s hardly any disagreement among economists about that. That this package if it passes will make things worse. They’ve already laid-off 10% of the government work force and now this package will call for another 20% of the labor force, the federal labor force, to be laid off and another 12% of GDP over the next three years in budget cuts, which would be like $1.70 trillion in the U.S., budget cuts and tax increases. So this is going to worsen the recession unless some totally unforeseen events were to happen. There is going to be a default. That’s the opinion of the markets and most economists and the question is, what’s it going to be like? When are they going to stop punishing Greece and allow the economy to grow and employment to return? That’s the big questions.

AMY GOODMAN: What if the parliament just voted no today? Certainly the mainstream media in the United States, it is an absolute given they have to vote yes. CNN, through the morning the news anchors are saying, "They must do this."

MARK WEISBROT: Yes, I saw that show. It is amazing how they report as though there’s no choice. There is always a choice. There’s going to be a default right up the road, so they could default now and they could refuse to accept these conditions and they might be better off for that, especially, if the result of what’s going to play out is years of recession and high unemployment. You know, Argentina had this choice after 3.5 years in the late 90’s of following the IMF recipes and the economy worsening and at the end of 2001, they did default on their debt and they broke the link with the dollar, their currency with the dollar and they did quite well. The economy shrank sharply for just one quarter and then it grew 63% over the next six years and they pulled 11 or 12 million people out of poverty. So, that was a different scenario and that’s also an alternative for Greece.

AMY GOODMAN: Can you talk also about, and there is of course is a connection between the appointment of Christine Lagarde as the IMF chief replacing Dominique Strauss-Kahn who is facing sexual assault charges here in New York. She is the French finance minister. Talk about what she represents and what this means for Greece, Europe, and the rest of the world.

MARK WEISBROT: Well you can see she is already saying, you have to accept this. You don’t see anything coming from her that would provide any light at the end of the tunnel for Greece or Ireland or Portugal or Spain. All of these countries are being subject to these, what economists call "pro-cyclical" policies that make it difficult or impossible for their economies to recover and I think she’s going to continue that. In fairness to her, you could say, well, she doesn’t really run, she doesn’t make policy for the IMF because it is run by an executive board and a board of governors and that’s the G7 countries, the United States and Europe. And that’s something I think Americans should know too here because you know everybody is acting as though the U.S. is just a bystander here, but in fact our government is heavily involved because they’re the major voice within the IMF and the IMF, as you know, is right on the front lines here in Greece and these other countries.

AMY GOODMAN: What about the international banks like Goldman Sachs? How did Greece get in this situation?

MARK WEISBROT: Well they all contributed to it of course as they did in the whole crisis. All these countries got in to this situation because of the financial crisis and the recession of 2008, 2009. None of them would be in this situation if it weren’t for this and Greece’s crisis has been made worse by the policies that they’ve adopted and of course these policies are being adopted because this is what the creditors want. The banks and of course their allies in the European Central Bank and the IMF and the European Commission.

AMY GOODMAN: Finally, what the debt means in the United States and what the deficit is that we are dealing with here, can you fit this into this global picture and what you think needs to be done, Mark Weisbrot?

MARK WEISBROT: Well it’s kind of the opposite of what you see in a lot of these editorials that say the United States is like Greece, and we’re living beyond our means and we have to cut back, too. The real lesson from what you’re seeing in Europe and in Greece and Portugal, which just signed an agreement that commits them to two years of recession, you know, is that if you do these policies, which some people here want to do, especially, the House Republican leadership, if you actually try to cut spending and raise taxes during a recession, you are going to get much higher unemployment and a much worse economy. That’s the real lesson that you can learn, that people should learn from what’s happening in Europe.

Here's more from the article linked above about how Wall Street helped to create this mess in the first place. And none of these people have gone to jail, which is just a tragedy.

Wall Street’s Euro Scams:

Lobbyists are quietly working to ensure the secret derivatives deals behind the euro crisis stay secret.

But the Greek panic—and fears of a euro collapse and another financial contagion—also have a great deal to do with secret derivatives deals orchestrated by big American banks. As a result, the euro crisis is casting, yet again, a harsh light on efforts by Wall Street lobbyists to gut proposed rules requiring transparency in trading.

As always with European crises, we start out thinking they should be left for the Europeans to fix. Then we get dragged in. Only this time, we discover, Goldman Sachs and other investment banks already dragged us in years ago. Their strategy dates back to the '90s, when countries such as Greece and Italy, with chronic fiscal deficits, were eager to join the EMU but couldn't match the standards of budget discipline imposed by the 1992 Maastricht Treaty. So Wall Street helped them hide their true national indebtedness, at a high price. But these deals only made the crisis worse when the market reckoning finally came. This is not a new phenomenon. Many previous currency crises, going back to Asia in 1997–98 and Mexico in 1994–95, were exacerbated by overleveraged derivatives trades that were not revealed until much later. In those earlier cases it was the local banks, not the governments, that cut quiet swaps deals to juice their income. When Mexico decided in December 1994 that it would try to devalue the peso by just 10 percent, hundreds of millions of dollars of off-the-books derivatives deals turned the effort into a market rout. All of a sudden Mexico's major banks were hit with margin calls from U.S. banks, taking Mexico's central bank by surprise. The result was a $50 billion bailout orchestrated by Washington—the first of many, with Wall Street the main beneficiary nearly every time (though to be fair, the Treasury ultimately made a profit from Mexico's paybacks, too). The Asia crisis played out similarly, with Asian banks also badly hit.

A number of publications have exposed the ways in which Goldman and other firms helped Greece, and countries such as Italy and Spain, disguise their true indebtedness using swaps and other complex instruments that make government borrowing appear to be something else, like a currency trade or asset sale. In some cases, like a swap deal Italy did in the late '90s to defer interest payments on a bond issue, allowing it to squeak into the union, such instruments may have helped in the long run—assuming the euro zone and Italy's place in it remain intact. But many such deals, by pulling the wool over the eyes of investors, also "led governments down the wrong policy path of avoiding to take strict measures to rein in their deficits and debt," says Gikas Hardouvelis, an Athens-based economist who has documented Greece's transactions with Wall Street.

So of course we should be looking out for those same bankers now that caused this problem to begin with if you buy into the greater part of our beltway Villager common wisdom. If what's going on in Europe and across the world is not enough of an excuse to finally break these monopolies up that are wreaking havoc on our world's economy, I don't know what is. I've got to wonder just how many more riots across the globe it's going to take for that to finally happen and for our political leaders to finally be more worried about their constituents than the fat cats on Wall Street who are interested in nothing but taking every single one of us into a race to the bottom as long as it lines their pockets.

Can you help us out?

For nearly 20 years we have been exposing Washington lies and untangling media deceit, but now Facebook is drowning us in an ocean of right wing lies. Please give a one-time or recurring donation, or buy a year's subscription for an ad-free experience. Thank you.


We welcome relevant, respectful comments. Any comments that are sexist or in any other way deemed hateful by our staff will be deleted and constitute grounds for a ban from posting on the site. Please refer to our Terms of Service for information on our posting policy.