Custodians of capital Ruthless Criticism

In Italy and Greece, “technocratic” governments enforce the impoverishment of the people in the service of balanced budgets

Custodians of capital

In the fifth year of the global financial crisis, European politics brings forth a new achievement in dealing with its consequences. Under pressure from the EU – more exactly: the German and French governments – the parliaments in Greece and Italy replace their elected officials with nonpartisan “technocrats” endorsed by the respective oppositions; in Greece under the former vice-president of the European Central Bank (ECB), Lucas Papademos, and in Italy with the former EU competition commissioner Mario Monti at the head.

The government is to enforce harsh “austerity plans” to balance the national budget; the goal is a tolerable interest rate on government debt in the open capital market. The imposed nonpartisan consensus on the details of the austerity plan should also be guaranteed to remain in force for a sufficient period before new elections are held as promised, until the package of measures for consolidating the budget is finalized.

The great fetish of the Western community of values, the free duopoly of democracy and market economy, is proving to be in a crisis not yet fully taken for granted, and not even the semblance of an equal ranking of these two supreme values is maintained. The democratic custom of a lively contest of political ideas must stand back, and even the sacred right to a free vote by an enfranchised people has temporarily been lost and must – in the case of Greece – give way to a written pledge to honor the terms of the bailout signed in advance by the rival traditional major parties. A budgetary emergency has occurred because the national market economy no longer provides the state with a debt service that satisfies the financial markets. The electorate is not to be offered any alternative to its impoverishment by a vote. The politicians declare the restoration of the state's creditworthiness to be an irrevocable objective necessity of the market economy. And democratic freedom must bow down to it.

Freedom of the market

This is after all an indication of the true relationship between the two complementary freedoms in the bourgeois community: the freedom of the market, which is not possible without the regime of finance capital over the money of the society and even of the state, is a sacrosanct reason of state; which the voting citizens comply with by providing the trustees of nothing other than this reason with the voluntary approval of those who have to suffer from it and its consequences. The democratic process blesses what the elected representatives decide – the optimal carrying out of economic and financial market necessities.

In the case of the two crisis states in the Mediterranean, it is certainly not just about the only proper relationship between the economic reason of state and the democratic process. The market-economic rationale, which in the crisis demands that the state adopt an austerity program with built-in guarantees of success for the buyers of its bonds, comes off as the leverage of the EU, a political interference by the major powers of the euro club. Germany, France and other like-minded people launch not merely an appeal to the “systemic” self-interest of their partners, but pursue the disciplining of the most prominent problematic cases.

And so blatantly that it poses for Greece and Italy – and hardly less explicitly for many others – the question of sovereignty: whether in fact the principle of balancing the budget at any price is an obective constraint that there is no alternative to in a market economy, thus is willingly enforced, or rather signifies an incapacitation of the nation in the form of its highest power by foreign authorities.

The actual situation concerning the sovereignty of the bankrupt euro-states is something worth clarifying. On the other hand, it is striking how the sovereignty question is tackled by the newly installed technocratic governments.

Sovereign subordination

As a result of the financial and sovereign debt crisis, some countries of the euro zone must acquiesce to certain rules in making their budget. In bourgeois states, which govern their societies with money, this means: they are no longer sovereign in the use of their power. They have purely economically lost their freedom of action with the financial sector's lack of enthusiasm for their debt securities. They are therefore also politically restricted in their freedom to make their budgets, namely by those authorities that still loan them the funds they need.

This position follows in the first place from the sovereign decision of the state power to finance its budget – even if only partly – with loans, to arrange the refinancing of its debt service by taking on new loans and hence to perpetuate its debtor relation to the world of finance. This is the basis for the system of mutually advantageous cooperation between the state and the financial sector: the former licenses the owners and managers of money to speculate on itself and its supreme authority over a national capital location as a secure source of money, this way supplying the market with its bonds, which are indispensible for the growth of the banking sector. The financial world allows the state freedom to make a national budget by marketing its debt, and the growth of its business increases the financial power that the state can tap into. This mutually beneficial relationship has been destroyed by the crisis.

When a state loses its creditworthiness and its circulating debt securities are continually downgraded, and in the end even no longer recognized as money capital, then it can normally still make use of its central bank. In cases of emergency, it accepts notes that represent the state's budget deficit and thereby brings legally valid money into circulation. It is precisly this recourse to the state's sovereignty over money as a source for the country's budget that is no longer available to members of the Euro club. With the introduction of the euro as a single currency and the establishment of the ECB, they gave up the right to decree redemption of their monetized budget deficits in central bank money. But it wasn't outside pressure that casued them to do this. Their idea was that by subordinating themselves to a larger currency they would get more and, above all, cheaper credit than before. It was their benefit calculus that made them decide to submit their sovereignty – their ability to go into debt according to their own discretion – under the regime of the Maastricht Treaty, which limits national debt and prohibits them from financing their budget through their own central bank – “printing money.”

Material inequality

That's why the euro-states that have lost their credit with the financial markets literally have no money. The distrust of creditors who are willing to meet the refinancing needs of Greece, Italy and some other euro-states only with prohibitve conditions or even no longer finance them at all reveals what these countries have incurred with their speculation on the advantage to their nation of a supranational money and the adventure of joining the euro club: as long as they fear the incalculable risk of returning to the status of dependent outsider of the EU and would rather remain in it, they have ultimately given up their sovereignty over the basic stuff of their rule.

Formally, this applies of course to all euro states, even those whose debts are still in demand as an investment. They have also transferred their monetary sovereignty to the ECB and are consequently no longer allowed the freedom to finance their national budget in case of emergency by their central bank. However, in reality this formal equality of the national sovereigns before the supranational statute of the ECB is founded on material inequality and, on this basis, a rather unique balance of power between the partners.

Those states which get credit, and therefore don't suffer a loss of their budgetary autonomy in the collective regime over the community money, face other states which have been brought into such fundamental financial difficulties through the distrust of markets; they face them as an authority which – of course “only” as a trustee of the legal situation established and accepted by all – refuses to let the candidates for bankruptcy convert their debts into liquidity by means of the collective central bank, which it is capable of in principle. In practice, the financially stable euro states – ultimately Germany as the leader – have the decisive power, which the partners have not at all contractually handed over to them, but to the community construct, the ECB.

For the insolvent states, it depends on whether and how far they ultimately let the Frankfurt money guardians do what they may not do formally, namely make budgetary funds available. And for the time being, the governments of the solvent leading states, in place of the “license to print money” which they formally continue to deny the ECB, are very conditionally willing to loan their insolvent partners the minimum in budgetary funds that is absolutely necessary for them to service their debt. In this way, the financially weaker countries are placed in a debtor relation to the leading powers organized as the “European Stability Mechanism” (ESM). Hence, in fact, the sovereignty of the debtor states over their state finances is largely overruled.

The infringement on the autonomy of the states that rely on loans from their euro-partners thus does not begin in the first place with the conditions set by the financially stronger powers for the disbursement of funds to their bankrupt partners. If Greece and others must borrow funds to govern, their sovereignty itself is borrowed. This is the basis on which Germany, France & Co. can assume the right to interfere with their neighbors – so massively and so concretely, that in Italy and Greece elected governments leave the field and make room for teams of technocrats that suit the taste of the euro authorities.

With “expertise”

The demand that the governments of both these countries transfer their rule to non-partisan technocrats is an unequivocal message to the democratic parties there, both those in power and the opposition. They are under suspicion that, out of calculations of party politics or campaign tactics, they will not consistently carry out the austerity programs that are deemed necessary, thus sacrificing the market-economic reason of state to their democratic power struggle for popularity with the voters. That's why, in order to satisfy the EU partners and the financial markets, representatives are needed in the governments who insist on the inevitability of all the mandated cuts and privatizations – “experts.”

Such figures also come to power: they are put in power by the parliaments which are viewed with so much distrust. In doing so, the parties act under extortionate pressure from outside, but certainly with their own calculations. On the one hand, they know the discontent of their constituents: the distress of the impoverished masses about the already executed and pending material impositions, the wrath about the very class-specific distribution of the accruing burdens, the patriotic rebellion against the nation's domination by external authorities and foreign rulers. They do not want to be held responsible for this.

On the other hand, they nurture the expectation that the technocrats appointed into office will finagle what they themselves see as their own mission: Papademos and Monti and their people with their undoubted “expertise in economic issues” should guarantee the population of the inevitability and rationality of the prescribed austerity programs. And with their non-partisan service to the national cause, they should attest that this is not EU lackeys setting to work on foreign orders, but the nation out of its own sovereign decision doing what is necessary, and all sensible patriots can be proud of their brave homeland. In that regard, the otherwise divided “parties supporting the state” are already quite nonpartisan about the basic reconciliation of the people with the state power which is treating them so brutally.

The specialists in power do their best in line with this. They act as guarantors for the fact that the package of measures which they execute has only one goal, namely the recovery of national autonomy by restoration of the country's creditworthiness.

Wrecking crew

Monti's taking office in Italy and being ostentatiously recognized by Merkel and Sarkozy as a third member of their team has the intended effect on the markets: They show a new interest in Italian bonds and thereby in practice demonstrate what a speculative matter a state's creditworthiness is. The Greek colleague Papademos, however, takes power over a country that suffers an “oath of disclosure” of its own kind. The fact that Greece has so completely lost its credit in the financial world is the result of a critical comparison of countries which goes through the states in the euro zone after these, especially the leading powers, had reversed the collapse of just this financial world with a massive volume of state credit and central bank money.

In this comparison, investments in Hellas fare especially badly. The withdrawal of funds from the country mercilessly reveals that the far more competitive companies from the major euro countries have quite completely conquered the Greek domestic market, which has been out-competed in its own economy. This nation has long functioned as a market only by loans from other European countries. The state budget also lives on foreign investments. With those gone, it's over. And promptly the country is hopelessly overburdened by its debt service. The rescue of the state's solvency by the solvent euro powers is designed on the one hand to prove – indeed the longer it lasts, the harder it is – the absolute solidity of euro-credits and the stability of this credit-representing currency. The aim is, avowedly, “to reassure the markets.”

The conditions which are imposed on the debtor states serve to demonstratively prove that equiping them with the minimum amount of money, which is to be paid on schedule to foreign creditors, does not in reality violate the emphatically invoked criteria for a responsible credit- and money creation at all: the whole world should see that the guardians of the euro hold the value of their currency more important than the survival conditions of a people without competitive capital. The unplanned, but consistently advancing ruin of the country confirms the decisive EU policy makers in their ever clearer expressions of dwindling confidence in the resolve of the government, the ability of the state apparatus, and the willingness of the people to deliver on the demanded restructuring success, without the Greek government having to use a different means for it than rigorously slashing any requirements for money.

The requirements of the nonpartisan technocrat government in Athens are thereby certain: Papademos and his side should allay the mistrust of the creditors and by initial successes in deficit reduction prove that the Greek will to reform is creditworthy. In fact, they continue as ordered the demolition work on the livelihoods of the majority of the people which has already been pushed a long ways by their social democratic predecessors; however, with the result that the social catastrophe brought about according to plan does not at all increase profitability in the nation, but shrinks it. The austerity program does indeed reduce the expenses on what is estimated as the people's material existence. But at the same time it further decimates the remnants of capitalistic sources of wealth that could provide revenue to the government. The praise and recognition from the partners for Papademos and his cabinet is correspondingly cautious. The friends of Greece ever more seriosuly discuss sending a “savings commissioner” to Athens – just as though the restructuring of the country would be a question of ruthlessness and the technocratic government is still dealing too softly with the national “structures.” The alternative is “to let the country go broke,” something Europe can cope with more easily now than months ago.

EU plan in danger of failure

No wonder that the government fulfills its other task just as badly. The economic decline of the country discredits the promise that the impoverishment of the masses by the state would someday, somehow lead to a new upswing, according to the panacean logic of the market economy. So the reconciliation of the people with European capitalism leaves a lot to be desired. Leftist radical parties, i.e. those outside the consensus of the conservative New Democracy (ND) and the social democratic PASOK, which traditionally take turns in government and now form a coalition under Papademos, agitate not without success against the reason of state which makes an increase of impoverishment into an unavoidable necessity: at demonstrations the opinion is becoming ever more often heard that, in view of their own bankruptcy, the rank and file of the nation couldn't care less about the bankruptcy of the state and the financial world. And the nonpartisan appeal to patriotic feelings turns out to be just as useless in bringing the population into line. The patriotic rage is directed in part against the government that simply fails to argue for the Greek homeland. Another part of the population is indeed in agreement with the state power, though this support does not apply to the political line, but the appearance that the negotiations with the creditors are a war of resistance against foreign domination and paternalism.

So the concept of the EU, that the written pledge signed by the major parties will obligate whichever government emerges from the upcoming elections to enforce the restructuring plan without concessions, is endangered. Because a large part of the PASOK base “drifts to the left,” this decrease in voters does not benefit the ND, which voters run away from for its own reasons, including appointing the technocratic government an absolute majority with the governing Social Democrats. The advance pledge by the existing mainstream parties threatens to come to nothing, since after the spring elections parliament might be dominated by the Communist Party (KKE), the Coalition of the Radical Left (SYRIZA) and other Left parties that reject the “austerity dictat.” The KKE even demands withdrawal not only from the Euro-zone, but also from the EU, which they criticize as an “imperialist union” “controlled by capitalist interests.” In this respect, the European community of values might have to grapple with the problem that a bit of democracy is out of place, to the annoyance of Europe's reason of state called the “free market economy.”

Translation of an article by Theo Wentzke in March 26, 2012 Junge Welt (Germany)