4th Newsletter from TroikaWatch

28 May 2014 by Troïka Watch


In the period towards the elections, governments and European institutions tried to avoid any bad economic news. But the crisis is surely not over, so we can expect that more bad news will come soon after the elections. From many countries we also hear about debates, that governments want to make it easier for banks to seize the homes of indebted people.

Here you can find the results of the European elections.

European level

On the European level, there is a growing fear of deflation. Further ‘unconventional‘ measures by the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html
are to be expected. On the international level, the negotiations of TTIP (the trade agreement between the US and the EU) continue.

However, also the resistance continues. In many countries people took the streets and participated in the European days of action of the Blockupy coalition to protest against the current policies of austerity everywhere in Europe. In Brussels, on the 15th of May, hundreds of people took the streets against TTIP and austerity, when the European Business Summit united leading politicians and businessmen. The police arrested over 200 peaceful protesters.

A Tribunal on EU economic governance and the Troika took place in Brussels on 15-16 May. Eleven witnesses from ten countries in Southern, Eastern and Western Europe gave testimony to the failure of the EU and Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html
policies to address the crisis. In fact many testified that the strategy of the austerity policy measures is a deliberate attack on (working) people’s standards of living. According to Georg Rammer (Attac Germany), “the most recent statistics from the OECD OECD
Organisation for Economic Co-operation and Development
OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.

http://www.oecd.org/about/membersandpartners/
indicate that around 20% of the population in Germany is affected by poverty or social exclusion. Children are particularly affected”.

Europe-wide reports from rapporteurs on debt, democracy, poverty, public services, wages and feminist perspectives collaborated the narratives presented on the national situations indicating alarming developments, including intensifying racism and neo-fascism.

However the dominant message from the Tribunal is that resistance continues in large and small mobilizations, and in many creative experiments of grassroots democracy all over Europe. Ana Maria Jimenez of the PAH (Platform of People affected by Mortgages in Spain) reported that: “Today we are more than 200 nodes in the state. We have stopped over 1.000 evictions, we have relocated over 1.000 people through our Obra Social campaign”. The Tribunal ended with a verdict that synthesized the contributions of all the participants.

Many protests took place as part of the European Week of Action in countries like Austria, France, Germany, Italy and Spain. The European Week of Action ends on the 25th of May. Further information about the events can be found on the website May of Solidarity.

Greece

Since our last newsletter, and as announced in it, the Greek government finally accepted all the conditions set by the Troika to get the release of a tranche of 8.8 billion euro of loans, required to pay back loans and interests due by the end of May, before the European elections.

This release, together with the confirmation by Eurostat and the Troika of the primary balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. surplus, has fuelled a campaign pretending that Greece has recovered, memoranda and Troika have left and markets are confident. A successful, well-organized, issue of short term bonds at a rate lower than 5 % has been used to demonstrate the last point.

Furthermore, the Troika allowed electoral concessions (500 euro in compensations) to be distributed to a targeted group of 1,000,000 voters, in order to influence their vote in local and European elections, which took place on the 18th and 25th of May.

The sudden emergence of a new party (POTAMI=The River), which gained a lot of media attention, has a lot of similarities with the 5 Stars Movement in Italy, is positioned on the center-left and expected to gain up to 10% of votes, has also changed the political landscape. The forecasted clear victory of SYRIZA at the European elections is challenged by the ruling conservative party, in the latest forecasts.

However key facts, initially hidden, progressively appear on the foreground: the primary surplus hides a deficit of 12.7% of GNP Gross National Product
GNP
The GNP represents the wealth produced by a nation, as opposed to a given territory. It includes the revenue of citizens of the nation living abroad.
, due to a huge recapitalization Recapitalization Reconstituting or increasing a company’s share capital to reinforce its equity after losses. When the banks were bailed out by the European States, they were most often recapitalized with no conditions attached and without the States having the decision-making power their participation in the banks’ capital should have given them. of Greek banks by the Greek state (10% of GNP) in 2013, not taken into account for the calculation of the primary “surplus”. This explains the raise of the ratio of debt to 175%, which postpones the perspective of any relief of austerity, unemployment, poverty, Troika and new memoranda in the coming years if, as expected, a haircut is not decided on.

New measures on pensions and on seizing houses of indebted people at very low prices are already on the table for just after the elections, while 7.7 billion euro have to be found through additional austerity cuts, privatisations and taxes until 2017.

And as the Greek economist Yanis Varouvakis wrote in his blog, on top of the official bailout the Greek banks also received an hidden additional bailout, amounting to as much as the official sum that have been given to them. This will lead to an additional increase of Greek debt in the future.

On the 18th of May, the first round of thelocal elections took place. The majority of the candidates from the two governing parties (Nea Demokratia and PASOK) who managed to get through to the second round did not state the party they are coming from; this may have helped them, as results indicate that they have a candidate in the second round everywhere. SYRIZA has, for the first time in recent history, beaten the right in Athens and Attica, and Golden Dawn has lived up to their 8% expectations, it even reached the dangerous score of 15% of votes in Athens.

However, because of the fact that candidates are not obliged to announce which party they are representing, these elections do not give a very clear picture of the political landscape and whether the government still has legitimacy or not. The European elections on 25th of May will tell more about that, as candidates are obliged to announce their party in these elections.

Ireland

In Ireland more and more voices speak out to state that the EU bullied the Irish government into bailing out its banking system and saving foreign banks, mostly from Germany, Great Britain and France, from taking huge losses (and making the Irish citizens pay for this). „It was outrageous of Germany, the European Commission and above all the ECB to threaten to force Ireland out of the euro if it did not follow through with that foolish guarantee, lumbering Irish people, who have already suffered enough from collapsing house prices and a sinking economy, with a €64bn bill to bail out bust banks, €14,000 for every man, woman and child“, says Phillipe Legrain, a prominent former advisor of the president of the Commission Barroso in the Irish Independent on the 7th of May. Ireland’s debt burden at 125 % of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
is now five times larger than in 2007, before the crisis, when it was at 25 % of GDP.

Portugal

A heavy governmental propaganda campaign is creating a mythological picture of reality: „[...] Prime Minister Pedro Passos Coelho [announced] the country will no longer have to answer to foreign creditors after the bailout ends on May 17th“; “The decision to exit the bailout without a security net is a major success for the government“; „[the government] met targets to cut the country’s budget deficit“; „[Portuguese] economic activity turned positive again last year“.

These statements contradict other statements coming from the very same leaders and ministers: „It would be an illusion to imagine austerity politics would come to an end in the near future“ (prime-minister Passos Coelho, October 2013); „the adjustment program will last about 20 years“ (Oliveira Martins, February 2014); „Portugal will continue subject to [Troika] supervision at least until 2035“ (president Cavaco Silva, March 2014), and so on.

On the other hand, there is no evidence on the Portuguese ability to pay a debt that, under the rule of Troika, almost doubled in 3 years, while the gross domestic product and the state income keep falling down. On this matter see a complete study by Grazia Tanta from the 2nd of March 2014.

The state of law is coming to an end. The government is proposing heavy restrictions to collective agreements on wages and labour relationships (Notícias ao Minuto, 7th of March 2014;MSN Notícias, 12th of May 2014). Overtime is not paid any more and the shortening of the collective agreements term from 5 to 2 years reveals the will to put a final end to every regimentation on labour matters in the near future.

Situations such as the one experienced by the Santa Filomena neighbourhood also evidence the end of a state of law warranties. For the benefit of some real estate corporations, the inhabitants are being expelled and their houses are being demolished, by orders of the city mayor (a Socialist Party leader), who called the police to aggressively execute the expelling act. These inhabitants are now living in the open, some of them found shelter in a church. 30 to 40 years ago, they bought the land where they were living and for which they were paying taxes (IMI); they bought it from the same city hall that is expelling them now. For more infos on the issue see the homepage of Habita.

Cyprus

Despite the lift of measures restricting withdrawals of deposits in banks decided in April, giving a feeling that things are going better, the Troika was back in mid-May for its 4th assessment of its programme for Cyprus.

The Troika claimed to be satisfied with the reforms in the country; the program remains in course because of structural reforms, bank restructuring plans and reduced public spending. Projections for recession were revised from 4.8 to 4.2 %, which should open the way to the next payment of Troika bailout loans.

The main pressure by the Troika concerns two issues: the recovering of bad loans by the banks by easing the seizing by the banks of homes of indebted people and the speeding up of cuts in health system through the adoption of a new health system.

Meanwhile the unemployment rate remains at high levels before the European elections and will be a key issue during the campaign. The protest against Troika policies is mainly expected to express itself through high abstention from voting (50% according to forecasts). However the governing party is considered as favorite and expected to get two or three European MPs out of the six Cyprus has.

Spain

Public debt is about to exceed the ceiling of 100 % of GDP. This issue topped news headlines in local media in mid-April. Although still below the levels of Greece or Portugal, the rate of growth of public debt in Spain has been dizzying, 37% of GDP in 2007 to 96.5 % of GDP last February, and the forecasts exceed 100% of GDP in 2014.

In late April, the government proudly announced that unemployment, which is around 26 % of the working population, had dropped by 2,000 people in the last quarter. But the reality is that they have destroyed 184,600 jobs. Unemployment drops because the labour force has shrunk by 187,000 people in the last three months, mainly due to emigration and people who are no longer registered in the unemployment office, for they have no hope of finding work anymore.

In this context, the Spanish Government has submitted a tax reform proposal that favours the business sector, rising inequalities (in a country that is rated as second in inequality in Europe, after Latvia).

In the private sector, there is an increasingly obvious presence of Vulture Funds hunting toxic real estate assets, and hedge funds Hedge funds Unlisted investment funds that exist for purposes of speculation and that seek high returns, make liberal use of derivatives, especially options, and frequently make use of leverage. The main hedge funds are independent of banks, although banks frequently have their own hedge funds. Hedge funds come under the category of shadow banking. buying public properties that are being sold at bargain prices. The measures imposed by the Troika, willingly implemented by the government, regarding consolidation of bank accounts through the Bad Bank and privatization of public goods and services, are beginning to benefit the scavengers of the financial system.

In reaction to this situation, daily struggles and demonstrations continue in Spain, social forums have been held in Madrid and Barcelona and citizens continue with their daily resistance and building of alternatives, while the Government pushes for the criminalization of protests.


Italy

Tens of thousands of protesters marched on Rome on April 12th to denounce austerity measures and the economic reforms of Matteo Renzi’s new government, as well as to restate their call for income, housing and dignity for all. As a matter of fact, the governement is planning to save 6.7 billion euro through spending cuts, higher VAT and an important reform of the labor market (“Jobs Act”), which will encourage precarity while still in a period of deep economic instability.

Several measures of privatisations will be taken as well, among them the privatisation of 40% of Italian Post. All these measures, which are intended to solve the debt crisis, will on the contrary worsen it. For example, the sellout of the Post service will reduce the Italian public debt from 2,089 to 2,085 billion euro (so 4 billion), while the big financial interests will benefit from the selling of a public service.

Italy, as several other countries in Europe, has joined the appeal of the Blockupy days of action. For example on May 16th there was a national day of initiatives against biocide and for sovereignty and democracy of territories, which took place in several cities starting from Naples, whereas in Bologna on May 18th a rally against the re-opening of the deportation centre for migrants was organized.

Moreover, on May 17th a national demonstration was be held in Rome for the reappropriation of commons, democracy and social rights, and against TTIP, austerity, privatisations, precarity and environmental devastation.

Slovenia

The European Commission expressed the expectation that Slovenia would continue to carry out fiscal consolidation measures and structural reforms [en] despite the crisis in the ruling party Positive Slovenia (PS) is threatening to undermine the government. Resigning just 13 months after being sworn in, the Alenka Bratušek (PS) government is concluding one of the shortest government terms in Slovenia’s history. The change in party leadership has shaken the ruling coalition.

Moreover, the two-time Prime Minister and now right wing opposition leader, Janez Janša, was sentenced to prison [en] after a guilty verdict by the Higher Court in the Patria bribery trial for accepting the promise of a bribe.

Although Slovenia raised 2 billion euro with one more bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. issuance [en] in April on somewhat favorable terms (investors were willing to buy up to 9.5 billion), finance minister Čufer continues to push for a major and quick privatization of state owned NLB bank, DARS (manages all of the motorways), Post of Slovenia, Petrol (leading energy company) and other companies. At the same time, the government has no problems with recapitalizing yet another bank. It is said that Banka Celje will be bailed out with approximately 388 million euro around the time of summer.

The European elections are being debated more and more. Recent polls put right wing parties in the lead [en]; while voters can only choose between two options on the right, it looks like the left will be represented with no less than eight parties. Although too early to tell, the inability to reach a compromise and a constant barrage of “austerity is needed” propaganda will probably take its toll on (some of) the anti-Troika parties.

Demonstrations against the new act on higher education (Zvis) [en] took place in Ljubljana on the 16th of April. This law, which aims to expand commercialization of public universities and introduces tuitions, brought together a diverse group of students, union workers and smaller political parties; altogether some 2,000 people gathered in order to voice their opposition.

However, there is one more alarming issue related to the recent wave of demonstrations in the last two years. There exist an obvious attempt to criminalize demonstrations and put pressure on civil society; some prominent people living in Maribor, where the wave started, have been called to attend a hearing before a parliamentary committee [en]. The individuals are expected to explain their role in the 2012 and 2013 Maribor anti-establishment protests.

From our side

TroikaWatch is created by a diverse group of people: some of us work for civil society organisations like the Bretton Woods Project, CEO, CADTM, Humanitas or TNI, others are activists in networks such as Attac, ICAN, the Forum per una Nuova Finanza Pubblica e Sociale or the Spanish 15M social movement.

We plan to publish this newsletter once or twice a month in English, Dutch, French, German, Greek, Italian, Portuguese, Slovenian and Spanish. You can subscribe to this newsletter at www.troikawatch.net/lists/?p=subscribe&id=1 and contact us by sending an email to info at troikawatch.net. On Twitter, you can follow the debate by using hashtag #TroikaWatch.

Greetings from Amsterdam, Athens, Barcelona, Berlin, Bruxelles, Dublin, Florence, Frankfurt, Kopenhagen, Liège, Lisbon, Ljubljana and London.
The TroikaWatch Team

Source: http://www.troikawatch.net/4th-newsletter-from-troikawatch/




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