Greece: What is to be Done? by Roth Karl Heinz

Author:Roth, Karl Heinz
Language: eng
Format: epub
ISBN: 9781780998237
Publisher: John Hunt Publishing
Published: 2013-01-01T16:00:00+00:00

Deflation and Inflation: A Collective Exploitation Squeeze

But the IMF experts were not the only actors in Greece’s tragedy. They enjoyed the support of European Central Bank (ECB) and European Commission task forces, both led by Germans. Klaus Maruch is the head of the ECB’s Department of Economic Development in the EU Member States. He won his spurs while working closely with Otmar Issing, the former chief economist of the German Federal Bank, and later of the ECB. Matthias Mors entered the European Commission after completing his academic training in 1984. During his time in Greece, he worked under Olli Rehn, the European Commissioner for Economic and Monetary Affairs and the Euro, as director for the national economies of EU member states. Maruch and Mors were put on an equal footing with Thomsen, the head of the IMF delegation. The three teams collaborated closely and smoothly at their headquarters, the Athens Hilton. While Thomsen’s task force focused on the objectives of the structural adjustment program, the staff of the ECB and the European Commission procured data and documents relevant to the ongoing fiscal and economic evaluation of the austerity program and its practical implementation from Greek government departments and agencies. They covered all key areas of the Greek economy: finances, tax policies, labor markets, welfare, state-run enterprises, but also the complex administrative hierarchy and the health service.

The two European task forces widened the conceptual framework of the multilateral intervention decisively. The European Commission and the ECB had temporarily adopted the globally controlled anti-crisis programs of the G20 group and the US Federal Reserve System, but in spring 2010 they returned to the principles of European “stabilization policies.” Although the crisis had not been overcome, the old concepts that had dominated European fiscal and economic policy since the establishment of the ECB and the eurozone were reintroduced: monetary policy was rigorously oriented toward price stability, and the central bank was exempted from economic regulation, with its statute prohibiting the purchase of government bonds and the granting of credit to the public sector.[43] This approach ruled out every possibility of anti-cyclically expanding the money supply and lending to the public sector. But since the crisis soon resurfaced and intensified dramatically in the countries of the European periphery, time-consuming and ineffective detours had to be taken, such as the establishment of the European Financial Stability Facility (EFSF). Worse still, national economies that had slipped into depression had nowhere to turn to other than the free bond markets when trying to obtaining the means to expand public credit. As a result, the refinancing costs associated with public debt increased rapidly. This means that countries such as Greece are trapped in two ways. First, they are part of a monetary bloc that functions just like the former gold standard system in that monetary and credit restrictions exacerbate the crisis. Second, this European successor of the gold standard system lacks instruments by which to compensate for current account deficits and prevent the range of unit labor costs from widening.

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