Greece and the Euro: Fifty Ways to Leave Your Lover

The problem is all inside your head she said to me
The answer is easy if you take it logically
I’d like to help you in your struggle to be free
There must be fifty ways to leave your lover.

–Lyrics by Paul Simon

The Euro appears to be a marriage of incompatible partners. A June 1st article in the UK Telegraph titled “Why Europe’s Love Affair with the European Project Is Ending” reported that two-thirds of 9,000 respondents thought that having the euro as their single currency was a mistake.

For Greece, it was a tragic mismatch from the beginning; and like many a breakup, it is really about money.  Greece is a vivacious young woman chained to a tyrannical old man.  She yearns to be free to dance on her own; but breaking up is hard to do.  Defaulting on her debts will force her out of the Eurozone and back to issuing drachmas, and she could get brutally beaten by speculators on foreign exchange markets for her insolence.

Fortunately, there are alternatives to an ugly divorce.  The treaties binding the 17 member nations are just a set of rules, entered into by mutual agreement; and rules can be bent or broken, especially in crises.  The ECB (European Central Bank) broke a litany of rules to save the banks, and so did the Federal Reserve to save Wall Street in 2008.  Rules that can be bent for banks can be bent for people and nations—not just Greece, but all the other Eurozone countries threatening to file for divorce.

Paul Simon says there are 50 ways, but here are five creative alternatives.

1.     The Open Marriage: Return to the Drachma Without Abandoning the Euro

James Skinner, former chairman of NEF (the New Economics Foundation in the UK), suggests that the Greek government could start issuing drachmas without abandoning the euro.  Drachmas could be reserved for domestic use—to pay the government’s budget, hire workers, build infrastructure and expand social services.  He writes:

Greece is suffering from a lack of money because the only source, the single currency, has dried up. But there is no law that states that there has to be only one currency.

. . . By enabling the Government, monitored by the Central Bank, to spend newly created money directly into the economy, bypassing the banking sector, the burden of increasing national debt can be avoided. . . .

This programme for creating a new Greek Drachma, bypassing the private banking sector, could start tomorrow. Its immediate effect would be to get the unemployed back to work. All existing Euro transactions can continue as before, quite separately from the new currency. The two currencies can perfectly well co-exist and run alongside each other. . . . Foreign banks will continue to deal in Euros and other currencies as usual.

This solution was successfully used in Argentina when its currency collapsed in 2001. The government walked away from its debts and started issuing its own Argentine pesos.  Three years after a record debt default on more than $100 billion, the country was well on the road to recovery.  Exports increased, the currency was stable, investors returned, unemployment diminished and the economy grew by 8 percent for 2 consecutive years.

2.  Separate Bank Accounts: Fire Up the Printing Presses at the Greek Central Bank

In a March 19 article on Seeking Alpha, George Kesarios observed that the Greek central bank has the power to issue more than just drachmas.  The ECB is not an ordinary central bank:

Rather, it is a confederation of central banks. Each European national central bank can theoretically do the same types of market operations as the ECB and then some. The forefathers of the euro have left many monetary windows open, which, if used correctly, can solve the European debt crisis in a very short period without taxpayer funds.

He cited article 14.4 of the Protocol on the Statute of the European System of Central Banks, which provides:

14.4. National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.

That means the National Center Banks can do whatever the ECB can do—and even things it can’t.  The Greek central bank could step in and start issuing euros itself.  Again, there is precedent for this.  It was under Article 14.4 that the Irish Central Bank was able to print 80 billion euros as “emergency liquidity assistance,” and the Greek central bank has already printed 44 billion euros itself.

The Greek government could print euros, refinance its sovereign debt, and pay the interest to itself, effectively eliminating the interest burden.  Among other precedents, there is Canada, which borrowed from its own central bank from 1939 to 1974 to fund major infrastructure projects and social programs.  It pulled this off over a 25-year period without hyperinflating the currency, driving up prices, or increasing the public debt, which remained low and sustainable.

There is the concern that the euro might suffer by devaluation if other Eurozone members followed suit.  But Kesarios points to the Japanese experience, “where one can print and print and then print some more, without the value of the currency being marked down (due to positive trade flows).”   The euro might be equally resilient.

3.  Divorce: Just Walk Away

According to the May 29th New York Times, the 130 billion euro bailout that was supposed to buy time for Greece is now mainly just servicing the interest on the debt.  The “troika”—the ECB, IMF, and European Commission—which holds three-fourths of the debt, is sequestering the bailout funds to be paid right back to themselves in interest payments.  This is merely going to compound the debt to disastrous levels, without a single cent going to the Greeks or their comatose economy.

Interest rates on Greek ten-year bonds have gone to nearly 30 percent recently.  Under the Rule of 72, at 30% compounded annually, debt doubles in 2.4 years.  If the Greeks can’t even pay the interest on the debt today except by borrowing, how are they going to repay double the principal in a mere 2.4 years?  At 30%, the Greeks could be paying over 100% of their GDP in interest charges.  Legally, a contract that is impossible to perform is void.

Alexis Tsipras, leader of the radical left-wing Greek party Syriza, which is now in second place in the Greek parliament, calls it an “odious debt,” a legal term for a national debt incurred by a regime for purposes that do not serve the best interests of the nation.  An odious debt under international law need not be repaid.

4.  Spousal Support: The Public Bank Option

If divorce is too much to contemplate, Greece’s crippling interest burden can be relieved by taking advantage of the ECB’s very generous 1% rate for bankers.  Article 123 of the Maastricht Treaty forbids member governments from borrowing directly from the ECB, but it makes an exception in paragraph 2 for “publicly-owned credit institutions”—something Greece will have plenty of when it nationalizes its banks.  They can line up at the ECB’s window for its bargain-basement 1% banking rate and use the borrowed funds to buy up the national debt.

Researcher Simon Thorpe wrote to the ECB and asked whether they would object if a publicly-owned credit institution were to borrow from the ECB and use the funds “to supply the money to a government such as the Greek government in order for that government to pay off its debts to financial markets.”  The ECB replied:

According to the Treaty—as you have just quoted—such publicly owned credit institutions “shall be given the same treatment by national central banks and the ECB as private credit institutions.”  It is up to the banks to decide how to use the money they have borrowed from the central bank system.

5.  The Dowry: Impose a Financial Transaction Tax

Thorpe notes that the ECB has issued and lent nearly one trillion euros to the banks at 1% since December 2011—three times the total Greek debt of 355 billion euros.  If Greek public banks borrowed from the ECB at 1% and bought Greece’s sovereign debt, the debt could be paid off in 10 years just from the returns on a very modest Financial Transaction Tax (FTT) of 0.3%.

Imposing a tiny FTT on all financial trades would not only be a lucrative source of revenue but would prevent the attacks of speculators, both on the newly-issued drachma and on the sovereign debt of Greece and other Eurozone countries.  The FTT has already been implemented in many countries.  In 2011, there were 40 countries that had FTT in operation, raising $38 billion (€29bn).

Where There Is a Will, There Is a Way

The problem is finding the will, particularly among the Eurocrat leaders holding the reins of power, who may not be looking for an amicable workout. The marital problems of Greece and the Eurozone stem from an arbitrary set of rules that were entered into and can be changed by agreement.   But as Mike Whitney maintained in a June 3 article titled “Europe Moves Closer to Banktatorship”:

These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to . . . solidify the power of big finance over the individual states . . . .

To avoid that dire scenario, the popular majority needs to grab the reins of power.  It is fitting that Greece, the birthplace of European culture and democracy, is the focus of the struggle against bondage to an elite banker class.  Greece can dance again if she can set herself free.

20 Responses

  1. I’ll take what’s behind curtain #3. Renounce the bankster debts en toto and cancel any and all plans for austerity.

    Then I’ll take a side order of #2 and use the Greek central bank to spend the currency of its choice into the economy to save people lives and livlihoods.

    If other countries follow suit, this could be the counter revolution that ends the bankster empire.

    • Right on. As someone famous said (loosely), “We can live in abundance instead of austerity if we get the banker parasites off of our backs.”

  2. Just copy Iceland they are doing great.

  3. Amusing. I see this article more as an example of the increasingly frantic reaction of US neocons to the realisation that neither the EU nor the euro are going to collapse, nor is any Member State going to leave the eurozone, least of all Greece. The Pew survey (you can link to it via the Telegraph article) is a hilarious example of flat-footed manipulation of figures so as to produce the desired result. Most of the raw data has actually been concealed! By the way, Syriza, like all Greek parties except the communists, want to keep the euro, as do about 80% of the Greek people. On present polling trends, no matter how Greece votes, 90 – 95% of the voters will choose pro-euro parties. That sounds a lot like a love affair but not one that’s likely to break up anytime soon!

    • It sounds like stockholm syndrome kinda love affair.

    • I tend to agree; they’ll change the rules rather than crash the system. It’s a huge game of chicken.

  4. The bankers own every single politician in Greece and their nephew the civil servant. Things will not end nicely.

  5. By Zeus, what a great article by Ellen Brown.
    The five ways to leave your oppressor are excellent measures for Greece and all of us, all the countries suffering from the strangulation, hypersqueeze, and suffocation that is being perpetrated upon us by the less than 1% – the Midases of the world.
    The question is: why can’t Greece choose any or all of these five ways to free themselves? They CAN and I believe the will is there on the part of the 99% – but does the Greek government choose to do so? If they don’t, it is probably due to the same forces that are at play here.
    Greece seems to be a microcosm, IMO, of what is going on worldwide. Ellen Brown has made excellent recommendations for banking and finance reform. The ideas are there. The problem, sadly, seems to be the “Banktatorship”, the Imperial Plutocracy. As mentioned in this article, the banksters are not in the business of fixing economies, and are engaged in a not so stealthy campaign to solidify the enormous power of the financial elites over the rest of us – the 21st century serfs.
    The answers are here also. The 99% needs to be aware of what is no longer stealthy – although it was for a long time hidden – and “grab the reins of power.” We have to get out of our “Stockholm Syndrome” mode.
    Let’s make a new plan, Stan. Print those drachmas with a beautiful picture of Olympian Zeus holding a giant and awesome thunderbolt in his great hands.

    • Thanks, and great imagery!

  6. [...] bondage to an elite banker class.  Greece can dance again if she can set herself free.Ellen Brown The Web of DebtPosted: Thursday, 7 June [...]

  7. [...] – Greece and the Euro: Fifty Ways to Leave Your Lover (Web of Debt, June 6, 2012): The problem is all inside your head she said to me The answer is easy if you take it logically I’d like to help you in your struggle to be free There must be fifty ways to leave your lover.–Lyrics by Paul Simon [...]

  8. Solution #1 is the most logical from a systemic POV.
    It is what Bernard Lietaer is also recommending as per his recent report made for the Club of Rome (Money & Sustainability: the Missing Link) on the subject of Complementary Currencies. In fact, I suspect Skinner got the idea from him…
    Look at how Uruguay and Brazil have been using that concept to satisfy their internal needs. Consider how the Swiss use the Franc and WIR to keep their economy in balance.
    Sure, it’s not “efficient” (adding another variable), but it is more “resilient” through diversity.
    The key is to remove the power of issuance from the private banks, and limit (if not, prohibit) convertibility.
    Every nation should be considering this idea, except allow the issuance to be controlled by provinces/states, municipalities, etc. since most nations already have sovereign control over their national currencies.

    • “Look at how Uruguay and Brazil have been using that concept to satisfy their internal needs.” Do you have references for that? Thanks.

    • Thanks. The problem is that the local currency will get killed by speculators if let out of the country; but the Greeks could do like Malaysia did in 1998 and impose strict currency controls. You change your money at the border; nobody speculates with it abroad.

  9. Good piece. FYI, SYRIZA’s platform is here: http://socialistworker.org/2012/06/06/what-syriza-stands-for

  10. The recent Global Research article on Belarus, Sanctioning Progress: The Secret Economic War against Belarus (re-published here) is most insightful and revealing. Whilst Belarus is demonised or ignored by the corporate and phony alternate news media, it provides an example that Greece and the rest of the European Union would do well to follow.

    This comment of 14 October 2011 on this site shows that Belarus owes much of its prosperity to public banking as well as public spending programs.

    On another topic, Ellen, have you any thoughts on the on-line payment system, flattr at flattr.com? It makes
    it possible for people who make non-proprietary copyrighted contributions to the Internet, such as this, to be paid for their work, but as it is voluntary it relies on the good intent of readers. This blogger thinks highly of it. (Even though he has a
    curious myopia towards Public Banking for someone who opposes neoliberal economic orthodoxy, his article on flattr is quite good.)

    It seems that flattr is private financial institution and not a public institution.

    If any of the public banks were to set up an equivalent on-line payment facility, I think it could be made more versatile and taken up at a rate still more rapid than that at which flattr is now being taken up.

  11. 16.06.2012
    Ending the ‘Zero-sum game’(dilemma) in Greece
    ————————————————————–
    This article suggest simple and effective methods to solve for the Greek tragedy
    of our times, by means of diagnosing the illness down to its causes and then offering available simple measures for unwinding these malignancies.
    The present day Greek crisis comprises a socio-economic dilemma consists of a couple of ‘Zero-sum Game’, where resourcing for one critical need comes on the expense of another critical need. These dilemmas compound each other to form concrete threats to the socio-economic stability on continental and global scales.
    One of those Dilemmas concerns the monetary constraints, with the supply of currency is subjected on the one hand to heavy interest by the global banking cabal, headquartered in Wall-street, and on the other hand is subjected to depletion(“vacuuming”) by means of VAT – a “skull tax” like system which targets the foundation of socio-economics in the flesh.
    The other Dilemmas concerns the need to protect the country itself,
    i.e. the stability and the natural resources, while all such funding must come on the expense of other critical matters, given the above VAT-vs-Interest constraint and aggravating its impact further.
    Greece may implement a most effective measure for the sake of
    ‘implicit_default-while-effective_recovery’, by means of eradicating its VAT.
    VAT is quite like a skull-tax or a carbon tax, i.e. inhumane thus its annihilation
    should be the first and most target of economic public protection.
    This is because the monetary policy of currency-starvation is two folds:
    On the one hand, the thraldom-of-interest on money issuance causes the crisis altogether. On the other hand, VAT depletes the currency supply exactly where it is needed most: at the end user’s hand-to-mouth in-the-flesh economy.

    While combating the thraldom-of-issuance requires addressing explicitly and directly the cartel of interest i.e. taking the global banksterite genocidal mafia head-on, then curbing the VAT rather a matter of social-welfare, which this time is implemented in the most effective, just and economic sense.

    The military dilemma
    The concentration of the ~1/4 million US military personnel from around Europe in Greece may bring some $25 Billion p.a. to that country,
    thus saving it financially for the long run, without a threat to French banks or to German pensions. The U.S. GAO (Government Accountability Office) claimed:
    “245,000 beneficiaries in U.S. European Command”,
    where the cost of a single brigade, i.e. at about 11,000 personnel,
    is at about $100m p.a.:
    http://www.armytimes.com/news/2010/09/army-brigades-in-europe-cost-billions-093010w/
    Zero-sum games are coupled with immorality
    1. A Zero-sum game yields immorality,
    e.g. arid environments give a great survivability advantage to evil people.
    2. Immorality leads to perpetrating zero-sum games,
    e.g. web-sites for on-line ‘deals’, where the unsuspecting users
    are bound to loose in a rigged game the kind of a Casino.
    Since zero-sum games are the presence of evil, then it is very clear they must be unwound entirely, i.e. to the point of dissolving them entirely, thus urgently – while the physical damage is still manageable, containable and corrigible.

  12. Ellen Brown, I’ve shared your blog post re: 50 Ways with numerous people and with a local newspaper editor. Thanks very much for writing it.

    Please, a penny for your thoughts on the Greek election which was concluded last night. Maybe it’s time for a new blog entry?

  13. By choosing the New Democracy party in the Greece elections it appears that the greeks have rejected all of the alternatives listed above. Instead of “50 ways to leave your lover”, how about “I’ve got plenty of nothing” [cus nothing is plenty for me] http://www.youtube.com/watch?v=Qf6WLrMIsMA

  14. […] Read more: Greece: Greece and the Euro Fifty Ways to Leave Your Lover WEB OF […]

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