A Coup to Cure EU’s Economic Gangrene?

For the first time since financial crooks perpetrated and politician sidekicks facilitated, the frauds underlying the 2008 economic crisis-turned-sovereign-debt-disaster – a respected EU economist warns of possible putsches in Europe.

Lehman Brothers Rockefeller centre

Lehman Brothers the first to fall, Image via Wikipedia

For while around 1000 bankers and politicians were jailed in the US in the 1980’s over the Savings and Loans scandal (a costly crisis that was in some ways a dry run for the enormous damage their successors have now wreaked), justice in the US is taking a long time to deal with the gangsters this time round, while their complicit UK counterparts are, as (UK satirical magazine) Private Eye has noted, untouchable. The anger of the voters, whose lives have in many cases been destroyed, remains palpable and unquenched thanks to this failure to punish irresponsible perpetrators. Discontent has been fuelled by weeks of inflammatory TV pictures from the streets of Athens.

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Not since the Portuguese armed forces marched out of barracks on April 25, 1974 to oust a 48-year-old rightwing dictatorship, have  Brussels-harboured EU elites heard the word ‘putsch’ bracketed with the worsening political and financial crisis in their coveted common market now known as Euroland.

Germany’s Der Speigel (Time to Get Angry, Europe) worries about los indignados, the betrayed and disenchanted graduate population in Spain and across Europe trapped for three years now by unemployment thanks to unscrupulous global economy-wreckers, casino bankers and their political soulmates.

However Dr Andrew Lilico, an economist and contributor to the London Daily Telegraph newspaper, worries about the debilitating impact of what others call the ‘medieval leech cure’ and the possible popular overthrow of some EU democracies: “There is now a significant risk that, around Europe in particular, many state-owned banks will go bust, despite government backing. If it happens, this is likely to bring down governments – indeed, may even lead to constitutional overthrows in two or three countries. The consequence could be another recession as bad to twice as bad as that of 2008/9”.

Strong words they may be but hardly disproportionate.

For there is a growing awareness that a crisis prompted by delirious bonus-driven financiers and their henchmen who stuffed global banks with fraudulently-prime-risk-rated complex derivatives and other poorly understood instruments — insured against default through credit default swaps that still today threaten to mass destruct the monetary system — was a calculated swindle on a global scale, as Nick Shaxson author of “Treasure Islands” suggests:
“The analysis about banks looting is so pervasive and so undeniably correct that it’s almost official now: the latest global economic crisis has involved the biggest, most wholesale looting and unpunished fraud in financial history. This is not sloganeering: this is about the actual breakdown of the rule of law in the financial sphere.”

The problem is that the world’s financial police force is overstretched while the size of the derivatives problem is conceptually mind-boggling: the derivative portfolio in the world’s interlinked banks is unbelievably large and totally opaque, lacking regulatory standards and piled high with risk. Near 1 quadrillion US dollars (1,000,000,000,000,000) in derivatives exist and the figure grows by the day. Legendary investor Warren Buffett has called them “financial weapons of mass destruction”.

“We’ve been warned: the system is ready to blow, only a new way of managing the global economy can prevent more mayhem in the markets and on the streets”, writes Larry Elliott in London’s Guardian newspaper while Ambrose Evans-Pritchard his counterpart on the Daily Telegraph warns that the Euro bail-out is in doubt as ‘hysteria’ sweeps Germany and Chancellor Angela Merkel’s political power base looks increasingly fragile.

This latter point is of course, also of concern to France, the other partner in the Franco-German duopoly that has been attempting to fire fight flaming crises over the long hot summer. French politicians are readying la rentrée for the electoral battles of 2012 where Euroland, a more deeply-federated EU and austerity-driven spending cuts will all shape the political manifestos.

The French Socialist party’s Ségolène Royal, a bidder to be the party’s presidential candidate in 2012, has already made her views on the financial crisis clear. In a recent interview on TF1 she said: “The first rule of the game that needs to be changed is the one we must impose on the banks: It is time for our country, and for Europe to stop taking orders from the banks and force them to obey us. (…) We must ensure that banks no longer operate in their own self-interest, because that is where the real crisis lies…”

Benjamin Masse-Stamberger writing in a recent issue of l’Express magazine notes: “This is not a financial crisis. Nor is it an economic crisis. It is more of an institutional crisis. That is why, perhaps, technical measures and policies adopted three years ago, failed to turn the page from the 2008 nightmare. Despite the triumphant G-20 communications, the financial sector has not really been properly domesticated. Despite declarations of intent from major powers, the global economy continues to be unbalanced. Despite numerous European summits, all more “critical” than the last, governance in the euro zone is now more than ever, in an impasse. This suggests that the real blocks to a solution, lie elsewhere: inside the heads of the political leaders. ‘We cannot solve a problem using the same thinking that gave rise to it,’ said Albert Einstein, so a change in strategy, especially in mentalities, is now the European imperative.”

Story: Ken Pottinger

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