Thursday, November 15, 2012

The IMF, the ECB, and the Germans

The Troika--IMF, ECB, Germany--managing European financial affairs is analyzed in this post by economist Joseph Joyce.


Mitch Guthman said...

@ Art,

Thanks for the link to this excellent post. Excellent article but I think he neglected to mention something that the IMF inexplicably doesn’t seem to care much about, certainly not in Europe but apparently not anywhere else either. I can’t help noticing that the IMF, ECB and Germany don’t seem to be addressing the things that caused the European economies to crash in the first place.

There isn’t any effort to condition their support on improvements in the regulation of speculative activities in the private sector even though it was unrestrained property speculation which caused the crashes in Spain and Ireland. Indeed, my memory is that both countries were running surpluses at the time of the crash.

Support isn't being conditioned on improvements in the regulation of the financial markets even though, yet again, it was the rampant speculation of the financial sector which crashed the world’s economy and brought us to the brink of the unparalleled disaster where we find ourselves at this time. A very large portion of the recent debt which is the main preoccupation of the Troika was incurred not to prop up the social welfare state but rather to make good on the speculative losses of banks and property developers.

Neither is support by the Troika being conditioned on the simple requirement that recipient countries curb rampant corruption and begin to collect taxes. Italy’s financial difficulties are largely down to the fact that it doesn’t collect the bulk of the taxes that it has imposed. Indeed, I have seen several analyses suggesting that if Italy simply collected the taxes owed it would be more than capable of meeting current expenses and servicing its debt.

Greece’s problems can be traced almost entirely to the tremendous corruption which infects practically every aspect of life there, including the failure to collect most of the taxes owed. Indeed, even now, when Greek civil society is fighting for its very existence, the Greek government cannot bring itself to collect taxes from the rich.

There is no better example of what’s wrong with Greece than the affaire of the HSBC-Lagarde list of potential Greek tax cheats. The list was given to the Greeks in 2010. They did nothing except to consider its existence a high secret of state. The fact that the Greek government had the list but wasn’t doing anything with it was leaked in November. Instead of being shamed into investigating the potential tax cheats, the Greeks arrested the journalist and tried to throw him in prison!

Yet the IMF and ECB care nothing about these problems and instead focus on forcing the workers and the middle class to pay the price for massive corruption and wild gambling by the rich bankers.

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