Tuesday, May 24, 2011

The Arab spring conquers Iberia ....and The alpha and omega of debt

The Arab spring conquers Iberia ....
By Pepe Escobar

But to live outside the law you must be honest
Bob Dylan, Absolutely Sweet Marie

"No one expects the #spanishrevolution." That's one of the signs in Madrid's iconic - and occupied - Puerta del Sol Square; Monty Python revised for the age of Twitter.

"I was in Paris in May '68 and I'm very emotional. I'm 72 years old." That's one of the signs in Barcelona's iconic - and occupied - Plaza Catalunya. The barricades revised as a Gandhian sit-in.

The exhilarating northern African winds of the great 2011 Arab revolt/spring have crossed the Mediterranean and hit Iberia with a

vengeance. In an unprecedented social rebellion, the Generation Y in Spain is forcefully protesting - among other things - the stinging economic crisis; mass unemployment at a staggering 45% among less than 30-year-olds and the ossified Spanish political system that treats the citizen as a mere consumer.

This citizens' movement is issuing petitions that get five signatures per second; it can be followed on Twitter (#spanishrevolution); streaming live from Puerta del Sol at Soltv.tv; to see its reach, click
here. Reverberations are being felt all across Spain and word-wide - from Los Angeles to Sydney. A mini-French revolution started at the Bastille in Paris. Italians are planning their revolutions from Rome and Milan to Florence and Bari.

Outraged of the world, unite
They call themselves los indignados - "the outraged". Puerta del Sol is their Tahrir Square, a self-sufficient village complete with working groups, mobile first-aid clinic, and volunteers taking care of everything from cleaning to keeping an Internet signal. The May 15 movement - or 15-M, as it's known in Spain - was born as a demonstration by university students which spontaneously morphed into an open-ended sit-in meant to "contaminate" Spain via Facebook and Twitter and thus turn it into a crucial social bridge between Northern Africa and Europe.

They were only 40 people at the beginning. Now there are tens of thousands in over 50 Spanish cities - and counting. Soon there could be millions. Crucially, this is without the support of any political party or institution, trade union or mass media (in Spain, totally exposed to ridicule by political power). That's extraordinary in a country not exactly known by its tradition of dissent or the power of citizen organization.

The outraged are pacifists, apolitical and altruists. This is not only about the unemployed, "no future" youth - but an inter-generational phenomenon, with a middle-class crossover. This full stop to Spanish inertia - as in the sign "the French and the Greek fight while the Spanish win on soccer" - implies a profound rejection of the enormous abyss between the political class and the population, just like in the rest of Europe (Greek and Icelandic flags are seen side-by-side with the Egyptian flag.)

The outraged want citizens to regain their voices - as in a participative democracy embodied by neighborhood associations, and in favor of the right to vote for immigrants. Practically, they want a reform of the Spanish electoral law; more popular say on public budgets; political and fiscal reform; increased taxes for higher incomes; a higher minimum wage; and more control over big banking and financial capitalism.

Early this year, students in London protested en-masse against the rise in university tuition costs. The potential for protest is huge all across Europe. In Mediterranean Europe, the lack of prospects is absolutely bleak - from Generation Y to unemployed thirty-somethings stacked with diplomas. Even though the context is markedly different - in Northern Africa the fight is against dictatorships - the Arab Spring has shown young Europeans that mobilized citizens are able to fight for more social justice.

The Spanish left has tried to co-opt the movement. Prime Minister Jose Luis Rodrํguez Zapatero - badly bruised by these past Sunday elections, obviously boycotted by 15-M - said they must be listened to. The right, predictably, privileges a Hosni Mubarak approach, even asking the Ministry of Interior to go Medieval, as the former Egyptian president did. Right-wing media accuse the outraged of being communists, anti-system, urban guerrillas and having relations with the Basque separatists from ETA. The only thing missing was an al-Qaeda connection.

The outraged respond they are not anti-system; "it's the system that it's against us." Their original manifesto condemned the Spanish political class as a whole, plus corporate media, as allies to financial capital; those that have caused and are benefiting from the economic crisis. The outraged J'accuse includes the International Monetary Fund (IMF), the North Atlantic Treaty Organization, the European Union, financial risk agencies and the World Bank.

The Spanish economy is in fact being controlled by the IMF. Whether or not he was a reformer, the IMF under disgraced Dominique Strauss-Kahn's unleashed major social devastation over Spain, Greece and Portugal. It's not only the unemployment rate of 45% for under-30-year-olds in Spain; it's pensions and wages reduced by 15%. The IMF is leading the way for the economies of southern Europe to, in a nutshell, regress.

It's as if the 15-M movement had been electrified by that famous dictum by Polish Marxist theorist Rosa Luxemburg - according to which capitalism is unredeemable in its antagonism to true democracy. The record shows that's exactly what's happening in the industrialized North as well as in the global South.

The new 1968
So this goes way beyond a student revolt. It's a revolt that lays bare a profound ethical crisis convulsing a whole society. And it goes way beyond the economy; this is a movement seriously inquiring over the place of human beings in turbo-capitalist society.

No wonder baby boomers - the parents of Generation Y - cannot but be reminded of the late, great German philosopher Herbert Marcuse. Compared with this breath of fresh air amid the asphyxiating social and economic landscape in Spain and great swathes of Europe, how not be reminded of Marcuse in a conference in Vancouver in 1969, talking about a worldwide student rebellion.

Marcuse then evoked how French existentialist philosopher Jean-Paul Sartre was asked the same question - why these rebellions everywhere? Sartre said the answer was very simple - no sophisticated reasoning necessary. Young people were rebelling because they were asphyxiated. Marcuse always maintained this was the best explanation for this rebel yell denouncing a structural crisis of capitalism.

Marcuse was an ultra-sharp analyst of the degrading of culture as a form of repression, and the necessity of a critical elite capable of smashing the totalitarian opium of consumer culture (the outraged are also performing this role).

Marcuse identified the French and the American 1968 as a total protest against specific ills, but at the same time a protest against a total system of values, a total system of objectives. Young people didn't want to keep enduring the culture of established society; they refuted not only economic conditions and political institutions but also a rotten, global system of values.
In 1968, they were realists; they were demanding the impossible. Today, one of their signs read, "If you don't let us dream, we won't let you sleep."

Bob Dylan turns 70 this Tuesday. In Bob We Trust; he won't tell us, but deep in his heart and mind he knows where los indignados are coming from. If, as he wrote in Absolutely Sweet Marie, to live outside the law you must be honest, los indignados couldn't be more honest themselves, because they refuse to live under this law that is in fact killing them as well as most of us.

That's why it feels so great to be stuck inside of Madrid with the Cairo blues again.
The alpha and omega of debt
Peter Morici

Greece is in crisis again. Athens should restructure its debt and abandon the euro to reassert control over its finances and economy.

Just one year after wealthier European Union governments and the International Monetary Fund (IMF) extended 110 billion euros (US$155 billion) in emergency financing, Greece is unable to meet the aid plan's deficit reduction targets and grow fast enough to make its debt payments more manageable.

The European Central Bank and IMF insist that Athens can meet these targets, but raising taxes or cutting spending further would only slow growth even more, and likely cast Greece into a deep
recession from which it could not recover.

Now, Greece is slipping from a liquidity crisis into downright insolvency. Bond investors are demanding yields 20 percentage points higher on Greek debt than on comparable German debt. Rolling over existing bonds, as those come due, will be prohibitively expensive, and the collapse of Athens' finances seems inevitable.

Unless Greece gets significant concessions and loans at preferential rates from the EU and IMF, it will be impelled to ask private creditors to accept bonds with longer maturities and paying lower interest rates than the bonds they currently hold. As the market value of those securities would be much lower than the face value of Greece's current outstanding debt, such a restructuring would constitute a ''soft default".

Exacerbating the crisis, the ECB has threatened to cut off support for Greece's private banks if Athens restructures its debt. The ECB reasons that the banks' holdings of Greek debt would make them a bad risk, but it does not extend such thinking to German and other European banks holding Greek government paper.

The European Central Bank and IMF remain firm that no such restructuring is necessary, but cutting government spending or raising taxes enough to pay higher interest rates as debt rolls over would be self defeating. The recession that would result would reduce debt servicing capacity, not improve it, and endanger political stability as social services were slashed and unemployment skyrocketed in tandem.

The alpha and the omega of Greece's debt crisis - and those that could follow in Portugal, Ireland and other distressed states - are the anomalies in EU institutions that make it difficult to finance pensions and other social benefits in Greece and other poorer EU economies.

The 1992 Maastricht Treaty significantly harmonized product and safety standards and methods of taxation across the continent and was supposed to remove untold barriers to growth. It didn't, because European strict labor laws and business regulations discourage individual initiative and investment, and the EU's much advertised single market raised expectations among voters in poorer countries that pension and social benefits would be on a par with Germany and other rich states.

The single currency, the euro, introduced in 1999, was heralded as the next great elixir but it too failed to rev up growth, because it addressed a problem that didn't exist and created a new major barrier to the effective management of macroeconomic policy.

Prior to the euro, the European Currency Unit linked at fixed rates the national currencies of many of today's euro zone countries. The ECU was accepted as payment in international commercial transactions - the primary void the euro was supposed to fill.

However, each country could print its domestic currency and occasionally devalue against the group as its circumstances might require. With the euro that flexibility was taken away from poorer countries like Portugal, Spain, Greece, and Ireland.

Germany, like New York, greatly prospers by participating in a huge single continental market, but Brussels cannot tax Germany to subsidize Greece's welfare state in the same way Washington taxes New York to subsidize Mississippi's Medicaid.

With all that wealth to itself, Germany provides generous pensions, gold-plated employment security and jobless benefits, short work weeks, and the like. Meanwhile governments in Greece and other poorer EU states struggle to keep up, pile up lots of debt and can't scale back too much without risking political upheaval, because their populations won't accept they cannot enjoy the same perks as the Germans.

If Greece still had its own currency, it would still have had to cut spending and increase taxes - but not by nearly as much as the EU aid pact requires - because Greece could also devalue its currency against those of richer EU economies to make exports more competitive, accelerate growth, and increase debt servicing capacity.

Now things have gone too far. Greece's debts are too large and are denominated in euro, not the Greek drachma.

The only real solutions are for Greece to restructure its debt - both sovereign and private creditors should take haircuts; abandon the euro and reinstate the drachma; and rethink its welfare state. Like Americans, the Greeks will have to work longer to retire and accept other less generous social benefits, but they could reassert control over their economy.

The alternatives are endless EU bailouts - something the German and French voters are doubtful to allow - loss of Greek sovereignty, and economic collapse.