The Eurocrats stage a coup d’etat

On 1 October, the Portuguese economist José Castro Caldas took part in a debate entitled ‘Tomorrow’s Europe: technocracy or democracy? Who decides?’, a Battle of Ideas satellite event in Lisbon. His opening remarks are published below.

Recently, the Guardian’s Katharine Ainger wrote about the preparations for a financial coup d’état in Spain. Nothing more or less than that: preparations for a financial coup d’état in Spain; following already consummated financial coups d’état in Greece, Ireland and Portugal.

As a result, it is difficult to talk about European democracy with the dispassion the circumstances require. The reality is one of European institutions promoting a series of coups d’état and demanding a ‘dismissal of the people’ when the people rise against the loss of democracy represented by such coups d’état.

What happened to us – and has been happening for at least two decades – can be summed up in a nutshell. Freed from postwar restrictions, capital took flight, it placed itself above democratic political institutions and dictated economic and financial rules on both international and national levels. From that vantage point high profitability levels were demanded and obtained by cutting wages and restraining rights. New increases in value were demanded and found in pension funds and privatised public services.

Banking deregulation activity was demanded and obtained in procedures to both recycle existing accumulated surplus value and in new exotic financial products. In turn, credit briefly sustained consumption despite the decline of wages. However, it did not finance productive investment, nor could it finance such investment given the stagnation in wages and demand.

In fact, uncontrolled credit, abundant and cheap, evolved into speculative bubbles. Once those bubbles burst, banks, if not too big to be allowed to fail, would indeed have gone bankrupt. Only then did one rediscover the overwhelming power of states and central banks. Those same states and central banks, once weak before global capital, were now rising like a phoenix from the ashes to rescue the financial system. And one began to hear about billions never thought to exist or even be possible; billions channelled to a bankrupt financial system.

At the same time, an immense gap was found in Europe between economies in deficit and not between creditors and debtors. This gap had been deepening since the creation of the euro, the enlargement to the east, and the European Union opening up to overall imports. Apparently, no one noticed this gap.

On both sides of the gap, banks acquired unequal financial positions. Banks from surplus countries became creditors to heavily indebted banks from countries in deficit. Once bank debt was added to public debt in Greece and Portugal – and transformed into public debt in Ireland and Spain – it became clear that what had been a financial crisis had turned into a ‘sovereign debt crisis’.

Creditor banks which had flooded shortfall economies with low-cost credit were now refusing any more advances and claiming their money back. They were even willing to accept a financial coup d’état and a state of emergency being declared – just so long as they got paid back.

And this is what happened in Greece, Ireland and Portugal under the framework of ‘adjustment programmes’ that were previously conceived and tested by the IMF during the 1980s and 1990s in Latin America, Africa and Asia. Only now, the IMF is acting on the Eurozone and is supported by European institutions which include bailout countries as fully-fledged members.

Spain and Italy will eventually follow. After that, no one knows.

Adjustment is destroying bailout countries and even those countries where bailouts are still in preparation. Without a shadow of doubt, it is destroying those countries and not even allowing debts to be paid. A part of Europe is being put to fire and the sword. Adjustment is defeating government after government and is already threatening to split nations apart (such as Spain).

We are all living through a crisis created by arsonists who control the financial system, a system still managed by the very same arsonists who created it.

If we are unable to think calmly and rationally about democracy in Europe, and the future of Europe itself, it is only because we feel that those same arsonists are preparing to use the fire they have started as an excuse to claim a permanent state of emergency.

José Castro Caldas is an economist and a researcher at the Centre for Social Studies (CES) of Coimbra University. This is a translation of a speech given in Portugese at the Battle of Ideas satellite event Tomorrow’s Europe: technocracy or democracy? Who decides? on 1 October 2012.