“The contempt shown by Anglo Irish Bank for the Irish people and for their welfare and their public institutions was probably not very different from the attitude taken up by some of the other banks. We just do not have first-hand aural evidence of the …
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In Ireland, transcripts of telephone conversations between employees from 2008 at Anglo Irish Bankhave caused a massive outrage. In the tapes, the workers make fun of the government’s decision to guarantee bank liabilities at the height of the …
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Irish PM shocked by ‘vulgar’ Anglo Irish Bank tapes
New Straits Times
BRUSSELS : Irish Prime Minister Enda Kenny said Friday he was thunderstruck by leaked tapes at the centre of a scandal at the bailed-out Anglo Irish Bank which he said has tarnished Ireland’s reputation. But Kenny said after an EU summit in Brussels …
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Mocking Germans Adds Irish Insult to Banking Injury
Irish politicians say jibes at Germans by some of the country’s former bankers undermine their case for securing help to cut the 64 billion-euro ($83 billion) bill for saving the financial system. John Bowe, a former executive at the now defunct Anglo …
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Anglo Irish Bank scandal ‘damages democracy’, Angela Merkel says
Angela Merkel has expressed “contempt” for the disgraced Anglo Irish Bank executives caught on tape mocking Germany’s involvement in the institution’s €30bn (£25.7bn) bailout. The German chancellor delivered a strong condemnation of the revelations, …
BRUSSELS (AP) — German Chancellor Angela Merkel on Friday blasted newly disclosed comments by former directors of Ireland’s most notorious bank, who mocked foreign depositors and conspired to conceal the true scale of their losses while winning a …
Speaking at the EU summit in Brussels, Enda Kenny, the Irish prime minister, gives his response to recordings of Anglo Irish Bank staff joking about a bailout deal and mocking Germany. His comments follow an accusation from the German chancellor …
Tapes show Anglo Irish boss demands
Anglo Irish Bank bosses were ordered to go down to the Central Bank with “arms swinging” to demand a multibillion-euro taxpayer bailout, latest leaked tapes reveal. Also in this Section. Man quizzed over double murder · Fast-growing firms create 90 …
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German media fury at jibes of Anglo bankers
On Tuesday morning Dan Mulhall, the Irish Ambassador to Germany, gave an upbeat assessment of Ireland’s economic recovery and its EU presidency on Germany’s equivalent of RTÉ Radio 1. Just 24 hours later, he had a far less pleasant task: sending an …
Revelations of the behaviour and attitude of Anglo-Irish Bank executives before and after the introduction of the bank guarantee in September 2008 were stomach churning, the Minister for Transport, Leo Varadkar, has said. Speaking in Dublin as he …
Anti-austerity campaigners ask for three senior bankers to be charged read full article
This proposed prostitution law is going to run into the same problems as all the other attempts to deal with the subject because it’s fundamentally not amenable to logic. I personally find the notion of prostitution revolting, but that’s not a reason to ban it. I also find Youth Defence, Bono and Fianna Fáil repulsive […]read full article
Connection between Ireland’s sovereign and banking debts remains intact read full article
Ireland is officially back in recession after the government’s planned export-led recovery took a hammering. read full article
The bad news comes after shocking revelations this week about Irish bankers’ attitudes to the billions of taxpayers’ money used to rescue the banks at the start of Ireland’s financial crisis. “The economy is still ‘flatlining’ and net exports are a …
Trustees chairman warns payment to Government puts scheme under severe financial strain read full article
Material given to the Quinn family, in its battle with the former Anglo Irish Bank, indicates what would be revealed in a banking inquiry read full article
Minister asks FG colleagues to reflect on Bill before voting against it read full article
Fine Gael TD for Wicklow to join two others and break Government ranks read full article
Screenshot from the documentary “Sex – Made in Germany” – (Tina Soliman, Sonia Kennebeck)
Hombach was one of the first to collect taxes from the prostitution industry and he’s talking about what up to now has not been a focus of the debate about legalized prostitution in Germany: the fact that when women sell their bodies, the state earns a lot of money from it, either from a flat-rate sex tax or regionally levied entertainment taxes.
Just how much money was not something the two German TV journalists, Tina Soliman and Sonia Kennebeck, were able to find out in the two years they researched their documentary called Sex – Made in Germany. The documentary, shown on June 10 on Germany’s ARD channel, takes an in-depth look from various perspectives at the effects of prostitution legislation that came into effect in 2002.
For 45 minutes, the journalists examine the following question: what has resulted from the federal government having declared prostitutes small-business entrepreneurs who have health insurance and a right to the same social insurance coverage as anyone else? As their film reveals, apparently very little except for the fact that a lucrative economic sector – both real and virtual – has developed from what was once a shadow world.
Particularly frightening is the fact that as Germany’s neighbors tighten up their laws, brothel-keepers – particularly in the south of Germany – are increasingly catering to sex tourists from Italy, France, Switzerland, Luxembourg, Belgium and Sweden. Secretly filmed footage shows tourists from Asia and the United States on six-day package tours of German “clubs.”
A big favorite on the itinerary is the “King George,” a flat-rate brothel in Berlin where customers can get a sex-until-you-drop-and-drinks package for 49 euros. “There’s not a lot of margin on that,” says owner Sascha Erben, adding that making the package profitable is contingent on “high volume” of customers and the fact that most men overestimate how much sex they will actually be able to have. Erben says his customers come from Russia, Scandinavia, and Arab nations.
“Sex in Berlin is cheaper than anywhere else,” he says: Berlin is a sex paradise, no different than Thailand. A Danish customer who is a regular at a brothel in Flensburg (in northern Germany, near the Danish border) confirms that: “Germany is the biggest whorehouse in Europe, no question.” The value for money in Germany appears to be unequalled anywhere else in the world.
While Soliman and Kennebeck mostly spoke with supporters of legalized prostitution, they also interviewed some of its victims. What their interviews amply illustrate is that there are many different kinds of women willing to take money for sex.
For example 21-year-old Bettina, clearly delighted by the fact that she earns up to 15,000 euros a month at a Stuttgart “free body culture” (FKK) club. Or former part-time prostitute Sonia Rossi, who earned the money for her education. Also 22-year-old Nathalie, who auctions virtual sex on the Internet the way others might sell their couch on EBay, and pays 15% of her hourly 200 euros salary to the operators of the website.
“They treat you like garbage”
There is also Claudia, who works at the “King George” and earns 150 euros per night “for a maximum of ten guests” while her colleagues from eastern Europe – who their boss praises as being more “resilient and committed” – service at least 20 men in one night. “I need the money,” says Julia from Romania. In Germany she can earn in one evening as much as she can earn in a whole month back home.
Another young Romanian woman, who did not wish to be shown in the film, told the journalists that a few years ago a pimp lured her to Germany and she ended up at a flat-rate brothel called the “Pussy Club” where she was expected to service up to 40 men a day and could not eat or sleep on a regular basis. This went on until the authorities raided the place and arrested a group of human traffickers. “In Germany,” she says, “they treat you like garbage.”
The documentary makers do not address claims like this nor do they include interviews with politicians or human rights activists. They do include statements by customers, one of who says: “What I think is really great about the flat-rate brothels is that you don’t get the feeling that as a customer you’re being exploited.” He is one of 1.2 million men per year in Germany who pay for sex.
The sex business in Germany has become socially acceptable. Paying for sex is considered a “lifestyle,” and the businessmen behind the scenes are almost always relatively conventional older men who drive Mercedes, wear made-to-order suits, and spend a lot less time thinking about moral issues than they do about making money.
Men like Jurgen Rudloff, who owns a chain of FKK clubs called “Paradise” and is pleased at his growing customer base from Italy, France, Switzerland, Belgium, Luxemburg and the Netherlands. Clubs located near borders are particularly lucrative, he says. A few months ago he opened a club in Graz, Austria, but the experience has shown him that “in Germany it’s much, much easier to run this kind of business.”
However on-going federal government discussions about changing Germany’s prostitution laws may in the future make setting up a brothel in Germany a little more difficult too by requiring brothel owners to apply for licenses. Rudloff complains that local governments have also cottoned on that there’s money to be made in the business. Another man, Armin Lobscheid, owner of Europe’s largest brothel the “Pascha” in Cologne, tells the journalists that his business has to pay taxes amounting to “seven figures” every year.
Added to that is the new special tax for prostitutes that brothel operators will tack onto the room rate charged to the women. That way, state coffers rake it in but the government doesn’t get its hands dirty, say the journalists adding that “the government has become today’s pimp.”
Soliman and Kennebeck reach the conclusion that the good intentions to strengthen the position of prostitutes through legislation in fact achieved the opposite. “Women have become a resource, to be used as efficiently as possible,” they say.
Are we now living in a German Europe? In an interview with EUROPP editors Stuart A Brown and Chris Gilson, Ulrich Beck discusses German dominance of the European Union, the divisive effects of austerity policies, and the relevance of his concept of the ‘risk society’ to the current problems being experienced in the Eurozone.
How has Germany come to dominate the European Union?
Well it happened somehow by accident. Germany has actually created an ‘accidental empire’. There is no master plan; no intention to occupy Europe. It doesn’t have a military basis, so all the talk about a ‘Fourth Reich’ is misplaced. Rather it has an economic basis – it’s about economic power – and it’s interesting to see how in the anticipation of a European catastrophe, with fears that the Eurozone and maybe even the European Union might break down, the landscape of power in Europe has changed fundamentally.
First of all there’s a split between the Eurozone countries and the non-Eurozone countries. Suddenly for example the UK, which is only a member of the EU and not a member of the Eurozone, is losing its veto power. It’s a tragic comedy how the British Prime Minister is trying to tell us that he is still the one who is in charge of changing the European situation. The second split is that among the Eurozone countries there is an important division of power between the lender countries and the debtor countries. As a result Germany, the strongest economic country, has become the most powerful EU state.
Are austerity policies dividing Europe?
Indeed they are, in many ways. First of all we have a new line of division between northern European and southern European countries. Of course this is very evident, but the background from a sociological point of view is that we are experiencing the redistribution of risk from the banks, through the states, to the poor, the unemployed and the elderly. This is an amazing new inequality, but we are still thinking in national terms and trying to locate this redistribution of risk in terms of national categories.
At the same time there are two leading ideologies in relation to austerity policies. The first is pretty much based on what I call the ‘Merkiavelli’ model – by this I mean a combination of Niccolò Machiavelli and Angela Merkel. On a personal level, Merkel takes a long time to make decisions: she’s always waiting until some kind of consensus appears. But this kind of waiting makes the countries depending on Germany’s decision realise that actually Germany holds the power. This deliberate hesitation is quite an interesting strategy in terms of the way that Germany has taken over economically.
The second element is that Germany’s austerity policies are not based simply on pragmatism, but also underlying values. The German objection to countries spending more money than they have is a moral issue which, from a sociological point of view, ties in with the ‘Protestant Ethic’. It’s a perspective which has Martin Luther and Max Weber in the background. But this is not seen as a moral issue in Germany, instead it’s viewed as economic rationality. They don’t see it as a German way of resolving the crisis; they see it as if they are the teachers instructing southern European countries on how to manage their economies.
This creates another ideological split because the strategy doesn’t seem to be working so far and we see many forms of protest, of which Cyprus is the latest example. But on the other hand there is still a very important and powerful neo-liberal faction in Europe which continues to believe that austerity policies are the answer to the crisis.
Is the Eurozone crisis proof that we live in a risk society?
Yes, this is the way I see it. My idea of the risk society could easily be misunderstood because the term ‘risk’ actually signifies that we are in a situation to cope with uncertainty, but to me the risk society is a situation in which we are not able to cope with the uncertainty and consequences that we produce in society.
I make a distinction between ‘first modernity’ and our current situation. First modernity, which lasted from around the 18th century until perhaps the 1960s or 1970s, was a period where there was a great deal of space for experimentation and we had a lot of answers for the uncertainties that we produced: probability models, insurance mechanisms, and so on. But then because of the success of modernity we are now producing consequences for which we don’t have any answers, such as climate change and the financial crisis. The financial crisis is an example of the victory of a specific interpretation of modernity: neo-liberal modernity after the breakdown of the Communist system, which dictates that the market is the solution and that the more we increase the role of the market, the better. But now we see that this model is failing and we don’t have any answers.
We have to make a distinction between a risk society and a catastrophe society. A catastrophe society would be one in which the motto is ‘too late’: where we give in to the panic of desperation. A risk society in contrast is about the anticipation of future catastrophes in order to prevent them from happening. But because these potential catastrophes are not supposed to happen – the financial system could collapse, or nuclear technology could be a threat to the whole world – we don’t have the basis for experimentation. The rationality of calculating risk doesn’t work anymore. We are trying to anticipate something that is not supposed to happen, which is an entirely new situation.
Take Germany as an example. If we look at Angela Merkel, a few years ago she didn’t believe that Greece posed a major problem, or that she needed to engage with it as an issue. Yet now we are in a completely different situation because she has learned that if you look into the eyes of a potential catastrophe, suddenly new things become possible. Suddenly you think about new institutions, or about the fiscal compact, or about a banking union, because you anticipate a catastrophe which is not supposed to happen. This is a huge mobilising force, but it’s highly ambivalent because it can be used in different ways. It could be used to develop a new vision for Europe, or it could be used to justify leaving the European Union.
How should Europe solve its problems?
I would say that the first thing we have to think about is what the purpose of the European Union actually is. Is there any purpose? Why Europe and not the whole world? Why not do it alone in Germany, or the UK, or France?
I think there are four answers in this respect. First, the European Union is about enemies becoming neighbours. In the context of European history this actually constitutes something of a miracle. The second purpose of the European Union is that it can prevent countries from being lost in world politics. A post-European Britain, or a post-European Germany, is a lost Britain, and a lost Germany. Europe is part of what makes these countries important from a global perspective.
The third point is that we should not only think about a new Europe, we also have to think about how the European nations have to change. They are part of the process and I would say that Europe is about redefining the national interest in a European way. Europe is not an obstacle to national sovereignty; it is the necessary means to improve national sovereignty. Nationalism is now the enemy of the nation because only through the European Union can these countries have genuine sovereignty.
The fourth point is that European modernity, which has been distributed all over the world, is a suicidal project. It’s producing all kinds of basic problems, such as climate change and the financial crisis. It’s a bit like if a car company created a car without any brakes and it started to cause accidents: the company would take these cars back to redesign them and that’s exactly what Europe should do with modernity. Reinventing modernity could be a specific purpose for Europe.
Taken together these four points form what you could say is a grand narrative of Europe, but one basic issue is missing in the whole design. So far we’ve thought about things like institutions, law, and economics, but we haven’t asked what the European Union means for individuals. What do individuals gain from the European project? First of all I would say that, particularly in terms of the younger generation, more Europe is producing more freedom. It’s not only about the free movement of people across Europe; it’s also about opening up your own perspective and living in a space which is essentially grounded on law.
Second, European workers, but also students as well, are now confronted with the kind of existential uncertainty which needs an answer. Half of the best educated generation in Spanish and Greek history lack any future prospects. So what we need is a vision for a social Europe in the sense that the individual can see that there is not necessarily social security, but that there is less uncertainty. Finally we need to redefine democracy from the bottom up. We need to ask how an individual can become engaged with the European project. In that respect I have made a manifesto, along with Daniel Cohn-Bendit, called “We Are Europe”, arguing that we need a free year for everyone to do a project in another country with other Europeans in order to start a European civil society.
A more detailed discussion of the topics covered in this article is available in Ulrich Beck’s latest book, German Europe (Polity 2013). This interview was first published on EUROPP@LSE
THE HAGUE, Netherlands – A Dutch court on Wednesday ordered the government to compensate owners of cannabis-selling cafes who say they lost money because of measures aimed at stamping out drug tourism.
The court said that turning coffee shops in the southern Netherlands into private member-only clubs last year deterred not only foreigners but also Dutch customers, and ordered compensation for the cafe owners. The amount will be settled later.
The decision was the latest skirmish in a long-running legal battle between the government that wants officially tolerated coffee shops to sell cannabis only to locals, and owners of the cafes who insist they should be allowed to sell to anybody.
Cannabis is technically illegal in the Netherlands, but police turn a blind eye to possession of small amounts and it is sold openly in coffee shops. Large-scale growers are prosecuted.
Michael Veling, a spokesman for the Dutch Union of Cannabis Retailers, said the group was disappointed by the parts of the ruling that upheld anti-drug-tourism measures, and would appeal.
In a written reaction, the Dutch Ministry of Security and Justice called the judgment “a powerful underpinning of the present policy” and said it saw grounds to appeal the ruling that said turning coffee shops into private clubs was too harsh and unnecessary.
Under a government policy change that came into force May 1 last year in southern provinces close to the Dutch borders with Germany and Belgium, only holders of a “weed pass” are allowed to buy cannabis. The measure took aim at problems caused by thousands of foreigners who pour across the borders each year to buy drugs.
The government scrapped the pass in November, but continued its policy of allowing coffee shops to sell drugs only to Dutch residents.
However, it said local authorities would be responsible for enforcing the measure. Amsterdam, whose scores of coffee shops are a major tourist draw, immediately said it would continue to allow tourists to buy weed in the cafes.
By Mike Corder, The Associated Press
At the end of the G8 meeting in Northern Ireland on Tuesday night, Barack Obama and Angela Merkel will hop on a plane bound for Berlin together. Merkel has already boasted that she will make their meeting an awkward one, promising to ask uncomfortable questions about the Prism affair. The image that comes to my mind is that of a pinscher yapping at a great dane, while the great dane just benignly gazes into the distance.
Of course, the pinscher has every reason to bark its lungs out. Surveillance of worldwide internet communications, as practised by the National Security Agency (NSA) through Prism, is the stuff of Orwellian nightmares. Any democratic system rests on the idea that its citizens can think and act freely – but no individual can act and think freely while being watched. The very fact of being watched means that we act differently. Unsupervised communication between individuals is an essential precondition for a functioning democracy.
There will always be people who dismiss complaints about state surveillance as hysteria. Since 11 September 2001 it has become increasingly easy to discourage those who care about their fundamental rights. Just insist that a new measure will aid the fight against terrorism, and that legitimises it. Particularly in Britain and the US, many people seem surprisingly blase about the idea of the state watching over them.
I despair at such indifference. Germany endured two totalitarian systems in the 20th century. Not just Nazism, but the GDR too, built a dictatorship on the surveillance, registration and selection of individuals. People became objects who were divided into nebulous categories. The fight against terror requires a similar division of civil society according to sex, age, ethnicity, religion and politics. The problem with such machine-led screening methods is not only that it is very hard for people to escape them once they get caught, but that they no longer presume innocence – everyone is now a potential suspect.
Because of this, Germans have traditionally been more sensitive to assaults on their private sphere. There are fewer CCTV cameras, and Google’s Street View project was met with widespread resistance in 2010: click yourself through a map of Germany and you’ll still find large areas still pixelated. A few weeks ago, Germany published its first post-reunification census – the previous ones in the 1980s were widely boycotted on ethical grounds. But that Germany hasn’t reached the level of the US is not thanks to politicians’ sense of history, but to the so-called “basic law” that anchors our constitution and the federal constitutional court that protects it. One “security law” after the next has been proposed and then rejected by the court for infringing on civil rights.
But being a little more sensible on civil rights issues than other European states will no longer do. On the contrary: with its unique historical background, Germany should be leading the charge against any form of Big Brother system.
Having been raised in East Germany, Merkel especially should know what is at stake here. She experienced in her youth how long-term surveillance can demoralise the human spirit and distort the character of a society.Explaining that to her American counterpart would be a start for Merkel. She should explain to him that there is a lesson for the rest of the world in Germany’s history. In the 21st century, modern technology will take the possibility for total surveillance to a completely new level. Compared with what Prism allows you to do, Stasi activities look like child’s play: the size and speed of the data flow threatens to overwhelm the lawmakers who are meant to control it.
My fear is that Merkel’s protest will be hard to take seriously, and that Obama will notice this. Since 9/11, Merkel’s government has also passed laws that allow the state to virtually x-ray its citizens. Der Spiegel recently reported that Germany’s equivalent of the NSA, the BND, is planning to expand its web monitoring programme over the next five years.
Ultimately, Merkel’s emphatic concern about the Prism affair stems from the fact there will a federal election in Germany in September. It’s a convenient chance to demonstrate a bit of political spine. Once the pinscher’s done with the yapping, the great dane will give her a kindly smile and assure her that everything is happening within the law. After that, the excitement about Prism will soon evaporate, and they in America and we in Europe will continue collecting data.
Data protection is to the communication age what environmental protection was for the age of industrialisation. Back then, we lost decades because we didn’t realise how severe the damage we were causing really was. Let’s try not to make the same mistake twice.
• This article was amended on Tuesday 18 June. Angela Merkel was born in Hamburg, not East Germany, as the seventh paragraph originally stated. She was raised in East Germany.
Our problems are not due to a lack of innovative ideas; they are due to an excess of financial power concentrated in the hands of an elite of bankers.
For years already, the youth of Europe’s heavily indebted periphery has been facing mass unemployment. In Greece and Spain, a respective 59 and 56 percent of young people are now out of work, while youth unemployment in the EU as a whole currently stands at a troubling 24 percent, up from 22.5 percent last year. The “lucky” ones are those waiting tables with PhD degrees in their back pockets. Those who were forced to leave their families and friends behind to join the generational exodus to Germany or Angola don’t even show up in the statistics.
In recent weeks, European leaders somewhat belatedly seem to have become mightily interested in the issue. Italy’s new Prime Minister Enrico Letta called youth unemployment the most serious problem facing his country and called for an EU plan to “combat” it. German Chancellor Angela Merkel, flag-bearer of the European austerity movement, similarly considers youth unemployment to be “Europe’s biggest challenge.” Meanwhile, a new campaign by Big Think somewhat naively asks “what’s causing youth unemployment and what can fix it?”
Apart from the obvious hypocrisy of these concerns — coming from the lips of the same officials whose unrelenting insistence on austerity, neoliberal reforms and full debt repayment largely caused the unemployment crisis to begin with — this newfound sympathy for our generation’s plight hinges on a dangerous assumption that serves to ideologically re-construct youth unemployment as a “problem” that can somehow be “solved” with a magic fix or a continental master plan — without addressing the underlying causes of austerity, depression, and a fundamentally unsustainable debt load, let alone the internal contradictions of the eurozone and globalized financial capitalism more generally.
It should be clear to any intelligent person by now that youth unemployment is not a problem in the ordinary sense of the word; it is a symptom of a much more deep-seated disease that’s breaking down our society from within. Other symptoms include the rise of neo-Nazism and xenophobic violence in Greece; the wave of suicides across Southern Europe; the 400.000 families that have been evicted from their homes in Spain; the thousands of starving horses that have been abandoned by their owners in Ireland; the UK students who had their tuition fees tripled and now face the prospect of either dropping out, studying abroad, or accruing massive student debts; the eurozone record levels of mortgage debt held by Dutch households, etc., etc. — not to mention the thorough discrediting of democratic institutions and the massive riots that have rocked major European capitals like London, Athens, Madrid, Lisbon and Rome.
But European leaders seem blind to the metastasis of misery that has crept into the social fabric of our continent. Wouldn’t it be great, they now seem to tell us, if we could have crippling austerity, an increasing debt load, a devastating social crisis, starving pensioners, the return of fascism, a wave of suicides and mass deprivation — but without the youth unemployment? I’m not buying this story, and I don’t think any of us should. The attempt to cast the current crisis in generational terms serves to drive a wedge between us and our unemployed, indebted and/or retired (grand)parents. It serves to co-opt the youth in the ongoing wave of neoliberal reforms, making us believe it is in our best interest to crack down on the labor rights, jobs and pensions of our parents so we ourselves can better compete for the increasingly precarious jobs of the future.
The real reason European leaders are suddenly so concerned about youth unemployment — while they remain unmoved by the plight of Greek AIDS patients, for instance, who now can’t get their anti-retroviral drugs — is simply that they are terrified by the prospect of social unrest. As the New York Times reported today, “it is clear that policy makers are seriously worried that millions of frustrated young job seekers pose as much of a threat to the euro zone as excessive government debt or weak banks.” German Finance Minister Wolfgang Schäuble literally admitted that “We will have to speed up in fighting youth unemployment, because otherwise we will lose the support, in a democratic way, in some populations of the European Union.” What they fear, in other words, is a continent-wide youth uprising. At its worst, their plans to “fix” youth unemployment serve to distract us from the obvious class dimension at play, promoting the illusion that the social crisis we face is just a series of economic problems that can be fixed without radical changes to the political status quo.
The inconvenient truth is that unemployment is an integral element of the neoliberal policy response to the crisis pursued by the European Union and the IMF. This, in itself, is nothing new. IMF austerity programs in the developing world have long involved dramatic reductions in wages and rises in unemployment. Careful quantitative analysis of the Latin American debt crisis of the 1980s has shown that “the most consistent and statistically significant impact of Fund programs in Latin America … was the reduction in labor share of income.” Even official IMF studies recognize that its austerity programs “boost unemployment and lower paychecks.” Most importantly, the authors of a 2011 IMF report, Painful Medicine, conclude that austerity causes not just short-term but “particularly long-term unemployment.”
In other words, asking for austerity measures without youth unemployment is like insisting on the medieval practice of blood-letting without the blood-loss. It is not only brutal, but also practically impossible. Austerity and unemployment are like Siamese twins, conjoined at the hip, designed to strengthen and reinforce one another. As long as the EU and IMF keep imposing these highly destructive adjustment measures, unemployment will keep on rising. The only genuine “solution” to unemployment, therefore, would be to break free from the shackles of austerity and to default on the foreign debt. This is the reformist vision pursued by SYRIZA in Greece, and despite the lack of revolutionary imagination of this quasi-Keynesian approach, there is certainly something to be said for it from a humanitarian point of view.
At the same time, I have now written some 50,000 words on this question — why not default? – for my PhD thesis, showing precisely why the option of default is often so elusive. In a word, default would greatly harm the interests of foreign private creditors, who just happen to control virtually all the critical resources in the global economy, giving them a disproportionate ability to block the type of solutions that would favor the unemployed. So to get to the phase where we can even realistically start considering genuine “solutions” to the “problem” of youth unemployment, we first have to confront the financial power structures that obstruct the pursuit of such solutions to begin with. This requires much more than a continental master plan to combat youth unemployment. It requires a radical break with the status quo.
Our problems, in short, are not due to a lack of innovative ideas; they are due to an excess of financial power concentrated within the hands of a tiny elite of bankers. This means we have to dramatically reformulate our question. Rather than asking what innovative ideas can solve the problem of youth employment, we should be asking what type of strategies could upend the structural power of international creditors. This leads us away from economics and back into the realm of revolutionary theory and praxis. How could Europe’s downtrodden youth ever possibly conceive of shaking the global financial order? It is to this impossible question that I will turn in my next post.
The euro zone has registered yet another record high unemployment rate of 12.2%, European statistics agency Eurostat reports on Friday.
Earlier in the day, Italy, the third-largest economy in the currency bloc, reported a first quarter jobless rate of 12.8%, the highest in the 36 years this data has been collected, Meanwhile youth unemployment rose to a staggering 40.5%, also an all-time record high, reports Il Sole 24 Ore.
Here is a breakdown of the alarming numbers:
-More than 26 million people unemployed in the 27-member European Union.
-More than 19 million unemployed in the 17-country euro zone.
-Euro zone average: 12.2%
-European Union average: 11%
Greece: 27% in February 2013
In comparison, the United States was 7.5% down from 7.6% in the previous month and 8.1% in April 2012.
-Euro zone youth unemployment: 24.4% up from 24.2% in January 2013.
-European Union under-25 unemployment: 23.5% down from 23.6% in January 2013.
Euro area inflation expected to be on the rise:
WITH CONSIDERABLE speculation about an impending deal on bank debt, with the Taoiseach and the German Chancellor jointly stating that Ireland is a ‘special case’, it is helpful to remind ourselves just how special a case we are.
Eurostat, the EU Commission’s data agency, has calculated the cost of the banking crisis in each EU country. The following focuses on the cost to general government budgets. Ireland has really taken one for Team EU.
Yes, there’s wee Ireland up at the top, just edging out Germany for the dubious title of spending the most on the banking crisis. €41 billion to date according to the Eurostat accounting data (this doesn’t count the billions ploughed into the covered banks from our National Pension Reserve Fund as this was not counted as a ‘cost’ to the General Government budget).
Of course, this doesn’t give the best picture. What happens when we look at the cost as a percentage of GDP?
Ireland may not win football’s European Championship but when it comes to banking debt we are Barcelona, Bayern Munich and Manchester United all rolled into one with Real Madrid for a bench. Germany may have run Ireland close in the nominal amount of banking debt but when it comes to a proportion of GDP, it is just pennies behind their sofa. For Ireland, it’s the entire house.
Here’s another little stat to chew on. The European banking crisis is just that – a European crisis. But as we know, this has not been addressed at European level. Rather, the cost has been delegated to individual countries regardless of their size or ability to pay. For instance:
- Ireland makes up 0.9 percent of the EU population
- The Irish economy makes up 1.2 percent of EU GDP
Ok, we’re small. So how much of the entire European banking debt have we paid?
- The Irish people have paid 42 percent of the total cost of the European banking crisis
We may be minnows when it comes to population and economic size, but when it comes to banking debt we are the whale in the pond.
One more breakdown. How much have countries paid per capita?
The European banking crisis to date has cost every individual in Ireland nearly €9,000 each. The average throughout the EU is €192 per capita. I really don’t know what you can say after that.
So, Ireland is a really, really special case. We require a really, really special solution. The Government (and we must always remember that this mess wasn’t created on their watch) has a real challenge in the negotiations over bank debt. But there is a bottom-line here.
If any deal does not qualitatively alter these dismal statistics, then it won’t be a deal worth applauding. The Government may be tempted to return to the Irish people waving a sheet of paper claiming ‘a bank debt deal for our time’.
But if are still paying nearly €9,000 each while the remainder of the EU pays only a fraction of that, then it is no deal at all; just a re-arranging of euro notes – a lot of euro notes – on the decks of a sunken ship.
High levels of military spending played a key role in the unfolding European sovereign debt crisis — and continue to undermine efforts to resolve it.
A new report by the Transnational Institute — ‘Guns, Debt and Corruption: Military Spending and the EU Crisis’ — looks at the ways in which excessive militarization directly fed into the unfolding European debt crisis, and continues to undermine efforts to resolve it. Below the downlink links and infographic you can find the executive summary of the report.
Five years into the financial and economic crisis in Europe, and there is still an elephant in Brussels that few are talking about. The elephant is the role of military spending in causing and perpetuating the economic crisis. As social infrastructure is being slashed, spending on weapon systems is hardly being reduced. While pensions and wages have been cut, the arms industry continues to profit from new orders as well as outstanding debts.
Perversely, the voices that are protesting the loudest in Brussels are the siren calls of military lobbyists, warning of “disaster” if any further cuts are made to military spending. This paper shows that the real disaster has emerged from years of high European military spending and corrupt arms deals. This dynamic contributed substantially to the debt crisis in countries such as Greece and Portugal and continues to weigh heavily on future budgets in all of the crisis countries.
The power of the military-industrial lobby also makes any effective cuts less likely. This is perhaps most starkly shown in how the German government, while demanding ever higher sacrifices in social cuts, has been lobbying behind the scenes against military cuts because of concerns this would affect its own arms industry.
The paper reveals how:
High levels of military spending in countries now at the epicentre of the euro crisis played a significant role in causing their debt crises. Greece has been Europe’s biggest spender in relative terms for most of the past four decades, spending almost twice as much of its Gross Domestic Product (GDP) on defence as the EU average.Spain’s military expenditure increased 29% between 2000 and 2008, due to massive weapon purchases. It now faces huge problems repaying debts for its unnecessary military programmes.
As a former Spanish secretary of state for defence said: “We should not have acquired systems that we are not going to use, for conflict situations that do not exist and, what is worse, with funds that we did not have then and we do not have now.” Even the most recent casualty of the crisis, Cyprus, owes some of its debt troubles to a 50% increase in military spending over the past decade, the majority of which came after 2007.
The debts caused by arms sales were often a result of corrupt deals between government officials, but are being paid for by ordinary people facing savage cuts in social services. Investigations of an arms deal signed by Portugal in 2004 to buy two submarines for one billion euros, agreed by then-prime minister Manuel Barroso (now President of the EU Commission) have identified more than a dozen suspicious brokerage and consulting agreements that cost Portugal at least €34 million. Up to eight arms deals signed by the Greek government since the late 1990s are being investigated by judicial authorities for possible illegal bribes and kickbacks to state officials and politicians.
Military spending has been reduced as a result of the crisis in those countries most affected by the crisis, but most states still have military spending levels comparable to or higher than ten years ago. European countries rank 4th (UK), 5th (France), 9th (Germany) and 11th (Italy) in the list of major global military spenders. Even Italy, facing debts of €1.8 trillion, still spends a higher proportion of its GDP on military expenditure than the post-Cold War low of 1995.
The military spending cuts, where they have come, have almost entirely fallen on people – reductions in personnel, lower wages and pensions – rather than on arms purchases. The budget for arms purchases actually rose from €38.8 billion in 2006 to €42.9 billion in 2010 – up more than 10% – while personnel costs went down from €110.0 billion in 2006 to €98.7 billion in 2010, a 10% decrease that took largely place between 2008 and 2009.
While countries like Germany have insisted on the harshest cuts of social budgets by crisis countries to pay back debts, they have been much less supportive of cuts in military spending that would threaten arms sales. France and Germany have pressured the Greek government not to reduce defence spending. France is currently arranging a lease deal with Greece for two of Europe’s most expensive frigates; the surprising move is said to be largely “driven by political considerations, rather than an initiative of the armed forces”. In 2010 the Dutch government granted export licences worth €53 million to equip the Greek navy. As an aide to former Greek prime minister Papandreou noted: “No one is saying ‘Buy our warships or we won’t bail you out.’ But the clear implication is that they will be more supportive if we do”.
Continued high military spending has led to a boom in arms companies’ profits and an even more aggressive push of arms sales abroad ignoring human rights concerns. The hundred largest companies in the sector sold arms to the value of some €318 billion in 2011, 51% higher in real terms compared to 2002. Anticipating decreased demand at home, industry gets even more active political support in promoting arms sales abroad.In early 2013 French president François Hollande visited the United Arab Emirates to push them to buy the Rafale fighter aircraft. UK prime minister David Cameron visited the Emirates and Saudi Arabia in November 2012 to promote major arms sales packages. Spain hopes to win a highly controversial contract from Saudi Arabia for 250 Leopard 2 tanks, in which it is competing with Germany – the original builder of the tank.
Research shows that investment in the military is the least effective way to create jobs, regardless of the other costs of military spending. According to a University of Massachusetts study, defence spending per US$ one billion creates the fewest number of jobs, less than half of what it could generate if invested in education and public transport. At a time of desperate need for investment in job creation, supporting a bloated and wasteful military can not be justified given how many more jobs such money would create in areas such as health and public transport.
Despite the clear evidence of the cost of high military spending, military leaders continue to push a distorted and preposterous notion that European Union’s defence cuts threaten the security of Europe’s nations. NATO’s secretary general, Anders Fogh Rasmussen “has used every occasion to cajole alliance members into investing and collaborating more in defense.”
Gen. Patrick de Rousiers, the French chairman of the EU Military Committee, at a hearing in the European Parliament, even suggested Europe’s future was at stake if military spending was not increased. “What place can a Europe of 500 million inhabitants have if it doesn’t have credible capacity to ensure its security?” he asked rhetorically.
We believe, by contrast, that at a time when the European Commission’s agenda of permanent austerity faces ever-growing challenges, there is one area where Europe could do much more to impose austerity. And that is the arena of military spending and the arms industry.
Abolishing nuclear weapons owned by France and the UK could save several billions of euros every year and fulfil a major pledge made by these countries under the nuclear non-proliferation treaty to finally eliminate nuclear weapons. Reductions of all EU nations’ military spending to Ireland’s levels (0.6% of GDP) would save many more billions.
Writing off dirty debts caused by arms deals concluded through bribes, would be a good first step to lay the bill for the crisis with those who helped cause it. Such measures would also prove that at a time of crisis, Europe is prepared to invest in a future desired by its citizens rather than its warmongers.
Download Guns, Debt and Corruption: Full report (pdf, 525KB)
Download Guns, Debt and Corruption: Executive Summary (pdf, 77KB)
Everyone knows the stereotypes. Germans save for the future, while Spaniards spend everything they earn. So it’s not surprising that Germany has survived the recent crisis in decent shape, while Spain is a mess, with unemployment at roughly 27 percent. If only the Spaniards had been as thrifty as the Germans, this never would have happened, right?
Wrong. The spending patterns of Spanish households did not cause the euro crisis, but were a response to the imbalances created by excess savings in Germany. Furthermore, these excess savings were not caused by the thriftiness of German households, but by policies that forced up German savings rates to levels that Europe could not absorb without creating serious imbalances.
National savings and household savings are often assumed to be the same thing, but are actually very different. The household savings rate is the share of household income — mainly wages, investment income, and social transfers like welfare payments and pensions — that households do not spend on consumption.
The national savings rate, on the other hand, includes not just household savings, but also the savings of governments and businesses. It is defined simply as a country’s GDP minus its total consumption. While the household savings rate is determined primarily by the cultural and demographic preferences of ordinary households, the national savings rate is not. Indeed in some cases, such as China and Germany, the household share of all the goods and services a country produces, which is primarily a function of policies and economic institutions, is the main factor affecting the national savings rate.
National savings, in other words, have very little to do with household preferences and a lot to do with policy. Take China, which has by far the highest national savings rate in the world at roughly 50 percent. This is in part because Chinese households, like those of many poor countries lacking a robust social safety net, save a high proportion of their income.
But while China’s savings rate is extraordinary, Chinese household savings rates are merely on the high side, and on par with other East Asian nations. Chinese households, it turns out, are not nearly as thrifty as their exceptionally high national savings rate implies. Why, then, is China’s savings rate unprecedented? The main reason is the very low household income share of GDP. Chinese households retain a lower share of all the goods and services the country produces – around 50 percent — than households in any other country in the world.
This is a consequence of policies Beijing put into place over the past two decades that goose GDP growth by constraining growth in household income. These include low wage growth, an undervalued currency, and extremely low interest rates, all of which reduce household income while subsidizing growth. As a result, the household share of China’s total production of goods and services has been falling for 30 years, from 60-70 percent in the 1980s to 50 percent today. Consequently, as households earn a declining share of what China produces, they also consume a declining share. China’s high savings rate, in other words, has little to do with Chinese thrift, and much more to do with policies that reduced the share of Chinese household income relative to GDP. This is also true in Germany.
In the 1990s, Germany saved too little. It ran current account deficits for much of the decade, which means it imported capital to fund domestic investment. A country’s current account deficit is the difference between how much it invests and how much it saves, and Germans in the 1990s did not save enough to fund local investment.