Exclusive: Sell the Acropolis, says Merkel in bugged phone call

German Chancellor Angela Merkel has complained to President Barack Obama about the bugging of her mobile phone by America’s infamous National Security Agency. In fact, according to whistleblower Edward Snowden, the NSA has access to just about everyone’s emails and phone conversations.

We’ve been passed a transcript of a three-way conversation between Merkel, Mario Draghi, the head of the European Central Bank in Frankfurt and Christine Lagarde, head of the International Monetary Fund, who was in Washington at the time. The call took place in May 2012 when the Greek government was close to collapse over its plans for further drastic cuts in public spending before a new bail-out was agreed.

Merkel: What are we going to about Greece? German taxpayers are fed up with their attitude. We can’t keep bailing them out if they are not going to make sacrifices. If they won’t sack civil servants and cut their pensions, we should throw them out of the euro.

Draghi: Madame chancellor, with all due respect, we can’t just eject them from the euro because it could easily lead to the domino effect.

Merkel: What is a domino?

Draghi: It a piece of black plastic or ivory used in a game, it is oblong shaped and has white dots on one side. You stand them on their end, next to each other. If you push one over, the others will fall too. This is called a domino effect. Many wars start this way.

Lagarde: Madame chancellor, I think what Signor Draghi is saying is that if Greece leaves the euro, others may consider that the single currency is only for rich countries. Others like Spain and Portugal may also run into difficulties and the euro could collapse.

Merkel: Ah, so. We keep Greece in the euro but insist they cut their spending before they get more bail-out funds. Is that correct?

Draghi: The difficulty is that it’s hard to see what how they can reduce their spending much more. I am told that the government has run out of money to pay for imported medicines and that hospitals cannot pay their electricity bills. We may have to lend them more money so that they can repay the banks the interest on the loans they gave them in the first place.

Merkel: We have to do something. Tourists from Germany are being abused when they go on holiday in Greece. The Greeks seem to blame us for their problems yet we have gone out of our way to help them. Perhaps they could sell the Acropolis or the Palace of Knossos? That would raise some money, surely?

Lagarde: Yes. I know some hedge funds here in Washington that would buy these monuments and lease them back to the Greeks. There must be many more temples and palaces that could be sold in this way. We should ask their government to draw up a list. We have to stand shoulder to shoulder over Greece. Other countries must know that if they get into debt that the most important thing is saving the banks and the financial system. These are our priorities.

Draghi: Many European banks are still in some difficulties over the excessive debt on their balance sheets. Protecting them has to be top of our agenda.

Merkel: Agreed. So we will tell the Greek government to, how do you say, swallow the medicine because in the long run it will cure them! By the way, who do you think will win the European Champions League final in Moscow [between Bayern Munich and Chelsea]?

Draghi: It won’t be a Greek team!

Lagarde: Nor a French one!

Wanted: a democratic alternative to Merkel and Cameron

The choice between living in a European so-called “super state”, as advocated by German chancellor Angela Merkel, or an independent, “sovereign” state, as viewed by prime minister David Cameron is, in reality, no choice at all.

            

Merkel is in no position to enforce a complete political and economic integration of the 17 countries that make up the ill-fated eurozone, let alone the entire European Union. And Cameron is simply playing the nationalist card when he says his government will always put “British interests” first.

The driving force behind the comments made by Merkel and Cameron in Berlin yesterday is an economic crisis that has swung wildly out of control, gathering a momentum that overwhelms conventional politics as well as underming the European Union project itself.

Launching the euro in 1999 was viewed as a step towards the harmonisation of the European economy. Within a few years, it became the world’s second largest reserve currency after the dollar. Now it is on its back, brought down by debt mountains across the continent.

But Merkel is mistaken if she thinks that total integration of fiscal and monetary policy under a single European state would save the euro and/or prevent this from happening again. Leaving aside the political impossibility of her ambition, the real problem lies in the cause of the crisis itself.

Debt, as we have pointed out many times, is actually the product of far deeper problems inherent within the capitalist system, and not the source of the global crisis. The amassing of household, corporate and government debt was necessary to fund and fuel the expansion of the economy in the period of intense globalisation.

When consumers were maxed out on credit and the economy began to slow in the earlier part of this century, the banks were caught holding worthless, so-called toxic assets. They stopped lending, several went under and the world was plunged into recession. Tax revenues fell and sovereign debt soared.

The contraction is deepening. Italy’s industrial output fell a staggering 9.2% in April, it was revealed today. Spain is bankrupt and is reported to be planning to formally ask for an EU bail-out over the weekend. China’s economy has slowed rapidly, dashing the hopes of those who thought it would take up the slack.

Under these conditions, integrating the EU states into a single entity – even if this were a realistic possibility – is meaningless because the problem lies within the nature of the capitalist system itself, not political will. Naturally, neither Merkel nor Cameron can or will address this as they are ruling class politicians who endorse the status quo of globalised capitalism.

A European capitalist “super state” is an ugly and dangerous concept, as World War II demonstrated in practice. British nationalism is an equally nasty prospect, whether it is in the hands of Cameron, UKIP or the Labour leader Ed Miliband, whose reactionary speech on Scottish independence yesterday left him wrapped in the flag of St George.

There is an alternative, however. An equal partnership, even a federation, of European states committed to a joint, sustainable future is possible as well as necessary. That has to be driven by the aspirations of ordinary people themselves and not the ruling elites.

If it is made part of a project to liberate ourselves from the grip of corporations and banks, a democratically-run Europe is worth struggling for.

Paul Feldman

Communications editor 

Historic showdown builds in Europe

Two of surely the most delusional people on the planet strolled down the red carpet in Berlin last night, talking about growth and keeping Greece among the eurozone countries. No chance on the first, and close to zero on the second.

Francois Hollande, the newly-elected French president, took more notice of the lightning strike on his plane from Paris to meet Germany’s chancellor Merkel than the real state of the economy.

Greece is close to financial collapse, with people taking their euros out of the country, leading to fears of a run on the country’s banks. With fresh elections due in June, the country is without a government after electoral deadlock.

Even if Greece had a government, there is no way the European Union/International Monetary Fund would meet demands, expressed by voters, for a renegotiation of the draconian bail-out terms. So much for “democracy”.

Europe is in trouble – serious trouble, with the debt contagion claiming Greece, Spain, Italy and Portugal to name just some of the victims in recession. There are serious doubts whether the euro could survive a Greek exit from the single currency, as seems likely now.

But what about the so-called emerging countries? In China, looked to by many as the saviour of the capitalist economy,  a measure of money supply and a leading indicator of economic growth six months ahead has  contracted since November. They are shrinking faster that at any time during the 2008-2009 global meltdown, and faster than in Spain right now

State investment in railways has fallen 44%, with an accelerating decline over recent months. Highway construction has dropped 2.7%. "The data shows extreme weakness in the Chinese economy," said Alistair Thornton from IHS Global Insight in Beijing. Yes indeed it does: eight of the ten largest shipbuilders in the country have not received a single new order this year. "A wave of closures in the shipbuilding industry has yet to begin. A hurricane is approaching," said one official. 

Housing sales slumped 25% in the first quarter, and this has fed into a drastic fall in new building, which employs 10% of the Chinese work-force directly, and a further 20% indirectly. Land sales provide 70% of tax revenue to local authorities and 30% to the central government. Or at least they did.

Ambrose Evans-Pritchard, international business editor of the Telegraph, isn’t known for understatement, but his stark collection of data should make everybody’s eyes widen in alarm. “Something odd is now happening,” he says. “The People's Bank said new loans fell from $160bn (£99.5bn) in March to $108bn in April. Non-conventional lending seized up altogether. Types of credit including ‘trust lending’ fell by 96pc, and ‘bankers' acceptance bills’ by 90pc. This is astonishing data,” says Ambrose, and you have to agree.

India? Its industrial output fell 3.5% in March. Brazil’s growth has slowed too, with car sales down 15%  and industrial production contracting in March. The bad loans of its banks have reached 10.3%, higher than after Lehman crashed, taking the global financial system down with it.

Evans-Pritchard and his co-thinkers including Willem Buiter, and Ebrahim Rahbari of Citigroup, still call for miracles in the shape of a new globally co-ordinated collective effort by central banks to pump more fountains of cash into the financial system in the faint hope of staving off a world slump. 

Merkel holds the ring in Europe right now, and she’s got no intention of returning to Weimar-style inflation. So it’s austerity and “restructuring” all round, whatever Hollande may have promised the French people who elected him.

The Communist Manifesto was published in 1848, the last time there was a Europe-wide revolt against the old order. With Merkel’s party losing heavily in weekend elections, a new showdown is building between the working people of Europe and a political class that is helpless, hopeless and committed to a capitalist economy and financial system beyond repair. In their manifesto, Marx and Engels wrote, the “proletarians have nothing to lose but their chains. They have a world to win”. That remains the case today.

Gerry Gold

Economics editor