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!

Banks in 'collateral crunch' as debts mount

Thousands of high school students took to the streets outside parliament in Nicosia yesterday. They were protesting against the harsh consequences the people of Cyprus can expect from the deal imposed by the European Union, International Monetary Fund and European Central Bank.

This conspiracy of non-elected bodies is the technical arm of a near-dictatorship ruling throughout Europe. It is fighting belligerently to save a social, economic and political system that is wrecking the fabric of societies. The resources that are being consumed, let alone the lives ruined, surely don’t justify the results. As for the people of Cyprus, they simply get no say as the deal is not going to parliament, just in case it’s rejected.

The banking crisis in Cyprus is just one of the storms in the vast clouds of credit and debt invented to finance the global growth of production and consumption from the 1980s onwards. This one was triggered months ago when Greece was forced to write down the value of its government bonds as part of the bail-out punishment for its people. At the end of 2011, the Bank of Cyprus had $14 billion tied up in Greek debt, while Laiki Bank had more than $24 billion.

The botched and brutal temporary patch designed to prevent a formal default by the smallest member of the eurozone will reverberate throughout Europe and the rest of the world. The imposition of capital controls to stop instant transfer of funds out of the country undermines the fragile state of both the eurozone and the wider European Union.

UK  civil servants won’t have been the only ones working through the night to minimise the impact on ex-pat Cypriot bank branches, like those in Mayfair and Birmingham. President Putin’s people will have been hard at it too, searching for ways to extricate the remains of the vast amounts of Russian wealth that found its way into Europe via Cyprus in recent years.

Cyprus, already in a deep recession, now facing an estimated further 20-30% cut in its GDP as a result of the deal, will be devastated. Thousands of businesses and tens of thousands of jobs will disappear overnight. The story is being replicated throughout Europe.

Portugal, where unemployment is heading towards 20%, is entering a third year of contraction amplified by austerity; and Spain’s jobless rate will pass 27% according to its central bank as the Europe-wide contraction drives the country into a deeper slump. France, the second biggest eurozone economy, has seen 22 months of rising unemployment, now exceeding 10% and certain to rise further as car factories are shut down due to overcapacity.

The global recession is spreading like a virus across the United States too. Cities wrecked by the crisis, including Detroit in Michigan, San Bernardino and Stockton in California are seeking bankruptcy protection to exempt their pension funds from being raided to pay debts.

In the UK, observers are warning that the decision by the Bank of England today to require banks to raise another £25 billion of capital, will could lead to a “collateral crunch” that could shut down the market for credit. So don’t fall into the trap of thinking it’s just Cypriot banks that are over-stretched. UK banks have piles of debt that no one is paying interest on, which is why the Bank of England has stepped in.

Wherever you look, which ever way you turn, the conclusion must be the same. Capitalism as an economic and political system is in extermination mode. In this situation,  private and public sector employees and pensioners need to unite with finance sector workers throughout the world with one goal in mind. All the resources needed for production, distribution and exchange must come under social ownership and control. So long as they remain out of reach, the worse our prospects become.

Gerry Gold

Economics editor

EU referendum also about who rules Britain

In raising questions about Britain’s membership of the European Union, the leader of the Tory Party has put constitutional questions about the state and democracy on the agenda. While David Cameron would like to confine these to the EU, we should make how Britain itself is governed the main question.

Naturally, as a ruling class politician, the prime minister is mostly concerned about prospects for the City of London and the major corporations when eurozone countries hand tax and spending policies to the European Central Bank – without the people of Europe having a say. Countries outside the eurozone – like Britain - could find themselves at a disadvantage.

And obviously, from a political point of view, he is keen to outflank the right-wing  populism of Ukip, whose fear and loathing of foreigners in general and Europeans in particular knows no limit, and bring his own eurosceptics into the fold.

But in his long speech, Cameron was also compelled to cloak himself in the language of democracy and emphasise the right of people to decide for themselves. In doing so, he opened up a can of worms for the ruling class because voters are also deeply troubled by a self-evident “democratic deficit” in Britain as well as the EU.

One of Cameron’s stated reasons for announcing a referendum on the EU in 2018 if the Tories win the next election is the “gap between the EU and its citizens which has grown dramatically in recent years”. He says that this “represents a lack of democratic accountability and consent”.

But his remark that the “EU is seen as something that is done to people rather than acting on their behalf” puts him on dangerous ground. Because while this is true, it also applies to the electorate’s relationship with the state and political institutions in this country.

When he points that “people are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity” he wants to confine this to countries like Spain, Greece, Italy and Ireland.

But this could and should be extended to what’s going on in Britain. The vicious austerity drive imposed on working people, which has seen a massive transfer of wealth to the rich, may appear as the result of decisions taken at Westminster.

But in reality, the policies flow from the ConDems’ slavish commitment to maintaining the status quo of corporate and financial power. Their source is equally as “further and further away” as those carried out in the eurozone. No mandate was sought for the cuts before the last election – by any of the parties.

The deficit was so huge as a result of the global crisis that, from a capitalist point of view, it had to be cut. And that meant taking the axe to public spending to persuade the financial markets not to impose exorbitant borrowing costs. Not much democracy at work here Cameron!

So we should extend the debate about democracy. We should make the central issue who rules Britain and by what means. Have, as Cameron claims, the people actually lost control and their voice to Brussels? Or, as is the case in practice, they never had either in the first place?

The British state and its institutions rule for the powerful, the elites, the rich and the establishment in general and a referendum on membership of a crisis-ridden EU that is beyond reform won’t change that.

Labour certainly won’t raise these fundamental questions. They are solely concerned that a referendum might undermine the “national interest”, by which they mean those of business and finance. Hell would freeze over before Ed Miliband talked about anything else.

A campaign is gathering pace around the project for an Agreement of the People for the 21^st century. It proposes a new constitutional settlement in Britain that would spur democratic transformation everywhere and lay the basis for a Europe where powers rests firmly in the hands of the people. Lend it your support.

Paul Feldman

Communications editor