Michael Roberts has a very good post on the appointment of the technocrats, Lucas Papademos in Greece and Mario Monti or Giuliano Amato in Italy, who are supposed to lead Greece and Italy through those “much needed reforms” that these countries need to reduce their oh so troubling debt levels. The ‘reforms’ or austerity, are needed to deal with the intransigance of those democratically elected governments who are not doing enough to reduce the debt because they want to pamper their electorate. It’s a lie of course. As Paul Krugman points out “the countries in trouble are not in any way marked out by having especially generous welfare states”. Using the OECD measure of “social expenditure”, measuring both public spending and private spending, we can see that “Sweden, with the largest social expenditure, is doing just fine. So is Denmark. And Germany, which is the up side of the pulling-apart euro, has a bigger welfare state than the GIPS”.
Michael Roberts post reminds us (or informs us) about the previous positons that these men have held.
Democracy should be put above markets, said Papandreou. Berlusconi said that the appointment of a government of technocrats would be “an undemocratic coup” that ignored the 2008 election result. But it is still happening. In Greece, Lucas Papademos will become prime minister. He was head of the Greek central bank when Greece joined the euro and boasts of his leading role in achieving that. Now he takes over in order to keep Greece in the euro, a decision that now President Sarkozi says was “a mistake”. Papademos was in charge when Greek officials lied about their fiscal position to the EU authorities and he presided over the failure of the Greek government to collect taxes from rich Greeks (like himself). But he is now the financial markets’ own man. Greece is to be run by the very man most responsible for getting them into this mess. It’s like Alan Greenspan taking over as President after Wall Street demanded President Obama step down for failing to cut entitlement spending enough to balance the budget!
In Italy, Mario Monti and Giuliano Amato are to take over. Monti is a mainstream economics professor who briefly worked for (guess who?) Goldman Sachs and then became EU competition commissioner for many years, where he insisted on ‘liberalising and deregulating’ markets. He is a close friend of the new ECB chief, ‘Super Mario’ Draghi, another Italian banker. In the 1990s, when a number of countries, including Italy and Greece, engaged deliberately in credit swap transactions to take part of government debt and deficits off the official accounts with the connivance and help of Goldman Sachs in particular, Draghi was director general of the Italian Treasury and then joined Goldman Sachs (2002-2005). Draghi and Papademos both got their doctorates in economics at MIT in 1978. Amato is a ‘centre left’ ex prime minister who was close to the corrupt social democrat premier Craxi of the 1990s. He was head of the Italian anti-trust commission which tried to deregulate the economy especially in financial services.
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