What Should Greece Do? Leave the eurozone and return to the drachma

Interesting take on Greek debt by Hudson. He says there is no legal mechanism for eliminating government debt. He also says that the Greeks did not receive the bail out dosh - French and German banks did - like with the Irish bailout. He also says that under US Law making loans which the lender knows cannot be repaid is fraud. http://michael-hudson.com/2015/07/why-greeces-debt-is-illegal/ Quote: HUDSON: The United States and Europe have a long body of law going back hundreds of years to deal with private sector bankruptcy. Individuals have bankruptcy laws to free themselves from debt. Corporations go broke all the time, they go to court, and debts are written down. But government debts are something different. There is a deliberate anarchy that’s been imposed, especially since World War II, to prevent a discussion of governments writing down debt. The idea is that if the world’s bondholders – and basically, we’re talking about the 1 percent – if the 1 percent can stop any court form writing down this, then there’s anarchy if a government says it can’t pay. It’s obvious that a lot of governments can’t pay, above all Greece. Normally, governments have been able to renegotiate debts with bondholders. There’s a market in government bonds. By 2010-12 the marketplace had priced down Greek government bonds to about 30 cents on the dollar. That means that the markets believed that maybe Greece could pay a third of its bonded debt, not more. But central banks today have something else in mind besides writing down debts. It’s not really economic, and it’s not really financial. It’s political. If you look at how the European Union has been organized, it doesn’t have any common governing organization. There’s no real parliament able to set European-wide tax rules, regulatory rules or anything else. There’s only one European organization that can set policy, and that’s the European Central Bank. And the European Central Bank, like central banks everywhere, are run by the commercial banks. And in Europe they’re run by the ultra-right wing. So we’re talking about a right-wing extremist policy, and they believe essentially in privatization giveaways. So what’s at issue isn’t really whether or not Greece can pay the debts or not. Everybody knows that it can’t. Yesterday U.S. Treasury Secretary Lew came out and said that Greece needs a writedown, it can’t pay the debt. A week ago the International Monetary Fund said that it will not make any more loans with the European Central Bank to Greece, because it can’t pay. Everybody realizes it can’t pay. But the European Central Bank has taken what is very nearly a fascist position. It also knows that Greece can’t earn the money to pay that debt. What it can do is sell off its islands, it can sell the Parthenon. It can sell its land. It can sell its gas rights in the Aegean. It can sell its radio stations and television stations. It can sell its roads to people the EU approves. For comparison, imagine that all of a sudden there was a financial crisis in America, and Governor Chris Christie of New Jersey or Mayor Rahm of Chicagowere put in charge of selling off the public domain. They’d sell to their cronies. They’d sell to their insiders. That’s basically what the European Central Bank has told Greece to do. Two years ago, the right-wing parties that ran Greece agreed to privatize their gas rights. Half of the privatization that was scheduled was supposed to be the gas pipeline. The largest bidder was Gazprom of Russia. But the ECB said no. Operating on behalf of NATO and the New Cold War, they told Greece to sell to their appointees at a lower price. Greece said, wait a minute. You’re telling us to sell off the public domain, to privatize to people who are going to charge more to use the roads, charge more for public health, charge for the islands, and drain us. You want us to sell to the crooks that the Greek people have just thrown out? They knew Greek politicians have accused the ECB of backing the most anti-democratic individuals. Quite frankly, they’re gangsters. From the beginning, Syriza’s Varoufakis and Tsipras saw that the European Central Bank was operating with its own agenda. Even the IMF said that the ECB had to write down the debt that Greece owed it. But instead, the European Central Bank said, “We’re in control. We insist that you do exactly what the previous parties were going to do” – the parties that were voted out of power in January. “You must sell off your land and privatize, and basically wipe out a big chunk of your pensions. You need 30 percent of your population to emigrate within two years. You have to create a permanent austerity crisis. If you don’t do this and agree to it, we’re going to wreck your banks and cause chaos.” ..... PERIES: So Michael, earlier you were calling the debt that Greece has an odious debt. Describe what that is, and explain the mechanism that you have derived that could possibly deal with the debt crisis. HUDSON: The term odious debt is a legal term. It was invented earlier in the century, almost 100 years ago, for debts that are basically wrong, or ones that are taken on by a non-democratic government in the name of the people, but paid to themselves and their backers. Then they try to shift this debt onto a country’s taxpayers. Under international law such debts don’t have to be paid. That’s what happened in Greece. The loans made to Greece by the International Monetary Fund and European Central Bank were not really made to Greece. Greece was only a vehicle for them to pay bondholders, who made a killing. Many bondholders had bought Greek bonds for 30 cents on the dollar, and ended up getting paid 100 cents on the dollar. This made tens of billions of dollars for speculators and insiders. Then the European Central Bank said, “Just like we made Ireland’s government and Irish taxpayers pay for the crooked debts by the Irish banks to bondholders, we’re going to make you, the Greek taxpayers pay.” One of the principles of odious debt is similar to what’s called fraudulent conveyance in the United States. Under U.S. law if somebody makes a loan to another person, or a company (especially) but knows that the company can’t pay, it’s a fraudulent loan. Suppose that you see somebody who owns a home – a widow who has inherited a house, but doesn’t have much money. Suppose the home is worth, say, a few hundred thousand dollars. Suppose you lend her maybe $1000 to help her buy groceries. And then all of a sudden you say, well, it’s collateralized by the house. And then, before she gets her next welfare check to pay it back, you demand payment. She can’t pay. So then you try to grab the house. That’s considered a fraudulent debt, because the lender had no idea how the creditor could repay in the normal course of business. During the 1980s, a lot of corporations in America were taken over by high-interest junk bonds. People would borrow a lot of money, take over the company, and empty out the pension funds. They’d sell off the parts and break them up. And the companies tried to protect themselves by suing under the law of fraudulent conveyance. This is much what has been done to Greece. The European Central Bank says, “We will lend you more money. We know that you can’t pay, and we’re not even going to discuss whether you pay or not. We’re going to lend you money, and if you don’t do as we say, we’re going to smash all your banks. We’re going to stop the bank internet payment. We’re going to stop supplying you with currency, and we’re going to drive you bankrupt if you don’t agree to sell off your public domain.” That’s what we’ve just discussed in the previous segment. This is illegal under the odious debt law. So finally the Greek ruling party, Syriza, is preparing a legal case to go to the European court of justice and claim that this is an odious debt. We’re not going to go to the IMF, because that’s a kangaroo court. The IMF people are tunnel-visioned doctrinaire people who are trained simply to calculate how much a country has to pay. If it can’t pay, they come in and smash and grab. .... The European Central Bank and the IMF are not run by economists, but by lawyers. Christine Lagarde, the head of the IMF, was an anti-labor lawyer. She worked for firms to smash up labor. That’s the job of the IMF. It’s not there to help countries to balance their payments deficit. It’s job is to strip away their pensions, cut their wages, and make them more “competitive” under the pretense that any country can pay its debt if it only will reduce its wages and living standards by enough. That’s an odious concept. That’s the right-wing concept, and it’s effect is downright evil. That’s what finally the Greeks are coming out and saying. The way the financial system is structured now is anti-human, against human rights, against national sovereignty. It’s pretty much what in the vernacular is called evil.

Privatization Commission & Corrupt Practices

http://www.youtube.com/watch?list=UUnMBV5Iw4WqKILKue1nP6Hg&v=WMBlIhYasX8&feature=player_detailpage#t=570 Anyone investigated in #Pakistan how IK's below average migrant family from Jallundar was allocated priced land in Zaman Park. it was the most priced area behind Aitchison College in Lahore in 1947. Virtually all priced land was allocated to Burki family, By Raza Khan uncle of IK who was DC Lahore after partition to favour family Saudi Arabia sold $1 trillion worth of oil during last 3 years..accumulated $745 billion in sovereign assets Shahristani said in #oil conf in #Iraq that a progress in negotiations has been made w/ #KRG to resolve export issue http://www.shafaaq.com/sh2/index.php/news/economy-news/71791-2014-02-01-17-25-07.html … Biden tells Barzani KRG must work with Baghdad to resolve oil export conflict http://bigstory.ap.org/article/biden-talks-oil-exports-iraqi-kurdish-leader … #Iraq via ============= LOOT SALE OF THE COUNTRY Privatisation or the sale of the century? Asad Umar Friday, February 14, 2014 From Print Edition 640 83 550 2 Part - I The regressive fiscal measures taken by the PML-N government in its first nine months in power make it abundantly clear that PM Sharif’s ‘most experienced’ team has no interest in citizen welfare when taking important economic decisions. While the citizens have been burdened by unprecedented increase in prices of electricity, gas, petrol and burdened further by increase in taxes on essential daily use commodities, the elite has been lavished with tax breaks and amnesty schemes to get richer. However, the party may have just begun. The ‘most experienced’ team’s next target is to deliver what may be the ‘grand sale of the century’ – marketing it as the miracle cure for the ailing economy. This is the same miracle cure that was administered by the ‘most experienced’ team in the 1990s under the IMF stabilisation programme. The results of the 1990s privatisation programme were dismal. The Asian Development Bank’s 1998 evaluation report found that only 22 percent of the state-owned enterprises (SOEs) that were privatised were performing better under private-sector management, whereas 34 percent of the unit’s performance worsened significantly. Out of the 83 manufacturing units privatised, 20 were closed down permanently, leading to significant loss of employment. We risk making the same mistakes if we are not more thoughtful in our approach. The government has prepared a list of 31 state-run enterprises to be privatised within the next three years. There is little to suggest that the results will be any different this time around. The PTI supports a formal restructuring of state-owned enterprises under an independent board of directors (BoD) and through a transparent process as prescribed by the Pakistan Institute of Corporate Governance. The best example of a developing country successfully turning large inefficient state enterprises into engines of growth is Malaysia. The Malaysian government setup an autonomous strategic investment company ‘Khazana Nasional’, run by an independent BoD with powers to appoint CEOs and hold them accountable on clearly defined performance benchmarks. The landmark Government-Linked Companies (GLC) Transformation Programme of Khazana Nasional has been a huge success and has rapidly transformed inefficient SOEs into high performing corporate giants. SOEs with strategic importance were kept under government ownership but made competitive through eliminating influence of politicians/bureaucrats. Strategic importance can be for financial reasons (the income generated for government), energy security, employment generation capacity and public service delivery (water, health, education and public transportation). A few select SOEs with little strategic importance were also privatised. However, privatisation was pursued only after the SOEs had been restructured and made profitable to achieve maximum value for shareholders (government and public). Importance was given to strengthening the regulatory agencies to achieve the privatisation objectives of enhancing competition and raising competitiveness of industry. The Khazana Nasional model was also a key recommendation put forward in the National Economic Agenda that was presented to the government in 2012 by the Pakistan Business Council (PBC). This is also what the PML-N promised in their 2013 election manifesto. Specifically, the PML-N manifesto stated that “the immediate task of the CEOs – appointed by independent and professional boards, will be to manage these corporations effectively and to plug the losses”. Instead we see indecent haste in outlining over 31 SOEs for privatisation. Like all other pre-election promises, the PML-N government has abandoned its promise of a transparent privatisation process managed by an independent board, free of nepotism. Instead the Privatisation Commission BoD nominated by PM Sharif are all members affiliated with the ruling party and hence not independent. The professional expertise of some of the members is also highly questionable. Despite the passage of over nine months in power, the PML-N government has failed to appoint CEOs of over 28 of the SOEs/institutions. The SOEs being run with acting CEOs include PSM, PSO, OGDCL, SNGPL, SSGC and Pepco etc. For example the acting CEO of the PSM is the same man accused by the PML-N to have systematically destroyed Pakistan Steel under the PPP government. This raises serious questions marks on the intent of the government. Questions are propping up over the government preparing to hand over these SOEs at throw-away prices to friends and family. Similarly, the PML-N government has systematically moved to weaken the regulatory authorities ahead of the planned privatisation programme. Ogra, Nepra, SECP and now even the SBP are without appointed CEOs and are being run on an ad hoc basis. The scant regard this government has for laws pertaining to regulators can be evidenced from the multiple violations of the State Bank Act being committed by the government in the last few months. This again raises serious question marks over transparency of the privatisation process – with the government deliberately and systematically weakening regulatory authorities ahead of initiating privatisation. The PML-N privatisation mantra is deeply flawed. The party argues that the private sector can run these SOEs more efficiently and that the government can no longer afford to spend taxpayers’ money on bailing out these SOEs every year. There is little evidence to suggest that private enterprises are always more efficient than state-run enterprises. Take the example of the energy sector; Sinopec of China and Saudi Aramco are just as profitable as BP or Exxon Mobil. Similarly, Singapore Airlines and Emirates, both state owned, are bigger and more profitable than almost any of the private sector airlines. The corporate banking giants in the US and EU had to be renationalised or recapitalised following the 2008 global financial crisis. The railways sector in the UK and EU had to be renationalised following disastrous results under private-sector management. The real reason the government is demonstrating undue haste in pushing through privatisation is the need for money to finance its large deficits. The PML-N government borrowed over Rs883bn (June 1 to January 24) from the SBP for deficit financing – a new record beating even the woeful PPP government’s dismal performance. The IMF has put strict limits on further money printing and so the government is seeking new avenues to finance its unsustainable deficits. Instead of initiating real reforms to raise government income through tax on the large, extremely wealthy untaxed segments of the economy or curtailing unproductive spending, the government has gone for the easier short cut to finance its large deficits. This is, of course, a very short-sighted strategy as it is onetime revenue earned through sale of the SOEs and will leave the structural problem unresolved. Let’s dig deeper and see how serious a drain the SOEs put on the government finances. The budget documents show that government paid Rs367bn in FY13 to SOEs for subsidies/losses out of which Rs350bn (95 percent) was accounted by only two entities – Wapda and KESC. As we know, KESC (Karachi Electric) is now a privatised entity. If we take out Wapda and KESC the losses of the SOEs paid by the government in the FY13 budget were only Rs18bn. Interestingly, the government forgets to mention the fact that most of the SOEs put up for privatisation are profitable and earned the government over Rs63 billion in dividends alone in FY13. So the net budget impact for the government (dividends minus subsidies) of the SOEs, excluding the power sector, was a positive contribution of Rs45 billion last year! To be continued