‘Gouvernement Sachs’ and the death of a democratic Europe?

Posted: November 16, 2011 in Uncategorized
Josh Ryan-Collins
Senior researcher, Monetary Reform
Newly appointed technocrats in Italy and Greece do not have the interests of the European people in mind.


So much has happened in Europe over the past year that you may not remember the fuss about the role of a certain global investment bank in the Greek debt crisis early in 2011 Goldman Sachs came under massive criticismfor helping Greece raise $1 billion of off-balance-sheet funding in 2002 through a ‘currency swap’, which European Union regulators apparently knew nothing about until February 2010. At the time, Goldman was criticised for helping the Greek financial situation appear considerably better than it actually was, making it easier for the country to enter the Euro. After the Enron scandal in 2005, Goldman sold the swap to the National Bank of Greece.

You probably have noticed that over the last ten days two democratically elected leaders of sovereign European states, one the third largest economy on the continent, were forced from office without any form of consultation with their nation’s people. At the same time, the new President of the European Central, Mario Draghi was put into place. Astonishingly, all three men have strong links to Goldman, as revealed in this Le Monde article.

Draghi was vice-president of Goldman Sachs Europe between 2002 and 2005. He was responsible for “companies and sovereign” which oversaw, among other things, “currency swap” deals (Draghi denies he was involved in the Greek one).

But at least Draghi was appointed to post in the expected fashion. Greek premier George Papandreou made the mistake of attempting to give some democratic legitimacy to his departure by offering a referendum. All hell broke loose in the markets and the result was not only was the referendum pulled but he was forced to resign. His replacement, Lucas Papademos, was in charge of the Greek Central Bank from 1994 until 2002 and thus oversaw Goldman’s “swap” deal.

Elsewhere, Silvio Berlusconi – whatever you may think of him as an individual – fairly won three consecutive elections and was the longest serving post-war Italian leader. He has been replaced by Mario Monti, ‘international adviser’ to Goldman since 2005 (a post he immediately resigned upon taking office).

Writing in the Atlantic magazine in May 2009, Simon Johnson, ex-Chief Economist at the IMF, wrote:

“Elite business interests –financiers, in the case of the US – played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the investiable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.”

Something rather similar appears to be happening in Europe. What Draghi, Monti and Papademos also have in common is that they are classically trained orthodox economists who have spent a good part of their lives working for the European bureaucracies and banks that have bought about this disaster.

These so called ‘technocrats’, bought in to calm the markets, are not proposing alternative policies. Instead, they are proposing a policy formula we know doesn’t work: massive cuts in public expenditure and the welfare state, along with regressive tax rises, can only ever harm demand and growth, drive unemployment, increase inequality and economic insecurity. Rather than allowing so called ‘sovereign states’ some freedom to set their own monetary and fiscal policies, these leaders appear intent only on further centralising such powers.

But whilst the public sector is being subjected to a massive upheaval, talk of breaking up the banks, regulating them more effectively or even imposing a tiny financial transaction tax remains, largely, talk. These men may have Goldman Sach’s vote, but I doubt they have that of the European people. The European project is reaching a new nadir.


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