Merkel's machinations and the death of democracy

Consider this question about Zimbabwe. Roughly one-tenth of the 330 million dollar debt it “owes” the UK relates to the supply of British-made Land Rovers to the Zimbabwean police. Rates of infection for HIV in Zimbabwe have begun to decline in recent years due to a scale-up in antiretroviral treatment, according the latest United Nations World AIDS Day report. Should patients now forgo life-saving medical care so that bills can be paid back to the former colonial overlord?

In his compelling book Debt: The First 5,000 Years, David Graeber describes how the International Monetary Fund demanded that Madagascar cut a monitoring and eradication programme for malarial mosquitoes in order to settle debts. In the absence of proper monitoring, malaria returned to the highlands of Madagascar, where it was previously thought to have been wiped out. Ten thousand people died, Graeber writes, “in order to ensure that Citibank wouldn’t have to cut its losses on one irresponsible loan that wasn’t particularly important to its balance sheet anyway.”

Africa’s debt is not the hot issue it was in the late 1990s and the early part of the new millennium. But the underlying problems have not disappeared. The way us journalists have shifted our attention away from this persistent crisis is all the more inexcusable, when you consider that there are some parallels between it and the problems we face in Europe.

During the past week, the Dublin government paid 1.25 billion euros to unsecured Anglo Irish Bank bondholders. At the end of March, another 3.1 billion euros is scheduled to be paid by Ireland, largely to please French and German banks who consorted with Anglo in financing reckless speculation by property developers. The 3.1 billion euro sum would be sufficient to fund Ireland’s primary school system for a year, according to the campaign group Debt Justice Action. Children who weren’t even born in 2007, when Anglo approved the loan for the single biggest transaction in the Irish property boom, are being condemned to an inferior education.

A touchy-feely quote on the programme of this year’s World Economic Forum in Davos reads: “The purpose of human life is to serve and to show compassion and the will to help others.” It is attributed to the theologian Albert Schweitzer. Sadly, that sentiment appears alien to the woman who opened the event, Angela Merkel. In her Davos speech, the German chancellor made the case for “more Europe”. What she really desires is a meaner Europe, where remote institutions in Frankfurt, Brussels and Luxembourg have the power to insist that less is spent on essential public services.

Taking capitalism to extremes

On 31 January, Merkel will probably be granted her wish of having a “fiscal compact” treaty for the EU. It will give the European Court of Justice power to fine EU governments that do not keep within rigid deficit limits. Dogmatic principles about how every economy in the Union – with the exception, this time, of Britain – should be run will be enshrined in the agreement rubberstamped at the imminent summit. No matter what type of governments us mere mortals elect in future, they will have to play by these rules. As a result, the Union will be formally committed – under its treaties – to a much more extreme form of capitalism than the United States is under its constitution.

Almost none of the Union’s citizens will have any say on these matters. The idea that they should be consulted is viewed as absurd by Merkel and Nicolas Sarkozy. Overstepping their powers, they made sure that George Papandreou abandoned his plan to hold a referendum on the terms of a “bail out” a few months ago. Papandreou’s idea was considered so silly that he had to hand over his job as Greek prime minister to a de facto representative of Goldman Sachs.

“Deficit of public authority”

Ireland, it appears, is the only country that might have a referendum on this “fiscal compact” monster. And I’m sure that Enda Kenny’s government would avoid holding one if it could get away with doing so. The sole reason why Ireland traditionally lets its people say “yes” or “no” to EU treaties is that an economist called Raymond Crotty undertook a court challenge against an attempt to ratify the Single European Act without a referendum in 1987. Crotty died in 1994 but his case established that significant changes to EU treaties necessitated an amendment to the Irish constitution, something that can only be done with public approval.

Rulings of similar significance have been delivered in Germany. In 2009, the federal constitutional court in Karlsruhe gave its verdict on the Lisbon treaty. According to the court, there is “a deficit of public authority when measured against the requirements of democracy.”

To her disgrace, Merkel is now taking actions that will increase that deficit. Ironically, of course, her efforts are being presented as indispensable towards dealing with another type of deficit. Why is tackling fiscal deficits considered a more urgent task than resuscitating democracy?

Around this time last year, mass demonstrations in Cairo caused the downfall of Hosni Mubarak’s dictatorship. The protests can be emulated in Europe. When Angela Merkel tries to deprive children of a good education to increase her own stature, resistance becomes imperative. Unless ordinary, decent folk – the 99 percent, to use the slogan of the Occupy Wall Street movement – stand up to her, 31 January 2012 could go down in history as the day when democracy died.

●First published by New Europe, 29 January – 4 February 2012.

The EIB's malignant myths

Does Philippe Maystadt have the cushiest job in the EU bureaucracy? For the past eleven years, Maystadt has been president of the European Investment Bank. It is a post that has required him to move from his native Belgium to Luxembourg but that drawback has been compensated for by a handsome salary and a chance to manage one of the largest portfolios held by any international financial institution in the world. The remoteness of the EIB headquarters has many advantages, too: nicely insulated from journalists covering European affairs from Brussels, his activities usually evade scrutiny from the mainstream media.

And so Maystadt was able to depict himself as a valiant eco-warrior last week by publishing data about how the bank delivered “record climate action lending” in 2010. With his statement dutifully regurgitated in business publications, Maystadt could relax safe in the knowledge that none of us journalists are too bothered to ask what the EIB is really up to.

As it happened, the bank dropped strong hints about its real agenda one day earlier. In a separate statement, it announced plans to finance the world’s largest “carbon capture and storage” scheme. Cash for this initiative will be generated through the sale of 300 million licenses to pollute under the EU’s emissions trading system (ETS). The bank does not intend to make public comments on individual beneficiaries of the scheme, according to the statement.

It is certain that much of the funding will be released to the fossil fuels industry, which has been promoting carbon capture and storage (CCS) as a panacea for the global warming that their rapacious activities played a large role in causing. Sure, the concept is a seductive one: instead of releasing heat-trapping gases into the atmosphere, these will be buried under the ground where they can do no harm, the theory goes. The flipside of this fantasy is that it offers industrialists an excuse to keep burning as much coal and oil as they want and policy-makers to avoid taking urgent measures.

The scheme being supported by the EIB is called the “New Entrants Reserve” (NER). Documents given to transparency campaigners by Chris Davies, the British MEP who is one of carbon capture’s most vocal advocates, have shown that Shell and BP managed to tweak the terms of reference for the NER in their favour. In February last year, Davies – with more than a little help from his oily friends – clinched a deal with the European Commission and EU governments that at least eight CCS projects would be financed under the NER. As BP’s reputation belly-flopped in the Gulf of Mexico shortly after that deal, it is little wonder that Maystadt’s mandarins want to keep quiet about how they will be shovelling euros into projects designed to aid that corporate despoiler.

In September 2009, José Manuel Barroso undertook to work “more imaginatively” with the EIB in order to address the economic crisis. What the European Commission chief really meant was that he had parked his own imagination in a cul de sac. For senior politicians in Brussels have a habit of calling up Maystadt when they want to be seen throwing money at a problem. So it was no surprise to read an opinion piece that Catherine Ashton, the EU’s foreign policy chief, had published in The Financial Times on Valentine’s Day. Her gesture of love to the people who had risen up against their governments in “our southern neighbours, including Egypt” would be to ask the EIB for a dig-out of €1 billion, she wrote.

According to Ashton, these loans will help support democratic transition. Why the hell does she think that loans are an appropriate instrument for that purpose? Under its dictator Hosni Mubarak, Egypt racked up foreign debts of nearly $35 billion, roughly $9 billion of which is owed to EU countries. International law holds that debts incurred in a manner that does not serve the interests of a country’s population should be declared as “odious”. Therefore, the fair thing to do would be to write off that debt once free and fair elections are held in Egypt. Yet instead of tackling that debt burden, Ashton wants to increase it.

Ashton described the potential loans as a “downpayment for reform”, implying that the EIB is on the side of the brave demonstrators who clogged downtown Cairo in recent weeks. That is laughable. Research by the Bretton Woods Project, an anti-poverty group, has documented how the EIB has been at the forefront of a trend whereby international financial institutions have been directing their loans away from public institutions to private firms. In 2000, about 90% of all funding for developing countries from those institutions went to public sources, the remaining 10% to corporations. Within seven years, that ratio was turned on its head, with 60% of such finance allocated to the private sector.

Counterbalance, another campaigning organisation, has shown that many of the firms on the EIB’s loan book operate in tax havens. They include Mopani, a Swiss-owned mining company, that has been taking its profits from copper extraction in Zambia out of Africa, without paying taxes, according to an audit paper made public earlier this month. This is not the first time that the EIB has been found abetting the plundering of Africa’s resources, and it won’t be the last. Shouldn’t we be paying a bit more attention to how this bank behaves?

·First published by New Europe (www.neurope.eu), 27 February – 5 March 2011