When the euro crisis hit in early 2010, with Greece the first domino to fall, all it took to surmise that Europe had no intention of resolving the euro crisis was one good look at the toxic finance the EU concocted in response. Today one good look at the toxic finance the EU is deploying to fund Ukraine offers similar evidence that Europe has no interest in helping that country — and indeed, that quite the opposite is in play.
Back in 2010, the eurozone economies were buffeted by a tsunami of bankruptcies that began on Wall Street before toppling the French and German banks and, soon after, the treasuries of Greece, Ireland, Portugal, Spain, etc. Europe’s response to a crisis that was triggered by the bonfire of Lehman Brothers’ house of cards was a classic case of panicking firefighters deferring to the arsonists who had started the inferno.
Europe’s conundrum was that the EU treaties banned Brussels from lending money to the Greek government to pass it on to Deutsche Bank, Société Générale, BNP Paribas, Finanz Bank, and so on. Alas, if the EU did not lend these monies to Athens, the German and French ruling classes would have to bail out their banks directly — not something they were prepared to do.
To solve a riddle caused, initially, by the unravelling of Lehman Brothers’ toxic derivatives, the EU did something breathtaking: it employed men who used to work for Lehman Brothers to create almost identical derivatives, this time on behalf of the EU. Then the EU deployed these new toxic derivatives to fund the bailout of the French and German banks.
The EU issued new debt, on behalf of Greece, that was structured just like a Lehman Brothers collateralized debt obligation (CDO). For each €100 of new debt, around €24 was underwritten by Germany, €20 by France, €13 by Italy, and so on, with each share reflecting the country’s national income as a portion of EU aggregate income. Moreover, each of these chunks of debt within the same EU…
Auteur: Yanis Varoufakis
