Comment: The secret birth of a European IMF
An organisation more powerful than any European state is being built and no-one is talking about it.
By Ian Dunt Follow @IanDunt
The best way to keep something secret is to do it in plain sight. Right in front of our faces, an organisation more powerful than any European state is being built and no-one is talking about it. Its function is to turn European democracies into free market test beds. It will be online in July.
David Cameron's return from Brussels last week saw the media focus on his phantom veto and the mood of his backbenchers. The precise room in which the British prime minister chooses to be powerless was the subject of intense interest. But despite the avalanche of coverage of the eurozone crisis and the frantic political efforts to correct it, little mention was given to the European Stability Mechanism (ESM).
This innocuous sounding organisation was put firmly in place last Monday with the timetable for its creation being shortened from the end of the year to mid-summer. The lack of coverage it has received is inversely proportional to the threat it poses to European democracy and left-wing economic solutions. Shaded in secrecy and exempt from the rule of law, it is tasked with enshrining austerity across the continent.
The ESM will be set up with a £416 billion (€500 billion) fund, with an extra £166 billion (€200 billion) of capital on the side for stability. European Council resident Herman Van Rompuy said the ultimate number will be "reassessed down the line". According to the treaty, eurozone members "irrevocably and unconditionally undertake to provide their contribution to the authorised capital stock". If it wants more money, members have to pay up in seven days. Just like that.
Its governors, composed of representatives from member states, are offered the sort of legal protection which would make a Latin American dictator sleep comfortably at night. The treaty allows them "immunity from every form of judicial process" as well as "search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action". No government, judiciary or national law can interfere with its activity.
There's more. "The chairperson of the Board of Governors, governors, alternate governors, directors, alternate directors, as well as the managing director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents." It's unclear precisely what 'inviolability' means in this context. Perhaps it means we cannot destroy their papers. Perhaps it means we can't even see them.
The mechanism is intended to fund members who get into "severe financial problems", but like all such funding programmes, its generosity comes at the cost of macro-economic adjustment programmes. The ESM is a euro-clone of the IMF, which has caused such havoc and misery across the developing world with its suggestions for turning struggling economies into privatised utopias. The tyranny it imposes has now reached Europe's shores. Loans will be made "under strict economic policy conditionality" – code for austerity, privatisation and structural adjustment programmes. Anyone requesting help from the ESM is required to make a similar request to the IMF. Just like the IMF, it enjoys "preferred creditor status". It will even be able to print and sell debt and buy government bonds.
Everything about its creation has been typified by a frantic desire to evade democratic accountability – an unsurprising development given this is now the default managerial response to changes at the EU. The European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM) were set up after the financial crisis as temporary emergency bodies. Then the European Council agreed a two-line amendment to the treaty to avoid any referendums when they were changed to allow a permanent mechanism. Even the idea the new mechanism would merely consolidate the two organisations has been shrugged off, with the EFSM intended to run in tandem with the ESM. It’s just more capital for a Europe awash with magic money – but none for the poor.
Now the permanent mechanism has been revealed, we can see it is just another IMF – able to overrule national governments, shrouded in secrecy, untouched by law and tasked with the implementation of free market fundamentalism in Europe.
It is nothing less than a coup against the left and anyone sentimental enough to still believe in the right of the public to decide the economic life of its country. With the eurozone crisis reducing states to a chaos and poverty, the overwhelmingly right-wing governments of Europe are seizing the opportunity to fundamentally alter the structure of European politics.
Across the continent, left-wing oppositions rally against the changes taking place, entirely unreported by the British press. The irony is that it's Britain, which is entirely sympathetic to the right-wing politics of the ESM, which could, for reasons of history and culture, be the most effective barrier to its implementation.
This coup comes just as the West's baffling love affair with austerity is showing signs of fraying around the edges. In Britain, a Conservative prime minister is so beset by criticism of capitalism he is forced to make speeches on its reform. Barack Obama used his State of the Union speech to demand the rich and corporations pay their fair share, against the background of an increasingly successful stimulus programme. In France, Francois Holland looks set to win the upcoming election on a radical leftist programme. The left is gaining in strength in the Netherlands, Germany, Sweden and Italy.
But this growing backlash against neo-liberalism may have come too late. Once the ESM is established, the left will effectively have been outlawed in Europe. The subjugation of national sovereignty to market discipline will be one step closer to completion.
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