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Economist Paul Craig Roberts: Greece Must Leave the Eurozone to Regain Its Sovereignty

Paul Craig Roberts, a former undersecretary of the US Treasury, discusses how indebted countries are forced to accept austerity.

If Greece remains in the EU and continues using the euro, there is no prospect of the country seeing a real economic recovery. (Photo: Theophilos Papadopoulos)

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In Greece, the Syriza-led coalition government is now set to agree to new rounds of cuts and privatizations demanded by the country’s lenders. Prior to its initial election in January 2015, Syriza had promised to abolish the country’s loan agreements and austerity policies. Now, unemployment remains at record levels, and the young and educated continue to leave the country, while recent large-scale privatizations such as the sell-off of the port of Piraeus have been pushed through.

Paul Craig Roberts, a former undersecretary of the US Treasury and former Wall Street Journal editor, agreed to share his thoughts on the recent developments in Greece. The author of over a dozen books and numerous journal articles, Roberts regularly analyzes global economic conditions and geopolitics in his writing. In this interview, which has been lightly edited, he discusses how countries are indebted and forced to accept austerity, as well as current US economic conditions and the presidential election.

Michael Nevradakis: You have written that Greece is under foreign occupation. Explain why you believe this is the case.

Paul Craig Roberts: Greece is being looted like a colony of the private banks, which is what it is. Previous Greek governments accepted bribes to indebt Greece to private banks. For example, someone would come from Germany and say, “Let us make you this nice loan so you can buy German submarines, and here’s a bag full of money for agreeing.” This is the way much of the Greek debt was built up.

“By remaining in the EU and using the euro, there is no prospect whatsoever of Greece recovering.”

Normally in the past, when governments had excessive debt that they couldn’t service, the debt was written down to an amount that could be serviced. For example, when Mexico couldn’t pay in the 1980s, the debt was written down, and the US government came up with Brady bonds, which was a way of writing down the debt. But now that looting is completely unleashed; the rule is that if a government can’t pay, the people have to pay, and the way they have to pay is to accept cuts in their pensions, cuts in employment, lower wages, cuts in social services. And they have to sell off their municipal water companies, their ports, the state lottery. This money is then used to pay the private bankers that lent the governments money that did not really benefit the people very much, but benefited the foreign recipients of the loans.

This is a looting process; it’s the way that the colonialists looted the colonies in Africa and Asia, and now what we see is that the West is looting itself, and this all happens because the people accept it. Even when they protest, they don’t go far enough. We have here a situation where the Greek people don’t even understand what they have to do to save themselves and to be independent … [They accept] EU [European Union] domination, which means you have no national sovereignty. If you’re a member of the EU and you use the euro, you have no financial independence.

You have written a lot about privatization and how it is used as a strategy to destabilize or weaken countries. How are privatizations used as a weapon?

When a national resource is privatized, the revenues from that resource pass outside the hands of the government to private parties. So it depletes the government of revenues. For example, if the Greek national lottery is privatized, then those profits from the lottery go to the private owners. They’re no longer feeding into the government’s budget. Now, if these private owners are foreigners, as will be the case for almost all the Greek privatizations, the revenues not only leave the government budget, [but] they leave the country. Privatization is a way of diverting Greek revenue sources into foreign, private hands. To agree to this is to accept being a colony.

In your view, is Greece’s debt sustainable or even legitimate, and how do the IMF and Western powers use debt as a means to loot these countries?

Governments are given debt, often with bribes and false promises. There’s a famous book by John Perkins, titled Confessions of an Economic Hit Man, and in this book, he describes the process, as he was part of it. You take a development plan, for example, to a foreign government, [but] these promises are always grossly overstated. The purpose is to get the government in debt.

“There is no such thing as an independent, sovereign country that cannot create its own money.”

The government falls for the development scheme, contracts the debt, and when this game doesn’t succeed in servicing the debt, the private banks say, “You owe us this money, you’ve got to pay it”; the government says, “We can’t”; and the International Monetary Fund (IMF) comes along and says, “We’ll protect your credit rating by lending you the money to pay off the private banks.” This is often described as aid, but it’s not aid; it’s simply the IMF taking over the private debts and leaving the government indebted to the IMF.

Then, the IMF says, “Now you have to have these austerity programs, such as the ones imposed on Greece, so you can pay us back, and also, you will have to supplement these austerity programs by selling off your national assets.” Whatever the country has passes into foreign hands, the revenue streams associated with those assets pass to foreigners, and it leaves the country more impoverished.

Often, [these countries] still can’t pay the debt, and part of the deal is you have to accept American military bases, you have to vote with us in the UN. All sorts of political conditions are put on the loan, and all of it is done in the name of protecting the country’s credit rating so that it can continue to borrow. Well, of course, it can’t borrow anyhow; it’s already over its head in debt, and yet, government after government continues to fall for this, or is bribed into it.

Would Greece have any chance of recovery remaining within the eurozone and the European Union?

By remaining in the EU and using the euro, there is no prospect whatsoever of Greece recovering. In fact, [Greece has] given up so much now that probably [it] can never recover, even if [it] left the EU. They had an opportunity to leave and they should have seized it, and the Russians offered to finance them, but either the government had no vision, or was intimidated by threats, or felt that it did not have the public support. So I think now Greece is history. It’s a colony of Northern European banks.

How could Greece manage an exit from the euro?

They just have their own currency! Every government that joined the euro gave up their financial sovereignty, because they no longer had a central bank that could create money to finance the government. So they became dependent on private banks. These are looting mechanisms. The minute Greece joined the euro, it gave up its sovereignty. The only way it can get its sovereignty back is to leave the euro and to bring back its own currency and use its own central bank to provide the country’s money, and not rely on German and Dutch banks or on Goldman Sachs. There is no such thing as an independent, sovereign country that cannot create its own money.

Shifting to what is happening in the United States, you have argued that the economic figures provided by the Obama administration are phony. Why do you argue this is the case, and what do the real figures show?

First of all, let’s take the consumer price level. That measures inflation. Over time, the way the government has measured inflation has fundamentally been altered. Formerly, there was a fixed basket of goods; items in the basket were weighted according to an estimate of their percentage of consumer expenditures, and so if an item went up, then the index would go up by the weight of that item in the basket of goods, so that you had a measure of a constant standard of living.

What they did was, they introduced the “substitution effect.” They argued that when the price of something goes up, consumers substitute a less expensive alternative. What they started doing, when the price of something went up, they threw it out of the index and stuck something in there that was less expensive. In that way, they changed the index from measuring a constant standard of living to one that measures a declining standard of living. They do this in order to avoid having to pay cost of living adjustments on social security. That is one way they understate inflation.

“It’s impossible for democracy in the US to bring any change, because there’s really not any democracy. There’s an oligarchy.”

The other way they understate inflation is they say not all price rises are price rises; some are quality improvements. That’s of course true. On the other hand, the consumer is still faced with a price rise, and therefore it does cut in to the consumer’s real income. Furthermore, once you start this, once you say it’s a quality improvement, you can spread it to everything. All of a sudden, every price increase becomes a “quality improvement,” and this is the other way they understate the inflation. So the inflation measures no longer measure inflation. For example, we’re told we have zero, even negative inflation, but if you measure the inflation the way the US government previously measured it, before the so-called reforms, the current rate of inflation in the US is between 8 and 9 percent. So you see a rapid deterioration, year over year, in the real incomes of the American people.

How do they measure employment? We now have, according to the government, a 4.9 [percent] unemployment rate [in the US]. This does not count any discouraged workers. Discouraged workers who are not currently searching for jobs are no longer counted in the unemployment figure.

The government has a second measure of unemployment that is never reported in the headline news or emphasized in the financial press. This measure, U6, counts short-term discouraged workers, and if you add the short-term discouraged workers — and “short-term” means less than one year — that measure of unemployment is 10 percent. If you add in the long-term discouraged workers, which no longer [is done in] … any government measure, the current rate of unemployment in the US right now is 23 percent. We know this because economic analyst John Williams, who runs the website, continues to measure long-term unemployment according to the methodology that the US government used to measure it before abandoning it. Those are the ways that they create the image of economic success, when really, there is serious economic deterioration.

With the upcoming presidential election in the US, do you believe any of the candidates offer any hope for a change of political, economic or foreign policy direction?

The government is not run by presidents. It’s run by several hundred assistant secretaries, and they have nominal bosses called cabinet secretaries … when you get elected, you’re excited and want to get going and you’ve got to get all of these appointees through the Senate, you end up having to appoint the people the Senate’s going to confirm. Otherwise, you never have a government. So unless the revolution also changed the Senate, so that they were to say, “Yes, let’s appoint all of these people who will bring change, and undermine all of our relationships with the power structure, the people who give the political contributions to keep us in office, let’s wreck all that and appoint somebody who’s going to make change,” that’s not going to happen!

As far as I’m concerned, it’s impossible for democracy in the United States to bring any change, because there’s really not any democracy. There’s an oligarchy. These are the powerful interest groups that provide the campaign contributions that elect the House, the Senate and the president.

Recently, scholars produced a study in which they concluded that the American people had zero input into the policies of the US government. That is a fact. So for change to come to US politics, I think it will come from failure and collapse, from outside the system, from the system’s failures, from a deep and long-lasting depression, from a massive military defeat or a massive foreign policy failure that cannot be disguised, such as the one neoconservatives may be creating for themselves with the conflict that they are trying to bring to Russia and China. This is a conflict that could cause the type of failure in Washington that would bring change, and an economic collapse can cause the sort of failure that would bring change in Washington. But it’s not going to happen from domestic politics or the rise of an indigenous leader.

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