The Eurozone's Conspiracy Theories

The ultimate audacity of conspiracy mongers is to advertise themselves as victims of conventional wisdom

By Fabio Rafael Fiallo

Putting the blame of Europe's economic woes on sinister forces operating behind the scenes has always had its charm and its advocates. Suffice it to recall General de Gaulle's invectives against what he used to name the "gnomes of Zürich," i.e. the financial markets, guilty in his view of the travails of the French franc in the 1960s.

The crisis that the Eurozone is currently going through has provided a unique terrain for conspiracy theories to blossom one more time. A race is on among politicians and economists who try to identify which sly interests have created or prolonged the current economic turmoil in the southern countries of the Eurozone.

For conspiracy mongers, the crisis owes little, or even nothing, to the fact that the sovereign debt of southern European countries had taken them to the point of near-insolvency. Plot theorists brush aside the fact that markets had reasons to be afraid of never seeing their money back and, as a result, raised significantly the interests on those countries' sovereign bonds.

The true mover of the markets, according to conspiracy designers, was a perverse desire to subdue European countries of the Mediterranean bank, and for that matter the Eurozone altogether.

Thus, at the beginning of the Greek crisis, the Prime Minister of the time, George Papandreou, was loath to recognize the responsibility of the State, and that of his own party, in his country's predicament. He chose instead to accuse external forces of maliciously attacking Greece's government bonds and banks.

In the same fashion, when markets became distrustful of Spain's solvency, the intelligence services of that country reportedly initiated an enquiry aimed at identifying the foreign forces that had engineered the rise in interest rates charged on government bonds.

A convenient culprit was swiftly found. Conspirators had their headquarters, not in Zurich as in de Gaulle's time, but in the Anglo-Saxon financial and media establishment. The ulterior motive, we were told, was to sink the euro. Proof of the plot: markets had engaged in massive short-selling of the single currency, bringing down the value of the euro vis-à-vis other world currencies, notably the dollar.

What is intriguing, and indeed funny, is the fact that, among those who saw the sovereign-debt crisis as the result of a despicable Anglo-Saxon conspiracy to sink the euro, there were many who now advocate the depreciation of the euro as a means of enhancing the international competitiveness of the Eurozone.

Here we are at a loss. How can conspiracy mongers vituperate against short-selling of the euro, which makes the value of the single currency fall, and subsequently, when it comes to proposing a solution, many of them call for pushing the value of the euro down in order to restore the competitiveness of the zone? Furthermore, how is it that the conspiracy mongers who used to denounce the existence of a perfidious plan to sink the value of the euro now accuse the European Central Bank of refusing to work towards the depreciation of the single currency?

Be that as it may, as a result of the financial support provided to debt-stricken countries of the Eurozone through the European Stability Mechanism (ESM), markets regained some degree of confidence in the repayment capacity of these countries. Pressures on the euro have eased accordingly.

Did conspiracy mongers give up their claims? Not quite. They simply changed targets.

The alleged plot against the Eurozone is no longer aimed at annihilating the euro but, rather, at dismantling the European "social model" (read: the profligate entitlement system that prevails in a number of countries of the region) by imposing "quasi-criminal" austerity policies on debt-stricken countries.

What about the ulterior motive? Conspiracy mongers found that too. The purpose is to force the privatization of pensions and other social services, thereby enabling private pension funds and insurance corporations to capture the market left by the collapse of Europe's social security system.

The argumentation doesn't make sense. If the public budgets of debt-stricken countries continue in perpetual deficit, public pensions and other State-provided services will, sooner rather than later, cease to be affordable. Putting the government's financial house in order is thus a means of salvaging publicly-funded social benefits. What can bring the European "social model" to collapse is not austerity but profligacy.

To rebut this fact, conspiracy mongers take on what they conveniently present as manipulated conventional wisdom. Mainstream economics, they argue, advocates budget equilibrium because it is shaped to suit vested interests, namely those that seek to take over the market of pensions and health services.

This is creative conspiracy at its best -- or at its weirdest. For if there is something that can be regarded as today's conventional wisdom, it is not "austerity" but the opposite thereof, namely: stimulus packages à la Obama and Shinzo Abe and quantitative easing à la Bernanke and Kuroda.

The ultimate audacity of conspiracy mongers is to advertise themselves as victims of conventional wisdom. As a matter of fact, to a large extent, they form part of it.