The scenario employed against Greece, Portugal and Spain by New York-based international financial gamblers is all too familiar to anyone who recalls the events of the 1997-98 Asian financial crisis. Then, as now, hedge funds targeted a country whose GDP was largely dependent on tourist dollars - Thailand - and had fiscal problems at the time. The crisis afterwards engulfed the “sick south” of the continent - Indonesia, Malaysia, South Korea - and severely affected China, as well. The MO was slightly different, as hedge funds targeted these countries’ currencies, whose devaluation jeopardised their ability to repay the dollar-denominated loans, requiring the IMF’s massive intervention.

Then, as now, it all started with rumours vehiculated in the financial media about these countries’ fiscal management or the state of their currencies. Granted, the PIIGS, as they are nicknamed in NY (Portugal, Italy, Ireland, Greece + Spain), are members of the euro club and therefore better protected. Hence, the euro’s viability is called into question. As a result, private creditors have massively dumped sovereign European debt, an objective desired by the betting crowd. 

The size of the Southern European countries’ budget deficits and public debt are now the targets. The bet is that by raising the spectre of country default it would be much harder for them to sell the bonds necessary to finance their deficits. Thus, the concerted and vicious attacks led to a steep increase in the cost of insuring their bond emissions against risk : if for every 10.000.000 euros worth of T-bonds issued Germany pays around 45.000 euros, Greece has to pay 398.000 euros and Spain 162.000 euros !  This, however, is not all. Companies and corporations in the affected countries are seeing borrowing costs balloon. Austerity measures required to adjust budget deficits are already provoking pain and huge union protests, at a time when deficit spending should not be curtailed if the EU is to ride out of the financial crisis any time soon.

So why are these attacks happening ? Should we blame them on the blind “forces of the market”, as American spin doctors do ? Unfortunately for those concerned, we know the names of the investment banks and hedge funds responsible for unsettling the market and deriving benefits from the panic. Such developments call into question the wisdom of leaving too much money, through lower taxation, in the pockets of the US "investment class", as its members are not mature enough to know when they are jeopardising their own country's international standing and endangering global security through their mindless pursuit of higher returns. Accordingly, it might seem wise for American policymakers not only to introduce taxes aimed at financial transactions, but to reintroduce some form of progressive income tax aimed at those earning more than USD 250,000 a year, as well. In hindsight, multilateral institutions such as the IMF were better positioned to assist countries with development capital they needed and extend loans to them, than private finance. A consensus is developing among Western experts that the globalisation of financial transactions has not led to overall economic growth, being now considered a huge disappointment.

The current speculation in sovereign debt points to a systemic problem specific to the US. Since the ’70s, the American economy has hollowed out - a phenomenon that has not affected Asia or the European Union. The US has lost its consumer electronics industries to Japan, its car industry is in deep trouble, while the Silicon Valley entrepreneurs cannot, by themselves, compensate for the lack of investment opportunities in the country’s industrial sector. The mountains of cash available for investment that resulted from years of low taxation were in search of high-return opportunities (like the dot-com and the real estate bubbles). Wall Street bankers are offering to investors high profits from either Ponzi schemes or… from raiding other countries’ economies, like buccaneers, and then scavenging their bankrupt companies, as in South Korea.

This time around, the EU is being “punished” because it adopted a single currency, has kept a strong industrial base and is vocal against the casino capitalism promoted by Wall Street bankers. During the Asian crisis, countries like South Korea were being punished because they were expanding too fast and did not allow American investors to take chunks of their industries. In 1998 some of the fund managers involved in sparking off the Asian crisis claimed that they possessed a “nuclear-financial” weapon that makes armed intervention obsolete… Unfortunately for those concerned, the global traders and their subservient media have hit the US's allies in Europe. By speculating in the media North vs. South divisions in economic performance and productivity, the perpetrators of such attacks hope to weaken the solidarity of EU countries. This follows the "New Europe" - "Old Europe" divisive tactics used by American officials at the outset of the war in Iraq.

North-south differences in economic performance and cultural differences are also present within the United States. Spanish-speaking demonstrators burning US flags in California and chanting secessionist slogans a few years back were not, however, emboldened by Madrid-based or other EU countries' media or secret services, military or otherwise. (A break-up of the United States is only discussed, and possibly desired, by some Moscow circles, although nobody has paid any attention to them within the EU.)    

By allowing its financial sector to run amok and harm countries around the world, the US loses influence and credibility in world affairs. To protect themselves,  Asian countries are busy planning an Asian economic bloc, whilst Europeans are looking at ways of abandoning the trans-Atlantic military and strategic partnership by adopting their own security architecture.

It comes as no surprise, therefore, that President Obama has decided not to meet with the European Union’s political leadership at the May summit this year. Indeed, what is there left to talk about ?