If that's true, it's a total disaster. There is one thing in the Lisbon treaty that should be removed. It's article 123 which says the following:
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.It's this restriction that prevents the European Central Bank from directly intervening in the money supply. And as a consequence, all European governments (not just those in the Eurozone) have to go begging for money from the markets and end up having to pay ridiculous interest rates. For the latest figures, see the European Central Banks website. The numbers for October 2011 include Greece (18.04%), Portugal (11.72%) and Ireland (8.10%), but the truly insane thing is the way the rates fluctuate wildly. We simply cannot let democratic governments be dictated to by the follies of irrational markets. These rates are no more rational that the stock markets, which go up and down like a yo-yo.
My cousin Chris pointed me to a great little video (in French) that explains the debt problem (thanks Chris). It's called "La dette publique expliquée aux nuls (avec morale à la fin)". It shows beautifully how all our problems can be traced to the fact that we have handed over the keys to the money creation process to commercial banks who have been charging tax payers ridiculous levels of interest for decades. I've copied one graph from the video that makes the point.
If the ECB had lent the French government the money, instead of the banks, then the 1.4 trillion euros of interest that has been paid by the French taxpayer (i.e. me) could have been used for something useful, instead of paying obscene bonuses to traders and being stashed away in tax havens.
I don't have access to the equivalent data for countries like Greece, but I'm sure it's a similar story. The central problem is interest charges - not the excessive spending by the Greek government on wages and pensions, or even tax avoidance. That money stays in the Greek economy. But the interest payments that are gobbled up by fat cat bankers can end up anywhere.
Is it possible that Article 123 of the Lisbon treaty was inserted as a result of lobbying pressure from the financial sector? Whatever the reason, it is clear that this insanity has to stop.
Actually, Article 123 has a second bit which might just have the seeds of a solution. It says
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.It sound like this means that governments could create their own credit institutions that could directly access ECB generated money without having to go via the banks. Could this be a way out??