This week Alexander Downer declared that politicians should be the target of the Occupy movement, rather than the banking system. Writing in the Adelaide Advertiser, Downer said that it was ironic for demonstrators from Adelaide to London to be attacking banks, while in Europe the very survival of many banks was in question. The former foreign minister warned of the dire consequences of the debt crisis in Greece, Italy and other European nations will be increasingly felt in Australia if the situation worsens.
“Let’s face it, Europe is in economic turmoil. If the European economy falls into deep recession – and that is a real possibility – then it will have a direct impact on growth, living standards and jobs in Australia.” Downer’s analysis of the situation and the causes of global financial insecurity, isn’t reserved to Europe.
“The Occupy group may be targeting the banks but the real villains of the piece are the politicians,” says the former Howard government minister. “A few years ago, US politicians told the banks they had to lend a proportion of their housing loans to low-income, high-risk borrowers. “It almost worked, until interest rates started to rise and borrowers couldn’t service their loans.
“In the meantime, these sub-prime loans had been packaged together by the banks and on-sold as securities to other banks, including many of the largest European banks. So when the loans couldn’t be serviced, some banks hit the wall. “The governments of Europe and the US decided to bail out most, but not quite all, of these banks. That cost a lot of money. The problem was, the governments themselves were already deeply in debt. It’s debt the Occupy movement should be objecting to, not banks.” Downer points to Greece’s experience of what happens when governments can’t finance their debt.
“They plunge the economy into recession. “The Greek foreign minister told me last week his country’s GDP would, by next June, have declined by 14 per cent in two years.” Downer says for Australia, there are lessons to learn. “We need to get away from the culture of excessive debt … that means we get what we can afford. If you really want a new government program, that’s fine. Taxes will rise to pay for it. But let’s get off the debt treadmill or it will destroy our economy.” Alexander Downer was foreign affairs minister in the Howard government from 1996 to 2007.
