Yanis Varoufakis gave an energetic, pointed, and insightful talk at the INET conference in Berlin. His message was that the efforts by European authorities were misguided, in that they were seeking to ringfence individual countries, when it was the Eurozone as a whole that needs to be shored up. And he contends this can be done now without special approvals.
This talk is the antithesis of airy-fairy. For instance, consider these observations at around 5:30:
First, we have to accept that the ECB will not be allowed to monetize the debt, whether we would like it to do so or not, that there will be no EBC guarantees of debt issues of member states. There will not be any ECB purchases of government bonds in the primary market. And there will be no leveraging of the European financial instability mechanism, ah, stability I should have said.
The second major assumption that I wish to make is that again, whether we like it or not, surplus countries will not consent to the issue of jointly and severally guaranteed Eurobonds. For good reason, in many ways. Since the yields, the interest rates that these bonds will fetch will be the weighted average of that which Germany and the Holland on the one hand and Greece and Portugal on the other will achieve, these Eurobonds will have interest rates that will be too high for the surplus countries and and not low enough for the deficit countries.
Thirdly, federation is not the solution. It may be a long-term objective for some of us, but we’re not ready yet, and it should not be an attempt to fix the Euro crisis.
It is worth noting that one of the questions after the various presentations on the Eurozone mess raised the issue of the “democratic deficit”. The various speakers endorsed the idea of getting public approval, but they implicitly or explicitly acknowledged that it would be after the fact. Erm, so since when do you approve a fait accompli?