Yanis Varoufakis on the Crisis in Greece Posted on September 16, 2012 by Yves Smith In this interview with Max Keiser, Yanis Varoufakis gives a vivid account of conditions on the ground in Greece and why he is still pessimistic for the prospects for the eurozone. Post navigation ← Dan Kervick: Shamanistic Economics Local DAs Allowing Debt Collectors to Use Their Letterhead, Split Fees from Shakedown → Subscribe to Post Comments 15 comments hyperpolarizer September 16, 2012 at 3:45 am Chilling. What is foreseen is either i) a catastrophic and disorderly break-up of the Eurozone, followed by 20 or so years of Continental depression, or ii) a political unification of all Eurozone countries into a single federal entity, with (presumably) Germany at the helm. Do I hear a vote for an orderly break-up of the Eurozone? steve from virginia September 16, 2012 at 7:48 am Wall Street is the supplier of the world’s credit. No credit, no … ‘car parts’, no gas, no economy, either. As folks would say at the ‘Brand X’ website: “Credit embargo, bitchez!” This is a matter of dogs fighting over scraps in a back alley. Underway in Greece is in the future for the rest of the world, starting with the other Mediterranean countries, including the US and China soon enough. Problem isn’t complicated: we are living the consequences of burning up capital for no return. The Greeks are experiencing ‘conservation by other means’. cg September 16, 2012 at 6:01 pm Hear, hear. The leading economic indicator for everywhere is… Greece. Rob September 16, 2012 at 11:26 am It is so unlikely there will be an actual united Europe,with the nation states ceding all affairs to a central federal government.BUT this was the dream a century ago….the group of world power players who formed the twentieth century……the British round tables,the Cecil family and their adherents/cousins who ran the empire and their progeny who created the association of helpers known as “the council on foreign relations”,and the “institute of international affairs”,as well as the organizations they set up in Russia,Germany,France,Canada,Australia,south Africa,and the pacific nations(the IPR-institute of pacific relations,which was funded though the US branch and was shut down during the communist hysteria years since they supported all the communist upstarts in the region ).But a hundred years ago Lionel Curtis and his friends were supporting the “three block worldview”,where Europe was to be unified and controlled via Germany,and Russia was to control the east(now china is vying for that role with thenrussians)and the Atlantic union of Britain and America controlled the rest….. Those guys died…. But the story still seems to be moving in that direction. We’ll see what happens. emptyfull September 16, 2012 at 5:45 pm Yep. It is super unlikely that a USE will work. With the exception of the (quite brief) era of the Holy Roman Empire you have 1500 years of a disunited political Europe, with a relatively high degree of religious and high-cultural exchange. Yes, powerful politicians have long dreamed of uniting the continent under their rule, but too many wars have been fought against such megalomaniacs to believe this project will ever succeed. Europe’s habits of power seem consistent with what it had before the Euro: a group of sovereign nation states united loosely with some vague pan-European rules and a largely (but not entirely) toothless bureaucracy (once the Catholic church, then the EU). That is, I think, a ‘natural’ balance for a prosperous and peaceful Europe. But such a balance was not big enough for the political dreamers. And those folks are still trying to make the dream a reality, despite the increasingly obvious problems. Indeed, they are using the problems as a ratchet to force their dream on unwilling commoners. They will not succeed and it will end in tears. The only solution is real national sovereignty (bye-bye Euro) and less (but not no) “Europe.” Ruben September 16, 2012 at 11:28 am The Greek State is a very sick State. The Italian and Spanish States are also sick to a lesser degree but quite sick anyways. Readers able to read Spanish and interested in why the “structural reforms” push for Southern Europe is a necessary one should read this: http://politica.elpais.com/politica/2012/09/08/actualidad/1347129185_745267.html Problem is the southern European governments are trying to equate structural reforms with social security cuts and wage reductions whereas there is much to do on the structure of the State itself. Susan the other September 16, 2012 at 1:07 pm That was interesting. Varoufakis said stg that Soros also just said, that the indebted nations of the EU cannot separate from the euro so they are stuck. Varoufakis was talking about the impossibility of bringing the Drachma back because it is a massive undertaking which Greece cannot do, and he compared it to what the US and the UK did in Iraq. We made Iraq an instant protectorate by flying in “7 or 8 jumbo jets” full of dollars. Varoufakis also says, ‘Why would anyone buy an Island today when it will be twice as cheap tomorrow?’ (I read that Israel just bought one.) And he says things are deteriorating too fast to control; that Bernanke wisely saved the US from this fate of spiraling depression by infusing the system with enough money to hold asset prices up – but nobody could do that for Greece because of the politics. The missing politics. So it was also interesting the other day in the post from Der Spiegel wherein the word ‘sovereign’ was used in a modified way. Der Spiegel said that it is imperative for the EU to come together politically so that the nations can be relieved of their “sovereign debt.” That is, public debt, not private debt. Right now the EU countries have already given up their finances, their commonwealth. And they stubbornly reject coming together to form a new one. One reason is that Germany wants to maintain German debt separately from any new commonwealth. Curious. I don’t get that part. Susan the other September 16, 2012 at 3:06 pm Two more things. Again Der Spiegel, today’s links. Draghi Offers To Defend Himself in the Bundestag. Draghi says ‘the euro is irreversible’ and the Germans need to stop being hysterical over inflation, and he subtly implies they will benefit. But Germany wants most of all to ‘control its own debt’ which must be code for ‘create its own credit’. This begins to make sense. The two opposing forces here are the German private banks wanting to create their own credit and the rest of the EU which wants a well-thought-out commonwealth federation. You’d think Germany, of all states, could appreciate the desire for commonwealth. Reich. But instead the opponents harp about the subtle differences between monetary and fiscal. When everything is falling down around your ankles, it hardly matters. Germany is afraid a commonwealth will make German “investment” secondary, no doubt. Because a money commonwealth, by definition, makes no bones about monetary v fiscal when there is a need and a consensus for spending on education, health, social secutity, research, transportation, toxic cleanup, law enforcement (not Holder’s kind), transportation, agriculture and the arts. And other investments into the future. Screw the “free” market. Jim September 16, 2012 at 3:15 pm Interesting observation, Susan. While you can’t fathom why Germans would not want to cheer for a team from the US of E in the next World Cup tournament, I can’t imagine why any citizen of Italy would willingly renounce Italian citizenship. At least you’re consistent. You praise both Bernanke and Draghi. Many liberals condemn Bernanke while extolling Draghi for doing the same. With the difference that Bernanke has a mandate to do as he has, while Draghi is burying German democracy as he does. Finally, you ask why would Germany want to have its debt separate. Imagine a US of E. The South far outnumbers the North. What would prevent the South from (i) passing laws that will enable them to receive permanent transfer payments from the North of 15% of GDP, and (ii) assuming EuroDebt, as a % of GDP, substantially above what they have today? Of course, if, within the US of Europe, the votes of a citizen of a peripheral state will be worth 20% of what a vote from the core states, then Germany has nothing to worry about (other than a strong defense department to quell the rebellion in the peripheral countries :-)). Susan the other September 16, 2012 at 5:23 pm Actually, that is what I think about the EU, that the south should absorb the surplus of the north because it benefits both. And about extolling Bernanke, I do think he has done his best to prevent outright depression. I only wish the Fed would infuse the states and municipalities with cash. I think that is what would happen in a more efficient manner if we had a money commons. Calgacus September 18, 2012 at 6:25 am Jim, Germany has already decided to not have its debt separate, by joining the Euro Suicide Pact. Germany has decided to run its economy in a way which is highly destructive to the rest of this insane system – by “transfer payments” of real goods in return for Southern debt. Such German transfers, their trade surpluses are the biggest international problem. There are only two sane choices, which are really just one: a normal “country”. Normal Europe or Normal Germany. The only way for the Euro to not be a suicide pact, and to allow the current German economic policy is for Germans to allow sufficient money-printing, which WILL NOT, CAN NOT, BE INFLATIONARY – to sustain full employment in the South. Compared to now this is a magical win-win. South gets more real, particularly German, goods. Germany gets more uninflated Euros. Both get more employment. Nobody has crushing debt. It’s fiscal, but it is NOT a transfer. Germany wants to do & DOES the transfers, already. It’s addicted to them. That’s the problem. If it wants to do the transfers, why not do them in a way which doesn’t destroy others’ and their own (if they stick to this craziness) economies? As Dean Baker said somewhere, Germany is like a merchant selling its customers goods on credit, that demands both that they pay up their tabs & buy more goods (& refuses to buy stuff from them?). Germany’s demands don’t make sense. They contradict themselves. They are based on neoclassical economics – superficially common sense – examined a little – unadulterated insanity. Zog September 16, 2012 at 1:43 pm Only one solution: Rise up and hang the bankers. Hang them all. Matt September 16, 2012 at 2:39 pm In just the first minute Varoufakis taught me that the currency crisis brings inventory compression. Survival depends on the shipment of goods but the financial system is minimizing costs with no safety margins for survival. First with just in time inventory and now in Greece with pre-pay requirements before shipping. Inventory is just another asset for the financiers to suck the blood out of before they get around to buying the real estate for cheap. YouDon'tSay? September 16, 2012 at 7:19 pm Yep, it’s coming soon: A Donkey Show Bert_S September 18, 2012 at 7:01 am I don’t know why Greece doesn’t just sell all the Bimmers it bought from Germany and pay off the National Debt. They hold resale value pretty good and with the bond write off Greece got already, the Bimmer sales proceeds should cover it and Greece would be debt free! Comments are closed. Tip Jar Please Donate or Subscribe!