Yanis Varoufakis: What Merkel’s Third Term Means for Europe

Yves here. Varoufakis gives a high-level overview of the political and economic constraints on Merkel in dealing with the festering Eurocrisis. While many of the political issues have received decent coverage in the English language press, the nature and severity of Germany’s economic challenges have gotten scant notice.

By Yanis Varoufakis a professor of economics at the University of Athens. Cross posted from his blog

A few days before the German federal election, the American commentator Bob Kuttner called upon German Chancellor Angela Merkel to use the election victory that was clearly in the making to change tack regarding the European Periphery. Focusing on Greece, Kuttner added to a chorus of commentators who have called for a Marshall Plan, accompanied by a generous degree of debt forgiveness, as a ‘second phase’ of the program of budget austerity and reform imposed on Greece over the past three years. Kuttner even suggested labeling it The Merkel Plan, so as to afford the Chancellor a timeless legacy for genuine ‘tough love’, as opposed to being permanently remembered, at least in the Mediterranean, for unremitting heartlessness toward citizens of countries bankrupted when the Eurozone’s architecture was found wanting.

The problem with Kuttner’s noble suggestion is that Germany cannot afford such largesse. For it is impossible to imagine that Greece will be treated to a therapeutic combination of debt relief and large scale investments without similar overtures towards at least Portugal and Ireland, the other two original ‘fallen’ Eurozone member-states which, it must be said, had sunk less into the mire of debt than Greece and have since displayed a great deal more ‘moral enthusiasm’ for adopting austerity measures.

How could Merkel ever look the Irish in the eye and explain to them why the Greeks should receive, primarily from Germany, a fresh multi-billion aid package while they remain under a cloud of austerity? How can she tell them that, while the Greek government is excused massive loans that Athens’ Parliament approved while fully cognizant of their size and nature, the Irish people, who were never asked about the hideous promissory notes issued by their government to corrupt private banks, must continue to repay those illicit loans in full?

Similarly with the Portuguese: is Merkel at liberty to present to the Portuguese people such a generous change of heart toward the Greeks after three years of having been impressed by Lisbon’s cross-party Merkelite commitment to progress-through-austerity? Not unless she can offer Portugal similar debt relief and analogous investment injections.

Merkel knows all this. She knows, too, that, were she to institute a Merkel Plan for Greece, Ireland and Portugal, its repercussions for Spain and Italy would be powerful and far-reaching. Italy, a country that has managed to stay very close to the Maastricht deficit limit (of 3% of GDP) and which is a sterling high added value exporter, is already straining under recession-inducing fiscal constraints set by Brussels. Could it continue to consent to them if, at the same time, a Marshall-like Merkel Plan were doing the rounds in Greece, Portugal and Ireland? And what of Spain? Will Madrid, or its electorate, accept the idea that, while Spanish unemployment bolts past the 30% mark, neighbouring Portugal is experiencing a Merkel Plan-induced boom?

Kuttner’s well-meaning proposal will, then, find no advocates in Berlin, even if Merkel warms to the idea of a Merkel Plan and the favourable legacy it will grant her. Put simply, a Merkel Plan would have to be on offer to the bulk of the Eurozone, since most of its member-states could, and would, present Berlin with reasonable claims for assistance. Alas, Germany could not afford this. To fund it, Merkel would have to find at least €300 billion a year for something like a decade. Even if the other surplus countries, plus stuttering France, could be convinced to provide half of that sum, that would mean that Germany would have to channel nearly 4.5% of its GDP to the rest of the Eurozone, as pump priming within the context of a Merkel Plan. Recalling that the Marshall Plan cost the U.S. 2% of GDP annually, it is abundantly clear that a proper Merkel Plan is a bridge too far.

It is not just the cost of a Merkel Plan that makes it prohibitive. The German economy is facing a barrage of problems whose impact will be felt very, very soon. When it is, no German Chancellor, however concerned she might be about her legacy, will dare tell the Bundestag that Germany ought to fund a European Marshall Plan named after her good self.

First among these impending problems is the anticipated diminution of Chinese demand for Germany’s capital goods. As Chinese investment tapers off, courtesy of the simple fact that its current level is unsustainable given the level of effective demand for China’s output, Germany’s capacity to replace falling demand from the Eurozone (mainly from Italy and Spain) with additional demand from China will wane substantially.

There is also a brewing crisis due to the high, and rising, cost of energy; the ‘fuel’ behind Germany’s export-oriented heavy industry. In Texas, where I now live and work, German corporations (e.g. BASF) are building gigantic new production facilities at the expense of investing in Germany. As the energy price differential between Germany and the U.S., but also Germany and the rest of Europe, rises, the German economy will increasingly feel the pinch.

Merkel’s third term will also be plagued by a political backlash that will be difficult enough to cope with even without a Merkel Plan for the Eurozone. The country’s demographics are putting a strain on German hospital, pension and social security systems. Meanwhile, the growing masses of Germans living in poverty and working dead-end, soul destroying ‘micro-jobs’ are unlikely to take kindly to a massive Merkel Plan for countries which the German press and an assortment of German politicians, including many of Merkel’s colleagues, have been painting for three years now as profligate, debt-driven, unworthy Eurozone partners.

Merkel’s Third Term Dilemma

Granted that Germany cannot afford to pay for the Euro Crisis, what can Merkel do during her third term to prevent the disintegration of the Eurozone and the effective dismantling of the European Union that would surely follow?

While it is clear that Merkel would love to do nothing much (i.e. to continue with the well-tried policy of “extending and pretending”[1]), she knows that, sooner or later, her chickens will come home to roost, the Eurozone’s integrity shattering under the pressures of the tectonic plates that are shifting under the surface.

One option being contemplated by Merkel and her colleagues is to “amputate and print”: that is, to go back to the idea of a mini monetary union, expel countries like Greece and Portugal and print sufficient quantities of euros to flood the remaining Eurozone money markets with liquidity. This is a dangerous game, as Merkel well knows, and will most likely cause the death of the Franco-German axis as the process of sequentially ‘amputating’ Eurozone member-states cannot end without France being forced out too. And as the Franco-German axis is the one around which the European Union has been revolving, since it started life as a coal and steel cartel, Europe-as-we-know-it will spin out of control.

But there is a second option, proposed by Stuart Holland, J.K. Galbraith and myself. We call it a ‘Modest Proposal for Resolving the Euro Crisis’ and we think that it offers Merkel immediate solutions, feasible within current European law and treaties and, above all else, without any need for the German taxpayer to fund debt relief or needed investment in the Periphery. The idea is to deploy existing institutions that require none of the moves that many Europeans oppose, such as national guarantees, fiscal transfers and troublesome treaty changes, which many electorates could anyway reject. Taken together, these four policies amount to not a Merkel-Marshall Plan but a European New Deal. Like its American forebear it would yield decisive progress within months, through measures that fall entirely within the constitutional framework to which the German government has been committed.

1)    A Case-by-Case Bank Programme would bypass the impasse of Banking Union, by sequentially Europeanising troubled banks currently under the jurisdiction of fiscally stressed member-states. One by one, peripheral banks in trouble would fall into the lap of the European Stability Mechanism which would, in association with the European Central Bank, oversee their recapitalisation, resolution or merger, before re-selling them to the private sector. In this way stressed sovereign debt can be de-coupled from bank recapitalisations swiftly but also sequentially, allowing for a proper banking union to be effected only when Europe is genuinely ready for a common resolution mechanism that includes all banks. And when this process is over, and the banks have been cleansed, the European Stability Mechanism will sell its shares into the cleansed banks recouping (most probably with interest) the capital that Europe’s taxpayers will have put into the project of cleaning up their (now unified) banking sector.

2)    A Limited Debt Conversion Programme, with the ECB administering a simple Debt Conversion Program for any member-state that chooses to participate. The gist of it would be that the Central Bank pays (as opposed to ‘purchases’) a portion of every maturing government bond corresponding to the member-state’s public debt that it was ‘allowed’ to have under the Eurozone’s foundation Treaty, known as Maastricht (their Maastricht-Compliant Debt or MCD hereafter). To fund these payments (or redemptions), the ECB will issue its own bonds (ECB-bonds) in its own name, guaranteed solely by the ECB but repaid, in full, by the member-states (on whose behalf the ECB will have issued them). This is how: Upon the issue of ECB bonds, the ECB will simultaneously open a debit account per participating member-state into which the latter is legally bound to make deposits (to cover the ECB-bonds’ coupons and principal).  And who will stand behind the ECB-bonds in the case of a defaulting member-state? First, the ECB debit accounts of each member-state shall enjoy what is known as super-seniority status vis-à-vis all its other debts (i.e. they get repaid first by the member-states if the latter cannot repay all their debts to all their creditors). Secondly, the European Stability Mechanism will insure, against a hard default, the repayments by each participating member-state into its ECB debit account.  In summary, member-states will enjoy large-scale interest rate reductions (having refinanced their MCD at low rates secured by the ECB) at no cost either to the ECB or to… Germany. Instead of monetising debt, or having German taxpayers pay other nations’ debts, the ECB will have played the role of a go-between member-states and money markets, insured by the ESM. Additionally, the ECB-bond issues will help create a large liquid market for European paper that advances the euro’s reserve currency status.

3)    An Investment-led Recovery and Convergence Programme to help shift idle European savings into productive investments and, more generally, to re-cycle global surpluses into productivity enhancing ventures in the parts of Europe that most need them. To do this, at a level that is comparable to FDR’s 1933-1937 New Deal, all Europe needs do is empower the European Investment Bank (EIB) to administer such an investment program utilising its long-held capacity to issue its own EIB bonds (thus mobilising idle savings for investment purposes) to cover 50% of a massive Pan-European investment program while the ECB backs, on behalf of the Eurozone, the remaining 50% of the EIB’s investments. That is the way to inject investment in the ailing Eurozone without asking German taxpayers to foot the bill.

4)    An Emergency Social Solidarity Programme to meet basic human needs caused by the crisis and funded by monies, currently accumulating in the guts of Europe’s central bank system, generated from the same asymmetries that helped cause the crisis.[2]

Four policies for addressing Europe’s four intertwined crises, each involving existing institutions and requiring no Treaty changes, no German guarantees of other nations’ debts, no tax-funded stimuli, no Central Bank monetisation, indeed none of the commitments that Europe’s ‘family’, Germany in particular, is so clearly unready for.

If Merkel is seriously interested in her legacy, she should adopt the aforementioned proposal. This would make her third term synonymous with the overhaul that the Eurozone desperately needs, without mortgaging Germany’s future GDP or committing to an oppressive federal-like ‘marriage’ that neither the French nor the Germans want. All it would require is a rational re-assignment of existing European institutions. All that is missing is the will. “But why?”, I hear you ask.

The sad answer lies in the political realm. Europe’s tragedy is that those with the power to re-design, and in so doing fix, the Euro-system, i.e. Mrs Merkel during her third term, stand to lose a great deal of bargaining power within the Eurozone if they do so. Put succinctly, if Mrs Merkel uses her power to fix the Eurozone along lines such as the ones that were mentioned above, she will be forfeiting the exorbitant power of the German Chancellery (within the Council of Europe) to dictate policy to the rest of Europe. Thus, she is unlike to use it in her third term, with the result that the perfectly save-able Eurozone is crumbling all around us. With immense human cost and at the great benefit of thugs like Greece’s Golden Dawn.



Back in July I published an article in Handelsblatt that called for a hegemonic, rather than an authoritarian, Germany. Coming from a Greek author who vehemently opposes current German policies, that article provoked considerable reaction. But my point was a simple one. If Europe is to prevent its own disintegration, Germany must adopt an hegemonic role similar to that played by the United States following World War II. Merkel has the option of doing so, by adopting policies like the ones in our Modest Proposal, at no cost to the German taxpayer and with gigantic benefits for Europe and, by extension, for Germany. Alas, I very much fear that she will do no such thing. Instead, she will stick to the current “extend (the crisis) and pretend (that it was sorted out)” policy. If so, her third term will go down in history as a tragically missed opportunity.


[1] ‘Extend and pretend’ is the bankers’ favourite ploy when they want to hide the fact that some large loans they gave to some corporation or states has become ‘non-performing’. Rather than admit that they lost the monies, and be forced to write off these as bad loans, they grant a second and a third and a fourth loan to the, effectively, defaulted party. Thus, they ‘extend’ the loans and they ‘pretend’ that they are being serviced.

[2] As we ‘speak’, every time a Portuguese purchases a Volkswagen or a Greek send her savings to a German bank (fearing that her Greek bank will fail), the European System of Central Banks registers (in an accounting system called TARGET2) a net asset in favour of Germany’s Central Bank (the Bundesbank). At the end of each year, Portugal’s and Greece’s Central Banks pay interest to the Bundesbank on these liabilities (which are, of course, the Bundesbank’s assets). This accumulating interest is a reflection of the imbalances within the Eurozone and they get worse and worse as the Euro Crisis flares up. So, our modest proposal, in this regard, is that these interest payments, which are mere reflections of the Crisis, are channeled toward financing the basic food and energy needs of the Crisis’ victims. Notice that not one cent of this money will be sourced from the German taxpayer. All we are proposing is that the German Treasury (which is the final recipient of these interest payments now) should not benefit from the suffering of people in the Periphery.

This article was commissioned by The New Left Project – click here for the NLP’s site

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  1. allcoppedout

    I drive a Volkswagen made in Portugal. Much of Germany’s manufacturing success is down to much smaller, paternalistic businesses making and exporting such as pencils. I rather like their model, but it can’t be a general solution. The underlying comparative advantage model is a zero sum game and takes little account of economics as if people and the planet matter. We are regularly suckered into thinking 196 competitive countries is the answer.

    The left needs a real explanation of what debt is and how it is created. This has little to do with simple explanations fractional reserve banking. My guess is we need a much more penetrative analysis of inherited and competitive advantage (often about keeping other competition out through barriers to entry etc.) in the use of money. We are under-estimating the role of criminality in wealth and seem reluctant to recognise most private debt is indenture and supports unnecessary economic rents.

    I might believe in an EU prepared to adopt modular economics and a green work programme for full employment (recognising much work is already robotised and more of it should be). Money in this module would be transparent and misuse a clear criminal offence, including many existing rip-offs of EU funding through transfer-pricing and over-charging already in wide practice.

    The left is not asking enough questions on why economics is the main block to us doing the worthwhile, from global warming to getting a grandmother’s flat decorated. Mutti has little to do with the real problem.

    1. Ignacio

      I was to write a reply similar to yours. The obsession with competitivity is widely shared by economists no matter they are american, eurocoreans or europeripherians. Nevertheless I disagree with your idea suggesting that we need better analyses on adquired or inherited competitivity. What we need is to shift the focus from competitivity to social and ecological sustainability.

      1. allcoppedout

        I’d want to end up in the same place Ignacio – I just see the ideological problems as inherited and that we can’t resolve them without surfacing them.

  2. H. Alexander Ivey

    Not to snipe (too much), but I noticed that the further down the list of 4 proposals the author talked, the fewer the proposal words and the more critical, important, and political related (vs. the detailed “economic” proposal of #1) their proposal became. It looked like too much of step one MEGO at this level of detail (while ignoring a fundamental question – should different countries have identical banks?, followed by progressively vaguer yet the more important points about the various political wills of Europe, not just Germany.

  3. Hugh

    The mistake is to assume that Merkel has any interest in resolving the euro crisis. We live in kleptocracies. Merkel is there to keep the looting going for as long as possible. She is not there, and would be quickly replaced if she showed the slightly inclination to actually fix any of the problems in the eurozone. For the hundredth time, the eurozone has 6 critical problems:

    1. An insolvent predatory banking system
    2. A weak central bank
    3. An absence of a democratic fiscal and debt union
    4. Ongoing internal mercantilist trading patterns
    5. Thoroughly corrupt political classes and elites
    6. A kleptocratic ruling class of the rich

    Merkel is part of the problem, not its solution. None of these problems has been addressed, and Merkel was re-elected by the German powers that be to ensure that they remain unaddressed.

    1. Mike Hall


      I agree with you. Merkel would not even have been a candidate if she wasn’t inclined toward the neo liberal agenda, whether she actually understands its implications or not.

      In fact, I tend to think politicians, as simply the PR propaganda front, are most effective for the elites they really serve, when they don’t have much clue. All the better to peddle the lies.

      People like Blair & Obama epitomise the empathy/ethically vacuous self serving professional politician. I don’t see any mainstream politicians who much any different.

      I doubt very much that ‘Golden Dawn’ fascism will go away as easily as some now think. The conditions for its continued rise are still present.

      In any case, the Greek ruling parties have shown themselves entirely happy with a fascist force perpetuating a low level ‘divide & rule’ civil war that deflects any serious challenge to their power.

      It’s only a matter of degree, not fundamental difference in the political tactics, of all the mainstream parties, in any country.

      There hasn’t been meaningful ‘democracy’ for a very long time (if ever very much) anywhere in Europe of the US.

      I suspect things are goinmg to get far nastier before we see any serious attempt at it.

    2. charles sereno

      Hugh, good points as usual. However, on this you’re wrong — Merkel was not re-elected by the powers that be. She was re-elected by Germans who voted or didn’t vote, the vast majority of whom are not “kleptocrats.” Until effective ways are found to enlighten such a group, nothing will change. It may be an impossible task and catastrophe will ensue. For my part, I will keep searching for EFFECTIVE methods for change. We’ve got the Bells but haven’t figured out how to collar the Cat.

      1. James Levy

        Merkel not elected by the Powers That Be? How did she get to be running the CDU? Who paid for her campaign? What media outlets pointed out the foolishness and mendacity of her policies? How many pointed to the predatory German lenders and the policy of force-feeding Euro debt so that German industry could soak up the money?

        Oh, and by the way, did the American people elect Bush and Obama, or were they put forward for our ritual approval? I think the latter. And I think the same is true of Merkel.

        1. charles sereno

          You’ve completely missed my point. How do you convince citizens that they are merely participating in “ritual approval”? That’s what’s needed and that’s what will lead to effective change.

  4. Hilary Barnes

    Germany would have to transfer 4.5% of GDP…. Well, why not? It has a current account surplus of about 7% of GDP, and it is that surplus that neeeds to be recirculated (there are many options for doing so) to the rest of the Euro zone. Instead, Germany says all EZ countries must strive for a current account surplus, which is not a rational way to run a monetary union

  5. craazyman

    “Dazed And Confused”

    with apologies to Led Zepplin, (ah the Golden Oldies!)

    Been Dazed and Confused for so long it’s not true.
    Wanted a union, never bargained for you.
    Lots of people talk and few of them know,
    soul of the euro was created below.

    They hurt and abuse tellin’ all of their lies.
    Ain’t no other way, Lord how they hypnotize.
    Don’t know where it’s goin’, I only know where it’s been.
    I need some more lovin’, here I come again.

    Every day I want to work, bringin’ home some hard earned pay
    Try to love you euro, but you push me away.
    Don’t know where you’re goin’, only know just where you’ve been,
    Sweet little baby, I need you again.

    Been dazed and confused for so long, it’s not true.
    Wanted a union, never bargained for you.
    Hear them all talkin, let them say what they will.
    Will their tongues wag so much when we send them the bill?

    1. craazyboy

      Ten Years After – I’d Love To Change The World

      Everywhere is Greeks and hairies
      Banks and fairies, tell me where is sanity
      Tax the rich, feed the poor
      Till there are no rich no more

      I’d love to change the world
      But I don’t know what to do
      So I’ll leave it up to you

      Population keeps on breeding
      Nation bleeding, still more feeding economy
      Life is funny, skies are sunny
      Greeks make sandals, who needs money, monopoly

      I’d love to change the world
      But I don’t know what to do
      So I’ll leave it up to you

      World pollution, there’s no solution
      Institution, We want Union
      Just north and south, rich or poor
      Them and us, stop the war

      I’d love to change the world
      But I don’t know what to do
      So I’ll leave it up to you


        1. craazyboy

          Ya mon. Zep 1 was my favorite album in ’69, ‘cept for all the other albums that came out in ’69.

          Was too young to bong then, but I bought second copies of all the albums later after wearing out the first copies straight.

        2. craazyboy

          Cream – “Sunshine Of Your Love”

          It’s gettin’ near dawn,
          When Greeks close their tired eyes.
          I’ll soon be with you my Angie,
          To give my golden dawn surprise.
          I’ll be with you darling soon,
          I’ll be with you when the banks start failing.

          I’ve been waiting so long
          To be where I’m going
          In the sunshine of your love.

          I’m with you my love,
          The golden showers down on you.
          Yes, I’m with you my love,
          It’s the morning and just we two.
          I’ll stay with you darling now,
          I’ll stay with you till bladder is all dried up.

          I’ve been waiting so long
          To be where I’m going
          In the sunshine of your love.


        3. craazyboy

          haha this one doesn’t even need editing

          Rolling Stones – Angie

          Angie, Angie, when will those clouds all disappear?
          Angie, Angie, where will it lead us from here?
          With no loving in our souls and no money in our coats
          You can’t say were satisfied
          But Angie, Angie, you can’t say we never tried
          Angie, you’re beautiful, but ain’t it time we said goodbye?
          Angie, I still love you, remember all those nights we cried?
          All the dreams we held so close seemed to all go up in smoke
          Let me whisper in your ear:
          Angie, Angie, where will it lead us from here?
          Oh, Angie, don’t you weep, all your kisses still taste sweet
          I hate that sadness in your eyes
          But Angie, Angie, ain’t it time we said goodbye?
          With no loving in our souls and no money in our coats
          You can’t say were satisfied
          But Angie, I still love you, baby
          Everywhere I look I see your eyes
          There ain’t a woman that comes close to you
          Come on baby, dry your eyes
          But Angie, Angie, ain’t it good to be alive?
          Angie, Angie, they can’t say we never tried


        4. craazyboy

          real old stuff – Greece enters eurozone

          Buffalo Springfield – “For What It’s Worth”

          There’s something happening here
          But what it is ain’t exactly clear
          There’s a man with a ‘zone over there
          Telling me I got to beware

          I think it’s time we stop
          Children, what’s that sound?
          Everybody look – drachma’s going down?

          There’s battle lines being drawn
          Nobody’s right if everybody’s wrong
          Young people speaking’ their minds
          Gyro or drachma, we are left behind

          It’s time we stop
          Hey, what’s that sound?
          Everybody look – drachma’s going down?

          What a field day for the heat
          A thousand people in the street
          Singing songs and carrying signs
          Mostly saying, “hooray for our side”

          It’s time we stop
          Hey, what’s that sound?
          Everybody look – drachma’s going down?

          Paranoia strikes deep
          Into your life it will creep
          It starts when you’re always afraid
          Drachma’s no good, the Man comes and take you away

          We better stop
          Hey, what’s that sound?
          Everybody look – drachma’s going down?

          We better stop
          Hey, what’s that sound?
          Everybody look – drachma’s going down?

          We better stop
          Now, what’s that sound?
          Everybody look – drachma’s going down?

          We better stop
          Children, what’s that sound?
          Everybody look – drachma’s going down?


  6. Wolverine

    ”…With immense human cost and at the great benefit of thugs like Greece’s Golden Dawn…”

    What about the left wing thugs,you know the rioters who murdered a pregnant woman in an Athens bank.?

  7. Banger

    These are interesting proposals. I hope that, at some level, these sorts of solutions are being considered. But not knowing the general attitudes of the Euro-leadership I have no idea whether these things are being thought about. My small exposure to these sorts of people was back in the 90s and my impression was that Euro leaders were, on a personal, level, more open to ideas than their American counterparts.

    I imagine Euro-leaders are much more constrained now by powerful interests.

    My sense is the system in Europe is moving in the direction of the USA, if so then any logical or win-win system (for the people) will be automatically rejected. In the U.S. there is no possibility of a rational solutions to any collective problem since everything has been gamed, both parties are deeply corrupt and the mainstream media is nothing more than a number of PR/advertising/entertainment firms that have virtually no interest in informing anyone about anything.

  8. TC

    As the first matter of importance regarding Professor Varoufakis’ four-point proposal for a European New Deal is the issue of current bank insolvency “resolution,” the truthful nature of today’s interdependencies such as extend to the very core of the trans-Atlantic banking system and reach far beyond the euro-zone need first be contemplated, this in honest assessment of legitimate liabilities that stand separate from liabilities that were added in promotion of a Ponzi scheme whose beneficiaries continue to escape scrutiny, yet foremost need be held to account.

    Yet even this matter of “resolution” need be guided by a higher principle whose values are harmonious with mankind’s inalienable rights, such as were nobly stated in the U.S. Declaration of Independence. In other words, without a republican revolution on the European continent, no satisfactory “resolution” of today’s hopelessly bankrupt, imperial monetarist arrangement is likely. As the overriding framework under which “resolution” is to take place is the supreme driver of any pursuit of a “New Deal”–this institutionalizing the agreed essence of the human condition and those necessary priorities required to uplift it, such as establish the means for doing so in a deliberative, inclusive manner–the other points venturing a European New Deal will remain completely hostage and subject to such compromise as makes today’s simmering prospect of war among European states no less likely than were these New Deal proposals not ventured at all.

    The time has come for the American Revolution to be exported to Europe, and I would be interested to read Professor Varoufakis’ view on what the Greek Special Forces Reservists (KEED) have been venturing to counter fascist marionettes in Greek political life whose Golden Dawn wildcard exists to create static resistance to solutions whose implementation would confirm that, Europeans actually discovered the wisdom of growing a pair after FDR bailed out their sorry asses following their last failed experiment in fascism. From my vantage point KEED is stepping up to the challenge, already having demonstrated courage to claim that, the imperialist bankers dictatorship today ruling Germany is but a different shade of death than that formerly delivered by way of Hitler’s Nazis, displaying this in defiant, public protest during Angela Merkel’s recent visit to Greece.

    1. Chauncey Gardiner

      Thank you for your post, TC. Particularly the link you cited to the Greek reservists’ fifteen demands: http://www.zerohedge.com/news/2013-09-26/greece-verge-military-special-forces-have-15-demands-or-else

      It will be interesting to see if this initiative gains traction. If this is being accurately reported, hats off to them for their courage.

      The level of obfuscation of this development suggests it is inconsistent with the strategic objectives of those who control corporate media.

    2. Chauncey Gardiner

      Thank you for your post and for citing the link to the “Fifteen Demands” in your linked comment, TC.

      I repeatedly tried to post a direct link here to the ZH article that in turn links to those demands, but without success.

      It will be interesting to see if this initiative gains traction.

  9. Ignacio

    Although I generally agree with the author in this article, there is an error that I think economists cannot avoid commiting. Varufaikis writes that Germany faces a challenge with high energy costs and cites BASF opening a factory in Texas as an example of a company fleeing from those high energy costs in Germany. This is too simple of an explanation that very much resembles the crowds of economists obsessed with unit labor costs. Investing in Germany, the US or China is not only a question of energy costs or labor costs. There are many other factors influencing investments including currency exchange, currency manipulation, fiscal treatment of investment and savings, interest rates and some other socio economic factors. If Germany sees jobs massively beign outsourced to other countries, I doubt energy costs will be the major driver. It will probably occur simply because some countries won’t like to sustain commercial imbalances with Germany any more.

  10. kaj


    A well meaning plan but requires too much interlocking harmony to be successful.

    My thinking: Who is going to balance and right things with high unemployment in Europe, Southeast Asian economies, e.g., Thailand, Indonesia, Malaysia, etc. in near recession, and both India and China afflicted with their indigenous problems. Not the IMF! There is far too much uncertainty in the global economy right now. There is an enormous and overwhelming supply of manufactured goods for which there are scarce buyers and hence the quasi-deflationary cycle that we are experiencing globally.
    The U.S. economy is likely to re-enter near-recesson without the Fed’s continuing monetary support.

    Keynes deep perception that markets are inherently incapable of gravitating toward quasi-stationary equilibria and need soverign governments equipped with their regulatory mechanisms and independent currencies to intervene at both points of growth and decline in national income is coming back with a vengeance. So, with all that uncertainty, who is going to invest and where and what? There is a limit to investment in Greece and Portugal, never mind Spain and Italy. Short answers like Green energy don’t suffice considering the size of the problem which seems to be in trillions of Euros.

    Also, how much uninvested or surplus(money) is floating around in the world economy and which is willing to accept ~2% interest and the enormous uncertainty of Euro/USD trading at ~1.35? I realize that the Chinese and the Japanese might help out, but the large banks, mostly U.S. are under capitalised.

    The best solution is break up the Euroland, which I have voiced for quite some time. Free the Serfs. The rentier class in the Club-Med has successfully tilted the dialogue in their favor and need a come-uppance

  11. allcoppedout

    Deep in all this is some dire “biological” stuff about keeping people poor when there is no need. This shows up in neo-liberal and merchantilist ideology we need rid of, including being neurotic about work. This means we can’t develop what, say, Hugh points out because they keep us forever in deconstruction of the madness.

    The Rothschild’s ‘own’ more of the world than DR Congo sits on in mineral deposits – perhaps 20 times German GDP – and none of such is available to reconstruct Greece or the rest of our economies.

  12. Fiver

    I am always struck by the venom directed at Merkel and Germany as if they had invented, planted and detonated the financial derivatives bomb rather than the US.

    While this piece at last recognizes that Germany cannot possibly fund a full Eurozone recovery, that acknowledgment appears to me to have been immediately shoved under the carpet in the proposed remedies, where it is not recognized that by giving ECB or ESF debt “super-seniority” the responsibility for making good on those debts would still fall in the end to Germany as the backstop of both entities.

    In my view the core of this problem goes back to the rationale for creating the Eurozone to begin with – the chief arguments revolved around the supposed advantages of “being bigger” in order to “compete” with “economies of scale” in a global economy being organized into “trading blocs”.

    It didn’t matter, it seems, that the basic assumptions of modern US corporate capitalism re the benefits of “bigness” spelled doom to most of the world’s workers, most of the world’s nations’ independence, and the basic viability of a host of the globe’s small or weak or “non-strategic” countries.

    It is folly to blame Merkel or Germany for this, when it is evident that it is US-driven corporate globalization that has defined the “winners and losers”, and only a radical restructuring of global trade, finance, investment, environmental, labour and other policies is undertaken. The WTO needs to be ripped up and tossed in the garb, and a new structure created.

    To expect anything other than increasing instability and ever-deepening sets of crises while clinging to the existing, inherently rapacious economic order is, well, crazy.

    Yet if Merkel, or Germany, were to actually advance the required dismantling of mega-corporate globalization and its financial, production, trade and legal structures, they would come under immediate and vicious attack from the US.

    That said, I believe Merkel is going to surprise, once this latest artificial “crisis” over the debt-ceiling is resolved, and the political dead-end for the Party of “No” is clear to all.

  13. Kevin

    Of course she won’t do it. What has to be faced squarely is that virtually all politicians in the “developed” countries are now in the pockets of the great banks. They serve the banks, and the banks pay for their elections and exert the necessary pressures. As Bill Mitchell pointed out, fewer than 200 individuals own the world. Why can’t intellectuals face this and write and think consequentially, instead of saying that “opportunities will be missed”, as if such a possibility really existed given the concrete facts? If you want to win a a battle, you mass your efforts at a single key point; you don’t spread yourself thin all over the board.

    1. Nathanael

      More information on the coalition process:


      The SPD has no incentive to form a coalition and a strong incentive not to.

      The Green Party… well, what can Merkel offer them that will be bribe enough to join with right-wingers? I think it’s going to be very hard to find anything which will satisfy both the Christian Democrats and the Greens. Though the fact that the Free Democrats are gone, kicked out of Parliament, helps a lot. Merkel *could* go for full-on “green stimulus package”, which she could not have done with the FDP in Parliament.

  14. Nathanael

    In short, the mistake is to assume that Merkel will have a third term. She probably won’t.

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