Yanis Varoufakis: Greek and European Prospects for 2015

Yves here. Yanis Varoufakis discusses the prospects for negotiations between a new, likely Szyria-led Greek government and the Troika over the next Greek restructuring. Varoufakis in effect argues that the Greeks should go hardball because the Trokia’s demands are unreasonable. We’ll find out soon enough whether the incoming government has the public support and the guts to do so.

As much as a Grexit would be a lose-lose of major proportions, Varoufakis argues that the logic of current Eurzone arrangements is driving members to a break-up. Indeed, some observers believe that Germany would like to kick Greece out of the Eurozone. As Marshall Auerback put it by e-mail:

As far as Germany goes, let me quote Macbeth:

I am in blood
Stepped in so far that, should I wade no more,
Returning were as tedious as go o’er.‎

By Yanis Varoufakis, professor of economics at the University of Athens. From an interview by Alessandro Bianchi in L’Antidiplomatico on Greece and Europe in the run up to the Greek general election of 25th January 2015

European media often speak of the “Greek recovery” and the growth of competitiveness of the country to try to persuade the public opinion about the effectiveness of austerity and structural reforms imposed by the Troika. Considering the macroeconomic data, however, we find a youth unemployment above 50%, a negative inflation rate and a debt-deflation spiral out of control. How is it possible to speak of “recovery” when three Greek citizen out of five have exceeded the poverty line?

Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?

The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did.

So, let’s be frank: There was no recovery. What we did have was a monstrous denial that was functional to the story Mrs Merkel wanted to convey to European citizens: If austerity worked even in Greece, it must be the right cure for every European realm, and it must thus be accepted unthinkingly by every European – especially the… Italians.

In Greece there will be a general election next January 25, 2015. According to the latest polls, SYRIZA, the main opposition party critic of the austerity measures imposed by the Troika, could be the winner. But, victory at the polls could be precluded by the speculative attack of the markets on spread, aimed at creating a climate of terror among the public. What remains of democracy in this oligarchic regime of the European Union? And the same scenario could be repeated in other countries with those parties critical of the institutional architecture of the EU?

The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors. When you do not borrow, you do not care about the interest rate! No, the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin. Days after its election, there is a strong chance that our European partners’ officials, in violation of democracy’s – and logic’s – most basic principles, will threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will. This is far, far worse, and morally more reprehensible, than being terrorised by the markets. Investors have every right to demand high interest rates in order to lend you money. Fellow democratic governments and unelected central bankers have no right to threaten a newly elected government with Armageddon if it dares ask for a renegotiation of an unsustainable loan agreement with the EU, the ECB and the IMF.

In its program, SYRIZA provides for the annulment of the Memorandum, the complete restructuring of the public debt, the refusal to pay interest on it until it will be a real economic recovery (suspension of payment of the debt) and, finally, the ECB becomes lender of last resort in order to guarantee a portion of the debt Greek. Given the hostile attitudes of Berlin, Brussels and Frankfurt, how would SYRIZA react facing a new absolute denial of the European authorities compared to its demands? Would it be the pretext to consider the unilateral exit from the euro zone?

Exit from the euro is not an idea that a SYRIZA government will ever entertain or use as a negotiating strategy. While it is clear that Greece should never have entered the Eurozone (and, indeed, that the Eurozone should never have been designed the way it was), exiting would inflict massive damage upon everyone. At the same time, the ‘logic’ of the current agreement is busily working toward dismantling the Eurozone. Italy’s social economy for instance is unsustainable under policies inspired by those first tried in Greece in 2010. To save the Eurozone, and indeed to save Europe’s integrity and soul, we need a New Deal for Europe. SYRIZA is determined to kickstart the conversation on what this New Deal should be. Naturally, the outcome of such a debate will be a compromise. Alexis Tsipras, SYRIZA’s leader, knows this: When you are entering a negotiation, you are aiming at a compromise with which all sides can live. To bring it about, you must stake your initial position – which is what the party’s platform does – and set thin red lines which, if the other side crosses, you walk out. One such line, in Greece’s case, must concern the demand that Greece borrows from, amongst others, the ECB to repay the… ECB for bonds that the ECB bought in 2010/1. If Berlin continues to insist on such illogical transactions, a SYRIZA government must simply say ‘No’ and refuse to do it. Whatever the threats.

In these three and a half years of the troika regime, Greece has lost important parts of public land and areas of national strategic interest in a program of wild privatization. Is SYRIZA thinking of a new state intervention to nationalize at least the essential public services to be delivered to the citizens? And in that case it would not be a violation of the principle of non-interventionism enshrined by the Maastricht Treaty?

The privatisation program has failed spectacularly. There are, indeed, some assets that have been turned over to shady privateers (e.g. the national lottery and the Hellenikon site) which a new government must look at afresh – at least in terms of their legality as re-nationalisation will be impossible given the state’s illiquidity. Having said all this, the most extensive privatisations took place not during 2010-14 but during 2000-2009 involving banks, the state telecommunications monopoly etc. As for public services, the problem there is not that they were privatised. The problem was that they were dismantled or strangled by austerity and hideous cutbacks.

However, the response of European crisis continues to be clear and summarized in the reduction of public spending, increasing taxation and so-called structural reforms to bring down the cost of labour, the only way to compensate for the competitiveness gap between countries. Compared to this, Syriza puts forward very interesting proposals, but those are measures that had been rejected in the past by Brussels, because they violate the rules of the existing treaties, such as Eurobonds and the political control of the European states on the European Central Bank. Do you believe that it is time to overcome Maastricht and to start thinking about a new Treaty?

Our proposals have been calibrated in a way that they do not violate any of the Treaties. For instance, our proposal for an ECB-mediated conversion loan for the Maastricht compliant part of each member-state’s debt, without monetisation by the ECB or debt guarantees by the surplus countries. Or, to give another example, the proposal for a form of Quantitative Easing where the ECB buys large quantities of European Investment Bank bonds for the purposes of funding a European invstement-led Recovery Program. These are some of a number of ideas that can be implemented tomorrow morning, political will permitting. Once we stabilise Europe by means of such policies, we can then talk until the cows come home about a future federation, future Treaties etc. But any attempt to tamper with the Treaties now, while the crisis percolates, will only backfire.

In the event that the countries of the North, as already claimed in the past, will oppose these scenarios of change needed to overcome the crisis, should the countries of the South, in particular the parties critical of the current institutional architecture, start thinking about a new form of integration funded on economic and social solidarity, which aim to the respect of the national sovereignty? Due to the severe conditions of their economies, is there still time to deal with a drawing up of a new Treaty based on those principles?

No, I do not think so. As I argued above, this is not the time for Treaty changes. First we must halt the fragmentation and only then discuss consolidation. Having said that, the current Treaties allow for so-called ‘enhanced cooperation’ – which allows for nine member-states or more to go it alone in the implementation of European Union policies that are not binding on the rest. Perhaps Europe’s ‘South’ could use this institutional facility.

On the opposite side, Europe seems to head very quickly toward a road opposite to that outlined by Syriza. This is clear especially after the sanctions to Russia and the political interferences of NATO in Ukraine, the inevitable passage of TTIP, the area of free trade with the United States, which the European elites want to approve in 2015. Could a new majority of Syriza in the national Parliament stop the ratification of TTIP?

The idea of free trade with the United States is splendid. The problem with TTIP is that it is not at all about free trade but, rather, about handing inordinate property rights over environmental standards and intellectual property to multinational corporations. Similarly with the security issue. Ukraine should be stabilised and Russia democratised. Alas, the current standoff with Moscow is not about this but, rather, it is part of a grubby geopolitical tussle out of which Europe’s citizens, from the Atlantic to the Urals, will lose out.

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  1. ambrit

    The last ‘question’ mentions “…the inevitable passage of TTIP….”
    If the Trans Pacific version founders upon the rock of Japan, does that give aid and succor to the anti-TTIP crowd? If TTIP goes through, the public blowback when the “masses” figure the con out will be massive. Even the ancient Romans knew that “bread and circuses” had to be free to do their work of anesthetizing the masses. These modern oligarch wannabes haven’t read their history.

    1. Yves Smith Post author

      I think Yanis is wrong on that. Germany has woken up to how much national sovereignty will be compromised. They had a particularly well-publicized case of how the German government was sued and paid large fines for phasing out nuclear power. It’s not just that the public was hugely unhappy, the government was too.

      The Germans want a real negotiation (as do the Japanese). The posture of the US Trade Representative Michael Froman has been to act as if he can dictate terms. His posture has been very consistent with the TPP despite very clear demands from his negotiating partners.

      So I still think the odds are good it won’t get done due to how bad our team is, and that we are insistent on nation-gutting provisions that are major partners aren’t suicidal enough to agree to.

  2. John Jones

    “Exit from the euro is not an idea that a SYRIZA government will ever entertain or use as a negotiating strategy.”


    “The privatisation program has failed spectacularly. There are, indeed, some assets that have been turned over to shady privateers (e.g. the national lottery and the Hellenikon site) which a new government must look at afresh – at least in terms of their legality as re-nationalisation will be impossible given the state’s illiquidity.”

    Yeah cause you want Euros

      1. John Jones

        I do not know why Yanis and SYRIZA want to remain so attached to the E.U and Euro.

        Ok have a go at trying to change things but they should be telling the population the alternatives if things don’t go as planned.

        Yanis held the same view of staying in from the beginning of the crisis. Instead of explaining what else Greece can do if it has to leave.

        They all act as if Greece never survived out of these institutions. It did and was doing well.

        1. madisolation

          Bryan MacDonald, a Russian-based Irish journalist has a different take on Greece than Yanis Varoufakus. In MacDonald’s article, entitled “The 7-Year Itch: Europe’s Elite Face Judgement in 2015”, he writes:

          Greece will be first up, later this month. Every survey conducted since May has confirmed that SYRIZA will secure the most popular support, the only disagreement being on the margin of victory, anywhere from 2-11 percent. Their charismatic leader, Alexis Tsipras, is a communist who named his son after Che Guevara. Tsipras blames the neo-liberal elite in Brussels for destroying the EU economy and sending his country into penury. He has also indicated that, if or when SYRIZA take power, he will force markets to “dance to the tune” of Greece. Furthermore, he dislikes Angela Merkel and blames her for intensifying, rather than aiding, Greek woes.

          The Brussels establishment is terrified of Tsipras. Not merely because he may steer Greece out of the eurozone but because of what his success could unleash around the continent – proof that there is an alternative to neoliberalism and supplicant Eurocrats. EU Commission President Jean-Claude Juncker has already betrayed his anxiety, saying “I wouldn’t like extreme forces to come to power. I would prefer if known faces show up.”


          1. John Jones

            Thanks for the article. I’d like to think he is correct on Tsipras but I don’t think he is. I hope to be wrong though.

        2. OIFVet

          Because it’s their mission to defend the colony from straying out of the EU and the Eurozone. Just look north of the Greek border to see an even more naked example of this capture. The only “benefits” of EU membership have been to the “elites”: graft of infrastructure Euro funds by well-connected firms, relief of internal pressure by allowing the citizenry to scatter to various EU destination to be exploited for pennies, getting the “good boy” pat on the head from Merkel and Juncker.

            1. Yves Smith Post author

              I suggest you do some homework before attacking Yanis.

              Greece was forced to convert pretty much all of its Greek law bonds to English law bonds in past restructurings, so it can’t redenominate them in drachmas.

              So if it leaves the Eurozone, its currency will tank, which would normally be seen as desirable, since it gives it an advantage in trade and tourism. But Greece exports only agricultural goods. It’s not as if it can make more of those to take advantage of its new advantage in currency terms. it will also enormously increase the cost of its debt which will remain denominated in euros.

              The odds are high that the Greek banking system would collapse. Please look at the US Great Depression as a model. And Michael Hudson will disabuse you of the idea that things have worked out well for Iceland in the wake of its banking system collapse. And the Icelanders were somewhat prosperous before they started out.

              Revolutions sound appealing but almost without exception they leave ordinary people worse off.

              1. nostromo

                This “English law” debt basically means that a Euro exit has to be accompanied by a default. So I guess starting with a default without exiting the Euro is the right bargaining position. Yanis says it clearly: “One such line, in Greece’s case, must concern the demand that Greece borrows from, amongst others, the ECB to repay the… ECB for bonds that the ECB bought in 2010/1. If Berlin continues to insist on such illogical transactions, a SYRIZA government must simply say ‘No’ and refuse to do it. Whatever the threats.”

              2. John Jones


                What happens If Greece defaults on the debt nationalized it’s banks and leaves E.U and Eurozone?

              3. John Jones

                But Yanis was against leaving the E.U or Eurozone from the beginning of the crisis. Before those past restructurings you mention.

                “But Greece exports only agricultural goods. It’s not as if it can make more of those to take advantage of its new advantage in currency terms.”

                I was told this in 2013 so I don’t know if It can still apply but at the time.
                But Greek exports accounted for 26% of GDP bringing annually 58 billion euros in foreign exchange. In addition tourism accounted for 18% GDP. And so was told operationally Greece would have more than enough foreign exchange to facilitate trade operations.

                It didn’t just export just agriculture I have seen other things written like chemicals and others but they allude me now. Either way though it is never going to be able to come up with new products for export or improve agricultural exports while stuck under the rules of the E.U and Eurozone.

                I get there would be pain involved(what they have already gone through but with nothing to show for it but even worse circumstances and more losses and more to come). I am not claiming it would be all back to normal as soon as they would leave. But it’s pain that will lead to solutions and they would have national sovereignty and be able to make their own decisions based on what is best for them. Not other countries. And at some stage things would get better and economically exceed any time they had in the E.U and Eurozone. Like before they entered.

                To add. SYRIZA is not the only party to buck the troika. They are the one claiming to do so inside the E.U and Euro.
                Dimitris Kazakis and EPAM is the other party that would.

            1. OIFVet

              Going on 25 years now, and in earnest since 1997. Between 1997 and 2001, about $80 billion of state assets were privatized for $3 billion. Flat tax and highly regressive VAT and excise taxes were instituted by a Bulgarian “Socialist” Party-led coalition government in 2006. Nice, huh? I truly hope Greece manages to get off this path, in the name of all that is decent and human. I hate what was done to BG by local compradors, and the very real suffering that they unleashed on a rapidly diminishing population. At the risk of sounding cavalier, I think there is better hope for Greece than for BG. There is a real and vocal left in Greece, in BG it is small and extremely marginalized even if the population is fond of the what it used to have prior to 1989. The Greek students are far more vocal and leftist than BG students, whose main goal appears to be to obtain an NGO grant-funded sinecure. NGOs being, of course, mostly neoliberal funded.

              Don’t let Greece become the next BG and Romania.

              1. John Jones

                Jesus Christ 80 to 3 billion

                That is what annoys me the most. When it is done by pseudo socialists. It should be illegal for parties like that to have the name socialist.

                I don’t know I hope you are right but as I see it has been
                done to Bulgaria and Romania and sounds like a it just demoralizes people. Why would Greece end up any different.

                1. OIFVet

                  Sorry, didn’t mean to be all doom and gloom. The fact is that there is a ray of hope in BG. In February 2013 the poor and the hungry rose up and began to protest. After several public self-immolations the center-right government resigned. The problem is in what came next: the “socialists” were returned to power, and concurrently the neoliberal white collars launched a counter-revolution against those neoliberal “socialists.” The white collars of the summer 2013 counter-revolution called themselves “creative, smart, beautiful, and able to pay their bills”, as a way to distinguish themselves from the “ugly, poor, toothless (pensioners!!!)” demonstrators of the February 2013.

                  This counter-revolution managed to bring back the same center-right government in October of 2014, this time with several of the “creative” white collars to feed at the trough. The problem of the winter protesters was that they were very good at airing the outrages that were at the heart of their grievances, but could not frame an ideological and economic alternative and allowed the neoliberal “socialists” to return to power.

                  Yet, I don’t think the neoliberal right government will survive the winter. The electricity price hikes that spurned its downfall just returned as of January 1st, but the population is not in any better position to pay those bills. There have been blizzards and bitter cold over the past five days, so the electric and heating bills are going to be big, and most will be unable to pay them. Self-immolations, including public ones in front of government institutions, have continued unabated. There is too much desperation for the status quo to hold for much longer. I just don’t know whether what will replace it will be qualitatively better. In Greece, where there is no baggage of a communist past, leftist ideas don’t have the same stigma as they do after 25 years of relentless propaganda in BG, where even the demonstrably good social and economic achievements of communism were thoroughly demonized, to the point where the public is nostalgic for the better times prior to 1989, but is afraid to call itself leftist, or socialist, or even social-democratic. In Greece that’s hardly the case from what I saw and heard during my last visit in October of 2014. Thus, I see potential there that is lacking in BG.

                  Just my 2 cents.

                  1. John Jones

                    Thanks for taking the time for the thorough explanation OIFVet. I hope the Bulgarian people end up turning it around.

  3. Jose

    How can Greece´s European partners “threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will“?

    Presumably, this would result from a refusal by the ECB to keep lending reserves to Greece´s commercial banks. The Greek banks wouldn´t then be able to transfer (euro) deposits abroad or to make payments in euros to entities located outside the country, in other eurozone member states.

    In pratice, with such a move, the ECB would be effectivelly expelling Greece from the eurozone.

    There is a problem with this scenario, however: the European Treaties do not allow for the expulsion of a country from the eurozone. By refusing to provide liquidity to the Greek banks the ECB could thus be putting itself in a situation of violation of its mandate to faithfully implement the Treaties.

    Perhaps then the first initiative of the new Greek government should be the following one: hiring a first class team of international lawyers to sue the ECB.

  4. No one in particular

    Beg to differ – as the Greek banking system is mainly financed through “ELA’s” an ultra “short-term” temporary life line created in 2008, now used for – 5 yrs and counting, the ECB migt be leagally “clean” to withdraw the ELA funding. Normal repofunding, due to sadly lacking assets passing even the completely diluted security requirements and haircuts, is not worth mentioning. Yep, and ceasing the ELA would expel the Greeks from the eurozone. One could quibble there are more states with ELA’s, but I am certain they will be clever enough to circumvent it – there is still time.

    However, could we please at least mention that Yanis, the author is part of the Syriza economics team, said to play a “major” role in a possible Syriza government, and thus his comments and conclusions may not be entirely unbiased?
    And whilst I am the first to question the sanity of the entire bailout chimera, starting in May 2010, I am indeed too tired and too fed up to comment on another round of one-sided German bashing. And as far as I am concerned, I am very surprised how little anguish the permanent – “Germany’s fault now and forever, for everything” has caused locally – up to now. However, if Angie would be forced to acknowledge “real” losses from whatever result may emerge in Feb 15 – the people of Germany are grumbling already. And while the press is doing her very best to deride the “Pegida”* movement as outright ultra right wing and thus “unspeakable in Germany”, not worthy of consideration; Angies tightrope walk of saying one thing to the world, while saying something different at home might come to an end much sooner than anybody, including me, is expecting. I leave for everyone to consider whether this is fearmongering or realistic.

    *Pegida – a group voicing concern about too much immigration, sometimes way not considered PC by the mainstream media. Real, objective information is almost impossible to come by. But the main topic appears to be that the people marching feel taking advantage of – if this makes sense.

    1. Yves Smith Post author

      Please provide evidence of your claim. I can find none via Google. Meeting government officials to give them you views is hardly tantamount to being in a role where you craft policy.

      Szyria has most assuredly not adopted his plan, which he calls A Modest Proposal.

      Yanis supporting Szyria in in his blog posts because it is the only party willing to buck the Troika somewhat
      Germany deserves to be bashed. It is insisting on utterly incompatible policy goals. that of continuing to run large trade surpluses and not being willing to finance its trade partners. And it is no exaggeration to depict it, as Marshall does, as having blood on its hands. Its policies have led to misery, destruction of businesses, a near-collapse of hospitals (they can’t buy many medications and are even having to put new patients in beds with no change in sheets) and a sharp rise in the suicide rate in Greece.

      No less than Keynes recognized that the fact that countries that run chronic trade surpluses are hugely destructive to an international economic order. He proposed putting strong disincentives to persistent trade surpluses in place at Bretton Woods but was nixed.

      1. No one in particular

        I beg to differ. I will try to write this as unbiased as possible. [Not sure which claim I am supposed to deliver support material, pls specify If it is regarding Yanis; somewhere in the last third of the article

        http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11286477/Greek-candidate-willing-to-call-European-leaders-bluff.html ].

        This is a quick write up, not a well crafted essay. And I only have public sources, no insider knowledge, and it reflects my personal perspective, only. Apologies for the rotten English.
        First of all, the whole Bailout thingy was human folly at its best, I guess May 2010 was a result of Angie having promised not save any more banks shortly before, and Credit Agricole, and other French and German Lenders would have not survived the weekend without, and Sarkozy blackmailed her – and she let herself to be blackmailed. However the roots are deeper and it will get confusing, but I not think it was about Greece in the first place, harsh as it is.]

        1. The euro always was a political construction, and there was never any way for it to work economically. Read Mundell, and you will find the euro is as far from an optimal currency area as possible. It currently survives with a lot “moving the goalposts” at the ECB, regulators and I assume, auditors; masking the delay of insolvency of states and banks.
        2. However, the euro was the “price”, imposed by the French (Attali, memoirs) on Kohl, then German chancellor, another blackmail activity to get rid of the strength of the German Mark/Bundesbank (the Franc devalued about 65% between end of WW2 – and euro inception), hurting the pride of the French, and masking an even bigger diversion in economic development.[Kohl can and should be blamed for accepting the euro as price for reunification, but then pls blame Mitterand as well]. And since inception of the euro there was no way to revalue whilst the economies took even more divergent trajectories [now about 25- 35% and counting] – never mind reunification which led, after the first blink, to a vastly increased German GDP in relation to France – and the respective governments have been unable to engineer the necessary rebalancing of power between Berlin and France in an amicable way. And as the German economy is too small in relation to the rest of the euro zone to finance the rest via transfers, i.e. gifts, the euro will have to go; sooner or later, less or more amicably. The issue is the currency union between France and Germany, and subsequent geopolitical power implications. Greece’s troubles are – from that perspective, a mere sideshow. [Sorry, I do not mean it that way, I recognise there is a lot of suffering in Greece.] So in a way it was Sarkozy’s and Angies fault – jointly – they wanted to save their delusional dream of unity and their own banks/backs.
        However, I have trouble with the “capital exporter claim” – and I would dearly love to see at least some of all the CA surpluses’ repaid in real terms, sadly it will never happen. I hear you saying ” if I should buy from you, you have to lend me the money?” Germany can only run these surpluses’, because she is struck in a totally undervalued currency (Deutsche had something a few month back, France needs the $ at 1.10 euros, Germany somewhere in the 1.50…no, I did not keep the link) – and let’s be realistic here, do you really think the Greeks, or the Irish, or Italians are going to repay their Target balances, ELa’s etc in real terms, never mind all the toxic waste allowed onto the ECB balance sheet by Draghi?. So if I am allowed to exaggerate for a moment, it is beamers against worthless paper (in real terms), a gift. That qualifies as stupidity or otherwise know as “dumb German money” or “German asset stripping”, as impoverishes the Germans, especially the working people, unnecessarily; and the Germans will be punished when the big write off comes – but beyond? Furthermore, how can the German’s run surpluses’ unilaterally – somebody needs to buy the stuff – and apparently it is too cheap, otherwise why would somebody buy it? And especially a resource empty country like Germany, which has to import almost all stuff for later export, never mind oil etc – do you really think these worthless surpluses’ will create wealth? I do not. [Which is not deny the fact, that a lot of the big German cooperation’s were in favour of the euro – because they did not want to deal with these pesky re-valuations any longer]

        And finally, isn’t it time for the Greek’s to take responsibility of for their own misdoings – their elites [and let’s exclude the ordinary people here for a second] are squeezing their own people and more recently the European taxpayers to an “admirable” extent. A country which survives without a working land register, but is demanding international capital to invest, none of the 209 reform steps agreed with the Troika has been successfully completed. The administration is hapless to incompetent, etc. Yes, Samaras and the lot have practiced hurtful economies on their people, but is it the lenders fault – that there is no will to live within their means, at least none I can discern from the Greek political elite, or to change their ways – and how many ordinary Greeks had plush sources of government pork barrel?

        I am with you to blame the current (and previous) German government(s) for their single-minded stubborn attitude of “all want to be/live like us” – thus our solutions are the only one. I recognise everybody has the right to make their own choices, but I think then they need to bear the consequences of their doing, i.e. take responsibility. Blame the Germans – for whatever – and demand more of their money to continue their old ways feels like being fleeced. I think they should have let Greece go in 2010/11, with all the consequences it would have entailed.

        And yes, the Troika enabled the graft to continue, and yes, any sane person knew the Greeks would never repay the debt – but a lot of private investors were saved from oblivion, time and again – which I consider to be one of the most important goals behind the whole bailout drama. This has nothing to do with “the Germans”, rather something different.

        Thanks for listening.

        1. Jose

          do you really think the Greeks, or the Irish, or Italians are going to repay their Target balances

          Target balances don´t have to be “repaid”.

          They´re accumulated debit (and corresponding credit) positions of eurozone National Central Banks vis-à-vis one another – with no upper bound limit and no maturity date.

          These credit and debit positions are the automatic reflex of the net flow of payments between the banking systems of the countries of the euro; at any point in time, they may be increasing or decreasing depending on the direction of these flows. (For instance, if German consumers start buying more products or services – say, tourism – from Greece, there will be an increase in net cash flows from Germany to Greece, which will reduce both the credits accumulated by the Bundesbank in TARGET2 and the debts of the Bank of Greece in the same system).

          Thus, only the interest (presently, at a rate approaching zero percent) on the outstanding debt positions in TARGET2 is “owed” – the principal can´t possibly be “repaid”.

          In a sense, TARGET2 “debts” are a type of perpetuity, whose outstanding amount is constantly changing and whose principal is not destined for repayment.

          1. No one in particular

            I think you’ve misunderstood the intention of the target system. Originally, it was meant to as a short-term settlement system between central banks to manage the transfers between banks, and the credits/debits were never above 15- 20 bn at month end – before 2007 [mostly settlements which lasted over month end]; when they started to accumulate, the Germans are currently owed about 470bn. As as far as I am aware, there is no interest agreed, as they were supposed to be zero, every month. However, currently it is misused a financing the periph central banks, mainly Spain and Italy (each at around 300-400 bn, but these figures are old), or what Yves calls these pesky capital exports. But as described above, they should not even exist. Economically, they are debts owed by the periph to the core, and yes, they will need to be repaid, sooner or later. As you described, with the delivery of goods, or more debt. – or they need to be written off. What do you think it will be?

            1. Jose

              @ No one in particular

              I´m afraid your interpretation is just incorrect.

              TARGET2 balances are credits or debit entries of eurozone Central Banks vis-à-vis the ESCB (European System of Central Banks). They all net out to zero, have no upper bound limit and have no maturity date. They simply cannot be “repaid”.

              In a “single currency” area (not to be confused with a simple system of fixed exchange rates) it is just impossible to put a limit on the outstanding balances of the payments and clearing mechanism (TARGET2) that connects the single currency area´s Central Bank to the individual National Central Banks of the Member States – or to set a date for their “payment”.

              Setting such limits or maturity dates would spell the end of the euro; the euro requires the free cross border movement – and convertibility at par value – of all the bank deposits (that is, of “money”) held inside the zone. If at the limit all the bank deposits of, say, Spain or Italy were to be transferred to Germany, TARGET2 could and would accomodate such movement (that´s already happened in a substantial measure during 2012, when hundreds of billions of euros were transferred from those countries to the German banking system).

              As Ulrich Bindseil (an economist at the ECB) has written: “putting limits on the size of TARGET2 liabilities…would throw the common currency area back to the system of fixed exchange rates with those central banks that face TARGET2 limits being forced to struggle to maintain their stock of internationally fungible reserves”.

              1. No one in particular

                @ Jose,
                Firstly, the intention of Target and what it is currently used for are two very different animals. Target was modelled, as far as I am aware, on a similar system between the local FED’s, and they do impose total clearance at month/year end. And that has worked for – 200 yrs and counting. I think the “fixed exchange” comment confusing, and diverting from my real point. As you say, Target are debit/credit between the central banks, and not hovering in thin air, thus they need a counter credit/debit in the respective national bank balance sheet, and that’s were the rub is. The intention, (not the current practice) was to transform these target debits/credits into public or private receivables/loans. Which has not happened, precisely because the periph bought more than they could (transform into private or public debt) – and Target transformed into a shadow financing system. And fixed exchange have nothing to do with it – from my point of view – as the periph central banks were unable to pay in euro’s – they did not have them, so Trichet let them be conjured out of thin air onto the ECB balance sheet. This is an indication of buying more than you can pay for, but where come fixed exchange rates in? I really do not understand. However, the mere existence of a about a 1 trillion of gross Target amounts is one of the more poignant indicators towards the huge imbalances the euro created between its member states.

  5. MG

    If I was a Greek and under the age of 30, I would advocate for nothing short of revolution. SYRIZA won’t do that and instead legally finagle with the EU. Just no future in that for the Greeks.

    Kind of wonder why there has been more violent uprisings on both ends of the spectrum. Good family friend who goes back to Athens every Christmas and knows the academic/political community there well says it is largely two main factors – the large amount of talented young Greeks who have left and the rampant black market activity again which makes the official GDP numbers essentially meaningless.

    Much of the talented young Greek population has migrated and emigrated as part of the Greek diaspora to Germany and Australia and to a lesser degree US, UK, and Canada from the anecdotal articles I have seen. As for the black market activity, gold/silver have been important stores of wealth again along with precious stones but that the real trading goes on with common items especially cigarettes and alcohol. His estimate is that in large areas of the country now that up to half of the economic activity doesn’t register on the gov’t official books.

    1. John Jones

      Only Dimitris Kazakis of a small Party called EPAM will do that. But they will never get elected.

    2. Banger

      The main hope, in my view, for the people around the world is the growth of the unofficial and non-regulated economy. A well-regulated state demands clear and just rules of the road–the current “global marketplace” does not have that–instead we have a system that favors feudal powers both corporate and individual to manipulate “markets” and States for their own benefit. Those of us who are not part of that system are not part of the “club” as Carlin put it so well many years ago–we are, even under Confucian rules, obligated to resist and not recognize illegitimate authority. One way to do all that is to try to live outside the mainstream system by bartering, using alternative money, ignoring laws–the more we do that the harder it is for the authorities to enforce their rules.

  6. steviefinn

    Interesting times – I wonder how long it will take for enough people to finally realise that although they have a headstart – to all intents & purposes we are all Greeks to the Neoliberal mill, which has no room for anything other than faux democracy to grind us down with.

  7. Banger

    I believe Yannis is well-meaning and honest–but he is also part of the Establishment in Europe even if only peripherally. His own position in that world depends on the reasonableness of his views–the same is true for Tsipras. Both must “play ball” within a certain political structure and to go in another direction is extremely risky on all levels. First, let’s be clear TPTB will not allow serious deviation from the EU/Euro project. Look how much was invested in the struggle to influence/seize Ukraine. The minute Tsipras tries to move away from the Euro the oligarchs will rile up the fascists in Greece–Tsipras is in a strong position if he gets a nice majority–this will allow him to get concessions and time to build alliances with leftists in Spain and Italy for starters and gradually pressure the EU to reform from the inside.

    1. peteybee

      “The minute Tsipras tries to move away from the Euro the oligarchs will rile up the fascists in Greece”

      Yep. Ugly as can be, but I’m afraid that’s how the C level game is played.

  8. Fiver

    If Greece had forced its way out of the Euro closer to the outset, I think they’d be doing at least as well now vs what ‘staying the course’ has cost them. In a global economy driven by giant corporations there are no roles for the likes of Greece in the global financial or production systems. Smaller and medium states need to create local and regional economies that can thrive without global financial and corporate power.

  9. Knute Rife

    I’d post some snark about the UK Office of Budget Responsibility’s Autumn Statement, but I’ll just point to my diary entry that I’ve already posted. The Autumn Statement really shows what a lie austerity policies and the “recovery” are.

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