Economics

Věčná řecká krize

Dec 20, 2016 Yanis Varoufakis

ATÉNY – Od léta 2015 se Řecko (většinou) neobjevuje ve zprávách, ale není to proto, že by se jeho ekonomická kondice stabilizovala. Vězení nestojí za zprávu, pokud vězni trpí tiše. Teprve když vyvolají vzpouru, kterou úřady potlačí, objeví se před věznicí přenosové vozy.

K poslední takové vzpouře došlo v první polovině roku 2015, kdy řečtí voliči odmítli přihodit na hromadu již tak neudržitelných dluhů další úvěry, kterýžto krok by odsunul řecký bankrot do budoucna předstíráním, že ho překonal. V tu chvíli Evropská unie a Mezinárodní měnový fond – jejichž přístup „prodlužovat a předstírat“ se ocitl v ohrožení – rozdrtily „řecké jaro“ a vymohly si na zbankrotované zemi další nesplatitelnou půjčku. Takže bylo jen otázkou času, kdy problém opět vyplave na povrch.

Těžiště evropské pozornosti se zatím přesunulo k brexitu, ke xenofobnímu pravicovému populismu v Rakousku a v Německu a k italskému ústavnímu referendu, které přivodilo pád vlády Mattea Renziho. Zanedlouho se pozornost Evropy přesune znovu, tentokrát k drolícímu se politickému středu ve Francii. Kdyby však někdo náhodou zapomněl, tak nesmyslné řešení evropské dluhové krize začalo v Řecku. Malá země ve velké Evropě se stala pokusným králíkem strategie, která by se dala přirovnat k válení sněhové koule do kopce. Vzniklé laviny od té chvíle podkopávají legitimitu EU.

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0 Comments on this paragraph, 42 Comments on this article

adam dreaver Jan 13, 2017

You give a source for "Greek voters rejected loans in 2015", but you don't give a source for the EU and IMF forcing Greece to take a loan with their "extend and pretend". I am trying to spread your words reddit and I need a source for this, people are adamantly anti-greek and I need to show that the responsibility lies on the big banks and the citizens of greece, not just the citizens of greece alone.
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EIRINI TZIMA Jan 4, 2017

Dear Yannis, i would agree on the analysis and the solution if it wasn't of a tiny possibility that finding a solution is not the target in the first place. Do you really believe, after all these years that they do not know how to solve it? They are the creators so they know exactly why and how it is created in the first place. All these austerity measures have nothing to do with Greece's well being or prosperity. Has everything to do with enslavement, metaforically or not, cheap hands, cheap buy of what in any normal state you should never touch ie ports and airports etc and of course a nice access to the underground wealth of whatsoever and of course geographical control due to her position. You are asking today from Syriza or any other member of the Greek parliament to save Greece? It's as if you ask the killer not to feel pleasure out of his victims suffer. It is the parliament and all political parties invlolved for over 40 years now that systemically and with clear stragedy created the ground for what we live today. Masks down, my question as a Greek citizen is why are we still talking about memorantums and the courts are not proceeding with National Treason? Special note: I am not a leftist or a socialist or any of those crap. But i feel in my skin the results of these politics and i tell you, may no other nation have to feel it again.
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Robbie Jena Dec 29, 2016

Bottom Line for Greece and Europe (except Germany) is Merkel (Germany) did not know how to fix Europe and hence lying all the way. This is due to complex Globalization. We have a solution for Greece. Time will tell...
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LESLIE HALLS Dec 27, 2016

Having spent quite some time in Greece over the last couple of years and having travelled extensively around the country one soon sees that the economy is split intothe tax nonpayers and the tax relyers.In Loutra Ypartis the town used to receive taxpayer funded visitors to its spa, now the town is dying. Hospitals are failing yet many hotel owners are still happy to live in the cash only economy. The government seems unwilling to tackle the obvious cheating yet happy to turn a blind eye tothe obvious suffering. Perhaps it knows which side its funding is buttered or happy to see the weak endure what they must
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Ariel Tejera Dec 26, 2016

Another idea: There is an institution missing around in international finance, which would provide indebtedness protection to "sovereign" nations, allowing Greece to fall under a sort of Chapter-11 protection. Otherwise, sovereign bankruptcies, being eternal, as the Argentine case demonstrates, will accumulate forever, until half the world nations become insolvent.
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Hergen Heinemann Dec 26, 2016

To complete the list of lies it should be added that the Greek population is not only the victim but the Greek government is also the culprit in avoiding the taxation of its rich and its companies and in spite of that spending money they only have borrowed internationally to its union organized workerer and retired poeple. Everybody knows that Greek can and will never repay its debts. But the Greek government and people should know that the international creditors may not see any use in restructuring Greek debt unless Greek convinces them that Greek is willing to finance its own living in future instead of defaulting from time to time.
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The Other Dec 22, 2016

Extend and pretend (e&p) addresses neither the banking crisis nor the public debt crisis, neither the under-investment nor social crisis.
What e&p does address is the medieval idiot’s version of assumption of punishment for the sin of believing that Euro-zone is the one-currency zone.
Aside the fact that Euro-zone banks before the crisis had the quotas of credit placements, aside the fact that banks themselves believed that Euro-zone cannot sink, aside even the fact that the banks didn’t do their job of risk assessment, the fact remains that even the Euro-zone banks believed and acted as the Euro-zone is one-currency zone.
How can anyone with their right mind accuse the Greece and Greeks that they are guilty for the slightest amount of enormous debt generated while inside Euro-zone, if even the Euro-zone banks believed and acted as the Euro-zone is one-currency zone?
It seems that accusers believe that if someone is accepted in one currency area that that one has to act as if one isn’t in one currency area? That if crisis hits the whole Euro-zone the one must act as if it’s not in the Euro-zone? But how? It is not possible to act like that, and it is especially impossible to accuse the 3rd class passengers for the intentional design flaws of the system.
It is more than obvious that system is sinking after it collided with complex crisis. From where then does this enormous retarded rigidness comes from?
Perhaps the 2nd class passengers are trying to portray themselves as the 1st class passengers by pretending that their cognitive-dissonance-copyright-machine is the same one that the 1st class passengers are using. But the 1st class passengers know the difference between the privately owned and maintained cognitive-dissonance-copyright-machine and the one that is more or less self-generated by the system failures. At the precise depth. When the system is half-sunken.
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Steve Hurst Dec 22, 2016

Come on Yanis, when is somebody going to stand up and say there cannot be a common currency area without perpetual transfer from stronger economic areas to weaker ones- aka a transfer union, aka subsidy - and that means an EZ federal entity and loss of sovereignty for all. Further that remaining in a flawed common currency can only mean the perpetual accumulation of debt in weaker economic areas if such subsidy does not occur. That the mechanism supresses the currency used by the stronger economic areas to their advantage. By definition wealth transfer occurs from weaker to stronger. It really is that simple.
- John Cowan Dec 25, 2016
  
  Of course it will. And this is a bad thing because? The U.S> is just such a transfer union, and it has become a superpower in consequence.
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Per A Eklund Dec 22, 2016

Per A Eklund
Reflection
Varoufakis article calls for reflection. It illuminates nature of conflicting positions in stalled negotiations between Greece, the Eurogroup and the IMF. Varoufakis importantly refers to the joint blog post by Markus Obstfeld, IMF Chief Economist and Poul Thomsen, Director of the European Dept. of the IMF. Mere debt relief, with lower primary surplus, is insufficient: they call for so far unseen reformed structure of taxes and spending, ’friendly to growth and equity’.

Democratic support?
The democratic support or legitimacy of Varoufakis’ proposal needs to be validated. Uncertainties prevail abt economic repercussions. Eventually transition towards a ’Grexit’? The tourism and shipping sectors, with payments in euro and USD, will manage; less so other sectors.
Will Varoufkis’ article trigger call for a referendum? For the Syriza Government – supported by a coalition of other parties? - to determine democratic support in Greece for:
a) Declaring a unilateral moratorium on all debt repayments;
b) Proceeding with growth and equity friendly reforms of the Greek tax and investment structure, unshackled by current EU fiscal compact rules;
c) Reformed EU institutions for relaunched investment and growth in the Eurozone.
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David John Stone Dec 22, 2016

To found it necessary to impose the deprivations on a member that have been imposed on the people and the state of Greece,
must demonstrate conclusively that the EZ , and because of it the EU is an absolute failure.
religious adherence to a flawed macroeconomic ideology aside , the relevant powers could not be so obtuse except that they foresee in allowing a workable pathway for Greece , the acknowledgement that a large amount of debt will never be paid will trigger directly or indirectly the early complete meltdown of the european and then the world's financial system.
All it can be is that they hope some miracle solution will appear out of nowhere to save it from it's fatal flaws if they can only pretend a little bit longer.
For the whole of the EU I think the best thing would be to recognise that it is dysfunctional and all agree to dissolve it amicably and collectively, go back to national control and start again with the lessons from the first attempt. I don't believe there has to be another war over it. But failing that I think individual nations should and will withdraw as like Greece membership has failed and will completely destroy them.
Cheers David J S
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Stamatis Kavvadias Dec 22, 2016

Well, if Varoufakis recovered (instantly) from the referendum negation by Tsipras, the Greek people have not; they will not for a long time. There is almost no Greek that would support "moratorium on all repayments", or directly Grexit, who trusts the next day to any politician. In fact, the majority does not want any conflict with the EU or eurozone; they have concluded Greece is not up to it (economically or politically).

The lesson is the same, with Grexit and Brexit: in or out, you cannot change anything, if you do not change domestic oligarchic governance and the resulting lack of alternative choices.
- John Mulkins Dec 22, 2016
  
  The prime directive of any democratic nation is to produce policies supported by the majority of the people. "The "NO" (ΟΧΙ in Greek) vote won in all the regions of Greece, as well as in all the Greek constituencies."
  https://en.wikipedia.org/wiki/Greek_bailout_referendum,_2015
  
  When majority rule is rejected by a tiny minority of bureaucrats, a revolution becomes necessary. Given the growing economic and environmental insecurity, peaceful revolution is not only possible, it is morally necessary. We must together design an economy that works for the vast majority while providing for the well being of everyone on this small planet. We must take an evolutionary step forward together, or we will write our own ticket to extinction.
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Jeremy Edwards Dec 21, 2016

Yanis, you're a don. But how come I never hear you talking about taxing land values? If you're in London any time soon...

Liberty or death,
jlamadehe at gmail
- M M Dec 22, 2016
  
  Jeremy, in Greece tax is levied on land, the only country in the EU. If one levies a tax on land say in the UK , France, etc...you will have the asset managers crying their hearts out.
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David Olson Dec 21, 2016

Back in 2010 Michael Shedlock and several others recommended that the EU kick Greece out of the Euro, resulting in Greece's government going bankrupt and European banks having to recognize Greek debt as worthless, then leading to bank restructurings. Done back then, Greece would have suffered, but perhaps they would have gotten their house in order by now, and the cost to the rest of Europe would have been much less THEN than it is now.
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Marc Sargen Dec 20, 2016

And Varoufakis is lying when he claims this is not 100% caused by the excessive deficit spending, corruption, and inefficiencies of the Greek government past & present.
Greece was lying about it's budget when it entered into the EU and It lied to it workers when it promises massive benefits & pension.
Greece has always been able to cut the Gordian Knot. It bluffed that it would & then when Syria realized that the bluff had be called & that they were locked out, instead of defaulting & starting a Grexit, they had to settle for the remaining dregs of an offer.
Greece can unilaterally freeze it's payments yes, and It can also send even more of its young fleeing, the country, & more of its visitors staying aways, and more business relocating.
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Jeffrey Schmedeke Dec 20, 2016

I respect Professor Varoufakis very deeply. He teaches us many great lessons. One is missing from this article, however, and this is it: The only way Greece will ever claw its way back to some kind of prosperity is to decouple from the Euro. That currency is Greece's "cross of gold" to which the entire citizenry is nailed.

Debt reduction is part of the story. But, in historical example after example, it can only work when the country can float its own currency; the only one tied to its national decisions and accountability.

Until the return of the drachma, the misery will needlessly continue, and an entire generation of young Greeks will have had to either leave their home country or live in a shadow economy of low expectations.
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Mauricio Duran-Loriga Dec 20, 2016

And you are lying too Mr Minister No More!
For Greece the Eurosystem is acting as a gold standard system, where Greece can nor control the amount of currency in circulation, neither influence or fix its value against other currencies.
No amount of debt relief will solve the problem of chronic Greek uncompetitiveness.
The Euro is a phenomenal tool designed for a gargantuan wealth transfer from uncompetitive countries to Germany.
What amount of collective suffering is needed within the uncompetitive European countries to stop the slaughter? As of today, it looks like the the marathon has miles to go.
Sure enough there is an end to everything.
Sure enough, for every corrupt European politician there is a distinctly engraved pitchfork ready to report for duty.
- Steve Hurst Dec 20, 2016
  
  @Mauricio
  
  You are quite correct a common currency area which does not have an automatic inbuilt transfer union mechanism can only perpetually generated local debt. Any debt write-off is only a temporary respite. Like financial continental drift from tectonic plate movement it will simply push up mountains of debt. I dont know why Yanis will not spell this out. Of course implicit in properly structured transfer union is a federal structure and a loss of sovereignty.
  
  What is actually occurring is a creeping debt mountain and de facto loss of sovereignty without the stability of a federation. There are only two outcomes - federal structure into a Greater Germany - unlikely for a number of reasons - or the ultimate collapse of the Euro with Germany absconding with the money chest.
  
  In the meantime a list of the countries that benefit from the EZ/EU can be drawn up and their blocking votes on reform noted. That is why the locked door on the fire escape remains locked it needs all EZ keys in place to unlock it
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slightly optimistic Dec 20, 2016

Thanks for the comments below. Ah, the days before global financial stability became an aim.
Incidentally, the chairman of the G20's Financial Stability Board is the governor of the BofE. Unfortunately such globalists, including the IFAC, are discouraged.
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Paul Friesen Dec 20, 2016

I think you are right about the moratorium. That is one card Greece has to end this absurdity. If it means exiting the Euro, that is a much better outcome than more austerity. With its own currency, Greece would have the tools it needs to end its depression.

The only problem I see is possible vindictiveness from the EU. Trade sanctions are a possibility that cannot be dismissed.
- Jan Czaja Dec 21, 2016
  
  Matt,
  Although I agree with your for the most part that leaving eurozone would be tough, continuing with the existing circus is not getting Greece anywhere either. It's been already 5+ years and everyone continues to suffer and debt continues to grow. A combination of converting to drachma with sovereign bankruptcy would throw the country into even greater misery for year or two. However, after that, the country could finally recover. I think the recovery will take significantly longer if the Greeks stick with euro. I also speculate that nothing will come out of the discussed debt write down. I think Greeks need to swallow the hard pill for year or two, but come out as masters of their destiny. The current situation is just an unsustainable mess.
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- Paul Friesen Dec 21, 2016
  
  @Matthew.
  The Greek debt is unpayable, and there is no point pretending. And if Greece defaults, it has no need to borrow, because the government primary deficit(before loan repayments) is already essentially zero. Without loan repayments, the government can pay its way without loans.
  The devaluation which, as you point out, will surely happen, has a bright side. It would boost Greek exports and make Greece a fantastic, cheap tourist destination. Unemployment would vanish pretty fast. But the EU could put a big crimp in that with trade sanctions if it wants to.
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- Matthew McCarthy Dec 20, 2016
  
  @Paul,
  While I agree that Greece leaving the eurozone is the proper solution the problem I don't think the issue is potential vindictiveness from the EU, it is the viability of the alternative currency in some sense. Who wants to be paid in drachma when they know that the Greek government is going to keep devaluing it? Who is going to buy Greek debt in drachma without some insane interest rate so that they are not basically throwing their money away? If Greece can't borrow in drachma how much will leaving the eurozone ease their debt problems? Obviously if they can convert current debt to drachma they can devalue it, but that is only a small part of the issue. More on that below...
  
  I think most of the commentators here recognize the irony of the article: YV whining about how people don't want to face the truth when he is so devoted to not facing the truth himself. The Greek state was insolvent well before the financial crisis, they were just successfully lying about it until then. When the European establishment and the IMF gave the "largest loan in history", they also included the largest debt write down in history at the same time, but in YV's words the Greek government decided the write down meant it was time to start digging again. But the main thing he doesn't want to face is that when Greece defaults, the money is going to come from somewhere, and that somewhere is going to include Greece. The reason why the Greek population opposes leaving the eurozone is because that means much of the money is going to come from them. Much of their savings that are still in the country will be wiped out when it is converted to drachma and devalued. And their pensions and government paychecks will also be converted to drachma and devalued. Leaving the eurozone will impact the debt situation because the Greek government can devalue their obligations to their own citizens, and can do so more easily than obligations to anyone else. This is what the Greek population is trying to avoid. Individual Greek citizens could protect some of their assets by sending them overseas, but they cannot protect their pensions and government paychecks.
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- Steve Hurst Dec 20, 2016
  
  @Paul
  
  The matter will be continually deferred until external effects act. Simple as that
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slightly optimistic Dec 20, 2016

The question now is whose taxpayers will reimburse the lenders of Greece's unpayable debts. Greece is not alone with its debt pile. Gigantic debts seem to be everywhere, due to the absence of financial discipline in other countries that the IMF allowed.
How we got here is surely a systemic problem in global finance that the political G20 will have to deal with, having taken over responsibility after the IMF failings that led to the last big international crisis in 2008. The International Federation of Accountants have tried to pressure the G20 to act, but to no avail yet.
- Steve Hurst Dec 20, 2016
  
  errata Helots not Herlots, fat fingers. Apologies
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- Steve Hurst Dec 20, 2016
  
  @slightly
  @M M
  I believe the term is debt serfdom which is near becoming intergenerational. But like all Empires the Euro will fail because the Herlots have the vote unlike in 3rd Century BC
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- M M Dec 20, 2016
  
  Until the MOUs' were agreed and accepted by Tsipras, there was no legitimate debt. Now this whole Greek affair has become a time ticking bomb..
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M M Dec 20, 2016

Yanis, in your eights paragraph there was a typing error, hope it was not deliberate..Poul or Foul or Paul.... We have all been living a very big lie since the 50's...The problems in the EU, including Greece have been known for a very long time, but everyone enjoyed living the lie. The originator machine of this lie, is crumbling, and is crumbling fast, the left, right and centre are disintegrating and people are being left with only one choice "the extreme right".... exactly what you declared prior and during the January 2015 election. Such a beautiful country, such a good people to be destroyed and ravaged all for a lie....a very big lie one must say!
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Ariel Tejera Dec 20, 2016

It came to my knowledge that after WW2, the UK held substantial debt from the U.S, because of war expenses. And they payed it fully, ending in the 1970s. However, Germany got no wartime credits and thus had to pay only postwar debt. That's international finance, man. This story may provide inspiration to Greece. If they declare war to the EU, and lose it, and its current government disappears, then its debt might also disappear, on some technical argument. Just an exercise of thought.
- John Cowan Dec 25, 2016
  
  “When an international financier is confronted by a holdup man with a gun, he automatically hands over not only his money and jewelry but also his shirt and pants, because it doesn't occur to him that a robber might draw the line somewhere.”
  ― Rex Stout
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David Morgan Dec 20, 2016

Is there a possibility that the underlaying reason for Europe (Germany) not wanting to write Greek debt off is the fact that they had an American financial firm massage their economic figures, hiding a massise amount of debt to be able to join the EU in the first place?
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Bernhard Kopp Dec 20, 2016

Why are Greeks, from within Greece and from abroad, not investing in Greece, not creating jobs and purchasing power domestically, and export revenues as well ? Since the ruling class does not want to change, as they have not during the past 10 years, and not before that. They do not need academic financial engineers, they need common economic sense, which, unfortunately, i not very common.
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Andreas Pappas Dec 20, 2016

"it is therefore the Greek government’s responsibility to cut the Gordian knot, by declaring a unilateral moratorium on all repayments until substantial debt restructuring and reasonable fiscal targets are agreed" - If I am not mistaken, the last time Greece came close to taking such unilateral action, following your government's referendum, the targets were significantly raised by the Troika. Do you still think Greece has the upper hand in such a negotiation?
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Jose araujo Dec 20, 2016

If you want to play hard ball, at least be sure you brought a bat. The EU only knows how to play hard-ball, and it will crush Greece, that’s evident to all.
- Steve Hurst Dec 20, 2016
  
  @M M
  
  Having seen some of the candidates from afar seeing them close up in the flesh is a troubling prospect. At least Yannis can opt to wear motorcycle clothing. Oh I forgot he's persona non grata, presumably a badge of honour, though I dont know where he would wear it
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- M M Dec 20, 2016
  
  Steve, depending on the type of attendees..
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- Steve Hurst Dec 20, 2016
  
  @Jose
  
  If you are going to negotiate its better to wear clothes, nobody takes demands from a naked man seriously
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Steve Hurst Dec 20, 2016

AS the recent history of the IMF includes a leading sex pervert who had to resign and a current incumbent just found guilty in court how can anybody take the IMF seriously

The extend and pretend mechanism is a logical device to use to defer the inevitable EZ implosion. After all if it is inevitable whats the rush. If the menu is disater today or disaster in a few days, most woud pick disasterin a few days. Escaping the EU lunatic asylum is difficult as even others who are not euro-ised eunuchs are finding. The UK Brexit is proving a tad difficult as every effort is made by the EU to cling onto its 15% budget supplied by the UK. The question is - who in their right mind would today want to join this crazy frat house other than those expecting a large handout

'The problem with Greece is that everyone is lying'. Indeed. But this started before Greece joined the euro, so its nothing new

.
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