Yanis Varoufakis’s latest blog post

I remember being excited when Barack Obama was elected, but largely because he was such a fine orator and black and reasonable. I didn’t hold out very much expectation that this ‘change’ that we were supposed to be believing in would be all that exciting, though of course politics is full of surprises, and so I was intrigued and didn’t entirely prejudge the possibility that he might be able to change politics in some way that we might look back on as being transformative. But I didn’t know what that would look like and I didn’t rate it as much of a chance.

As it is, I think he’s done pretty well achieving health reform in an increasingly dysfunctional political culture, and have been pretty frustrated with his penchant for ‘negotiating with himself’ as Paul Krugman calls it – his tendency to begin negotiating with The Stupid Party by doing the initial negotiating for them and presenting them with an entirely reasonable proposition which they then denounce as socialist and treat as an ambit claim.

I’m more genuinely excited by Yanis Varoufakis. That’s not because I share his worldview. I’ve read most of his book The Global Minotaur and while I enjoyed being reacquainted with big picture painting of the evolution of the global financial architecture after the Bretton Woods system was established in the late 40s, I found a lot of it unconvincing with conspiracy claims (about how the Americans were controlling things) many of which were interesting and worth considering particularly in the 1950s, but many for which little evidence was presented.

But what’s exciting about Varoufakis is firstly his remarkable style with the media. This is important to me because, as I argued earlier on Troppo, we live in an age of such domination of the style of communication that it takes great insight and skill to cut through with a different approach on the media.

Secondly the message he has is the simple response of economic orthodoxy to the VerySeriousPersonOnomics that has Europe in its grip. Indeed it’s hard to see what’s so left wing, what’s so radical about his most recent post most of which I reproduce below. Yes, he omits some of the other side of the debate – represented in this comment on the post – as most people putting a case do. But it’s compelling stuff IMO.

So the change Varoufakis wants us to believe in is the commonsense of economic orthodoxy (before the VSPs got hold of it in or around 2010). #WTNTL?

Of course there is the question of Varoufakis’s chances. Well as another commenter on his blog mentions, they seem pretty slim and Robert Preston in this BBC column (make sure you read the associated letter from Tsipras to Merkel) makes seem slimmer still.

When, in early 2010, the Greek state lost its capacity to service its debts to French, German and Greek banks, I campaigned against the Greek government’s quest for an enormous new loan from Europe’s taxpayers. Why?

I opposed the 2010 and 2012 ‘bailout’ loans from German and other European taxpayers because:

  • the new loans represented not a bailout for Greece but a cynical transfer of losses from the books of the private banks to the weak shoulders of the weakest of Greek citizens. (How many of Europe’s taxpayers, who footed these loans, know that more than 90% of the €240 billion borrowed by Greece went to financial institutions, not to the Greek state or its citizens?)
  • it was obvious that, at a time Greece could not repay its existing loans, the austerity conditions for giving Greece the new loans would crush Greek nominal incomes, making our debt even less sustainable
  • the ‘bailout’ burden would, sooner or later, weigh down German and other European taxpayers once the weaker Greeks buckled under their mountainous debts (as moneyed Greeks had already shifted their deposits to Frankfurt, London etc.)
  • misleading peoples and Parliaments by presenting a bank bailout as an act of ‘solidarity to Greece’ would turn Germans against Greeks, Greeks against Germans and, eventually, Europe against itself.

In 2010 Greece owed not one euro to German taxpayers. We had no right to borrow from them, or from other European taxpayers, while our public debt was unsustainable. Period!

That was my ‘controversial’ point in 2010: In 2010, Greece should have borrowed not one euro before entering into debt restructuring procedures and partially defaulting to its private sector creditors.

Well before the May 2010 ‘bailout’, I urged European citizens to tell their governments not to even think of transferring private losses to them.

To no avail, of course. That transfer was effected soon after with the largest taxpayer-backed loan in economic history given to the Greek state on austerity conditions that have caused Greeks to lose a quarter of their income, making it impossible to repay private and public debts, and causing a hideous humanitarian crisis.

That was then, in 2010. What should we do now, in 2015, that Greece remains in crisis and our people, the Greeks and the Germans, have, regrettably but also predictably, descended into a mutual ‘blame game’?

First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe.

Secondly, we need to focus on our joint interest: On how to grow and to reform Greece rapidly, so that the Greek state can best repay debts it should never have taken on while looking after its citizens as a modern European state ought to do.

In practical terms, the 20th February Eurogroup agreement offers an excellent opportunity to move forward. Let us implement it immediately, as our leaders have urged in yesterday’s informal Brussels meeting.

Looking ahead, and beyond current tensions, our joint task is to re-design Europe so that Germans and Greeks, along with all Europeans, can re-imagine our monetary union as a realm of shared prosperity.




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john Walker
9 years ago

Ingiolf over at conversations at Stanly park has reported James Galbraiths ‘eyewitness’ account of some of the meetings that Varoufakis has had with the VSP EU world

“The frequent lack of professionalism and coordination on the European side shocked him.”

Crocodile Chuck
Crocodile Chuck
9 years ago

Health Reform?

What reform?

All he did was make it illegal NOT to purchase a health insurance policy from the ‘Usual Suspects’.

9 years ago

I largely agree on the economics. But the economics is itself only one side of the story!

First, we should work towards ending the toxic ‘blame game’ and the moralising finger-pointing which benefit only the enemies of Europe.

How is that working out for them? Now Merkel (once again into the breach) has released that the important men running things are just not very good, and taken over. She takes the high road, and Tsipras goes back onto reparations… I think Greece’s chances now consist solely of their chances of convincing Merkel, and so far I suspect Tsipras has barely convinced her that he exists.

Maybe you will say Varoufakis should have gone to Berlin instead?

9 years ago

In this speech Varoufakis seems to be arguing that it’s an EC crisis not a Greek crisis and the answer lies in fiscal not monetary policy.

David Walker
9 years ago

I haven’t followed the Greek debt issue for way too long and am not qualified to offer an opinion on it.

But I do continue to be puzzled by one aspect of it: the repeated claims that lenders to Greece ought to have been smarter and more responsible than to believe that the nation could make its own decisions.

Varoufakis seems to have said repeatedly that various problems of lending to the Greek state should have been so obvious that if people went ahead and lent … well, all bets were off. This is a particularly convenient argument for Varoufakis now that he’s the finance minister of Greece looking for a way to reduce his nation’s debt burden without, say, the hard work of building a workable tax system.

And good on Varoufakis for trying it on, I suppose. It’s certainly a better line of argument that telling the Germans that they still owe Greece for World War II.

Nevertheless, it’s hard to support. It invites everyone to treat Greek like a sort of mentally disabled state that can’t be trusted to make its own decisions.

OK, tell me what I’m missing.

9 years ago
Reply to  David Walker

Well, if you are a journo with average monthly earnings of $6500 and I lend you $2,500,000 on the basis that you work at Fairfax and I read their papers, who cops what when you can’t pay?

How would you propose to proceed? I keep a lien over everything you earn and by the way run your career for the next fifteen years and make you move to someone’s backyard shed, or we restructure and I take a haircut and you owe me sth you can pay but not more and we all move on?

Greece should have been allowed to restructure it’s debt at a substantial haircut, openly, because that is what is happening implicitly through deferral terms etc, and because doing it openly would have allowed Greece to start rebuilding.

David Walker
David Walker
9 years ago
Reply to  Patrick

Patrick, my answer to the pragmatic question of how to proceed would probably be much like yours: lenders take a haircut, the Greek state gets to make some hard decisions, and let’s get things done quickly and move on. Bankruptcy is a pretty smart regulatory strategy.

Ingolf Eide
9 years ago

Nicholas (and John), apologies. I haven’t been paying attention recently and missed this post.

As you say, Varoufakis’ position as laid out here is a matter of common sense. The post crisis obsession by authorities almost everywhere with protecting creditors was disastrous. It’s led to nothing but tears and discord.

Small matter. The blog post you refer to it seems to have vanished. Is this a Varoufakis problem or is there some alternative way of getting to it? More than anything, I’d be curious to read the comments.

Ingolf Eide
9 years ago
Reply to  Nicholas Gruen

Ah well . . . thanks anyway.

John Walker
9 years ago
Reply to  Ingolf Eide

The Wayback machine archive of that post

Ingolf Eide
9 years ago
Reply to  John Walker

Thanks John.