Minister No More
yanisvaroufakis.eu
yanisvaroufakis.eu
The next few days are going to be incredible. I really do hope Yanis stays on with the Greek government - his knowledge is clearly beneficial even if his ability to negotiate is lacking (for reasons I'm partially sympathetic to given the qualifications of his counterparts). He definitely has a position to play in the Greek government adivsing their plays in the coming future.
e: I'd absolutely love to see him and Wayne Swan (AU centre-left-wing treasurer during the GFC) sit down and discuss both the AU and Greek history between GFC and now. Swan and co. implemented a massive stimulation package that's widely credited as saving AU from feeling the bulk of the pain of the GFC and was relatively unique in its existance amongst the approaches of various nations. I think both of them could have quite the discussion about how both AU and Greece approached this and the resultant effects then to now.
I've no doubt that the Greek government was trammeled in ways that the AU government was not. We were in a comparitively very healthy position with a significants surplus to draw upon and an ongoing (at the time) resources export boom, among other things.
Not to mention a relatively natural resource-based economy, and significant trade with China... one of the other least GFC effected parts of the world.
I believe his exit was planned before the referendum, regardless of the outcome. He had already openly stated that he would step down if the result of the vote was YES, but the media never asked him what would happen in the event of a NO victory.
His exit, especially in the early AM before EU markets open, will give some confidence to the bankers and most likely prevent the markets from sinking. Furthermore, it will signal to the creditors that SYRIZA is serious about reaching a deal.
I've been following the evolution of Mr. Varoufakis's thinking for the last 5 years, through his many appearances on Doug Henwood's Behind the News podcast. Listening to him speak on the Euro-crisis, it's clear that there's no one in the media who has a better grasp of how we got into this mess and how we ought to get out of it.
http://lbo-news.com/2015/01/28/yanis-varoufakis-on-btn-16-ti...
http://i.imgur.com/mHgxQeQ.png
They're in worse shape than the US was at the same time into the Great Depression. Six years after the GFC, and Greece's GDP is still 25% lower than it was pre-crisis.
This is really unprecedented stuff. Hard to blame them for taking extreme positions to end the suffering.
Rather than 'tightening belts,' FDR responded with Social Security, the TVA, banking reform, relief funds, the housing administration, new tax policies, the list goes on.
Amusingly, even then, those on the right charged him with attacking business and even communism, but unlike the left-wing policies of the last couple of decades, he actually stuck to his guns and rode the goodwill of the people into the first and only third term in the history of the presidency.
About the only case I know of for austerity ever actually leading to anything half-good is Finland, the only country in WWII ever to pay off the full extent of its war debt. But while the eventual result was to turn the country into a proper industrial power, the intervening decades are still remembered as one of significant poverty, of literally making bread flour from tree bark because wheat was too expensive. One even wonders if this was the start of Finland's lingering reputation for depression and alcoholism, from which it is only now starting to recover.
The ugly truth about austerity politics is that it is very much about making a handful of very rich people even richer, and little else. Look at Britain, where the party of some of the richest people in the country are blabbering about tightening belts. You think David Cameron's cutting back at home?
Or hell, look at Germany. The biggest bully for austerity politics in the whole EU is also literally it's richest country. And you can damn sure bet they aren't playing the same game at home.
And oh look, just as last time Europe tried to squeeze a country into bankruptcy for its debts, there's suddenly all these new fascist parties gaining popular support, and an iron-fisted tyrant consolidating power in Russia. It's almost like we've all forgotten the 30s ever happened already ...
Inform yourself which reforms where enacted in Germany in 2004/2005 which lead to a nearly uninterrupted decade of economic growth and a very practically balanced-out federal budget. Maybe cutting spending and increases taxes actually leads to a sensible economic state and a more-or-less working public sector. Unless, of course, austerity always fails!
Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
Germany failed to collect 2.3% of its tax receipts, Greece failed to collect 89.5% [1]. If Greek people want to continue not paying taxes, they’ll have to make cuts elsewhere, yes.
> Germany has not implemented austerity, yet it feels the need to lecture other countries on the need to do so.
Greece has not contributed financially to the bailout programmes, yet it feels the need to lecture other countries on the need to do so.
> Greece is part of the single market, that means that people can leave. All the smart, qualified people left Greece a long time ago.
So? I don’t mind Greeks moving to Germany for jobs, they’re welcome here just as any other person from the EU. What exactly are you trying to say?
[1] https://img.washingtonpost.com/wp-apps/imrs.php?src=https://... fromhttp://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/03/w...
I should think after WWI, Germans of all people would see the danger in driving a European country to ruin with onerous debts, but maybe everyone there just forgot about that after the little dictator just decided he didn't want to pay them anymore?
Harz IV. Kurzarbeit. Eurojobs. Stable currency for decades/no devaluations.
Lo and behold, it actually worked for them (although it was quite unpleasant for many Germans).
The first decade or so after reunification was in all respects unusual so I'd rather not try to draw any conclusions from that. They /did/ have trouble around 2000 or so and Schröder was brave/dumb enough to make drastic reforms in order to improve things.
https://en.wikipedia.org/wiki/Hartz_concept
(And it turns out that I don't know how to spell Hartz. Rather embarrasing.)
The way I as an outsider understand the economic history of Germany, Hartz IV was the one that really mattered.
Whether or not you agree that Hartz IV helped or that it was necessary, I think you can at least agree that it hurt :/ -- in which case one can't complain that Germany wants drastic measures to be undertaken in Greece without being willing to taste the same medicine itself.
That can be attributed to the influence of wealthy business lobbies. Austerity puts downward pressure on wages, which in turn creates upward pressure on profits.
Economists, like everybody else, respond to incentives.
A) The relative position of the owners still improves.
http://isites.harvard.edu/fs/docs/icb.topic620591.files/Indi...
B) Businesses in the rest of the Eurozone can reap the benefits of suppressed Greek wages (in the form of a more cut-throat labor market), without facing the consequences of lower demand themselves.
So I'd say looking at that graph they're in exactly the same place the USA was ~4 years after the 'start', depending on where you measure it from.
E.g. if a country started with a GDP of 100, dropped to 10 in a single year, and then over the next 90 years grew its GDP by 1 each year, it would be 90 years of economic growth but still a recession?
http://www.debtdeflation.com/blogs/2015/07/06/discussing-syr...
Somewhere round the 1:00 mark.
As such, it seems more reasonable to compare the current GDP with a reference in, say, 1990. Back then, Greece’s GDP was at 98,251,934,651, whereas for 2014 you have 299,615,364,238 (USD), or roughly a 305%-growth. In comparison, France stood at 1,275,300,566,196 and is now at 2,829,192,039,171, i.e. 221%.
In other words, Greece borrowed too much and now people are upset that they can’t continue their just-achieved standard of living because people don’t give them any more money. But even now, their cumulative GDP growth over 24 years is still larger than that of France, one of the primary lenders in the ongoing debacle (comparison to Germany is difficult, due to reunification complicating everything).
(Source for all numbers: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD )
http://www.bruegel.org/nc/blog/detail/article/1647-is-greece...
Several Eastern European countries took a similar dive after they got rid of their socialist governments in the 90s. Then their economy started to grow a bit later.
http://i.imgur.com/7zPvyKo.png
For Greece, an equivalent amount of debt relief (a reduction of 46% on an NPV basis) would equate to something like $150 billion in forgiven loans.
I think they'd be much more competitive, don't you?
If I understand Wikipedia correctly, Greece was indeed given a 106.5 + 48.2 = 154.7 billion haircut in 2012:
"The haircut alone lowered the government debt pile by €106.5bn (equal to a debt-to-GDP ratio decline of 55.0 percentage points), but as Greek banks at the same time were holding almost one third of the restructured debt, this also created the need for the Troika and Greek government to pay for a €48.2bn bank recapitalisation in 2012"
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/05/i...
In that sense, yes, he's better gone: he leaves while on top, having been vindicated by both economists (IMF report) and the public. I fear this might mean Greece will still have to swallow a bitter pill though.
Where do you think the mistranslation happened? Here's the text (in Spanish) from the El Mundo interview. My Spanish isn't great, but it seems quite clear:
(El Mundo) Aunque no haya encuestas, en las calles de Atenas lo que se siente es que la gente cada día que pasa tiene más miedo.
(Varoufakis) Sí, así es. Lo que están haciendo con Grecia tiene un nombre: terrorismo
(El Mundo) ¿De verdad piensa que lo que están haciendo con Grecia es terrorismo?
(Varoufakis) Por supuesto que lo pienso: es terrorismo. ¿Por qué nos han forzado a cerrar los bancos? Para insuflar el miedo en la gente. Y cuando se trata de extender el terror, a ese fenómeno se le llama terrorismo. Pero confío en que el miedo no gane.
(El Mundo) Even though there are no polls, what you feel in Athen's streets is that people is more scared every day.
(Varoufakis) Yes, that's it. What they are doing to Greece has a name: terrorism.
(El Mundo) Do you really think that what they are doing to Greece is terrorism?
(Varoufakis) Of course I think so: it is terrorism. Why did they force us to close our banks? (They did so) To instill fear into people. And when the objective is to spread terror, that phenomenon is called terrorism. But I have faith in that fear won't win.
---
My personal stance is that he did indeed call their counterparties terrorists. However, he carefully distinguished them from "violent terriorists" such as ISIS et al. Which kind of terrorists are actually more harmful in the long run... that's a matter for personal opinion.
But the guy have a penchant for not mincing words...
However, if his words are commonly misrepresented, then he should be more careful when speaking publicly. Part of being a politician, and particularly a minister, means your every word will be scrutinised in every way.
While he definitely had the ability as an economist, he did not when it came to being a politician nor a diplomat. But his resignation seems to confirm that he himself realises this.
Their government can certainly print money endlessly, but it's like issuing more stock: it doesn't just make the value of that country go up, it makes the value of its stock (money) go down proportionately.
So the fact remains that Greece won't be able to buy all the things it wants without outside cash. And who is going to give it any now? If you just print money without limit, you'll soon find that there's nothing to buy with that money due to inflation.
Maybe they can copy Argentina, but when their finance minister's exit speech is basically "haha, later suckers!" I don't have high hopes.
If their currency were to lose value, their exports would become cheaper in relation to others.
This in turn would drive up exports.
Right now the euro is trading pretty much on par with USD.
Not likely that this is beneficial for the Greek economy, as it seems very dependent on farming and raw material extraction.
Googling the actual Greek word he used brings up page after page of arguments that it meant exactly that: terrorism.
This is no longer a negotiation regarding greek debt, it is a determination of the process for greek exit from the Euro.
> It is a determination of the process for greek exit from the Euro.
It might well be the determination of the process for Euro dismemberment. It's now clear that a country not useful to the current "enlarged deutschmark" will be just thrown to the wolves, so the clock is ticking for Italy and Spain.
From my reading of the IMF report abstract, it seems that they believe the debt is unsustainable given that Greece didn't follow the plan laid out in the 2012 framework. Hardly a change of message, I'd say.
Relevant passage:
> By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed under the November 2012 framework, if the program were to have been implemented as agreed. But significant changes in policies since then—not least, lower primary surpluses and a weak reform effort that will weigh on growth and privatization—are leading to substantial new financing needs.
http://www.imf.org/external/pubs/cat/longres.aspx?sk=43044.0
Here's a wonderful anecdote about their glacial and incompetent privatization:
http://www.forbes.com/sites/timworstall/2015/07/03/the-airbu...
Note the marvelous bit about the hundreds of clients the non-selling of 4 Airbus planes provided jobs for.
Deleted comment
For starters, delusional may imply mental illness but its primary definition is to hold false or unrealistic beliefs or opinions. That clearly describes the Syriza government.
Trained monkeys is a figure of speech to imply that economists have little place at the negotiation table until they are called upon to produce a fact or table that is required, often to create such a fact or table even if it is not supported by the data. Whether or not they have the capacity for reasoning is completely superfluous to their role in the discussion, they are window-dressing and nothing more.
It is my _opinion_ that Varoufakis has been primarily interested in making sure that he emerges from this sorid affair as he went in, a 'rebellious rock-star' who can assure himself of at least a decade of speaking gigs and punditry while the rest of his country crumbles. Nice work for a mid-grade academic. I am sure the book describing how none of this is his fault and if only they had listened to him everything would have worked out just fine (and the 'elites' would have gotten what they deserve, etc.) is due to be published any day now.
What is wrong or subjective in "delusional government", "failed", "working to maintain his own brand"?
Is it the "trained monkeys" you object to?
Edit: and I think you are just trying to use appeals to decorum to suppress dissent.
Note: "childish", "defamatory", "bad-faith", "stooping", "vacuous", "insults". Hoisted by your own petard? Projection?
All in all... we get it, you dislike the Greek government, disagree with them entirely, and are confident you know what is going to happen. Your views are subjective.
Greece is not the only democracy in Europe and Merkel likes her job too much for that to happen. Sure, if the US/IMF think that the debt should be forgiven, they’re welcome to purchase it and hand it over to Greece, but that’s even more unlikely.
Which was the only possible solution for Greece (outside of 50% debt relief which would have been optimal, but politically impossible due to conservative culture). So in a way he delivered.
And it's a bit rich to talk about the "competent" Greek economist vs. his "incompetent" EU counterparts when they're the ones with the money and he isn't.
When it comes to the Greek debt fiasco, Shakespeare said it best 400 years ago: "Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry."
So you mean that all competent economists are in rich countries, and all incompetent in poor ones?
Does the same apply to other disciplines? Like all good mathematicians are in the US and India? All good painters are in the Netherlands? etc
How sad! I now realize that coming from a country with less than average literary achievements, no matter how I try I won't be ever able to write! I thank you for saving me the effort to try!
What a funny world!
Right? :-)
One positive note: most organizations are culturally self-selecting. So if it didn't work out, that means he's freed up to land a better gig even if he could have made an larger impact if allowed, it's clear the leadership either blames him, feels they have irreconcilable differences or doesn't want him to succeed. It appears he gave it a good go, but perhaps insiders think otherwise. Reiterating the maxim of never burn bridges and always take the high road when leaving employment (and never gossiping/speak ill of anyone in an exit interview.)
As far as I can see it is much harder to reach a deal now that there is a precedence to have the negotiated deal rectified at a referendum.
If everyone else can't handle the truth then they're being fools. Is that true?
> If everyone else can't handle the truth then they're being fools.
Take a step back, the idiocy of the past is history. There is the idiocy of the now to deal with.
Someone who (or something which) superficially dazzles with apparent qualities but on closer inspection disappoints utterly.
http://ordnet.dk/ods/ordbog?query=distancebl%C3%A6nder
(I agree completely with your description: some good arguments at best and then only if...)
He understands that the last restructuring agreement terms is not acceptable. I would assume that he was probably being very vocal in meetings, thus certain parties would think that his presence might make future negotiations more difficult.
Leverage better terms? I don't think you have any idea how much Tsipras has alienated France and Germany's public opinions. Now that supporting Greece has become synonym of political suicide, I believe that Greece has effectively very little leverage.
After Tsipras' call to vote No, I would be surprised to see any negotiation happen in the near future.
The problem is that the creditors insist on "squeezing blood from a stone", unwilling to reach an agreement that actually works, and the people of Greece insist that they won't accept that. Now, it's often said and true that in a democracy, the people of one country cannot be allowed to force their will onto the people of 18 other countries. But the facts are on the table; the Greeks have demonstrated that they won't budge. If the creditors won't budge either, it probably means total default and Grexit, something that ostensibly nobody wanted, but that is inevitable given how nobody was willing to make the necessary concessions to avoid it.
In the medium to long term, the Greeks will probably be better off outside a dysfunctional currency union, and the Euro will either get fixed or dissolved after the next few crises.
If Greece defaults, most likely they will exit the Eurozone and this will be disastrous for Europe (Italy and Spain will be exposed in particular).
Financially, it will send a ripple effect and the Euro will devalue as those debts can't be collected, i.e. written off. Politically, it will be the beginning of the end of the Eurozone.
Again, basic knowledge of the current public opinions of either countries on the subject strongly indicates the contrary.
I do not have the background required to have an informed opinion about the economical consequences of such situation.
Just stating the obvious from a pure political standpoint IMHO.
In Greece's situation, the public opinion (by form of referendum) is used to cement their bargaining position, i.e. the people are ready to accept the repercussions of debt default if they don't get a better deal.
Which is why the negotiation is continuing / will continue, otherwise it will be a terrible lose-lose situation for all.
Greece was sacrificed to save the wider euro, and the German and French public should be grateful.
When a bank makes a loan there's always a risk of losing money and that's priced into the load (or should be).
'moral hazard' should limit the amount of money banks are willing to lose and so willing to lend to people / companies / countries etc.
The banks and european politicians seem to have forgotten about the hazard and instead bailed out those who lent money to Greece and left the public to pick up the cost.
Yes. The Troika wanted to negotiate, but Varoufakis didn't have the power to negotiate anything because the Greek prime minister reserved the right to veto anything which came out of the negotiations.
First rule of negotitations: If you're serious about negotiating, you send someone who has the power to negotiate.
It's a race to the bottom.
And let's not forget how much of the help for Greece wasn't actual help, it was a bailout by proxy for German and French banks. How would the political climate in Europe be if these banks had needed an explicit bailout?
Regarding the bailout thing. A bailout is, per definition, paying off the creditors (banks in this case). The reason people do it at all is to keep the confidence of the money market. Greece wouldn't need a bailout if they were planning to stop taking on any debt at all. But they aren't.
To answer your question, if the banks would take the hit, then it would hurt private households. People think of banks as some super dodgy prop hedge funds, that use their own money to reap super profits. They don't. Banks invest the money of their clients and bag any difference between the interest rate they've offered and the interest rate they've earned. So again, the hit would go to pension funds and possibly depositors. Now, what kind of political climate would be in Europe, if say a German pensioner suddenly got less, because the Greeks couldn't pay back?
Yep.
We are talking iterated games and rational expectations here. Something you'd expect an expert in game theory to understand -- which he of course does, leading to the conclusion that he has been very dishonest the whole way through.
(I agree with the rest as well.)
[1] http://www.economicprinciples.org/
[2] https://www.youtube.com/watch?v=JQuHSQXxsjM
[3] http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf
On Thursday, Schulz told German daily Handelsblatt that the elected Syriza government should be replaced by “technocrat” government until stability is restored.
“We should appoint governments of technocrats,” Martin Schulz told Handelsblatt. [2]
[1] http://www.theguardian.com/world/2001/may/07/terrorism
[2] http://www.telegraph.co.uk/finance/economics/11718296/EU-war...
Varoufakis, and Greece in general, are in a somewhat different position right now than America was immediately after the First New Deal. On the other hand, if Varoufakis is right, the differences may not be as great as I imagine...
He's been caught lying on multiple occasions, most recently only two days ago about already having new proposals from the eurogroup.
And it's still remains to be seen how truthful the arguments with which he sold the Greek public on a "no" vote are.
Was this the plan all along?
Is this the highest stake of good cop, bad cop ever played?
Whatever the outcome, I have full respect for Yanis and would be taking full note of everything he has to say.
It is not the critic who counts; not the man who points
out how the strong man stumbles, or where the doer of
deeds could have done them better. The credit belongs to
the man who is actually in the arena, whose face is
marred by dust and sweat and blood; who strives valiantly;
who errs, who comes short again and again, because there
is no effort without error and shortcoming; but who does
actually strive to do the deeds; who knows great
enthusiasms, the great devotions; who spends himself in
a worthy cause; who at the best knows in the end the
triumph of high achievement, and who at the worst, if he
fails, at least fails while daring greatly, so that his
place shall never be with those cold and timid souls who
neither know victory nor defeat.
-- Teddy RooseveltFor instance, given Varoufakis's resignation, we could interpret the man in different ways:
1) As a person who chose not to be in the arena(in TR's words).
2) A man who was already in the arena but already failed while daring greatly.
3) A man who was already in the arena and arrived at triumph of high achievement, by allowing the Greek people to challenge the Troika with a referendum. And his resignation is just another triumphal move.
I do agree tho that filling comment threads with open-to-interpretation quotes is not very constructuve. Still one here one there can make the issue less black and white - which is good IMHO.
That this might be taken to imply that the long-dead author of the quote which I used for its poetry somehow endorses a position in contemporary political debate is so obviously absurd that I cannot imagine a HN reader doing so.
Isn't a country better off after debt restructuring?
But yes, a country can be better off after debt restructure and should remain that way if certain reforms are put in place.
I suppose the simplest answer is: to increase your spending (ability) right now, with the expectation that after the debt has been paid off you will be achieve a net positive value.
A small business might borrow to buy expensive equipment which will enable them to offer additional service, or to access other market segment.
Along a similar line, a country might borrow to accelerate their growth (e.g. investing in infrastructure projects).
I realize that you probably imitated GP's short style on purpose, but to elaborate a little bit: It's an accounting tautology that every (monetary) savings must be offset by a debt somewhere. Since private households tend to save (and we should consider that a good thing, given how available savings is an essential part of freedom within a capitalist system), the debts have to be somewhere else. They could be debts of firms (for investment), but the private sector is exposed to (sometimes severe) economic fluctuations. So a buffer is needed somewhere, and the logical place for this buffer is government debt.
I hope i will live enough to see sovereign debt being given only with a physical collateral: a piece of national territory. Otherwise, no way currency union, or any other supranational union except those backed by force (like USA) can survive. If EU leaders had balls, they will prevent what's happening with Greece now, but nobody wants it to do in their electoral cycle.
Debt must come with strict, enforceable and unavoidable means to collect it, otherwise both sides - lender and recipient - if they are sovereign nations - are making troubles for themselves and others.
Basically, what happened is that one small group of people sold everyone else into debt bondage. They had no moral right whatsoever to do so. Now these people lost their savings and face a daunting prospect of shortages and hardships. Call it democracy, but really it's just a crime. Perhaps it's time to rethink what role should governments play in our lives, if any.
There's no moral failing, it's purely an economic decision from here forward. Greece will technically default, they'll renegotiate terms, they might leave the EZ, but in the end, life will go on and banks will gladly lend to them again.
Again, I am not saying Greece should not be more fiscally prudent. The Greek government needs to be more fiscally transparent, collect more tax and generally run itself better. However clearly the austerity medication has not worked and (as the IMF itself recognizes). At some point the EU has to decide if punishing Greece's youth (who will not get decent pensions or social benefits anyway) is an appropriate response to overspending by their parents and grandparents.
Demanding interest: it worked when Greece was selling their debt on the free market. I have no problem with that, whoever buys their bonds accepts the risks, and the rate is market driven, caveat emptor rule applies. But right now we are speaking of money given essentially for free, on conditions much more favorable than any market rate Greece can expect to get (this is why they are asking for money, otherwise they will just offer more bonds). So you are not right here: money given on below-market conditions may, and should, require ways to collect it back.
If you want some "strict, enforceable and unavoidable means to collect it", you are not talking about debt as we know it.
There is no business with a profit margin and 0 risk. Well, there is actually: the ones the private lenders made with Greece, before unloading their financial instruments onto the European governments
I find it really interesting how people immediately start making moral judgements (it would only be fair if they repay it, they stole someone's money and ran off with it etc.) of the side that borrowed the money when it's on country level.
But when it's a company borrowing money and not being able to repay it - hey, that's just business for ya. The lender should have known better.
In case of a bankruptcy, only stakeholders of the company suffer: management team simply gets fired, employees either get another job or work for the new owner if assets are sold. Same here: i am not suggesting making private citizens responsible for the national debt directly, just the government, which should either cede some part of its territory, or gets dissolved outright.
And yet, in most countries the biggest land owner is... the state.