Varoufakis Blasts Europe's Remarkable Ability To Remain In Denial

Authored by Yanis Varoufakis via LiveMint.com,

Any objective assessment of the Eurogroup’s recent deal on Greek public debt would conclude that it condemns Greece to permanent debt bondage...

Europe’s establishment is luxuriating in two recent announcements that would have been momentous even if they were only partly accurate: the end of Greece’s debt crisis, and a Franco-German accord to redesign the eurozone. Unfortunately, both reports offer fresh proof of the European Union (EU) establishment’s remarkable talent for never missing an opportunity to miss an opportunity.

The two announcements did not come in the same week by accident. The Greek debt implosion, back in 2010, was the ugly symptom of the eurozone’s design flaws, which is why it triggered a domino effect across the continent. Greece’s continuing insolvency reflects the deep disagreements within the Franco-German axis concerning eurozone redesign. While three French presidents and the same German chancellor were failing to agree on the institutional changes that would render the eurozone sustainable, Greece was asked to bleed quietly.

In 2015, the Greeks staged a rebellion, which Europe’s establishment ruthlessly crushed. Neither Brexit nor the EU’s steady delegitimation in the eyes of European voters managed to convince the establishment to change its ways. French President Emmanuel Macron’s election seemed the last hope for the new Berlin-Paris accord needed to prevent a suffocating Italy from triggering the next - this time lethal - domino effect.

Under Macron, new, hopeful ideas were proposed: a common budget for the eurozone; a new safe debt instrument and quasi-federal tax-raising capacities; a common unemployment insurance fund; common bank deposit insurance and a common pot from which to recapitalize failing banks. Moreover, a new investment fund would mobilize idle savings across Europe, without adding to the fiscal stress of member states. A year later, with Italy on a collision course with the EU, the Meseberg Summit between German Chancellor Angela Merkel and Macron delivered an agreement on eurozone reform. A few days later, the Eurogroup of eurozone finance ministers delivered its own “solution” to the Greek debt crisis.

In a decent universe, these two announcements would herald the end of a lost decade for Europe and the beginning of an era of rebuilding so that Europeans may face, together, the challenges posed by US President Donald Trump and the next economic downturn. Alas, that is not the universe we inhabit.

Even before the Meseberg Summit, Macron had diluted his proposals to the point of surrender. The common bank deposit insurance scheme and the recapitalization fund were pushed into an implausible future in which the eurozone periphery’s banks have to shed their bad loans before a proper banking union is forged. The common unemployment insurance scheme was not even discussed. A common debt instrument to underpin a eurozone budget amounting to 2-3% of eurozone aggregate income was unceremoniously consigned to the dustbin.

Naturally, Merkel offered just enough to allow Macron to disguise his humiliation as a personal triumph. In front of an ecstatic press corps, they hailed the decision to create a eurozone budget in name, when in reality it is nothing more than a credit line from the European Stability Mechanism (ESM, the bailout fund that gave Greece its loans in 2015). They also agreed to an insubstantial “rainy day” fund, to be financed by member states, and a fictional financial transactions and digital economy tax—a “compromise” that costs Merkel nothing, given that countries like the Netherlands and Ireland are likely to torpedo it.

As for bank recapitalization, Macron and Merkel touted an ESM-funded scheme. But with all ESM decisions subject to German parliamentary approval, the German Bundestag would have veto power over the recapitalization of, say, an Italian bank. Italy’s new government is unlikely to buy into this.

When bankers try to cover up bad loans on their books, they extend new loans to enable their insolvent borrowers to pretend to be servicing the original loan. When the new loan is exhausted, the client is allowed to suspend repayment for a few years, with interest accumulating. This keeps the net present value of their asset (the loan) constant while postponing the day of reckoning. Since 2010, Greece’s creditors have been practising this extend-and-pretend strategy. Instead of a courageous and therapeutic haircut, or the moderate gross domestic product-indexing solution, the Eurogroup’s recent decision, proclaimed as the “end of the Greek debt crisis”, boiled down to the apotheosis of this cynical practice.

Technically speaking, the central pillar of the new debt agreement is a decade-long postponement of payments totalling €96.6 billion that were due to begin in 2023. The Greek state has thus been offered easy repayments until 2033 in exchange for continuing harsh austerity ad infinitum; impossible annual debt repayments from 2033 to 2060; and a debt-to-national income ratio above 230% by 2060 if the next global recession puts the plan’s over-ambitious growth targets out of reach, as it surely will.

Any objective assessment of the Eurogroup’s recent deal on Greek public debt would conclude that it condemns Greece to permanent debt bondage. And an impartial observer of the Merkel-Macron Meseberg Summit would conclude that the eurozone remains as macroeconomically unsustainable as it was five years ago. And yet Europe’s establishment, oblivious to the Nationalist International preparing to devour the EU, is serving it appetizers. 

Comments

Free This Haus-Targaryen Sat, 07/14/2018 - 07:26 Permalink

Europe is asleep, and there is no prince to kiss their asses to wake them up, meh. They have been fully invaded from the south, just like the US has been, and the invaders are just waiting for the word to do their thing, once all logistics are in place.

Difference between Europe and the US, is we are STILL ARMED!

Varoufakis was no leader, nor a panacea for Greece. The Greek state has had their balls cut off by that drunk Junker and themselves. Socialism does NOT work, period. More debt does not solve any problems, the US has the same problem.

In reply to by Haus-Targaryen

El Vaquero Free This Sat, 07/14/2018 - 11:13 Permalink

Any objective assessment of the Eurogroup’s recent deal on Greek public debt would conclude that it condemns Greece to permanent debt bondage...

Dear Yannis, that's the fucking point.  The EU wants a bigger say in what the IMF does for a goddamned reason.  And look at the European Neighborhood Policy for the EU trying to do to non-EU countries what it did to you.

In reply to by Free This

Teja Reichstag Fire Dept. Sun, 07/15/2018 - 10:30 Permalink

Varoufakis at ZH.... thats a surprise that is. And Haus-Targaryen back again, too. Double whammy.

Reading Varoufakis' analysis, I feel his future job will not be the one of a politician, but as a chronicler of the demise of the European Union. He has got a very sharp mind and clear thinking and stands over the petty nationalist thinking exploding in Europe.

In reply to by Reichstag Fire Dept.

anarchitect Haus-Targaryen Sat, 07/14/2018 - 08:28 Permalink

Under Macron, new, hopeful ideas were proposed: a common budget for the eurozone; a new safe debt instrument and quasi-federal tax-raising capacities; a common unemployment insurance fund; common bank deposit insurance and a common pot from which to recapitalize failing banks. Moreover, a new investment fund would mobilize idle savings across Europe, without adding to the fiscal stress of member states.

All of this sounds like a way for the responsible to subsidize the irresponsible to an even greater degree.  The responsible aren't interested, so the proposals go nowhere.  So long as the irresponsible stay in the Eurozone, they will endure austerity.  The responsible keep pretending that they can avoid severe haircuts, and the irresponsible keep pretending that they can make good on their debts.

In reply to by Haus-Targaryen

waspwench Haus-Targaryen Sat, 07/14/2018 - 16:20 Permalink

How much longer are we going to have to wait for impoverished countries, of which Greece is the poster child, to turn on Bruxelles and Berlin, revert to their own currencies, announce that the debt cannot be repaid in the foreseeable future, and just walk away.

Your statement is absolutely correct, the consequences cannot be ignored, and yet they still are, and the longer this circus continues the more difficult will be the reset.

In reply to by Haus-Targaryen

Truth_Hoits EuroPox Sat, 07/14/2018 - 08:41 Permalink

You are correct.

It's easy to control someone with millions in swiss bank accounts.

 

Tsipras sold out his people.

Varoufakis resigned in disgust.

The sad thing is that for some reason the Greeks don't know that Tsipras sold them out. When they voted to not continue this crazy debt structure, Tsipras went against the people's vote! A vote that he himself encouraged. In other words, he gambled that the people of Greece would vote to continue... In hopes that he would make it look like it was their choice. They voted not to. He did it anyway... And he's still there... And I'm not kidding when I say that his mommy fights his battles for him in the press. "Leave my son alone... He's a good boy" . She knows... A man, he is not...

Even worse, he's a traitor to his people.

Varoufakis, agree with his politics or not, was/is a patriot who was/is genuinely concerned for his country and his people.

 

Tsipras, may he rot in Hell.

 

TRUTH HURTS

In reply to by EuroPox

CogitoMan Truth_Hoits Sat, 07/14/2018 - 09:58 Permalink

This article proves that Vorufakis is full time globalist. He just wants others to pay for the mess Greeks did to themselves. Calling it "patriotic" is horse manure. If he was true patriot he would say that the only way out is getting out of Euro and default on debt.

Which might happen anyway when EU itself falls apart but not because anyone in Greece asks for that.

In reply to by Truth_Hoits

OverTheHedge CogitoMan Sat, 07/14/2018 - 10:12 Permalink

He just wants others to pay for the mess Greeks did to themselves

Not quite - he simply believes that there should be consequences for insane lenders who were happy to lend Greece money at the same cost as they lend Germany, despite the fact that Greece was obviously already debt-saturated. Lend money to someone who can't pay it back, and don't be surprised if they don't pay it back.

If he was true patriot he would say that the only way out is getting out of Euro and default on debt.

And that was Yannis's position in a nutshell. Hence his resignation. I recommend reading some of his posts on his website - you may not agree with his politics, but he does seem to understand finance and economics, to some extent, and the history of the EU extremely well. This one gives you a potted history of the EU to date, and it's reason for enforcing the Greek "rescue". Hint - it rescued French and German banks, not Greece.

In reply to by CogitoMan

swmnguy OverTheHedge Sat, 07/14/2018 - 12:19 Permalink

Exactly.

Greece has had a weak economy since the days of Socrates and nobody gave a shit.  It wasn't really a problem until the E.U., working with global (read, "US and German") banks, set ridiculous requirements for entry into the Euro.  The average Greek was much better off with wads of low-value Drachmae, than with a Euro that was basically a German Mark.

But the Greek Elites wanted to use Euros so they can more easily own property in Paris and elsewhere, so the Greek government teamed up with Goldman Sachs to set up an incredibly complicated web of derivatives to make debits look like assets and make Greece's debt situation look different from what it was.

And it worked, for a few years, to get by Maastricht requirements.  Then the whole thing fell apart in 2008, just as it did for people who financed their lifestyles by refinancing their houses every other year.

It wasn't "Greek Irresponsibility," or "Socialism," of the "Welfare State" that screwed up the Greek economy.  It was trying to salvage the ridiculous derivatives schemes, courtesy Goldman Sachs, and bailing out the German banks and New York banks that underwrote all the worthless paper.

The Greeks should have gone Iceland, told the banks to go fuck themselves, and sat on the beach drinking wine and eating cheese, olives, grapes and figs.

In reply to by OverTheHedge

theprofromdover swmnguy Sat, 07/14/2018 - 13:18 Permalink

Agreed, and Greece should still just walk away and default.

One day the Greeks will elect a leader who is a nationalist, and the German Banks and the IMF won't be able to do a thing about it.

Varoufakis didn't play his hand right, he should have exposed Tsipras the moment he buckled under the tiniest hint from the Troika; but maybe the Greek establishment and media had already been bribed.

In reply to by swmnguy

waspwench OverTheHedge Sat, 07/14/2018 - 16:32 Permalink

Greece could not service it's debts so it was lent money to do so.   To be forced to borrow money, to pay the interest on a debt which, since the principal is not being paid off, continues to increase in size is something the mafia does.

The EU is, effectively, a mafia and the Merkin's Germany is a parasite feeding off the rest of Europe.

USURY!

In reply to by OverTheHedge

deja thunderchief Sat, 07/14/2018 - 15:32 Permalink

He did do something.  There was a plan to drop out of the Euro and issue drachmas.  Tzipras put the kibosh on it, though rumor http://www.keeptalkinggreece.com/2016/10/13/hollande-putin-told-me-tsipras-wanted-to-print-drachmas-in-russia  has it the Greeks asked the Russians to print the new money since they no longer had access to a capable printer and that Putin spilled the beans to then French President Francois Hollande.

In reply to by thunderchief

Farqued Up FlKeysFisherman Sat, 07/14/2018 - 09:35 Permalink

It was well written except he could have pointed out that in a democracy the wolves would have first voted on eating them, but the supranational dictatorial Brussels wolves fed them enough until the Greek Sheep’s Judas Goat led them into the slaughter chute. No vote needed.

i must say that Verilyfuckus had to know that to crawl in bed with a gang of dirty-leg whores they ran a huge risk of coming down with the claps eventually. Besides, this is payback for suggesting a couple millennia ago that anything challenging the yoke of oppression would be subjected to demonic forces of retribution.

What to do? Trust your people, repeal all bans on firearms, let them arm themselves, and then tell Brussels to go fuck themselves and watch the girly men huff and puff and shit their pants. Simultaneously, burn publicly the EU documents that joined you to the whores to begin the ordeal. Guillotine the traitors that screwed your country.

In reply to by FlKeysFisherman

Free This Mittens is a god Sat, 07/14/2018 - 08:23 Permalink

This is my rifle. There are many like it, but this one is mine.

My rifle is my best friend. It is my life. I must master it as I must master my life.

Without me, my rifle is useless. Without my rifle, I am useless. I must fire my rifle true. I must shoot straighter than my enemy who is trying to kill me. I must shoot him before he shoots me. I will…

My rifle and I know that what counts in war is not the rounds we fire, the noise of our burst, nor the smoke we make. We know that it is the hits that count. We will hit…

My rifle is human, even as I, because it is my life. Thus, I will learn it as a brother. I will learn its weaknesses, its strength, its parts, its accessories, its sights and its barrel. I will keep my rifle clean and ready, even as I am clean and ready. We will become part of each other. We will…

Before God, I swear this creed. My rifle and I are the defenders of my country. We are the masters of our enemy. We are the saviors of my life.

So be it, until victory is America's and there is no enemy, but peace!

===================================

I bet your head will explode on this one, suck it sister!

In reply to by Mittens is a god

itstippy Free This Sat, 07/14/2018 - 09:46 Permalink

Your rifle isn't capable of getting you out of crushing debt.  If you have a large home mortgage, and a car loan, and credit card bills, and owe back taxes, and you can't make the monthly payments, you will lose all your stuff.  Because it's not really your stuff; it belongs to your creditors until you pay for it in full.  If you bought your stuff with borrowed money your rifle can't help you, and if you try to use it in some idiotic manner to rescue yourself from crushing debt you will be killed or incarcerated (and also lose all the stuff).  The Greeks could all arm up with rifles and it wouldn't help their debt situation one bit.

I too have a rifle; I use it to shoot deer.  It doesn't provide me any income, or solve my health problems, or repair my truck, or maintain my residence, or make my spouse happy and content, or anything like that.  It shoots bullets to kill whitetail deer.  Today I'll be repairing a scour hole in my driveway, and I'll be using a shovel, a wheelbarrow, and a tamper.  Those are the correct tools for repairing scour holes in driveways.  When you say, "Without my rifle, I am useless." you sound absolutely psychotic.  If you tried to repair a driveway using your rifle you would be utterly useless.

In reply to by Free This

Free This itstippy Sat, 07/14/2018 - 12:22 Permalink

I have a mortgage yes, and 1 credit card with a balance, all the others are at 0. All of my cars are paid for, so are ALL of my guns.

I have to pay taxes on the mortgage, but I am just like everyone else, don't pay those and I lose my house. So if I can't pay my mortg., I definitely cannot pay my taxes, and will lose it anyway.

Come take my guns and you can have my bullets, one at a time! My guns are not for hunting or sport.

The rifle has a butt, just sayin'

A psycho huh? Well, you ain't seen nothing yet longshanks!

In reply to by itstippy

nathan1234 Sat, 07/14/2018 - 07:41 Permalink

Vari baby, you can send the immigrants over to Mutter Merkel in Deutschland as payment towards the debt. After all she says they add value to your country.

MoreFreedom Reaper Sat, 07/14/2018 - 08:54 Permalink

Default is the first step towards freedom.

Default shows irresponsibility, while borrowing money they had no intention of paying back shows greed and deceit.  Freedom and responsibility are two sides of the same coin.  No one forced Greece to borrow any money. 

,,, creditors have been practising this extend-and-pretend strategy

Which is what the US and China's central banks have been doing as well.  The "hopeful ideas" mentioned by Varoufakis and Macron, are merely a means to extend the ability of people to steal from each other via the government.  I expect that debts will be "repaid" by central banks printing the money, pretending assets (promises they'll be paid later) they hold have value.   It's just a means of those in power to steal from taxpayers as well, especially since they get the printed money first to spend.  I'll trust in God and gold, but not politicians or voters who seem to think they benefit when government changes from protecting us from others who'd harm us, into a government that takes from that other guy behind the tree (while that guy behind the tree says the same thing).

In reply to by Reaper

OverTheHedge MoreFreedom Sat, 07/14/2018 - 10:26 Permalink

Default shows irresponsibility, while borrowing money they had no intention of paying back shows greed and deceit.  Freedom and responsibility are two sides of the same coin.  No one forced Greece to borrow any money

And that is such a wonderfully black and white, naïve position to take. Tell me: if someone steals your credit card information, and buys vast amounts of stuff in your name, without the credit card company ever wondering if you could pay for it - are you liable? In the same way, am I, who have no right to vote in Greek national elections, liable for this debt? Because I get to pay for it, and so will my great grandchildren, if they elect to continue living in Greece. I believe "No taxation without representation" is a thing, in some countries. (You could argue, with some justification, that because I chose to live in Greece, I should be liable for the debt, even though I moved here before Greece joined the euro. The poor buggers who were born here had no option but to vote for corrupt political party A or corrupt political party B, both of which stole money hand over fist, as though it is their god-given right.)

In reply to by MoreFreedom

adonisdemilo MoreFreedom Sat, 07/14/2018 - 13:05 Permalink

@MoreFreedon.

" No one forced Greece to borrow any money"

BOLLOCKS, the EU contrived to make sure that the banking system couldn't function unless they borrowed. Increasing their debt from what was 40 billion initially to over 300 billion now.

There is also the scam pulled by the Germans whereby they were advanced 9 billion on proviso that they bought 3 fucking submarines from Siemans.

In reply to by MoreFreedom