Obviously, my analysis of the Greek debt crisis was wrong. My crucial error was the assumption that, having held the referendum and being faced with an unacceptable offer, Tsipras would choose exit from the euro rather than capitulation. Judging by this interview with Varoufakis (H/T Chris), that’s what Tsipras thought too, until, too late, Varoufakis told him it couldn’t be done. Certainly Tsipras’ actions were consistent with that interpretation.
Syriza has clearly been beaten. But I doubt that the outcome will work well for the other side in the long run. (Nearly) everyone understands that the debt can’t ultimately be repaid. But the German voting public hasn’t been told that. A deal that had some kind of quasi-automatic mechanism for writing down the outstanding balance (for example, by multiplying up the proceeds from asset sales) might have got around this problem. As it is, an explicit writedown will be needed at some point, presumably after Syriza has been forced out of office. That will be incredibly unpopular in Germany, while making clear to everyone else the locus of sovereignty in the post-crisis EU.
Update Commenters generally disagree with my take on the Varoufakis interview. I’m not wedded to it. The crucial point is that exit from the euro is extremely difficult, and that this fact will be used to punish any eurozone country that tries to resist the controlling powers.
John Quiggin 
On this matter of bluff or otherwise, maybe the Germans arent quite into game theory as your title suggests. In respect to this possibility there was a very interesting article in the Independent yesterday.
http://www.independent.co.uk/news/world/europe/greece-referendum-result-live-monty-python-sketch-perfectly-explains-the-greek-debt-crisis-10367008.html
Leaving aside the hilarious Monty Python skit which is worth checking out if nothing else, the article suggests the German view may be much more driven by perceptions of immutability of expert derived ‘The Law’ when it comes to economic agreements than we understand. This is in contrast to the suggested way of us viewing economic rules in the Anglosphere way – that everything is always up for negotiation.
The suggestion is that this is deeply rooted in German philosophy (and maybe their Roman Law based system/thinking?) – whereas to judge by stories of how Greek culture works, government laws themselves are even less respected than our tax laws are by sneaky accountants – hence the allusion to the German philosophers.
Irrespective it is interesting consider the problem as coming as much from differences deeply rooted in the different national philosophies.
I’m loathe to be too stereotypical but it is an interesting feature of Australian environmental management that it is based on the use of ‘Guidelines’ which can be freely updated by expert panels without legislative sign off. These Guidelines are just as powerful as legal regulations thanks to Common Law. But importantly in the present instance they do illustrate the difference between black letter and common law type approaches. And in this regard it is notable that Germany I believe puts much more onus on expert judgement that our adversarial battle of arguments approach.
I wonder if this is part of the story?
The Germans might have over-played their hand. They crushed Greece because they could and Greece is small enough that there is no blow back onto the German economy. But bringing France and Italy, or even Spain, to heel will be much more difficult. They don’t want to be ruled by Wolfgang Schäuble. Who in their right mind does?
The current deal doesn’t have this. But it does have a provision for quasi-automatic further discretionary spending cuts when (not if) the primary surplus target is missed because the agreed spending cuts have shrivelled the Greek economy further.
This is madness. Presumably Herbert Stein’s aphorism “if something cannot go on forever, it will stop” will kick in eventually, though by then the Greek economy might resemble that of the Republic of Macedonia.
That’s not my reading of that interview. And it’s certainly not what Varoufakis said on Late Night Live last night. Varoufakis says he was keen to put Greece on a footing of being prepared for Grexit (start issuing IOUs, give a unilateral haircut on ECB-owned Greek bonds and seize back control of the Greek Central Bank) but that Tsipras blinked.
@Benjamin O’Donnell
Varoufakis also more or less said he is going to challenge Tsipras for the leadership of Syriza, so he might get the chance to put his money where his mouth is.
I’m currently thinking that insofar as the bankers have a plan, that plan is to liberate all possible assets from Greek ownership then move on. I don’t think they’re worry out grexit at all, only about whether they can gut the country before it escapes. And possibly a little bit of whether those assets will be worth anything afterwards to whoever is left holding them when the game stops.
It’s worth noting in that context that privatisation of assets has been successful even in African countries that have fairly unhappy governments. Definitely successful in the sense that the people doing the privatising made a profit and often the initial buyers of the assets did too. But note that I have not talked at all about the people those assets were liberated from, or the “consumers” who depended on them. They’re not relevant to this type of analysis.
Well, Varoufakis is an MP and, while there have been reports suggesting that he wanted to stay in the EU, the problem now is that the referendum result has given him no room for manoeuvre. Tsiparis blinked and is now yesterday’s man. Syriza wasn’t elected to behave like Pasok. The Greek people have a choice between immiseration and hardship on their own terms or Schnauble’s. I know what I’d choose.
@Uncle Milton
Did he say that? I remember wondering if that was on the cards, but I couldn’t work out if that was what Yanis was hinting at…
If history is to repeat itself, then perhaps Nazism in Greece (e.g. Golden Dawn) getting more popularity is likely to be inevitable. How much more support will they get in the next election will be interesting however daunting, I’m sure I won’t be happy about it though.
On the other hand, Germany’s victory had given itself a bad diplomatic reputation and getting furious criticisms from economists to the wide social media. All of these are because of rejecting Greece’s initial austerity proposal put forth by Greece and demanding more even draconian austerity measures than before. Had they simply accepted Greece’s initial austerity proposal after Tsipras’ back down, they would not face such harsh judgements (at least from the social media) and would still declare victory over Syriza.
My opinion is that, Greece public has lost, Syriza has lost and Germany has also lost but that’s more because of an own goal than anything else. Greece’s problem will come back again within the next 2-3 years as austerity does not solve (Euro) debt problems; by then, how much support will Germany get from the world will be questionable.
Your last sentence is incorrect. However, the use of guidelines in Australian environmental regulation certainly does pose many conundrums.
“Obviously, my analysis of the Greek debt crisis was wrong. My crucial error was the assumption that, having held the referendum and being faced with an unacceptable offer, Tsipras would choose exit from the euro rather than capitulation.”
Your expectations about possible outcomes is how the situation appeared to me (see my post #45,p2 on the thread ‘Backing down on…) until I found a quote by Tsipras on how he interpreted the communications between the government and the public (which I could not follow because I don’t read or speak Greek) about the apparently contradictory objectives on wishing to stay in the EURO and wanting a solution to the debt and liquidity problem.
“But I doubt that the outcome will work well for the other side in the long run. (Nearly) everyone understands that the debt can’t ultimately be repaid. But the German voting public hasn’t been told that.”
I don’t think the German voting population hasn’t been told the Greek debt can’t be repaid. I recall having read many months ago a report in the SZ according to which Schaeuble had said words to the effect : ‘they can’t repay that’ even earlier.
Moreover, there are hundreds of thousands of Germans who have spent holidays in Greece and many of them are not economic illiterates; they are able to form opinions on the basis of observing relative prices, incomes and asset values in relation to debt.
The term ‘write-down’ of debt can have many meanings. The cancellation of debt of country A in the EUROzone is not possible because, the way the system is set up, it would mean countries 1, ……19-A would take on the debt of A. This would be a ‘fiscal transfer’, which is ruled out (because of national sovereignity). It is one thing to say a full federation would overcome this. It is another to start from the reality of uneven development of countries in Europe and the aim of convergence.
But finance people know how to work around this. Evidence: Goldman-Sachs’ advice to the Greek government and the Greek government at the time accepting it. The job is essentially to undo the damange done by Goldman-Sachs and co, at least partially such that most of the hot air of high finance numbers is dispersed into the ether over time. This involves substituting one set of financial contracts (called securities) for another one such that the time profile of payments is changed sufficiently to make the whole mess bearable. (The US did it via ‘quantitative easing’, which is nothing else beside substituting one set of securities for another.)
An astute finance expert may wish to check whether the proposed collatoral assets demanded from the Greek government explicitly excludes military hardware. If not, here we go, there is a possibility of ‘asset recycling’.
Newtonian is raising important points about the reality in the EU. Most countries, certainly France, Italy, Spain, Germany – not sure about the more recent members of the EU from Eastern Europe- have a legal system based on the Napolionic code, much modified of course. As an outcome, engineers (Tsipras’ background) have higher incomes than lawyers and the accountants and the latter are supervised by government auditors in the sense that at regular intervals the books have to be produced.
Note, the open letter by Piketty et al not only mentions changes now but talks about new finance rules in a future agreement.
The whole idea of pitching Greece against Schaeuble (and Merkel) is not based in the reality of voting power in the EU and the fact that the EUROgroup consists of 19 democracies. There is no ‘leader’ in the EU. There are heads of EU bodies and there are heads of national governments.
The media we see focused on interviews of Merkel and Holland (two easily pronouncable names from countries generally known in the English speaking world and even among immigrants from Asia in Australia, I noticed in my neighbourhood.) French news report ‘a win for Holland’, German news papers question Paul Krugman’s motivation.
So, JQ, you were in good company regarding ignoring the institutional and cultural background of the EU. It seems to me unless one is retired one can’t even try to figure out what is going on.
Personally, I don’t trust Varoufakis but I have great respect for Tsipras. The final outcome is up to the Greek people.
This latest episode of critical points in the development path of the European project shows to me how difficult it is to achieve convergence by non-military and non-dictarorial (strictly centrally planned) means.
@Ernestine Gross
“This latest episode of critical points in the development path of the European project shows to me how difficult it is to achieve convergence by non-military and non-dictarorial (strictly centrally planned) means.”
I agree with this statement. Achieving convergence in a monetary union without vertical and horizontal fiscal transfers will indeed be difficult. However, given the political and cultural difference of Europe, fiscal union is likely never achievable and thus making convergence in the monetary union likely never achievable.
However, when Eurozone can slowly, through it’s power to phase out democracy so that regional democracies by themselves are not allowed to change anything. Then its semi-dictatorship may allow itself to impose deflationary policies to achieve convergence in the long term after everyone dies of poverty.
The EU is badly designed and dysfunctional, especially the currency union. But you can’t tell the French and Germans (er um I mean the Europeans) that. I guess they will figure it out in time when it all collapses in a heap.
Meanwhile, Greece gets asset stripped. Floored by a king hit each from Goldman-Sachs and then the “Troika”. Chalk up another victory to neoliberalism and global financial capital. More money for a few and poverty for millions.
It’s all over for Greece. It will never recover from this. And the contagion will spread.
‘The Fourth Reich’: What Some Europeans See When They Look at Germany – Spiegel
http://www.spiegel.de/international/germany/german-power-in-the-age-of-the-euro-crisis-a-1024714.html
It was a previous Greek government that hired Goldman Sachs to help them
liebe economical with the truth about the true state of their finances so they could gain get the euro.That king hit was self-imposed.
@Uncle Milton
Yes, and there is plenty of blame to go around.
One third blame to Goldman-Sachs for being party to a deception.
One third blame to previous Greek government for being party to a deception.
One third blame to the “Troika” (EC, ECB and IMF), for failing to do due diligence.
In fact, the failure to do due diligence was so egregious one wonders whether the plan might have been to trap and asset strip Greece all along. I wouldn’t put it past some of the players involved.
@Tom
IMO, it is a mistake to conceptualise the problem only in terms of macro-economic models, developed in the Anglo-Saxon literature and very much known in Germany, the Netherlands, Denmark and probably some other countries.
I don’t have a cristal ball. I know there has been and there is growing public resistance in many EU countries to aspects of what JQ discussed over time under the heading of ‘neo-liberalism’.
According to Der Speigel (13.07.15), 52% of the German public agree with the deal, while 44% are against it.
“Die weitere finanzielle Unterstützung für Griechenland bezeichneten 52 Prozent der Befragten als richtig. 44 Prozent halten die Unterstützung für falsch”.
78% of the German public do not trust the Greek government to implement the reforms.
“Auf die Frage, ob sie der griechischen Regierung vertrauten, die vereinbarten Reformen auch umzusetzen, antworteten 78 Prozent der Befragten mit Nein, nur 18 Prozent mit Ja.”
The German media in general seems to suggest the deal was correct.
For all the talk of philosophy and psyche I think many here in Germany simply remember a decade ago when German unemployment was over 10% and Germany was labelled “the sick man of Europe”, while Spanish and Greek economies were humming along on a Euro fuelled debt binge.
One of Aesops fables (Greek) that is very poppular here as a German kids story is the Grasshopper and the Ants, about the grasshopper who didn’t prepare for the winter and just played his fiddle in the sun all summer long. When the first snows came he became sick and was taken in by the ants and nursed back to health. Then he could play the fiddle for them all winter. It seems the Germans are waiting for Greece to become (really) sick so they can get the Greeks to be their muse.
I was just listening to Professor Jie Chen of UWA talking about the current China Russia cooperation. The interviewer attempted to extract a statement of doom on the Greece EU situation, and Chen straight out put it into the proper perspective, which is my feeling also, he said “this is the Eurozone ‘maturing'”. Growing pains. They will get past this, they have to because they have greater to, the people of Europe have common interests. Talk of separation and going it alone makes headlines, but it does not make good sense, especially to young people looking at their future. Neither Greece nor Australia deserves the low grade bumbling fool politicians that we are lumbered with.
Thinking about it this is about old people protecting their assets, and not giving a damn about the younger people who ultimately pay for the mess of greed. The one that amused me was the indignation that pensions for early retirement would get cut. Hello! Here in wealthy Australia wd ard told to work till 75. I’d like to retird yo sn idland villa too, but that ain’t gunna happen at the public expense.
“During the Cold war era, a French intellectual observed he liked Germany so much he was glad there were two of them.”
Tolstoy observed that the march of western and central Europe to the East (Napoleon’s Grande Armée) was matched by an equal and opposite reaction. The War of the Sixth Coalition saw Russia, Prussia, Austria, Sweden and various minor allies push Napoleon back to Paris.
Germany, since the time a little before unification, plays a different part. It pulses in the centre, expanding and contracting at intervals, first conquering in all directions and then being repelled. Thus we have the Franco-Prussion War (1870), WW1 (1914-1918) and WW2 (1939-1945) which were all essentially about Germany’s attempt to take all of Europe as its empire.
The above dynamic is not yet exhausted. Germany still seeks to dominate Europe. In doing this it simply does what Powers always do. They seek to expand. And when for various reasons you can’t use tanks, you use banks.
Going back a little further in time to the 30 year war and you find a preview of the quagmire that is the Middle East at present.
https://en.wikipedia.org/wiki/Thirty_Years%27_War
I was never interested in history taught in high school because the accounts were written in the same language Ikonoclast uses. I wanted to know how the people not mentioned lived.
Whose bloody country is this anyway?
@BilB
Homo sapiens reached what is now Germany about 40,000 years ago. The video shows a blank space until something like 400 AD. So it is only showing some recognised civilisations when and after they arose and not earlier peoples. To my mind that gives a completely false impression but that’s just to my mind.
@Ernestine Gross
You dislike “grand narratives”. They could be just invention after all.
It’s true that “Going back a little further in time to the 30 year war and you find a preview of the quagmire that is the Middle East at present.”
I have my doubts however that the M.E. can recover and progress as Europe did. I base this on modern M.E. resource scarcity compared to its modern population sizes.Today Egypt alone has 80 million people and it’s basically a desert with one (big) river running through it. On the other hand, Europe in the period of the 30 years war had about 70 million people and was a rich continent relatively un-exhausted by modern standards. It had plenty of resources for recovery. I think the M.E. now, once wrecked, has no recovery in it. But I might be wrong.
SBS Insight question from the audience: Why weren’t past Greek governments held to account by European Union for their financial mismanagement?
On SBS Insight, from 9:30PM until 10:30PM on Tuesday 14 July, a female member of the audience asked why the European Union and the IMF never held to account past Greek governments for their mishandling of the money lent to them in the past.
Just as the rulers of Nazi Germany were held to account for their crimes at the Nuremberg trials, those past Greek governments, who indebted Greece so badly for no tangible economic gain, should have been held to account by the European Union and the IMF, before they allowed them to further increase Greece’s indebtedness.
Given that the European Union and the IMF did not hold those past Greek governments to account, why should the EU and the IMF be considered any less culpable for Greece’s economic failures and indebtedness than those past Greek governments, and why should all Greeks, including the vast majority, who were not complicit in that financial mismanagement, be expected to pay so dearly in 2015?
That is the best argument put forward to date, James. It is not a get out of jail free card, though, as much of Greece’s indebtedness arose from the due taxes it failed to collect from its own people. This is money that is still owed and can still be partially recovered.
I have suggested a tax bond system secured against the property of substantial Greek tax defaulters issued to the value of their tax default, bonds which can be bought back from the government over time.
In addition to the debt crisis, Greek also has a refugee crisis. It may become very crowded on boats crossing to Southern Italy with desperate passengers. It seems that Greek airports, highways and beaches will be up for sale, if there are any buyers, which highlights the residue problem of investment. Is austerity a plan, or merely a punishment without foresight as to consequences?
Hilarious to hear the pathological liars lecturing about how even deeper austerity is required because of an issue of “trust” regarding the Greeks.
Luckily we now have the latest leak (Reuters) showing that these lying fascists knew when they strong-armed the latest “deal” that it would certainly doom Greece to an even more unsustainable position.
And they tried to hide what they knew, yes – we really should wonder about who to trust.
In the real world, if you attain a negotiated settlement through fraud, duress or based on withheld information it can be voided and you can be severely sanctioned. Fascists don’t like those old fashioned constraints on their ability to extort supplication.
I sincerely hope the elected representatives of the Greek people respect their most recently expressed instructions that there be no more austerity – i.e. vote down this disgraceful ‘package’.
None of these people care about the real suffering of the real people (including refugees from their imperial wars of aggression).
@Ernestine Gross
Even if public resistance in what we generalise as “western countries” against neoliberalism grows, it will not solve Eurozone’s problems. The fundamental problem that I see is layed out by you in prior argument (as I understand) that because the Eurozone consists of 18 democratic countries, a single countries democratic decision should not automatically meant that Eurozone should accept that decision.
I wish to ignore arguments over which party is at fault as it is more of a moral issue than anything else. The unsolved problem is that austerity does not solve public debt denominated in Euro problem. The crisis of Greece will not only reanimate again in another 3-5 years time, but it is highly likely to happen in Italy, Spain and Portgual as well for the foreseeable timeframe. In that time, no matter how utter failure austerity is, it will continued to be imposed not because of economical reasons but political reasons.
The fact that Eurozone’s decision is made by democratic leaders of 18 countries meant that none of them will vote in favour in a decision of debt relief as that would constitute a fiscal transfer of potentially their taxpayer’s money to another region and this vote will highly likely to have strong local public support. The end result is of collective failure, that austerity will continued to be imposed regardless of past failures like the Eurozone itself is economically insane. Still, no matter how many past regional debt problems and austerity is imposed, the same Eurozone is forced to lend out more taxpayer’s money to troubled regions as they know for a fact that they cannot afford not to support them otherwise a default of government payment will wreck havoc on Euro bonds rate. The end result is of both a political and economic deadend which the cycle runs in liqudity problems>austerity and further lending>shrinking government tax revenue as GDP falls>liqudity problems.
The Eurozone public does not see austerity as neoliberal zombie, they see it as a decision to lend or potentially transferring their money to another country thus even if they grow resistant to neoliberalism, it does not affect their attitude and thinking about the issue.
This is not the only time but I sincerely hope and will be happy if I’m proven wrong and delusional by future events.
@Newtownian
As a general rule, Germany is one of the most rule oriented societies. So yes definitly, this was a lot more about rules than about game theory. The common vs roman law aspect could help to explain why so many people in also relativly rule oriented (compared to the entire world) anglo saxon nations tend to be so puzzled about Germany. But since other countries that are rather relaxed about rules, much more so than the developed common law countries have roman law, that explanation doesnt really work for the inner EU conflict.
The next three years of forced austerity will leave Greece even worse off than it is now, with even higher debt. The Greeks will still be blamed for taking the medicine wrong, because the austerity remedy is infallible.
What Greece needs is a politician who plans for Grexit and is ready to tell the creditors exactly how much of a haircut he will impose if it is forced on him, like 75%. Perhaps Varoufakis fits the bill.
This article suggests that the reason for Greece’s economic problems cannot be found in corruption and laziness. Greece is not an outlier on these measures at least so far as such things can be measured or estimated.
http://pogiblog.atlatszo.hu/2015/06/27/corrupt-lazy-greeks-debunking-ethnic-stereotyping-substituting-economics/
Also from Wikipedia:
“An error sometimes made is the confusion of discussion regarding Greece’s Eurozone entry with the controversy regarding usage of derivatives’ deals with U.S. Banks by Greece and other Eurozone countries to artificially reduce their reported budget deficits. A currency swap arranged with Goldman Sachs allowed Greece to “hide” 2.8 billion Euros of debt, however, this affected deficit values after 2001 (when Greece had already been admitted into the Eurozone) and is not related to Greece’s Eurozone entry.[89]
A study of the period 1999–2009 by forensic accountants has found that data submitted to Eurostat by Greece, among other countries, had a statistical distribution indicative of manipulation; “Greece with a mean value of 17.74, shows the largest deviation from Benford’s law among the members of the eurozone, followed by Belgium with a value of 17.21 and Austria with a value of 15.25″.[90][91]” – Wikipedia.
Note that Belgium shows a nearly similar deviation from Benford’s law.
I still suspect that bad macroeconomics by the Troika is the main reason for Greece’s current problems. A contributing factor would be the lack of complexity and depth in the Greek economy. I don’t know how to express this concept in economic terms. Greece is heavily dependent on tourism and has no other industry of note except perhaps shipping.
A further contributing factor might be the general resource depletion of modern Greece with poor vegetation cover, poor soils, poor water resources and lack of mineral resources. Demographics is also a problem with a high aged count.
Alas, this is nonsense. Greece’s biggest export, 35% of total exports, is refined petroleum. Greece’s biggest import, 25% of total imports, is crude oil. Both are priced in $US so moving to a devalued drachma would not help Greece at all, at least in respect of its biggest export industry.
@Tom
#1. Sorry Tom, but you did not understand how I outlined it in a previous post on the predecessor thread. I talked about 19 democracies in the EUROzone. Tsipras put it succinctly in words to the effect that the outcome of the EUROgroup summit last Sunday is a solution if all want it. (At present the decision of the Greek parliament as well as that of a few other parliaments is still outstanding.)
#2. There is a distinction between researching how this mess came about and blame games. At present there are many smoke and mirror games going on in the various types of media, IMHO.
As for the moral question, may I direct you to say Habermass (Gunther Grass also spoke up a long time ago before he died recently). I am not a philosopher. As such I observe that the UK immediately rejected the proposal by the head of the EU, Junker, to use suggestion to use EU (28 countries, including the UK) funds for a bridging loan for Greece (presumably to overcome the waiting periods entailed in the conditional agreement). So, whatever moral questions you seem to have in mind are not strictly relevant for the EUROzone. What about the people who transferred about Euro1billion out of Greece just before the referendum? How moral is that? The required bridging loan is Euro1.2billion.
May I note, when mature natural disasters happened in Australia, John Quiggin organised fundraising and he put money into it – more than what readers could offer. What did Yanis Varoufakis do?
Do you ever check data? There is no risk of bankruptcy for Spain, Italy, France, Portugal.
But look at the personal bankruptcy rates for England and Wales; they surely have grown a lot since 1988.
https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_Kingdom
(Data can be found for other countries too. The data for the UK came nicely organised such that I did not have to do any work. Moreover, the UK laws, as described in the article, look similar to those in Australia while US laws differ a lot, eg student loans are non-recourse while housing loans are recourse etc, etc. )
Austerity. What do you think this term ‘austerity’ means? Did the UK adopt ‘austerity’ measures in response to the GFC? What were they?
#3. See #2 above and the no rhetoric agreement – o.k.?
#4. I don’t know what the EUROzone public thinks. Given the size of the population I should think there are many opinions.
#5. You couldn’t be called delusional if your personal expectations about future events turn out to be wrong, I should say (unless you were Paul Krugman writing under the name of Tom, which I doubt.)
Varoufakis on LNL:
Greek bailout ‘a new Versailles Treaty’, says former finance minister Yanis Varoufakis
Monday 13 July 2015 10:39PM
Exclusive: Alex McClintock
In his first interview since resigning as Greek finance minister, Yanis Varoufakis took aim at Greece’s creditors, revealed the extent of the country’s preparations to leave the euro and warned of the rise of the far right. Late Night Live reports.
In his first interview since resigning earlier this month, former Greek finance minister Yanis Varoufakis has described the 86 billion euro bailout deal agreed to by prime minister Alexis Tsipras as ‘a new Versailles Treaty’.
In the coup d’état the choice of weapon used in order to bring down democracy then was the tanks. Well, this time it was the banks.
Yanis Varoufakis
‘This is the politics of humiliation,’ he told Late Night Live. ‘The troika have made sure that they will make him eat every single word that he uttered in criticism of the troika over the last five years. Not just these six months we’ve been in government, but in the years prior to that.
‘This has nothing to do with economics. It has nothing to do with putting Greece on the way to recovery. This is a new Versailles Treaty that is haunting Europe again, and the prime minister knows it. He knows that he’s damned if he does and he’s damned if he doesn’t.’
The deal, agreed to on Monday after 17 hours of talks with eurozone leaders, contains tough conditions including pension cuts, tax increases and the movement of public assets into a trust fund to pay for the recapitalisation of Greek banks.
Mr Varoufakis rejected the deal in the strongest possible terms, comparing it to the 1967 coup d’état that installed a military dictatorship in the Mediterranean nation.
‘In the coup d’état the choice of weapon used in order to bring down democracy then was the tanks. Well, this time it was the banks. The banks were used by foreign powers to take over the government. The difference is that this time they’re taking over all public property.’
Mr Varoufakis suggested that Mr Tsipras may call a snap election rather than bring the deal before the Greek parliament, saying he would be ‘very surprised’ if Mr Tsipras wanted to stay on as prime minister.
He insisted, however, that he and Mr Tsipras remain on good terms, and that he has kept a low profile over the last week in order to support Mr Tsipras and his successor in the finance ministry, Euclid Tsakolotos.
‘I jumped more than I was pushed,’ said Mr Varoufakis, describing his resignation in the immediate aftermath of the ‘no’ vote in the July 6 referendum on bailout terms similar to those accepted on Monday.
‘I entered the prime minister’s office elated. I was travelling on a beautiful cloud pushed by beautiful winds of the public’s enthusiasm for the victory of Greek democracy in the referendum. The moment I entered the prime ministerial office, I sensed immediately a certain sense of resignation—a negatively charged atmosphere. I was confronted with an air of defeat, which was completely at odds with what was happening outside.
‘At that point I had to put it to the prime minister: “If you want to use the buzz of democracy outside the gates of this building, you can count on me. But if on the other hand you feel like you cannot manage this majestic ‘no’ to an irrational proposition from our European partners, I am going to simply steal into the night.”’
The former finance minister also described the Greek government’s secret preparations to print drachmas in the event of the country being forced to leave the euro.
‘As a responsible government, knowing full well that there was a very significant alliance within the eurogroup whose purpose was to throw us out of the euro, we had to make contingencies,’ he said. ‘We had to have a small team of people in secret who would create the plan in case we were forced to exit the monetary union known as the eurozone.’
‘Of course, there is a conundrum here. Once this plan begins to be implemented, once you go from five people working on it to 500—which is the minimum you need to implement it—it becomes public knowledge. The moment it becomes public knowledge, the power of prophecy creates a dynamic of its own … We never made that transition from five to 500. We never felt we had a mandate to do it. We never planned to do it. We had the design on paper but it was never activated.’
Mr Varoufakis said that he will remain as a backbencher in the Greek parliament, where he has ‘a lot more room to manoeuvre and speak the truth’. He warned however, that austerity will further embolden the country’s far right.
‘In parliament I have to sit looking at the right hand side of the auditorium, where 10 Nazis sit, representing Golden Dawn. If our party, Syriza, that has cultivated so much hope in Greece … if we betray this hope and bow our heads to this new form of postmodern occupation, then I cannot see any other possible outcome than the further strengthening of Golden Dawn. They will inherit the mantle of the anti-austerity drive, tragically.
‘The project of a European democracy, of a united European democratic union, has just suffered a major catastrophe.’
@Ernestine Gross
RE#1. I don’t understand where I misunderstand the concept that Eurozone is made of 19 democratic countries so that the concept of democratic decision is separated into two different levels which are country specific democratic decisions and Eurozone specific democratic decisions.
RE#2. I specific mentioned that I’m not going to discuss about which party is to blame or which party is at fault as well as any other moral issues because it is philosophically (which the discipline itself questions the concept of morally “right” and morally “wrong”) difficult.
RE#3. I can no longer distinguish what you classify between rhetoric and political arguments. If you dismiss all political arguments as rhetoric then it will be difficult to understand the decisions that troika and Eurozone made. In fact if political and psychological arguments are rhetoric which you refuse to engage at, then why do you even bother to write a lengthy point 2 is beyond my understanding. Throughout my whole comment, I did not blame any party at hand but focused specifically at the conflicting psychology leading to what is in my opinion the most likely political decision that would lead to economic disaster (unless you’d want to debate about how austerity would work as a solution).
RE#4. The size of the population does give rise to different opinion but it does not mean psychological and political analysis is then impossible. I have given an argument which is the most logically coherent and rational argument in my thinking about Eurozone and I understand that I may be wrong and that other people’s logical conclusion can be different from mine.
RE#5. Different to most economists, I’d like to take my future reputations (economics honours student planning to do phd and hope to become an academic) at stake and give advice that is actually useful, or at the very least not to resort to giving explanations after the storm is long gone and the ocean is flat.
With regards to Spain, Italy and Portugal, I do not see that Euro denominated public debt drop as a percentage of GDP, in fact it rose in the past years despite austerity.
@Tom
As someone who wishes to put his/her future reputation at stake, it might be helpful if you were to reveal your full name for otherwise it is not really credible.
I wish you well in your endeavours, whatever they may turn out to be.
@Ernestine Gross
I have linked my blog in my comment name which I used to write quite a few years ago that has my full name, the content of what I wrote, even if they were written quite a few years back, can also affect how others judge me. I could well have not done so if I chose to.
Thanks for your wishing me well, I do really hope I can succeed.
The plenary session is about to begin.
Greece (via its parliament) has precisely 7 hours to pass laws enacting even more cruel austerity upon its people by increasing GST to 23%, “reforming” pensions so that pensioners suffer even more than the more than 50% cuts they have already suffered and locking in automatically further spending cuts if surplus isn’t attained. As well as others.
About 30-40 Syriza politicians have apparently refused to sell out the large majority of the population that clearly voted against more austerity.
It looks like the remaining stooges (Syriza sell-outs, ND, PASOK) will have enough votes to make something happen. It remains to be seen whether they can enact that final humiliation in such a short time and whether the citizens will give up without a fight.
The police and “anti-terrrsm” forces are apparently beefing things up around the place, according to local establishment media.
@Uncle Milton
Local value added is what matters and in that regard, tourism and shipping takes indead the no1 spot. The oil in refined petroleum out trade matters far less, just like those medication trade shenghians which are just price/regulation arbitrage with hardly any local Greek value added.
Look, an issue change!
I think it’d do you well to realise that the feelings that lead you to think that not talking about what you were talking about and to start talking about a new issue are in fact the feelings of “f***ing up”. You’ve set out a position, you’ve encountered evidence that suggests your position is wrong… but your self-image can’t cope with that, so you’ve dug up something that lets you ignore the evidence.
Doesn’t hugely matter what. “Real name!” is just a quibble, a pretext: if not that then something else.
At the end of the day:
+ people are fallible
+ they act according to their best efforts
-> therefore, their mistakes must be a result of their best efforts and invisible to them. That you can’t see your mistakes is normal and expected.
@Ernestine Gross “I wanted to know how the people not mentioned lived.”
Photos of women in the French resistance were deleted as were photos of black Americans and other groups in the Allied forces of liberation. There are records of a “whitewashing”
http://news.bbc.co.uk/2/hi/7984436.stm
Yes 229
No 64
32 from Syriza voted No and 6 voted ‘Present’ (abstained).
Riot police have detained about 50 protesters. Tellingly, a TV van was set on fire.
The Troika will need to get billions of euros into Greek banks very, very quickly if they want to avoid serious citizen unrest. Even then, the Greek people probably won’t take this hyper-austerity unchallenged.
This is entertaining
https://hat4uk.wordpress.com/2015/07/15/breaking-analysis-the-full-story-on-why-christine-lagarde-is-pointing-her-cannons-at-the-eu-creditors/
@Megan
Varoufakis voted no. He’s all set to try to topple Tsipras, as he foreshadowed on LNL.
@Uncle Milton
I can’t see him having the numbers – going on the vote just passed, I guess he has a maximum of about 40 Syriza MPs who would support him. The rest have just demonstrated that they will sell-out their voters and back austerity. They obviously don’t have the spine for any alternative approach, so I’m betting they’ll back the new “Cop-out coalition”.
Tsipras is trying to say that, despite the harshest austerity ever, the ‘good’ thing about this package is the ‘guarantee’ of addressing the unsustainable debt (he said ‘re-profiling’).
But there IS no guarantee whatsoever, it isn’t even mentioned – except to explicitly rule out nominal reduction.
The short term key issue will be how much cash, and how quickly, they can get into the banks to re-open without capital controls. I don’t think it will happen in the near term.
@Megan
You are too hard on the Syriza MPs who voted yes. It was Sophie’s Choice. The alternative was the Germans immediately destroying the Greek economy by bankrupting the Greek banks. Of course the German austerity plan is most likely going to destroy the economy anyway, but less quickly. I don’t know what I would have done.
@Uncle Milton
Actually, I might have done what Varoufakis did, voted against knowing it would pass. That way I could keep my place atop the high moral ground.
I sincerely hope this is ‘off topic’ – from “ekathimerini.com” a few hours ago:
Tsipras and Varoufakis should have campaigned for and then personally led a million-person march on Frankfurt. Revolt is all that remains.
@Megan
I doubt it has anything to do with the current political/economic situation in Greece. A brief Google search reveals that Greece and Turkey are more-or-less constantly violating each others’ airspace, and have been doing so for years.