The Penny Is Dropping: Mervyn King, Daniel Gros, Jim O'Neill, and the increasing relevance of the Modest Proposal

This blog has been risking its readers’ sanity by repeating ad nauseam, and in a myriad different guises, the claim that the euro crisis is, at root, a chain of bank insolvencies causally attached to another (derivative) chain of member-state insolvencies. And that, as such, all attempts to deal with the resulting Crisis by rivers of liquidity (to the banks by the ECB and to the states by the EFSF/IMF/ECB/EU) are bound to worsen the problem. So, when Mervyn King, Governor of the Bank of England, said the following a few days ago, I found it hard to fight off a creeping sense of gratification:

“Right through this crisis from the very beginning … an awful lot of people wanted to believe that it was a crisis of liquidity. It wasn’t, it isn’t. And until we accept that, we will never find an answer to it. It was a crisis based on solvency … initially financial institutions and now sovereigns.” [See his speech by which he presented the Bank’s first report on financial stability after the formation of a new tailor-made financial policy committee.]

A few posts back I had entitled an entry “The Penny may be dropping?” I think it is time to remove the qualifying ‘may be’ with an emphatic ‘is’. Mervyn King (not renowned for his radical tendencies or for his mingling with odd characters like your truly) confirms this by weighing in decidedly on the side of those of us who have been arguing for more than 18 months now that Europe’s commitment to denial is putting the global economy at risk. King summed it up thus:

(a) The current euro crisis is systemic and the greatest threat to the UK banking sector yet,

(b) “[P]roviding liquidity can only be used to buy time”, (c) “… [T]he belief, ‘oh we can just lend a bit more’, will never be an answer to a problem which is essentially one about solvency.”

While the mantra of ‘lending a bit more’ is reaching a climax these days (with another €100 billion being touted for bankrupt Greece), the debate on how to get out of this cul-de-sac is intensifying. FT Alphaville put it less than tactfully: You have “to be dropping acid” to think that the current policies will work.

All sorts of proposals are being considered, rejected, resuscitated back to life, ridiculed, complemented, often at once. Below I discuss three proposals (that are receiving much attention presently) before insisting, once again, that our Modest Proposal is uniquely comprehensive (and therefore more likely to succeed), more desirable in term of its long term outcomes and, lastly, more feasible from the perspective of political and institutional constraints.

1. Germany’s Roll-Over (Vienna Conference-like) Plan

It is well known that, in order to share more ‘fairly’ the burden of further lending to Greece between the taxpayers and the banks, Germany (and Mr Schauble in particular) has been pushing hard for a grand bargain between eurocrats (politicians and apparatchiks) and bankers. The touted bargain will have the bankers agree to a large scale purchase of fresh Greek bonds every time older Greek bonds mature (during the next couple of years, till the EFSF begets the permanent ESM); with the eurocrats throwing in some sweeteners which render the roll over more palatable to the recalcitrant bankers. Initially, Germany insisted that the bankers ought to be made an ‘offer they cannot refuse’. But such belligerence faded into the background in the face of furious resistance by the ECB and the French, both of whom recoil in terror at the thought of the ‘credit event’ that who follow the perceived of banks into new Greek bond purchases. So, what we now have is ‘informal talks’ with selected bankers who are being cajoled into ‘participating’. That this ‘plan’ is even part of the public discourse is clear evidence of the deep denial our leaders remain in.

First, it won’t happen. The great bulk of Greek bonds maturing in the next (critical) two years is owned by Greek and non-Greek banks (in contrast to pension funds whose bonds will be maturing, mostly, later) plus the ECB (which has declared no intention of rolling over its maturing Greek bonds). The sad fact is that no banker eager to avert his shareholders’ wrath (and writs), and to stay within the straight and narrow of his ‘fiduciary duty’, will ever choose to roll over maturing Greek debt when all analysts agree that the probability of a Greek default is well over 40%.

Secondly, if Mervyn King’s arguments (and my own repetitive claims) are correct, it makes no difference whether Greece’s new loans come from the EU, from the bankers or, indeed, from some benign deity. In a sense, it matters not one iota whether the banks agree to issuing new loans to Greece (via a Vienna style roll over) or whether the new loans will come from the EU’s other member states. In fact, it is a major error to narrate these fresh loans in terms of the ‘kicking the can down the road’ metaphor. For we are now in the realm of kicking a troublesome can uphill. And the more we kick it the heavier it grows and the steeper the gradient becomes.

2. Turning the EFSF bonds into a sort of European Brady Bond

Recall that the eurozone has been issuing eurobonds since last November. Tragically, they are hideous in their architecture and resemble the CDOs of yesteryear (toxic eurobonds I called them here). I am referring, of course, to the bonds issued by the European Financial Stability Fund (EFSF) for the purposes of providing a large part of the bailout funds for Ireland and Portugal. Greece has, so far, not borrowed from the EFSF but, instead, directly from other EU member states, the ECB and the IMF. So, here comes a new suggestion for how the Greek debt crisis can be averted.

The idea is based on a version of the Brady bonds (utilised in the later 1980s and early 1990s) to restructure the debt of Latin American and former communist nations. (See here for an earlier post in which I argued that the Brady bonds solution was inappropriate for the eurozone.) The new twist is the suggestion that the EFSF bonds play the role in the Greek crisis that the Brady bonds played in Latin America. In particular, German Ministry of Finance circles suggested that the EFSF exchanges some of its bonds for Greek government bonds (GGBs) held by Greek banks. That way Greek banks may be in a position to continue posting (these triple-A rated EFSF) bonds with the ECB for liquidity in case Europe decides to restructure the Greek debt, i.e. imposing a haircut on all existing GGBs without causing the Greek banks to begin a sequence of banking failures throughout Europe.

VERDICT: The reason why this idea will never fly is twofold: First, because there is no way that such a plan can be extended to Ireland, without seriously depleting the EFSF’s limited capitalisation. Secondly, because it does nothing to address the debt crisis of Ireland, Portugal and, indeed, of Spain and Italy (crises that will certainly explode once Greece defaults).

3. Daniel Gros’ plan to collect Greece’s debt under the EFSF and then restructure it

In a recent NYT article “Avoiding the Default trap“, (19th June 2011), Daniel Gros repeated his view that, the way things are going, (a) a Greek default is inevitable (see here for his impressive comparison of Greece and Argentina) and, thus, (b) the EFSF should be utilised in order to effect an orderly restructure of Greek debt, a planned default that causes minimal damage to all comers. The idea is simple and compelling: Offer all holders of Greek government bonds (GGBs) a swap with EFSF bonds “at current market price”. Gros assumes that no bondholder, in their right mind, will refuse to swap junk bonds with triple-A rated EFSF bonds, even at a hefty haircut of 46%. Once the EFSF holds all Greek debt, Gros continues, it can then make the Greek government an attractive offer: In exchange for privatisations and deep structural reforms, the EFSF will now swap its old Greek bonds for fresh ones of a much lower face value (absorbing the 46% haircut it received) and a longer maturity. Gros estimates that this plan will slash €130 billion of Greece’s debt, leaving it with a manageable debt to GDP ratio of less than 100%.

VERDICT: The Greek debt crisis is so acute that no single plan will do the trick. In this sense, Daniel’s proposal has merit. But only if its role in dealing with the crisis is marginal. Its main flaw is that it mistakes the current depressed price of GGBs for the price that would prevail if, suddenly, a large buyer (the EFSF) were to appear on the scene loaded with cash (or, equivalently, triple-A bonds). We should not forget for an instant that the current, market price reflects minuscule amounts of trades involving a tiny number of extreme traders (desperate risk averse sellers on the one hand and risk-loving speculators on the other). In effect, the current price is a marginal price whose level will more likely than not skyrocket the moment the demand side is bolstered (by the EFSF). This means that the cost to the EFSF of restructuring Greece’s pre-2010 debt will prove much larger than Daniel Gros anticipates. Moreover, and this is crucial, the cost will rise inexorably if this scheme were to be employed to deal with the concurrent Irish and Portuguese crises (leaving aside the very real prospect of having to do something about Spain).

Conclusion: Still no substitute for the Modest Proposal

Mervyn King was not the only voice to have caused me to think that the penny is, indeed, dropping. Consider the latest contribution by Jim O’ Neill in the Telegraph (25th June 2011) in which he warns Europe to be bold or face ruin. He writes that “Greece is not economically that important. Greek debt… is at around $450bn – is only around 20pc of China’s foreign currency reserves… Perhaps a more imaginative solution needs to be found. The problem is that Europe’s leaders don’t have an abundance of imagination.”

Well, Europe’s leaders may well be lacking in the imagination department but this does not mean that imaginative solutions have not come out of Europe. I submit it to you, dear readers, that our Modest Proposal is one such idea. Unlike the current ludicrous plans involving some voluntary roll-over, as well as the above ideas revolving around the EFSF (which contain interesting suggestions that may help at the margin of a comprehensive solution), the Modest Proposal has the advantage of dealing at a systemic level with the euro crisis, rather than treating the Greek malaise as a separate problem in need of a piecemeal solution. Unlike the proposal under 2. above, which again concerns itself solely with the Greek banks’ liquidity, Policy 1 of the Modest Proposal deals decisively with the entire eurozone’s banking system’s insolvency issues. And unlike Gros’ proposal (under 3. above) which effectively asks, again, the surplus countries’ taxpayers to buy back, and then restructure, Greece’s debt alone, Policy 2 of the Modest Proposal suggests a eurobond-financed (and thus revenue-neutral) horizontal transfer of the Maastricht compliant debt (up to 60% of its GDP) of each and every eurozone member state (that wishes to participate in this transfer) to Europe’s Centre (i.e. the one solid internationally recognised eurozone institution: the ECB). Lastly, Policy 3 adds a crucial ingredient to the anti-crisis medicine: a strategy for investment-led growth which is absolutely in sync with the Modest Proposal‘s first two policies. Such a comprehensive, imaginative, utterly feasible solution to the Crisis, once adopted, can always be embroidered with elements of some of the policies considered above; e.g. Daniel Gros’.

Is the penny really dropping? Jim O’Neill aforementioned article suggests so strongly when arguing that Europe: “…probably has to quickly try to turn EMU into a more optimal club than it has so far been in order to survive. A starting place might be to agree to introduce a true common euro bond for all members and for the 60pc debt to GDP that was permissible under the Maastricht Treaty.” One hopes that the dropping penny will land before the euro is past the point of no return.

44 Comments

  • With the next steward in Brussels, Draghi and his neo liberal views and history are no secret, I am not optimistic.

    Yanis, since March 2010 I am asking this question, who are the owners of the CDS?

    All this, after careful consideration over the past four years, has the makings of the perfect crime to me.

    Last but not least, and for the records, I find the inauguration of someone with such a specific history in Goldman Sachs to be the next head of ECB totally unacceptable.

    I wonder, and I am really curious on your views, what would happen if from one minute to the next, all debts, private and sovereign, I mean literally all, including private household global debts, would be wiped out. Of course I know that ones liability is another ones assets, but in real life, id such a scenario would happen, who would really be hurt?

    Best
    Georg

  • The prevalent ideology in the EC runs against idea of creating Euro bonds, common debt, and an active European Investment Bank. Yet to save the Euro means rejecting the very neo-liberalism, market orientated principles that the original design of Euro was based on. The ‘penny’ is dropping through this gap but it may need to be forced. The European Community is increasingly a contradiction in terms.

    It is cheeky of ‘A Modest Proposal’ to expose this contradiction – and to have the plan on the table early, waiting for its moment. Also, even if Greece exits, something like ‘modest proposal’ will still be needed to deal with the debt and ensuing banking crisis. An European-wide investment (not punitive) program will still be needed to undo the damage done and to ensure that economic and political structural reforms can be seen as measures that lead to future that benefit all. This is not just for Greece, the Eurozone but for the whole of Europe – nobody has mentioned the damage being done to Greece’s neighbouring economies.

  • In the end, there will be no escape other than to implement the Modest Proposal (aka Eurobond solution). Until then Greece needs to be provided with temporary low cost of funds; a 2% WACC(Weighted Average Cost of Capital) would be my preference.

  • Say, Germany’s current rate of financing its debt is 3%. And as a result of a common Eurobond issue Germany’s rate increases by 100 basis points.

    Could the countries then benefiting from the new Eurobond issue, share in their proportionate reimbursement of the German delta(difference)?

    • The ECB could make special arrangements with the Bundesbank involving interest rate swaps. But I am convinced that the eurobond issue will NOT boost Bund rates significantly. This is no zero sum game.

    • “zero sum game.”? Did you just invent a perpetual motion machine?

      I do not understand why it is good that PIIGS have low interest rates. The artificial low interest rates after the EURO was introduced were one of the key reasons we have the current mess. If Greece, Ireland, Portugal and Spain would have had to pay 7% interest they would have never taken on this massive debt.

  • Has anyone discussed the possibility that the EU’s measures are meant to force Greece to cry uncle? I only ask because I wonder if it would be possible to ringfence the rest of the eurozone once Greece is out, save Portugal, Ireland etc. with a plan like the Modest Proposal. I know Greece is no virgin, but she may make a good sacrifice for people who still insist on moral hazards and other principles (which don’t apply to elites and bankers).

    Or, if after a Greek default, the Modest Proposal would be ineffectual for Ireland and Portugal precisely because of probable contagion, panic, bank runs etc., as well as the inevitable rising interest rates on bonds.

    Do Greeks talk about the EU purposely forcing them out? It would explain much.

    • Dan:

      My understanding of the existing treaty is that there is no mechanism to force a member out.

      If Greece were to leave the eurozone:

      1. She could opt out herself on a voluntary basis.
      2. The treaty needs to be revised but the likelihood of getting singatures from all members (which will be affected also by the new provisions) is subzero.

    • There is indeed no exit procedure. If a member state leaves it must also leave the EU. And bring down the whole eurosystem with it!

    • Yes, I realize there is no procedure. I simply wonder why the “voluntary” exit procedure was approved in Lisbon. I’m very suspicious about “voluntary” measures. We see the word voluntary being thrown around quite a bit these days.

    • You are ever so right. Neoliberalism is a fraud predicated on the ill defined notion of consent. The only saving grace here is that any exit from the euro of a deficit country will trigger the euro’s collapse.

  • why is everyone against the default? It’s the most logical thing and noone died from defaulting…

    Banks should be nationalized, recapitalized, sold. And then, after starting fresh, a solution might be found.

    Right now, it’s about stealing from northern countries taxpayers’ cash and give it to european banks. It has nothing to do with Greece, which by any maths will default. It’s about passing the hot potato from the banks caught pants down to the northern taxpayer…

    Anyone can make a profit as long as they have customers in this world; we’re already overproducing so any idiot can manage provided they have the customer.

    So if company “C” bribes corrupt state official “O” into making a project which that state doesn’t really need at an inflated price, both C and O will make cash. Cash borrowed from bank B which already has problems investing it’s mountains of cash(hello 2000-2007 and the mountain of private cash printed by banks in various derivatives) due to low yields and which is very happy to lend despite the absurd risks for a small premium.

    Now B, contrary to O and C doesn’t manage to profit because the said state can’t repay(something that was obvious even for a child from the start) so it forces the EU to lend to said state in order to be able to repay them so they can get their money back – effectively passing the hot potato from it’s books to the suckered taxpayer. Funky enough, even with a profit(no haircut, a premium on interest compared with German bunds for instance). Even funkier, making some cash also by writing CDS despite simple maths saying that a default is very probable. Even even funkier, pressing the regulators for avoiding a default(despite the obvious) so they can have their cookie in full and eat it too(if a default would happen, they’d have to pay those CDS and God forbid, they’d lose their bonuses)…

    So the taxpayer ends up with a debt which will be defaulted regardless, because said state still can’t pay…

    Really, some money were siphoned by C and O with the help of B. Losses should be shared between C, O and B. Since O and C already profited, tough luck, it has to be B. Since it’s a bank, it can’t go bankrupt so has to be nationalized, but that’s another story.

    Rest is UFO scenario; no offense, even modest proposal – it starts from the assumption that money siphoned by private entities should somehow be paid back by the taxpayer(in this case – modest proposal – the Greek taxpayer), in the ECB case by the european taxpayer(who’ll be repayed by the greek state when pigs will fly…).

    The moral hazard is truly present right now:

    1. the state saves some entities from malinvestment(without receiving something in return – on the contrary, by incurring losses to the tax payer). Just because – the power of the lobby.

    2. we’re cancelling a century of economic theory(that, poor as it is) progress. Already the average person dreams about gold standard and blames fractional reserve, fiat currencies and state intervention to avert a crisis. Despite the fact that gold standard is still stupid, state intervention is even more necesarry nowdays and fiat currencies having nothing to do with the fact that some officials are saving some investors from malinvestment FOR FREE(they should be saved – but for a cost – a portion of their capital as a fee for their stupidity). Buffet saved GS, but for a fee, rightfully so.

    • People do not seem to like the truth. Anyone who believes Greece will not default is a dreamer.

      It is like divorce. People live together for years while they already have divorced in their minds…

  • I have recently found your blog and am impressed with the clarity of the presentations.

    I would like to ask you a question: If you were in the Greek parliament would you vote yes or no to the proposed extension loan? That is, what is worse, declaring default now, or getting the extra money and foundering in three years?My physicist’s brain says we should have defaulted in 2009 when the debt was smaller and we might have kept most of our silver. A default in 2014 would have us owe double the amount and in the meantime by privatization etc most of the silver will be gone. And we should not forget that the people getting their hands on the family silver might have ulterior motives rather than only investment and profit.

    • I would have voted a decisive NO. But there would be no default since the EU would be energised to deal with the situation from Athens to Dublin and from Portugal to Germany in a few hours.

    • Does your estimate that the EU will scramble to make us take the loan anyway mean that we are on a loose-loose track?

      Would you advise the government not to take the loan ( so that we save part of the silver)?

      If not, you would advise them to take the loan, what is the meaning of the parliament voting “no” now since it does not mean default? Defiance?

    • The meaning of my NO to the new bailout/austerity plan is simple: No to policies that worsen the crisis for everyone and which buy time for Europe to sink deeper into the mire. A resounding NO now would force Europe to face up to reality sooner than later. It will signal no Greek default, as the EU will rush in to avoid it, and will pave the way to a rational resolution that involves no loans.

  • Isn’t it that the Germans are waiting for the insolvency mechanism to be installed, so that Greece could be kicked out of the Euro, without any danger for themselves? Only pitty, that the mechanism is to be installed 2013, which is too far away.

    • yeah, sure, thats why we gave and give u (and the banks…and the irish…and the spaniards…and so on) all that money and pay our taxes…and what is the sense in talking about “germans” and “greeks”?…who do u think would be better performing without the Euro (which actually was not a german, but a french idea) and the EU, the PIGS or the so called nothern part of europe? make ur guess…
      as a german, im as tired of all that national bullshit as anyone should be…just make ur homework…

    • svarez
      You seem to be the one raising the blood levels around here. Look, I’m an American, you didn’t hear us raise a hue and cry when we gave you $30 billion (passed via TARP through AIG to German banks) to bailout your banks, despite the fact that Germans have a much better social safety net than Americans. We work harder than you, get less back than you, and yet we paid to make Germany whole (something we have done throughout Germany’s history as a debtor nation)! You should blame your own executives, such as the heads of KfW who gave Lehman Brothers $300 million just one hour before it filed for bankruptcy!

  • Hello sir,

    I have recently started reading your blog with great interest. I had almost lost hope that there are any voices out there, let alone voices of reason, and I will definitely be using your blog as a source of news when it comes to economics and a general insight into current financial matters.

    Can you please help me out by directing me towards a resource where i may find real financial stats, specifically for my/the Greek government?
    In conversations with my peers i have always requested to see a simple piece of information: a pie chart showing a government’s income, depicting how much is made through income taxes, profit from assets, return on investment, etc. For example, it seems impossible for me to find how much money the government is currently making from taxes paid by people in the 12-20000 euro bracket, vs the 20-30, vs how much money it is making by investing in funds, etc.

    Is it just me, or are most informal conversations (ie: conversations currently held in the media or in social environments) based on abstract subjective morals rather than hard facts which are lacking in the first place? Wouldn’t it be a lot more reasonable if the state said outright that we are lowering the minimum taxable income from 12000 to 8000 euro because we expect to collect ‘x’ amount of money, which in turn will be used to pay y% of loan ‘z’? Or is it the case that no-one really knows how much income is made by the state?

    Thank you for the effort put in to write your posts. They are extremely useful.

    Kind Regards

    A concerned reader

    • You will be horrified to know that the statistics you so reasonably request are either unavailable or unreliable. But do not forget that until fairly recently the Greek state did not been know the size of it’s deficit!

    • Dear Dr. Varoufakis,
      Am I to presume then that the Eurostat statistics that show Greece collecting roughly 40% of GDP in taxes for a decade (and also holding a 100% debt to GDP ratio for a decade) are also unreliable? I have been noting how different those figures are from those banded about in the media. As well, I read the Eurostat report of Jan. 8, 2010 on Greek finances, and the report seemed to state that Eurostat sent auditors to Greece every year (with much perturbation) after receiving plainly incorrect predictions for the year. I know that you yourself have stated that you contacted Eurostat in the mid 2000s with concerns and that Eurostat brushed you off. It would seem then that the Eurostat numbers for Greece may be unreliable as well.

  • Knut34:

    You talk about divorces and default, but if you think about it the only country that can voluntarily divorce the Eurozone is Germany itself.

    There is nothing stopping Germany from voluntarily opting out of the Eurozone and thus make a big splash in terms of impressions and substance.

    This idea of “quarantine” for weaker peripheral countries is a pipe dream.

    As Soros just said there will be at least one country leaving the eurozone and I would like to submit to you that such country will be Germany.

    Now, in case you get excited about it, such divorce is not gonna last more than a few hours before the entire German political system collapses with a thud.

    • Yes the stupid government ist stopping it. I would be very very happy if Germany would leave the Eurozone.

      The German “political system” what ever you mean by that has by my definition collapsed already. If these debt guarantees are pulled and Germany has to put money on the table for it, you will see a different spectum of political parties. Holland and Finland are just a first taste.

  • I assume most believe that the EUR is relatively stable. That is correct if compared to the other sinking boat, the dollar.

    Comparing EUR against CHF shows what kind of currency the EUR really is…

    https://www.comdirect.de/inf/waehrungen/detail/chart_kd.html?timeSpan=3M&ID_NOTATION=1619898&#timeSpan=5Y&e&

    Seeing this plus knowing that Switzerland is doing great (incl. the usual complaitns) also puts the argument that a North Euro would cause problems for the North Euro members due to higher valuation

    • Dear Knut, First do not mistake the exchange rate with the respective economy’s vibrancy. Secondly, Switzerland and Germany may be close culturally but a world apart in terms of how they reproduce their affluence. Switzerland draws capital in without the need to export much. Germany is exactly in the opposite end of the spectrum.

    • no offense, but between nearly 8M and 81M+ population is… a world of difference. Luxemburg might be the most prosperous country around, but with 0.5M and the ability to turn it into a semi fiscal paradise, I could run it too with awesome success…

      also, don’t forget Switzerland is a safe haven entity for centuries, while Germany was everyone’s battlefield 4 centuries ago.

      That being said, euro is crapply designed, but I don’t see why it should crumble if Greece defaults. It just needs to be redesigned. The idea is good, the implementation is awful – and beating around the bush doesn’t make the implementation better.

      Plus defaults happened, happen and will happen so… it should be taken into acct. like any normal event. It’s stupid to pretend there are no earthquakes if you live in an earthquake prone area just because you don’t like the them. Bank investors should suck it up like any investor on this planet. You wanted to make a quick buck, it didn’t work out, that’s life; be more careful next time – history is full of sovereign defaults(and of earthquakes, too :)…

  • After your letter to the Prime Minister, I suggest that you now write an open letter to his party (PASOK) MPs urging them to vote NO. Some of them may listen to you and this may prove to be the much needed trigger for the Eurozone politicians to act.

    • Yes! This would be great. We could even collect incentives $$$ for politicians to vote no. There would be supporters all over Europe. Maybe ebay? 123 NO

  • Yannis, it’s simple really. When a financial model stops making sense you know you’re in trouble. Inventing derivatives on derivatives of derivates is sheer lunacy and creates an obfustcated systemt that will eventually grind to a halt in a disasterous ways. Liquidity is indeed not the problem, it’s not a case of “let’s hold on a bit longer and we’ll be OK”, the financial system has failed in a monumental way and the political system is now desparately trying to shore things up by creating so-called bailouts that do nothing but multiply the eventual damage.
    The member states of the EU do not benefit, the citizens of Europe do not benefit so just ask yourself “Qui bono” (i’m sure you’ve done this already).

    We’re experiencing a financial crisis of unprecedented proportions but I have not yet seen a poor banker….

  • I think there is a flaw in modest proposal strategy to be accepted as a feasible one . It talks about problems in european banks other than exposure to greek bonds . How german and french politicians are going to explain that to their citizens ? Will a political party accept the responsiblity to that ? They would prefer to dissolve EU and blame Greece for that (can this be right?).
    But again , US and UK and certainly other countries too , would oppose to that , because globalization is a reality .

    Well , there is a solution to that !!!
    Export Greek politicians to European States . They are trully world class .

    They presented TROIKA as freedom force . They convinced Greek people MKI package was Salvation . They made Recession look like beginning of Growth and finally they present the voting of MK2 package as patriotic act.

    I am sure for Greek politicians , manipulating Germans and French ( No offence) would be piece of cake .

    • Thank you Mr Varoufakis for your analysis and views . Even if i dont agree to everything you say . The more opposing views we read , the more the puzzle is solving itself .
      Also i have the chance to read honest views from people all around Europe and more . And even some times i found them totally absurd , i realize that i may sound totally absurd to them .
      But i have a big complain , i have read no single view supporting MK2 . That’s not helpful for the sake of dialogue .

    • >>>They would prefer to dissolve EU and blame Greece for that
      This is incorrect. They would dissolve the Euro. Anti EU and anti EURO parties already had success in Finland and the Netherlands. In Germany there are two new parties which will profit from the rising anti EU and anti EURO sentiment.

      The EU will not break apart after the Euro. Many countries do not have the Euro and never will. The EU should be a free trade zone again and not a bureaucratic monster as it is today.

    • A piece of cake! They’ll eat it, gobbling up all the trading surpluses and correcting a flaw in the Euro.

      Call it J. Swift’s Modest Proposal 2.0: impoverished Greeks might ease their economic troubles by selling their politicians as food
      .
      Better still call it the European Fat and Skinning Facility

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