Cessation of posts till end of July. But here is a message from Southern Crete…






Having spent a day on a deserted Cretan beach overlooking Libya, I returned to Loutro (our haven) to discover messages on my phone suggesting that I chose the worse week to go AWOL: the week when the euro is finally collapsing. Steady on folks! The euro crisis has a long, long way to go. The explosion of the Italian and Spanish spreads is yet another early warning. What we need do is pay no attention to the inanities presenting themselves as ‘solutions’ (e.g. debt swaps or debt buybacks) and to focus on the main game: The reconstitution of the eurozone. It will, I am sure, happen. Since I am in no condition to write sensibly more about this presently (you should see the mindboggling scenery around me!), all I can do is suggest to you the best article on this issue that I stumbled upon after a few minutes of searching: That by George Soros in the FT (click here). Now I must go back into the boat in search of more splendid isolation. Cheers

Here is what I wrote just before boarding the ferry in Pireus:


Crisis, what crisis? As if in a bid to annoy my Northern European friends and readers, tonight we are boarding a ferry to Crete. Final destination a small village, called Loutro, on the Libyan sea, cut off from the rest of Crete due to a quaint lack of roads. Only access by boat. Thus we are towing our ancient inflatable to Sfakia (the only place that no occupier, Ottoman or Nazi, dared occupy; something like the Asterix Gaul village of Goscinny and Uderzo) from where we plan/hope to sail to Loutro. Ten days in utter isolation. Then, upon our return, I fly to Sydney to deliver daughter Xenia to her mum and school routine. Back on 28th July, when I shall resume posting here. With wishes for a blissful summer wherever you happen to be.


  • 🙂 Thanks Yani, have a safe and pleasant trip.


    you may want to read this thread referring to a Italian banking figure that triggered my memories from Lord of the Ring, not only because of his name, Bini Smaghi, but equally his whimpering voice.


    The link in this thread from Phillip to Bini Smaghi’s speech is a must read, really!!!


  • Happy holiday! While you’re absent we Northeners will dutifully continue to kick the can further down the road to preserve the parlous state of The Union for your return. We’re looking forward for you to resume your noble crusade in August.

  • Hi Yanis, Stephen here. You gave us my favourite course at U of Sydney.

    Question: Was the Greek collapse easy to predict? (sorry, I haven’t been reading your writing – just from BBC.)

    Like to see you in Sydney.


  • I am looking for a Ianis who is orriginally from Crete and works or worked on cruise ships as Head Chef. He was working on Royal Olimpic in 2002.
    Any ideea how I might find him?


  • Last time I were in Sfakia, we ate the most incredibly fresh fish just caught less than an hour before it appeared on our plates.

    Needless to say it was the most delicious seafood ever!

    Yani is just a lucky man!!!

    • Forgive me. I forgot to attach the musical version of how lucky Yani is:

  • Σας ζηλευω. ΣΙΓΟΥΡΑ θα περασετε θαυμασια!
    Χαιρετισματα απο το Αμστερνταμ.

  • How apt for the rebel economist to travel to the heart of Kriti resistance.
    “May the force be with you.”

  • How apt for the rebel economist to travel to the heart of Kriti resistance.
    “May the force be with you.”

  • Dear Mr. Varoufakis.
    I am sure you will enjoy Loutro. I have been there in 2003 and I combined with some free camping days in Gavdos. Loutro is the best place to isolate from everything and refill with energy in mind, body and soul.
    Greetings from Lefkada (holidays in hometown).

  • Happy holiday Yani, thank you for the information about Loutro it seems to be a great place for vacation.
    Looking forward to hear from you,

    Christos Triantafillou

  • Have a nice trip and wonderful time.
    Do not forget to have a dip for us too. 🙂

  • By referring to the Soros article I hope you are also not deferring to him? I am with the commenter in FT who said:

    “Sanchez99 | July 12 11:43am | Permalink
    Meanwhile, behind the scenes Soros likely bet big money against the Euro. Soros weighing in on economies is like Dracula advising the blood bank. ”

    BTW it needed to sign up to FT in order to access the free articles, so I am now an “Assistant” an “administrator” “government/NGO…”, the closest description to my post at retirement :). I assist in organizing lectures for the retirees of my institute :).

    Τα μπάνια του λαού είναι εδώ.

  • The World from Berlin

    For Euro Zone, It’s Euro Bonds or Else


    A share trader in Frankfurt. The euro debt crisis is escalating.

    Markets in Europe are being hit hard by fears that the debt crisis will spread to Italy, which is regarded as too big to rescue. German media commentators say the time has come to stop the piecemeal bailout efforts and to make the member states share liability for their debt — via euro bonds.

    European markets and the euro are falling on worries that the euro crisis is about to engulf Italy and Spain, which analysts regard as too big to rescue. To make matters worse, the euro-zone finance ministers failed at their meeting on Monday to agree on a second bailout package for Greece.

    They pledged longer bond maturities and a more flexible rescue fund to help Greece and other European Union debtors, but they set no deadline to act, merely saying new steps would be decided “shortly.” They also declined to rule out the possibility of a selective default by Greece, even though the European Central Bank is opposed to such a move.

    A decision has been postponed due to continuing disagreement over the terms of involving private-sector investors in a second bailout package for Greece.

    The euro fell below $1.39 on Tuesday, down from €1.42 at the end of last week. and the yield on the Italian 10-year bond rose to 5.9 percent, above the 5.7 percent pain threshold identified by some market participants as putting Italy’s public finances under heightened pressure. The yield on 10-year bonds issued by Spain, the euro zone’s fourth-largest economy, rose to 6.28 percent.

    German media commentators say the pressure on Italy, the euro zone’s third-largest economy which has strong economic fundamentals despite its high debt-to-GDP ratio, shows that investors have no faith in the EU’s crisis management.

    The bailout efforts taken over the past 18 months have been piecemeal and achieved little more than buy time, they argue, adding that a fundamental reform of the euro zone’s financial architecture is required: Member states may have to assume common liability for public debt in the 17-nation euro area via the introduction of so-called euro bonds — a taboo until now because it enshrines the principle that strong euro-zone economies assume liability for the debts of the weaker ones.

    The left-leaning Die Tageszeitung writes:

    “The next approaching crisis — in Italy this time — shows that the euro states’ rescue strategy isn’t working. In fact, it shows that one can’t even call it a strategy, strictly speaking. Buying time, whatever the cost — not much more than that has happened in the one-and-a-half years since the Greek crisis erupted.”

    “The problem is that buying time makes no sense. It entails the constant cobbling together of new bailout packages while the speculators and their henchmen, the rating agencies, set their sights on the next crisis candidate.”

    “Even though the Italian economy is fairly solid by comparison with the other crisis countries, the nation is an easy target. All market players know that the Italian debt mountain was the highest in Europe until the Greek crisis and that the Berlusconi government was usually too busy with other matters to worry about the dreary task of balancing the budget.”

    “If a rescue fund were to bail out Italy, it would be expensive. Very expensive. Maybe then the time will have finally come for the euro politicians to put an end to the incessant costly patch-up jobs, and to put the single currency on a new common footing. There has long been a plausible solution. It’s called euro bonds. In future, all euro states would borrow funds together. Anyone who wanted to speculate against European government bonds would have to take on Germany, France and 15 other states. That would but up a roadblock to the wandering circus of speculators. It would be an opportunity to restore the primacy of governments over the markets.”

    The Financial Times Deutschland writes:

    “The case of Italy will show whether Europe is truly prepared to defend the euro. It’s not enough to call for a few austerity packages or an increase in the rescue fund to €1.5 trillion. If the pressure on the country increases, Europe will have to break what has until now been a taboo: to pool the organization of borrowing and debt — in a fiscal union with euro bonds. Alternatively, the EU must solve the problem on its periphery so fast, sustainably and decisively that the attacks on its core will cease.”

    Business daily Handelsblatt writes:

    “The EU is going to have to decide whether to abandon its monetary union or whether to assume common liability for the lion’s share of the government debt. All interim solutions appear to be disintegrating and the strategy of postponing decisions is also reaching its limits. Plans to waive part of the debts will probably only work if the strong euro states give watertight guarantees for the rest.”

    Mass circulation Bild writes:

    “Italy’s weaknesses have become a focus for all the doubts that in truth are directed at the euro overall: Will the euro states get to grips with the debt and currency crisis? Or won’t they?

    “The euro will only truly be saved if a convincing solution is found for Greece. That is lacking at present. Who still believes that constantly lending billions upon billions can do any more than postpone Greece’s insolvency and debt restructuring?

    “As long as the euro states just play for time and keep on shouldering new aid packages, the mistrust of the markets will remain — and will in the end possibly focus on Germany.”

    — David Crossland

  • The dislocation of the so called liquid markets (e.g. Italy) is such that you may well discover an arm here, and a leg there; it is a total massacre out there.

  • Hi Yanni,
    I envy you for being able to enter “silence” for a while.
    Indeed i was ready to send you the link of Soros’ article which is also posted at Project Syndicate.
    Wish you and your daughter the best time at Loutro, and i wish you will soon come back to fight 🙂


  • There is a study from a German Endowment Trust published in July 2011: CEP They developed a default index and tracked this from 2001 to 2010. The great thing are the graphs and the ranking. The surprise is where the US and France end up and that the data was there all these years and noone saw it or those who did ignored it.

    It is only available in German. I will explain the key figures so you can read the grahs by country starting on page 25.

    Kategorie = Category. Category 1 is good news, category 4 is bad news

    The two interesting parts of the study is (A) the clustering into 4 categories and (B) the development you can see in the detailed country section starting page 25.


    GFS = Measures a country´s need for foreign capital. Surplus countries have a positive GFS, deficit countries a negative GFS

    Ik = Level of investments that increase capacity

    CEP Default index = GFS + Ik

    Positive EP-Default-Index means investments that increase capacity are larger than net capital import

    A negative CEP-Default-Index means the net capital import is larger than investments that increase capacity. The country consumes all domestic value add plus some part of the net capital imports. This can cause solvency issues, if it is the case over a longer period of time

    The shocking news is on page 33: France

  • Να πατε και στα μαρμαρα αν δεν εχετε ηδη παει.. Ειναι πολυ κοντα στο λουτρο και ειναι πανεμορφα..

    Εγω εχω να σας κανω μια ερωτηση. Τι σημαινει για τον απλο πολιτη-επιχειρηματια η επιλεκτικη χρεωκοπια για την καθημερινοτητα του; Πως θα μας επιρεασει αν συμβει; Ρωτω γιατι συμφωνα με τα λεγομενα του υπουργου μας δε πρεπει να ανησυχουμε καθολου..

    • Όσο η Γερμανία δεν φεύγει απο το ευρω, πράγματι δεν πρέπει να ανησυχούμε πάρα για την όλο και βαθύτερη ύφεση που επιβλήθηκε απο τους μαθητευόμενους μάγους επι της ελληνικής κοινωνίας.

  • Loutro is special, especially with friends. Thanks again Yani and Danae
    Dimitris & Maria

  • Thanks again Yani, Loutro is special and very unique, especially with friends
    Dimitri and Maria from Melbourne