Europe needs a circuit breaker: Interviewed by ABC TV's The 7.30 Report

Click here for the ABC’s site, where you can find the video or just read the ABC’s own transcript below:

Australian Broadcasting Corporation

Broadcast: 20/10/2011

Reporter: Leigh Sales

Greek economist Yanis Varoufakis discusses the renewed protests in Greece against austerity cuts.


LEIGH SALES, PRESENTER: In Greece authorities are bracing for a second day of mass protests against moves to impose harsh government spending cuts on the population.

Greece is on the verge of defaulting on its debt and there are fears that will send all of Europe into a full-blown recession.

The IMF and the European Union have given money to help bail Greece out of its woes, but the condition is that the Greek Government pass austerity measures to get its budget under control.

The Greek population isn’t impressed because they’re the ones at the receiving end of cuts to pay cheques and pensions.

To discuss where this is all going I was joined a short time ago by Yanis Varoufakis, an economist at the University of Athens.

Yanis Varoufakis, what’s different with this round of protests in Greece – it’s not just the scale of them, but the range of people who are involved: what does that signify?

YANIS VAROUFAKIS, ECONOMIST, UNIVERSITY OF ATHENS: It signifies a loss of legitimacy of the Government, but more generally the political system. It means that the depression, which has been the characteristic of everyday life of the average Greek is once again flaring up, transforming itself into anger, and it means that the days of this continuing vicious cycle of more austerity which leads to more recession which then feeds into more austerity are numbered.

LEIGH SALES: What in your view is causing the Greek Government to lose legitimacy? Because aren’t these conditions that it has to impose an austerity package being imposed on it from outside?

YANIS VAROUFAKIS: They’re being imposed from outside, but the big question concerns whether it is wise for the Greek Government to be seeking the next instalment as if it is the Holy Grail of the Greek nation. To give you a parable that you – that Australian – the Australian audience may understand better, it’s a little bit like the loss of legitimacy of the generals in Gallipoli – sacrifices are being expected from the troops, from the people on the ground, but the people on the ground cannot see that these sacrifices are an investment into victory, into a turnaround of this terrible crisis.

LEIGH SALES: So what then do you think is the alternative to an austerity package, particularly given that the Greek Government doesn’t exactly have a lot of its own money to play with?

YANIS VAROUFAKIS: When you’re in a vicious cycle, I think the only alternative to continuing within that vicious cycle is a circuit-breaker, something that will break that vicious cycle, and at the moment I think the only rational course of action for the Greek Government would be to say no to the measures that are being imposed upon it by the troika, by the European Union and the IMF. Let me put it very succinctly: the whole of Europe is caught in co-centric vicious cycles. Something has to give; if it’s not Greece, it will be a French bank; if it’s not a French bank, it will be the Italian debt. I think the sooner that this vicious cycle or sequence of vicious cycles is broken, the better for Europe as a whole.

LEIGH SALES: And when something gives, what do you think will happen?

YANIS VAROUFAKIS: Well, go back to September 2008. Something gave, it was called Lehman Brothers and there was a cascade of insolvencies and bankruptcies. And then suddenly the powers that be pulled out of a hat a very large rabbit and political action was taken to resolve what was a financial catastrophe. This is what’s going to happen here. Something will give. I don’t know whether it’s going to be a French bank, as I said, or some state within the eurozone, but once that happens, I think it will force the hand of our European leaders and perhaps, hopefully, convince them that the time to dither has ended and the time for action has begun.

LEIGH SALES: So what exactly then are the protestors in Greece asking for at this stage?

YANIS VAROUFAKIS: They’re asking for the end of the shadow play, of the fraud of pretending that if these new austerity measures are pushed through Parliament then Greece will be saved because we’re going to get a great big loan that is going to tie us over. This has been played again and again and again, this shadow play, since May 2010. It is clear that the more that this shadow play continues, the deeper the crisis in which people find themselves in and the deeper the crisis of the eurozone as a whole. So what they are saying is the best strategy for Sisyphus is to stop rolling and pushing the rock up the hill.

LEIGH SALES: How much strain do you think that this financial crisis is placing on the European Union? Could it undo 60 years of European integration? 

YANIS VAROUFAKIS: Absolutely. What is happening at the moment is an inability of the political class and the political elite of Europe to handle and to manage a process of disintegration that began with the great – the Global Financial Crisis a few years ago. The euro system was never designed to sustain such a major earthquake and now it is collapsing. The political class is not up to the task of shoring up, of injecting cement into the foundations of the euro system. And the tragedy is that the euro, however badly-designed and ill-conceived it might have been, if it collapses in the effects few weeks, months, whenever, is going to drag down with it the whole concept of a European Union. Europe is going to turn into a postmodern 1930s of everybody hating everybody else, or the war of all against all, hopefully not a war involving tanks and machine guns, but at least a process through which the peoples of Europe, instead of finding a common home and a common interest, they indulge in a kind of Hobbesian tit-for-tat between themselves.

LEIGH SALES: Alright, Yanis Varoufakis, we’ll have to leave it there. Thank you very much for joining us. 



  • Please, Prof. Varoufakis, respond to this call with your ideas, not for abandoning the EU, but for restoring it as a DECENT EUROPE!

    Eurozone Break-up Award

    Lord Wolfson is offering a GBP 250,000 prize for the best plan to manage one or more countries abandoning the euro currency. The prize is described as the second biggest cash prize to be awarded to an academic economist after the Nobel Prize. Lord Wolfson has said, “I think there is a very real possibility that the euro may collapse, and if that happens then it needs to be managed, and if it’s not managed then it’s going to be catastrophic for European finances, and not just for European finances. The knock-on effects for the world banking system would also be very very serious.”

    • @ Elisabet Sahtouris, PhD

      Mum ,I scanned your site and i must say your smile says it all.
      Having said that it’s worth pasting certain words of yours.

      “All healthy Living Systems self-organize and maintain themselves by the same principles

      Among these principles are:
      Empowered participation of all parts
      Negotiated Self-Interest among all levels

      Businesses are Living Systems
      and will be healthy when they ensure:

      Empowered participation of all employees and negotiated self-interest among all levels”


      If you want a butterfly world, don’t step on the caterpillar, but join forces with other imaginal cells to build a better future for all!

      Thank you.

    • that is indeed what Europe needs, some short circuit. being rather smug about the state the US was back in 2008 it has been paid back in full. writing on a book No Logos (wtih Naomi Klein’s first book and the Greek meaning of Logos for the science called Economy in mind) I stumbled on a lot of circumstantial evidence the US needs the Euro on its knees….

      payback time, for china needs to gobble up those US Treasury Bonds, the OPEC has to keep on buying (and selling) oil in the US Dollar.

      so now the

    • @ Elisabet Sahtouris, PhD


      I just saw the three parts of your video “After Darwin”.

      The End of my life ->

      Thank you ,
      thank you ,
      thank you.

      The Beginning of my life->

      From now on i will be thinking every possible creative future system of this world as “The Butterfly Multiples”.


  • But if Greece says no to the austerity measures, then surely it would go into default and then what for the country, the monetary union and the EU? What’s the “day after” senario in this case?

  • What disappoints me in this conversation is the lack of specificity and attribution. It is as if, in a fatalistic kind-o-way, we have accepted our present condition and we only resort in general criticisms about the efficacy of the system.

    Yet the specifics are appalling and culpability is enormous.

    Consider this recent complete absence of logic and self-contradiction.

    The agreement in principle of last July, as an example, called for a voluntary 21% haircut, or private sector involvement(PSI). We all know that such haircuts are the brain child of Germany whose deep inferiority complex on the issue of contributive solution has erected the largest monument of stupidity the world has ever seen.

    Let us be reminded that the very purpose of the 21% voluntary haircut was to avoid a credit event and somehow appease Germany in her Quixotic quest of lessening its own burden at the expense of a systemic failure.

    So here we are a few months later. Germany now insists that Greece’s failure to reach its artificially prescribed targets – mind you there is nothing scientific in the deficit reduction targets Greece was asked to adhere to; they are more like wishful future projections than anything else.

    The latest German mythology is that because Greece was off by 0.05% (right, half of 1%), Greece is now in much worse condition that previously thought of and as a result a much higher “haircut” ( a favorite German word meaning “I don’t want to pay so why don’t you” ) is now needed.

    This is incredible hog wash from the Germans. Check out the logic here. So, because Greece “can’t make it”, according to the gospel by St. Merkel, why don’t we proceed with a mandatory PSI this time, large enough to trigger a credit event and severe enough to keep Greece shot out from the global markets for at least the next 20 years. Who in the world would want to lend Greece again if her present bondholders write off a la Germania 50% or more of their holdings?

    We are talking about pure nonsense folks and the disturbing part is that has been the German plan all along. I can walk you through articles in Der Spiegel (over the last 18 months) showing without a shred of a doubt the very sinister German plan looking for tangential pretexts to unleash European calamity. After all a strong paper trail has been the hallmark of German politics, at least for the last century or so.

    So here we are folks, Germany arm wrestling with France over details that escape the financial competence of both, using Greece as the poor excuse of a patient who has died at the hospital (how dare you Greece?)after she has been given massive amounts of the wrong medicine.

    And we simply watch and comment………

  • From Stratfor


    Greece: Eurozone Ministers Approve Second Aid Payment
    October 21, 2011

    The eurozone finance ministers approved the second stage aid payment of 8 billion euros ($11 billion) Oct. 21 under Greece’s European Union and International Monetary Fund (IMF) bailout program pending IMF approval, the ministers said, Reuters reported. The disbursement should take place in the first half of November if approved.


    And the parade continues

    • Dimitri:

      FYI – Stratfor is bunch of pot smoking Austonites who produce informercials on demand for Oil & Gas clients. They are involved in a particular form of prostitution with Turkey. You are wasting you time with Stratfor.

    • @ Dean

      Thanks for the input.

      It is not always easy to find neutral sources.
      Do you have any? Preferably geopolitical analysts.

  • Evharisto, Dimitri,

    So happy you appreciate my take on the world…as I appreciate Yanis’ take on the euro crisis! Solutions are simple if difficult to implement!!! But humanity is growing up fast, so I have high hopes!

    IN truth, I voted aganst Greece joining the EU in the 1980s because I knew it would end the self-sufficient farming of Greece (as it did) and because the monies poured into Greece as ‘poor relation’ would largely be siphoned off into private Swiss bank accounts (which was also reasonably correct). I have since come to like the idea of a European Federation such as his DECENT EUROPE proposal, with more autonomy for each nation and more genuine coperation among us.

  • Yanis,
    could you elaborate a little more, on, why you think that the collapse of the EURO would take with it the whole concept of the European union?

    • Once Germany, Austria, Holland, Poland, Estonia, Finland and Slovakia form their own currency union, the first victim will be Belgium whose two communities will split up, with the Flemmish joining the Germanic North and the Walloons rushing under the Parisian umbrella. France, whose overtures to Berlin to be allowed into that new nortern union will have been rejected, will try to create its own vital space (along with Italy, Spain and Portugal) only to find that its new Latin Union has a currency that loses half its value in relation to that of Germany. A currency war will more likely than not lead to demands for quotas and tarrifs. A Tory led Britain will, very soon, grab the opportunity to split for the EU altogther. Etc. etc. In this climate, the notion of a United Europe will seem not merely laughable but, importantly, irrelevant.