Another emblematic EU non-event: A first reaction to the latest EU 'agreement'

With the din of the debate on what the new EU anti-Crisis ‘agreement’ means in our ears, and after a long night of anxious observation of our leaders’ deliberations, it is terribly easy to lose sight of the only truth about this new twist in the euro crisis saga: There has been no agreement to speak of.

Europe had committed to providing a grand solution to three related problems: Its collapsing banking sector, the problem with Italian and Spanish public debt (and their potentially catastrophic effects on France’s triple-A rating), and the derelict Greece economy. Not one of these was even remotely tackled last night. The banking sector required aggressive, compulsory recapitalisation at a central European level. It will not happen. (Not only is the sum set aside to feeble but, primarily, the bankers will be given multitude chances to wriggle out of losing control over their bankrupt banks through various means that will render recapitalisation a dead letter.) The EFSF-on-anabolic-steroids (which is what its private capital leveraged version will turn it into) that has been announced will neither lessen the burden on Italy (nor remove the dark clouds over France). Lastly, the Greek haircut is a mere empty shell of a number (50% is the rule of thumb agreed on in the early hours of the morning, just in order to have a number) since it is predicated upon a series of ludicrous assumptions and deals that deals with the bankers that politicians are nowhere near completing.

And thus the Crisis will continue along its current path, overcoming the eurozone’s last defences on its way to the latter’s disintegration. In short,  those of us who stayed up watching and listening, with our antennae trained toward Belgium, simply wasted a good night’s sleep.


  • Morning,

    It will be interesting to see how the ISDA statement will be phrased, explaining why the default does not constitute a credit event.

    German parliament was informed on the details of this plan only hours before voting. Since 2008 the ruling ‘There is no other way’ fraction in Europe pulled these stunts. – These negotiations with Bankers should be performed in public! –

    While the US increases the police pressure on the OWS movement, in Europe they are passing laws that Goebbels would be proud of.

    Lisbon 2.0 has unleashed fatalistic forces within the EU technocrats, and they do not hesitate to sacrifice the wellbeing of millions of people to achieve their totalitarian wet dreams. What the above means is a transfer of powers to politicos that can not be described other than most dangerous. Dissent will become easily a punishable event, purely at the will of politicos in power. Lisbon was about that, more power for politicos, elected and unelected.

    On the events in the past few days, climaxing in a coitus interruptus last night, it is only three weeks ago that Merkel insisted that with her as chancellor, there will be no such thing as leveraging risk. It is stereotype for this spineless woman without any political convictions whatsoever, her motivations are purely to be understood from the thought of maintaining her own power, we observed more than one time that she put party and her own political interests before the wellbeing of people Greece, and did not hesitate to raise her patronizing voice, slandering an entire nation.

    Her self appraisal in the parliament yesterday was one thing, but to demand specific constitutional changes from every EU member, well, it emphasizes the mindsets at work.

    Let aside, as Yanis already said, that the results are rather unimpressive as usual, and wrapped again in many layers of self appraisal, it is in line with the Incrementalists activities so far, kicking the can down the road, giving Banksters all the time in the world to continue what they do best, transferring money from the real to the parasitic economy.

    I believe the hat ideologically motivated fatalism that I observe amongst the EU technocrats since years is more ruthless than I ever wanted to be true. They rather destroy the entire system and have it go up in flames instead of admitting they are wrong. They accept millions of people in Greece to be sacrificed for their megalomania, spearheaded by a woman who changes her views quicker than I can change my socks, and a substitute Napoleon at her hand.

    Ask yourself a simple question. Let’s say over the period of 4 weeks, in every EU member state people are educated on the reasons and the effects of this global heist, programs are broadcasted every evening at a certain time, people are given the chance to ask questions, and really participate.

    Then we would have a European wide referendum on banking matters, asking whether we should:

    1. Introduce a bank holiday for 10 consecutive days to:

    2. Break up all banks with more than 500 billion in their asset portfolio.

    3. Immediately close the data centers that perform high frequency trading, dark pool trading etc. effectively shut down the entire parasitic economy over night

    4. Open new banks that operate on the grounds of social banking and social finance (Roland Benedikter et al.)

    5. Delete all debts unconditionally across the board

  • One can only agree with this analysis. There might be one bright side, though.

    One report said that the national banking supervisory authorities would be mandating – at the behest of ECB and Central Banks – their banks to mark all their sovereign bonds (all, they said; not just the Greek ones!) to market prices beginning with September 30, 2011. Now that would be the most forceful instrument to bring banks to the negotiation table! Once banks do that, governments won’t have to run after them and beg them to accept a recapitalization any longer. The banks themselves would have to pilgrim to their governments with hat in hand and request very politely that the governments bail them out. And then governments could even stipulate demands like no dividend payments for a while.

    Of course, it depends of the “market price” to which banks are forced to mark their sovereign bonds. If it is 95% instead of 100%, one can forget this excercise. If it is closer to 50%, we could look forward to seeing “clean” bank balance sheets again. The ECB can, of course, steer that “market price” to where it wants to have it through the buying (and perhaps even through the selling) of sovereign bonds.

    Other than that, I would caution Greeks not to except that the pain will now be over because half of the debt has allegedly been forgiven (I would bet any money that the final number will be much, much less than 50% of the nominal!). The savings in annual interest expense is not much more than a few months’ of capital flight at the current rate.

  • Θα συμφωνήσω απόλυτα με την τελευταία παράγραφο και ειδικά στο “άδικο” χάσιμο του όμορφου ύπνου μας … Μήπως τελευταία έχει γίνει ανώφελη συνήθεια ;
    Αν και μιλάμε συνέχεια με αριθμούς και οικονομικούς όρους , που σίγουρα έχουν να πουν “αλήθειες?” , θα ήταν σκόπιμο ίσως μια πιο φιλοσοφική ανάδειξη του όλου θέματος στα πλαίσια μιας γενικευμένης ολίσθησης της παγκόσμιας τάξης που επικρατεί.
    Συγνώμη για τα φτωχά ελληνικά μου … μόνο αυτά, προς το παρόν, μας άφησαν αλόβητα .
    Ευχαριστώ για τη φιλοξενία

  • Germany is playing a very risky game. Ive never expected me to say this but a Quantitative Easing like programm might be the only solution to end this crisis.

    From Krugman:

    Yet that achievement is under threat because the European elite, in its arrogance, locked the Continent into a monetary system that recreated the rigidities of the gold standard, and — like the gold standard in the 1930s — has turned into a deadly trap.

    So true…

  • We hear that a major part of the “plan” is to sell of “assets”.

    All “State” assets are surely the property of the people and paid for with the people’s tax and the “government” is surely only there as “guardian” of those assets.

    Am I barking mad; or is this just another example of a misappropriation of power?

  • Sleep well “Europe”, sleep tight. The dreams that we have all shared – but few have acted upon – have let their way to the common nightmares of the near future… The choice was yours, the result is ours!

    PS according to one etymological approach, Europe means the “the broad view”, one encompassing the grand vision… (no comments!)

  • δυστυχώς έχετε δίκιο και το τοξικό πακέτο 1 τρις ευρώ θα σκάσει την Άνοιξη, με μόνη διέξοδο τοτε το ευρωομολογο με ραγδαία μεγαλύτερο κόστος για τους γερμανούς φορολογούμενους, αλλά με σημαντικα πολίτικα ανταλλάγματα για τη γερμανικη κυβέρνηση. Δυστυχώς δεν καταφέρατε έγκαιρα να έχετε πρόσβαση σε κέντρα αποφάσεων. .

  • Banks’ recapitalization is on way. The EU-leaders just set the priority in terms of money-sources. Private, National, EFSF sources for the recapitalization.

    The EFSF’s capacity will get increased.

    So, the above should alleviate Market’s fear of spreading the crisis over Italy & France.

    Adequate EFSF capacity (accorded with Paul Krugman’s approach) & banking sector’s First Aid.

    The mere but crucial matter is Growth. Alas, growth under austerity and monetary non-expansion (liquidityyyyyy!) is a pipe dream.

  • Dear Yanis,

    Considering yesterday’s decision what would be the most probable future of Hellas and Europe a year from now?

    Further, if we consider the posibility that within the coming year there will be general elections in Germany and in France, are there any chances to effectively change current decisions should the opposing (socialist) parties win the elections?



  • I hope you are wrong…
    …but the reality of the last few months suggests that you may be right.
    At least the haircut of 50% (which I hope will be executed and not fall victim to bankers’ tricks and politicians’ incompetence / inability to enforce this agreement) offers a chance to get Greece’s debt mountain to a level that can – hopefully – be considered sustainable.
    Given that the budget deficit is brought down quickly and the Greek economy will be set on a path towards growth (though from a lower base, unfortunately).

  • Especially In the Case of Italy they said nothing of substance considering that Italy has to refianance 600 billion of its debt in the next 3 years.scary thought.

    • Spot on. Italy has only one chance: To take money from the rich in a one time event (solidarity tax, bond, etc.)

      I do not believe it has to political will, nor will it do what the EU, Merkel and the ZarkoDwarf will tell it.

  • hello mr varoufakis i have been reading your comments for the last two months, The whole world is very supportive of the EU agreement. write something possitive i am fed up with the doom and gloom with all my respect you are like the ex communists one dogma for ever be more optimistic WE got hair cut and why not the troika stay in athens for ever who wants the corrupt politicians in control: thanks

    • Nick, my job is to say ‘it’ as I see ‘it’. I leave the task of ‘talking things up’, when there is no evidence that they can so be, to our government spokepersons. I may be wrong in what I say. But believe me I take no pleasure at criticising what the powers that be are doing. I dream of the day when I can write an article in praise of their decisions.

  • I realise it’s still early hours after the deal, but perhaps when you’ve got the time, Yanni, you can expand on your three points above. Namely, I’m hoping to know more about

    1) How will the bankers wriggle out of the forced recaps
    2) Why won’t it lessen the burden on Italy or France
    3) What are the ludicrous assumptions and deals regarding Greece’s economy.

    As an aside, I read elsewhere that this 50% is not a halving of Greek debt. It’s a reduction of debt by 50% of GDP. So it will go to 120% of GDP from 170% of GDP. Still twice the allowed Maastricht level.

    I also read that Greece will not be able to access capital markets for another 10 years. So does this mean that Greece will be on an EU/IMF/ECB intravenous drip line for 10 years, or until she is able to produce, not just primary surpluses, but absolute surpluses (or at least balanced budgets) and requires no further borrowing?

  • Yani what do you see as the prospects of the Greek economy after the haircut? there is a lot of media talk most of which sees the glass as half empty: while the haircut will significantly reduce the crashing weight of the debt on Greek economy, it will have detrimental effects on Greek banks and Greek welfare funds (who are going to lose roughly 10 out of 20 billions invested in sovereign debt). What are the prospects for these two sectors and welfare funds in particular. And also what are the prospects, after last night’s decisions, on Greece’s economic recovery? many people are puzzled by the fact that when the crisis started the Greek deficit was at 115% of the country’s GDP and now, after the haircut, it will be at 20% of the country’s GDP. how is this possible? with all the frugality measures taken? I think it is possible because none had taken into account the psychological effects of the crisis: people in Greece (like elsewhere) have stopped buying, consuming, investing, spending. Money is not going around and this plays an important part in the maths of the crisis and in the increase of the deficit. so perhaps the most urgent question that I would like to have your opinion on is what now? what after the haircut? how can the Greek economy get moving again while also mitigating the eefeects of the haircut on welfare funds. Also is there an additional impact of the haircut on Greek people’s purses? I mean something more than what we have already experienced?

  • I have for long tortured everyone with this view of mine that I have now to stick by it: This is not a crisis that they intend to solve.This is a crisis which they use as the lever for restructuring the european economies, the state sector and for uprooting the entire legacy of the soliademocratic post-war era re: labour-democratic-social benefit rights.Who are they?I do not know about you but I think we should beware of the financial-political complex that clearly emerges despite its apparent conflicts among some of the weaker parts of the financial part (old style banking) …Even the odd forward looking billionaire has pointed at this emerging complex…So none of us shoudl waste any sleep, just try to gather what the plan is and advise how to resist by not allowing it to come to fruition.On the eve of the national holiday (re:WWII) goodnight and good luck to our dear country Yanis…

  • Hello. Has anyone seen today’s cover of the New York Times? IT features a most interesting (startling) portrait/portrayal of Chancellor Angela Merkel. A not to be missed piece of ‘visual art’ I would say. Here is a link however please note: the digital color is incorrect. The actual image has many tones of purple, not blue, which makes her expression all the more unsettling.

  • and one more thing: 10 year long projections just dont work! It is just too long and deep into the future. Seems more like a pray than a plan.

  • na eisai kala re file, agglika den xero alla epsaksa kai brika pou grafeis meta tin proti fora pou se akousa, kathe fora gia ena mikro arthro sou xreiazomai poli chrono gia na to metafraso, alla axizei ton kopo.
    se euxaristo poli

  • From what little sense I can make of all this, your assessment of this agreement seems pretty spot on. What baffles me is why the markets seem to be taking this latest ‘progress’ at face value and continuing to go up? I can appreciate a certain ‘madness of crowds’, but I also would imagine some sort of market value intelligence given that we have a rather anemic economic environment…..

  • BTW, Yani:

    Can this be true?

    “Greek banks are estimated to have the biggest capital holes on their balance sheets, wrote on Thursday. Figures from Morgan Stanley estimate that Greek banks would require over €80 billion in handouts, while Spain, Italy, France and Germany require up to €30 billion between them.”

    …I think the sentence needs to say “..while Spain, Italy, France and Germany require up to 30 Billion euros among them”…but still, such a big difference? Can this be true? That 70% of the bank recapitalization funds will go to Greece? Oh, my! Are the Greek politicos aware of this?

    • I do not think anyone has a clue about what each bank needs. First they need to replace their boards and only then will they be in a position to look under their ‘bonnet’ to see what is missing…

    • Dear Dean
      I believe it could be true: The reason is that the haircut is to be applied to Greek government bonds – held by a number of countries’ banks. But a big part is held by Greek banks.
      So I would not be surprised if the Greek banks need to get a big share of the recapitalization fund.

    • I don’t think people in northern Europe have understood what is going on in southern Europe !

      Politicians also have no clue ! They are brainwashed by their own propaganda . They have put their heads in the soil , denying reality .

      Media is not showing what is going on in Southern Europe . Let me give you an preview of today’s national celebration in Greece .

      They will go belly up , still discussing the re-capitalization of banks !

    • Students parading are walking out of their lines , joining the angry crowd , which is under police surveillance !

    • I want to restore the honor of cretan people today . There are not many videos about what happened in Heraclion today . We ask for forgiveness because , we were too impatient and rushed the politicians out before the start of the parade .

    • And when people is uprising all over Greece and has the wisdom to avert bloodshed , our “prime minister” is holding a conference of international socialist party in the super luxury VIP hotel in Agios Nikolaos .
      And no , events didn’t take him by surprise . People demonstrating on national celebration day was to be expected . He chose to be there .

      He has the same authority in Greece as ex king of Greece has . Only an honorary title .

    • People are starting gathering in Ag. Nikolaos demonstrating . He would probably leave the hotel in a helicopter . Truck owners and farmers have have surrounded the area and closed all the road accesses .

      MP and politicians traveling to meet the PM in the hotel were asked to return back because there was no access .

    • “I don’t think people in northern Europe have understood what is going on in southern Europe !”

      Most do not, but it is very simple: The EU uses the debt crisis to make the EU an antidemocratic socialistic superstate how it was enviosioned for decades by the French. In order to avoid anger in the North that our money is wasted on bad “investments” it imposes a program on the South that (a) they say will make these countries competitive and (b) make people in the North feel like they are in charge of the South now….

    • Greek banks, always profited by the special connections they had with the greek political system, they had established a monopoly with outrageous interest rates for credit cards, they charged for everything , the citizens and they gave away money to their political friends NO MERCY

  • @ Triantafyllidou
    Ms. Triantafyllidou a lot of questions, most of which have been anwered by several including Prof. Varoufakis (I met him as a prof. so I will stick to it than using the the more intimate blogging influenced Yanis)..
    What worries me is that although you have fallen several times into the trap of arguing following the old good narrative based on Greek mentality and the inability to become like the bold Europeans, now that the thing actually does not work even for the bold Europeans, you are using the psychological escape route. Psychology has a big past in economics but also does reality (I do not dinstinquish between the two). How do u expect people to spend? Form where exactly? The biggest difference with crisis in the past concerning GReece is the very low levels of personal savings (check the thing in comparison to the 1990s). Now that this thing does not exist, and within a recession, the whole thing of recovery is not happening. And it will not. You are asking form Prof. Varoufakis to adress questions that he has been adressing for months now (along with a big part of the anglo-saxon world) but apparently you were not there to hear. And something else stop speaking all the time about the public sector and take a look on the private sector which is shrinking. And you can blame as you want the GReek mentality, but after you do that, take a look on the private sector of the ex-empire, yea Britain.And come back to this blog. Sorry for being kind of aggresive but some of us have had enough with all the empty arguments of European modernising advocates.

  • Ilias Trou said: Media is not showing what is going on in Southern Europe .

    This small sentence carries a lot of weight and very a important truth. As an observer of international press, I read it every morning, I would fully agree with that statement.

    The country in Europe that is under a barrage of fire from banksters and politicos is literally ignored in public media. It is more important to point sticky fingers, broadcast opinions that blame a ‘Dionysus’ Life style to be the real problem in Greece, in short, slandering an entire Nation. It could not be further from the truth and could not be more disgusting how politicos are playing this card. A school teacher finding employment after the first drastic wave of austerity would have earned around 1200 euros, after the latest austerity, today he/she would get less than 600 euro in Greece. Thankfully Gregor Gysi from the left party did not hesitate to point out these facts of austerity in the german parliament, the political cosy cartel of CDU/CSU, FDP and SPD/Greens however, made sure that this insane EFSF proposal is voted for.

    The public is being lied at, increasingly blatant since 2008. The smoke screens are dense, and the lies are many.

    Peace is more than the absence of war alone, much more!

    We do no loger live in peaceful times. The contract was broken, unilaterally broken. A contract that kept the peace was wasted for the benefit of very few, sacrificing peace for their personal advantage. Politicos play a game of deception and lies.

    The markets this, the markets that. Fuck the markets, and shut down the entire system over night, it has been done before, it is called bank holiday.

    The markets are a bunch of extremely overpaid cocain addicts who sit at computer terminals and play ‘World of Warcraft’. They are kiddos paid by banksters, market makers., and of course then you have HFT, algorithmic trading.

    To fix this mess requires not austerity, but to fix the markets instead, to close insolvent banks and not socialize their losses, implementing neo feudal structures as a consequence, dismantling democracies that our fathers and their fathers have fought so hard for.

    We no longer live in peaceful times. This is a war waged on the people. An the generals and admirals are forcing a strategy of burned earth, the collateral damage is calculated and desired.

    The collateral damage are you and I.


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