Want to follow the U of Texas Conference on the Euro Crisis and the Modest Proposal?

While awaiting the news from Athens on the shape of the new government, why not tune in to the ‘Crisis in the Eurozone‘ conference. It promises to be interesting and to do what Europe is not particularly good at: To delve into the deeper causes of the Crisis and discuss real, not fictitious, solutions. Click here for the live streaming. (And for more on my US lecture tour, click here.)



  • Are you suggesting to face the truth to the eyes !!!??!!!

    No Sir , prefer to watch the crucial political developments taking place in Greece right now !

  • Damn, and I have to work today!! I wonder if portions will be available for later viewing.

  • In Greece , there is a pandemonium so that Papandrew resigns !
    Then , everybody would sign with their feet and teeth and hands the new loan agreement!
    The whole parliament would sign it (constitutional condition ) and then every MP irrespectively of political side would congratulate each other . It would be celebrated as the Greece was rescued once more !

    Could you have imagined this scenario one week ago ?


    I guess i am a conspiracy theory enthusiast !

  • Great talk and discussion, we really need to hear that many times and study it. Excellent questions too. Hope you will upload this soon!

  • 1) You stress the stand-alone nature of bonds which the ECB would issue (i. e. no guarantees from national governments). Please clarify for me: the national governments – through their NCBs – are liable for the ECB as far as I know. In other words, the ECB can’t go bankrupt because the national governments – via their NCBs – would have to replenish the ECB’s capital. So it is not a direct guarantee which would go into the national accounts but an indirect one which is just as good. Am I wrong?
    2) As far as I can tell, we already have Eurobonds. When the ECB buys, say, Greek bonds and national governments are in the final analysis on the hook for the ECB, those bonds are now Eurobonds. Am I wrong?
    3) From my dealings with the EIB over the years, I am afraid you overstate their potential role for a country like Greece (even if there were no co-financing required). The mindset of the EIB is “large projects” and not “middle-market projects”. I am not saying that the EIB could not play a role in investments in Greece but they would be the larger investments. Given the structure of the Greek economy, a few large infrastructure projects may well fit in but that is unlikely to do all that much for domestic economic growth because large infrastructure projects are typically heavily foreign-sourced.
    4) Thus, I believe what Greece needs is tons of middle-market investments (5 to at the most 500 employees) where you are only talking about single-digit EUR million numbers for individual investments (more likely in the lower single-digit numbers).
    5) I am a firm believer that the true test if something works or not is if private capital can be motivated to flow. You sort of leave the topic of private capital on the side (perhaps thinking, correctly, that today only a fool would invest his private capital in Greece).
    6) There is plenty of private capital available which would flow to Greece if the investors had the right security, competitive business framework and return potential. I am thinking of the hundreds of billion EUR which Greeks have in foreign accounts.
    7) The security aspect can be taken care of by having the EU guarantee an Investment Law which Greece offers to those foreign investors.
    8) The competitive business framework and return potential can be taken care of by establishing areas in Greece (I call them Free Trade Zones) where investors are offered everything they desire. I guess at the start it would be enough to have one in the Athens area and another one in the Thessaloniki area because this is where the population and the unemployed are. Someone has criticized that these FTZs would be ”sweat-shops”. I disagree. Many of the consumption products which Greece presently imports from, say, Central Europe are produced there and there are no “sweat-shops” in, say, Germany.
    9) There are zillions of ideas floating around these days what “new-idea-projects” Greece could undertake (solar energy, etc.). In the longer-term yes; in the immediate short-term no, because those are untested areas and untested areas take time (which Greece presently does not have).
    10) What Greece could do immediately is to start new middle-market businesses for the substitution of imported products which could just as well be produced in Greece if the security, economic framework and return potential were right. A little “infant-industry-protection” (import taxes) wouldn’t hurt. I know this would violate EU-treaties but this, in my mind, cannot be a hindrance in times of emergency.
    11) If Greece substitutes imports, the present exporters to Greece will suffer. That, however, could motivate them to shift some of their production to Greece so that you would not only have the offshore capital of Greeks as a source of foreign investment but also these foreign companies.
    12) To sum up my point: Greece will have to reduce imports (i. e. standard of living) one way or another if foreign money no longer flows as in the past. If this reduction is not compensated by new domestic production, the Greek consumer will suffer badly. If it is substituted, the Greek consumer could perhaps hold on to his consumption habits but, at the same time, new domestic growth would be stimulated with new jobs, new incomes taxes and new corporate taxes.

  • By now, the referendum call has proven a disaster, though origianlly I thought it to be a way to force “Modest Proposal” type thinking on EU

  • Just some private thoughts, as posted earlier on an Irish economy blog…

    SYSTEM OVERLOAD – Feeling dizzy lately?

    Phew, what a week, what a month, what a year….! The last week is a good example for chaos at work, or what is perceived as chaotic I should really say.

    In reality, it is anything but chaotic, it is a reflection of massive social-political changes that are presented to the public on the grand stage as chaotic. Take this ridiculous stage managed G20 theater where besides the Merkozy’s of this world, the finance ministers and central bank governors, Bill Gates is present as well, of course!

    If you look at the history of achievements of this club, pretending to be an epistemic community, you will find nothing, exactly nothing but very high costs for security and wine and dine, the 2010 Toronto Bill came in at around 1,2 billion for the few days of their meeting there.

    What should be a G-196 instead is a representation of the strongest, it is not a representation of the countries in this globalized world, and as such is equally an expression of post colonial elite mindsets at work. When talking about the G20 you have to talk about the IMF and World Bank at the same time.

    x x x x

    When G-Pap announced his Referendum, I knew in the very same moment that this is nothing but political trickery, and that it would never take place. It simply can’t be allowed by the powers at work behind the political stage, and they would do whatever it takes to prohibit this referendum, and I mean everything…..!


    November 1st, 2011

    Democratic Lip-Services filled the news channels of most European countries. George Papandreou announced a referendum to be called to decide on the next debt deal that is forced upon Greece, and everyone in Europe was keen to express the democratic right of the people to vote on these decisions, decisions that determine their future and that concern them all, but in reality, somewhere in a room in Greece, the curtains are closed, no light can be seen from the outside, and a Barrett M95 had already a cold and polished .50 in it’s chamber, just in case.

    The next morning, and all the news papers were filled with one picture, and one picture only. The corps of G-Pap, headlines speculating who shot him, articles flooding the internet with theories, and on the political stage an international outcry would fill the news channels, followed by a ceremony of his burial and speeches to honor his legacy as a great politician, good friend, an outstanding Statesman, pillar of the Greek society, most important contributor to the European idea, and it should remain a talking point for years to come, just like JFK, but the politicos and media move on quickly, and the truth would never see the light of the day.

    Somewhere on the caymans, a bank account filled up rapidly with substantial amounts. In Geneva in a private vault Gold bars are stapled for it’s new owner, when a chap that looks rather like a first grade school teacher than a professional assassin, checks in at Athens airport. The thick glasses and his high pitched voice irritate the officer who is checking this Finnish passport, a first class replica that only very few people can get their hands on, when someone behind Dr. Aarne Rehn starts muttering about the efficiency of Greek services, armed with his two little obnoxious children left and right acting the Mickey he stares at the officer who is in the last 15 minutes of his long shift and then hands Dr. Aarne Rehn his passport nodding him through….

    Ok, you are right, I admit it, I always wanted to write a political-thriller, and I do not know where this hotel room was, except that it is in a radius of no more than 2,0 kilometers to the target, who would not see it coming, a painless death, lights out, that’s it, – grins -, but seriously now, would I be astonished if an assassination would have happened as a last resort to get rid of this referendum?

    Nope, not a bit, it would not even trigger an eyebrow anymore!

    So much is at stake for the players in this social engineering event that they would not hesitate to clear the path by all means possible, I have no doubts about this at all. A government politician from Finland was already publicly demanding tanks on the streets in Athens three weeks ago.

    x x x x

    It is bad advise to focus on Europe exclusively these days when observing the developments that change the world.

    UNESCO voted for Palestine membership, and it triggered a quick succession of events, Israel’s increase of settlement policies, followed by the usual international diplomatic disapproval, a test launch of a nuclear capable rocket able to reach Iran, a headline about pre emptive strike possibilities, and a British announcement to stand ready should the US plan to intervene in Iran.

    Remarkable isn’t it?

    I think the Gaza peace flotilla is about to come closer today. Gaza has been under siege for more than 20 years now, depriving more than 1.5 million people of basic human rights, and it is essentially an American financed occupation, and their motivation and double talk is written all over the history of the Middle East.

    I fully understand people to feel totally overwhelmed when faced with the flood of Informations that comes down the pipe these days. It is a lot to digest, and it is happening so very fast, but it always happens fast when big changes are about to occur.

    We witness a change of global power dynamics, new emerging forces claim their stakes, old forces resist changes, and in between billions of people, confused, angry, scared.

    People in Kenya saw the prices for their basic food double in a months, in Kibera one of the better know Kenyan slums, people can not afford the same amount of beens and bread like they could a week ago, traders behind solid iron bars, the Illusion of protection, hand over basic food for money from the spare shelves with very little goods.

    Food prices, and commodities are just one aspect of the rigged markets, rigged by powerful speculators and the leaches on their arse who make a profit with death and starvation, it is nothing new, it is going on since decades. Joseph Ackermann took the stage and spoke of ethical markets, of deals not worth taking when they are unethical, right. Hitler warning the people on the dangers of fascism. Surreal.

    The system’s weakest points are uncovered, economical and political weak points, and people begin to understand a little better what goes wrong, but these are informed people, people who stay on the ball and developed critical analytic skills to be able to judge the events unfolding.

    Make no mistake, most people are ill informed, brainwashed with daily propaganda, steered to react, steered to blame and steered to maintain status quo, to ridicule and marginalize those who question it, they are a majority.

    Slowly people are waking up, the OWS like movements around the world are an expression of this awakening, they are not the majority of mainstream thinking, but they are right to point to the fact that they represent the 99% for other reasons.

    Last week yet another young man in his 30’s took his own life. I am always left speechless when I hear it, life is most precious, it is all that really counts. He was one of the 99% as well.

    What society do we wish to leave for our children to take control over when they are grown up?

    Perhaps this is the basic question we need to take more serious. Perhaps we find that only by taking to the streets we might have a chance to bring the changes that we wish to bring forward. Politicians will have to react to the pressure from the streets, whether it is by tears gas, or by political change, reactions will follow. It is a numbers game really, the threshold passed which ignorance does no longer work, and reactions must follow.

    The ritual of the G20 stage managed final summit photo. Smiling people facing death, starvation, poverty and injustice, the extended arms of Bankers interests.

    They do not represent me, not a sausage! They represent what is wrong with our system, like the IMF and World Bank represent what is wrong. Conscience to me Malcolm, is not exclusively a matter of intellect, think Sophocles’s Antigone.

    Disobedience is a matter of conscience, and equally a conflict of course. I believe that the post WWII consumerism that dominated our societal structures has hindered the healthy development of critical conscience in generations, this is only one explanation for the wide spread political ignorance and the will to subscribe to propaganda exclusively.

    In my world, conscience is the glue that hold together civilization, the more we loose it, the more we endanger civilization. In the age of enlightenment, Kant expressed critical conscience in the categorical imperative.

    I believe we are at the crossroad where one way is into another age of enlightenment or the other points back to the dark ages. As the human beings that we are, the choice is ours.


    • Great piece Mr. Baumann! I think people all over the world are beginning to realize what is going on. The problem is there is a “phase shift” and it will take time before they can unite to fight…

  • The German haircut plan has effectively made Greece bankrupt(you can’t suggest a haircut without saying bankruptcy in the same breath). Problem is that the so called Greek haircut is only 1/40th of total eurozone problem that Germany needs to cure. Therefore Germany has both failed to cure the eurozone problem (grossly inadequate measures) and has thrown Greece into bankruptcy. This is the most malicious act I have ever witnessed during my lifetime.

    • One question , what’s Fitch and S&P says if the Oct 27th agreement is implemented ? It is DEFAULT isn’t it ?
      As soon as PSI exchange is carried out , Greece is going to be declared by rating agencies as Default .

      It’s not only Germany Dean , US on the other hand is using Greece as a blunt instrument to extort Germans .

      What really makes me angry is the plan of german elite for Greece . It is in every aspect COLONIAL . HELIOS is a disgrace ! What we need to do , in my opinion , is to inform other european people about the “Bail out” and the “investment plan” prepared for Greece .

      I show them documents and they feel ashamed by what their government is doing . That’s the only way , i am afraid . Fight the propaganda in international media .

      The same as Varoufakis is doing for several months now !
      And others !

      The next one is to contrast the previous one .

  • Dear Rod,
    I have (unfortunately) just fallen off my chair laughing while watching the link you provided in your comment. Aliens??????? I finally understand what is meant when young people say: LMAOFOMC

    I will certainly share this with others and I hope everyone else might take a similar action. So much of the world can not or will not read between the lines of this crisis for a wide variety of reasons (some of them excellent, I must admit) and must therefore attempt to get the “truth” from the ‘world media’. Yet, the capacity of this same, corporate owned/backed world media to twist and warp the truth this week has made Marshall McCluhan a veritable genius (if he wasn’t one already) who said: “Only puny secrets need protection. Big discoveries are protected by public incredulity.” http://marshallmcluhan.com/mcluhanisms/

  • One more thing:
    When all else fails there is art. Going out on a giant limb here (as the topic of this blog is economics/politics last I checked) I post one of my poems, below. Written a few years ago and inspired by another occasion, it seems perfect (unfortunately) for this week’s occasion as well.

    The Liars

    What are the liars thinking
    When they are moving their lips?
    Do their words get jammed,
    Stuck on the salted roofs
    Of their parked jaws
    Or does it get easier
    To lob them ever?

    Naturally for a winning match they need
    The mercury in their tennis balls,
    The lightning phrases on their silver tongues,
    Their referees to never signal the call
    For a cure time:
    The pause, the breath, the groan, the sigh,
    The nap, even, before their turn
    To serve the ball again.

    Let it out
    The lies and all the rest
    Then try to teach your children
    To distinguish
    Between the white lines you made
    Before the
    AND and BUT,
    And all the rest
    You said
    You never said.

    c. 2011 Triada Samaras

  • Dear Dean
    The haircut plan to me seems the only option. The debt mountain is just far too big. For a while now, EU partners tried the way of giving emergency loans. Doesn’t work as, with the economy shrinking while trying (unsuccessfully so far) to balance the budget – which is one precondition to stop the debt mountain from growing – the debt/GDP ratio keeps increasing.
    So the debt mountain has been growing and continues to do so, despite Greek effort to balance the budget and EU emergency loans.
    Reason is that a substantial part of the Greek pre-crisis GDP was based on debt-fuelled growth. With balancing the budget, that part of GDP (20ish percent?) just disappears. Together with the debt mountain that already existed before the crisis and the fact that even now, the budget is not balanced, the debt situation is truly unsustainable.
    So “Plan A” did not work. Therefore, we need a Plan B. The only way out I can see is to reduce debt. As Greece isn’t able to grow out of it (economy was already debt-supercharged and that “turbo” is gone now) and can’t pay it off by increasing government revenue and/or quickly enough cutting the budget, Greece is truly insolvent.
    A haircut is the only option out of this mess.
    Apart from Germany (and others – volunteers first!) just handing over the money. But we don’t have money just pouring out of the ground (like Saudi Arabia). So just giving the money away to a country that’s been cheating all along and seems deeply dysfunctional would just throw good money after bad wouldn’t be right.
    A haircut is a bad thing. But the best solution for everybody in this situation.

    • @Martin Can you give me some numbers with the projection of greek financial situation with haircut of 27th October applied ? Does this agreement turn the greek debt sustainable ?

      Also , i would really like your opinion about the insolvency issue of German and French banks . Are you aware of this matter ? Has your prime minister informed you about your financial status ?

    • Yanis has never proposed “handouts”, or said that “handouts” are the way to solve the Euro mess. What he proposes is described here: http://yanisvaroufakis.eu/euro-crisis/

      On the other hand, throughout his blog he has been explaining why the haircut is not going to solve anything. And his prediction proved to be correct, since right after the Oct 27 Agreement Italy’s fall accelerated instead of stopping (even before the Greek referendum fiasco).

      [Forgive me Yani for replying on your behalf]

    • Dear Ilias
      No, I unfortunately don’t have a projection of the Greek situation with the haircut applied. I’ve read somewhere that the debt / GDP ratio may go down to 120% (currently at about 160%).
      Anyway, without the agreement, the debt mountain (now at around 160% of GDP) is bound to keep growing.
      Unless something dramatic happens to lower the debt (by e.g. Greece applying a one-time “emergency wealth tax” to its wealthier citizens, using the Gold reserves to pay down debt or whatever). But this does not seem to happen. So without a haircut, Greece would just need more and more “emergency loans” and the debt mountain would keep increasing.
      Taking 50% of the debt off (applied to some of the debt but not all of it) as foreseen in the October agreement would obviously lower the debt.
      So – together with other drastic measures that Greece has to take (see above for some suggestions) – there is a higher chance that the debt could be stopped from growing. And sometime, from a lower base, the economy would start growing again and the debt / GDP ratio would start going down (slowly).

      But given the experience of the endless negotiations and the Greek lack of leadership as well as some common understanding within the population that drastic measures have to be taken and are inevitable to get out of this situation (as well as some social balance by having the wealthier ones carry a bigger burden than the less fortunate ones), I don’t think the October agreement would finally lead to the desired result.

      So that’s why I suggest: Let’s accept that this is not working. Stop pumping “loans” into Greece that will never be paid back. Just let Greece default, have a massive haircut (more than 50% on all debt), switch to the Drachma and then try again.

      This does not work so we should stop trying. It is painful and degrading not only for Greece but also for the rest of Europe.

      Europe’s limited resources should be applied where hopefully, they can still make a difference: Maybe Italy can still be saved. But Greece is beyond any cure within the Eurozone, I believe.

      This would cost some money in order to support some otherwise failing e.g. French and German banks. But so be it. That would be a one-time expense while keeping to pay for Greece would go on for years and years to come. And in the end, it won’t even work and the Greek hate us anyway. So why not stop what does not work?

  • Ilia:

    I agree. We need to fight back. This is a communications war; we didn’t choose this fight but we are deeply in it and we are losing horribly at the moment.


    See my comment on one blog above(more recent).The PSI needs to be removed from the Greek package. It’s the PSI that causes the default. Germany can do better than this and let’s stop pretending that there is only one way to resolve the crisis (and that is Germany’s way and that’s it).