The Modest Proposal in the European Parliament: Varoufakis and Holland, on video, presenting

On Thursday 1st December, Stuart Holland and I presented our Modest Proposal to members of the European Parliament. Here is a compilation of one of our presentations – the one featured was hosted by the EU Parliament’s Left Caucus. (While I believe that the eurozone is probably incapable of adopting a rational solution package, like the one we have been advocating for a while, it is still incumbent upon us to keep plugging away till the bitter end…)

In the first video, Yanis Varoufakis is presenting the Modest Proposal

In the second video Stuart Holland answers questions in a manner that provides the institutional and historical context for the Modest Proposal


  • There are a few recent articles in Frankfurter Allgemeine Zeitung (FAZ)by M. Hudson and one by S. Wagenknecht of Die Linke. The common theme seems to be debt writedowns. Wagenknecht’s article has more policy details and does not support eurobonds, which probably allowed it to be printed. But she appears to support a scheme of licensing EFSF monies to national banks; unfortunately that will not be a solution. She mentions deficit areas in Germany. She points the finger at neoliberalism. Oddly, this major newspaper of the ECB’s home city has printed opinion further to the left than has appeared in the WSJ, Washington Post, or NYT.

    Hamburg’s Der Spiegel is extremely nervous and prints articles of doom by W. Munchau. The comments on the stories are usually dumb but the editors are clearly stressed. The FT Deutschland in Hamburg seems strangely unreactive by comparison with the FT in the UK, maybe because of separate ownership. The Süddeutsche Zeitung has some scolding toward Germany by Juncker, but it’s not accessible online.

    Apart from FAZ and Der Spiegel, the highbrow German press is rather unaware of the urgency of a smoking Atlantic volcano of computerized shadowy debts. The popular press such as Bild recycles the same violent trash about bad “Greeks” (it’s more racist in German because the emphasis is “the crisis of the Greeks” as a people rather than on the government of Greece).

    FT alternates between panic and resignation. M. Wolf diagnosed the German misperception in three charts. There also was an unusual video recently of a City banker with eyes wide relating his fright about the loss of banker control from a euro collapse. Headlines have words such as “battle”, “bluff”, “clash”, “terrible”, half-baked”, “pain”, and “silly”. The NYT sympathizes with the British and worries about Obama’s election prospects due to euro collapse, with the exception of Krugman, who recently mocked those complaining about Greece, a rare pleasure after years of ongoing beatings on Greece to keep Europe’s big banks pseudo-solvent.

    • “The FT Deutschland in Hamburg seems strangely unreactive….”
      Ahem, haven’t you read the FTD’s columns by Münchau and Zeise – both of them arguing for eons against the German mainstream?

  • What was the MP’s reaction yannis? Did they understand? And if they did, will anyone there embrace it as their own political agenta? Cause i have a ffeling that you receive too many friendly pats in the back but no real support.
    Here’s to Irish visitors

  • Dear Prof. Varoufakis,

    You and Stewart Holland are doing a commendable job although, as you yourself readily admit, may be fighting for a lost cause. Nevertheless, hope dies last.

    You are engaging and talking with ‘Anglosaxons’ and are trying desperately to talk to the Germans. You are, of course talking to the Greeks. Might this not be the optimum way to further this effort from now on? Maybe it’s high time to concentrate your efforts in engaging opinion-makers, intelligentsia and political figures in other peripheral Eurozone countries on the one side and on 2nd tier core countries (e.g. Finland or Austria) on the other? Maybe you should also get an Italian or Spanish economist on the team?

    I wish you the best in your efforts

  • At about 1:40m into the first video, Yannis states that “Germany is not going to condone democratization of debt”, and that we should not question why, but just take it as a “given”. However, it is clear that their answer would go to the root of the problem. What Germany wants, in effect, is a “United States of Germany” with Berlin at the head of this “new dawn” of tyranny. Let’s dispense all notions of egalitarian democracy in Europe. Germany IS the problem.

    As Michael Hudson recently said, “The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum.”

  • I found the video of the complete event much more helpful .

    In my opinion , the highlight moments should have been between 0:31 and 0:34 min .

    “Modest proposal scope is to reduce debt not to extend it ”

    Toxic eurobonds logic undermines in populistic terms your proposal . That distinction must be your key point according to my opinion .

    Each member state is doomed if seen as an individual . Simply because the strategy of each member state was carved under the assumption that it remains a member state for the last twenty years .

    If you think that conflicting interests is a problem in Eurozone right now , try to imagine how those conflicting interests will grow in a free for all race after the fall of Eurozone .

    One question : What happens if an individual country fails to serve its debit account in ECB in the future?

    • If i understand correctly , you mentioned something answering my question in 0:54, but i fail to comprehend .

  • Mr. Holland is a real inspiration. This man has style and a good partner to combine with.

  • Dear Yani,
    the role of the ECB as described in the modest proposal, continues to omit a very crucial element that will convince a bond investor that the ECB newly issued bonds are better than the bonds of the state that they are issued on behalf of and thus will fetch a better price . You used the analogy in your talk that it is like your parents getting a loan on your behalf and (using your words) “…except that your parents use their good reputation and better collateral with the bank in order to effect this debt conversion…”. This is very true. I have been asking you in other posts and I have not yet seen an answer.
    What is the collateral that the ECB brings to the table to guarantee those bonds in case the borrowing state cannot repay them back? If I see that then I can understand how they can get better rates on their bonds issued on behalf of the Spanish state for example. If I do not see that why should I ask for less interest than I would have asked Spain for the same?
    So far I have seen two things supported in your presentations that attempt to provide some sense of “guarantee”. Super seniority on the ECB bonds and last resort money printing. Is that correct or have I been missing something?

    • This is correct. You have missed nothing. Except for the notion that Central Banks do not need collateral. This is a Sachtian idea, as Toporowski ably explained in the penultimate post I uploaded.

    • OK after having quickly skimmed through the guest post of Toporowski in your previous post I then conclude that what you mean is essentially money printing. They do not need collateral like everybody else does because they can just type a number in a terminal and credit the bondholder’s account with the funds when payback time arises. Fair enough. I do not know how convincing that alone is to command significantly lower interest rates on bonds issued by it and of course I won’t even go into imagining how willing European member states are into accepting such a scheme as a viable solution for the current mess.

    • Not money printing. That is what Geithner and Sarkozy are suggesting. What we are claiming is that not ruling out money printing, in the context of our proposal, wil ensure that money never needs to be printed for the purposes of backstopping the ECB. Unlike what is happening now which is both money printing to purchase secondhand Italo-Spanish bonds AND no end to the Crisis.

    • Yani, , the question is very simple and needs to be answered convincingly to justify claims that these new bonds will command the lowest interest rate possible. If not then we are talking about wishful thinking, something of which we have seen already enough of.

      So the answer to the question “how does ECB guarantee bondholder payback in the event a member state fails to pay back the ECB” in the context of the modest proposal is : it prints money. Is it not?

      Whether you and your partners are hoping that this will not be necessary is somewhat important but is not the answer the above question. A bond buyer, any bond buyer yourself including, should ask the above question before lending money to anybody. Today I lend to Spain asking say 6% interest. This interest includes among other things, the perceived risk of Spain not paying me back in full or partially or on time or not.
      Tomorrow the ECB comes and says : “I want money to cover Spain’s needs so I will issue new 10 year bonds”. Fine. When I will look into those bonds to assess my risk I want to see how the ECB will pay me back. If I read in the prospectus that the funds will come from the Spanish state paying back the ECB, I will then ask, what is the risk of the Spanish state not paying back the ECB on those bonds. I will then value the ECB bonds with that risk in mind and I will ask for the relevant interest rate. No magic. As simple as that. The markets know that, the traders know that, the credit rating agencies know that and the politicians and people *should* know that.
      So how does the modest proposal change the risk of Spain not being able to pay back the ECB and in turn me on those bonds? If you tell me now that the ECB in that event will go and borrow from somebody else I want to know who will that be, and I will asses the new risk again. If you tell me the ECB will just pay you back no matter what with its own funds this is equivalent to money printing. That’s also fine. I will assess the impact of this and decide then whether I will buy those bonds vs others and at what rate.
      Given the above I personally have formed the view that the modest proposal is, at its current form, just yet another unnecessary layer over what you are correctly claiming is happening today with the ECB using to some limited extend its “unlimited” firepower to buy member state bonds in the secondary markets. What you are perhaps doing is just postponing a bit into the future the need for the ECB to print money for a particular state, hoping I suppose that in the meantime significant changes will happen that will change the risk of Spain not being able to pay back the ECB. But is this prospect going to convince the current bond markets to lend to the ECB at low interest rates? I would not bet my savings on that…

  • Κ. Βαρουφάκη σε σχέση με τη πολιτική της λύσης σας σχετικά με τη κρίση χρέους (την έχω διαβάσει στο protagon) δε μπορώ να κατανοήσω πως θα μπορέσει να διαχειριστεί η ECB το χαρτοφυλάκιο των ομολόγων των ελειμματικών χωρών (με δεδομένο ότι ο λογαριασμός τους θα πιστώνεται και μέσω της ανάπτυξης και τα ομόλογα που θα έχει αναλάβει η ECB για λογαριασμό των ελλειματικών χωρών θα λήγουν σε μικρότερο χρόνο από αυτά της ECB) για να διατηρήσει την απαραίτητη ρευστότητα που πρέπει να έχει. Αν μπορούσατε να απαντήσετε θα βοηθούσατε έναν φοιτητή οργάνωσης και διοίκησης να καταλάβει.

  • Horrible microphones in that room. Every time either of you turned your head to the side, the sound became muddy. Even when you faced the mic directly it sounds like you’re talking in a barrel.

    But great presentations. I so hope the Modest Proposal gains traction. The chances of failure of the summit tomorrow are very high, but the advocates of austerity will not give up their intent to gut Europes’ ‘social contract’. It appears they would rather the EZ fail than do the right thing. The neo-liberals have been watching and waiting for the opportunity from the beginning of the Euro to demolish working people and the unions. They see themselves in a winning position right now; it will be interesting to see how markets react to the summit.

  • Yanis, correct me if I’m wrong please, but it seems to me that the modest proposal’s main argument is that it’s better to have a promise of debt monetization by the ECB than the monetization itself. If that’s the case, are you certain that the international investors will borrow the ECB at the low interest rates you’re assuming?

    • You are correct. And yes they will buy. In droves. The ECB bonds will sell like hot cakes. Remember: this is not only a debt crisis but also a crisis of mountains of capital with nowhere to go. ECB bonds will be extremely attractive at a time when all investors have access to is US t-bills and Japanese bonds.

    • “ECB bonds will be extremely attractive at a time when all investors have access to is US t-bills and Japanese bonds.”

      You are omitting that they have German bonds that they can buy now!

    • @Guest
      If Germany is the only “sure” game in town for investors it’s logical to assume that:
      a) investment capacity will remain unutilized

      b) rates of German bonds will lower well below 2% which will be less attractive?

    • If joint bonds of several nations incl. joint guarantees would have a better risk reward ratio they would have invented by the finacial services industry long ago. If they exist, noone needs the proposed Euro bonds.

    • Agreed. So, what we need is ECB bonds; i.e. eurobonds not guaranteed by any of our member-states but only by the sole institution that is common to all and which can effect a rational management of the eurozone’s relatively small but unsustainably unbalanced debt (in term of aggregate interest due in twenty years).

  • I am delighted to inform you that we have a credible solution to the euro crisis.

    It’s called Kepler-22b; the only thing needed to set it in motion is to ask Merkozy to travel and set up in the new place so that we continue there our crisis resolution conversation.

    We all promise to be right behind them. And I mean real promise, not just another save the euro scheme.

    P.S. I will provide you with a bank account shorty. Please deposit as much as you think fit to make the trip comfortable for our leaders. And don’t worry I’ll take care of the rest.

  • It’s over guys the eu has lost it’s marbles.agreement for balanced budgets with the lee way of .5% exceeding the budget.what three or four countries can do that within the eu,500 billion in the esm when Italy alone needs that in the next Eurobond wonderful why dosent ask Germany tp just leave and get this game over with.

  • Yiannis,

    can the EU implement The Modest Proposal without Germany. Surely, the other surplus states would be enough to implement. Let Germany go on it’s own. This should be played out like poker, who can bluff who.


    • This is the best proposal, but I would hope that Holland will leave too.

  • Seriously now. Many of you remember my strong opposition to PSI as a Merkozy contrived nonsense. Finally, here comes the public admission that it was wrong and no longer a policy objective.,1518,802515,00.html

    This is also an interesting piece in the “spade is a spade” language Americans are best capable of talking as they zoom quickly at the heart of a given problem. I am not suggesting that what the article implies will happen, rather I am interested in the framing of the issues and the background info which – in all honesty – is all a strategist needs in charting an appropriate course:

    • Is US propaganda part of your mission here, Dean? I have already told you that I do not accept reliance on US sources as academically valid; now, you put forward a more obvious message.

      My experience of US academic work on Europe is that the quality is highly variable, with much of it ill-informed and lacking in empirical details, while other work imposes US paradigms that are inappropriate. A certain amount of work does make progress, especially with simplified theoretical ideas that US academic insists on — despite Einstein’s dictum that “things should be as simple as possible, but not simpler”.

    • Xeno:

      I can see that the American presence irritates you quite a bit. Good. This means I am on the right path.

      Here is a hint: It’s only starting. When the process is done there will be no German morony left to speak of.

    • It has been also very interesting to google on your name…. I think you have answered me in the comments of the video, part two. I promised not to quit, so, after that I was here already to comment also. But… the feeling of being immensely disappointed in mankind and most of all political leaders has stopped. I am beyond the disappointment. I am ready for even the worst scenario, without fear, completely calm. Strange but true.
      About US: I don’t think it is funny what you answer on “Xeno”: “I can see that the American presence irritates you quite a bit. Good. This means I am on the right path.”
      I think it is time that US stops with interfering in Europe’s business as if they are ruling this planet.
      They did.
      They made a mess out of it.
      It is time for this Minotaur to eat itself.
      Or I send mine.

    • Antoinette:

      You are right. Forgive us boys, we occasionally misbehave.

      But the truth is Germany or Alemania Horribilis is acting in a very self-serving way.

    • Dean…
      Germany is not worse than any other political strong country.
      Though I never liked it to be there: I don’t hate them. They are correct, polite, and work hard.
      Globally (world wide) I don’t see a way out. I am prepared on a huge sacrifice to save Mother Nature, who is suffering because of world economics and materialism.
      Mankind is an evil product of nature. Jung spoke about it.
      Video here with Jung, speaking about evil:
      (I don’t know if the embed code works):
      or url:

      It is the human mind (psyche) that is the most dangerous phenomenon on this planet, If Nature can be healed by the disappearing of mankind then I am ready to leave (die, the worst scenario) with all the others.
      This sounds maybe dramatical, or ridiculous, but I am utterly serious!

      My love for nature goes beyond your or anybody’s imagination. Nature is me. You. Everybody. And life proved that it is impossible to open eyes with explaining, talking. I gave up. Let happen where 90% percent, I guess, is asking for. Nobody (except those 10%) listens or wants to make needed changes, to sacrifice luxury. Nobody.
      They don’t even see where they live on and in. The most are not aware. Don’t know awareness.

      Dear Dean, and other readers, don’t only follow Yanis’ blog, follow also videos on vimeo, made by Danae Stratou, and others. Search in the links on this blog page (right side, up).
      Join there also.
      It is for me a way to survive: to find soulmates. To connect. In the mind and heart. Create unseen but strong lines. Maybe this is the mental, architectonic structure for a new constrcution of social life for mankind, in positivity. The battle behind curtains against negativity and destruction, against materialism, the Minotaur, greed.

  • From what I’ve read and heard this morning, it seems apparent that every leader in the EZ and most of EU are moving in the direction of Greece and Italy, ie, establishing an undemocratic ‘technical government’ composed of unelected leaders/technocrats residing in and around the ECB, not even answerable to the EP. When Pap and Burl voluntarily turned their countries over to technos they set the pattern for all the rest.

    My prediction if this technocratic junta takes control of the finances of every EZ country is that the fallout will be swift in every subsequent election in every country – and since the so-called socialists have discredited themselves everywhere, the fallout will be to the benefit of far-right parties all over Europe. Marching toward a kinder, gentler fascism?

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