Crying over spilt milk: My piece on Greek sovereignty and the unholy alliance between German and Greek leaders

[The following story was commissioned by Click here for the complete article.]


  • German and Greek politicians are at odds over who should control Greece’s budget
  • Greek political economist Yanis Varoufakis says both are guilty of failing to grasp the real problem
  • Varoufakis says both countries mislead voters in agreeing an unsustainable rescue package for Greece

Athens, Greece (CNN) — German leaders are furious with Greece. Yet again they have to go back to their electorates asking for more billions to throw down the black hole that is the Hellenic Republic. They have now become so angry that they are even openly proposing that Greece’s fiscal affairs be deferred to some European Commissioner, preferably one of a Teutonic disposition.

Greek leaders, meanwhile, have seized upon this German “transgression” with glee. For it offers them a wonderful excuse to put on domestic display their patriotic fervor at a time when they are running low on legitimacy in the eyes of a battered, demoralized electorate.

Beating their chests about the German threat to Greece’s national sovereignty, they are hoping that the Greeks will somehow forget that it was they, their leaders, who ceded sovereignty to the so-called troika of the European Commission, the International Monetary Fund and the European Central Bank.

This is a typical case of a shady coalition of vested interests that is disintegrating under the weight of its collective hubris. For the rest of the article click here.


  • A few comments:
    Greek PM claimed that one third of lost productivity has already been recovered…means that another 25% wage-haircut on average is in the cards? (in my view, no probability of saving the “bonuses” (13th and 14th salary)).
    German leaders made one more step in their strategic game play towards pressing Greece and in fact, Portugal, etc, to accept a budget Commissioner in exchange of the gigantic loans. This rhetoric is consistent with Germany’s choise to hold the Eurozone exit option, by blaming in such a case Greeks or Portuguese for failing to implement the structural reforms and curb twin deficits.
    As I mentioned in previous comments, the end game: “Germany eventually exiting the E-zone” is high probable and is getting higher and higher…

    • Kosta:

      I am not buying it about the so called “German exit”. Not one chance in a trillion.

      The only credible scenario is the EZ remains intact and German errors and omissions will increase the price payable by the “dragging their feet” Bundes exponentially.

      The big casualty of this process will be neither Greece not its politicians. It would be Merkel and her coalition of terror.

      Just watch; it’s coming to a theater near you.

    • ““Germany eventually exiting the E-zone” is high probable and is getting higher and higher…”

      Let´s hope so. Then our children will not be another lost generation which will not have jobs just because the politicians want to unite Europe by force with this silly one size fits none currency.

      Life was not so bad when we had Escudo, Peso & Lire.

    • “dragging their feet” more applies to the average greek worker. Lack of efficiency means not working fast enogh! Hahaha!

    • I bow in front of your sophistication and sense of superiority. [Last time I tolerate comments whose sole purpose is to offend, sneer and offer not an iota of enlightenment.]

    • “by blaming in such a case Greeks or Portuguese for failing to implement the structural reforms and curb twin deficits”

      So you think that the GIPSIFs made the necessary structural reforms and curbed their deficits, to be(come) competitive with Central and Northern Europe?

      They certainly had a long period of time to do so. Betweeen 2001 and 2008, there were effectively euro-bonds (which are by now called for by a lot of GIPSIF politicians and ohters who would profit from them), the spreads over Bunds in the range of 0,2…0,4 percent.

      Did they use this chance, the long time of very cheap refinancing, to bring their economic houses in order, instead of bloating the public sectors and distributing a lot of other social goodies which must inevitably lead to huge problems in a currency union?

  • For all that argue Germany needs to take part inthese bailouts to save their banks:

    Out of the top 20. There is only Commerzbank 20 billion, Deutsche 13b, HRE 11b. Out of a total of EUR 560 b. Looks like the latins are screwed without making Germany a labor camp to cover their losses..

    The amount German banks lent to PIFGIS is small. It is the banks of the latin block that will fail if there is not bailout for the PIFGIS.

  • “the Germans accuse the Greeks of incompetence, corruption and a singular failure to meet “their” targets”

    Who exactly is ‘the Gemans’ here? Merkel? Aside from that: are such accusations wrong? From the reports in the media, not really.

    As for the rest of the text, I am completely with you.

  • Dear Dean,
    euro exit option is critical for Germany not to withdraw. Prob gets higher to reach this decision point, and looking forward, maybe the political catalyst will be Hollande’s victory breaking the Franco-German (pseudo)coalition…

  • It is too early to say whether a German exit is probable. A Greek exit is more likely and the rest of Europe is ring fencing itself as we speak for this scenario. European politicians are smart enough to see Greece as a bottomless pit and they know that it will be impossible to sell another rescue plan to their voters.
    The bankruptcy of the EU banks is not a “done deal” as Mr. Varufakis is assuming. There is an new kid on the block; Mario Draghie, who, as a genuine Goldman Sachs disciple, will prolong their viability for the foreseeable future by LTRO’ s and other means (taken from the FED’s bag of tricks). See the head of HSBC global head of fixed-income research at Bloomberg and be enlightened by the way financiers take on the situation.
    These policies will buy enough time for the following to happen : Greece will be out of the picture maybe as early as this spring ( or later this year as the absurdity of the new and last rescue plan becomes painfully clear. The rest of the EU will try to work it out for themselves.
    The irony will be that from the failed experiment of Greece, they will probably adopt a more pro-growth and less fiscal austerity stance. They may even get the eurobond in one of the various forms. I honestly hope that I am wrong, since I believe it is in the interest of Greece to remain in the EZ, but I am bracing for a “Costa Concordia” moment.

  • The Greeks, meanwhile, are replying with references to World War II …

    The subject of German war reparations has been mentioned here. If anyone is interested in knowing why Germany received preferential/special treatment from the U.S. in the aftermath of the Second World War — btw, there were some members in the American adminstration who wanted Germany turned into a “potato plantation” — this subject is extensively covered in the chapter titled “The Global Plan” from Yani’s book The Global Minotaur

    • “it still wouldnt be possible for all the EZ members to become “little Germanies”…”

      The Europhiles are missing that there is a world outside the EU:

      – Surpluses and deficits do not need to balance in the Eurozone. They need only to balance globally
      – Making German labor more exensive (proposal from Mrs? Lagarde) will not solve the problem. The Eurozone would turn into a deficit zone as one of its few globally competitive countries becomes less competitive

  • Actually, the problem is quite simple to identify.

    Just like the EU can not afford to have a strickter monetary policy than the US and Japan, the same way Greece can not afford to have a strickter monetary policy than the rest of the EU.

  • @Bavarian Trader
    What you are missing is that just because a whole world outside the EU exists,doesnt mean they are waiting ready to consume whatever surpluses the EU can produce.In other words who would absorb all this production in the hypothetical case that all EZ members turned to a german model of production?The increase in “competitiveness” of the periphery would make up for the loss of German “competitiveness (did you read the essay?)”
    And how would exactly EU turn to a defict economy in relation to the others while a large part of German surpluses are already a result of trade inside the union?

    • And one more simple thing.Because in the end its simple mathematics.

      Y = G + X – M + PX + I
      The GDP equals to Government Spending plus exports minus imports plus private spending plus private investment

      Subtract taxes from each side
      Y – T – PX – I = [G – T] + [X – M]
      So Private Net Savings equals to Government budget (deficit or surplus) plus trade balance (deficit or surplus)

      So there cant be a way for an economy to run on a government surplus and at the same time running a trade deficit, without getting into recession.Whoever is asking in the middle of crisis for a government to run a surplus instead of hoping for bigger deficits than normal is just asking for recession.Simple is that.

    • “Two-thirds of German trade is within the Eurozone, while the Eurozone’s trade with the rest of the world is roughly in balance. The accompanying graph clearly shows Germany’s surplus to be mirrored by the ‘Club Med’ deficit. No devious plot is implied; this situation arises because somebody’s surplus is by definition somebody else’s deficit.

      Obviously, small surpluses and deficits are not the problem. Rather, it is when the surpluses and deficits become large and entrenched over many years that action must be taken. Clearly, reform of economic governance is required if the Eurozone is to prosper in the long term. Just as the China-US trade imbalance is best resolved by increasing aggregate demand in China and recycling surpluses rather than by means of expenditure contraction in the US (the cost of which would be further recession), the Eurozone trade imbalance cannot be resolved by inducing recession in the Mediterranean.”

    • The Eurozone as a whole would have a huge trade deficit without Germany.

    • What do you mean without?Without means Germany is out of the Eurozone.Same way Germany would starve without the periphery because Eurozone would be a huge net exporter and the euro would skyrocket so bye bye exports.

      We are talking about a change in the internal trade balance,externally the Eurozone is already in balance!You still dont answer,who can absorb all the excess surplus since you believe that all eurozone members could be net exporters?

    • Or maybe you want to turn everybody to a net exporter by decreasing their consumption?If thats the case, you might aswell kiss your exports goodbye….

  • Spartans! What is your profession?

    HA — OOH!!!

    Greeks! What is your comparative advantage?


    Please excuse that little outburst, Yani. I am currently reading George T. Dennis’ Three Byzantine Military Treatises (Greek text, translations, and notes).

    Τοῦ κυροῦ Νικηφόρου τοῦ βασιλέως (By the Emperor Lord Nikephoros):

    Περὶ τῶν ἐγχρονιζόντων πολεμίων κατὰ τῆς χώρας ἡμῶν, ἵνα ὁ ἡμέτερος στρατὸς κατὰ τῆς χώρας αὐτῶν ἐπέλθῃ. (While the enemy delay in our country our army can invade theirs.)

    I am thinking about a Greek “invasion.” Like the odious debt, the ECB, the vulture funds … into Hades with them! Let them become the prey of dogs and birds, not Greece. (A return to the drachma if necessary, hence the “tourism” bit :-))

    And the PSI . . . The Greek government should be (or should have been from the start) in total control of the PSI negotiations. The vultures don’t like the Greek terms offered? Tough moussaka! It’s Greek terms or nothing. It should be nothing because they, the vultures, took on the risk of buying the discounted GGBs and not the citizens of Greece. (That is why the bonds were sold at a deep discount — they were high risk!) As for the CDS threat by the vultures, so what. Let them activate the CDSs if they dare. First, it has nothing to do with Greece. Second, who knows how many times these insurance policies have been assigned to other parties down the line. I doubt very much the vultures (even the originators of these policies, for that matter) know who holds their CDSs … and yeah — good luck collecting, vultures. In case the vultures haven’t noticed, the ISDA — the banksters — makes the rules as it goes.

  • For those of you wanting to look beyond the obvious, here is what I think is the real issue with Greece.

    Greece has an EEZ roughly 5 times its land mass. You can see it here in this map:

    In this watery economic zone(yet to be exploited), there are estimates of hydrocarbon discoveries ranging from $3 Trillion – $10 Trillion (depending on the price of oil and gas).

    As such Greece(together with Cyprus and Israel) become the future replacement for the North Sea in terms of bona fide EU energy deposits.

    As you can see the total Greek debt is but a small fraction of these future energy assets which will be developed for both Greece’s and the EU benefit.

    So, what is going on you might ask?

    IMHO, a lot of joking for positioning. Germany seems to be at a disadvantage in this game as US, French, UK, Israeli and Russian firms seem to have better experience and technology in such energy field.

    So, perhaps now you can begin to understand how provocative and offensive are the German suggestions(even in jest) that Greece should sell some of its smaller islands. Based on the Voronoi mathematical circles, some of these small islands command an EEZ as large as 1/3rd of continental Greece. The numbers are very substantial and a very large energy game has just begun.

    So, now please sit back and ponder for a second all of this pressure to “reform” and attacks on organized labor. This is truly the last chance. The last chance to shape an economic reality in Greece before some large energy discovery announcements become a game changer.

    Hope this little blurb assists you in understanding the Greek situation in more realistic geostrategic terms but not as the pre-packaged notions floating out there for various self-interests This a case which will be unprecedented for both the Greek and European energy scene (let’s not forget Israel and Cyprus in the mix).

    The topic is a bit deeper than this cursory explanation but at least it ought to reset your perspective.

    • It does make a little sense but it doesnt explain certain questions that arise from the hypothesis itself “IMHO, a lot of joking for positioning. Germany seems to be at a disadvantage in this game as US, French, UK, Israeli and Russian firms seem to have better experience and technology in such energy field”

      So how does all this situation gives to the Germans any advantage in “experience and technology in such energy field”?

      I believe that if this game is being played for whatever energy fields Greece has to offer then the pressure for labor reforms etc are in the interests of all players (except greece) therefore the actual conflict for control hasnt happened yet.This also explains why Germany isnt being stopped by anybody,maybe the situation until now is still in their own interests too.

    • Grossover:

      It doesn’t. The Germans have no advantage in Greece’s future that’s why they wrecked the Greek economy with abandon.

      There is no way that Germans ever again will establish a dominant position in the future Greek economy.

      The only question that remains is which one of the remainimg players will.

    • @Dean its Crossover not Grossover 😛

      Im still trying to understand your idea.OK let’s say that what you claim is true and that Germany is only wrecking havoc because she wont be able to gain any advantages from the Greek economy any more.
      Whats the reason for that though?Why destroy something just because its useless (for you) ?

      The only possible answer that i can think of is: “So that others wont be able to have any gains either”.If thats what you think,i can only say that the status quo that is being established (or is attempted to be established) is at the interests of whoever is going to be “Greece’s new pimp”.So Germany is simply making the life of the next “landlord” easier.

    • Crossover:

      Much simpler. As an avoidance example to others.

      Because Germany has very little to gain from Greece, Germany is perfectly willing to break Greece to pieces as an extreme example to others.

      We all know that Germans are perfectly capable of sadism and occasionally enjoy it.

      And such is not a “gross” exaggeration.

    • Crossover- Part II.

      In case you didn’t understand my answer here is a more commercialized version.

      Because Germany is not interested in dominating the Greek market, rather German is for European dominance at a political level.

      If Germany can crack the tough Greek nut, then she can lay claim to the rest of her European ambitions.

      How many chances do you think Germany would get at Euro dominance? This is it. If she can’t do it she will go down in flames.

      Which precisely what I think will happen.

      Picking Greece as a reform candidate was a huge error in German judgment. The very act disqualifies Germany automatically as the head of the European table.

      As I said. Just wait. It’s all coming to a theater near you. And it is going to get ugly for Germany; very ugly.

    • well yes Dean,this does make sense.And i’ve thought about the possibility of Germany using us as an example for the others to avoid,but its pretty obvious that none of the reform programms will work out in any country because its simply against nature,so im a little cautious as to what to believe about them.Can they be so stupid after all?They must have a reason other than that because its pretty obvious that they are digging their own hole aswell right now.

    • Or maybe Germany is pushing Greece to become independent of the US, France & UK by defaulting.

      Merkel has already hinted she is happy to pick up the pieces after a default.

      About the geo-strategic issue you raise. It makes sense.

      Greece has been treated like a piggy bank for the last 100 years.

      Somewhere safe to have natural resources and tightly controlled enough for the government not to break away and do their own thing with the savings.

      Greece has been kept dependant on foreign banks to stop the piggy bank running away so to speak.

  • From P-SI debate (Private Sector Involvement) to O-SI debate (Official Sector Involvement) and possibly to …N-SI (NO SECTOR INVOLVEMENT)? Notice the letters of each acronym move in inverse alphabetical order as TIME is up….

    • It is tough to learn to live at or below ones means when one is not used to it.

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