Greece should default within the eurozone: On CNBC

English Greek Crisis Uncategorized 2265 Views 73 comments February 8, 2012

While Greece’s political leadership was continuing with its  game of  charades (Will they sign? Will they not?), the country is being led down the garden path, once again. The debt-deflationary downward spiral will be given another impetus. Here I tell CNBC that Sisyphus’ optimal strategy is to stop pushing the rock up the hill. And that the assumption that if Greece defaults it must exit the eurozone is a motivated lie: CNBC 7th February 2012: Greece must default within the eurozone

Related Posts

73 Comments

  • Keep trying Yanis, I hope the Greek troika listens, not sign any new aggreement and defaults in the Eurozone.
    Good job Yanis.

    • Already, we hear malakies from the fat buffoon — that the Greek political parties must decide whether to stay in the euro or not. Clearly, this is an attempt to divert attention from the real issue, which is how and when to default while remaining within the euro.

      I am sorry to say it, but basically Greece has elected a tribe of self-serving crooks and morons to run the country. There is actually no hope of getting through this crisis with the mix of corruption and incompetence that has come to characterise Greek management of almost everything…

  • Brief, eloquent …straight to the bone. It’s time to call up the cards. Greece is at default and all European leaders, including some remaining Greek ones, need to decide boldly on the way forward.- Simple! It’s time to roll up the sleeves guys and do the job that we elected you for! Don’t you think so?

    • I agree. If nations will not have a common economy the tectonic plates constituting Europe will break apart and the oceans will submerge the land, as one is told of Atlantis.

      In Geology, it is called the EMU law of continental cohesion 😉

  • To the best of my knowledge, nowhere in EU-treaties does it say that it is illegal for anyone to go into default, be that an individual, a company or — a country. If there is a default, both parties (borrower & lenders) have to deal with the new situation and, as a general rule, it is always better to deal with reality than with illusions.

  • I’d like to link to this http://www.spiegel.de/international/europe/0,1518,813919,00.html article on the english language Spiegel Online, which I consider to be quite important since it states opinions not often voiced on German media before. Does it signify a turning point in the German intelligentisia’s thinking process or is it just a rogue opinion piece? I honestly don’t know. Maybe Yanis can enlighten us.

    • it is something that you can read in a lot of german newspapers since at least one year (but only in german), also, german economists are suggesting the same. unfortunately the german politicians are not listening to it and the public opinion here and there gets more and more polarized. i am truly sad about what is being done to your country! i whish you all strength to try and fight youre politicians and the troika in order to get out of this helpless situation and this enforced european “agenda”. my question is? why are there no more huge scale demonstrations? have people given up?

  • http://www.spiegel.de/international/europe/0,1518,813919,00.html

    “Something has gone very wrong with this rescue….

    And it’s not just private creditors who will have to forego a large part of their outstanding Greek debts. It is also other European countries and the European Central Bank….

    The euro-zone states would also have to build a bigger firewall around the remaining crisis countries in order to prevent contagion. They would have to help some banks that get into trouble as a result of a debt cut. And they would have to provide Greece with a real opportunity to get back on its feet and start growing under its own steam — in other words, a kind of Marshall Plan….

    And unlike everything that has been negotiated up until now, the solution would also be worthy of being called a rescue package.”

  • Is it just me or our politicians do not have a clue of what the deal is here?

    If the benefit from the PSI+ is 100something billion which we will get anyway as a NEW loan then what is the point of all the trouble?

    The debt remains at the same (non-viable) level plus you have more austerity measures. Why do we even consider this path?

  • Yanis,
    Why can’t common sense ever be common practice, especially among political “leaders?”

  • I have to think about this.

    I don’t like the word “default” and the word “bankruptcy”. Too easy for Merkozy to get off the hook after the mess they have created.

    To me Yani and readers the situation is quite simple:

    The troika/Merkozy fiasco has been acting as an incompetent monopoly. Monopolies are illegal and the affected parties are usually awarded treble damages (or any other damage multiplier).

    You can not just allow an incompetent monopoly to wreck your country and then let the guilty party simply walk away from it.

    This is like saying that you are going to invite a youngster at an alcohol party, get them drunk beyond any acceptable limit and then let them pass out and deal with it themselves.

    No way! This is why we have laws. Merkozy and their incredibly out-of-depth milieu has to be prosecuted to the full extent of the Law.

  • Yannis, I couldnt agree more, the situation presents itself once again that Greece should default and Europe get serious about their experiment. I dont know how its possible to pay a debt under an economy that is contracting yoy, impending social unrest and a bureaucracy that will simply not cooperate in achieving any fiscal targets through tax collection / and other key services. Whilst it is true that the greek economy needs an overhaul to become more competitive, beating wages into oblivion, increasing the tax envelop, and beating the country into submission is modern day imperialism and cannot possibly be positive. I am beginning to feel that Germany in particular has opened the door for a Greek exit as she makes it unattenable for Greece to accept such measures. Once again as I have argued consistently, Greece lacked and lacks leadership. No leader is willing to committ political suicide for their sole purpose is to position themselves for power and little more now that elections are right around the corner. Greece should play the last card and default, surely it is better than the misery that will be guaranteed for years to come… What is interesting is that N.A. Media has swung from initially denouncing a default to openly embracing one as current austerity measures make it impossible for Greece to achieve fiscal and debt targets.

  • Dear Yannis,

    you have promoted recently default within the eurozone, calling Greece’s exit “suicide”. I have a question.

    Greece is in a deep liquidity trap. There are only two ways (afaik) out of it: (a) public spending (Keynesian-style stimulus) and (b) enough contraction + deflation to sustain the whole economy from exports, with minimal suuport from domestic demand (aka, banana republic, Bagladesh-style).

    If you reject (b), you have to look at public spending.

    In the case of Greece within the EZ, “public” can only refer to EU stimulus. Indeed, ESPA and such (so-called Marshall plans) are possible ways to create (investment-driven) demand, and I believe that is what you and others have in mind when you reject exit from EZ. Yet, to convince serious investors to come, this stimulus has to have sufficient (and significant) magnitude and duration, else it will only attract opportunistic investments (in Greek: αρπαχτές), which will take profits and leave the country first chance they get. Do you believe that EU stimulus of significant magnitude and duration will happen (that is, happen for Greece! I am pretty sure it will happen for other countries eventually…)

    Alternatively, introducing domestic currency **and the requisite policies, i.e. at least capital controls** is rejected by you and others, but I have yet to understand the rationale. It is certainly contrary to any textbook I have come across! Can somebody explain it to me? And even if it is risky, what else can we look up to?

    Of course, we first have to avoid (b), which is where this PSI will point us at, but that is a different issue (and depressing at that…).

    Thank you

  • Having followed your comments for some time now I think that if we lived a millennium before you would have been named a profit (the voice of God), not because you are, just because you follow logic argument and evaluate data with a critical mind.
    I also enjoyed your book, good eye opener but I think very pessimistic. Let’s hope you missed something…

  • Yiannis, you have the logic and perception and awareness needed to drive this country out of its misery. You keep saying that Greece should have defaulted 2 years ago. The inevitable will happen and you support this with feasible examples. My question to you is why do you think the political heads are ignoring the obvious together with the data and facts provided. Tell me who are our politicians afraid of and what are the foreign politicians planning? Its so obvious to all us lay people, everyone’s talking about it but why don’t their actions make any sense to us???

  • While I agree with the overall thrust of your comments, I wonder about the last part – Greece being able to default while remaining in the Eurozone. Overall, I would say you are right. there are no current mechanism through which Greece could be forced out of the Eurozone if it defaults. However, if the last few years have taught us anything, it’s that the EU political leadership is never shy about rearranging the furniture when and if it suits them.

    I could very well see them either a) “reinterpreting” treaties from a narrowly legalistic point of view to assert that the right to dismiss a member from the Eurozone for defaulting has always been implied in current treaties or b) arguing that existing treaties can be rapidly changed to include such clauses and then applying these changes.

    But other than that, I agree with you that the current situation is hopeless and Greece should default immediately.

  • Your interview was a good opportunity to read the whole story of Sisyphus (although not in detail I must admit). Sisyphos has been a rather naughty guy:
    – He was a collaborator of God Asopos when he was hunting god Zeus
    – He was the one who put god Ades in chain and created chaos by making death impossible
    – He was the one who tricked Persephone to let him walk away when his dead soul came to the underworld

    He committed the probably most dishonest crime of all: tricked the gods, i.e. hubris; that is why the Judges of the Dead convicted him to push the rock up the hill for eternity.

    Greece has not committed hubris, but did what every golden boy did in 2008 Wall Street crisis: gambled with other people’s money (remember Danny DeVito in the movie?). Unfortunately, the bet was on the wrong horse: itself. And the loser horses either get extra training in order to perform better or they are shot.

    If the optimal strategy for Sisyphus is to stop pushing the rock, I wonder what is the optimal strategy for the gods that put him in the awkward position of pushing ?

  • Very well stated, Yanis. I noted the interviewer had a wry smile while nodding her head in agreement with every point you made. She also knows the “markets” agree with you, even though mainstream media’s talking heads continue to parrot the oligarchy’s talking points.

    Eurointelligence blog this morning had some encouraging poll results–

    Democratic left party on the rise in Greece

    A poll carried out for Skai showed the conservative New Democracy to lead with 31%, consolidating its growing popularity, while PASOK remains fifth place with 8%, according to Kathimerini. The Communist Party (KKE) and the Coalition of the Radical Left (SYRIZA) are holding firm at 12.5% and 12% respectively. But the Democratic Left has surged in popularity, garnering 18% of the public vote, up 4.5% since last month. All together, the left parties got 42.5%, but as KKE has ruled out cooperating with other parties, the figure is misleading.

  • The only reason for taking on more loans is we think that by doing that we can repay them. Now we can’t. And everybody knows that — the ECB knows this, the IMF knows this.

    Indeed! Taking on more loans when you know you can’t ever pay them back is . . . FRAUD.

    Therefore, the ECB and IMF are knowingly forcing Greece to take part in a criminal activity.

    You know what makes countries such as the US and Canada great (notwitstanding that the dummies in the US don’t have single payer universal healthcare)? The ability, when one has hit financial hard times and there is no hope for recovery, to start over again — this includes individuals, corporations and government entities. There is even a word for it: bankruptcy — or if you wish a more fancy term, we can call it default. (I personally prefer the more geeky term reboot. 😉 ) Anyone here doubt? Go ask Mr. Capitalist himself, that guy with the funny hair, Donald Trump. He’ll tell you that his bankruptcies (yeah, he’s had a few over the years) were some of the best business decisions he’s ever made.

    What’s best for Greece? (Hint: it’s written in the Greek consititution, which unfortunately the G-Pap never got around to reading) It’s for the government of Greece to do what is best for its citizens, the people it claims to represent: default, as Yanis says.

    Also, to those who say that in a case of bankruptcy access to global markets will be lost for decades for Greece, I ask this: If you were a lender, to whom would you rather lend money? To an entity that is neck-deep in debt with the likelihood of repayment to be nil (read: Greece) or to an entity that is starting over and has zero — nada, zilch — debt? And don’t forget, Greece in her history has had bankruptcies (like many other coutries, she definitely does not have a monopoly on bankruptcies) … and she still got loans

    PS: I am still not sure whether it’s best to default within the Eurozone or not, Yani. I know you are advocating within the Eurozone, others are advocating the drachma. A pros and cons list one day when you have the time would be much appreciated. My indecision has mostly to do with the future of Greece’s tourism industry and its competitiveness against Turkey’s tourism industry now that the Turks are developing their Aegean coastline.

  • Excellent interview but too short. I am sure our political leaders will not surprise us this time either and they will do the wrong thing (more loans, more recession, more suffering).
    I have some questions for you
    1) Which country (among Ireland, Portugal, Spain, Italy) has the political leaders to do the right thing (say no to more loans)
    2) what happens if Sarcozy loses the elections in France and his opponent (Rolan – not sure that it is spelled this way) wins? Do you see a change in the strategy against the euro crisis?
    Thanks in advance

    • Just to let you know, regarding your first question: you can count Portugal out; our government is more than happy to be Merkel’s and Troika’s lapdog. They call it “being a good student”! (as in, you have to be a good student and apply what your teacher says, no need to think for yourself, and don’t be the “rebel”. Just shut up and eat the drivel.)
      And I mean this literally. It has been said many times by ministers, prime minister, president… you name it. Literally.

    • I know, I know. The thing however is that the harder the try to be good students the more likely they are to… fail their ‘examination’…

  • Yiannis, it seems like you have the wisdom and logic to drive this country out of its misery. It all makes sense to me and I’m sure to most ‘lay’ people that a default is inevitable and although grim in the beginning, we will see light at the end of the tunnel. It will be ” a horrific end” ( where there will be a new start) and not “an endless horror” (as quoted by you yourself!)Why then are the politicians playing dumb when as you stated exist all the facts and details??? What are politicians afraid of???What are the foreign heads planning??? Is it really part of a bigger picture that we, can’t fully yet grasp?? Please can someone at least try and explain their actions to me cause its driving me mad!!!

  • Come on fellas, don’t fall for it. Merkozy is tempting you with iconic debt forgiveness which in reality is nothing but.

    Returning Greece after 10 years, circa 2022, at 120% debt to GDP which is higher than the 113% which Greece had in 2009 is beyond a joke.

    It’s a giant waste of time and you are falling for it.

    The issue here is fairly simple. There are more than one options available to assist Greece and Germany has picked an non-option and of questionable results.

    Instead of playing the German nonsense game of “let’s learn finance in kindergarten”, why do we do what needs to be done: pooling all EU debt together.

    That’s the only solution and there are alternative ways of reaching this goal which is fine.

    To say let’s bankrupt Greece at this point because of Merkozy’s errors and omissions is not very smart (it’s kind of criminal, if you ask me).

  • I am still looking for the business model. Without it does not matter if Greece defaults or not.

    1. Unit labor costs: In thelast 15 years the unit labor costs in Germany remained more less the same. In Greece they increased by 75%
    2. Greece has the lowest patent filing rate in the Eurozone
    3. Greece has the lowest rate of company birth rates (2007)
    4. Legal costs of setting up a company are higher than anywhere else.

    http://www.zerohedge.com/news/three-charts-confirm-greeces-death-even-after-restructuring

    Invest here?

    • You are right.But dont tell me the current troika reform,is what you consider a business plan.And any business plan is useless no matter how good it is,if it concerns an unstable economy.First you stabilize the economy,then you reform it.Troika does the opposite.What makes the debt be a problem is the lack of growth and not the debt itself,but i havent seen a single reform in order to boost growth,apart from turning us to China.

    • @Bavarian Trader just a comment from the link you posted,that i found interesting:

      “Germany relies on the weakest members
      It’s probably because of a truth that no one likes to talk about: Germans have benefitted greatly from the euro — it’s given them an artificially weak currency. Normally, one would hate to be paid in a weak currency — among other things, it makes their vacations abroad more expensive. But for Germany, a weak currency has been its ticket to prosperity. If the Germans would leave the euro, they would actually be shooting themselves in the foot.

      Consider that Germany, which has a generous social safety net, relatively high wages and just 80 million people, is the world’s second-largest exporting country. The euro has played a significant part in this. German exports have more than doubled since they went on the euro in 1999, going from around 469 billion euros to well over a trillion euros in 2010. The rate of growth was also twice as fast as other nations in the zone. While there is no doubt that the Germans make quality stuff, the reason they are able to export so much at competitive price points is because they are operating with a relatively cheap currency.

      In no way am I defending anything. Just pointing out that the “Germany is an innocent victim” story/view is lacking in a basis set in reality.”

      That is part of the reason,Greece was accepted in the EU with cooked numbers and lets not forget Greece wasnt the only one to cook the numbers.I dont bite the story that “they didnt know”.The only ones who didnt know were the citizens of all the countries.Germany would have no reason to form a currency with northern countries only.This would make the currency harder than the Mark,they would be stupid to leave the Mark for a harder currency.

    • The troica business model seems to be:

      1. Squish unit labor costs and consumption.
      2. Raise taxation, tax everything and everybody. But give concessions to select businesses (in so-called “special zones”).
      3. Firesale of all state owned assets.
      4. Increase pressure to indebted companies and persons.
      5. Expect some investment from EU (state-controlled).

      This model has a name: state-controlled capitalism, aka fascism.

    • You’re quite correct on 2,3 and 4.

      No.1 is a little misleading though.
      Yes, paychecks did rise in Greece over the last 15 years.
      But they remained among the lowest in Europe while prices for goods and services have been and still are, consistently among the highest in Europe.

      Nobody has a problem with getting a lower wage that is aligned with market prices.
      But, when the EU asks the Greek middle class to accept ridiculous wages while milk in the supermarket is more expensive in Athens than is in Oslo (and I’ve been in Oslo) then something is very wrong with this picture.

    • And therefore we all need to help them sink to the bottom… great logic. Greece has serious structural problems, let’s compound them with cyclical ones.

    • The Troika “reforms” are doing no muc to make greece more competitive. The current discussed one has small elements like minimum wage decrase.

      Other than that, they will cost you your job and me my money. It is a waste of money & time. Iceland has recovered just fine without Troika & Euro.

      For the middle and lower class in German a weak currency is bad. For the owners of export comanies it is good (for a while).

      People often forget German is not only the #2 exporter in theworld, but also the #2 importer! For the people the imports are real cost, for the factories it is just flow through cost.

      If one argues that a weak currency is good for one countr (German) than one must equall argue it is good for any other (e.g. Greece with Drachme).

    • @Bavarian Trader
      Germany (as an economy) benefited from the Euro because its exports were boosted.How exactly has Greece benefited from the Euro?unless you consider an increase in imports (and equally an increase in trade deficit) a benefit.Floating rates existed for a reason.

      On the other hand,acknowledging such benefits for both sides (you said it,i dont agree) means that if this relationship stops then both sides stop benefiting.thats exactly why they dont want to let us or anybody else leave the euro and use your money (?) to avoid a (inevitable) default.But im not sure they ever tell you this side of the story.On the other hand i would love to know,if they have any clue about what is going to happen to your economy when demand falls so much that you wont be able to export this much any more?

      You say: “People often forget German is not only the #2 exporter in theworld, but also the #2 importer! For the people the imports are real cost, for the factories it is just flow through cost.”

      Thats a kindergarten calculation.
      Imports or exports make no sense in absolute numbers.What matters is that germany is 2nd in current account surplus
      http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance
      1st is China.The situation in the EU is pretty much the same with the situation between USA-China.it would make a lot more sense if China stimulated domestic demand than USA to impose austerity.They are not doing it yet and thats part of the reason the demand decrease in USA is causing chinese growth to decrease.

      “For the middle and lower class in German a weak currency is bad. For the owners of export comanies it is good (for a while).”
      At least you see the obvious,you have been forced to use a weak currency as consumers,you even acknowledge that only export companies actually benefit,and i might add that the fact that wages in Germany were frozen for years also benefited your exporters and not you,but still instead of demanding an increase for your life standars (that are still better than ours inspite the wage freeze),you demand that others decrease theirs.

      Im sorry but you are full of contradictions.

    • @Crossover: You are pretty much on the same page as I am. The only difference is that you do not differntiate between German people and German export comany owner.

      How Greece benefited from the Euro is obvoius: Your interest rates went down by 80% and capital went into Greece. The issue is that this was used properly and led to toomuch debt and misallocation of capital.

      Of course it would nice to have higher wages in Germany. The issue with your and (Mrs(?). Lagarde´s argument is that the Eurozone is not alone on the planet. If we all decide to become as competitive as Greece, we have fixed the tensions in the currency union, correct. But then we will have outpriced us in the world markets. Not really something that will boost employment.

    • @Bavarian Trader:
      German people (just like all people in the world) are one of the factors of production in their economy so you cant be disconnected from the exports.Thats exactly why i keep saying that if the south goes down,then everybody goes down.Your economy is heavily based on exports.When demand in the south drops,your exports will be significantly affected.2/3 of trade is taking place in the eurozone.Which means that your competitiveness is mostly boosting internal trade anyway.My point is that the largest part of your surpluses are a result of EU countries deficits and not the rest of the world’s deficits so you should stop worrying that much about rest of the world competitiveness.
      But still that doesnt mean only EU must change.I already said China should do the same.Everybody has to balance.Relying heavily on exports is pretty much the same as relying heavily on imports.

      There are 2 ways to balance:
      1) the south reduces its imports – thus reduces its quality of life to some extent,which will cause a reduction in your exports that will cause a reduction in your quality of life.Eventually we both balance but for the worst.And also lower production/consumption means lower gdp.
      2)You raise your internal demand,allowing the south for more room for exports.This results to better quality of life for you,and better quality of life for the south aswell.In the end again we both balance.You reduce your suprlus and we reduce our deficits.

      I have no clue why would anyone choose the 1st way.People seem to think that these imbalances can go on for ever.And indeed they can,if there is an uninterrupted flow of money (credit or not).Now the flow of money is interrupted and you think only one side will be hurt?The only difference is that the importers are hurt 1st.

      Either the decision makers are idiots,or they somehow believe that if the south stops importing you will find new importers elsewhere.I guess im too stupid to think of any.

      As for Greece benefiting from the euro.The euro just made Greek products expensive to export and import products cheap.This would seem as a benefit for a consumer,because consumers realise the economy from their own perspective.They dont act for the common good of the economy.Which is not a bad thing.Im not accusing anyone.Its natural.I will look to buy as much as i can while spending as little as i can.In order for Greece to be able to profit from the euro,it should have already reformed its economy before joining.And im not talking about cutting budget deficits etc.Im talking about improved technological level,thus improved quality of products etcHaving bad governments only made things worse,but bad governments arent even the main reason,is what im saying.And the fact that not only “corrupted Greece” has financial problems,but others aswell,simply proves that.

      If you dont agree you must think that its a coincidence that the most common thing we all have is that we have had increasing trade deficits for many years.

    • Crossover: Option (1) looks nice on paper. How should option (2) work?

      What products from Greece can I buy that I cannot buy from China, Turkey etc. cheaper and or better?

      I would need some workers on my parents farm, but also for this Greeks are too expensive. I will take workers from PL instead. they are cheaper and work harder (yes also much harders than Germans).

    • BT:
      An increase in your purchasing power doesnt mean you will directly spend your cash in Greece.But those who profit from your increased demand will.The more money traveling around,the more everybody profits.Btw our trade deficit has been improving while we were/are still “expensive”.Imports are falling and exports are rising up to date you might want to check it out.

      This doesnt mean Greece doesnt need reforms.

  • I’m following the Greek tragedy from California. Based on comments from other Greeks in the press, it sounds like the broader Greek population fear default more than austerity and would therefore prefer more austerity than default. What I don’t understand is this. I’m assuming most Greeks already know that more austerity most likely won’t work given past austerity measures hasn’t worked and eventually Greece will have to default anyway. Can someone explain why the broader Greek population wants to suffer more austerity before defaulting given that default is inevitable? Do they think postponing default will lessen the pain of default or are they expecting some kind of a miracle to make the default go away?

    • Very simple. The middle class and lower class will suffer and the elite can continue to import goods and pay them in EUR vs. Drachme. The Germans and the lower & middle class pays for the lifestyle of the upper class Greeks.

    • Indeed, if you watch comments in the press you get this impression and it seems illogic. I speak to people and get a very different impression of public stance: “we should say no to these loans and the austerity, but our political and media establishment are afraid to do the right thing, because it will mean their end (via elections)”.

    • The answer to your question is not simple.

      First of all, we are not asked to select an option.

      I agree with your logic, but consider the following: Are economists in Europe, or in US in agreement? If economists can not have a single response to your question, do you think that non-specialist people will?

    • Bavarian,

      What a load of crock. The German middle and lower classes are paying nothing. If you have evidence to the contrary, please lay it out now.

      All of this is happening because Mrs. Merkel doesn’t want her banks to suffer excessive losses. And neither does Mr. Sarkozy.

      Greece cannot pay their debts in full, will not pay them, and ordinary people are made to suffer because of the political theater needed to maintain the CDU/CSU in power. Germans are woefully uninformed about what’s really going on. It’s always easy to point the finger towards the Ausländer.

    • Very easy answer, even the most religious person who believes in the afterlife does not want to die. Doesn’t he think he will go to heaven? He is not sure that a heaven exists, so he prefers to postpone to something he knows than go to something he doesn’t…

    • GermanQR: The Greek middle and lower class AND the Germans are paying for the behaviour of the Greek elite.

      You want evidence? Here you go: The Bundesbank belongs to the German people. The Bundesbank is lending money below market rates to PIFGIS. This is opportunit cost, a loss.

      The German government is lending money and giving guarantees below market rates. Same story as above.

      Now you can argue that opportunit cost is not real cost. But who pays when the risk materializes? The Greek elite?

      If you want some evidence ifpeople in Germany are uninformed and relaxed about the situation, d the following: (1) Go to buy gold at proaurum in Munich and you will stand in line there. (2) Fly to ZRH from Munich or Frankfurt and go to the airside banking counters. Then fly back immediately. You will the some people 3 times: On both flights and at the airside banking counter!

    • How about the behaviour of the German elites? How about the German banks that were aggressively pushing loans into Greece’s private and public sector? Could you comment on them? Or is it that only the borrower is responsible when a loan that ought never been given is granted?

    • Point well-said Yani.People dont understand that banks use loans as an investment.Whenever any other type of investment goes wrong,its at least 50% the investor’s fault.I dont understand why it shouldnt be in this case.

    • The German banks and others should take the losses. It will not kill them. What is happening now is absurd, decision making and risk need to stick together. This is a key principle of capitalism. If you seperate it, you get a risk avalanche.

      It might be different for the French banks…

  • You’ ve said many times in the past that the German elite haven’t decided yet if they will keep euro or not. You’ ve also stated that if the decision is negative, then Germany will exit euro first. What if they have indeed already decided to exit the euro? Let me explain my thinking…

    The situation as it is right now seems to, generally speaking, benefit German economy in terms of money flowing into the country either through an extremely low interest government borrowing or through an increase in deposit accounts. So, it seems like a truly stupidity to leave eurozone as long as this status remains the same. In addition, politically speaking, a German exit wouldn’t be good for the reputation of the country because everyone would accuse Germany as a speculator leaving the “sinking ship” in the worst point of the eurozone’s history. So, what if they – although ready for the next “D-Mark day” – let the situation be as it currently is and make big money out of it, while pressing the Greeks and the rest of South Europe as much as possible to the point that these nations are forced to leave the eurozone, or at least start thinking seriously on this scenario. Then the German elite will simply say, “Game over, the party is finished. Now we’ re back to D-Mark!”, and the blame of the catastrophe would then charged to Greeks and/or other nations of the eurozone’s periphery.

    Given that a Greek euro exit will cause a domino effect which in the end would lead Germany to either pay an enormous amount of money or to leave the eurozone, an already taken decision for a German exit would not “harm” Germany (according to their logic) if they would wait to earn some more money till that day. What do you think Yanis?

  • So when is someone going to propose a business model for Greece (other than “do nothing and wait for more bailout money and silly Troika cost cutting measures”).

    • Dear BT, I hope you will allow me to make a tiny, yet crucial, point: The greatest fallacy at a time of a macro-economic slump is to think of the economy as an ailing business, in need of a business plan. As long as the powers that be in Germany keep thinking that a macro-economy is ruled by the same principles that govern a business, Europe’s troubles will be having a ball. First we need to arrest the free fall, by breaking the debt-deflationary cycle. This is a necessary, though insufficient, condition to allow a myriad business plans to grow in Greece so that the economy can be made viable again.

    • Mr Varoufakis, i dont know if you agree,but allow me to add that governments should never function in terms of household or business finances.Thats not their job.Euro might have distorted the nature and forced governments to compete with households and businesses for revenue,but that doesnt mean that its the right thing to do.And especially in unstable conditions such as the current one.By this,in no way i claim that especially the greek government is not in need of changes.

    • Point taken, than let´s not call it business plan. Let´s call it plan how to run the country without fiscal transfers from other countries.

      The current plan of (1) get rid of some debt (2) get fiscal transfers (3) hope to be able to bowwor more & do so (4) keep on running deficits and (5) return to (1) cannot be all that all these US elite educated Greek PhDs can come up with with.

  • At the time of the first Memorandum I believed that it was possible to aroid default.
    I still believe that it would have been possible to aroid default. THEN. But at this point, and as things have turned out, I must agree with Mr. Varoufakis that the only viable option is default within the euro.
    So in order to clear the Beatles’ name I’m offering one their songs which I think better describes the Greek crisis.

    http://youtu.be/OUd9Sx5Pumg

    Once there was a way to get back homeward…

  • Dear Mr. Varoufakis,

    If i make € 2000 a month and i want to buy a villa wich price is way more than i can afford, no bank would ever give me the money. Comming to my question:
    Is it possible to bring forward all contracts signed by all goverments and see when greece was starting to get loans beyond they could afford?
    2nd question, is it possible to sue whomever gave the loans, bring them to a court and sue them?

    I have read some actions brought forward by Raphael Correa from Equador…

    At last so many years greece, since the d’alors package was under continue observation by the eu. Did nobody see it comming? Where is room for justice?

    This does not mean that i am not pissed beyong borders with greek goverments.

    Thank you in advance.

    Best Regards,

    Sakis

  • Awesome interview. It tells you something about the state of the media when common sense seems radical.

    Hundred percent agree with you. A default in 2008 would not have been that bad. The currency in the pockets of Greeks would still have been worth more or less the same as it was before a default. Unlike any other default in modern times.

  • Germany in 1920 vs Greece in 2010: Find the differences

    Germany:

    -War economy returning from WWI.
    -Had to pay war reparations (set forth by the treaty of Versailles) either in gold or in raw materials and not in its own currency.
    -Due to the war reparations, exporting was made difficult (since materials were handed out as reparations instead of being sold in foreign countries).
    -The allies occupied certain German industrial territories (such as the Ruhr). Passive resistance and the fact that the German government continued paying sallaries for the workers (which were on strike) made things worse.

    Greece:

    -Entered 2010 with an economy in recession. Home prices were dropping since 2008Q4 and 4% of GDP was lost in 2009 because of reduced exports (of goods and services) to Europe (which faced a recession of 4% that year). Unemployment was already over 10% at the end of 2009.
    -Owes (mostly) foreign debt, denominated in a currency it does not control while payments come out of an economy in depression (6% lost output in 2011, unemployment which moves closer to 20%, retail sales in free-fall).
    -Finds it difficult to export its way out since the same austerity menu is served all over Europe (which is its largest export market).
    -Faces strict controls on its domestic policy imposed and controlled by the creditors and is obliged to fire sale most of its state property.

    http://kkalev4economy.wordpress.com/2012/02/04/germany-in-1920-vs-greece-in-2010-find-the-differences-2/

  • HI Yanis,
    My Name is Dimitri I am a Greek Australian
    My question is If the greek’s want to leave the Euro and the Germans obviously want Greece to leave the Euro Then Why don’t the German’s take over the Greek debt tell them to return to the drachma and start all over again. The debt that Greece has can be taken over by the German’s which by the way is insignificant to the German economy.

2 Trackbacks