Interviewed by The Occupied Times ~ of London

03/03/2012 by

The Occupied Times ~ of London honoured me with a request for an interview. It has just been published here. The text of the interview is also copied below. Please support them any which way you can.

Money Talk$: Yanis Varoufakis

In the wake of the brutal austerity package – cutting 3.3 billion euros of wages, pensions and benefits – which has just been passed by the Greek parliament, Professor Yanis Varoufakis, Professor of economic theory at the University of Athens, gives the OT his unique insights into the dark days that lie ahead…


OCCUPIED TIMES: You say Athens is in a “deep depression” – how does it feel to be living there?

YANIS VAROUFAKIS: People can talk about little else except the crisis. You meet people that you have not seen for decades and instead of asking each other how life has been, you launch into a discussion of the ‘disaster’. The lights are going out on the city, as many families have had their electricity supply disconnected. Every other shop is now closed, even in the posh areas of Athens. Businesses that are hanging on are readying themselves for the final curtain. Everyone owes money to everyone else and no one can pay. Jobs are a mirage, with unemployment amongst young people reaching 45% across the population.

OT: Aren’t electricity bills in Greece going up now, and isn’t there some new electricity tax…?

YV: Both. Electricity itself has just gone up by 12% while, on top of that, the government is introducing new lump sum taxes via the electricity bill. If it were not so tragic, it would have been hilarious.

OT: People talk about “the Greek malaise”. What exactly is it?

YV: Let me remind you that until 2008, Greece was doing rather well. The economy was growing faster than the average in Europe, investment was on the rise both in the public and the private domains. So, why did Greece implode in 2009/10? The reason is both simple and complex. The simple story is that Greek industry retreated in the late 1970s, following the combined shocks of the oil crises (that boosted energy costs) and the removal of tariff protection, so as to support Greece’s entry into the EEC – the predecessor of the EU. At that point, the losses of the private sector were transferred to the state sector, inflating public debt (especially as the state was utilized to employ workers and employees that industry was shedding). Add to this mix a chronic dose of tax evasion (that began with the rich and then spread down to the ‘lower’ classes) and you have the makings of strains in the public purse. Before the euro, Greece managed to avoid crises through frequent devaluations. But once we were in the euro, the shock absorber of devaluations was gone. That was a time when rivers of cheap toxic money (mostly produced by Wall Street, the City and the large Northern European banks) were flooding their way into countries like Ireland, Spain etc. They gave everyone a false sense of security and progress, but in reality they were creating a consumption-led boom. So, when the Crash of 2008 hit us, it was just a matter of time before the capital which had flown in flew out again, leaving nothing more than devastation behind. And given the impossibility of a fall in Greece’s currency, to absorb the shock, the result is that something else had to give – Greece’s social economy.

OT: And credit rating agencies, how did they fit into all this…?

YV: These outfits performed their criminal miracle during the good times, especially in Wall Street and the City. They played a crucial part in helping the banks print their private, toxic money (e.g. CDOs or collateralised debt obligations) by labelling it AAA or ‘riskless’. An unholy alliance between these agencies and the banks created the pyramids that crashed in 2008, with the results that we all feel worldwide to this day. Nowadays, I do not think they matter much. And if they do, it is the politicians’ fault – for example, when a Central Bank (like the ECB) states that it will only take in as collateral bonds or titles with a certain minimum rating from S&P or Moody’s, whose fault is it if S&P and Moody’s then exercise exorbitant power?

OT: It seems like the technocrats are taking over (in Italy & Greece) – you think they can do a better job?

YV: No, this is not a matter of personalities. It is a deep structural flaw in the guts of financialised capitalism in general and the eurozone’s unsustainable architecture in particular. In some respects, a degree of personal competence is not a bad thing. Italy’s Mario Monti is certainly better than Berlusconi. Not so our own ‘technocrat’, Lucas Papademos, whose greatest asset, in my estimation, has been his readiness to act as his master’s voice for a long, long time (his master being the European Central Bank). Although in a way, he’s doing a sterling job, given that his job description was, from day one, to orchestrate the acceptance of these loans by the Greek parliament. Once a lackey always a lackey!

OT: Is there any more to give? Any more assets to strip?

YV: It is important to emphasise that the worst aspect of the Greek ‘bailouts’ is that their purpose is not to asset-strip Greece. Their purpose is to hide the true, sorry state of northern European banks. For this reason, the insolvent Greek state, and its battered citizenry, is being asked to take on loans that it cannot repay for a simple reason: so as to pass them on to the insolvent banks. But to pass these loans through the German parliament, whose members do not want to pass these loans, the German government must demonstrate to its MPs that Greece ‘deserves’ its loans because it is suffering, bleeding and selling out. Thus, Greece is asset-stripped in order to placate German parliamentarians to pass loans to the bankrupt banks.

OT: What’s your issue with the PSI? (Private Sector Involvement) and the debt ‘restructuring’ we’re about to see?

YV: My issue with it is that it is fraudulent. I am all for haircuts. If a loan turns bad, then both the borrower and the lender must take a hit. So far, the burden and the pain has gone only to the Greek people, while the EU and the IMF are piling up new debt on Greece’s weak shoulders so that the bankers do not lose a penny of the money and the interest due to them. The reason why the PSI is fraudulent is that it forces the bankers to take a hit, but also forces them to pretend that they are doing this voluntarily. Why? To ensure that the Credit Default Swap contracts (in effect insurance policies, that some hedge funds and banks bought from other banks and hedge funds, that pay their owner money in case of an involuntary Greek default) do not ‘fire’ – since if they do then those bankers that have issued the CDSs will end up being insolvent too (since they lack the money to pay out the insurance contract owners). Thus, Greece is now being asked to negotiate with the bankers what hit the latter will take ‘voluntarily’. It is like asking a mouse to negotiate with a cat as to which part of the mouse the cat can eat. And all that as a precondition for the EU and the IMF granting more loans to Greece, that Greece will be using to pay the bankers leading to even more crippling austerity – while being prohibited from using even a fraction of that money to boost its economy or fund hospitals.

OT: It’s been rumoured that certain currency exchanges are preparing for a return of the Drachma – do you think that’s going to happen? What would happen if Greece pulled out of the euro?

YV: It would be criminally negligent if our governments were not preparing contingency plans for such an eventuality. Having said that, I think that a collapse of the euro would be awful for all of us; both those inside and those outside the euro area. Moreover, the human cost in a place like Greece from leaving the euro, while the euro remains legal tender, would be appalling.

OT: Will people be forced to leave the big cities (Athens, Rome, Lisbon etc.) and go back to rural areas?

YV:  A number of people are, indeed, leaving Athens for the countryside, hoping to establish a simpler more sustainable life. But this is not the solution. We live in urbanized, cosmopolitan societies in which the city is our civilisation’s lynchpin. The task ahead is to made them work. Not to abandon them.

OT: Why is ‘debt’ so powerful?

YV: Because the creditors possess monopoly power over the political system. Especially after the Crash of 2008, we live under a system I call Bankruptocracy – rule by the bankrupt banks. The greater the black hole in their midst, the greater their capacity to mobilise the state in order to extract rents from the rest of the social economy.

OT: Do you think the people will ever take back control of their banking system?

YV: Not until the middle class also revolts, and the political system realises that they must yield to the masses, or be done away with themselves.

OT: What do you make of the Occupy movement?

YV: It is the only ray of hope during a particularly dark night.

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