The Modest Proposal for Overcoming the Eurozone Crisis, Version 3.0

This blog was established in order to throw useful light on the Eurozone Crisis and, in particular, to present our Modest Proposal for resolving it. The first version was presented in November 2010. Since then  we have had a number of updates. Today, I have the pleasure of posting Version 3.0, a thoroughly re-worked variant in which we have tried to distil a year’s worth of debates, criticism and experience. Comments and suggestions are most welcome. 

  • Click here for a pdf copy of Version 3.0
  • Click here for a recent talk presenting the main ideas behind the Modest Proposal
  • Click here for a shortened version, as published in Eurointelligence
  • Click here for a popularised version of the idea behind Policy 2 – as published in the Globalist
  • Click here for a mini documentary which captures the spirit of the Modest Proposal
  • Click here for all the previous versions and various articles that offer a good background against which to project our ideas
  • Click here for our presentation of the Modest Proposal at the European Parliament


    • Generalizations again.

      I’m really getting bored of this.
      Choose your weapons.
      I choose gyros. 🙂

    • It was me, Pedro. I’m sorry. Couldn’t help myself. Thought he was an Ajax fan.

    • The Euro brings peace and wealth to Europe is what the Europhiles used to say!

    • Pedro dont even get us started…if you want to generalize about Greeks,based on these 2 punks (who actually attacked the man because they thought he was German, just for the record), we can always use Hitler Merkel & Co. to do the same.Not saying thats a wise thing to do but you already “lost” if you want go that way…

    • @ Pedro

      It is all the Greeks fault.

      We are actually superior geniuses.

      It was a plan of all the Greeks united as one mind to get into the EU ,let others abuse us ,hang tough while people die ,get your money and cause trouble to Germany.

      Greek EU Task Force?

      Who asked for you?

    • An maybe 1 million years ago someone stole a clay bowl from Greece…

      If the only industry that is somewhat interesting is tourism I would not take it so lightly that foreigners get beaten because they are foreigners. Strange way to thank someone for their business (and their tax money wasted for “bailouts”).

    • @ No EU dictatorship

      An our production was sacrificed so that you can live better.

      History will once more make you feel very ashamed for your German pettiness.

    • @ No EU dictatorship


      Siemens’ corrupted deals in Greece and forcing imports and military purchases and and and …….is very good business for parasites.

    • What did Greece ever produce that is now produced in Germany? You compete with China and India!

    • Ofcourse ,destruction production and not allowing our inventors to advance so they leave the country. You can’t go anywhere without finding a Greek mind advancing a science.

      Even your Goebbels said (if i remember correctly): “The future of this world lies at the combination of German technology with Greek spirit” ,among other things.

      Not that we hear him.

      What the hell are you going to do with your technology without any heart in it and still ,as for technology ,a small example ,

      do you know how many Greek cars ,and not only ,we could have had? Google.


      Rebranding Greek agricultural products to import back in Greece as foreign is a common practice.

      No country can have such power as the big forces without malpractice. It does not add up globally. There must be worst situations somewhere and if there aren’t any ,you create them. Sabotage all over the place.

      And still we are patient. Until…….

  • Hi Yanis,
    Your second affiliation in the pdf of the Modest Proposal 3.0 is incomplete. Anyway, thanks for sharing your ideas.

  • Dean, glad to see you back on this blog. Are you going to vote for ND in the next round of elections?

    • And the reason I don’t know, David, is that I’ve heard Hollande’s plane was struck by a thunder on his way to meeting with Frau Satan.

      So, I have to be real careful what I choose this time around 🙂 It’s one thing to make people mad in this blog and quite another to be the target of wrath from the 12 Gods of Olympus.

    • David:(seriously now)

      If your order is to vote left (as you previously expressly stated) then the furthest I can go is to vote for Kouvelis. And here I draw the line. No way that I can vote for an untested kid like Tsipras who is basking in the limelight of fame as a typical Leo personality.

      I like politicians with down to earth personalities, not rabble rousers:

    • Seriously, Dean, did you not make a case for Samaras being anti-memorandum? Did you notice he exploded at Tsipris and others who would not accede to the memorandum? Great sense of humor, Dean, but, who are you?

  • Over the past couple years I have read through countless proposals for resolving the Eurozone crisis. Most policy options seemed overly optimistic about the potential for policymakers and central bankers to let go of previous rules and reservations. So far those opinions have proven true and left many pundits sorely disappointed.

    I agree that relaxing these constraints is highly doubtful, despite the potential benefits. The policy proposals put forth here still require a large leap of faith (and probably further economic/political deterioration), nevertheless they represent some of the most plausible solutions and will hopefully begin seeping into mainstream discussion in the near future.

  • Not a good omen…On the way to Berlin for his first summit, Hollande’s plane gets struck by lightning.
    God’s way of telling him don’t go to the pit ,you’ll never return the same?

    Gives it another go…
    Leaves for Berlin in a backup plane.

    When you’ve got to meet the boss, you’ve got to meet the boss…

    I am on my way to get my red nose ,my vulcan ears and my squeaky head-horn.

  • 2 questions from the peanut gallery of the (economically) unwashed masses:

    – How does this (especially nr 2, the ECB bonds item) help Greece in its current situation? Even if Greece actually could reduce its interest payments, given its primary deficit (which is, at best, somewhere in “black zero” territory, interest of any kind seems tto be out of Greece’s reach.

    – if it actually helps, what is left to push Greece to finally modernize and improve its, well, insttitutional stature? Liberalize certain markets, well(!) regulate others, improve bureaucratic efficiency, tax collection, massively reduce overall bureaucracy, battle corruption and patronage systems, the plethora of things we now know don’t really work in Greece. Don’t you see a danger that Greece just takes the new-found breathing room and continues the way it did in the past, until, a few years down the road, we again are where we are now?

    • @MIchel D

      This is my very first attempt to explain anything concerning economics, so please everyone correct me if I’m wrong.

      As far as I can understand, the modest proposal system addresses the Maastricht compliant debt for each member, so the rest of the debt will have to be serviced otherwise by each member separately. Which means that in order to do that as well as to be free to participate in the investment plans by EIB/EIF, Greece will have to sort out internal beaurocracy, tax/tax collection system and whatever else stands in the way pretty efficiently.

      Hope I didn’t get it all wrong…

  • Professor Varoufakis

    Bringing your toy out again! I hope this time around you will find some ‘children’ to play with it.Since, as its sire along with Stuart Holland, you flagged it more than a year ago you have made so many ‘bastard’ revisions to it, that it has become difficult to identify its ‘true father’. But one thing is for sure, that in your vainglorious pursuit to persuade governments and bankers to adopt it, you will miserably fail. Your Modest Proposal was always a flying kite that would inevitably take its nosedive.

    • Its not my business,just speaking out of curiosity…

      If you dont like the man or his views, why bother coming here again and again and literally troll the [email protected] out of him ?

      They say haters gonna hate…lol

    • kotzabasis, Do you have anything at all to say, or you just pure blah, blah, blah? You obviously still haven’t read the Modest Proposal or you would know that structurally its unchanged since the beginning. Only the supporting dosiers are tweaked to bring clarity to the Proposal>

    • Dear sir,
      Since your use of the language is quite eloquent, why not explain yourself with facts and pure knowledge instead of ironic blaiming for no apparent reason?
      I’m sure we are all more than interested to a more accurate proposal than the modest one!

    • Does your name suit your character or your position or both?

      “elder or notable of the self-governing Christian communities of the Ottoman Empire”

      Your shambolic decoratums lay me swiftly as jaded as the umbra of your subsistence


      I pray thee cease thy counsel ,Which falls into mine ears ,as profitless as water in a sieve

      -William Shakespeare-

    • “Strong minds discuss ideas, average minds discuss events, weak minds discuss people.”
      ― Socrates

      P.S. You must have noticed that I talk a lot about Merkel. So, don’t follow my example. In politics you need to bring down your opponents and that’s precisely what I am doing. Unless of course, you can convince us that your critique of Yanis is politics; doubtful as this might seem.

  • New Caretaker Prime Minister Panayiotis Pikrammenos (sad).

    Have you ever noticed that certain events in nature occur that tie everything together ,fall into place ,complete eachother ,offer continuity ,and reveal info otherwise not revealed? It is called synchronicity.

    Now if that can say anything about the future or just the present preferably ,the name Pikrammenos (sad) ,shows we are in deep s_t.

  • Crossover
    I’ve no hate for no one, least of all for Professor Varoufakis who has a Kazantzakian character though highly ego-centric which at certain times cancels his strong character. I’m merely attempting to expose and rail against his misguided political positions, such as his ‘gamble’ support of Syriza, that can be so dangerous in the present critical situation of Greece.

    David Sheegog
    I’ve read Andreas Koutras’ critique of the MP and the subsequent revisions that Professor Varoufakis was enforced to make to his original paper to counter that dealy critique which in my opinion led to the burial of the MP.

    I’m not an economist and it would be foolish of me to make a counter proposal to the professor’s MP. I draw my conclusions from other experts in the field, such as Andreas Koutras among them.

    We are not responsible for our names nor for the colour of our skin. Names have no connection with character only our style of writing has.

    • If theres anything you are trying to expose such as his political positions or whatever, i guess thats fine.But having read your latest comments,i saw anything but actual arguments.
      About Syriza, well if you really feel like its dangerous and you want to blame its latest success on someone,make sure you blame PASOK,ND,Troika etc first.Its not really hard to see that Syriza was voted in order to reflect the current humongous opposition against the austerity policy and not due to its program or whatever…nobody becomes a leftist (or a rightist or far-rightist) overnight…

    • Would you care to elaborate on “his ‘gamble’ support of Syriza”?
      We have much to think of.

    • If you have no training in economics, you have no business making such nasty remarks. I have never heard of Andreas Koutras and can find no economic research or publications attributed to him, He is therefore another nobody like you.

  • If I’m getting this right you are suggesting that if the ecb is able to borrow at lower interest rates then the amount of interest paid by the eurozone members will be reduced.I don’t see how that can lead countries like Greece(without even considering implied liabilites like social security) into solvency. Also I’d like to point out that seniority of debt makes sense only when the debtor has enough to repay the senior portion of his debt,otherwise that guarantee is practically worthless. So when a member state fails to meet its payments to the ECB the EFSF will have to intervene leading us back to almost what we have right now. Don’t you think that the markets are going to price in the fact that the EFSF underwrites these ecb bonds leading to similar interest rates?

    I fail to see how an underinvestment crisis can be resolved by supranational organisations
    who are handled by unelected and unaccountable bureaucrats who are going to be spending other people’s money.If that were true wouldn’t the World Bank have a positive impact on growth in Africa?

    A much more rational solution I believe would be to let the market price the real value of periphery bonds have the sovereigns default and then have banks and sovereigns sit in a table and net off claims. That would lead to a necessary destruction of capital leaving states solvent(but also forcing them to achieve a balanced budget) while at the same time banks will be left insolvent due to the bond haircuts.At that point bank creditors will be forced to swap their claims with equity leading to capitalised banks but not at the taxpayers expense.

  • ΕΠΙΤΕΛΟΥΣ ΡΕ ΓΙΑΝΗ, ΕΠΙΤΕΛΟΥΣ….! Δυο χρόνια ακούω προτάσεις από νομπελίστες, από τους καλύτερους οικονομολόγους της Ευρώπης(που εγώ σε βάζω σε αυτούς και τον Στιουαρτ Χολαντ φυσικά). Σε όλες αυτές τις «προτάσεις»(ακόμα και από την άλλη άκρη του ατλαντικού) κάνεις δεν έβαζε το ένα και μοναδικό “πρόβλημα”….ΟΤΙ ΔΕΝ ΕΙΜΑΣΤΕ ΚΑΙ ΔΕΝ ΘΑ ΓΙΝΟΥΜΕ ΠΟΤΕ ΗΠΑ…ΕΛΕΟΣ! ΕΛΕΟΣ! ΕΛΕΟΣ! Όλες αυτές οι προτάσεις είχαν πάντα ένα έλλειμμα «ΠΟΛΙΤΙΚΗΣ ΚΑΙ ΚΟΙΝΩΝΙΚΗΣ ΣΚΕΨΕΙΣ».

    Είναι δυνατόν ρε Γιανη να γίνουμε ποτέ «πρώτα αμερικανοί και μετά νεοϋορκέζοι»? Δεν είναι θέμα «παλαιού πατριωτισμού» είναι θέμα ΙΣΤΟΡΙΑΣ, ΚΑΤΑΒΟΛΩΝ. Εδω γεννήθηκε ο διαφωτισμός φιλέ Γιανη, εδω έγιναν σπουδαία πράγματα, έγιναν φυσικά και τα πιο αθλία.. Έτσι μας πήραν οι γιάνκηδες την θέση στο διεθνές οικονομικό και πολιτικό γίγνεσθαι. Απλά όπως όλοι οι ανιστόρητοι λαοί ΔΕΝ ξέρουν πως νομοτελειακά εδώ θα γυρίσει η «δύναμη»(μη κοιτάς τώρα την Ινδία, τη Κινά, τη Βραζιλία) πάλι εμείς θα επωφεληθούμε από την «αστικοποίηση» αυτών των χώρων..

    Το διεθνές κεφάλαιο θέλει κάτι τέτοιο,(ονειρευτέ να γίνουμε ΗΠΑ, για την ομαλή ανακύκλωση του χρήματος και της «ευημερίας») για αυτό κάνε μια «μαντεψιά» να δεις ποιοι συμφωνούσαν με τις «πρώτες προτάσεις» σας(Φυσικά εσείς δε το κάνατε ηθελημένα, είμαι σίγουρος για αυτό, απλά «παρασυρθήκατε» από τα υπερατλαντικά κέντρα).. Ξέρεις Γιανη η νέα πρόταση σας με έκανε πολύ χαρούμενο για ένα και μόνο λόγο, επειδή μόλις «καλύψατε» το έλλειμμα πολίτικης και πατριωτικής σκέψεις- συνείδησης.

    Περά από τα «τεχνικά» τις πρότασης(που εγώ κλασικά θα ήθελα ένα new deal σιδηράς πειθαρχία προς τις αγορές διεθνούς κεφαλαίου-χρηματοπιστωτικό τομέα)Είναι ένα δείγμα ότι πραγματικά υπάρχει ακόμα ελπίδα σε αυτό κόσμο, κάνατε δυο χρόνια να το «καταλάβετε», αλλά ευτυχώς ποτέ δεν είναι αργά.!

    • @ human1988

      Indeed it is only natural that all life will eventually return back to Greece.

  • It is not a good idea for Greece to leave the euro. But it is time to prepare for its departure

    “GREXIT” is an ugly term for what may soon become an even uglier reality: Greece’s departure from the euro zone. As fury in Athens runs up against frustration with Greek recalcitrance in the rest of the European Union, the EU’s most troubled economy could be heading out of the single currency within weeks. If Greek banks suffer a mass run, as depositors withdraw euros for fear they will be forcibly converted into new drachmas, Greece’s fate could be settled even sooner.

    Greece’s ascendant politicians, particularly Alexis Tsipras, leader of the radical left Syriza party, want to repudiate Greece’s rescue deal with its European and IMF creditors. The creditors, particularly Germany, are standing firm, rightly making clear that they will not be blackmailed into repeatedly rewriting bail-outs. If in fresh elections on June 17th the objectors have a majority, as the polls suggest, and if they renege on Greece’s bail-out deal, then the world will cut off the supply of rescue funds. It is hard to see Greece then staying in the euro.

    There is already a whiff of inevitability about an outcome once deemed impossible. Central bankers now openly discuss the possibility that Greece may leave. As the impossible lapses into the inevitable, a growing chorus is arguing that it is even desirable. Advocates of an exit say that Greece would gain from a cheaper currency, and that the politics of forging a closer fiscal and financial union between the euro zone’s remaining members would be easier without a country that should never have joined in the first place. But it is wrong to pretend that a Greek exit is an easy or desirable outcome. Before it is too late, Greek politicians need to be honest about what an exit implies. And Europe’s politicians need to act far more boldly to protect the rest of the euro zone in case the worst happens.

    Eirexit, Porxit, Spaxit and Ixit

    Start with the Greeks. Most of them want to ditch the hated austerity policies that they blame for their plight. Mr Tsipras and his colleagues are fuelling the belief that Greece can somehow avoid austerity and still stay in the euro. In fact Greeks cannot avoid austerity, either within the euro or outside it.

    It is true that Greece can survive within the euro only with a gruelling downward adjustment of wages and prices, which demands painful budget cuts and structural reforms. Yet even stronger medicine would be required if Greece left the euro. Cut off from foreign funds, the country would be forced into still tighter fiscal austerity. It would need a disciplined monetary policy and bold structural reforms to retain the gains from its cheaper currency and avoid hyperinflation. Discipline and reform are not familiar concepts in Greek politics.

    Moreover a chaotic Greek departure would devastate the country’s political life, because Greece would risk expulsion from the single market and perhaps even the EU itself. A place that shed dictatorship as recently as 1974 would find exclusion from Europe traumatic. For a taste of what might ensue you only need to look at the rising power of extremists such as the neo-Nazi Golden Dawn party.

    If Greek voters deserve greater honesty about the Grexit, so do those in the rest of the euro zone. Greece may be a small economy, but a Greek departure from the euro, amid brinkmanship and bluster, would not be a small event. Most obviously, exit—and the subsequent default on its private as well as official debt—would cost European banks, firms and taxpayers a lot of money (see article). And that is without counting the danger of a general contagion in weak euro-zone economies.

    There is no formal mechanism for leaving the single currency. As depositors and bondholders across the euro zone factor in the increased risk that their assets could also fall victim to a break-up, other countries would come under pressure. Today’s much-ballyhooed “firewall” is not nearly strong enough.

    People strive to avoid disaster. Yet the scope for political miscalculation and financial panic means that the worst might still happen—it may even come soon. Deposits are fleeing Greek banks at an accelerating pace. If financial panic forced a Greek exit before the vote, it would wreck the credibility of pledges that banks across the euro zone are safe. As the Greek economy shrinks within the euro, the economic arguments will become finely balanced—because capital will have fled and the debt burden loom larger. As Greece’s politics is bankrupted, the siren call of populism may grow irresistible.

    These dangers require urgent action. First, to prevent a mass run, the European Central Bank must be ready to flood the Greek banks with liquidity—raising the losses to European taxpayers if Greece does eventually leave. And second, to stop a Greek exit being followed by a cascading loss of confidence in other peripheral economies, the euro zone must undergo much faster acceleration towards fiscal and financial integration than most European politicians will admit.

    To safeguard banks in Portugal or Spain from runs, European policymakers will have to set up some form of euro-wide deposit insurance. And to reassure investors in the sovereign-debt markets, there will have to be much quicker progress to some form of debt mutualisation among the single currency’s members. The Europeans should have started work on these things during the lull in the crisis earlier this year. Germany resisted that. Now these changes must be done in a rush.

    A vote to rock democracy’s cradle

    The Greek election is in effect a referendum on whether the country will stay in the euro. It is not completely without hope. A new Greek coalition which vowed to stick to the rescue deal would in fact gain some help from the rest of Europe. At the same time, with the promise of a common banking backstop and some form of Eurobonds, the euro would at last start to look as if it could survive and the dangers of contagion would fall away. And if Greece were an isolated problem, it would be much easier to nurse slowly back to health.

    The financial re-engineering of Europe is a prerequisite for the euro to survive. Greece is bringing forward that moment of truth. And yet politicians, particularly in Germany, have still to accept the logic, let alone explain it to voters. The prospect of a Greek exit means they must begin to do so—and fast.


    “At the center of the debate lies the question of national sovereignty, the core and periphery of Europe will then have to decide how much (or how little) they are willing to compromise in order to find a way out of the crisis. The answer to this question will not be the result of an economic analysis – it will be the result of a political calculation.”

  • Dmitri

    I’ve commented on this issue before on Varoufakis’ website. You probably haven’t read his paper (b) on prior to the election when he used a games-theory artifice in a GAMBLING form to vote for Syriza instead of doing it directly. Thus he showed that in a crisis situation, when action is most important and one has to act according ones political convictions clearly and promptly, Varoufakis was picking Syriza as his favourite party in this roundabout way and hence laying at the feet of Fortune the results of his strong convictions. In crisis conditions such conduct is not only cynical but also nihilistic.

    • @ kotzabasis

      Yes i read his paper.
      I understand your position. It is the usual position of someone who tries to find an exact solution for problems-situations-events ,which have near infinite and dynamic parameters one can not control.

      So actually the approach of Prof. Varoufakis is extremely logical ,exactly because he takes into account the subjectivity of logic itself.
      Noone can affect the whole population of Greece and Prof. Varoufakis made it clear that the criteria of this analysis are based on his economic thoughts about the party’s economic programs more than anything else.

      It is more than simply political convictions. No party is ready to handle this so called Greek crisis or is acceptable by the Greek population.

      There are also unknown new parameters for the Greek population to absorb and process. This is one reason i personally wanted the coalition or whatever happened this time.
      And my voting criteria were principles that are a bit forgotten by people ,so that there is a chance for one more step of evolution.

      Anyway voting for SYRIZA is only a reconnaissance mission.

      What is your position about the political scenery?

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