Discussing Grexit in Washington Post, Huffington Post and ABC Radio

MARK COLVIN: Greeks have been taking hundreds of millions of euros out of the country’s banks over the last few days – a sign that many of them don’t see any alternative to the country crashing out of the eurozone.

More about bank runs shortly.

But global financial markets are still spooked too – subdued today, but mainly because they’re marking time.

Some economists say a new, less severe program isn’t possible with Greece as part of the euro.

Others say the costs of a eurozone exit to Greece and the rest of Europe are simply too high to bear.

Business reporter Michael Janda.

MICHAEL JANDA: It seems joining the euro is like joining the Mafia; once you’re in, there’s no way to get out alive.

YANIS VAROUFAKIS: The moment this gets out, imagine what the ramifications for Portugal, for Ireland, for Italy for Spain?

MICHAEL JANDA: Yanis Varoufakis, a professor of economic theory at the University of Athens.

YANIS VAROUFAKIS: Europe is already on the brink of a very serious recession and Greek exit, with all the uncertainty that it will create; the whole of Europe is going to be suffering. A Greek exit will be a bit like the Greeks poisoning the swimming pool water in which we have to swim.

MICHAEL JANDA: Other economists say Greece must escape the vice-like grip of austerity that has seen its economy contract non-stop since the onset of the global financial crisis in 2008.

Professor Costas Lapavitsas from London’s School of Oriental and African Studies.

COSTAS LAPAVITSAS: These policies are killing the country and if Syriza is prepared to do something to lift the strangle hold then that’s a great piece of news for Greece.

MICHAEL JANDA: Syriza is one of the leftist groups that performed well at the recent election and is pushing for a renegotiation of bailout conditions that have imposed austerity on Greece.

Its leader Alexis Tsipras says he doesn’t want Greece to leave Europe but he also wants a better bailout deal.

ALEXIS TSIPRAS (translated): Our choice is to stay in Europe without austerity policies. We are in favour of the euro without the austerity that is destroying it.

MICHAEL JANDA: Syriza is expected to perform even better in the fresh election to be held on June 17, after a government couldn’t be formed out of the current parliament. That might hand it the power to push its battle against spending cuts and tax rises.

But Professor Lapavitsas says a big push against austerity is likely to see Greece forced out of the eurozone.

COSTAS LAPAVITSAS: It is pretty clear that these major changes are not possible within the confines of the European Monetary Union. If they undertook thesepolicies, they would very rapidly find themselves on the brink of exit.

MICHAEL JANDA: But the director of the Institute of Global Finance at the University of New South Wales, Professor Fariborz Moshirian, says the cost of Greece leaving the eurozone will be far higher than keeping it in.

FARIBORZ MOSHIRIAN: The second bailout package for Greece was around $US 170 billion but according to the Institute of International Finance, which represents over 450 banks, the collateral damage of seeing Greece leaving euro, will be something about $US 1.3 trillion.

MICHAEL JANDA: And both Fariborz Moshirian and Yanis Varoufakis are not convinced that a stand-alone Greece, with its own devalued currency, will be substantially more competitive than it is under the euro.

FARIBORZ MOSHIRIAN: The reality is that the Greek economy is not going to be attractive to foreign investors because simply they do not have the infrastructure like some other advanced economies within eurozone to specialise in certain goods where they can in effect increase their export revenue.

MICHAEL JANDA: Yanis Varoufakis says the weeks needed to transition to a new currency could lead to complete civil and economic chaos in Greece, unlike Argentina which simply devalued the money it already had in circulation.

YANIS VAROUFAKIS: It’s one thing to devalue currencies and do this overnight, it’s quite another to create a currency. My colleagues tell me, who work in the Bank of Greece, it will take actually, at least eight months to actually print the new money.

MICHAEL JANDA: Professor Varoufakis says it’s most likely there’ll be a fresh set of negotiations between a new Greek government and European and global financial leaders.

That’s provided financial markets don’t force the issue first.

YANIS VAROUFAKIS: The most likely scenario is that we’re going to have a continuation of this chicken game – this confrontation between the Greek government and the European Union and the question is who is going to blink first and whether whoever blinks first this will be soon enough before the whole thing collapses.

MARK COLVIN: Professor Yanis Varoufakis ending that report by Michael Janda.

13 Comments

  • It’s amazing how naive people are when they speak of Grexit.

    Folks, not even one chance in a trillion. There is absolutely no Greek action (whether political – a Tsipras government for example or fiscal – continuing primary deficits) that could force Greece out of the euro.

    None. Zippo. Natha.

    Grexit is an idiotic fabrication by Merkel and a pure instrument of terror for unsophisticated citizens.

    Not only this proposition is laughable but it also evades the issue of substantial German malpractice. As I pointed out before, if Germany gives Greece 1 Trillion euros in cash today (actually yesterday) in lieu of damages caused, we might think about it.

    Whatever Greece has become is now a 100% German and European problem. And here is the kicker: don’t expect any Greek cooperation either going forward. Those days are gone forever. This is going to become a slag fest of the highest order and in the end Germany will pay the entire bill.

    And this is to serve as a lesson for Germany never to mess again with the wrong people. We have been fighting and resisting foreign influence for 2100 years, since Greece fell to Rome and its successors, and we are still around. This ought to tell you who we really are. We are unconquerable and a real pain in the neck for those who chose to aggravate us.

    • “As I pointed out before, if Germany gives Greece 1 Trillion euros in cash today (actually yesterday) in lieu of damages caused, we might think about it.”

      We will happily do so in a few months, when 1 trillion Euros is worth about as much as a cheap French car.

    • I like Japanese cars better.
      German are ok too (tongue in cheek).

      Pay us in cars when the DM comes.

  • This is what would happen to money from The EIB and all other kinds of public investment in the deficit countries:

    “The two development ministry employees, arrested a week ago for soliciting and accepting bribes by a hotel owner on the island of Crete in order to release EU subsidies approved since 2009, will remanded in custody pending trial, it was announced on Thursday.
    A 58-year-old man and his 56-year-old female colleague, both programming and audit department employees, face felony charges for extortion, forming a criminal gang and bribery.

    According to the indictment, the two demanded 10 pct of the three-million-euro subsidies approved for renovation work. The hotel owner testified that after bargaining they agreed to accept 120,000 euros in kickbacks instead of 300,000 euros they had first demanded.

    The case was brought to light after the entrepreneur reported it to authorities. The suspects were arrested while accepting 10,000 euros in marked banknotes as a deposit.

    Both defendants denied the charges against them. ”

    http://www.hri.org/news/greek/ana/2012/12-05-11.ana.html

    • Hey ,

      do not mess with our Greek corruption that doesn’t eventually hurt you and worry about the “fat babies” corruption ,which is most certainly not Greek.

    • I see. If my tax money is spent on silly projects in the middle of nowhere just because the person approving it gets cash, I should not even say this is wrong!

      If all Greeks think like you do it is no wonder the country is so fucked up.

    • Actually ,what you said made my point.

      You are absolutely right.
      So ,worry about your governments manipulative games and we are with you all the way.

      We’ll do the same here.

      I guess this is not a disaggreement after all.
      Well ,for now 🙂

    • @no eu dicta..

      It behooves you to study the corruption perception index: http://en.wikipedia.org/wiki/Corruption_Perceptions_Index .

      True, Greece has double the corruption rating than Germany, coming 80th in 180 world countries, but Germany is not pure as snow either, coming 14th.

      Human nature being what it is, I attribute the difference to better policing, not to basically better ethical natures. There would be no Siemens scandals if this were true, that the German DNA cannot stand corruption.

      We do have bad policing, it is true. It is one of the reforms direly
      necessary. But bad examples exist all over the EU, otherwise the ratings would all be 10.

    • @ Anna v and
      @ No EU d

      Better policing being better organisation that delivers results
      but not necessarily better ethical ways that deliver results without manipulating everybody.

      You can use a knife to cut your bread and you can use a knife to kill somebody.
      You can also use a knife to hurt somebody and get her bread to feed your children ,without any children knowing about it.

      Since the knife holder feeds her children ,she is perceived as a positive inflluence.

      These indexes and any index for any matter must be used in conjuction to other indexes ,other parameters.

      Now the question is what to do with these parents. Will we allow for excuses? All of us?

  • Chilling piece on Spain, Yanis. I think it is time for commentators to take the focus off lazy, indulgent Europeans and focus on the real culprits, the greedy, criminally negligent banks. Great work.

  • Yani,

    Let’s put aside all of Greece’s domestic shortcomings for a moment.

    I fear that the EU is a failure.

    Keep in mind, it takes two to tango. Akis Tsochatsopoulos could not commit the crimes he allegedly did unless there was someone willing to pay him. Someone that wanted his factories busy at any cost.

    Back around May 2010, when the first Greek bailout was being put together, France and Germany, eager to keep their factories busy at any cost, made it a condition of the bailout that Greece make some rather expensive military purchases.

    These are not the actions of a Political Union. That’s all I need to know to arrive at the conclusion that the EU experiment is likely doomed to fail.

    Your solutions are some of the most credible I have read. But without political will, they can never be implemented.

  • I am starting to realize that what is happening in Greece now – this is capitalism’s Tiananmen Square moment. Will it give way to other kinds of thinking, or will it commit the kind of violence it takes to repress an entire nation.

    Frightening.