For Europe’s sake Greece must renege on its bailout commitments – my op-ed in Le Monde

Le Monde commissioned me to write an op-ed explaining my view that it is in Europe’s interest that Greece resists the ‘terms and conditions’ of its bailout package while staying within the eurozone. In effect, to explain why there is no contradiction between (a) the Greek people’s determination to stay in the eurozone, and (b) their tendency to vote overwhelmingly for parties that reject the terms of the ‘bailout’. For the french version, as published in Le Monde, click

Le prochain gouvernement doit refuser les termes de l’accord de “sauvetage”

For the english (original) version, read on…For Europe’s sake Greece must renege on its bailout commitments

Conventional wisdom has it that, if Greece wants to stay in the Eurozone, it must abide by the terms and conditions of its ‘bailout’ deal.

It is my considered opinion that the conventional wisdom is, once more, profoundly wrong. That Greece’s only realistic chance of staying in the Eurozone is to challenge the terms of its ‘bailout’ agreement. Moreover, I shall be arguing that such a challenge would be a great gift to Europe. Indeed, it may prove a prerequisite for the Eurozone’s survival.

Consider the following indisputable facts: 

  1. A week ago the bankrupt Greek state borrowed  4.2 billion from Europe’s bailout fund (the EFSF) and immediately passed it on to the European Central Bank (ECB) so as to redeem Greek government bonds that the ECB had previously purchased in a failed attempt to shore up their price. This new loan boosted Greece’s debt substantially but netted the ECB a profit of around  840 million (courtesy of the 20% discount at which the ECB had purchased these bonds).
  2. During the same week, the fiscally stressed Spanish government was injecting large amounts of capital into Spanish banks. Simultaneously, to help finance the Spanish state, the ECB has provided large loans to Spanish banks (at 1% interest rate) which they then re-lent to their ‘saviour’, i.e. the Spanish state, at interest rates often exceeding 6%.
  3. For the Greek and the Spanish governments to be ‘allowed’ to borrow the monies involved in the operations described under 1 and 2 above, the ECB and the European Commission (plus, in Greece’s case, the International Monetary Fund) demanded of them that they deflate their economies through savage spending cuts which will, with mathematical precision, reduce the national income from which loans, new and old, must be repaid.
  4. Average interest rates in the Eurozone (even if we exclude the three countries that have fallen out of the markets and have received ‘bailouts’, and include Germany’s crisis-induced ultra-low rates) are at least 1.5% higher than nations with a higher average degree of indebtedness, e.g. the UK.

The German Chancellor (correctly) argues that we cannot escape a debt trap by accumulating more debt. However, consider facts 1,2&4 above: they constitute a typical case of adding debt to debt; of insolvent states borrowing in order to pay a Central Bank that is lending to insolvent banks which, at once, receive capital from insolvent states and lend to them part of the money they themselves borrowed from the Central Bank!

Is this prudential, austerity-driven, economics that a country like Greece must abide to? Or is madness-in-action? With such policies in place, is it any wonder that the Eurozone has already entered an advanced stage of disintegration?

Something must shatter this vicious cycle. If not, the Eurozone will soon join the Latin Union as a footnote in the economic history books of the future. But what could that ‘circuit-breaker’ be? Can President Hollande provide it? His willingness notwithstanding, he is hampered by the state of the French state’s finances and the accusation his criticism of austerity is a ‘cunning ploy’ to have Germany finance French ‘white elephants’.

This is where the next Greek government enters the scene as a potential circuit-breaker. Imagine if the incoming Greek Prime Minister were to try out something novel: Telling the truth! Addressing our European partners and telling them that, even if every Greek man, woman and child strove to stick to the nation’s ‘bailout’ commitments, Greece’s debt-to-GDP ratio will remain on an explosive path which guarantees an ignominious exit from the Eurozone. And then add:

  • that Greece will not borrow another euro from the troika until and unless a rational plan is in place
  • that this ‘rational plan, must apply to all member-states, rather than privilege Greece at the expense of Ireland, Portugal, Spain etc.
  • that until such a plan is in place, Greece will strive to live within its meagre means within the Eurozone, suspending temporarily all payments to all creditors

At that point, Europe will have to make a momentous decision. Either ignore this Greek call to sanity, and instruct the ECB to cut Greece loose (with devastating repercussions for the Eurozone as a whole), or choose to europeanise the banks throughout the Eurozone (i.e. recapitalise them directly by the EFSF, without that capital counting against national debt), europeanise investment projects (via the European Investment Bank) and europeanise part of the member-states’ debt (via eurobonds). 

Am I proposing that Greece blackmail Europe? Certainly not. Since when is telling the truth and refusing to take loans that one cannot repay a form of blackmail? By taking this principled stance, Greece will be acting as a good citizen of Europe and will offer leaders like President Hollande a splendid opportunity to stop the rot that is nowadays consuming Europe’s body and soul.



  • Brilliant! It’s time for ideas and solutions for Greece such as this so that we can get past this notion that Greece has to either die slowly with the current “bailout” agreement, or die fast by being expelled from the Eurozone. There is a way to fix this for Greece and most importantly for the Eurozone as a whole. Thank you for this and I look forward to reading more of your posts Dr. Varoufakis.

  • Brilliant! It’s time for solutions and ideas like this so that we can get past the notion that Greece has to either die slowly with the current “bailout” terms, or fast by expulsion from the Eurozone for not doing so. I look forward to more posts by you Dr. Varoufakis.

  • Yes, the truth. Nicely said and clearing my mind too. Hope dies last…:)

  • I’m not sure why today you chose to publish the piece you published in rather than translate and publish this (and, I suppose, vice-versa..).

  • You pretend that Greece’s problem is just a problem of indebtedness. However, that is just one consequence of the main problem of this country: the political system does not work. Greece needs deep reform and yet it appears that a lot of creativity is spend in how to avoid that reform.

    You keep repeating that Grexit will start a domino and let other countries fall. I see no reason for that, to the contrary. Other countries under pressure are working hard to reform their systems, they have stable governments and a mostly supportive population. The dramatic consequences a Grexit will have on the Greeks’ standard of living will be a strong motivation for others to stay on track and not revert to populism.

    I do agree with your point that EFSF/ESM should directly recapitalize banks and I guess we will see that happen in the near future.

    • And you are pretending that this is just a problem caused by the disfunctional political system in GREECE whereas the political system only exaggerated the results of the bad design of the eurozone which is the rootcause of everything happening now.Unless Portugal,Spain,Italy,Ireland etc have problematic political systems too.

    • 1. Greece needs reform no doubt, but what you have here is the big guys in the EU assigning this task to the very political system that created the clientelist system which plagues the country, all the while doing nothing proactively on their part to help desmantle corruption in Greece (why people like Christoforakos are still shielded by the german judiciary…hmm?). Therefore, it is safe to assume that such calls for “reform” are disingenuous pretexts for what the austerity truly stands for: the furthering of the political retardation of the euro-periphery in order to keep the core’s trade surpluses flowing, and a good chance to experiment on some “liberal” economic lunacy while at it.

      2. The rest of the PIGS didn’t implement as harsh an austerity as Greece (that great guinea pig of Europe) did. Hence, their bleeding is slower, but they are reaching exhaustion point and it is only a matter of time before they too realise they’re on a dead-end street and stop buying into the “for our own good” illusion.

      3. Downplaying the prospect of contagion shows some people haven’t learned any lessons after Lehman…or that they are so calous to think that there is no systemic crisis at hand, just a few “bad apples” in the eurozone family, that need to take their bitter medicine, restart their bubble-forming machines and SHUT UP. Also, the light-hearted manner in which people talk about the possibility of Greece leaving the EU (because this is what a euro exit means) in disgrace, betrays the hijacking of Europe by a political cancerous growth which consumes the European MAN and metabolises it into numbers for the Eurostat to process.

      4. “Mostly supportive population” is a dubious term, when governments represent less than 30% of their real electorates (that is of course WHEN the oligarchs actually trust the electorates with the ballot anymore).

    • Is there any evidence that ‘other’ countries are working hard to reform or that reforms do not take place in Greece? Is there any evidence that populations are supportive of reforms in ‘other’ countries? Or is it that skilfully you are including the bigger bombs to the side you are with. It it so easy to reform when violent austerity and the mentality that advocates it have been prevailing for so long? Or is it that some are deeply intertwined with notions of violent and monodimensional appoach to being re-emerge under a different guise?

      Fortunately, hubris is there for all people. Corrective action will bring things to balance.

    • Noone is pretending that Greece needs not deep reform. But that reform will not come by suicide.

      It is the bailout program ,that while mentions reform ,it sabotages it.

      For ,with deep artificial unemployment and the same politicians no change is possible ,until after the end.

    • If the problem were (as you seem to imply) specific to Greece’s politico-economic structure, then there should be no eurozone problems in other countries. This is the original propaganda that the Germans originally started off with, and you continue to use it despite the fact that is just does not make sense. You also continue with this moralistic Germanic nonsense about how people should behave. Do you really think that the history of Germans — recent, Nazi period, nineteenth century — is anything to proclaim as virtuous? This self-proclaimed German morality is a mass delusion.

      Of course, it is true that the Greek political and economic systems are corrupt and inefficient — as indeed they were at the time of its admission to the EC and to the eurozone. Every competent EU policy-maker knew this. Owing to its particular combination of problems, the Greek debt problem is focused on the Greek state (as opposed to bank debts or private debts). So what? If Greece should be forced into an ugly exit from the euro, then the euro is unlikely to survive. Go back to the DM and see how quickly your German economy will plunge into recession.

    • Excuse me only Greece’s political system doesn’t work?!!! The whole world’s political system of every “normal and civilized” country has transformed the stock markets everywhere to operate exactly like casinos …. and that’s for Greece to blame?!!! and that’s just one example that all the countries are in the same boat with similar and equal responsibilities. And some have more responsibilities …

      But this is the challenge: not to play the blame-game but the reform-game … all the peoples united together ….

    • Please show us a country inside EZ with the exception of Germany that does not have a political dead end. You think that the other governments of countries belonging to EZ act in the interest of their country?

      What you don’t understand is that Greece actually serves as a message from the future for the rest of the countries in EZ. You think that political instability is a function of incompetent politicians and political consciousness of the voters. Basically you are wrong. It is heavily dependent on the robustness and prosperity of the economy. If such unemployment rates come to other countries you will experience unprecedented political instability. Remember that when everything goes smoothly, no one looks at symptoms.

      You fail to comprehend the economic vicious cycle that is imposed on Greece and is the general recipe throughout Europe. Cutting on public expenses and degrading the financial capacity of the people lead to lower national income and political instability that makes impossible for a country to withhold the increasing demands in paying off its debt.

      As a Greek, i don’t really have an interest in saying that to you. Actually, i prefer being outside EZ and planning a national strategy. But unless you walk away from national stereotypes and understand the essence of the EUROPEAN problem, you will experience much more severe consequences than Greece. At least Greece has the capacity to feed its people and has great potential in many sectors if governed fairly. What about your country?

    • Greece has cut its budget by 34%. The other countries you cite have cut by 5%. People keep pretending that these two cuts are somehow equal, but they are not. Even Monti yesterday has come around to the view that the Greek cuts were savage and debilitating and that this has little to do with reforms.

    • You refer to populism in Greece. Well it may well exist but not in the way you mean it. Let me give you an example.

      As Varoufakis has stated in the past in a video i think, laws of macroeconomics don’t coincide with laws of microeconomics. For instance, if a household faces economic difficulties, it is sound to consider a cut in unnecessary expenses and live a more prudent life. That is fine.
      If you try to apply the same principle in macroeconomics, that will lead to disaster. Imagine every household cutting on their expenses. The market will go bust. The national income will decrease tremendously, making the capacity to repay its debt far worse. That’s just a small example. And Greece is far lower in private individual debt in international scale.

      Now listen how politicians throughout Europe describe the situation and talk about austerity. Talking about countries using the logic of a household. Talking about rebels, tax-evaders, lazy people and reinforcing stereotypes, while at the same time they don’t even mention the banking crisis throughout the world. Who’s the populist now?

      I know it’s difficult to understand it, especially if you are not experiencing the consequences of such policies, as the Greeks are at this moment. But please try to imagine what will happen to the markets when such measures are imposed. Keep in mind that a huge part of national income comes from taxes in income, corporations and VAT. What will happen to these sources of income if austerity is applied? And how is this going to affect the capacity of a country to increase its income and pay off its debt. Is it populistic for greek politicians to talk about the stupidity of such measures? Is it populistic to be concerned about people who are dying in Greece? What is the meaning of politics if not serving your own people?

    • You miss the main point. Either on track or not (if the truck remains totally inelastic) result is the same (and obviously not only for Greece): Insolvency. Thus, we should look for alternatives. On the other hand, your statement “the political system does not work” is quite vague. You mean that democratic procedures, elections and internal political discussion (tough some times, it is true) is a proof of failed political system? No need to mention that economy provoked political changes and not the opposite.

      Last but not least, you implied that Greece have not done enough reforms. Generally speaking that is a true statement. However, name a program country that suffered all those cuts in wages, standard of living etc and still listens that did nothing (I remind that Greek standard of lining is already slightly below 20% comparing with 2009) . Name a program country that reached enough targets allow it to return to open market inside the deadlines that MoU states. List can be huge of that questions with a common answer. None. Why? Because Europe is following wrong path.

  • It may not be blackmail, but it is a gamble.

    If it does not work everybody in Greece will be in much worse economic difficulties then the present ones.

    The history of decision making in the eurozone does not give much probability that the gamble will work. They will say “OK, we just pile debt on you so as to serve the interests and maturations of the bonds we hold and go ahead and live within your income “. They will gamble that the other countries will get out of the hole. By the time the eurozone dissolves Greece will be back in the stone age.

  • A ferociously correct description of the “rescue” of so-called indebted countries. This debt
    deflation is profitable to the lenders. And while the peoples of Greece, and elsewhere, are knocked sideways by the sudden arrival of poverty, the long-term Thatcherite agenda of “restructuring of labour market” – elimination of decent working conditions and wages – is being pushed on through the Fiscal Stability and Governance Treaty and ESM. If ratified, these monstrous Treaties will transfer power over national economies to unaccountable and legally immune bodies. It is essential that these Treaties are rejected, as well as the unrepayable debt.

    • @itsapoliticalworld

      VEry well said my thinking friend but you are preaching to the converted here.


  • I would rather hear some practical ways out of the Merkel mess other than electioneering speeches of defiance against the beast of Berlin.

    Your basic premise that Greece is borrowing to repay its loans is grossly incorrect.

    What Europe has agreed to do for Greece is to provide bridge funding for Greece’s old debt maturing and thus in need of rollover into new debt. There is nothing objectionable to such international practice which by the way happens to be inescapable in the financing of modern states (in other words, a case not particular to Greece rather a practice of wide acceptance). By doing so the Europeans ensure the stability of their own system and of the global system as well.

    You hang up seems to be that Greece receives money from Europe to then repay Europe back, a move of mere formality to appease Merkel’s sense of false aid to Greece (in other words an act of falsehood to provide Germany with the political lie that is aiding Greece whereas no such aid is provided at all).

    The true problem here is the Merkel nonsense of arbitrary rules of austerity which instead of strengthening Greece further weaken her by destroying her economy. That is the real obnoxious and hideous part. Germany pretending to give “good advice” when in fact she has no idea what she is talking about and as we now know actually prolonging the crisis whose beneficial manifestations for Germany mean – among other things – zero cost of financing for the Teutonic state (aka free money). This is the criminal part. The delta (aka difference) between almost zero percent financing for Germany and anywhere between 400% to 700% higher cost of financing for every other European state.

    So, unless you address this part by introducing some serious punitive measures for the thieves of Berlin, an actual stoppage of payments by Greece accomplishes very little. All it does is that it forces an imputed renegotiation of terms with uncertain outcome.

    I might even say that your proposition is naive Yani. It’s a high risk, low return proposition which guarantees Greece nothing except a period of turbulence and self-inflicted wounds.

    What Greece needs urgently is competent representation @ Brussels. Greek experts of the highest caliber working the halls of Brussels in a tireless fashion frustrating the German game before it hatches and building alliances of political substance.

    Your advocacy of reneging terms from a distance plays straight into the German game of Greece’s isolation and political impotency.

    Greece does not need isolation. She needs meaningful engagement and crafting of terms protective of her vital interests. Reneging on terms does not do such. All it does is to release some emotional pressure under the false pretense of doing something substantive. It’s the mirror image of falsehood by Berlin. Just as the Germans pretend that they aid Greece you pretend to help her. This is not the real thing. It’s another illusion.

    • “Your basic premise that Greece is borrowing to repay its loans is grossly incorrect.
      What Europe has agreed to do for Greece is to provide bridge funding for Greece’s old debt maturing and thus in need of rollover into new debt.”

      This procedure has the same effect.

      “…nonsense of arbitrary rules of austerity…”

      Ofcourse. I do not actually see you disagree with Yani on that.
      You just call Yani -> Yanaki.

      “So, unless you address this part by introducing some serious punitive measures for the thieves of Berlin, an actual stoppage of payments by Greece accomplishes very little. All it does is that it forces an imputed renegotiation of terms with uncertain outcome.”

      Agreed. But it will never happen without change of political scenery. With the same people It will only be one more hypocritic game.

    • Yes, but Demetri of Sparta(Lakaidemon):

      Keep in mind that Germany has played the largest con game ever on ours and European backs. So before you decide to renege on terms first let’s understand who we are reneging with.

      To me reneging makes only sense if it harms Germany. Why do you want to cause harm to innocents like the French, Italians and Spanish who are as much victims of German duplicity as we are. Harming your friends makes no sense to me whatsoever. If you want to harm someone, harm your enemy by helping yourself. If the result of your action is to harm a bunch of innocent bystanders then you are no better than a terrorist.

    • Dean

      You kind of lost me there.

      I sure do not want to hurt anybody. I even want the right procedures of justice to work for the culprits.

      If we are talking about scenarios of destruction ,fantasy can have a party right now ,no matter the results of the elections.

      If they (elite) want some kind of destruction to occur ,then renegotiating or reneging don’t matter.

      If they have a limit ,then trying to renegotiate first ,not renege the memoranda ,is a logical step never mind what they (elite) say now.
      Geopolitics being the ace ,global relations will go back years if they do not compromise.

      Going as far as trying to hurt the beast ,seems more illogical to me. Who will be able to accomplish such a feet ,when all the powers of evil rule?
      (From the depths of Mordor).


      We need people that will try to take it as far as they can to change situations without sacrificing the future. Samaras won’t even try that much. He will just say he does. Things can surely get worst ,Tsipras or Samaras.

    • Demetri:

      Remember what I said before. I didn’t say vote Samaras for the sake of Samaras or Tsipras for the sake of Tsipras. What I said is that whatever party is ahead and could reasonably form an independent, single party government that’s what we vote for. Regardless of ideology.

      Therefore, a bedrock of my position is a single party government. I also have said, on numerous occasions, NO coalition government. Such would be a disaster.

      Yet all input at the moment leads to such impending disaster, because for whatever reason we have decided to split the vote as a defensive mechanism of “6 of these and half a dozen of the other”. Not very smart. Actually pretty dumb, if you ask me.

      If this gives you any comfort, you are not the only one noodling these issues. Many are trying to do the same and are creating a mess. Take a peak here. This guy calls for a Plan B, but he has no idea of what this Plan B ought to be. And this is a form of extreme mental paralysis.

      At least what I am telling you is to follow my simple instructions and let me do the thinking on this matter. The problem with us Greeks is that all of us consider ourselves more than capable for doing the thinking part. Yet, we are not.

    • Dean

      Let you do the thinking for me?
      Not a good proposition.

      Anyway ,i remember what you are saying and i told you that your analysis is pretty good.

      I also told you that ,if Samaras (not for the sake of Samaras) ,or any kind of Samaras if you like, forms a government then there will not be a change of direction anyway. So the power of forming a government will not be for the advantage of the Greek people anyway.

      Any way you look at it ,they (elite) have most advantages whatever happens. It is like the + and – signs.

      (+) (-) = – ,
      (-) (+) = – ,
      (-) (-) = – ,
      (+) (+) = +

      We only have one choice for our +. To form a government with syriza. Period.

    • Also i told you that no matter any plans you mention ,we should prepare for reality even if that reality is a coalition government.

      Why are you insisting on trying to impose a plan like 10000000 Greeks are going to listen to you?

      I do not use a sterile ideology to vote.
      We will either have the pain of freedom or the pain of slavery.
      Get used to that.
      There is no escaping that pain. The pain is here ,now.
      Things can and will get worst.

      Question: Worst with potential for what future?

    • Dean

      Present to us your Plan B.

      If your plan A is for everybody to vote for the most probable party to be first at the last minute ,i expect you to use telepathy and direct their minds.

      If you can not ,present to us a Plan B involving a one party government and a Plan B involving a coalition government.

      If you cannot ,behold ,reality confronts you.

      You still do not get that your analysis is for you only.

      Scenario 1:
      The leaders used Greece as a money laundering mechanism. Their job is almost over. Now ,they only oppose us because they are afraid that if we vote another party ,their comforting wealth concentration scheme will be in danger. They convince us by fear.
      We all vote pro-Memorandum. We have to cut 20 billion more by selling our assets ,not to balance our budget ,that need only cuts of 4 billion ,but for them to profit more. Then later the leaders change their policies for the better. In time everything gets better ,Greeks remain with the stain of “The Greek’s fault”. A fake stability is preserved until everything is relived again. In Greece or somewhere else. Greece has already lost her assets.

      Scenario 2:
      They convince us by fear.
      We all vote pro-Memorandum. They do not change their policies. Eurozone disintegrates. Everybody is in trouble. In Greece the same powers sell more of the country or we fight (begin a civil war?) now internally only ,to change the political scene.

      Scenario 3:
      We vote for syriza. If the leaders are prepared and oppose us because they lose their friends in Greece ,we get in trouble ,whatever they do with their policies. But we are free. For the leaders nothing change because they already do not pay for Greece but for the banks only. These payments continue anyway. Also we have a saying in geopolitics and they lose advantages. We only need to cut 4 billion to balance our budget.

      Scenario 4:
      We vote for syriza. If the leaders are not prepared ,they compromise and we change our political scene. We do not renege. We optimise. For the leaders nothing change because they already do not pay for Greece but for the banks only. These payments continue anyway if they do not recapitalise the banks directly. Also we have a saying in geopolitics and they lose advantages. We only need to cut 4 billion to balance our budget.

      Scenario 5:
      Coalition government. We are in deep shit. But we slowly change our political scene. For the leaders nothing change because they already do not pay for Greece but for the banks only. These payments continue anyway. It becomes an internal problem only. We only need to cut 4 billion to balance our budget.

      At the end the party battle in Greece is not for bettering our lives if we vote pro-memorandum ,but for the “european leaders” having their friends in power. Just that. Nothing else.

      Scenario 1:
      Is like buying a lottery ticket. You think you will at once better yout life. If you are not a gambler you also know the chances are slim. If you are a gambler you invest again and again. You lose small amounts that at the end leave you a moron.
      You choose to invest in a scenario with potential risks greater than the potential rewards. You invest to gain 100 with the risk of losing 200.

      Scenario 2:
      You invest to gain 100 with the risk of losing 400.

      Scenario 3:
      You invest to gain 50 with the risk of losing 50. In time you optimise.

      Scenario 4:
      You invest to gain 50 with the risk of losing 25.

      Scenario 5:
      You invest to gain 50 with the risk of losing 50. In time you optimise.

      All the above do not matter.
      You do not know the future.
      But what future would you like?

    • Why do i say that what happened was a full scale economic hit.

      Because they could all use Greece as a money laundering mechanism without anyone knowing about it.

      They do not insult the Greeks. They keep giving money to the Greek government with out the consent of the people ,they share some of the burden ,they write off some ,they implement fake growth programs in Greece for enabling the flow of toxicity etc. etc. they do the same in other countries.

      But they started with propaganda and forced so called “bailout money” ,asking illogical economic assurances.

      No ,this is not just a mistake. It was a bargain for them.
      They wanted to do this ,hoping that everybody will give in.
      Let us not forget that it is also symbolic for some of them ,that Greece should fall. We are the ones who usually oppose. They hate it.


    • They say that if we get out of Europe we won’t find partners because of the reforms needed. Reforms have already taken place.
      We only need to cut 4 b. to balance. The potential partners can audit us.
      With their own auditing mechanisms.

      The only reason partners may think not doing business with Greece is the negative propaganda. But the true businessmen and women will look for data. Real data. Not sentimental bs to accuse others.

      So no. There is no logical reason for us not to find partners.




  • But Yanis please tell me what are the probabilities that you attach to these likely repsonses of Europe in the case that Greece goes aheads and speaks this truth? Because I submit to you that Greeks must be very well informed of these probabilities and make an informed decision when they decide whether to vote for SIRIZA or another party. It is moreover hugely important to consider the probability of Europe making this 360 degrees u-turn with Greece in the Eurozone or after amputating Greece, given that it does decide to make a u-turn. It is my personal opinion that it will choose the latter, i.e. cut-off Greece and then make this resounding U-turn thereby safeguarding Eurozones futures without the Greeks… In any case I think you should agree that the maths for the Greeks are not working out very well, and so they should steadfastly and resolutely assure their place in the Eurozone by NOT making a whole-sale denouncement of the memorandum of understanding (which in any case they shouldn’t becuase it contains many good items, i.e. upgrading the computer system in the public sector, improving tax collection) and by NOT falling on their collective sword and becoming martyrs for what is likely to be a better and more sustainable Eurozone without us…

  • Germany was Not a strong economy when it joined the euro.

    It was still struggling with the re-unification and had to implement reforms under Schroder.

    Known as the Sick Man of Europe, Germany was creaking under its’ welfare/labour laws and also shouldering the costs of an eastern integration.

    The cost, in the tune of $300 Billion US, was never accounted for in Germany’s federal budget, being kept in a separate account.

    It became the Strongest European economy since its’ “external” exchange rate was depressed from what it would have been under the DM.

    Its main trading partners with a higher propensity to inflate labour costs were Trapped in the euro at a fixed parity, essentially indebting themselves to buy German factory output (think Siemens scandal)

    Germany Rised the strongest as the urgently needed reforms, at that specific moment in time, perfectly matched the conditions of the monetary union that it joined.

    Temporal change/cause and effect within a monetary union is crucial in understanding the Real Cause of this crisis.

    In essence, the German rule has de facto put Europe back on a “gold standard” and driven Greece bankrupt.

  • Actually, Yanis, while I am totally persuaded of the soundness of your argument, I have to clear up one small point in your conclusion. Telling the truth is exactly what blackmailers do — and it always terrifies those who are deeply invested in lies. The difference here is, that a blackmailer wants to be paid to continue concealing the truth. You’re proposing to drop the concealment entirely, and let the fresh air of reality bring everyone back to life & health.

    Unfortunately, Europe has really invested quite a lot in those lies …

  • “Am I proposing that Greece blackmail Europe?”

    Yes you do. Who do you think you are to tell 16 other nations at which conditions they have to lend money to an irresponsible, corrupt and incompetent Greek government to avoid it dragging down the rest of Europe?

    You Greeks have to learn to respect contracts and some decency. You do not have any right to criticize a program which you never implemented properly. The only governments who have that right to do that are the Portuguese and the Irish. If I had a say, I’d cut off the life line a long time ago. You seem to forget how much trust Europe put in Greece, how much trust was destroyed by Greece and that Europe cannot afford to be blackmailed by the same little tiny Greece because that would undermine any trust in any European agreements. You seem to think that you can have the cake and eat it, too. You will soon find out that the rest of Europe will rather accept the high cost of a Grexit than the even higher cost of keeping a country like Greece in or even worse, share debts with such a failed state.

    • And here is another one that does not know what he/she is talking about.

      They are the ones wanting to keep all the cake by indebting a country without consulting the people ,only to save their banks and preserve a system that exports all the negative aspects of an economy to weaker nations (instead of having balancing acts in their own country). They are blackmailing ,we are opposing. We didn’t want the bailout from day one(1). Get your facts straight and then talk.

      It was not the German austerity that made their economy strong ,it was the deals under the table and the breaking of all the rules ,so they can export unemployment to the rest of the periphery ,pay the corrupted politicians to take on debt so as to import more of the Northern products and now they are accusing the people and us of breaking the rules.

      200 Trillion debt of the banks with only 70 Trillion world output is the problem. You really think tiny Greece can cause such a crisis?

      WAKE UP YOU SLAVE!!!!!!!!!!

    • What part exactly pray tell of the program was not implemented? Firing 150.000 people on the spot? That was the one and only thing the government refused to do. Firing public servants. An even though i am not a fan of big government i say they had every right to refuse that in order to avoid an even deeper recession and the human tragedies that would cause. Most every other measure was implemented. Minimum wage was slashed. Worker’s collective agreements abolished, public spending savagely cut. How on earth do you think the primary deficit of the country was managed to be substantially reduced to around 1 billion or so. More cuts need to be implemented and they will in order for the budget to be balanced. Regardless of the bailout package. But make no mistake we have every right to criticize a program which despite what your government or its propaganda machine tells you WAS implemented for its most part. It is insult added to injury to keep reading the same lies. Have the cake and eat it too? That is a new one. Greece should have suspended debt payments back in 2009. That way you would have to bail out your own banks. Love to see how that would feel. Also don’t be too surprised when you learn that Portugal and Ireland are soon to experience the exact same deep economic depression that Greece is experiencing and therefore need adjustments to their program as well. But i forget this would be Greece’s fault as well for “making the markets nervous”. Grow up.

    • “What part exactly pray tell of the program was not implemented?”

      Collect/pay the due taxes? Structural reforms for closed professional guilds? To name just to of many.

    • @Tasos

      How dare you introduce inconvinient facts? Let’s keep it fictional, shall we?

    • Dear tmk
      I apologize on behalf of all my compatriots who have responded to you in anger and lack of awareness.
      NOTHING (or next to) was implemented right in the first place. Although fully avoidable, even “firing 150000 public ‘servants’ (a euphemism if ever there was one)” would have been preferable to bombarding the private sector with taxes causing 1,2 MILLION (at least) private sector unemployment. YES there is a systemic crisis, YES there is room for reformation on an agreement that was put in place with one party (the EU) completely in the dark (though it should have known better) about the Greek economy’s festering black spots (tax evasion, corruption and lack of overall productivity). In general though, and most importantly, no STRUCTURAL REFORM was ever implemented.
      I could go on and on, but really I’ m shouting in deaf ears.
      As for the result of this ‘blackmail’, it has already become crystal clear. Funding has been cut off already WAKE UP PEOPLE! After the denegation of the agreement the EU will just say “sod it”, opt to pay out our debtors BECAUSE THIS WILL BE DEEMED A MORE RELIABLE METHOD TO SAVE ITS OWN BACKSIDE, and leave us to make do with what we make on our own.
      When Tsipras steals the private sector’s last cents to pay for the public sector, is when the next civil war will begin: that between public and private sector employees, that between tax evaders and tax payers.

    • Tasos

      They will ofcourse say ,when the other countries are in deep shit ,that it was the Greeks’ delaying that caused the problems. And everybody will forget that the so called bailout aid is not being given in sequence ,but that the other countries already are playing this foolish game.

      They can not grow up. It is impossible.

    • “What part exactly pray tell of the program was not implemented?”

      Please give an update on the privatizations 🙂

    • @alienelin

      I agree with you that that public sector in Greece should bear the weight of the fiscal adjustment since it is mainly responsible for creating the enormous deficit in the first place. But firing 150.000 thousand people within 3 years is just too much. It only goes to show of the true nature of the memorandum program. As for the “structural reforms” you mentioned, i would suggest that you review all the laws the parliament passed AND implemented especially regarding labor legislation as well as market reforms. You will find that everything mentioned in the first and second memorandums was implemented. Anything except firing the aforementioned workers. That was the only thing.

      I would also suggest studying the German 6 points proposition for growth in the eurozone soon to be released. One point that was leaked out was the allowance of the formation of “special economic zones” in indebted countries like Greece, Portugal and so on. Taxation will be extremely limited in these zones meaning that along with recent labor laws companies will basically have a tax-free, extremely low minimum wage, individual contracts instead of collective bargaining safe haven. This would be a disaster for indebted countries as well as the rest of Europe.

      I don’t know about you but i consider it a disgrace. One of the solutions that Germany is proposing for growth to return to indebted countries is that said countries establish a base for them where they would LEGALY among other things avoid to pay taxes to the host country…

      That should tell you anything you need to know.

      P.S. Still waiting for a published piece, any piece that mentions specific measures from the program not implemented (except the already mentioned 150.000 people job losses).

      Not paying your taxes doesn’t count. We did pay our taxes. We just can’t pay our taxes any more..

      Can’t pay Won’t pay. Simple as that.

      Find another cliche..

      P.S. 2. You are absolutely right alienelin payments have been already suspended towards Greece and unfortunately our countrymen are oblivious towards it. You also mention that EU will opt to pay the debts directly in order to save its backside. This was firmly in place allready with memorandym MKII. No money would go towards Greece to be used in anything other than debt payments after the latest fiscal adjustment to the tune of 11 billion for years 2012 and 2013. All payments would be depositied to a special acount as well managed only by the central bank of Greece..

    • @ tasos “But firing 150.000 thousand people within 3 years is just too much.” Really? And firing ONE MILLION private sector employees is preferable?
      “It only goes to show of the true nature of the memorandum program.”
      The point I’m trying to make Taso is this: Troika came. Troika said “balance your accounts”. Greeks decided to balance their accounts by tax bombarding the working part of the Economy. The rest is History.
      Interestingly enough, the Government opted to implement the (admittedly ill – advised) part of the recent labour law reformation, which coincidentally also regards just the private sector.
      That said, as somebody who has actually worked in all levels of the private sector, I can assure you that the labour laws are largely immaterial to Greek employers, who, left completely unmonitored (for who cares about us private labour slaves), choose to do whatever they please with their minions anyway.
      Surely you are joking about the implementation (and I am talking about implementation, not just law passing) of the memorandums. What about the one that says Tax Managers either meet their assigned revenue goals or are fired?
      Just writing about this stuff makes me livid, so I will not continue I respect your opinion, as I do everybody’s, but the situation lately makes me feel more than ever that I come from another planet. I feel extremely sad that my country has come to this; that it should have given foreigners a reason to look down on its people; that it would offer itself so generously to be bought – out ‘for a piece of bread’ , when all it would have taken was some common sense.
      Just a final note to Mr. Varoufakis (delete it if you wish to): I hardly see the point of moderating comments if you let foul mouthed expletives pass the mustard. As I said, I respect everybody’s opinion as long as it is expressed in a civil way.

    • And P.S. , F.Y.I. tranches of Troika payments go towards directly paying the debtors in large part, but there’s still a substantial part left for the Public Sector to meet its needs. Without the tranches, the public sector would not be able to make its payments.

    • Tasos

      Yes ,that is a good one.

      “Shame on you that you do not pay your taxes (much more than any one should pay).
      Reduce your taxes for us the foreigners that will buy your businesses ,while we bail out our banks with you paying interest for money you never received.”

    • alienellin

      As for the public sector ,i totally agree with you.
      And we ,many of us here ,have already said that these problems are true.

      If my anger insults you alienellin i apologise ,but here is the thing.
      Certain people in here do not want us to just admit the malignancies of Greece. They also want to transfer their own corruption to us.
      This is unacceptable. And i got bored of it.

      I am (was ,now unemployed) a low income labour worker ,never worked what i studied ,and I ALWAYS PAID MY TAXES.

      Also i always hated the fact that Greece ,especially the public sector ,became so corrupted. I HATE THE PUBLIC SECTOR.

      Do not confuse these facts ,with the behaviour of those that want to see us worst than we are.

    • vss

      What ever you say ,still has nothing to do with the whole european crisis and is a Greek problem only ,that MUST be addressed.
      But you take the opportunity to cover your own governments’ corruption.
      So you may find someone who gives the wrong data once a while and attack him with lies hidden behind the truth ,but will sure not let you do it without talking back.

      As i said before ,you try to hide your own bad truth behind the bad truth of the Greeks.

      You are the racist and i sure do well to insult you.

    • vss

      Also you smart ass ,

      the article you presented for the taxes is from 10/02/2010.
      Now how can the tax revenues increase from the low income honest people and from the unemployed when the austerity has the effect of cutting production?

      Also everything has been cut already.

      We yell for the rich to pay what they owe. GO FIND THEM. THEM. THEM. THEM.

      SMART ASS.

  • Your article as always is excellent and to the point but I have this question for you, why you think that the domestic and European political system has politicians that can grasp these issues and try to resolve them?

    I fear that even if Greece finds the politicians to tell the “truth” as you say and apply your plan, why do you think the EU politicians will have the sound judgment to take the correct approach “europeanise the banks throughout the Eurozone (i.e. recapitalise them directly by the EFSF)” and not the incorrect and most probable, as they have shown the last couple of years?

  • I didn’t have the heart to read past the title. You see, I’m juxtaposing the latest athenian double suicide against your US cavalier, gambling spirit. I fear my heart is draining out of this country long before my brain will.

  • “The German Chancellor (correctly) argues that we cannot escape a debt trap by accumulating more debt.”

    Professor, why do you state that it is correct that we cannot escape a debt trap by accumulating more debt?

    For an economy to grow, demand is needed. For demand, means of exchange is needed (i.e. money). Money only comes through debt. If it’s external demand, then it’s somebody else’s debt.

    Europe’s (neoliberal) obsession is that this debt doesn’t come from the government, but rather from foreigners, or from the private sector. And yet, as you state, current policy grows government debt.

    • More debt is needed to grow the economy. The money they want to give is not for growth but to bailout the banks by transporting all the responsibility to the people of the southern countries and they gain legitimacy by using petty propaganda.

      People are always ready to accept that others are worse people than them. What better way for a government than to pet their ears.

  • Dear professor. I think that in this last piece your good intentions and your hopes got the better of your analytical ability. If i may i would like to share some concerns of mine considering two of your points:

    1) Tell the truth considering the inefficiency of memorandum MKII. Unfortunately this is simply irrelevant. Tell the truth yes, but to whom? The powers that be are obviously very well informed about the nature of memorandum MKII and the state of the Greek economy. Yet they keep repeating the same lines about “Greece keeping its obligations”, “Greeks that need to do more in order to be more competitive” and of course they don’t lose the opportunity to bring up “Greece told lies about its financial state” (Monti and the French this past week alone). After two years of the same mantra over and over again it is mission accomplished for them. Greece is made to be the sole culprit of the mess it is in right now and this situation is portrayed especially in the protestant countries as just punishment. Not one word of the grave sacrifices the people made these past years, not one word of the unprecedented effort to cut the fiscal deficit. Not one word of the fact that workers in the private sector had their wages cut by 30% and in many cases more. Not on word of the record unemployment rate. Not one word of the fact that the economy is actually in ruins and in economical freefall like you have described in past articles. Not one word of the fact that the ECB demanded and got a payment with profits on the bond purchases it made. The results of this psychological warfare are evident now: Greeks are now enraged not only justifiably towards their own government but also for the first time against the European Union as well and its dominant powers that are treating their country as a second rate member and its people as pawns. The results are also evident in other E.U countries. In a latest poll 60% of Germans want Greece out of the eurozone and for a first time 48% of the French. Taking all this into account one inevitably draws the conclusion that the truth is no longer relevant, if it ever was. Today Bloomberg for the first time wrote the truth, that effectively the Greek bailout was a German and a French bailout as well seeing as these two countries, and more importantly their banking sector, benefited the most from a package that practically gave nothing to Greece. Would an institution like Bloomberg have told the truth unless it was no longer relevant? Sadly it seemed like a post mortem piece to me. So the point i am making is that even if we shout the truth from the top of our lungs and refuse the terms of the second bailout package the spin machine and its work of the past two years has made sure any such effort will fall upon deaf ears.

    2) Greece will strive to live within its means until a proper plan is in place. Unfortunately this is a dream. The reality is the economic nightmare that we experience in the last month in Greece. Basically all non essential (which is absurd, since when was any payment the state made non essential especially in this economical environment of a five year straight recession?) payments are suspended and the state has enough money to last for weeks not even a month. The state essentially has been holding its breath for the past two years by postponing payments to the private sector and now everyone is about to burst since this 7 billion black hole of payments due to the private sector has effectively dried up liquidity in the market. Mr Saxinidis the past finance minister warned that Greece would have to impose cuts in the tune of 4,5billion euros alone this year to balance its budget if it refused incoming loans from the bailout. That would mean the 7 billion owed to its various contractors would not get paid either. This amounts to a devastating fiscal adjustment that would bring in a tsunami of bankruptcies, layoffs and foreclosures that could very possibly lead to a bank run and chaos. What you correctly suggest could have a slim chance of working back in 2010. I doubt that it has any chance now. Greece is in such a state of insolvency that unless substantial funds come its way for a proper restart of its economy the only possible solution is the issuance of IOUs which would naturally mean a de facto exit from the eurozone soon to be followed by an official exit. This is something perfectly foreseeable and it speaks volumes of the true intentions of the lenders.

    My main point is this: Greece was never given a fair chance. This was an exit strategy all along.

    • I don’t share your opinion. Three euro countrys have got an IMF adjustment programme. Ireland is doing quite well under the circumstances. Why should they discriminate Greece?

    • “Greece was never given a fair chance”

      Yes it was. Besides the incredible amounts of money sent to Greece via the various EU programms for agriculture, tourism and so on: between 2001 and 2008 the spread over Bunds was below 0,2%, which translates to: there were de facto eurobonds. What more of a fair chance do you want?

    • vss ,flippa

      Money that were sent out to Greece and vanished. Where exactly ,only German businesses know.

      Money that were sent out to Greece after the deals for production destruction so you can import more.

      The rest of the periphery is doing better because they didn’t have the same levels of austerity.

      The plan was for the Germans to have a bailout first.
      They unloaded their toxic waste to the population of Greece and now they say they are prepared for a Greek exit.

      vss ,you must not be a human being at all.

    • “My main point is this: Greece was never given a fair chance. This was an exit strategy all along.”

      I fully agree and the worst thing is that our own stupid politicians don’t even prepare for a plan b for Greece!!!

  • Yani,

    One point I wanted to make on the mater of the incoming Prime Minister “telling the truth.”

    I think the reason you, I (after serving the Greek infantry) and others left Greece in the first place was because there can be no meritocracy in that country. As a result there can really be no “truth” be told toward our European partners. By the way, being that our European partners’ behavior is governed by their respective banking and economic interests makes telling the truth even harder.

    What truth? Who would listen? Why would they believe the Greek government? And why would the average Greek taxpayer believe all of the above (euro-partners, Greek government, worlds’ financiers)? We should not forget that the Greek taxpayer will do whatever they can to avoid being cornered in a tax policy that supports what they think is a mess someone else created (vicious circle of disillusionment and uncertainty avoidance).

    It’s largely a matter of how much introspection can happen in Greece. It’s modern Greece’s modus operandi to look the other way or avoid facing the truth at all costs when the going gets tough. Can Greeks afford for once in their modern history look each other in the eyes and say “we’re all in this together…we can either all suffer together as a European indebted nation and try to show everyone we can be a trustworthy partner, or we can move forward as best we can in our own devalued economy but do this proudly and in earnest.”

    The bottom line: Greeks either drop the “we gave you western civilization” attitude and show the world once more the have the smarts and the conviction to do things the right way, or they continue to be mired in embezzlement and fuzzy accounting practices. Either way, they have to have a political and social attitude that is diametrically opposite to what they’ve had so far after WWII and to date.

    • “We should not forget that the Greek taxpayer will do whatever they can to avoid…”

      … paying the due taxes? Yes, this is the reality and one of the major reasons for the desaster Greece is in.

    • “…what they think is a mess someone else created (vicious circle of disillusionment and uncertainty avoidance).”

      How they created the mess of 200 Trillion bank debt?

      “they have to have a political and social attitude that is diametrically opposite to what they’ve had so far after WWII and to date.”

      Why did they have that attitude?

    • Sorry, but all of this ranting about Greece is completely off target. This is how the serious business people in Germany view the problem (it would appear at this point to be almost a 100% German problem):

      The Financial Times Deutschland writes:

      “For two years, the chancellor has been trying to cure symptoms instead of correcting the deeper causes of the financial crisis. This can worsen an illness, and it will now have an effect on the Germans.”

      “It would be in our best interest to stop the downward spiral. That could be through growth programs for the countries in crisis, which would absorb the slumps in the real economy resulting from the financial turbulence. Or it could be through euro bonds, which is probably the only way to stop the fatal logic of financial markets in panic mode that are throwing one country after the next into crisis.”

      “The Germans still appear to be profiting from the crisis through absurdly low interest rates (4.6 Bil. euro, two year notes at zero percent issued last Wednesday)that only exist because other euro-zone countries are in crisis and everyone is fleeing to German bonds. But that won’t last much longer, if the falling economic figures are any indication. If the chancellor isn’t stopped soon, the German economy will also soon find itself in crisis.”

  • Is there any reason why my very substantive comment did not clear the censorship of this blog? Is democracy dead in the Varoufakis blog?

  • The IMF and assorted central banks do not need to confront the truth; they need to confront power. Latin American, African, and Asian finance ministers, economists, and presidents consistently and clearly pointed out the predatory nature of the global financial system during the 90s to no avail. Remember, this is when Europe was “growing” by happily blowing bubbles by leveraging rents extracted from poor countries and calling it innovation, hard work, risk-taking, transparency, and efficiency.

    So… go, Europeans, go! If technocrats are crying blackmail, it means you are winning, that they feel your power to destroy their system of wealth concentration. Your power does not stem from thinking thoughts 3rd worlders can’t, your ability to confront and speak the truth, or being better than us, but because you have the ability to control the EU, the eurozone, NATO, and the IMF.

    You are continuing Lula’s struggle at the WTO, Argentina’s when it defaulted, the Zapatistas’ when they rose, Cochabambans’ after Bechtel privatized their rain. I know you are suffering but you have many advantages we do not have. When I see photos of your demonstrations and riots, I see well fed and healthy crowds wearing new shoes and the latest fashion. Imagine doing what you are with a tooth ache, illiteracy, five dependents, and 10 kilos underweight.

    We are counting on you. Do not surrender. You owe it to us.

    • Crossover

      Yes ,good explanation.

      So people that really want to be honest will think ,since it is impossible for an economy to have all three ballances negative ,how can something like that appear to be happening?

      Nothing exists in isolation. Eurozone is like one country. But instead of managing the deficits as one country they manage the surpluses for one part of the country and they transfer the negative aspects of the economy to another part of the country.

      That is exactly what they wanted from the beggining ,that is why they wanted Greece to destroy production.

      The eurozone started as a wealth concentration scheme.

    • @Demetris_(Λ)

      “Eurozone is like one country.”
      Thats what they dont want to understand.If you divide economies by the currency they operate on,you will have 99% of the economies being sovereign countries and 1% groups of countries (the EU and possibly a few other countries that peg their currency or use a foreign currency).

      People tend to think that just because we (the 1%) are not actually a single country,there’s no reason to operate as one.The problem is that the eurozone,from an economic perspective is no different from any other economy that is comprised by a single country.It only takes 5 minutes to look at the stats and see what im saying.External trade as a % of GDP is no different from any particular country for example.
      With that said,either you like it or not you have to operate (economically) as one country, or else you will have to face the consequences sooner or later.

      Think about Athens vs Grevena.Athens always had and will always have a trade surplus against Grevena.That means that Grevena trade deficit will have to be financed.If this doesnt happen,sooner or later they will stop buying and eventually Athens will stop selling.Obviously this doesnt affect only the deficit party.This demonstrates why transfer payments and subsidies are usefull for an economy.
      If you watch too much TV,you only think that transfer payments or subsidies exist as solidarity policies or that they are aspects of the welfare state.While this is true,they are also important factors for an economy to function properly.But politicians never tell you that.

      This also highlights the fact that flows are what makes the economy operate,its not stocks.If all blood is concentrated at the head,that doesnt make the head stronger than usual (or it might do that but not for long).Keep it away from the feet for a while and they will soon rot.

      Btw, whenever the discussion comes to the argument that the EU economy should function as a single country’s economy just like how USA operates,people come back with the argument that all states are forced by law to balance their budget.Although i dont know if this is true (its possible that it is,im just not aware),they forget to tell you that the federal gvt takes care of each state’s “external” deficit ,not by force,not by austerity but by transfer payments,subsidies and investment incentives.And as i’ve said previously in my Athens vs Grevena example,they have good reasons to do so….other than welfare and solidarity reasons (which are equally important i add).

      About MMT.
      You can start from these sites:

      http:// bilbo. economicoutlook. net/blog/
      http:// neweconomicperspectives. org/
      http:// moslereconomics .com/
      http://heteconomist .com/

      Also, this site dedicated to a newer “school” called MMR,which disagrees with MMT on some details but their most basic ideas are pretty much the same: http:// monetaryrealism. com/

      And also a Greek one: http:// kkalev4economy. wordpress. com/

  • This is spot on:

    The International Monetary Fund has ratcheted up the pressure on crisis-hit Greece after its managing director, Christine Lagarde, said she has more sympathy for children deprived of decent schooling in sub-Saharan Africa than for many of those facing poverty in Athens.

    In an uncompromising interview with the Guardian, Lagarde insists it is payback time for Greece and makes it clear that the IMF has no intention of softening the terms of the country’s austerity package.

    Using some of the bluntest language of the two-and-a-half-year debt crisis, she says Greek parents have to take responsibility if their children are being affected by spending cuts. “Parents have to pay their tax,” she says.

    Greece, which has seen its economy shrink by a fifth since the recession began, has been told to cut wages, pensions and public spending in return for financial help from the IMF, the European Union and the European Central Bank.

    Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: “I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens.”

    Lagarde, predicting that the debt crisis has yet to run its course, adds: “Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.” She says she thinks “equally” about Greeks deprived of public services and Greek citizens not paying their tax.

    “I think they should also help themselves collectively.” Asked how, she replies: “By all paying their tax.”

    Asked if she is essentially saying to the Greeks and others in Europe that they have had a nice time and it is now payback time, she responds: “That’s right.”

    The intervention by Lagarde comes after the caretaker Greek government met to discuss a sharp fall in tax revenues – down by a third in a year. Under the terms of the country’s bailout, Athens has agreed to improve Greece’s poor record for tax collection in order to reduce its budget deficit, and Lagarde’s remarks are evidence of a growing impatience in the international community. Reports surfaced in Germany and France of preparations being made to cope with Greece’s possible departure from the single currency after its election on 17 June.

    Belgium’s deputy prime minister, Didier Reynders, said it would be a “serious professional error” if central banks and companies did not prepare for an exit.

    The euro came under fresh attack on the foreign exchanges, dropping below €1.25 at one point on Friday, as the Spanish government was in talks to pump up to €19bn of rescue finance into Bankia, one of the country’s biggest banks, and the Catalan regional government sought financial help from Madrid to deal with its debts.

    Signs emerged of a widening gulf between Germany and France over whether common eurobonds should be issued to help those countries, such as Greece and Spain, with high interest rates on their debt.

    Jens Weidmann, president of the Bundesbank, poured cold water on the idea – which is strongly backed by the French president, François Hollande – and also said financial aid to Greece should be cut off if it failed to keep to the bailout deal.

    Jürgen Fitschen, joint head of Germany’s biggest bank, Deutsche, described Greece as “a failed state … a corrupt state”. Separately, however, there were reports suggesting that the chancellor, Angela Merkel, was dusting down the economic modernisation plan used to revive East Germany after the fall of communism in the belief that similar measures could be applied to Greece and other struggling eurozone countries. Today’s Der Spiegel magazine says Merkel will present a six-point plan based on the East German blueprint as a growth strategy. It includes measures such as privatisation, looser employment law and lower tax rates.

    Opinion polls are pointing to a close race between parties backing and opposing the terms of Greece’s €130bn bailout, but neither Germany nor the IMF has demonstrated any willingness to water down Greece’s austerity programme.

    In her interview Lagarde says Greece is not getting softer treatment than a poor country in the developing world, and that the IMF does not find it harder to impose strong conditions on a rich nation.

    “No, it’s not harder. No. Because it’s the mission of the fund, and it’s my job to say the truth, whoever it is across the table. And I tell you something: it’s sometimes harder to tell the government of low-income countries, where people live on $3,000, $4,000 or $5,000 per capita per year, to actually strengthen the budget and reduce the deficit. Because I know what it means in terms of welfare programmes and support for the poor. It has much bigger ramifications.”

    • TMK:

      The IMF involvement in Europe was Merkel (the stupid woman)’s idea. So, you deal with Lagarde and her nonsense and spare us with you infantile and incoherent thoughts.

      The fact remains the same. Germany has profited from the Greek crisis to the tune of 80 Billion euros and counting, in exchange for a paper exposure of 15 Bil. (not real but theoretical).

      Even if there wasn’t Greece, Germany would have invented some other crisis for its own dirty profiteering.

      The undisputed fact is that a lower euro (which each crisis produces) benefits German exports. Another undisputed fact is that Germany has zero interest (aka free money) at the expense of all Europe. The third fact is that Germany drains all Euroland from investment capital.

      It not a matter of if, but a matter of when Germany(aka the toilet of Europe) pays through the nose for her dirty game. It’s coming and it ain’t gonna be pretty.

      And the funny thing is that Tsipras (another of Merkel’s creations), will kick the Ugly Frau’s ass so hard that it will go down in history that a street kid with a bike has “done her in”.

    • This is anything but spot on. It is inflammatory and insulting. Has Lagarde offered any explanation why tax revenues are down this month? There is a very simple one:


      I am sure that this in Lagarde’s mind is the equivalent of tax evasion. I am also sure that the good people of Niger would be in the exact same state of mind if their wages have been cut in half or their incomes halved through tax hikes. They would find themselves in the exact impossible position through an ever worsening depression regardless of the initial position of their economy and their initial incomes. One would expect something as elementary as this to register in the mind of mrs Lagarde.

      Again not one word on the truth; Greece has slashed the budget deficit as far as it could during these past two years. Tax revenue has increased even though GDP has collectively shrank by 20%. What exactly does that tell you? Either tax collection has improved or that additional taxes have been implemented. It is economics 101. Yet the program that mrs Lagarde wants the government to implement calls for an unrealistic fiscal adjustment to the tune of 13 billions for 2012 and 2013 alone. This is ridiculous. Amongst this recession Greece is supposed to manage a 4,5% per GDP primary surplus within 2 years in order to pay interest rates alone since the budget is going to be balanced soon. This is simply impossible and mrs Lagarde knows it. She should spare us the theatrics and the charade.

      I finally challenge you to find on piece. One, if you can that mentions the exact measures of the adjustment program that Greece has not implement. You will find none except inflammatory pieces filled with lies like the latest work of mrs Lagarde. Greece has only refused to fire public servants en masse on the spot and proposed fiscally equivalent reductions in the wages instead. That’s all. Everything else has been implemented. The program has been a failure all along like it is certain to be in Ireland and in Portugal.

      But I forget, this would be Greece’s fault as well.

    • Well, this fake “morality” from Lagarde is no more acceptable than the fake morality from the Germans. Obviously, the IMF is under attack from the developing world for several reasons: (1) its long history of abject failure to do anything at all for economic development and assistance [they’ll argue that that is the job of the World Bank, of course]; its long history of domination by the US and Europe, and another French politician appointed to replace the elderly sex maniac; and its current emphasis on the eurozone. So, it makes political sense for the IMF to make nasty remarks about Greece…

      Employees of international organisations generally pay very low rates of tax (around 4% plus pension contributions) because they are employed outside of national law. So, Lagarde is certainly not paying much in tax. More to the point is that she fails to note the overtaxation of some in Greece (especially the self-employed) which leads many to defy the system, especially when it is easy and time-honoured to do so. In my research institute, I have given up bringing money to Greece because the effective deduction/taxation rate is around 80% for every person employed. This includes two impositions of VAT at 23% (completely illegal, and for non-commercial research even one is illegal), and insistence that research staff must be self-employed even when legally this is incorrect. The whole structure of taxation and employment in Greece is fucked up, and the bitch Lagarde should be focusing her attention on this aspect state reform instead of denouncing parents of children. Only an idiot pays high taxes to an illegitimate state that does little for him/her; Greece is not Sweden.

    • Lagarde’s statements are beyond trolling and they must be dealt with as such.
      Trolls of Internet re-unite!!!

      We (Greeks) want Lagarde as prime minister. She’s the only one speaking the truth. She’s the only one really caring about impoverished people all over the world. He is a humanist! No ! No ! She is a philanthropist.
      Angelina Jolie is a midget net to her!

      She is the only one who has a solid plan about Greece with very distinct targets and guaranteed results.
      Please vote for her in the forthcoming elections to put us out of our misery !
      (She is pro euthanasia )!

      Lagarde for president! She will be the first female prime minister of Greece.
      That’s the first step to become Germany !

      Lagarde! Lagarde! We love her.

    • How nice words from Lagarde.

      Some posts ago i said that they are hiding behind world hunger and other problems as an excuse. Prophetic? No ,just common policy.

      Now she remembered the African kids?
      Why doesn’t she say that Africa is full of Greek Churches and not only churches but certainly Greeks helping Africans ,without any funding?

      REALLY ,HOW LOW CAN YOU GO????????????

      How about the world bank who conned the African natives into thinking that they will help them?
      They built dams and bridges of millions (more than the real cost – illogical investments) ,they brought machines ,some clothes to the people and showed them how to cultivate the land with fertilizers.
      Mass agricultural production with most of the money going to the world bank.

      When their money laundering scheme ended (because that is what it was) ,they left the dam ,they dropped all support and vanished.

      The end result ,the soil was destroyed ,taking water from the dam was deemed illegal and the poor as always natives now had to leave from their land ,where they lived for hundreds of years.

      IS THIS HOW LAGARDE CARES????????????????

      FUCK YOU!!!!!!!!!!
      ALL OF YOU!!!!!!!!!!

      How about the cultural attacks? They keep saying that the Africans didn’t have any culture ,any civilization before the white men went there.

      The Africans have an amazing history that actually has many common points with the stories of other races.




      FUCK YOU ALL OVER THE PLACE!!!!!!!!!!!!!!

      FUCK YOU!!!!!!!!!!!

      And the problem is the Greek taxes when the banks owe trillions?


    • YOU DUMB ASS don’t you understand that when you are unemployed you do not have money to pay taxes?

      Ofcourse the tax revenues dropped. And only the elite does not pay taxes.

      Go learn some German history you sold out pathetic little excrement.
      You massively produced non-recycled human bag.

    • On CNN there was a report about Ethiopia’s latest hydroelectric project on the Blue Nile.

      I can’t say there aren’t issues with the project, but I had a little giggle to myself when the CNN reporter told viewers that the IMF – after much analysis – was “opposing the project because Ethiopia is drought-prone”.

      They really are “experts” in every field these IMF people.

      Why don’t you post the link for the whole interview you…….?

    • Wow! This board is getting friendlier every day! First we have ranting against Lagarde (which I hate too) and then we have satements like

      “Germany(aka the toilet of Europe)”

      Really funny when no other country in Europe has ever received so much money from other (before the bailouts).

      I strongly suggest that Greece should form some kind of union with Africa. Politicians would not need to adapt. And everyone else would learn a lesson or two.

    • Dean said:

      “The undisputed fact is that a lower euro (which each crisis produces) benefits German exports. Another undisputed fact is that Germany has zero interest (aka free money) at the expense of all Europe. The third fact is that Germany drains all Euroland from investment capital.

      It not a matter of if, but a matter of when Germany(aka the toilet of Europe) pays through the nose for her dirty game. It’s coming and it ain’t gonna be pretty.”


      Tasos said:

      “I finally challenge you to find on piece. One, if you can that mentions the exact measures of the adjustment program that Greece has not implement. You will find none except inflammatory pieces filled with lies like the latest work of mrs Lagarde. Greece has only refused to fire public servants en masse on the spot and proposed fiscally equivalent reductions in the wages instead. That’s all. Everything else has been implemented.”


    • No EU dictatorship: I do not know if you have learning difficulties, but by now most people have understood that only 20% of the loans to Greece actually came to Greece. The 80% went to (primarily northern) European banks to save them from possible collapse. The German government has no interest in Greece at all, other than as a possible car boot sale: their interest is in German banks, the German economy and saving the euro. This is in fact the main problem: the Germans are concerned only with themselves.

      So, kindly stop the propaganda. I assume that you are not actually so stupid as to believe what you have written.

    • @ No EU dictatorship:

      Yes, every day the number of anti-German rascist comments and conspiracy theories increases. Such rather moronic comments don’t exactly contribute to the excellence this blog had, rightfully so, not to long ago.

    • Guest, looks like you are stupid. Greece received 100% of the loans when they were paid out. We should not forget that all of these loans actually went to Greece and were spent.

      Now Greece cannot pay them back, and received more loans of which 20% agaon is wasted in the bottemless pit and 80% go to banksters of mainly France which is not in Northern Europe at all.

    • n eu d ,vss

      Go find those that took the money ,with all those businessmen ,German too ,that forced state corruption and put them to jail after forcing them to pay what THEY owe you.

      For i sure do not owe you anything.
      I have my ass kicked working to give my money to thieves?
      NO NO NO.

      And also deal with racists like you that begun the whole insulting game?
      NO NO NO

      Do not forget that we ,the people ,never asked money. They forced the so called bail out. We opposed it. Period.

      Not only are you ,vss and n eu d ,the racists but you are also stupid and you can not even find a smart and original insult.
      You twist everything and do not even try to find a smart way to present your lies.

      But do not worry. This blog accepts even non-humans.

  • Merkel is a die-hard populist by turning an entire nation into a scapegoat (so that she can fool her voters into thinking that the sacred cows known as financial institutions are not to blame at all for this mess). Hey, Adolf Hitler did that before her. It must run in the genes of German political speech. Come to think of it, she speaks just like those insane Greek right wing conspiracy theorists who see Jewish conspiracies everywhere. Merkel (and so does Lagarde, actually) basically tells everyone that there is a conspiracy by the Greek low-income classes to steal the “hard working” Germans’ money.

    As for Lagarde, I wonder when she’ll assume responsibility for her role in the Tapie-Sarkozy scandal. And I wonder if she pays her taxes… Oh, and that 400-odd million bond Greece paid last week? Its owner was an American tax dodger (“tax exile” is a euphemism for this sort of scumbag) named Kenneth Dart. Look him up, he’s quite a decent and nice fellow, who simply does not like paying taxes at all, even if he’s rolling in money.

    Let me also point out that, when the Fiat Group was bidding to buy Opel from GM, the German media (and the German politicians – ALL of them) were pushing anti-Italian racist slurs, especially to the members of IG Metall (not least because the German government had received serious kickbacks from a nice fellow named Oleg Deripaska, owner of Russian truckmaker GAZ and car parts maker Magna – and also a very close friend of Vladimir Putin – in order to grab the Opel brand and its factories; oh, and please don’t tell me that Opel has even the slightest piece of know-how, because it doesn’t)… Who’s the populist now?

  • Hi Yanis. As rational as your argument may be, and as destructive as the policies that have led to the current situation may be, the simple fact is – at this crucial point in time – Greece is without any friends. At least any friends who can bear influence on the outcome. Refer to Christine Lagarde’s comments today:

    And these are on the back of David Cameron’s comments earlier in the week. I doubt Hollande would go into bat for Greece either. Europe could always change policy but leave Greece hanging – or ‘payback’ time as it was put to Lagarde.

    • Like I said earlier, Lagarde should tell us about her role in the Tapie-Sarkozy scandal and she should tell us when exactly she’s planning to assume responsibility for it. Also, since she loves pointing the finger at everyone else, I’d like to ask if she pays her due taxes in full and what she has to tell us about the bonds that are owned by well-known tax-evading fraudsters (like Kenneth Dart) and are being paid by Greece. Christine Lagarde is a hypocrite and she’s also a textbook case of an argument against gender equality: every sexist and chauvinist out there will use her as a prime example of why women must never be allowed to manage anything outside of their kitchen. Women’s rights activists must isolate her (and everyone else that’s like her) and turn her into a pariah, because she gives women a very bad name.

    • @ Ο Αιρετικός

      You write a whole lot of demands you have for Lagarde, but you seem somehwo to miss her point which is: pay the due taxes, dear Greeks,. because this is an inevitable part of the solution. The Greek national sport to avoid taxes was a main contributor to bring Greece into the abyss she is in.

    • “The Greek national sport to avoid taxes was a main contributor..”

      on the one hand and this on the other hand:

      “Yes, every day the number of anti-German rascist comments and conspiracy theories increases. Such rather moronic comments don’t exactly contribute to the excellence this blog had, rightfully so, not to long ago.”

      @Very Serious Sam you better rename yourself to Very Inserious Scam that fits your statements here better!!!

      How funny a racist like you is complaining about others alleged ranti-German racism:-))

      What a drama queen you are!


  • It is true that his proposal does not “blackmail Europe.” But he does not tell the WHOLE truth: that he is playing high stakes poker with OTHER PEOPLES’ MONEY. All the European leaders and technocrats, bar none, have unanimously said that any repudiation by Greece of its “bailout commitments” would lead to its exodus from Europe. How credible, therefore, is Varoufakis’ implied assertion that they are bluffing and they would not cut off Greece from its European moorings, when so strongly and pellucidly have put their credibility and reputation on line about Greece’s exit? Are these two attributes so cheap in the minds of those who bear them and who hold such high positions in Europe?

    Moreover, behold professor Varoufakis’ impeccable logic. Hollande’s “willingness notwithstanding” to be the “circuit-breaker…is hampered by the state of the French state’s finances.” How then Greece could be the “circuit-breaker” when its finances are immeasurably worse than France’s? Where Greece will find the funds, once Europe turns off the tap, to pay pensions, public servants, the running costs of hospitals and schools and other public institutions once it bails out of its commitments?
    Beware of Varoufakis bearing gifts!

    • “How then Greece could be the “circuit-breaker” when its finances are immeasurably worse than France’s? ”

      Βecause France is not under any type of memorandum of destruction.Everyday that goes by Greece has less things to loose.

    • “Where Greece will find the funds, once Europe turns off the tap, to pay pensions, public servants, the running costs of hospitals and schools and other public institutions once it bails out of its commitments?”

      Apart from the fact that he has proposed cuts from top to the bottom so as not to hurt the low income people (which has never happened in the last 2 years) and still balance the budget,are you aware that the planned cuts that are (were?) going to be implemented in june amount up to 16bil or something?While at the same time,in order to balance the budget we need what? 3-4 bil cuts?

      So correct me if im wrong but you are against cuts of 3-4 bil and in favor of the 16bil cuts ?It really doesnt make any sense.

    • You are absolutely right. What kind of canary wants to get out of its cage?
      The kind of canary which is looking for food!

    • Please: if you don’t know anything about political negotiation, or what exactly the economic crisis is about, desist from uttering these foolish banalities. “Other people’s money”, for example: we are in the middle of a global banking crisis, caused by right wing politicians’ relaxation of controls on banks who then systematically created and sucked out money from everywhere, and you talk about other people’s money. Which people? what money? The fraudsters are still running the show, and you object to any challenges?

      Money is nothing more than credit. At this time, Greece is deprived of access to credit (partly owing to the incompetence of the ND governments in the last decade) and you tell us that the problem is with Syriza! The ONLY hope for Greece is to negotiate, and that entails being prepared to do and say anything that is in Greece’s interests. Not the interests of the rich (as you and ND want) but the interests of the country. Do you know the difference?

    • Let’s see your logic. Part of what you advocate is privatization of infrastructures such as water (a social good access to which is a basic human right – last time I checked, unless it suddenly became a luxury good). This means:

      1. The public (the taxpayers) make a massive investment in infrastructure that no private enterprise would ever think of making, because of minimal return of investment; let’s face it, private businesses want their investment to bring profit yesterday.

      2. Then, a private business (which also owns loss-making media that stay afloat thanks to the government turning a blind eye to their massive debts to social security funds) uses its media (newspapers, TV stations, radio stations and news portals) to denounce the “unprofitable” public services and make the public think that privatization will offer better and cheaper services.

      3. Massive kickbacks to politicians (provided by the private business) follow.

      4. The service is privatized.

      5. The cost of the service is immediately increased (at least 100%).

      6. As for the quality of the service after privatization, look at what happened to the water services in Paris.

      Private entrepreneurship is about taking risks, accepting risks and then swimming or sinking. The procedure presented above (which is standard neoliberal procedure, approved by the IMF and used in every privatization in the world, mind you) is not private entrepreneurship, it’s pure parasitism.

    • How credible, therefore, is Varoufakis’ implied assertion that they [“European leaders and technocrats”] are bluffing and they would not cut off Greece from its European moorings, when so strongly and pellucidly have put their credibility and reputation on line about Greece’s exit?


      “When it be becomes serious, you have to lie.”

      – Jean-Claude Juncker, Chairman of the Eurozone finance ministers

    • “Are these two attributes so cheap in the minds of those who bear them and who hold such high positions in Europe?”

      Ofcourse they are. As always. The word “philotimo” is only Greek and for those that have a real heart.

      “How then Greece could be the “circuit-breaker” when its finances are immeasurably worse than France’s?”

      By understanding that noone totally opposes the program ,only the details. Yanis considers them stupid. I say they know what they are doing. And if they know what they are doing ,then they are certainly bluffing. For the policies we follow lead to destruction anyway. If the brusselians are telling the truth ,then it doesn’t matter if we do not oppose. We are done. Everybody is.
      If they are lying ,they do not want destruction ,they do not want to sacrifice decades of building global relations ,they do not want to lose access to gas that is transported through pipes in the balkans etc. etc.

      The fastest we oppose ,the better.

      So the question is:
      Do you believe they are stupid or that they know what they are doing?

      If they are stupid we are done.
      If they want this we are done.
      If they are not stupid and they do not want this ,they compromise.
      No matter what they say now.

  • The permanent German bashing is getting annoying. Especially beause it is carefully orchestrated by French diplomats, and the stupid lambs follow blindly, as can be seen in a lot of comments here, including the article(s).

    One example. the beneficiaries of transfering a huge amount of toxic bondwaste issued by Greece, Portugal, Spain and Ireland from banks to the books of the ECB is who? Conventional wisdom here (and elsehwere) was led to believe: of course the German banks.

    Nice spin, except it was the french banks. See for instance here:

    At the beginning, the french banks exposure to GIPS-debt was a whopping 33billion euro higher than the what the german banks held. During the initial round of the deleveraging on taxpayer’s cost, just between Q1 and Q4, the risk reduction was ten times higher on the french bankss side.

    During this period, they transfered 45,5 bn € of risk to the taxpayers, while the german banks only 4,3bn €. And now?

    As I said before, anybody is of course free to be anti-German rascist as much as he or she wants, but please don’t ignore the facts again and again. You need to have a complete view to be able to find solutions. To focus on Germany only is not good enoguh, look also at France, the US, the UK, Luxembourg…

    And especially: what’s wrong with your own country. Since decades no functioning government, bloated public sector, tax evasion, bribery, spendthrift lifestyle on borrowed money… Face reality, finally, and accept your very own responsibility for the critical situation you yourself put Greece (and the rest of the world) into.

    • The French should have learned from history.. But maybe they know now, that after the Germans have invaded France 2 times, that it will not happen again. Reason: The Germans now know that France is so fucked up that the place is not worth invading!

    • @No EU dictatorship

      Germany has not invaded France 2 times, but much more. For instance it did that also in 1870. Furthermore, France has done the same manytimes (early 1800s, 1923 etc)

      France and Germany had been fighting each other at least 15 times in 300 years (1650 to 1950) with countless millions dead. Thus your comment is not very accurate.

    • Wow I am impressed. Congratulations actually. This is a big step forward realizing that the French and German banks are the ones that really got the bailout to the expense of French, German and Greek taxpayers alike. Of course you argue that the French banks benefited the most and they were in more trouble than the German ones. This is true when it comes to Greek exposure but it is not the main issue. I would suggest that you search for a similar chart that shows total exposure to Spain-Portugal-Ireland-Italy-Greece. German banks if I remember correctly benefited the most from the Irish bailout and of course I think that the Irish got screwed as well and make no mistake they do feel screwed. By the way you should also know that it was actually German Banks and Deutsche Bank specifically who started the run on Italian spreads by dumping several billion worth of bonds within a week. Guess who bought them? The ECB did, with the European taxpayer’s money. I would also suggest you look at the pre-PSI exposure of French and German banks to Greece in early 2012. You will find that their exposure was minimal. The ECB bond buying program bailed them out and then demanded full payment from Greece with interest. The haircut was mainly imposed upon Greek banks that where mysteriously (or stupidly that is always an option with bankers) exempt from the ECB bond purchase program and Greek social security funds.

      I would also like to note that feeling cheated and being pissed off at the way French and German banks were rescued to my expense does not make my a racist anti-German or a racist anti-French. I have a problem when I constantly listen to the same propaganda of Germany-France-what-have-you about saving Greece and the Greeks ignoring the fact that the greatest part of the bailouts (well over 80% in Greece’s case) went towards bailing out their own banks. How about the truth for a change? German and French banks dumped their potential liabilities on the shoulders of ALL European taxpayers and we should ALL feel pissed about it. These private entities used their political connections and leverage to avoid facing potential writedowns or any negotiation with their trouble debtors.

      Finally I would like to add that nobody is denying the Greek governments responsibility for the mess of the Greek economy. Most Greek politicians responsible for governing Greece for the past years would face the very real possibility of being lynched if they ever showed themselves in public places without serious police escort. Nobody is ignoring the serious mismanagement of the past years. Nobody is “ignoring reality”. But make no mistake: the Greek government and its cronies put itself in this terrible position and we are paying the price of that already. We are not even remotely responsible for the imbalances in the eurozone and the global economy that inevitably led to the global collapse we are facing.

      Anybody who believes that is simply delusional.

    • vss

      We look at everybody. And we are certainly not anti-German racists.
      We are anti-criminal.

      Once more we have already said that Greece has a lot of problems.
      Still ,it is not possible to cause such a crisis.

      For our problems are nothing compared to their criminal behaviour.

      So if you feel that “the permanent German bashing is getting annoying” ,then speak the truth.

    • vss

      “Nice spin, except it was the french banks.”

      Again you are taking certain data in isolation but you do not mentuion the flow and who is responsible for the flow.

      Is like saying that a burned house is a bad investment ,the occupants are to be held responsible ,but you miss to mention who the firestarter is.

      Hermes the thrice great supposedly said:

      “There will come a time that the stupid will be considered smart and the smart will be considered stupid.”

      I guess the past 2000 years give testament to that and even more so the last 200 years.

      And you are the stars.

    • In that case. The part “The Germans now know that France is so fucked up that the place is not worth invading!” must really be true now!

    • “Especially beause it is carefully orchestrated by French diplomats, and the stupid lambs follow blindly, as can be seen in a lot of comments here, including the article(s).”

      So from what i can understand is that you say Greeks have the ability to travel back in time. Wow. Thanks.

      So ,the French started all this and then we went back in time and appeared to oppose first.


    • You have lost it man.
      Now you try to target the French.

      Show some dignity ,will ya?

  • Christine Lagarde with her disgusting comments about Greece is simply attempting to maintain the status quo that existed before the Crisis of 2008 as are all the heads of Western financial institutions and governments . The issue is not Greek debt , or the debts of other members of the Eurozone ,or even the US ( the most indebted of all countries ) or the man in the street . It is DEBT ; debt owed by the many to the few, but it is the few that hold the power for the time being. There is a radical, political solution to all this debt and that is a debt jubilee aka forgiveness of debt, but it is radical and as such can only come from the 99% . How can this be achieved without violence? By civil disobedience that is refusing to pay individual debts to the banks . This requires great courage because these institutions rely on the public being ignorant ( e.g. not understanding that banks create money out of thin air ) and being intimidated by them . But it is the only way to change this terrible financial dictatorship . So Greek people take charge of your own lives, behave well , love your neighbour as yourself and you will overcome .

    • Baldrick’s cunning plans are more feasible and viable than the ones concocted by Merkel, Lagarde & Co. These people are not technocrats; if they think they’re doing the societies any good at all, they’re blinded by the cult (yes, it is a cult like Scientology) of neoliberalism – but they actually don’t want to benefit societies. Being true Ayn Rand fans, they’re merely sociopaths hell-bent on “exacting revenge” on the people they consider to be “parasites”. Round’em up and throw them in a psych ward for good. Them… And their “professors”.

    • If we dont accept that Germany’s stance is affected and/or dictated by interests then we have to blame their stupid belief that everyone can be like Germany and thus economically successfull.They like to look at Germany in isolation from the rest of the economies they interact with,and this is similar to looking at the gvt budget in isolation from the rest of the sectors of the economy.

      If this was a physics debate,the Germans would be arguing that from 1J of solar energy you can produce 2J of electric energy….

  • The director of the IMF just spelled out the opinion of the European elite. They really don’t care for what happens to Greece, at all. I’m sure many WW2 collaborators thought they were doing some good to, but at certain point smiling, offering gentle nudges and genial debate isn’t going to cut it.

  • @Tasos

    I was reading all the comments with amusement until I got to your note above saying that firing 150,000 civil servants in 3 years would have deepened the recession.

    Seriously, are you insane?

    Are you seriously telling me that firing 50,000 civil servants/year who produce nothing and drain th economy is not preferable to over 600,000 lost jobs in the private sector and an increase in the tax drain imposed on all citizens that has effectively killed the economy?

    The exact opposite is true. It would have effectively stabilized the economy in one day. By the way, Romania did this 3 years ago under IMF pressure and they just increased the minimum wage by more than 10%. Seems to have worked for them.

    If you believe this I can only conclude one of two things: (a) you are hopelessly bad at basic math, or (b) you are so blinded by socialist rhetoric that facts and realism have no relevance to you whatsoever.

    I sincerely apologize for getting personal, but as a Greek I can understand how we get defensive when our country is grievously insulted. I can understand that there are economic ideologies other than mine. But I cannot understand a suicidal denial of facts. This is no longer ideology, it’s more like a cult.

    • “The exact opposite is true. It would have effectively stabilized the economy in one day.”

      For the public sector i agree.
      Stabilized no ,but certainly would have helped.

      Now ,please give a full economic analysis of Romania ,the full deal with the IMF ,the sacrifices made so we can compare.

      Data in isolation are worth NOTHING.

      Thank you.

    • Glad to be able to amuse you. Did not take anything personally so don’t apologize we all share opinions it’s ok if there is disagreement. I think you misunderstood me. I am no socialist, I believe in small government. I also think that there is some value in a government effort to save jobs by implementing wage and benefits cuts in the public sector in order to achieve the exact equivalent fiscal result instead of firing people so as to avoid social damage. I also believe in the exact same action in the private sector in times of recession: Businesses should try and save as much jobs as possible. Adding or raising taxes that hurt the private sector more in order to save public sector jobs is unacceptable to me also.

      You are mistaken in one point though. Every time government cuts spending either by firing workers in the public sector or by wage/benefits/transfer payments reductions it reduces the GDP. Thus a recessionary effect is created. This is textbook macroeconomics. It doesn’t mean that I would like to see the government go on a spending and hiring spree, it simply means that for every action there are consequences.

    • @Tasos

      I agree with your comments. Sorry if I misread your point. Certainly saving jobs is worth every effort.
      In my professional capacity I’m in charge of controlling costs for a large company. Long before we touched salaries or positions (which we have not done to any serious extent) we slashed all our spending by reviewing each and every expense, renegotiating each and every contract and applying very strict controls for any new expenditures.

      It could be argued that these actions also have a recessionary effect since by slashing our suppliers’ prices, they may be driven to cut jobs or salaries. However it is a more certain way of cutting the fat than starting with jobs – at least there is the hope that other inefficiencies will be the first to go.

      This process should have been the first thing the Greek state did, but to my knowledge it has never been done.

      In my experience when such efforts are undertaken by relatively efficient organizations such as private companies for the first time, a 15% reduction is easy to deliver. For Gov’t organizations, a 25% cut is often feasible. If the Greek Gov’t had achieved a 15-25% reduction on expenses in the last 2 years, we would be in a very different situation right now.

      I cannot provide a full analysis of Romania. Well actually I can, because I have in depth knowledge of the country, but I think there’s no point – no two things are identical so I can see that any comparison would be easy to challenge.
      In my view there are enough similarities to draw a parallel. A state-heavy economy, where salaries rose very quickly in the last 10 years thanks to cheap liquidity and FDI, a real-estate bubble, an inefficient private sector with low end agriculture and poor infrastructure, low levels of automation and heavy (French-style) regulation of labor markets. Massive tax evasion which the Gov’t tried to combat with a low 15% tax rate (to encourage people to pay) leading to anemic revenues.
      There are enough similarities but also many differences, the first of which is that when civil servants were let go, the riots lasted two days and were very limited in scope.

    • DiJordan

      Thanks for your answer.

      While many of what you said are true ,you should also know that we already had austerity two times from 1980. What happens today has nothing to do with the Greek problems in isolation.

      We got in the euro ,as all countries did ,by manipulation and from then on everything got worst.
      Production had to be destroyed (a prerequisite for Greece to enter in the EZ) ,wages even when increasing had less purchasing power ,prices increasing more etc.. Phenomena that are unreasonable and impossible in any case.

      Lastly ,you should know the deals signed for the so called bailout ,one of the most important being concession of sovereignty.

      We can not accept that.

      We will not pay for the banks and their mistakes. We gladly pay for us and our mistakes. But in reality it has nothing to do with our personal debt and you should know it. It has to do with universal bank debt and overleverage.

      They could resolve their issues without attacking Greece or any country. But they need to preserve this neo-liberal monster.
      Now the problems keep pilling up ,exactly because they created a social meme. A self-fulfilling prophecy. You only need a little propaganda.

      Anyway ,pain for not losing my country is prefferable.
      But that’s just me.

  • Or perhaps madness-in-action is to believe that Greece can stay in the Eurozone and live within its meagre means. A quick look at Greece’s balance of payments shows that Varoufakis’ plan of blackmailing Europe is not possible unless Greek people are willing to accept austerity measure that are orders of magnitude harsher than those they experience today. One should remember that Argentina had a current account deficit of 1 percent of GDP which immediately turned to a surplus when it defaulted on its debt in 2001. Greece current account deficit is still close to 10 percent of GDP and even though it would suspend all payments to all creditors it would still be in deficit.

    • “Greece current account deficit is still close to 10 percent of GDP”

      Yes. On the other hand side, according to OECD, IMF, and EMU, Greece would have a primary surplus if just his people paid the due taxes… Which would be a good start on the road to current account equilibrium, no?

    • Sure it would be ,together with the true culprits paying up. But you do not want the true culprits to pay up. You love the fact that they exist. They are your partners.

      “according to OECD, IMF, and EMU”

      Sure and according to Hitler you are the Aryan race and everybody else is soap.

      OBD = occupation by distance.

    • Why do you care so much about the way we will balance our budget?
      Don’t you have other problems to solve?

    • @Very Serious Sam

      The current account deficit and the budget deficit are two different things. Many commentators on this blog believe that Greece can default on its debt (within the euro) as soon as it achieves a primary surplus in its budget. That’s not true at all because as soon as ECB stops funding the Greek current account deficit the newly-acquired budget surplus will immediately turn to a huge deficit as VAT revenue will plunge and unemployment in import-related sectors of the economy will surge.

      @Ilias Trou

      I have family in Greece and I believe Varoufakis’ plan would cause riots and make social unrest escalate to unprecedented levels.

    • You are, I am sure you will be happy to hear (since you care about Greece), profoundly wrong. You are obviously referring to the European System of Central Banks Target 2 mechanism which turns a current account deficit into liabilities for the Central Bank of the country with a current account deficit into an ‘asset’ of the Central Bank with the surplus. Well, the ECB has no legal right to suspend this whether Greece defaults or not. Period.

    • ECB can only do so with a majority vote of 2/3 at the board of governors.Im not sure Italy,Spain,Portugal,Greece,Cyprus,Ireland and maybe even France would shoot their own feet, cause thats the equivalent of this.

      Where do they teach that a balanced gvt budget results in a balanced current account position?

    • So what! Since 2010 noone cares about contracts any more. The EU has constantly broken contracts ranging from against the spirit of the contract to outright violating. On top of that they are even proud of that. See the famous qoute by (at time time French Finance misister) Madame Lagarde, now IMF Dominatrix

    • @yanisv

      Sorry, what I actually meant was EU/ECB/IMF rather than just ECB. And I was not referring to the Target 2 balances.

      My interpretation of Greece’s balance of payment is that the inflow of capital since 2010 comes almost entirely from the bailout programme.

      If that funding stops it will most likely have disastrous effects on Greece because other incomes are just too small. The current account deficit would still be almost €8 billion per annum after suspending payments to your creditors. The question is who will fund the deficit when you have rejected EU/ECB/IMF? If no one, then you have to start printing drachmas again because an €8 billion adjustment to the annual current account is just unimaginable. It would equal to the adjustment of losing all income from tourism.

      Your above plan might work two years from now if the current account deficit has narrowed further, but at the moment I believe it would be a disaster.

    • @Peter and @YannisV:

      “The current account deficit would still be almost €8 billion per annum after suspending payments to your creditors. The question is who will fund the deficit when you have rejected EU/ECB/IMF? If no one, then you have to start printing drachmas again because an €8 billion adjustment to the annual current account is just unimaginable. It would equal to the adjustment of losing all income from tourism. Your above plan might work two years from now if the current account deficit has narrowed further, but at the moment I believe it would be a disaster.”

      Yanni if I am not mistaken the current account deficit will lead to a reduction of peoples savings in Greece since no more loans will be availlable to fund the deficit.

      Is that correct? And if yes that will lead to the further empoverishment of Greek people isn’t it?

    • I am afraid it is not correct. The ECB system is obliged to finance all current account deficits of member-states of the Eurozone. The ECB cannot just decide to cut off a member-state from the Target 2 system of converting a boost in Greece’s trade deficit into a liability of the Greek Central Banks and an asset of, say, the Bundesbank. The only thing the ECB can do, in the case of a Greek default to the troika, is cut off liquidity from Greek banks. But that is a separate issue, not to be confused with Target 2.

    • @Yanisv:

      Κρούγκμαν: Αν βγει ο ΣΥΡΙΖΑ, η Ελλάδα θα βγει από το ευρώ!

      Θα προκαλούσε έκπληξη αν η Ελλάδα παρέμενε στην ευρωζώνη για περισσότερο από ένα χρόνο ακόμα…

      δήλωσε σε συνέντευξή του στον βρετανικό Independent ο Νομπελίστας οικονομολόγος Πολ Κρούγκμαν.

      Σημειώνει ότι το γεγονός που θα προκαλέσει την ελληνική έξοδο θα είναι ο τερματισμός της χρηματοδότησης των ελληνικών τραπεζών από την ΕΚΤ, που θα καταστεί αναπόφευκτος κάποια στιγμή «λόγω των αριθμών».

      Ο κ. Κρούγκμαν σχολιάζει ότι «αν ήταν Έλληνας καταθέτης θα προσπαθούσε να τραβήξει τα χρήματά του από τις τράπεζες καθώς υπάρχει φόβος ότι αυτές θα μπορούσαν να μετατραπούν σε νέες δραχμές».

      Προσθέτει ότι οι πιθανότητες ανάκαμψης εκτός ευρωζώνης θα υπάρχουν όπως ο ανταγωνιστικότερος τουριστικός τομέας, μετά όμως από μία «άσχημη» περίοδο έξι μηνών ή ενός έτους.

      Παρόλα αυτά σημειώνει ότι δεν υπάρχει βεβαιότητα για την επίδοση της ελληνικής οικονομίας μετά το ευρώ, αν και τονίζει πως ούτε τώρα η Ελλάδα πορεύεται σε βιώσιμη οδό.

      Αναφερόμενος στις συνέπειες μιας ελληνικής εξόδου στην υπόλοιπη ευρωζώνη σημειώνει ότι «όλα εξαρτώνται από το πόσο πρόθυμη θα είναι η ΕΚΤ να προμηθεύει με χρήμα τις ιταλικές και ισπανικές τράπεζες», καταλήγοντας στο συμπέρασμα ότι όλα επαφίενται στις αποφάσεις της Γερμανίας.

      Παράλληλα σε συνέντευξή του στο BBC, ο νομπελίστας οικονομολόγος λέει ότι «αν ήμουν ο πρωθυπουργός της Ελλάδας θα είχα μόνο δύο επιλογές: Ή να συμμορφωθώ με ό, τι λένε οι Γερμανοί, με αντάλλαγμα τη συνεχή δανειοδότηση ή να φύγω από το ευρώ».

      Και συνεχίζει τονίζοντας ότι «θα ήμουν σε απόγνωση, γιατί πιστεύω ότι η Ελλάδα πρέπει και θα φύγει από το ευρώ, νομίζω ότι δεν υπάρχει εναλλακτική. Παράλληλα όμως πιστεύω ότι όποιος πάρει αυτή την απόφαση, θα τερματίσει την πολιτική του καριέρα».

      Στην ερώτηση της δημοσιογράφου πότε πιστεύει ότι η Ελλάδα θα βγει από το ευρώ, είπε ότι «μπορεί να συμβεί ακόμα και σε μερικές εβδομάδες αν εκλεγεί ο ΣΥΡΙΖΑ, αν και φαίνεται ότι αυτό δε θα γίνει, ή αργότερα σε κάποια στιγμή όταν η ΕΚΤ σταματήσει τη δανειοδότηση στις ελληνικές τράπεζες».

  • “… redeem Greek government bonds that the ECB had previously purchased in a failed attempt to shore up their price. This new loan boosted Greece’s debt substantially”

    How did the new loan boost Greece’s debt, if it only replaced (was used to buy back) old loans?

    “… insolvent states borrowing in order to pay a Central Bank that is lending to insolvent banks which, at once, receive capital from insolvent states and lend to them part of the money they themselves borrowed from the Central Bank!
    Is this prudential, austerity-driven, economics that a country like Greece must abide to? Or is madness-in-action?”

    Does Greece borrow money from the banks? Obviously not. And since Greek is not abiding by that system, it cannot explain for the specific problems of Greece.

    But for Greece “not [to] borrow another euro from the troika” is a great idea. And also to stop paying its creditors. Even a so-called “temporary” stop would be a default.
    And a Greek default would indeed be the perfect circuit-breaker of the insane European bailout-politics at the expense of the taxpayers of the sound countries and at the expense of consumers, who will have to pay dearly (through inflation) for the gigantic undercover-bailouts that the ECB has already enacted.

    Let’s hope that Greece follows your line, Prof. Varoufakis!
    While unpleasant for a short time, a Grexit would save the Eurozone from a long and eventually fatal ailment!

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