The Greek Election as a manifestation of Europe’s Hobbesian Moment

The frenzy of reporting the Greek election is coming to a close. The world is now, quite understandably, swivelling its antennae toward Spain, Italy, Mexico and the G20. It is, therefore, a good moment to take stock of the main lesson the Greek crisis’ recent twist should teach a wary world: Beware of free riders paralysed by the fear of others’ free riding!

The Greek people voted in favour of a simple proposition: Bow to a loan agreement that is commonly known to be unsustainable but which Europe insists upon. Why? To buy time in the hope that the rest of Europe will, in the meantime, find some workable solution within which Greece may have a future.

A couple of weeks before that, the Irish people voted ‘yes’ in a referendum to a Fiscal Pact commonly known to be unworkable and impossible to implement but, nonetheless, a Pact that Europe insisted that the Irish must adopt (or else!). Why? Again to buy time in the hope that, meanwhile, the rest of Europe will work out policies that will allow Ireland to breathe.

In the very same period, the governments of Spain and Italy, while sinking fast into the same mire that has consumed Greece, Ireland and Portugal, are committing to austerity policies that they know will accelerate that ‘sinking feeling’. Why? Because it is expected of them to do so and they hope that, before long, the rest of Europe will end its denial and create institutions that will allow their countries to stop the rot.

Thus the deficit countries, the so-called Periphery, are free riding. They keep doing as they are told hoping against hope that the rest of Europe will ‘do the right thing’ (instead of just committing to ‘doing it’). But, who is this ‘rest of Europe’ that will sort things out? The answer, of course, is Germany. But Germany is itself paralysed not only both by the fear of the Periphery’s free riding but also by a penchant towards a free-riding of its own.

Germany free riding on the Crisis’ coattails? But of course. As long as this crisis is pushing Germany’s own borrowing costs to zero, and causing tsunamis of capital to shift from Italy and Spain to its own enfeebled banks, Germany’s eagerness to sort this crisis out is severely circumscribed. Or, at the very least, weakened. Especially if crisis resolution requires large steps that will diminish Germany’s own relative power within Europe. For instance, why should the Federal Republic tie itself irreversibly to the euro-mast (by means of a unification of the Eurozone’s banks or debt mutualisation) when it is benefitting from the current state of affairs not only in terms of the financial ebbs and flows but also politically (i.e. in terms of ever increasing bargaining power vis-à-vis deficit nations like France, Italy and Spain)?


The Greek election is about to produce a government whose raison d’ etre is to continue the sort of free riding that is wrecking Europe. It is the latest reflection of a common thread of determined free riding that runs throughout the Eurozone, connecting the Greek vote, the Irish referendum, Spain’s and Italy’s reluctance to speak out against the silliness imposed upon them, and of course Germany’s obstinate denial of the slow-motion train wreck that is the Eurozone. Everybody free rides at the expense of everyone else, hoping that the rest of Europe will sort things out. The end result is a postmodern variant of Thomas Hobbes’ state of nature which guarantees that the euro’s life will prove nasty, brutish and short.


  • Thank God we have global markets which will systematically dismember Germany and end her free loading nonsense.

    Who needs nations when markets could send Merkel to the poor house in a matter of seconds and without any need for political cohesion whatsoever?

    Markets = Merkel meets her Maker.

    • The markets are RIGGED. And by the same forces controlling Germany.

    • You are absolutely right about this. And although, like many others, I was close to tears when the election results confirmed a victory (of sorts) for the useless, corrupt, dangerous bunch that have driven the country to ruin, I would like to say something about this vote. I have never before in my life witnessed such a dirty pre election campaign. The smears against Tsipras and the SYRIZA party, the concerted terrorization, intimidation, the threats and the blackmail of the Greek electorate in every way possible from the Euro officials like Barroso and Rompuy (talk about free riders there!) to the German press and again our ‘own’ Papademos himself who has by now confirmed in whose employ he was when he sold the country down the river. An analysis of the voters confirms that it was the elderly and those terrified of losing their pensions who voted for the right wing memorandum parties (Venizelos included in that description of course). Still, though it may be a mitigating factor it is no excuse for the Greek people to fail so miserably to rise to the occasion. We can only hope, or perhaps just point out, that this is the infamous battle lost but not the war.

    • Dear racist Dean, a few days ago you promsied to leave. The date came and went, but you are still here.

      A new example of what can be expected from promises made by a Greek.

    • vss

      We still wait for the stolen artifacts ,the statues and the reparations.

    • Very Serious Sam:

      My dear old boy! There are no rules in the conduct of war. The only certainty is a win for the Greek cause.

      There no such thing as promises here.

      The only thing I promise you is the total embarrassment of Germany and her allies.

    • I am so happy Dean is still here! I was worried he got stuck under the table plugging in wires.

    • So, I leave you for 2 days and your morale plunges in 1998 levels?

      German economic morale dive is sharpest since 1998

      By Christiaan Hetzner and Sakari Suoninen

      MANNHEIM, Germany | Tue Jun 19, 2012 9:50am EDT

      MANNHEIM, Germany (Reuters) – German analyst and investor morale sank in June at its fastest rate since October 1998 on worries about the health of the Spanish banking sector and uncertainty over the Greek election outcome, a survey showed on Tuesday.

      The main reading from the ZEW think tank’s monthly poll of economic sentiment fell to -16.9, undershooting even the weakest forecast in a Reuters poll of 42 economists. The data adds to signs that Germany, Europe’s paymaster and growth engine, is beginning to feel the bloc’s pain.

      The figure plunged from 10.8 in May and came in way below the central forecast of a drop to 4.0, sending the euro lower against the dollar and weighing on European stocks.

      “This is a hefty decline. This is an indication that the worsening of the debt crisis and the increasing tensions in Spain are impacting Germany,” said Juergen Michels of Citigroup.

      “That should strengthen the ECB in its decision to reduce rates in June,” he added.

      ZEW economist Michael Schroeder said the number of survey participants who expect the ECB to slash interest rates in the next half year had risen but they were still in the minority.

      The disappointing figures come after data showed business morale in France, the euro zone’s second largest economy, also slipped in June, putting a dampener on the region’s prospects. ID:nP6E8FR02Q]

      “It has really come as a surprise to me that it is such a huge decline,” ZEW’s Schroeder said. “This is not just monthly fluctuation, this is really too big a change to be interpreted as that.”

      He added that falling exports and slowing growth in Europe and Asia had contributed to the decline.

      “The financial market experts’ expectations are a strong warning against a too-optimistic assessment of Germany’s economic perspectives in the remainder of this year,” said ZEW President Wolfgang Franz.

      “The risks of a pronounced decline in economic activity in countries with close trade ties to Germany are very clear,” Franz added.

      He described the situation in the euro zone as “precarious”, even after Greeks voted narrowly for parties supporting the terms of its bailout program, saving the country from bankruptcy and a potential exit from the euro.


      ZEW’s Schroeder said he did not expect Germany to fall back into recession but that Europe’s largest economy would experience slow growth. He pointed to the poor outlook for the next half year, especially in the banking and insurance sectors.

      “You can’t exactly translate a negative figure in expectations into negative growth,” he said.

      The German economy steamed ahead early in the year and managed to save the euro zone from recession by growing 0.5 percent in the first quarter, but recent data has indicated that it is succumbing to the effects of the region’s debt crisis.

      Figures released earlier this month showed that German imports tumbled at their fastest rate in two years in April and exports fell more than expected.

      The industrial sector is also suffering, with orders posting their sharpest decline since November 2011 in April as contracts from abroad dried up. Industrial production dropped more than expected in April.

      Purchasing Managers Index (PMI) surveys due on Thursday are expected to add to the negative mood, with the headline composite index that combines manufacturing and services seen pointing to a contraction in the private sector for the second month running.

      But economists said there was still hope on the horizon, and several German research institutes have recently raised their 2012 growth forecasts.

      Many expect private consumption in particular to be the economy’s saving grace as Germans benefit from low unemployment and higher pay in the chemical and engineering sectors following successful wage negotiations.

      “Towards the end of the year, we expect Germany’s economy to grow again and help drag the rest of the euro zone out of recession,” said Christian Schulz of Berenberg Bank.

      The ZEW index was based on a survey of 274 analysts and investors conducted between May 29 and June 18.

      Around 30 of the results were collected after Greeks gave pro-bailout parties a narrow majority in Sunday’s election but these were only slightly better than responses collected before Greece went to the polls, ZEW’s Schroeder said.

  • Spot on as ever Yanis.
    The free-riding periphery has the upper hand though still: Germany will always try and do the minimum it can to keep the union together.
    Because it loves the rest of us? Of course not. Because it’s in her interest.

    • Yes and she will do the minimum it can at the last minute so more is owed and assets of others legally stolen.

  • Dear Yanis,

    As always, i fully agree.

    Permit me to add that “fear” seems to be one of the last acts of democracy in Greece. The imposition of Europe’s austerity measures have turned a Debt Crisis into a serious political one… Greece is an example. It is more than obvious that young people (mainly) have started denying the validity of fundamental democratic procedures. One additional failure of behalf of the greek government to manage the internal expanding pauperization will lead to extremity…

    My sincere greetings,


  • Germany free riding on the Crisis’ coattails? But of course not! The low rates Germany had to pay for some time now were thanks to her own doings and ommissions. Not Germany’s fault that the GIPSIFs did (and still do) everything that justifies higher interest rates for them.

    Plus the German interest rates are since some time rising sharply, and the price of CDS even more so. Reason: Germany took on in loans and guarantees so huge risks for the GIPSIFs and their banks that this single-sided German solidarity inevitably leads to higher risk premiums.

    BTW, of course nobody prevents the GIPSIFs from restructuring; so their risk premiums will sink, relative to Germany’s and in absolute figures.

    So pls. stop this nonsense about Germany here and there, this is soooo boring (and wrong).

    To say it with MJ:

    If You Wanna Make The World
    A Better Place
    Take A Look At Yourself, And
    Then Make A Change

    Certainly you still have mirrors.

    • Really ,since you believe so much that in this economic world we are not interconnected and that everything positive now is because of Germany only ,you should all Germans fight to stop your leaders from doing what they do and even leave the EZ yourselves.

      Please do.
      That would be fun to watch.

      Here vss.
      Something for people like you.

    • Here vss. Learn something

      Selfishness is not living as one wishes to live, it is asking others to live as one wishes to live. ~Oscar Wilde, The Soul of Man Under Socialism

      Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders. Do not believe in traditions because they have been handed down for many generations. But after observation and analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it. ~Buddha

      The right to do something does not mean that doing it is right. ~William Safire

      Try not to become a man of success but rather try to become a man of value. ~Albert Einstein

      The only exercise some people get is jumping to conclusions, running down their friends, side-stepping responsibility, and pushing their luck! ~Author Unknown

      Laws control the lesser man. Right conduct controls the greater one. ~Chinese Proverb

      Dignity consists not in possessing honors, but in the consciousness that we deserve them. ~Aristotle

      My grandfather once told me that there are two kinds of people: those who work and those who take the credit. He told me to try to be in the first group; there was less competition there. ~Indira Gandhi

      Nearly all men can stand adversity, but if you want to test a man’s character, give him power. ~Abraham Lincoln

    • @ Demitri

      Tell you what. You Greeks change pronto your constitution so that rich shipping company owners start to pay taxes (hey, in the past 10 years they reaped profits of ~160 billion euro, no taxes, thanks to this fine and proud Greek constitution), not just their employees, and you yourself will have achieved w/o any influence from whoever the 1st big step out of the dependency from other nation’s taxpayers money.

      Wouldn’t that feel good? To finally grow up instead of lamenting like little children that you are helpless, sort of professional victims, and everything that is not good is the fault of others?

    • Let me inform you that Greek shipowners are based in London and well outside Greece’s jurisdiction. Greek shipping is only nominally Greek. So, unless you can recommend ways in which the world’s greatest tax haven (Britain) can be reined in, perhaps you can refrain from patronising comments of this sort.

    • vss:

      Could Germany save the eurozone by leaving it? Feel free to comment on the reverse “reflection” of europe’s current predicament

      May 30, 2012

      Editor’s note: Clyde Prestowitz writes on globalization for and is president of the Economic Strategy Institute. John Prout is the former Paris-based treasurer of Credit Commercial de France.

      (CNN) — With Greece probably heading for an exit from the euro, the European and global economies may be facing disaster. However, there is still time for European leaders to reverse this destructive dynamic with one simple, outside-the-box solution: Instead of pushing Greece out of the eurozone, Germany should voluntarily withdraw and reissue its beloved deutsche mark.

      The analysis of the problems of the euro and the European Union has long been upside down, focused on the debt and competitive weaknesses of the so-called peripheral countries (Greece, Italy, Spain, Portugal and Ireland) and especially of Greece. But issues of debt and competitiveness existed and were dealt with rather easily long before the euro arrived, through periodic devaluation of the currencies of the less-competitive countries against those of the more competitive countries, and especially against the deutsche mark.

      The problem now is not the weaknesses of the periphery, it’s the excessive competitive strength of Germany. Not only is the German economy inherently strong as a result of the high productivity of its workforce, its exports have added competitiveness because the euro is undervalued as far as Germany is concerned. Because it is the common currency of the eurozone countries, the value of the euro reflects the average of their combined competitiveness. But Germany’s competitiveness is far above the average. So, for Germany, the euro is too weak. This is why Germany has been accumulating chronic trade surpluses on the scale of the Chinese.

      As long as the rest of the eurozone countries are locked in the euro with Germany, the only way for them to become more competitive is to become, well, more Germanic, through austerity measures that cut government spending, reduce welfare budgets, cut wages and raise unemployment.

      This is, of course, what they have been doing for the past two years.

      The aim has been to achieve export-led growth. But because Germany is so hypercompetitive and has been unwilling to stimulate its own economy to achieve higher consumption, its eurozone partners have not been able to increase exports to it and have had thus to compete with it in exporting to the likes of China and the United States.

      That hasn’t been working very well, and now the consequences of grinding austerity are beginning to tear the political and social fabric even of countries like the Netherlands, which until quite recently were enthusiastically echoing the German call for austerity and growth led by trade with countries outside the EU.

      But it is not clear that the eurozone can sustain the social and political pain of austerity long enough and on the scale necessary to eventually achieve competitive parity with Germany.

      The alternative is for Germany to revert to the deutsche mark.

      That would immediately result in appreciation of the German currency and competitive devaluation of the euro for the remaining eurozone countries. Germany would tend to buy more while selling less, and vice versa for the rest of the eurozone. The extra consumption that Germany will not deliver via stimulus policies would be automatically delivered by currency revaluation.

      The single most essential element of a euro rescue has always been one form or another of a euro bond guaranteed jointly by all eurozone member countries. What the U.S. Treasury bond is to the U.S. economy, the euro bond would be to the EU. The main obstacle has been Germany’s insistence that it would not guarantee payments on bonds for the benefit of other European countries.

      German reversion to the deutsche mark would remove this obstacle, and with no further German opposition, the remainder of the eurozone could move ahead to establish a true euro bond, along with a unified treasury function to match the unified banking function of the European Central Bank.

      Some may object that German backing would still be required for the eurozone and a euro bond to be viable.

      That is correct, and Germany would indeed remain committed to the eurozone for a number of reasons. It would need the eurozone more than ever to buy its increasingly expensive exports. The Bundesbank (Germany’s central bank) would undoubtedly sell deutsche marks against euros to mitigate appreciation, and the resulting accumulation of euros would be invested in the new euro bonds. This in turn might inspire the European Central Bank to initiate quantitative easing programs that would stimulate the entire EU economy.

      The cost to Germany of saving Europe will be a hit to exports and perhaps a temporary rise in unemployment, but a return to the deutsche mark would attract a flood of capital to Germany and thereby spur investment while holding interest rates and inflation down.

      The real question is whether the cost of slower export growth and increased unemployment is less than that of paying for Greece, then Spain, etc. Somehow, the “unknown” risks of a German exit from the euro appear more manageable, more quantifiable and in some ways more familiar a challenge than endless austerity, social unrest and political polarization.

    • @ Yanis

      I KNEW there would a response claiming that also in this case the Greeks can do nothing. Poor professional victims, have no control about whatsoever – that’s what your permanent narrative sounds like.

      Let me tell you: you are stronger than you think, you can change some things: remove this gift for rich shipping company owners from your constitution. Not all of them are based outside Greece.

      Plus, also important: it would be a sign to the people who fund most of Greek’s bills that you at least are willing to do something, no matter how small, instead of just demanding more of the same (transfers).

    • vss

      Only that we do not demand transfers but honest investment.

      Typical response.
      Poor Germans. Everybody wants your money.

  • As you said some time ago: it’s not time to throw in the towel, yet!

    I know it is just a modest contribute, but I tried to give a name to the present idea that the German Government, actually the BuBa behind it, has of fiscal union, which corresponds very much to the expression used by NIAMH on Crooked Timber yesterday ( “politics without policy choice”.

    So I called it *reformatory fiscal union* (also influenced by your idea of the Victorian workhouse) in order to distinguish it from a federal transfer union like the US, in particular I have identified, theoretically, several possible reformatory fiscal unions and defined the present European one as a *repayment-oriented loan-based reformatory fiscal union*

    See this post of mine for more details:

    At the end of the post I also tried to explore the theoretical possibility of a third type of fiscal union which is not a reformatory union or a *fully* federal one and which could potentially open the path toward some kind of shared services (the banking union was the one I had in mind, but others could be).

    It’s quite a modest contribution, firstly because it’s just a taxonomy, and secondly because it’s just theoretical and so very much hypothetical yet. But I hope this contribute can help in some way anyway.

  • One strategy for the Greek gov’t that will enter into talks with the troika as to the new assessments of Greece’s economy is not to bargain at all. Simply say “Yes” to every single demand no matter how absurd. It would underline the point that Yannis is making.

    • Ithink the Irish are doing that. There was a tax that troika imposed on them i think 100euro per house. Only 50% payed. In Greece it was 500euro and ithink everybody payed it

  • Let’s talk about the highly charged quarter final of the European football championship on Friday, when Greece will play Germany. A match that is full of symbolism given the current tensions between the two countries. Greek newspapers are already in a “bring ‘em on” mode and are longing to give those overpowering and arrogant Germans a beating at least on the football field. For the Greeks it seems that nation and football team are becoming one and the team should make up for the humiliation the nation suffered at the hands of the Germans. The problem is that the Greek football team is everything the country is not: highly competitive, disciplined and concentrated on the collective effort.
    Whoever will win on Friday at the end, the fact is we would love the Greeks to be more like their football team. What the Greek team does is no rocket science. It is tremendously disciplined tactically and very well organized and probably the most effective team in the tournament which made three goals out of basically three opportunities. It is physically strong and fit, will fight till the very end, never gives up and and never ceases to believe that it can make it.
    Football is all about performance. You don’t get presents from anyone, no subsidies. There is no common goal fund that will transfer goals to your football account if you don’t score enough. In short, football works very differently from the way Europe works today. It is like comparing Manchester liberalism to the new European socialism of these days where individual debts are shared collectively.
    You also don’t have the whole European blame game in football. Sometimes teams blame the arbitrary if he didn’t see a foul or wrongly conceded a penalty. But you would never blame another team for the fact that your own team is not in shape. The idea of individual responsibility still is valid in football. Everything else would violate common sense. Just like the Greeks, the Spanish and Italians are insulting common sense when they blame Germany for their plight after every one of these countries wasted two years in which they basically refused to get back into shape.
    The funny thing about German-Greek rivalry on the football field is the fact that the foundation of the Greek team’s success has been built by a German team manager years ago. It was Otto Rehagel who led the Greek team to become the European football champion in 2004. And even under the new Portuguese coach Fernando Santos the Greek football style still draws on Rehagel’s philosophy.
    Rehagel coached the team from 2001 to 2010. And at the beginning he took a very hard look at what was wrong with Greek soccer. He found it was too much centred on so called stars that behaved like drama queens and out of a sense of entitlement or past glories believed that others should run and fight for them. ”Before that everybody did what he wanted. Now everybody does what he is able to do”, Rehagel said when asked to explain his success. He administered a healthy dose of German medicine and forged what before was a bunch of individualists into a real team. It was all about good organization, collective effort, everybody fighting for everybody else. He analysed that Greece didn’t have the refined players to sustain a beautiful attack game. That’s why he focused on Greek defensive strengths, fitness and willpower instead which carried the team all the way to the title in 2004.
    Well, it is hard not to see in this Greek success story a parallel to what Greece needs today. There are too many drama queens in Greek politics who put their own interests and that of their party before the national interest. The same holds true for all those Greek bureaucrats who think others should work for them and don’t even show up in their office or are so deeply corrupt that it is impossible to create an effective tax collection with them. And of course Greece is full of people with a sense of entitlement believing that the state or somebody out there (like: Germany) has to cater for a certain standard of living that they have grown used to. There is no effective organization of the state and definitly a lack of collective effort to make society work.
    Greeks are angry at the Germans because they think we are demanding too much of them. But what we are basically saying is: Follow the example of your football team, shape up and get competitive. There is nobody out there who can do this for you and no sums of money are going to save you if you don’t take your fate into your own hands, reorganize your game and state and start anew. You need some of the can-do spirit of your football team and the believe that you can make it. And please stop blaming others. It is your fault that you lack competitivness and it is your task to change that.
    And by the way the most important lesson Greeks can learn from their football team is this: every now and than it is a good idea to follow some German’s advice.
    Might the best team win on Friday.

    • Really, you spend fifteen minutes to write such common thoughts?!!!

      ” the fact is we would love the Greeks to be more like their football team.”

      What you must understand is that we claim, through fight, the right to behave as we like. We don’t give a damn what you think of us or what you imagine us to be. We know what we want.
      Find someone else to moral brainwash.

    • GreekDramaQueens

      I liked your post but unfortunately it is not a good analogy.

      “Follow the example of your football team, shape up and get competitive.”

      Otto Rehagel was amazing. Period.
      The German advice of your political leaders is garbage. Period.
      Maybe if Otto substituted Merkel and Schauble….

      And it wasn’t us that started the blame game. It was ALL YOU.

      Do not worry ,the truth is almost out for everybody to see and it has nothing to do with the Greeks.

      Tough luck for you.

      Also noone with reason can give such simplified explanations. Too easy to blame the Greeks for your leaders’ economic and political crimes.

    • At least we the Greeks have the reasoning to see that the elite has no nationalities.

      You on the other hand just love your corrupted leaders.
      Especially when they impose austerity on others for their own mess.

      Because our own individual mess has nothing to do with the crisis.
      Not the avg German’s or Spanish or Italian’s mess.

      It seems most Germans are too mentally lazy to think what is going on and they just prefer blaming others. The perfect people for slaves i guess.
      It is nice to be organised because you want to but It seems you are organised because you are robots.
      Well ,good for you.

    • “Even if toxic people are right about what is “good,” they are wrong if the approach is not healthy.”

      ― John L. Lund, How to Hug a Porcupine: Dealing With Toxic & Difficult to Love Personalities

    • Who cares who wins on Friday?

      The only cheap shot is that whichever team wins will claim that it “kicked the other out of the euro”. And the moronic/infantile press will have a field day with this pre-schooler’s wit.

      I would gladly exchange Merkel’s head in a bag for a team loss. Or Merkel’s head on a spike.

    • “But what we are basically saying is: Follow the example of your football team, shape up and get competitive.”

      And would the greek football team have become competitive if Otto Rehagel had cut their caloric input in half while doubling the exercises?

      That is what the german school is asking of the greek economy in your analogy.

      What Otto did was retrain them in group work, to form them as a team that could then be competitive.

      No doubt Greece needs retraining and learning to live within its means but the medicine given, salary cuts and reductions, has pushed the already faulty economy into a death spiral: the less money circulating the smaller the GDP the less money the government gets the higher the loan needs.


    • ‘What the Greek team does is no rocket science. It is tremendously disciplined tactically and very well organized and probably the most effective team in the tournament which made three goals out of basically three opportunities. It is physically strong and fit, will fight till the very end, never gives up and and never ceases to believe that it can make it.’

      I am sorry to say that the mentality of the Greek football team is not exclusively based on a dose of Rehagels medicine, but all those characteristic you discribed are noticable in other sports in Greece, especially basketball. It started in the 80s when highly disciplined, well organised, physically strong teams which never give up became a continental power by beating power houses and winning titles against all odds. As the decades passed, the Greek players also became highly skilled, making Greece one of the best teams around the globe. A team that thrives under pressure unlike any other. Hopefully, the Greek football team will develop like the basketball team, that will bring them closer to the level of elite teams like Germany.

      As for Greeks being angry at Germans, please let me make something clear. Greeks don’t have anything against ‘Germans’. We don’t see Germans as rivals and we don’t hold the German people accountable for our mess. We do think however that – despite our shortcomings – the problem was always far bigger than the country of Greece. Also, the bail-out policy that the German government is ‘dictating’ for the crisis-hit countries is not exaclty ‘Rehagels medicin’ as you put it.

      Both these key points are mostly ignored by the German media which in my view shows clear signs of intellectual lazyness and stereotypical bias. Mostly towards Greeks, but also South-Europeans in general. I can also speak German and I’m shocked with many comments on forums all over the internet. To be fair, we Greeks have an serious economical crisis, but at least we don’t take our racism seriously. I am sorry to say that I think that Germany has a (hidden) crisis in values.

      Good luck to ‘die mannschaft’ on friday.

    • A football team has nothing to do with an economy. It has only a few workers, no pensioners or state to support, no complex system of anything.

      Besides, you can be sure that a football team managed by Merkel or Samaras would lose every single game they played (and some that they didn’t play, too).

    • “It is your fault that you lack competitivness and it is your task to change that.”

      No doubt the Greeks could do many things to improve their competitiveness. Using your simplistic reasoning, surely step 1 would be to get a cheaper currency though?

      Would be most interesting to see how Germany’s competitiveness would have fared then if they had the DM over the last 10 years….

      The Euro is comparatively undervalued to the DM and Germany has done very well out of that game (similar to China undervaluing their currency).

      To be clear, I’m not advocating a breakup of the Euro currency. The financial and political fragmentation that would follow is not necessarily a good thing (worse than now). More common sense though – along the lines of what Yanis is advocating – would certainly help.

  • Greek might have a chance because this Drama Queen won’t play 🙂

    • HAHAHA

      He looked like DeNiro just for a second there,didn’t he?

      But now you know what is going to happen right?
      Ask yourself ,what would DeNiro do?

      Pull out his gun and shoot you.

    • Demetri there’s absolutely no need to loose your calm here…

      and since you mentioned DeNiro, just pass on the gun to GDQ – after first wiping it clean of your fingerprints – for the solo reenactment of the famous Russian roulette scene from The Deer Hunter…

      Break a Leg, GDQ!

      (which, btw, is increasingly the position that Frau Merkel has put herself in – not for the faint at heart I’m afraid…)

  • It is reading such balanced and well thought of articles like yours, dear Yanis Varoufakis, that makes one wonder how things can go in such a quiet way without more people waking up. Indeed the “bargaining” would have been a bit of hope, and the results now are not.

    And as far as I know, it is exactly like you say, acrobaticus, just wrapped in endless sermons of “the free markets” and “the right of Europe to grow” and stuff like that in Germany.
    Friday before the elections the german neolib paper, “Financial times” printed, in greece partially, a big vote for ND. It was – by far – not the only unbalanced view, just the one that will maybe stay in memory:

    They wrote the usual nonsense what would happen if Syriza would win. Now the “ZDF”, german TV-station, asked the germans if they’d think “if Greece should stay in the Euro zone”. Friday 33% only voted yes. (What a horribly stupid question, by the way.) A day or two after the elections about 66% voted yes…same question…
    This is how media-pressure works.
    It doesn’t explain everything, but it is certainly helping Lagarde, Merkel and more at the moment.

    Don’t forget, Germany is not only Merkel. We got a government with FDP, our neoliberal market-radicals and the conservative christ-democrats, Merkel’s party, with a few different conservative positions, including a strong market-radical one. (Not that SPD or green party would really think different at the moment. Red-green 1998-2005 would have made the same selfish decisions, I think. It is the same “the markets will do best”-thinking in all four parties.)
    It is and stays a mess, and rational thinking Germans, against Merkel’s government and their decisions, were hoping Greece would show Germany that – again in Yanis’ words – bargaining is better than what I call humiliation and arrogance.
    Is there ANY hope that the new ND-Pasok+? government will do more than waiting? Is there any hope that they would silently adopt Syriza’s real ideas (not what we could read in the papers, but what they really wanted?).

  • More and more you’re crossing the line of anti-German propaganda.

    It is Merkel that has been suggesting to move certain things to Europe and give up sovereignty, such as banking oversight and fiscal planning. Apart from the UK, it is mostly France that is pushing back on shifting sovereignty to the EU.

    You can’t really think Germany enjoys the current crisis mode because it means negative interest on German public debt? The risk taken by Germany via EFSF/ESM/IMF etc. is gigantic and Merkel is struggling to keep her parliamentary majority.

    Maybe you are not aware of this but in Germany, the chancellor is elected by the Parliament and this very Parliament can at any time replace the chancellor by simple majority. This has happened in the past. The chancellor acts on behalf of the parliamentary majority and for anything of relevance has to get the support of the Parliament. And by the way, Members of Parliament are not bound to party policy, they only represent their own will.

    What good would it be to see Germany’s government collapse and get a very anti-bailout government instead? That’s surely what would happen given the popular vote.

    Please keep in mind that Merkel is not like the French President with near unlimited power.

    • Germany — and I mean not only politicians but also the mass media — crossed the line of anti-Greek propaganda some time ago, So don’t play this card, it doesn’t have any value.

    • When thing go wrong from the begining…
      When you replace a stupid thing it doesn’t always mean that you put the smart one in its place. It may be dummer.

    • @Achim Hase:
      “More and more you’re crossing the line of anti-German propaganda.”

      Come on German friends all except you the Germans shout the facts about the Eurocrisis from the rooftops!!!

      Everybody else is blaming Merkel and the Germans for this crisis and you still deny reality?

      Here is two articles pinpointing the problem which is in fact Germanys and especially Merkels stance from the very beginning.

      Please wake up and take finally some responsibility for the mess you created in Europe!


      Published: June 18, 2012

      Ever since Greece hit the skids, we’ve heard a lot about what’s wrong with everything Greek. Some of the accusations are true, some are false – but all of them are beside the point. Yes, there are big failings in Greece’s economy, its politics and no doubt its society. But those failings aren’t what caused the crisis that is tearing Greece apart, and threatens to spread across Europe.

      No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply – perhaps fatally – flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places.

      So, about those Greek failings: Greece does indeed have a lot of corruption and a lot of tax evasion, and the Greek government has had a habit of living beyond its means. Beyond that, Greek labor productivity is low by European standards – about 25 percent below the European Union average. It’s worth noting, however, that labor productivity in, say, Mississippi is similarly low by American standards – and by about the same margin.

      On the other hand, many things you hear about Greece just aren’t true. The Greeks aren’t lazy – on the contrary, they work longer hours than almost anyone else in Europe, and much longer hours than the Germans in particular. Nor does Greece have a runaway welfare state, as conservatives like to claim; social expenditure as a percentage of G.D.P., the standard measure of the size of the welfare state, is substantially lower in Greece than in, say, Sweden or Germany, countries that have so far weathered the European crisis pretty well.

      So how did Greece get into so much trouble? Blame the euro.

      Fifteen years ago Greece was no paradise, but it wasn’t in crisis either. Unemployment was high but not catastrophic, and the nation more or less paid its way on world markets, earning enough from exports, tourism, shipping and other sources to more or less pay for its imports.

      Then Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece, some but not all of it financing government deficits; the economy boomed; inflation rose; and Greece became increasingly uncompetitive. To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.

      And then the bubble burst, at which point the fundamental flaws in the whole euro system became all too apparent.

      Ask yourself, why does the dollar area – also known as the United States of America – more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.

      Consider, for example, what would be happening to Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money for Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of.

      Or consider an older example, the savings and loan crisis of the 1980s, which was largely a Texas affair. Taxpayers ended up paying a huge sum to clean up the mess – but the vast majority of those taxpayers were in states other than Texas. Again, the state received an automatic bailout on a scale inconceivable in modern Europe.

      So Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency’s troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more.

      Which brings us to Sunday’s Greek election, which ended up settling nothing. The governing coalition may have managed to stay in power, although even that’s not clear (the junior partner in the coalition is threatening to defect). But the Greeks can’t solve this crisis anyway.

      The only way the euro might – might – be saved is if the Germans and the European Central Bank realize that they’re the ones who need to change their behavior, spending more and, yes, accepting higher inflation. If not – well, Greece will basically go down in history as the victim of other people’s hubris.


      By George Friedman

      Europe and the financial markets watched intently June 17 as Greece held general elections. German Chancellor Angela Merkel, French President Francois Hollande and Italian Prime Minister Mario Monti all delayed their flights to the June 18 G-20 summit in Mexico to await the results.

      The two leading contenders in the elections were the center-right New Democracy Party (ND), which pledged to uphold Greece’s commitments to austerity and honor the country’s financial agreements with the European Union and the International Monetary Fund, and the Coalition of the Radical Left (SYRIZA), a group of far-left politicians who pledged to reject Greece’s existing agreements, end austerity and maintain the country’s position in the eurozone. A third major party, the center-left Panhellenic Socialist Movement (PASOK), shares the ND’s position of maintaining Greece’s bailout agreement. PASOK had been Greece’s ruling party until it formed a unity government with the ND late in 2011.

      For a while it seemed these elections would be definitive. Either Greece would reject the country’s agreement with its international lenders, potentially being forced out of the eurozone, or it wouldn’t. If Greece rejected austerity and forcibly or voluntarily left the eurozone, the country might set a precedent for other troubled states and precipitate a financial crisis — a eurozone exit and default would likely go hand in hand. Europe would be tested as never before, and it would find out how resilient it is to a wider financial crisis.

      But in Europe, the least likely outcome is a definitive one. ND won the election with about 29.5 percent of the vote, earning 78 seats in parliament plus another 50 seats awarded to the winning party by the Greek Constitution. SYRIZA received roughly 27.1 percent of the vote, equivalent to 72 seats, and PASOK received roughly 12.2 percent of the vote, or about 33 seats. The rest of the vote was scattered among a host of other parties. A party needs 151 seats to gain an absolute majority in parliament, but since no single party passed that threshold, a governing coalition must be formed. So the ND needs PASOK if it is going to cobble together a governing coalition, but PASOK has said it will not join a coalition without SYRIZA. It is unclear what a coalition would look like between a party that wants to respect the bailout agreement and a party that wants to reject it, but such a coalition is unlikely to happen anyway. SYRIZA wants to form a powerful opposition. Something resembling a government eventually will be assembled regardless of current rhetoric.

      The Greek vote has settled nothing. In fact, it may not even lead to the formation of a government; the last election failed to produce a government and forced this election. That the European crisis most severely affected a country so politically fractious could be seen as pitiable. On the other hand, one could argue that the crisis inevitably would be most severe in the most divided country — not because the divisions caused the crisis, but because the crisis caused the divisions.

      The pressure brought on by the circumstances in Greece undermined whatever political order was in place; the choices for policymakers were so limited and so frightening that coherent responses were difficult. Greece has options, but it is unable to choose one. More than anything, Europe wants a decision on its future, whatever that decision might be. On June 17, Greece disappointed Europe not because of the choice it made but because it was crippled with indecision.

      Crisis Management

      Greece’s indecisions are at the ground level of Europe. Another and more significant framework for indecision is emerging in Franco-German relations. The French Socialist Party won an absolute majority the same day that the Greeks entered another gridlock. This makes it possible for France’s Socialists to form a government without the Greens, giving Hollande a strong and coherent platform from which to operate.

      France’s position on managing the sovereign debt crisis differs fundamentally from Germany’s. Germany has said it will not agree to proposed solutions that would essentially turn the eurozone into a transfer union until the rest of Europe can balance their budgets through austerity measures. Germany believes this must be the first step to further EU and eurozone integration. Hollande takes a different position. He, too, wants greater European and eurozone integration. However, Hollande advocates economic stimulus alongside austerity measures as a means to rebalance the finances of European governments.

      Hollande wants to grow Europe out of its financial problems. This means stimulating economies, a process that requires deficit spending. Hollande upholds a traditional Keynesian tenet that increasing demand for goods among consumers will increase economic activity and increase investment. As a Socialist with a strong leftist contingent in his party, Hollande cannot support the German position, which constrains the economy, particularly by decreasing government expenditures, thereby depressing consumption.

      The difference between the French and German approaches is substantial. It reveals a dispute at the heart of the European strategy for managing the crisis. The Germans have been aggressive in demanding balanced budgets. The French are becoming equally aggressive in demanding expansionary policies. Both want to avoid defaults, but the Germans want to guarantee payments of debt by a combination of bailout and austerity. The French want to add stimulus to this, which changes the situation entirely because the stimulus would be funded in large part by German coffers.

      This is not a simple matter of divergent economic theory. It is a matter of national interest. France is not as economically decrepit as Spain or Italy, let alone Greece, but nonetheless it is feeling the pressures of the financial crisis. If Europe continues on its path toward recession, France will face higher unemployment and therefore domestic political pressure under the German plan. It is not in Hollande’s or France’s interests to follow the German course. For its part, Germany cannot risk further government deficits in the European economic system. Germany’s robust economy gives the country a financial cushion to soften the effects of deficit cuts; the rest of Europe, including France, does not have this luxury.

      Interestingly, France and Germany were as one on this issue until Hollande was elected president. Indeed, the foundation and mission of European integration has been the close alignment of Germany and France. A founding principle of the union, such an alignment guaranteed stability and discouraged conflicts that had torn Europe apart. Now, Europe has lost its coherence at the highest level, albeit in a more orderly manner than in Greece.

      Disharmony and Public Opinion

      Of course, the situation is not that simple. What Germany says it wants differs from what it allows to happen. Germany claims to favor disciplined austerity, but more than any other country Germany needs the eurozone to stay intact. It is thus willing to compromise on austerity and on underwriting bad debts. On the other hand, Germany rejects the idea that a systematic strategy to stimulate growth is needed or likely to work. France sees no other solution, lest it face austerity itself. Both want different fiscal policies from the members and also, logically, from the European Central Bank.

      From the most beleaguered members of the European Union to the relations between its strongest and most stable members, there is now profound disharmony. What drives this disharmony is public opinion. The Greek public is divided politically; therefore, Greece is paralyzed. France held an election in which Hollande, who holds serious doubts about German policy, forced out and replaced former French President Nicolas Sarkozy, who shared the German position on managing the crisis.

      It is not the policymakers that are divided. Rather, the electorate is driving apart policymakers. The German solution to the problem is so unpalatable to the rest of Europe that traditional elite politicians supporting Germany’s plan, such as Sarkozy and former Greek Prime Minister George Papandreou, are being replaced. Their replacements tend to reject the German position.

      Indeed, political reality has constrained the actions of European lawmakers. Until about five years ago, a broad consensus governed Europe when it came to EU matters, and politicians were free to align themselves with Europe. This is no longer the case — the solution for maintaining Europe has diverged. Most important, Germany has become the problem in the eurozone where once it was the solution.

      Structural issues, such as German dependence on exports to the European Union, only partly explain the change in Germany’s public perception. More accurately, German methods for managing the crisis increasingly are seen by other countries as significant threats to their well being — there is not one anti-German coalition. Germany wants to find accommodation with France. The problem rests in how the French and German views are reconciled. France is not yet leading a coalition against Germany, but it is difficult to imagine a different scenario.

      The more elections are held, the more the public will force their leaders in various directions. More often than not, this direction will eschew austerity and Germany. Over time this will solidify into a new map. While this has yet to happen, the recent elections at the least are not solving Europe’s problem. In fact, they may be further dividing the Continent. And there are many elections to go.

    • It is quite reassuring Achim to remind us that Frau Merkel’s powers are Not unlimited…

      and since you mentioned the French president, maybe you would be kind enough to bring us to date with the legal saga of Mr. Wulff, former Bundespräsident der Bundesrepublik Deutschland, following his humiliating premature departure:

      Prosecutors seek to lift German president’s immunity

      16 February 2012

      Prosecutors in Germany have asked the federal parliament to lift President Christian Wulff’s immunity over an escalating home loan scandal.

      The prosecutors in Lower Saxony, where Mr Wulff, 52, was previously premier, said there was an “initial suspicion” that he improperly accepted benefits.

      He has also been accused of trying to bully a paper not to run the story.

      The president – whose primary role is to serve as a moral authority for the nation – denies any wrongdoing.

      The widening row is seen by analysts as a blow to Chancellor Angela Merkel, who helped Mr Wulff to secure the largely ceremonial office in 2010.

      Angry message

      On Thursday, prosecutors in Hanover, capital of Lower Saxony, said in a statement there were “enough actual indications” that the president had acted improperly.

      “Therefore they have asked asked the president of the German Bundestag (the lower house) to lift the president’s immunity.”

      The move is formally required to start proceedings against Mr Wulff, although this does not mean necessarily that he president will be charged.

      Mr Wulff’s office has not publicly commented on the latest development.

      At the centre of the row is the story – first published by the Bild newspaper – that Mr Wulff received a low interest 500,000 euro loan (£417,000; $649,000) from the wife of a wealthy businessman in October 2008.

      Mr Wulff was later asked in Lower Saxony’s parliament if he had had business relations with the businessman, Egon Geerkens, and said he had not, making no mention of his dealings with Mr Geerkens’s wife.

      The president was also heavily criticised for trying to force Bild not to break the story in the first place.

      It has emerged that he left an angry message on Bild chief editor Kai Diekmann’s phone, saying the story must not be published.

      Mr Wulff has since apologised to Mr Diekmann.

      He has also rejected calls for his resignation, saying he plans to serve his five-year term with the record of a good and successful president.

      Joachim Gauck becomes new president of Germany

      Wednesday 20th June 2012

      Amid the glow of beaming hopes and cheerful spectators in the Reichstag building, Berlin, Joachim Gauck was elected as Germany’s 11th President on a bright Sunday morning. Later on, he aptly depicted the whole jubilant scenario as, ”what a beautiful Sunday for Germany”.

      The former pastor and civil rights activist who strove hard against oppressive communist rule in former East Germany, contested the presidential election just to fulfill the legal obligation, otherwise, his success was pre-destined.

      He was jointly fielded by all the political parties except the Left party which put forth Franco-German Beate Klarsfeld as its presidential candidate.

      She succeeded in bagging only 126 votes. Whereas 108 delegates of the Electoral College known as the Federal Assembly, abstained from voting.

      The recurrence of this specially convened Federal Assembly, charged to elect the new German president, took place less than two years after the last one, owing to the premature departure of former president Christian Wulf.

      He abdicated amid the growing outcry for his resignation, by virtue of his misconduct as state premier of Lower Saxony.

      This scandalous political drama provoked a great deal of public outrage and consequently marred the image of the presedential office. It is expected that Joachim Gauck’s election would not only restore the dignity and prestige of the position, but also arguably reinvigorate its role which is otherwise largely ceremonial.

      Just after his nomination as presidential candidate, he made his intentions clear that he wanted to be the people’s president by bridging the gap between politics and public. On the eve of his election, he reasserted his lifelong cherished vision that he wanted to reacquire the public’s confidence in government and politics and bring them back into the fold of active political participation.

      The former Stasi archives’ commissioner also exhorted that both sides, politicians as well as the public, have to contribute equally to make Germany a free and democratic state in all respects. This is the mantra he repeated like a chorus throughout his life, campaigning for a free, just, democratic but responsible society.

      Although Germans have finally been able to exalt one of their icons for personal freedom and democracy to the status of president, it remains unclear how their expectations will be satisfied by this legendary figure. Whether he has to take extra strides to transform this ceremonial role into one which keeps watch on every political development, and intervene proactively if necessary, or he remains confined to delivering thoughtful speeches on burning issues like integration, far right extremism, the Euro crisis etc.

      Most political pundits are also eager to dissect the political relationship between Joachim Gauck and Angela Merkel. Both are East Germans with a theological background. But contrary to general presumption, she was forced by her junior coalition partner, FDP, to endorse his candidature this time against her will.

      At present, it is too early to predict whether he will be able to live up to the increasing aspirations of the people. But for sure, his nomination and election by securing cross party affiliation and support, bode well for Germany’s political future.

    • @Aristoteles
      The texts by Krugman and Friedman are of course very convincing.
      Obviously, it would be the nicest solution for everybody if Europe could lower its Debt / GDP – ratio by accelerated growth over the next few years.

      I cannot imagine anybody in his / her right mind to have anything against it: It would keep debts serviceable (so the creditors would be happy) and it would require less drastic austerity measures (so it would keep the debtor countries happy).

      BUT: If it was so easy to accelerate growth, don’t you think this path would have been taken by now?
      I think the catastrophic truth is that Europe as whole has over-stimulated growth through excessive debt-taking over last decade or so. This is why we are in this debt-mess in the first place, isn’t it?

      So the solution for getting the debt out of the system that occured in the attempt to stimulate growth to the max is…
      …even more debt to stimulate growth even further?!

      I am astonished.
      Maybe, this can work (and I am not an economist). But it seems to go against common sense.

      Growth is of course necessary and seeing the GDP plunge as in e.g. Greece in the course of austerity is terrible and only makes the debt burden less possible to carry.
      But pumping more money into the system hoping everything would go back to “normal” hasn’t really worked 2008 until now – it would be interesting to see what happened if we just ignored the obvious and poured even more money in hoping that suddenly, the economy would jump and grow like crazy.

      Unfortunately, I don’t know the solution but I am pretty sure that increasing debt further would only buy us a few months of relief – but land us deeper in the mud mid- to long-term.

      Maybe a combination of other measures (though painful) is more promising? Such as: Trying to stimulate growth & lower the deficit with measures that don’t cost money, such as increasing the retirement age, trimming unnecessary government activities, generally trying everything possible from the government side to make doing business easier (less beaurocracy whereever possible), enduring the inevitable decline in living standards in e.g. Greece and enduring more inflation than desired in e.g. Germany.

      Lot’s of little, painful steps.
      And patience.

      I don’t think there’s a “magical” solution such as “just increase the debt in order to kick-start the economy”.
      That may work once the foundations for a recovery are there, after more painful adjustment such as outlined above.
      If you just spent money now, this wouldn’t help much long-term at all.

    • Martin

      Yes Martin ,spending money wouldn’t have helped if the reforms were the problem but they are not.

      But why repeat myself?
      Because you repeat yourself and someone needs to counteract your inanities.

    • @Martin
      In both natural and social sciences, the truly important discoveries are not those that confirm “common sense” and traditional beliefs: they are the scientific theories that appear to contradict “what is obvious” and beyond debate.

      Such was the contribution of Keynes to economics, and one of the principal reasons that his analyses and prescriptions took so long to be accepted and are now mostly out of fashion. That stupid politicians cannot understand economics is no excuse for them to destroy the world when there are plenty of people who can understand. The tyranny of “common sense” is the tyranny of populism and ignorance over serious thinkers.

    • Dear Guest (xenos)
      I think you have a point. Common sense does not always point to the right choice – and especially not to ground-braking, new solutions.
      I guess to rely on both might be the answer: For general questions, common sense remains a good compass. For example, if a responsible Greek government had existed in, say, 2006, they would have probably been able to figure out that the level of debt and the way the economy was handled was very dangerous in case the slightest economic downturn happened. Common sense could have told them that. If they had applied it, some of today’s pain would not be there.
      On the other hand, once the situation is really desperate (like now), common sense alone won’t help and some ground-breaking solution might be needed (where commons sense may not work as a finding tool).

  • Yanis,

    Given the probable path of this crisis, does game theory indicate a first-mover advantage to a country that chooses to leave the EMU? If so, will it be possible to identify when first-mover advantage becomes rational?

  • Merkel is driven by the rhetoric she has been using for over a year to position herself for her re-election next year. It seems to be her best strategy, even more so than her motivation from her staunch neoliberal faith in markets and austerity. Merkel’s entire re-election strategy is running against Greece. She has apparently been very successful in convincing most German’s that “Greece offers the world a lesson in irresponsibility”. Whether she will have to broaden that and run against Spain, Italy and Francois Hollande remains to be seen.

    From Eurointelligence blog this morning:
    Jakob Augstein sees parallels with Weimar

    In his column in Spiegel Online, Jakob Augstein compares Germany’s position towards Europe today with its position towards democracy in 1933. He invokes Sebastian Haffner’s description that in 1933 the population was relieved that the experiment of democracy was finally coming to an end. He said it does not help that Angela Merkel is the first modern German leader for whom Europe has no emotional meaning. Europe’s only hope consists of surviving until the autumn of 2013, and for Germany to change its leader.

  • Prof Varoufakis
    I do not think you mean ” free riders” in this sense from

    “: a benefit obtained at another’s expense or without the usual cost or effort; also : soft or easy treatment ”

    There is nothing soft and easy in this ride for any country. They are all in a ride to minimize harm, as they estimate it, for their country.

    • Webster is just wrong. Free riding is defined, from a social science viewpoint, as a choice or action that would diminish everyone’s utility or well being if universalised (i.e. if adopted by all) but which, nevertheless, is a dominant choice for the individual (i.e. a choice that yields you more utility whatever the others have chosen to do). Example: Sitting or standing at a concert. If everyone sits, each has a better experience (compared to everyone standing). However, it may also be true that, if everyone else is sitting, one has a much better view if one stands. This would mean that one is better off standing independently of whether the rest are sitting (has a better view if one stands) or standing (since it would be catastrophic to be sitting when the rest are standing). Alas, since standing is a ‘dominant’ strategy for each, they all stand and end up tired and without a private advantage (of a better view). They have thus fallen in the trap of free riding. Just like Europeans today.

    • Webster gives the usual neoliberal (restricted) meaning, which does not take into account the macro consequences of the action. That is to say, it considers all actors as individuals, and there is no such thing as society or the macroeconomy, therefore there are no social costs.

      In just one simple case, you can see how neoliberal thought is at odds with reality and how it has damaged the world.

  • This is how a guy on TV today resembled the situation (after the G20 meeting):

    For every fish in the food chain there is a bigger fish. And finally Germany has sharks in
    its tail. And the waters are bloody ( from Germany’s victims but of course he didn’t say that)
    And by the way when did we stopped talking about Papandreou, Merkel, Sarkozy Hollande? Now we are naming the Greeks, Germany, Italy, Spain whole countries and nation. How sad! And dangerous!

    • Yani:

      This was an interesting conversation. Let me ask this clarification re: ECB bank recapitalization.

      I understand your point of not wanting to burden further an insolvent state. But let’s calculate the practical effect of savings to the Greek budget if the bank recap was a direct European obligation not shown as a Greek budget liability.

      So far the Greek banking sector has received 18 Bil. euros at a rate of 2% which might trend higher later but no higher than 3.5%.

      18,000,000,000 X 2% = 360 Mil. euros

      So the annual savings to the Greek budget would be 360 Mil. euros. Assuming that there will be an infusion of 12 more billion euros (Blackrock has calculated the erosion of Greek banking capital to a total of 30 Bil., notwithstanding the approval of 50 Bil. euros for reasons of demonstrating fire power). In such case:

      30,000,000,000 X 2% = 600 Mil. euros.

      Such amount represents perhaps less than 1% of the total Greek budget (I heard a number of 75 Bil. euros as the annual budget for Greece?).

      So your assumption is that if Greece saves such interest payment then Greece could allocate the savings to some other area of its budget.

      But 2 key questions arise:

      1. What if the ECB in directly assuming the bank recap introduces a provision that says any corresponding savings to the Greek budget could not be spent, rather put in a trust account thus increasing collateral for Greece?

      2. How are you going to convince the Germans , whose main concern is to deny Greece sources of new spending?

      I mean I like you idea of reducing the size of total debt by deducting the 30 Bil. earmarked for the Greek banks to cover the PSI-II damage, but to assume that you would be able to have the resulting savings at your disposal for reallocation to another part of the budget it might be a stretch.

      Judging from the German moves so far, the chances of such are minimal at best. The whole ECB recap idea will meet German obstructionism and the minute they figure out your imputed benefits, such funds will be taken away or restricted in some way.

      Have I misread the intent or is there another way around it?

    • I labour under no illusion that the 30 billion would become available to Greece to spend otherwise. But at the very least, it would be equivalent to reducing the state’s overhang by 30 billion and to sever the link between negative expectation about Greece’s fiscal position and those concerning the ever growing black hole in Greek banks. Not to be scoffed at! Also, if something similar applied Eurozone-wide, the gloom and doom that is hanging over the whole Continent would be lessened. That, in itself, would not be unhelpful for Greece either.

  • Dear Yanis,

    It’s time to review your commenting policy and ban certain people before this place loses all credibility.
    Heated exchanges and some rudeness I can understand but premeditated trollish behaviour should be of great concern to you and your fine blog.
    We even have a new troll whose nickname is insulting to others showing that he/she had no intention to engage in civilized debate from the get go.

    • Can you point out who this is? Truth is that I find it hard to read properly all the messages that I approve.

    • estrangeiro, you wouldn’t happen to refer to GDQ [GreekDramaQueens] now would you?

      GDQ: as they say in Britain, it takes one to know one

    • For example: GreekDramaQueens

      evidently does not want to “discuss” anything and doesn’t disappoint with two first posts about football, irrelevant crap that is, solely intented to insult others ohers on this board and inflame passions.