23 crucial days for Greece

On 20th August, the Greek government will have to borrow 3.2 billion from one arm of the Eurozone (from the EFSF) in order to repay another (the ECB). Yet Greece is insolvent. The very idea of an insolvent entity borrowing more from a community, like the Eurozone, in order to repay that same community is obscene. All it does is to shift the burden from the Central Bank to the taxpayers of Germany, Holland, Austria and Finland. This is not an act of solidarity with Greece. It is an act of irresponsible kicking-the-can-up-a-steep-hill. The simple point I have been trying to drive home for a long while now is that the Eurozone must make a simple decision: Either to give Greece a proper chance of exiting its current death spiral. Or to dump Greece now, before the Greek state loses all its remaining assets and before it gets deeper into debt. And if our Eurozone partners are not prepared to make up their minds (caught up in their own short term concerns and shenanigans), then Athens must force their hand to decide within the next 23 days. How? By announcing that Greece will NOT be borrowing on 20th August monies it cannot repay under the present scheme of things. 

The other day I published an extensive article in Greek making this point (see here). Today some good people, unknown to me, have re-posted that article in German (click here). English speakers can read it by using Google Translate (which does a decent job of it). Meanwhile, here is how I described the Eurozone’s dilemma concerning Greece on BSkyB (Sky News). The footage comes from the eve of the Greek parliamentary election (16th June). But it is still pertinent, I think.


  • “Either to give Greece a proper chance of exiting its current death spiral.”

    Yanis, please! Greece was given already a lot of such chances. Alas, she didn’t grab any of them. When will you accept the simple truth: it is NOT in the hands of aliens if Greece will again become a nation which is rightfully so part of modern Europe. It is the sole responsibility of the Greeks to make the necessary changes. The whole thing is is even not about money in the 1st place. It is about a mindset, about structures, about realities, about a spirit: accept the need to change, and then change, fast. Or go down – again.

    • Greece was given no chance whatsoever. None. During the ‘good days’, we were drowned in capital inflows that our lumpen ruling class gobbled up, aided and abetted by nice backhanders by the likes of Deutsche Bank and Siemens. Common folk in Greece (like in Germany) never got a chance to vote for or against these loans. They were just told to shut up and buy VWs on credit or imported stuff from Lindt. Then when the whole thing went belly up, and Greece was bankrupted, the country was forced (by the German and Greek elites) to take on huge loans on condition that our GDP would shrink. And when this made the insolvency worse, we were given more loans and more GDP-shrinking austerity. These ‘chances’, that you are referring to, were successive nails in our coffin. And the coffin of the EU.

    • “Common folk in Greece (like in Germany) never got a chance to vote for or against these ”

      This is why we need a referendum in all countries: Euro, yes or no.

    • Yanis, I agree with you whole-heartedly: common folk in Greece were never really given a real chance by their ruling class. Not since the Euro — and not really before, however far you go back in modern Greek history. Common folk moved their bodies to Northern countries in the time of guest-workers, worked incredibly hard there, built up a tremendous reputation for themselves, sent the money back to Greece and contributed to the rise in living standards of their families. Parallel to that, the ruling class moved the money back to the North and used it to enjoy a quality of life which one doesn’t see so quickly elsewhere.

      Not since my time in Argentina have I seen a nation where the ruling class did so little for the country, their own country, which offered them a wonderful lifestyle.

      Perhaps one change: in the “good old times”, the ruling class may have been a limited group of oligarch-type families and in later years it became, at least financially, a relatively large sector of the country which Petros Markaris calls the “Profiteers and the Molochs”.

      Personally, I still think – at least I would like to think – that common folk are still the majority, albeit a majority without real and/or effective representation in the democratic process.

      Interestingly, when I am in Greece (and that is about half the year), it seems like I only run into common folk (admittedly, I am never in glittery Athens). I know the other folk primarily through what one reads and hears in the media about them.

      There is a theory (i. e. “How nations fail”) which says that the dominance of a ruling class with its corrupt ways as in Greece is almost impossible to change. Certainly not when the country is a sovereign country on its own.

      From that standpoint, Greece has the advantage of being part of a union which, despite having its own ruling classes, does not culturally support the kind of ruling class which exists in Greece. Thus, I continue to hope that, one day, common folk in Greece see the light and strike alliances with that union to help them change and/or get rid of their despicable ruling class.

      This is not a matter of saying “We don’t belong to the West; we belong to Greeks!” Instead, it’s a matter of asking what type of a society do we want to be and who can help us get there?

    • They were just told to shut up and buy VWs on credit or imported stuff from Lindt.

      I think this is what is called “vendor financing.” In effect, German corporations were buying their own products!

      And here is the rub . . .

      Then when the whole thing went belly up, and Greece was bankrupted . . .

      Isn’t it ironic? German financing for Greek borrowing to buy German products . . . and the risk of nonpayment of loans is borne by the borrower and NOT the lender. Very clever, eh? 😉

    • Is there ANYTHING that the main street Greeks did influence one way or the other? Do they have NO responsibility at all for the problems the country is in? Are ALL faults committed only by the Greek ‘elites’, and aliens (of course, ONLY Germans, no French, Brits….)?

      Didn’t a lot of greeks benefit hugely from what the rotten ‘elites’ did? Isn’t this the reason the voted again and again the big two parties into power, knowing that they would again and again inflate the public sector, would refuse any structural changes, would take care of vested interests… And the Greeks, ‘elitesd’ and the electorate did this in the awareness that this can’t possible take a good end.

      The Greek ‘elites’ are certainly the main culprits but the Greek elecorate in his selfishness is the co-perpetrator, collaborator, without whom the desaster wouldn’t have been possible.

      You Greeks should revolt, it is high on time.

    • @Not Very Serious Sam
      This nationalistic neoliberal line that you insist on shouting from the rooftops was discredited some time ago. Obviously, you failed to notice and continue living in your own little dream world, fed tidbits by the Troika and German politicians. Quite why you think your ignorant opinion is of any interest to anyone baffles me.

    • “Greece was given no chance whatsoever. None.”
      Prof Varoufakis, how shall we take you for serious when you make such ridiculous exaggerations, time and again? Sam is right with his criticism, you always only talk about what others should do for Greece, but never say what Greeks should do themselvfes to contribute to the recovery. Sorry, but this “one way street” reasoning backfire disastrously and only reinforces the view that Hellas is a black hole which will suck up all money without delivering at least a ray of hope. And since you’re Greek, it also reinfoces the concerns that Greeks in general refuse to accept responsibility for anything and always point at a scapegoat instead. You’re not part of any solution, just evidence of the problem, really.

    • Given your assessment of the calibre of my views and proposals, I have decided to relieve you of the grim duty to participate in this blog. Henceforth you will have to peddle your dribble elsewhere. Fair well.

    • At last, you did a wise thing.That fool should have been gone long time ago,ever since he called us anarchists just because we oppose the policies our government tried/ is trying to implement even though they were not voted for these policies.

    • new guest here. you wrote “Greeks to live far beyond their means for decades”. by this do you mean that, I for example, unemployed for over a year now, am to be held equally accountable for the mess with, let’s say, former defence minister Tsochatzopoulos, who is in jail now for getting kickbacks for military contracts? It seems extremely difficult for you, bordering on a cult-like obsession, to accept that there are nuances and degrees of responsibility. Someone posted here something about the comfort zone. I think it fits your views perfectly. You see, you have neatly tucked away in your mind all the boxes explaining everything. God forbid if anyone so much as even thinks to shift them an inch or challenges their validity: 1. Greeks=profligate/immoral. 2.Germans=hardworking/ethical, end of story, everything explained, let’s move on. Is it that difficult to maybe, just maybe, rethink your solid, God-bestowed ‘convictions’ about the whole situation? Please don’t put me in your ‘black moral’ book, I have enough problems….
      p.s You know, mate, all Germans are merciless bastards, like all French are pussies and smelly, are aren’t they…..

    • Like the people in many lands, the US included, they are, and were, offered the choice of evils by their political elites. Real alternatives remained beyond the boundaries of discourse.

  • Does the root cause the lack of competitveness get solved by forgiving debt? No. So we will be exactly where we are today in 2 years.

    • That’s what I asked Yanis a few weeks ago, during the discussion of the red-yellow button story. How often he would want the button to be pressed, every other year or so?

      It is absolutely incredible. They ignore reality and responsibility and claim Greece was given no chance whatsoever, there is nothing Greece herself can do, aliens forced the Greeks to live far beyond their means for decades… And continue to do so.

      What did I read this week – since the bailoutomania started, Greek added, squarely against her contractual obligations, another 70.000 persons to the public sector instead of reducing the expensive, bloated, incompetent and corrupt thing.

      If you listen to Yanis and other Greeks here in this blog, if anyone in Greece is to blame at all, it are the ‘elites’ but never the electorate. But why don’t the Greek people revolt against their ‘elites’? The answer is obvious. For instance it is coded in the paragraph above: why SHOULD they as long as the ‘elites’ continue to provide them with goodies like jobs in the public sector? So much about it is only the Greek ‘elites’ who are to blame…

      A few months ago I wrote that if Greece continues to refuse to change, and I mean real changes, the standard of living of the Greeks will soon be dependend on how much the taxpayers of other nations are accepting to fund, and for how long. I reiterate this prophecy. And since Greece refused the real changes, she is now very much closer to the start of this living in dependency.

    • “the standard of living of the Greeks will soon be dependend on how much the taxpayers of other nations are accepting to fund, and for how long.”

      That is the case sicne Greece jpoined the EU. Only so far noone noticed.

    • When this reaches Germany I would like to see vss blaming the electorate.

  • Help is on the way in the form of OSI. As to the German malpractice which has lead Greece to this point, we will seek redress in the courts.

  • One would say that buying the assets of the Greek state very cheaply is exactly the strategy of Germany and other strong nations of the EU. In marxist terms (which probably explains better why a greek government is willing to accept this and sell, while not feeling that it “betrays the homeland”), the capital (inside Greece, in Europe, etc.) uses the crisis as an opportunity to force a redistribution of wealth and power upwards.

    • You got it, athinaios. It’s all just an asset grab, and since the Greek elites don’t pay any taxes, they don’t ‘owe,’ They will make out nicely. It’s the people and the small business men who will lose their shirts.

  • Yannis you should stay in Greece and work for peanuts in order to repay our creditors. EU has invested since 1981 (when Greece entered the EU) much money in order to raise and educate your generation. Well educated and skilled Greeks like you is the only asset that can repay the debts. You should stay in Greece and educate the future white Chinese-like workers in Greece. What are you doing in USA? Who let you get out of the prison? What will happen if most young Greeks follow your example?

    • Better question: What will happen if the Finns, Dutch and Germans leave and there is no more money to be sent to the South 🙂

    • First of all, Greece (and the EU) has spent **ck all on education, so that is just nonsense. Secondly, why should anyone work for peanuts when the whole concept of debt is highly debatable in this chaos of banking corruption? Thirdly, there is absolutely no point for anyone with skills to stay in Greece when there is a government of the old corrupt elite “running” things (actually, doing very little, but in theory they are in charge). If they can find work in a collapsing Europe, young Greeks should leave Greece — because there is and will be nothing for them here. And finally, Greece is absolutely certain to revert to its 1950s and 60s position of being dependent on migrant remittances and a third world level of economic development. There is no strategy to avert this, no possibility of serious economic investment with existing structures: why would anyone expect otherwise?

    • Guest, if you want to have a currency union, this kind of labor movement is actually required. If someone says it should not happen, then he also has to admit that htere cannot be any currency union.

    • @No EU

      No, this is not correct. There are other theoretical possibilities, which presumably some optimists believed in. One would be relocation of capital to the South, owing to lower wage costs — with the assumption that increased capital investment would lead to greater efficiency. Of course, this will not happen when the state infrastructure does not support innovation and investment — which is why Merkel et al are completely wrong to insist on the old corrupt elite remaining in power. It indicates that they have no intention of helping Greece to reform.

    • No you need these four:

      The four often cited criteria for a successful currency union are:[5]
      1) Labor mobility across the region
      2) Openness with capital mobility and price and wage flexibility across the region
      3) A risk sharing system such as an automatic fiscal transfer mechanism to redistribute money to areas/sectors which have been adversely affected by the first two characteristics
      4) Participant countries have similar business cycles

      Not one of them, but all 4. Since we have maximum 1 to2 the Euro was dead on arrival.

    • @No EU

      If you want to cite particular theoretical ideas, then it is normal to quote the author and publication. There is no clear consensus on how monetary unions should operate. Besides, even the USA does not completely satisfy the criteria you give. More important, besides, are the structural issues supporting national economies: it is these that have impeded, and continue to impede, economic development in Greece. It is also these that the Troika claims to be dealing with, but actually has worsened rather than improved.

      The fact is that the euro was a transitional experimental process, and it was not expected to last more than decade. Given this clear limitation, the Commission, France and Germany should have been ready with strategies to deal with exogenous shocks. The fact that they were, and remain, clueless is evidence of their lack of professionalism and unsuitability to govern the EU. One can say the same, with some reservations, about the ECB. Neoliberal propaganda is not a serious strategy: it is a mindless dogma.

    • “There is no clear consensus on how monetary unions should operate.”

      I think after 70 failed attempts in 3000 years of history and seeing the #71 failing at the moment the concensus should be: “DON´T DO IT”

  • Fianlly German politicians say in public, what the public knew all along:

    “Greece cannot be saved, that is simple mathematics,” Michael Fuchs, deputy leader of
    the parliamentary group of Merkel’s Christian Democrats and their Bavarian sister party told weekly business magazine Wirtschaftswoche.

    “The government has neither the will nor the means to implement reforms,” he said.

    Hermann Otto Solms, a financial affairs expert for the FDP, also underlined in an interview with Wirtschaftswoche that should inspectors from the so-called troika criticise Athens’s progress there should be no new aid for Greece, and it would have no choice but to leave the single currency.

    Roesler ruffled feathers last weekend when he told a German broadcaster that a Greek euro zone exit was no longer a taboo for experts and had lost “its fear factor.” A party colleague branded his remarks “reckless.”

    In his interview with OZ Roesler dismissed widespread criticism of his stance both from Athens and within his party.

    “In my ministry we’ve seen that the Greek government has been unable to implement very much.”

    His comments come amid a growing chorus of voices within Merkel’s centre-right coalition that insist there can be no new aid for Greece and that a Greek exit could be imminent.

  • July 27, 2012 Dow Jones Newswires published, that the chronic recession in Greece will tear great holes in the 2020 budget and Greece by then will need 30 billion euros more from international donors. They say, several insiders confirmed this to them; the insiders belonging to the Greek government and the Troika mission.

    For experts, they say, the consequence is that the public creditors of the country – so in the first place, the European Central Bank – have to agree to a debt section when the country is to remain in the euro zone. In addition, it needs more emergency loans to Athens to keep afloat. The debt renunciation of private creditors has not been sufficient, they write.

    The resistance of ECB, Germany and Finland to a haircut at the central bank is told to be large. The governments in Berlin and Helsinki demand first by the Greeks even more initiative of reform.

    The problem seems to be seen and discussed. So, ” announcing that Greece will NOT be borrowing on 20th August monies it cannot repay under the present scheme of things”, as you say, might perhaps only cut the tablecloth between Greece and the EU with advantage only for the EU.

    Rather Greece might try to alert the private creditors. Their debt renunciation was in vain, if the EU does not follow their example. And they risk to loose the rest too.

  • Your last post Yanis is absolutely correct. I have quite a few Greek friends and in all the times we have been to Greece, not once, not ever, have I heard any of them talk about what we now know the corrupt elitist government were up to. Why? because like most people in most countries, they were completely unaware of what their government was doing. Do I, as a British citizen know about the shady dealings undertaken by my government…of course I dont. Selling arms to Gaddafi just for instance or dodgy warplane deals with the House of Saud. This is the reality Very Serious Sam. And the “Spirit” of the Greek people? How do we reconstruct spirit? Do we do it by letting athenians grub about looking for scraps in wheelie bins or cancer victims die through lack of medications? Do we totally grind a nation’s spirit into the dust as a prerequisite for this “change” to take place? Do we watch a nation slowly disintigrate into something not very far away from some African nation before we are satisfied that a proper reconstruction of the “mindset” is underway. I think not VSS, I think not.

    • “Why? because like most people in most countries, they were completely unaware of what their government was doing”

      Are you joking? Most of my Greek friends talked about this years ago. It is one reason why many of them do not live in Greece anymore.

    • David, quite obviously, the Greeks don’t want to change at all. Of course, this is normal, as every person experienced in change management can tell you. Change is seen by almost everybody as threat to the current situation. Which, as unsustainable it might be, is the comfort zone the people don’t want to lose. So they don’t care much if the future could be better if they accepted and actively supported the change. They want to keep what they have even if they -intellectually- are aware that this refusal of realities leads to desaster, or not out of desaster respectively.

      The way to go is, may it be a company or a nation, that the leaders cooperate and force the restructurings through. And permanently explain the people what they do and why. Sooner or later most of them will understand and accept the inevitable.

      That’s BTW what the Schroeder government did with the indepth restructurings in Germany which made ‘the sick man of europe’, Germany, competitive again. The price being for the vast majority of main street Germans that their disposable incomes remained on low levels (a few days ago a study showed that the buying power of the average Germans is on the level of ’92). Please don’t think that they like this side effect. Especially if they now have to pay for countries who overindulged during these years.

      You can’t eat the cake and keep it.

    • @No EU Dictatorship

      There is a third possibility, one that you actually suggest, too: many normal Greek people were aware of the corruption of the elite in a general way, but did not know what to do about it, by lack of alternatives (not everybody has the financial, psychological and health-conditional means to emigrate to another country). So they tried to survive WITHIN the corrupt system, picking the grains that the elite dropped on the ground for them. Of course there are grey zones between “trying to survive in”, “trying to profit from” and “trying to extend” – the corrupt system.

      There is also a grey zone between “being aware of corruption in a general way” and “having specific information about large-scale corruption”.

      But what could those people who possessed such specific information, actually do, if they were not in a very powerful position, with enough powerful allies? Become whistleblowers? We all know what happens to whistleblowers – 99% ends up a victim, without having been able to break the cover-up. In poorer corrupt areas and countries it is closer to 99,99%, the penalty there tending to be not poverty, but death.

      If I’m rightly informed, the problems of Greece were known at very high levels in the EU-administration already in 2003, five years before the crisis began. Nothing was done with it, except that the careers of the people who tried to put it on the agenda (calling for an investigation of the problems), were crushed and their personal lives wrecked.

      That is why I have no trust whatever in European institutions like the ECB or the ESM. The (financial, social and psychological) corruption in the EU administrations is probably about as bad as in Greece, although much more cleverly hidden.

      The only way out of the crisis is: start with going back to basics, each individual, each town, each region and each country learning to rely on his/its own REAL strengths. Rebuilding communities of trust, bottom-up. It will be a long and very painful road. Even if it is follewed with success in the end, there will be many people who will not live to see this succes.

      On this basis, i.e. on the REAL strength of participating countries, areas and individuals, non-corrupt European institutions could be built that would add real value to the economic and cultural life of our subcontinent, and real geopolitical safety.

      But that requires people with a very different mindset from present-day European leaders. The only hope to educate ourselves to such a mindset, is regaining our democracy and making rules that foster independent, varied media, so that there is at least a chance that politicians with a relatively healthy mindset get enough popular support to enable them to be effective.

      That will take time, and it will require many years of struggle with powerful people who are not interested in the well-being of all, but only in the well-being of their own network, their own sponsors.

    • @VSS
      One question. Why on earth would Germans want to make the sacrifices needed to keep a currency that requires for the average Geraman to see his wage stagnate for twenty years? Ask yourself who exactly beneffited from that. Shouldn’t the national interests of Germany echo the interests of the “average” German. Rhetorical question, I know. I think your elites screwed you as well.

      Check this out


    • Mike what you say makes a lot of sense. You should read Vaclav Klaus:

      “The European politicians should be forced to admit that we find ourselves in a blind alley and that in such a case the only possible way out is the way back.”


      And most people and investors will distrust the ESM. This is why the thing will not, like the EFSF, be able to sell its bonds on the market.

    • “Why on earth would Germans want to make the sacrifices needed to keep a currency that requires for the average Geraman to see his wage stagnate for twenty years?”

      They were never asked. There was since around ’98 (and still is) an informal huge coaliton of all relevant (SPD, CDU, CSU, Grüne, CDU and FDP) political parties plus employer’s associations plus the large unions of the DGB who collaborated to keep the personnel costs (and consequently the real incomes) down in order to maximize international competiitiveness.

      That’s BTW the reason why the permanent claim that Germany profited most from the Euro is rubbish, since it was only the companies, not the employees.

      In the other eurozone countries, no such coalition existed. Quite the contrary, the ‘elites’ there used the much to cheap borrowing rats to fuel unsustainable bubbles. Thus, the personnel costs inflated grossly, making the companies and so the countries mostly incompetitive in comparison.

      So you see, the Germans have their ruling ‘elites’ as well who clearly acted and still do so against the interests of the people.

      Problem is, there is NO reasonable alternative one could support and vote for. Not yet.

  • Excellent as usual, with your permission Yannis, I will forward to the Globe and Mail newspaper in Canada. (Most prestigious paper here). To put it simply on Greece: the country is out of time, out of bullets, out of patience and a social-economic construct that is desperate! The euro and all its fanfare is loosing or one may argue has lost its value. With an economy shrinking 7% YoY austerity is suicide on so many levels. Without stimulis along with austerity you cannot have any hopes of a civilzed transition for Greece. The Europeans know Greece is a lost cause and they have no intention in saving it now in light of greater concerns: Spain, Italy ….etc. If Europe has no plans in debt forgiveness at least and no plans for a Marshall style investment and expects Greece to continue with austerity in light of a contracting economy making the targets originally agreed upon irrelevant, then it is clear Europe has made their decision and perhaps its time for Greece to make her own and move on without the Euro ! Am I missing something ? Or is this too obvious ?

  • There is strong odds on that Greece will not survive within the euro, and exit at the end of this year. Drachma or euro, Greece’s problems will not disappear fro many years.

  • Hellenes have displayed courage in fearful circumstances, recently by its 20th century migrants, They essentially left a third world country and entered foreign cultured lands with as little as a suitcase, no spare shoes, little or no education and generally with faith in their religion with their homeland.
    As a second generation migrant, when we hear of the constant excuse for inactivity by current lay Greek citizens against its elite, we feel saddened by the economic/social deterioration and sickened by the waste of opportunity our parents left you all in Hellas.

    May i put to you eco-elites blogging about the factors leading to the crisis that you have all ignored our parents (mid 20th century) Hellenic migrants to Australia/Ameriaca’s/Northern Europe and Africa essentially unburdened and most often supported your parents and yourselves with their fearless actions. Further highlighting the general inertia of the collective left in Greece.

    Take example of these Hellenes, you dont have to go back to Kolokotronis or look Euro-loved Kazantzakis as extreme and therefore somewhat intangible talents, but to these simple (i mean this gloriously) folk.

    take responsibility, accept that you had a few billion frappe’s too many, stop trying to act like what you imagine Parisians are, stop your bullshit facade of ‘european’ sophistication and accept your roots, grow some balls tell these Euro fuckers NOW that we do not want to be Europeans as much as Europeans want to be Greek.

    STOP THE EXCUSES YIANNI about all conspiring elite. You often use allegories and metaphors so i put back to you that your constant excuses for the Greek citizens is as im
    fbroken record, a nuisance more than a fact of event.

  • Dear prof.Varoufakis

    You conclude with:
    ” ….then Athens must force their hand to decide within the next 23 days. How? By announcing that Greece will NOT be borrowing on 20th August monies it cannot repay under the present scheme of things.”

    Suppose we follow your advice.

    Outcome 1) :

    They say:”nice to meet you, now go on your merry drachma way” and we will be owing about 400 billion in euro we will never repay, we will default and take the consequences of “δυστυχώς κύριοι επτωχεύσαμεν”.

    Outcome 2) They do find the money to keep us afloat and we end up owing our lenders 500 million we will never be able to repay. The can will be kicked down two more years or so.

    More people voted for outcome 2) , as I did.

    My rational was

    a) in two years there may be no eurozone and 400 unpayable is the same as 500 unpayable, monopoly game money. ( look at the US).

    b) in these two years, we might make the necessary changes in civil services to minimize corruption and bribes and tax evasion by the hoi polloi , which is the major problem. Computerizing everything will be an enormous help in this.

    c)the eurozone might self combust and we would be again on our drachma way, but not alone and shunned, in the same boat as everybody trying to survive in a post disaster environment. Then there might be a marshal plan.

    The type of impasse the eurozone finds itself is one of the reasons that wars used to happen historically, imo. Wiping the slate clean.

    I would still vote for outcome 2 , as the least of two evils.

    Now you are raising the specter of “selling all the family silver” with outcome 2), i.e. if we never default we will be forced into treaties that are exploitative of greek citizens.
    Suppose we are forced to give unreasonable percentages of our resources to various capitalists. When we are back on our feet and function as a modern country will be the time for a stand: treaties can be broken and reneged on and bargained again, from a strong position.

    If we managed things again like the two years of denial of PASOK and do not use the time to put our house in order, then καλά να πάθουμε.

    • You do realize that there is not a single ray of hope in all of these scenarios you are describing? What is the upside of the choice you are supporting? The euro has proven to be a weapon of mass destruction against vital institutions of our society. Is the euro so indispensible that democracy, essential worker rights and social security should be sacrificed at a moment’s notice? For what? Greece or any country can “put their country in order” under any currency. I agree that it is necessary but this has nothing to do with the damage that the euro brought to our society. Do you think that the millions of Greeks that do not have any money to pay their enormous tax bills as of this year or have gone bankrupt, being unable to pay their loans due to the internal devaluation aspect of the memorandum program care about the economical aspect of the question euro or drachma? They are broke in any case. Should they sacrifice democracy, sovereignty and independence as well? For what and for whom? I think it is high time Greece and other afflicted countries realize the trap that the euro has been and seek a way out.

    • There is an upside: Get Drachme back and people will have jobs again.

    • @Tasos
      It is one story not to have entered the eurozone and another to have adopted the euro.

      Yes, we would have been better off with our old drachma and its devaluations.

      We will be much worse off if we go on the drachma now, much worse than if we limp along as the tail end of the euro. And this is what the present government is accepting and acting upon, kicking the can, buying time. Do you have imagination enough to envisage what “no salaries, no pensions” will mean for the society? No hospitals no medicine and only home grown food?

      I suspect the professor once again gambles that the eurozone partners will not let Greece default on the hope that it will be a wake up call for the eurozone as a whole, Greece an Iphigenia, for better fate of the eurozone.

      I believe they are fed up with us and will let us go, with all the consequences above.

    • I can obviously only guess how the EZ would react to a Greek bluff but I share your thoughts that it would be very chancy at this time. Already with the last memorandum, conditions were put to Greece where one would have expected Greece to revolt. Perhaps to take it as an excuse to let the whole thing blow up. Venizelos must have had reasons for not revolting. Perhaps he sensed what was building up. Things haven’t gotten better since. It could well be that certain powers that be are just waiting for an excuse to bow out.

    • Kalus – “Already with the last memorandum, conditions were put to Greece where one would have expected Greece to revolt. Perhaps to take it as an excuse to let the whole thing blow up. ” – exactly my thinking. I bet the German government cannot believe what the Greek government is doing to its own people.

    • @ anna – “Do you have imagination enough to envisage what “no salaries, no pensions” will mean for the society? No hospitals no medicine and only home grown food?” – is someone or something going to rob all the money out of the hands of Greeks? Because that is what you are saying and it is nonsense. The private sector can function much more efficiently without government.

    • @Anna
      I suspect that lucky for you, you do not belong to the group of people I described above, namely the ones that are not able to pay their taxes for this year and the ones unable to meet debt payments. Do not misunderstand this statement as an attack, good for you. I am close to this group as well but my head is still above water. For this ever increasing percentage of our society however I think you can imagine that the question of euro or drachma is simply irrelevant. Broke is broke in any currency, unemployed as well, bankrupt also. I described the downside of giving up significant parts of what holds a society together such as democracy, sovereignty, belief in a single future along with the heavy sacrifices needed to keep a hard currency such as the euro. I pointed out that for an increasing percentage of our countrymen the cost is simply too high. They cannot hope of any recovery as long as the present course is continued and on top of that they virtually lose their country and it social economy. People need to hope for a better future and I think it is becoming obvious that the present situation is simply hopeless.

      I agree 100% with you that Greece should never have entered the eurozone. I feel frustration and anger for the fact that I, as a citizen was never asked to have my say in such an important decision. Others decided for me yet it is I and millions like me that will bear the burden. I was not asked about entering the EU as well, or to vote for the Lisbon treaty that would rule over the constitution of my country. Such was the faith of the elite of this country towards the people and its sense of natonal duty.

      I think though that it is time that Greece should reevaluate its position within the eurozone. I think that we should have an option and should examine that option very seriously. This should also be very soberly presented to the people in the form of a referendum. This was the only good idea that Papandreou had.

      Exiting the eurozone would be difficult but not impossible. It would have to be orderly and the new currency would have to have a fixed but lower value to the euro in order to cover Greece’s basic needs during the adjustment period for some time. The ECB and the central bank of Greece would have to co-ordinate so that the new currency gains basic credibility fast and some inflation should be allowed in order for liquidity to be restored gradually in the market. All local contracts and loans would have to be transformed into the new currency and this along with a small inflation could help to jumpstart the economy. The fact that we are near the point of realization that Greece is in an absolutely dire situation and this deep depression and the deflation process are killing our economy is the right point to start a logical discussion about what needs to be done. What is absolutely sure is that this course cannot simply go on, it is pure madness. It is like hitting a brick wall over and over again hoping that somehow a miracle will happen and you will break through. This is not the case. It is long past time we accepted the impossibility of the thing and set a new course. If said course cannot be within the eurozone so be it.

    • Tasos – I love your comment.

      If I add a few things.

      The course Greece is on at the moment is going to lead to either the government defaulting completely, (a good thing), or the government owning everyone’s assets because nobody can pay the taxes and then defaulting because it sold the assets to pay for the debt.

      I would also like to add that the recession in Greece is completely unnecessary. It has been made much worse than it needs to be by the taxes on the private sector and nowhere near enough cutting on the public sector. The public sector cuts are a joke. But it is a legal mine field which is why a default is essential.


      The banks and the Troika know this, they are simply stripping the assets of private citizens before the inevitable government default.

      “This should also be very soberly presented to the people in the form of a referendum. This was the only good idea that Papandreou had.” – This was a complete bluff by Papandreou to get Samaras to fall into line. It was a stoke of genius by Papandreou.


      “The ECB and the central bank of Greece would have to co-ordinate so that the new currency gains basic credibility fast and some inflation should be allowed in order for liquidity to be restored gradually in the market.” – I use my words very carefully here. The Greek central bank is the enemy of the Greek people.





      “The fact that we are near the point of realization that Greece is in an absolutely dire situation and this deep depression and the deflation process ” – I know this is what they tell you, but there is no deflation in Greece, the cost of living has gone through the roof.


    • @Richard
      Some of the facts you present are false, which can be explained I guess by the fact that you get them from the foreign press and do not actualy live in the country.
      There have been severe cuts in the public sector as well as tax hikes. I know people that had their wages cut by almost 40%. Pentions too. These people have to face additional taxes, making their situation in many cases impossible.
      Papandreou was not bluffing with the referandum. At the time the people would have given their support in favor of the euro by a huge percentage of probably up to 70%. This would help him build consensus to continue his program (not that I believe his program was correct and worth a seccond chance). His proposal would be a bluff if he thought the people would vote against the euro. It would be funny if something like that happens in a couple of months, trust me sentiment towards the euro can change very very quickly in this deterriorating situation.
      Greece has the lowest inflation in Europe. All assetts are losing their value very fast. Prices in supermarkets have fallen too although not as much because of high oil prices, VAT hikes, high commodity prices and other factors. Everything else is on its way down from wages, services, real estate prices etc. etc.

    • @Anna. I did state my sources? 40% wage cuts in the public sector is immoral. They should have kept the wages the same and cut 40% of the staff, that would have been something constructive. What they did and are doing is destructive.

      About inflation. The government measure it as the cost of living but they exclude taxes, energy and food prices. Which basically makes it a propaganda tool. If you take into consideration the increased tax burden and the increased fuel costs inflation has got to be a minimum of 10%.

      And this is a 10% in actual terms not in real terms ie the cost of things relative to people’s income. The sky is the limit if you want to measure it that way. If you look at it that way, food prices have increased massively.

      About the referendum. Papandreou was using Greeks love of the Euro as a tool to pass kamikaze economic measures.

    • @Tasos and @Richard.

      Of course there will be a difference for the already bankrupt and destitute part of the population if we boldly stop borrowing and get kicked out of the eurozone. A great difference, because there will be no food at all for them, nad they will freeze in the winter, the scarce resources will be hogged by the now more prosperous 60%.

      I am 72 years old. I remember the occupation and people dying of hunger in the streets of Athens by the thousands.

      When you produce less then you consume you are dependent either on charity or on lenders. Greece is producing much less than it is consuming, in basic resources, food and energy. When the lending stops, we will be in the situation of depending on charity,

      What price “proud democracy” and other ideals in this case when we become beggars? Better to sell the family silver than beg.

      I see as the best of the two bad scenaria the scenario of surfing along with the eurozone . This at least gives a chance of getting on dry land standing. If the eurozone fails, we will have company, as we had company after WWII. Charity then will be called something like “a Marshal plan”, easier to swallow.

    • Anna, no matter what, there is going to be pain, question is do you want it long term or short term? & that goes for all us, not just Greeks. About Greece feeding itself. I wouldn’t worry about it, there is more than enough land lying fallow in Greece for production to be increased. Also the sea. Greece has no problems in this area.

      How are Greeks going to afford cars from Germany? Tourism, farming and foreigners buying property. That is more enough for Greece to prosper.

      A default does not mean the government suddenly stops getting any money. It will still have revenue, just much less. They will have to prioritize properly and let the private sector pick up the slack. But I don’t think they will do that. They will cut pension and wages in order to build support for big government. They do not want to lose any control, even if this means starvation.

      My opinion.

  • Κύριε Βαρουφάκη,
    σας παρακολουθώ τα τελευταία δύο χρόνια νομίζω (λίγο περισσότερο ή λίγο λιγότερο).
    Κάνετε τις εύστοχες αναλύσεις σας και μετά τις προτάσεις σας. Δεν είμαι οικονομολόγος, δασολόγος είμαι, αλλά παρακολουθώντας και άλλες αναλύσεις και βιώνοντας την καθημερινότητα μιας ελληνίδας πολίτη – μάνας – εργαζόμενης, συμφωνώ κατά τα 99, 9% μαζί σας. Με έχει εντυπωσιάσει επίσης που δεν είστε απών, αλλά κάνετε έντονη την παρουσία σας, όσο σας το επιτρέπουν βέβαια και με τις κοινοποιήσεις μου προσπαθώ να βοηθήσω. Οι τίτλοι “πρόγραμμα 24 ημερών” και “23 κρίσιμες ημέρες για την Ελλάδα”, οδήγησαν την κατάθλιψη μου στο ζενίθ. Κάπως έτσι ένιωσα και το βράδυ της Κυριακής των τελευταίων εκλογών. Έχουμε έλλειψη ηγετών. Έχουμε έλλειψη οργανωμένου κρατικού μηχανισμού, για να αντιμετωπίσει πείνα και αρρώστιες. Μα το χειρότερο είμαστε μια κοινωνία εκπαιδευμένη στον καταναλωτισμό χωρίς παιδεία. Συχνά μου έρχεται στή σκέψη η αντίδραση του ιαπωνικού λαού και του ιαπωνικού κράτους, μετά το μεγάλο ενεργειακό ατύχημα και τρομοκρατούμαι με την σύγκριση των δικών μας δεδομένων. 23 ημέρες, 22 ημέρες, 21 ημέρες …

  • Gray Goods (oder soll ich besser sagen “Graue Güter”?),

    “you always only talk about what others should do for Greece, but never say what Greeks should do themselvfes to contribute to the recovery.”

    This is the typical German distorted view of the situation, distorted by the obsessive “Moralisieren”. Let’s go back to the year 2007 or 2006 and let’s try to imagine that Greece is a really better country. Which other country would this “better Greece” resemble? Italy? Spain? Portugal? Irland? All this countries are parts of the eurocrisis as well…Consequently, you are the one, who should stop refusing to accept the crucial German responsibility for the general management of the crisis and give something back from the bottoless pit (“Faß ohne Boden”) of the German profit out of the crisis…Otherwise, you “reinfoce the concerns” that the Germanw have only one dogma: mine is mine and yours is mine…

    • I have to agree with GrayGoods. Don´t ask what Germany can do for Greece ask what Greeks can do for Greece!

  • Hi Yanis,

    After reading this and your respective greek post in protagon.gr, I would like to ask you , how do you interpret the change of stance of the Troika, that will now not be leaving Greece but will stay for “as long as it needs to” in conjuction with the new 40 days express program that will be announced from the Prime Minister. From my point of view it seems that someone copy pasted your proposal and made it reality. I.e. Hurry, show good behavior to our creditors and we may yet be able to talk about gaining another two years to make things “right”..

  • Dear Yanis,

    The German book “Ratingagenturen” von Werner Rügemer list most of the owners of the rating offices. Remarkably: Moody’s and Standard Poors have partly the same owners. The book tell about their lobbyist network in which also mediaconcerns as Hearst (partly owner of Fitch) are engaged. They spread the lie that PIGS-countries are existing, So the related rating offices can downgrade these countries and after the help of other countries they downgrade the others because of more debts by helping the other countries. So the owners of the rating offices can get big gains of their ratings and credits to debt countries.

    The books tells that lowering of wages and so the tax incomes of the state will cause generations for paying debts and the appropriate way is higher wages will increase the tax income of the state and also money for services given by the state, so the state debt is quickly less.

    In the chapter “Die Rückkehr des Gouverneurs (the return of the governors, page 145-148) can be read about Papadimos and his arrangement with Golden Sachs and the role of the PO box of Titlos in London.

    This book is complete chocking. it tells also about the giant overspill (wasting of basic resources and energy) caused by the requirement of longer work by the people. Therefore is absolutely no need, It even has nothing to do with a sustainable and green economy.

    It is time to stop this way of financing, because the book asserts there is no eurocrisis at all. The financial world will only regain the lost money of the crisis 2007/2008. And uses therefore all means, legal of illegal.


  • British Guide to Germany – “Don’t mention the war!”
    Economists’ Guide to Greece – “Don’t mention the Greeks!”

  • US Treasury’s sincerity in offering Greece “almost unqualified support in the event of a return to the drachma”

    Now uncle Sam will hold Greece´s hand when exiting the failure zone.

  • The situation is completely untenable for Greek citizens at the moment and with fiscal, private and corporate deleveraging not yet done, the economic contraction may very well get worse before better. It is futile trying to picture growth when everyone is paying off debt and the government is burdened by international lenders’ indiscriminate cuts. This is all manifest from a very disparate group of nations that joined without the true sense of ‘we’re all in this together’. Until there is a material shift from Germany, allowing greater support for weaker nations/ economies, the situation looks rather bleak. I think through lack of alternative Greece should pursue the suggested path, therefore forcing the core’s hand. A default/ exit would be terrible, though perhaps shorter/ sharper pain would be better. Disregarding Argentina’s recent ridiculous moves, they along with Iceland have shown that default and devaluation may be viewed in hindsight as the most appropriate course of action.

  • “Either to give Greece a proper chance of exiting its current death spiral. Or to dump Greece now, before the Greek state loses all its remaining assets and before it gets deeper into debt” – Exactly, which is why more and more I am coming to Demetri’s way of thinking, Germany cannot be so stupid to not see what is happening when they bailout the Greek government.

    But I think your missing another possibility. The state going bankrupt after it has seized all the assets of the citizens through unpayable taxes.

    • Richard,

      Here is another possibility:

      The US Treasury’s Assistant Secretary for International Finance Charles Collyns had a meeting with Greek Finance Minister Yiannis Stournaras in Athens on Wednesday morning. The official Greek media version was that Collyns ‘expressed the support of US-Finance Secretary Tomothy Geithner to Greece and his confidence in Greek efforts. Yinannis Stournas briefed Collyns on the situation of the Greek fiscal condition, and the key challenges of the Greek economy’.

      In fact, Washington sources told The Slog last night BST that Collyns – a confidante of both Geithner and Stournas – was on a specific mission to impress on Greek Finance bosses the US Treasury’s sincerity in offering Greece “almost unqualified support in the event of a return to the drachma”. The White House is betting on the strong likelihood of Greece becoming formally insolvent before any more bailout monies are available from Berlin-am-Brussels.

      Charles Collyns is uniquely placed to deliver the message credibly to the Athens government: he was at the IMF for many years, and is a personal friend of Geithner going back a long way; but significantly, he is also an old classmate and close friend of Yiannis Stournaras himself.

      As The Slog reported earlier his year US Government covertly attempted to isolate Greece from the eurozone last March, in a bid to both make the country an important and loyal base for military intervention against enemies in the region, and itself play a beneficial role in the exploitation of Greece’s energy and mineral assets under the Aegean ocean. This move shows that the Obama White House remains determined to follow this course of action. A number of informed sources in Europe believe that the Greeks have had all the EFSF monies they’re going to get. On that basis, they would probably default on or around August 20th.

    • Greece does not exist as an entity capable for selling bits of itself. And no Greeks will ever do this on ‘its’ behalf.

    • Yiannis – “no Greeks will ever do this on ‘its’ behalf.” – you really believe that when the government is pushing for the sale of assets such as lakes and reservoirs through the privatisation of the water and electricity companies. As an example.

    • Yanis, your reply is factually not correct and dogmatic instead because you suggest that “selling assets to foreigners” is a bad thing.

      As long as a country has a current account deficit, it will have to make up for it through the capital account. Since no country, not even the US, will be able to bring in foreign capital as debt forever, every country – Greece, too – must attract foreign capital as equity. “Selling assets” of some kind is the mirror image of foreign investment. From the standpoint of the balance of payments, it is irrelevant who sells assets to foreigners, the state or private parties, but someone has to. What in the world is wrong with foreigners investing in Manhattan real estate, in S&P corporations, etc.? If foreigners didn’t do that, the US couldn’t live with its massive current account deficit seemingly forever (BTW, 70% of Siemens is owned by foreigners and almost 50% of Deutsche Bank).

      In my first post to your blog ever, after having read how the Modest Proposal would seemingly solve all problems at once, I asked “Who in this proposal will finance the current account deficit?” Your answer was a discussion-stopper like “The private sector; as always!” I suppose we can agree now that this is not always so.

      I once read a study which, if I recall correctly, said that Greece – since record-keeping – has run current account deficits with the exception of only a couple of years. So, instead of biasing your followership into reservations about foreign capital, you should explain to them that Greece needs foreign capital! Preferably through foreign investment, possibly through intelligent debt/equity-swaps but as little as possible through debt.

      In a way, the guest-workers’ remittances of the 1960s/70s, which contributed so much to the increase in the Greek living standard, were nothing other than foreign investment.

      I find it quite amazing that after almost 3 years of heated debates about Greece’s financial problems, there is still no discussion about the Greek current account deficit and its implications for domestic economic policy. If Greece could balance its current account (hypothetical assumption) and stop deposit flight tomorrow, Greece would cease to need new foreign funding starting tomorrow.

      I re-post a simply tale by Warren Buffett for all those to whom I could not express myself clearly above. Perhaps the remaining 19 days should also be used to think about this little tale and what it could/should mean for Greece.


    • When did I ever imply that selling assets to foreigners is a bad thing? Never, is the answer (since I do not believe that). Please criticise that which I believe/say. Not that which you feel like projecting onto me.

    • Klaus, you hit the nail on the head, the trade deficit is the source of Greece’s problems, and most Western countries. Fix that and the rest of the problems fix themselves.

    • How about islands declaring independency & joining other countries like Austria 🙂

    • If that is what they decide, I am happy to go along. However, it is more likely that Bavarians will vote for a union with Israel…

    • Sorry, it must be because English is not my native language. I misinterpreted you. I thought when you referred to “Greece’s selling bits of itself” and Greeks “never doing that on its behalf”, I thought you were referring to the sale of state property. Coming to think of it, what were you referring to with the “bits”?

    • There is a rather great difference between re-allocating ownership of state assets and reducing sovereign territory (such as selling islands). The former is, in all probability, a bad idea that will result in worse income distribution effects; the latter is simply treason.

  • To all those of anti German sentiment – The deputy leader of the German parliament has said he believes Greece should default and remain in the Euro.

    “Greece shouldn’t get additional financial aid, according to Michael Meister, the deputy leader in parliament of Merkel’s Christian Democratic Union, Frankfurter Allgemeine Sonntagszeitung reported.

    Greece’s problem is its government’s inability to carry out domestic changes, the newspaper cited Meister as saying in an interview. While advising against Greece being forced to exit the euro region, ”


    If any more evidence was needed that Germany backs the Greek people 100%

    here is my little write up on it http://independence4wales.com/2012/greece-german-government-urges-greece-default-with-greece-remaining-in-the-eurozone

    • Meister’s position on this does credit to himself and proves that all generalisations (about the Germans, the Greeks etc.) are a step on the slippery slope toward racism. However, this does not alter the sad fact that his is a minority voice drowned out, so far, by a cacophony of inanities.

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