A 45' interview on the Global and Euro Crisis: Interviewed by Tom O' Brien

Tom O’ Brien runs From Alpha to Omega, an excellent podcast-based blog focusing on political economics. He recently interviewed me on the Global and Euro Crisis. Click here to visit From Alpha to Omega, and listen to the 45′ interview. Or for a podcast uploaded on this site click here: 


  • On a side note: Bill Gross, no less, recently came to some conclusions which at least partially resemble what you wrote in ‘The Global Minotaur’. Maybe you should send him a copy, so he gets the other parts of the picture as well 🙂


  • Dear Yanis,

    I greatly enjoyed listening to your very interesting interview.

    Just a few comments or suggestions on some things you said:

    1) I don’t think you can address the issue of sovereign default without taking stock of the experience with Greek PSI this last February. Greek PSI happened precisely because Merkel could not justify further “transfers” of German tax payers money (these are actually subsidised loans so I actually don’t like to call them transfers) to pay for maturing Greek bonds and new debt, without the banks also sharing some of the costs of keeping Greek debt sustainable. No matter how small you may consider the cost imposed on foreign banks by PSI to be, it did save Greece 100 bn euros at the expense of foreign banks. However, as we know it also ruined the entire Greek banking system (and the Cypriot one too), who was the biggest holder of Greek bonds measured in relation to these bank’s balance sheets, and increased the need to fund Greek bank recapitalisations with public funds requiring more foreign public loans to Greece. My point is default can also have unintended consequences of this sort and if one wants to seriously address the merits of default as a policy tool one has to take them into account.

    2) I agree 100% with you when you say that there is more to the euro and the general European integration project than a long-term “Ordo Liberal” master plan to take over Europe. One has to see the euro as part of a more complex and contradictory historical process in which the European elites have been trying to reconcile the interests of French and German capitalism and manage in a world where the US ceased to act as a responsible global hegemon, integrating the interest of European elites, since it let Bretton Woods collapse in the 1970s. But this is a very long discussion which I can only flag in a few lines.

    3) You sounded like the only reason why you don’t support leaving the euro is because of considerations about the chaos that could ensue during the transition phase to a new currency. Surely there must be more to it than that. Right? Would governments really face less pressures to impose austerity if they left the euro and faced massive devaluation pressures? Is the case of Argentina really a useful reference for the euro area?

    These are just some humble thoughts that came to me while listening to your interview. Please keep up the great work! The left is privileged to have such a serious critical economist as yourself amongst its ranks.

    • Dear Dean
      If you are open to facts that may challenge your view, have a look at this, please:

      Then, click on the document at the bottom of the page called “Download Full Report (PDF–2MB)”.
      It is quite long but (I think) very interesting and insightful.
      Particularly, have a look at Exhibit 11 on page 24 of the document.
      There, you can see how much exposure the banking systems of France, the UK, Germany and others have to the periphery. After you’ve had a look at that, maybe tell me if you still think it is only Germany who’s about to loose a lot of money if southern Europe collapses.
      The truth is not as simple as you think – or maybe, it is simpler than you think but does not look exactly the way you like?

    • Martin:

      When I say “100% German mess” I don’t mean others are not affected by it. Of course they are affected in very profound ways due to interconnectivity.

      “100% German mess” = that it’s primarily Germany’s fault for allowing an initially curable condition to metastasize into a gigantic problem which is beyond German ability to address but which problem nevertheless will now devour Germany (along with many others as well).

      Therefore, the framing of the issue at this point in time is not who started it and why but rather who failed to undertake timely and intelligent actions to prevent the spreading of what now seems an incurable virus.

      Remember that food farm in Germany that was found to have spread a virus in the Americas and beyond? It’s exactly the same problem. A seemingly beyond reasonable doubt Germany with technology to boot, made errors which were not expected of Germany. And now with this financial crisis we have a manifestation of the same old problem. An incompetence failure by those who considered themselves competent.

    • @ Martin

      Since quite some time now, I showed clear and undeniable proof like the one you present now. That France’ banking system is the main minion of the bail outs paid for by other nations taxpayers. Bail-outs orchestrated by the french Strauss-Kahn (now Lagarde) and Trichet. And now Draghi.

      That the misdesigned currency union was imposed onto europe by the french.

      That Greece herself is the one and only who is primarily responsible for the status she is in, and consequently the one and only who primarily can (must) help herself. The other nations can and will provide support, but the cure is to be found only in changing fundamentaly the system that is Greek.

      There are people who will even nowadays never accept such facts. They do what simple minds always do: cultivate their racist hatreds. Better to not disburb with facts people who are nurturing their prejudices. They are hopless cases, unfortunately.

    • Dear Dean
      What I meant to show with the data in the document I sent the link to is that obviously, it was not only Germany and German banks who were very willing to lend Greece and others huge amounts of money, asking for too little interest payment and therefore enabling e.g. Greece to accumulate so much debt that it now collapses.
      If we can trust the figures in the document, then more money actually came from France and the UK. Which is why I think it is incorrect and unfair to blame the situation only or primarily on Germany.
      I agree that the situation has not been handled well – but that is not Germany alone. Greece for example could have handled it better as well. I don’t think it is fair to blame only Germany.
      The roots for the crisis (excessive debt-taking that was wasted on non-productive investments and consumption) was helped by the willingness of stupid banks in Germany and many other countries by lending too much for too low interest rates. So it was not only Germany.
      The same with fixing it now.

    • Martin:

      Yours is a revisionist version of events.

      When the crisis started Germany and France each held about the same amount of Greek sovereign debt (circa euro 40 Bil). Then Germany in violation of a prior agreements re: holding on to its Greek debt in order to avoid market panic, started an aggressive and secretive dumping program reducing its Greek debt exposure to euro 3 Bil. (through a combination of ECB dumping and aggressive write-offs ordered to its own banks for their portion of Greek sovereign held).

      Therefore, not only Germany lied and left France holding the bag but also Germany started moralizing of what others states should do after herself had just performed the odious task of deceit and further damage to Greece and others.

      Germany is a common hypocrite and a bad one at that. It deserves a very severe punishment so that lies and undermining of other EU member states is no longer condoned or sanctioned in any way within the European family. Shame on you and shame for this pathetic attempt of re-writing history.

    • Dear Dean
      You wrote:
      “When the crisis started Germany and France each held about the same amount of Greek sovereign debt (circa euro 40 Bil). Then Germany in violation of a prior agreements re: holding on to its Greek debt in order to avoid market panic, started an aggressive and secretive dumping program”.

      Funny – I remember reading exactly the opposite about a year or so ago: That French banks had started selling off their Greek bonds to the ECB, against prior agreement not to do so.

      No clue which version is right. Maybe, both are – from a bank’s perspective, it was probably clear (latest from mid 2011 or so) that selling at least some of their Greek bonds was a good decision in order to limit their exposure. Even if that was painful – because the bonds had already dramatically lost in value.

      When you say “when the crisis started” where do you refer to? 2007 (when the Global Financial crisis started)? Probably not because things were relatively calm in Greece then. So maybe you refer to the end of 2009 or to early 2010 when the crisis became fully visible in Greece? Or do you mean 2011 when it was clear that the fixing attempt from 2010 was not working as intended?

      I don’t have all that historic data. But I found some stuff, from 2011.

      This one mentions that French banks have the biggest exposure:

      So does this one:

      Here’s one from November 2011 mentioning that Commerzbank (Germany), BNP Paribas (France) and Barclays (UK) all had sold Greek bonds.

      I think you have to try really hard to construct a theory that again manages to blame solely (or even primarily) Germany – but I am sure you will not be shy to construct one!

    • Dear Dean
      You keep me busy!

      I found something – data from December 2009:

      On page 88 you can see that the French banking system had claims against Greece worth 79 billion Euros.

      On page 92 you can see that the German banking system had claims against Greece worth 45 billion Euros.

      Now – and you probably won’t like this – the situation in December 2010:

      On page 88 you can see that the French banking system had claims against Greece worth about 57 billion Euros.
      On page 92 you can see that the German banking system had claims against Greece worth about 34 billion Euros.

      So to summarize:
      From December 2009 to December 2010, the French banking system reduced its exposure to Greece from 79 to 57 billion Euros. So a reduction of 22 billion Euros.

      In the same period, the German banking system reduced its exposure from 45 to 34 billion Euros. So a reduction of 11 billion Euros.

      Your claim was without substance and completely twisted the facts around.
      France had a bigger exposure at the beginning – and it has also reduced it more significantly than Germany.

    • Martin:

      Unfortunately you are trying but not doing a good job. The answers you seek are all in Der Spiegel. Now, I am not gonna give you the article you should find, because it’s never a good idea to do someone else’s homework. But I will give you a hint:


      So, here is your task. Find the Der Spiegel article which gives a definite answer as to what steps Germany undertook (in violation with its agreement to others) and which have cut down its Greek sovereign debt exposure to below euro 10 Bil. Find the exact number and report it here. If the number is any higher that euro 4 Billion you still don’t have the right answer. Keep looking. Forget about all other publications and concentrate on Der Spiegel.

    • And Martin:

      Here is another article to help you in your search. But here is the thing. These are 1-2 year old articles I have given you from Der Spiegel. Your task is to find out what is this number(total banking German exposure) today and report it here for discussion:


      BTW, in te article above there is a fairly good description of the German tactics in the matter.

    • Dear Dean
      In my post from 5 October at 9.44 am I provided you with very clear evidence to support my statements.
      The data is from the Bank of International Settlements (“BIS”), the “central bank of the central banks”. Have you read my post and have you looked at the linked documents on the pages the numbers I provided?
      I would be interested in your opinion. Do you understand that those numbers mean that France held a lot more Greek debt than Germany – and that it also sold a lot more of that debt than Germany.
      Can you see that?
      I won’t go searching for some Spiegel article of uncertain value if you can’t even be bothered to have a look at BIS statistics just because you think that unpleasant facts just go away if you ignore them.

      I would be quite impressed if you could have a look at the facts and then tell me if you still claim that Germany and France held a similar volume of Greek debt and that Germany sold more of it once the crisis set in.

  • Like Very Serious Sam I just add a sidenote (Thanks for the interview, I still am so grateful I found this blog months ago!).

    Recently, even if the majority of german people (happy with the few bits the think they know – and they think since years “we know it all”…) still believe the nonsense about “good” Germany and “bad” Greece, there are a few more articles now that are more to the point.
    The “Junge Welt” is a small leftist paper that somehow plays the role the german “taz” played 25 years ago. (Now the taz is somehow “the small FAZ”, as the joke rightly says. Like our green party the taz moved and moved….to the postmodern market-radical parts of the spectrum).
    The “Junge Welt” constantly showed since years how Greece is treated wrong by austerity-politicians, by the Troika, by Merkel – and why. Certainly a long interview with Yanis Varoufakis would help much^^, but still – they know about the situation.
    September 29 now the Junge Welt published an article that sounds, well, a little little bit less hopeless.

    “Umverteilung in die BRD”

    is the title. (You can read it online at their website jungewelt point de, use their search engine. German only, sadly. But internet translater-programs sometimes are fun to use^^. For example google gives me “Νέοι Κόσμος” as a translation of “Junge Welt” ;-))).

    The article describes how Germany up to now profits from all this mess while conservative politicians from CDU to green shout “we are giving, giving, giving”.
    “Junge Welt” – journalist in Athen, Heike Schrader, quotes Suleika Ramers from the website “World future council”. Ramers’ guest commentary at “euractiv.de” explains that Germany up to now lost no single Euro – and shows how Germany won up to now. Ramers sees Germany as winner of the Crisis. German export industry could win 50 billions of Euro due to the Euro-devaluation “thanks” to the Crisis. And she tells what apart from many conservative parties all know by now…
    The greatly hyped “german strength”, the winner-role in all this competition, has 2 sides. “Germany is not only champion of the export game, but champion in wage-dumping….”

    She concludes: “To tell that Competitiveness would mean to have a better economy is a big mistake”

    Another article is from “Frankfurter Rundschau”, appeared September 4 (online available too)

    “Das Märchen von den Griechen”

    Here Stephan Kaufmann tells the prejudice our media told us since years as a kind of fairy tale about Greece. The good good Germans, the lazy bad greek people is the content of the fairy tale most of our media reproduce and reproduce.
    A lot of points are mentioned and information is added to bring light to this foggy views. A good read for at least german-speaking readers here! Or those who’d like to at last see some more balanced articles coming from the bizarrely onesided german media since years (including FAZ, Süddeutsche and a lot more. They all seem to work like a repetition machine for the “good Germany”-story.) So let’s turn on that translation-machine like from google :-)).

    The “Junge Welt” from September 29 also has an interview with Martha Vassiliadis, a german teacher.

    “Von 450 Euro kann man nicht leben”
    (something in the lines of “450 Euro aren’t enough to live” or “too much to die and not enough to live from”)

    The party member of the “Linke”, Gesinze Loetzsch (left party) of Germany invited her to come to Germany to tell people about reality in Greece.
    Vassiliadis talks in her interview about the economic situation (she is a teacher), and about school in general.

    So slowly, slowly, as all the Merkel sentences like “the free market will do it all alone” -tales [plus the Troika-decisions] made the situation worse – there are, even in Germany, more freely available articles. A small counterpoint at least, maybe too late, but I wanted to mention it.

  • The podcast of this interview is best synopsis of the eurozone crisis I have ever heard. All in 45 minutes! It covers history, the various manifestations of the crisis, solutions and the future. I admire your work ethic in giving your best effort in any every opportunity afforded to you to make your case for a saner Europe. Thank you Yanis.


  • Dear Martin:

    I asked you to keep one source of data so that we can avoid this apples and oranges discussion. Specifically, I asked you to use Der Spiegel data. As of September 2011 Der Spiegel shows the German exposure to Greek sovereign to be 13.8 Bil. If as you say Germany started at 45 Billion this means that a year ago already Germany had dumped 31.2 Bil.

    I then asked you to find what the exposure is today. And I gave you a hint that the true German exposure is no more than 4 Bil. Which means that Germany alone has been able to dump 41 Bil or so from the start of the crisis.


    Now, forget about the French for a moment. To be able to compare the German and French dumping you need to know who started it first and when the other guy followed because it had to. But let’s stick with the German part first. Will get to the French later.

    • Dear Dean

      I would prefer sticking with the BIS data – it is the most reliable data source I can think of so why go for the Spiegel, a German magazine (that itself has got the statistics from the BIS, as you can see on the picture in the article you linked).

      Here’s where you find the data for Greek debt held by France and Germany, according to the BIS:

      December 2008:
      Page 74 (both France and Germany)

      December 2009:
      France page 88, Germany page 92

      December 2010:
      France page 88, Germany page 92

      December 2011:
      France page 88, Germany page 92

      Here’s the summary of Greek debt held per specific date:

      December 2008
      France 75 billion EUR, Germany 38 billion EUR

      December 2009
      France 79 billion EUR, Germany 45 billion EUR

      December 2010:
      France 57 billion EUR, Germany 34 billion EUR

      December 2011
      France 44 billion EUR, Germany 13 billion EUR

      If we both agree on these facts (and if you don’t agree with the BIS data, I don’t think it makes much sense to continue to discuss) then yes, Germany has reduced its exposure to Greek debt significantly between December 2010 and December 2011. But France has actually started to reduce its exposure heavily between December 2009 and December 2010 when Germany reduced its exposure significantly less than France did. France has always held significantly more Greek debt than Germany – and it reduced its exposure more heavily between December 2009 and December 2010 than Germany did.

      I guess we are through with that and if you are honest, then you have to admit that your claims were a mix of half-truths and mistakes, am I right?

      What remains is your desperate determination to blame Germany for everything, including France reducing its exposure to Greek debt by more and earlier than Germany did.

    • Dear Dean
      Please read my post from 9.57 first. In that post it becomes apparent that the debt reduction started some time between December 2009 and December 2010. Trying to see at bit more clearly, I had a look at the BIS data again. There are quarterly overviews available. So I also had a look at the debt status as per March, June and September 2010 to get a more detailed picture. Here are the links:

      March: http://www.bis.org/publ/qtrpdf/r_qa1009.pdf
      June: http://www.bis.org/publ/qtrpdf/r_qa1012.pdf
      September: http://www.bis.org/publ/qtrpdf/r_qa1103.pdf

      Together with the data (links already provided in my post from 9.56), the picture in terms of Greek debt held by France and Germany in billion EUR looks like this:

      December 2009: France 79, Germany 45
      March 2010: France 71, Germany 44
      June 2010: France 57, Germany 37
      September 2010: France 63, Germany 40
      December 2010: France 57, Germany 34

      Between December 2009 and March 2010, France reduced its exposure by 8 billion EUR while Germany reduced it by 1 billion EUR. Between December 2009 and June, France reduced it by 22 billion EUR while Germany reduced its exposure by 8 billion EUR.

      I think this makes the picture quite clear in terms of who started to reduce the exposure first. It was France.
      I don’t have a problem with that and I think it was legitimate of France to do that. But it is plain wrong to deny those facts and to state that Germany left France standing in the rain and reduced its exposure while France was being heroic and holding onto its Greek debt. Facts don’t support that view of yours.