‘Wolfgang Schäuble [Germany’s finance minister] is convinced that, as things stand, he needs a Greek exit to clear the air.’ - Yanis Varoufakis, Former Greek Finance Minster
Say what you will about the former outspoken 54 year old Greek Finance Minister Yanis Varoufakis: He is still talking truth to word regarding the entire 21st century Greek tragedy that has befallen his country of Greece. In an Op-Ed piece from today's "The Guardian", Mr. Varoufakis doesn't pull any punches or spare any feelings in his Op-Ed analysis of how a certain EU partner country set out to make an example of Greece by this entire exercise of financial UFC mortal combat fight where Greece now finds itself hopelessly pinned to the floor in severe pain, and out for the count....But not dead.
Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.
In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the euro zone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.
In this Op-Ed, Mr. Varouakis further states that the creditors took the second option, that of what he terms a toxic option:
Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings. Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.
To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
And just what about those eight year olds.....
Well, apparently there were many eight year olds in the room, and they knew exactly what they were doing to Greece, and its financial future. Mr. Varoufakis goes on to state the once the entire "sordid operation" was complete, the EU in turn had acquired yet another more nefarious reason for not discussing a debt restructure.
In his words:
"...it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.
Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicized impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.
What is even more damning is what comes next from the Op-ed and Mr. Varoufakis in terms of one of those "off the record" conversations between him, and a certain Mr. Jeroen Dijsselbloem, president of the Euro group (the euro zone finance ministers) in a face to face meeting when Mr. Varoufakis had just begun working in his new position of Greek Finance Minister after just a few weeks......
In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Euro group (the euro zone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.
Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.
The threat of Grexit has had a brief roller coaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds, as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.
This almost reads from an HBO movie script from "The Sopranos" of from the classic movie "The Godfather".
By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Euro group – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.
Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.
To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilization of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.
The Op-Ed is an interesting read from a very complex man who I think deserves the title of "The Lion Of Greece. He is very educated, a MS in mathematical statistics at the University of Birmingham, and a PhD in economics at the University of Essex. He describes himself as a "Libertarian Marxist". His background is interesting, and one worth further rersearch, and reading as Varoufakis is a very serious intellectual, and one whom I believe, my personal opinion, that the Troika was very afraid of, and Prime Minister Alexis Tsipras may have well did him a favor by replacing him because he intimidated him as well. It could also be that Varoufakis, knew all to well what the end game was going to be, and with no reluctance, exited stage right from that current government in Greece. He didn't want any blame for what was about to happen, as we now have read in the papers.
On a final thought, Varoufakis ends his Op-Ed with the following pertaining to Wolfgang Schäuble (Germany’s finance minister):
After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.
What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian euro zone.
So, there might be more going on there than meets the eye.
Like I said in the my opening, love him or hate him he knows just who he is, and probably knows where the bodies are buried figuratively speaking regarding the EU, and all of the players involved in this game of financial extortion on the poor suffering country of the Cradle of Democracy, Greece.
You can read the entire Op-Ed from the July 10 "The Guardian"at:
http://www.theguardian.com/...
Let's be safe out there.