A simple and boring common bond

On Europe’s last chance, Wolgang Munchhau’s error and the urgent need for ECB-bonds:  Our euro-chickens are coming home to roost. Europe has only one last chance to reverse the eurozone’s disintegration: It must issue a new form of euro-denominated bond which will: (a) arrest the ‘popcorn effect’ (a much better term than the domino effect) that is putting enormous pressure on all public debt (including French, Austrian and even Finnish), and (b) reverse the latest Pan-European trend toward generalised recession. The only relevant question is: What kind of new bond?

The notion that the missing link is European Financial Stability Fund’s bond issues is a dangerous illusion (see here for an early post on the matter and here for a more recent one). Furthermore, the idea that (in view of Germany’s rejection of ECB financing of the EFSF’s activities) the EFSF can be levered up so as to plug the gaping black hole comprising banking losses and sovereign debt is bordering on criminal insanity of behalf of our political leaders (click here for a comprehensive critique of this latest policy). Wolfgang Munchhau put it succinctly the other day in the Financial Times: “A leveraged EFSF would have the worst kind of Eurobond: a tranche in a toxic debt security. I really hope EU leaders will come to their senses and stop pussyfooting with dubious financial instruments.”

So, what should we do? Munchhau’s answer is:  “The eurozone needs a risk-free asset class, and this means something boring and simple.” Hear, hear! I could not have put it better. Munchhau is right: We need a new type of bond that is ‘boring and simple’. Nothing fancy. In particular nothing that requires Treaty changes, federal moves, politically unacceptable or any controversial instruments which ask of the German taxpayers to guarantee Italian debt or which asks Italians to forfeit sovereignty to some German Über Fuhrer.

Alas, at that point, Munchau (like many other well meaning commentators) loses the plot. For his answer to the question “which bond?” becomes anything but ‘boring and simple’. It becomes far too ‘interesting’ and ‘complicated’. He suggests a bond jointly and severally guaranteed by all eurozone member states. But this requires a change in the Treaty of Lisbon and smacks of the very fiscal transfers which are bound to send the entire political class of Germany, Holland, Austria and Finland into an unimaginable frenzy.

The same applies with the related ideas like that of a European Redemption Pact (by P. Bofinger, L. Feld, W. Franz, C. Schmidt and B. Weder di Mauro)  or Thomas Palley’s clever scheme  by which some European Debt Agency is created for the purposes of issuing common bonds for the purposes of refinancing a large portion of existing member-state. All these interesting ideas crash against the rocks of the Treaty changes which are impossible to implement before the euro becomes irretrievable history. Additionally, I very much doubt (A) whether a bond backed by surplus and deficit countries will bear interest rates that are low enough for the deficit countries and not too high for the surplus ones, and (B) whether they would have any appreciable impact on the eurozone’s growth prospects.

So, back to the pressing question: What kind of euro denominated bond can do the trick of arresting the debt crisis and orchestrating a growth spurt throughout the eurozone (a New Deal for  Europe, as we call it)? The simple answer is: Bonds issued by the ECB (and guaranteed solely by the ECB) as part of a two-pronged plan (i) to effect a conversion loan that reduces the total mountain of interest payments due  by eurozone member states in the next twenty years, and (ii) to co-finance an investment-led New Deal via the European Investment Bank. Details of how (i) and (ii) can be made to work on the basis of a ‘simple’ and ‘boring’ ECB-issued bond (that requires no fiscal union/transfer, no guarantees by the taxpayers of the surplus countries and no loss of sovereignty by the deficit countries) are offered in our Modest Proposal. Simple, boring and utterly implementable.

Summary

Wolfgang Munchhau is correct to point out that the Crisis’ escalation has denied investors of any real opportunity to invest in the eurozone’s stabilisation and growth. He is right in arguing that we need urgently a new instrument. However, Munchhau is wrong to assume that the only such instrument is a eurobond jointly and severally guaranteed by the eurozone’s member-state governments. Munchhau acknowledges this when he writes: “Of course, the EU cannot introduce a Eurobond overnight. The most its leaders can do is to issue a credible statement of intent, and set in motion a process to enact the legal changes needed. It will take time.” But Europe has no time left in its hourglass. It must act now. What it needs to do is to empower the ECB to issue its own (euro)bonds. In its own name. Guaranteed by no one other than the ECB (just like the European Investment Bank’s eurobonds are guaranteed by no one except the EIB itself). Then, it can utilise the proceeds in two ways: to effect a conversion loan to member-states (a loan that reduces interest rates throughout the eurozone, thus making the debt crisis go away) and to co-finance (along the EIB) a New Deal for Europe.

32 thoughts on “A simple and boring common bond

  1. To Klaus

    In fact , thank you for the long answer .

    I see your points . You explained to me how the game is played . My problem is that i don’t like this reality .

    As you mentioned , you are an ex-banker . I can perfectly understand that when you are in a business , you must follow the rules . In Banks , there are shareholders to satisfy and profit optimizing and much more that i am not in a position to understand .

    I am working as a physicist in research . There are rules in my profession as well . You can’t do whatever pleases you . Inevitably what you do defines your thinking . But in contrast with physics
    (where reality is cruel : No matter how beautiful and elegant a concept is , or how hard you have worked for it, it has to converge with reality in order to be meaningful )

    Reality of economics or markets is an concept . It is in other words an agreed way to do business .

    The question now is , are people willing to change this agreement ?
    The answer to this question is tricky one . I personally don’t know .

    BUT by historical examples I KNOW it can change .

    Will i witness such a change ? I don’t know , but my children probably will .
    Does it worth to try to change it . Definitely, i am fighting to defend my way of living , the values of my people and my culture . To me neo-liberalism is an barbaric invasion .

    I know that you and Mr Varoufakis think the same with me . Because you see that possibilities of modest proposal are slim but you still try because you think this is the right way according to your mindset .

    As Mr Varoufakis says when things go well , nobody cares about such things . As Mattias Matthys said in a tv panel , we have to think Keynesian in good times as well .
    My way of thinking , thus , is to make the model self-sustained :) .
    A high standard Democracy can really make a difference to this issue .

    Was there a cause that triggered this total collapse . At first , there were some interesting opinions , then they suddenly disappeared from mass media . Why aren’t economists interested in fixing this ? I have a certain appeal to modest proposal because it correctly identifies the problem of eurozone and then tries to make it more sustainable . And i particularly respect Mr Varoufakis because he supports his views with logical reasoning and evidence . As you are .

    To my idealistic world , things must have a meaning in order to exist .
    To a banker’s world (don’t take it as insulting ) it must make a profit in order to exist .
    To my hierarchy of values , profit is not one . I see money as a means to do/create things.

    Obviously , i am not trying to get rich with my mentality . But i am getting furious because some others people’s greed and hypocrisy makes my life unbearable . And i don’t speak only with financial terms .

    (definition of “some others people’s greed ” would be fun as a question of an international gallop :) )

    P.S. I am not defending socially bad behavior exhibited by Greeks .
    Don’t get near Proton bank . This case has a particularly unpleasant smell . Don’t even use it as an example .
    There is a word in english about super rich . They are called dirty rich . Certainly greek tycoons are no exception .
    But bear in mind that with the exception of local financial elite parasitizing on greek state , greek ship owners have a tradition of centuries . That’s not of course an excuse for their total tax immunity .

    Anyway , thanks for answering and explaining .
    Still re-reading your answer to getter a better grasp of what you say .
    Obviously i can not respond to you in banking/economics terms because i don’t know what’s happening . What i do is read many contradicting opinions .

    • Oh, Ilias, I don’t like the financial system as it is being played, either; believe me! But laws/regulations alone cannot change this; only a change in values on the part of the players can. If you have a couple of spare hours, watch the 2 fascinating interviews in the below link (and read my letter).

      http://kleingut-reflections.blogspot.com/2011/08/two-views-on-america-george-f-will.html

      “In Banks, there are shareholders to satisfy and profit optimizing” – who says so? Banks are intermediaries between the have’s and have-not’s of financial assets; they are a means to an end and not an end per se. In a philosophical way, banks – if they stick to their classic economic mission – are much more similar to a public service than to a public corporation. The trouble is that most banks, particularly the large ones, are organized like public corporations; their ownership is in capital markets; and when you are reporting to capital markets, there is no way that you cannot play by their rules, whether you like it or not.

      Shoot Mr. Ackermann for setting a silly policy goal of achieving a 25% return on equity? Not really, because he is much more driven than being a driver himself. His investors tell him that they get 25% from his peers and if he doesn’t accomplish the same, he may soon find himself out of a job. Shoot the investors? Not really, because if fund managers don’t achieve the returns of their peers, they may be out of their jobs soon, too. So who to shoot? One American politician (I don’t remember who) once said: “We have found the enemy; it is us!”

      When you and I play one bank against another for the highest interest rate on our deposits; when you and I buy our electronic equipment at, say, MediaMarkt instead of the local shop because MediaMarkt is so much cheaper, then we set in motion a process which ends in the brutal competition at the very top.

      The first 30 years of my business life I worked for banks organized like public corporations (capital markets); the last 10 years for a bank which was organized privately; its shares were owned by their customers; the shareholders were indeed “stakeholders” (I guess “cooperatives” is often used to describe them).

      The former banks were run by managers who reported to other managers who reported to a CEO who reported to capital markets. When it came to issues like “customer satisfaction analyses”, investors wouldn’t give a damn because such things are only of longer term relevance. In the short term it is balance ratios. Example: one of my employers had just gone through an extremely successful expansion process; increased market shares with good risk; great customer satisfaction statistics (of course, one instrument to achieve that had been lower prices for customers); created new employment. The investors warned the CEO that the ROE percentages were suffering and something had to be done about it. The CEO returned from the analysts’ meeting, spread internal panic and the next thing was a restructuring project to reduce staff and quality of customer service.

      The latter banks were run by what I would call traditional “bankiers”. First all of, they knew most of the bank’s important customers personally and they spent a lot of time out in the market place (instead of internal meetings discussing ways to increase return on equity…). They dealt with the bank’s money as though it was their own. They acted entrepreneurially and were happy to assume responsibility for actions.

      The former were driven by return-on-equity targets; the latter were driven by customer satisfaction statistics

      One difference between the 2 types comes to surface in times of problems. When a large borrower (say Greece) gets into trouble, the former banker says “how can I get my money back?” The latter says “How can I help my borrower to become strong so that he can service my loans again. I don’t want him to repay the loans because my living depends on making (good) loans”.

      What did I learn from this experience? Well, I think it would be very worthwhile to discuss how banks should be organized (certainly not state-owned and under political influence because that would be the worst of all, as history has often shown).

      Those banks which are in the true “customer business” are probably not best served by having to report to capital markets because of the frequent conflicts between customer interests and capital markets interests. The organization of my last employer (shareholders were indeed stakeholders) seemed very, very attractive to me.

      Those banks which are in the “capital markets business” (i. e. a very large portion of their revenues comes from activities without any underlying “real” economic activity) are well served by reporting to capital markets. But even those banks should be divided into “commercial banks” and “investment banks” (like Glass-Steagall had done successfully for ½ a century). It all boils down the question how much banks should be allowed to trade for their own account with other people’s money? (Paul Volcker said: nil!).

      Lots of money is being lost in Las Vegas casinos on speculation but I never heard that society had to bail out speculators there. The problem is not speculation. The question is whether you do it with your own money or whether you can use other people’s money for your own speculation.

  2. Comment on Stella Stellaki

    Hallo Stella,

    Heel bijzonder om plotseling een comment te lezen in mijn eigen taal! Dank je voor die hartverwarmende intro.

    Where you speak about Intelligence: you are right when using the word Intelligence as it is used in the western world, in science. For me Intelligence is more than being rational. There are all kinds of Intelligence: emotional, social, and so on. There is also an Intelligence with a deep Awareness, Cosciousness, a developed consciousness, connected with Ethics. It is something what is related with more evolved souls. Yesterday I read about Danae Stratou, She has a deep Awareness (Intelligence as I mean it) also, she works with Art, she sees more than others, deeper.

    I read more and I found out that Yanis Varoufakis has a deep Awareness also, works in another way with it as Danae. But both work for and at what is the same as where I work at and for in my way. Also the Dalai Lama. Also Eckhart Tolle. Because Spirituality is a part of Intelligence also.

    Insight and creating solutions out of that for problems goes as far as the Awareness of the human being is able to produce. The most of the scientists, bankers, politicians don’t have that Intelligence and that is why it is so incredibly difficult to change this world. Because they rule the world with a narrow mind.

    Here is the video: Yanis Varoufakis – A Modest Proposal for Transforming Europe
    Url: http://www.youtube.com/watch?v=CRRWaEPRlb4

    I embedded the video but I don’t know if it works:
    [youtube http://www.youtube.com/watch?v=CRRWaEPRlb4&w=560&h=315%5D

    For Danae Stratou and her Art, showing Intelligence in another way:

    • Dankjewel Antoinette,

      Ik ben benieuwd en ik zal er met plezier naar kijken.

      Met vriendelijke groeten,

      Stella

  3. I am really sorry to see the fulfillment of your predictions to the European crisis with spreads rising as I write this in Italy Spain and even France that now is borrowing 2 points up from Germany. What you have correctly analyzed in your recent articles and interviews, is in my opinion the result of the implementation of Hengelian Dialectic method by the International Banking Cartel that will (and is) opposing such solutions as you propose. As you know the method has three steps: Problem creation – Reaction – Solution (a) The cartel creates the problem to start with (b) The reaction is the economic crisis and (c) The solution is provided by the same people that created the problem. Any solution independent of them will work, but at the same time faces the strongest of reactions.

  4. Yanis, my understanding is that the individual shareholding countries of the ECB (through their national Central Banks) are legally liable for the ECB (up to their respective share; I believe 27% for Germany). So with or without an explicit guarantee, which would actually not be necessary, the ECB cannot borrow stand-alone. Am I wrong?

    This is different from the EIB which, indeed, is legally a stand-alone entity (borrowing, however, on the basis of implied support of their shareholders. Without that, it could never get its rating).

    By the way, what makes you sure that “Europe’s largest bad bank” (ECB) could so easily place its own paper in capital markets on a stand-alone basis (if it could stand alone)?

    • Klaus, First, only the ECB is legally liable for the ECB. The shares you mention concern capital inputs into the ECB by member-states. Not liability. So, in short, the ECB can borrow just like any institution, private or public, can. Secondly, the ECB is not a bad bank. It is a mistake to think of a Central Bank like you would of any other bank. All Central Banks, since the inception of the Bank of England, have managed the debt and money supply of the currency area under their jurisdiction. Regarding your apt question “What makes me think that the ECB could place its own paper on a stand-alone paper?” my answer is simple: The largest bond traders in the world have confirmed to me personally that they would give their right arm to purchase ECB paper. The reason is simple: They are much happier buying ECB issued bonds than bonds issued by Japan, the US or, for that matter, Germany. Do not forget that the only thing bond buyers care about is the prospect of receiving their money in full and on time.

    • by issuing paper what will the effects be on the euro?by guess is it will fail which is not such a bad thing.

    • Yanis, I ran your Modest Proposal by the Governor of the Austrian Central Bank (who is an old friend of mine, so this was kind of informal) and asked him for a 2-word reaction. The answer was a bit longer: “interesting content; currently not covered by statutes”.

      Now, here I see a real problem. If one disagrees on content, there is no prospect of an agreement. If one disagrees on statutes, one ought to be able to objectively clear that disagreement. If both sides agree on content, they should figure out what the statutory necessities would be to implement content. Are you dealing with the ECB on the statutes issue?

      Personally, I am not 100% in agreement with content because the way I interprete it is that the risk-taking private sector would walk away free of charge (unless, that is, the ECB buys the sovereign bonds at an appropriate discount). We have seen what kind of jokes the private sector can get away with first with the alleged 21% and now with the charade of the 50%. I am worried that the long-term effects of the precedent of allowing the private sector to walk away essentially free of charge cannot be foreseen at this time.

      If those who would put up the money for the ECB tell you that they would do so, that certainly overrules my concerns about the “bad bank”. But mind you, even if the ECB is stand-alone legally, investors would only put money into it because they bank on the implied support of the governments, so at the end of the day politicians will still have to explain that to their voters. By the way, I am not sure that I agree with you on the role of the ECB so far. I am not sure that the ECB has acted so far like Central Banks have acted since the inception of the Bank of England. Central Banks generally print money but they don’t buy credit risk without collateral and/or deductible. The ECB has not only bought credit risk so far; it has in my judgment bought credit losses at par. By that I don’t mean the small amount of about 180 BN€ which they have allegedly laid out for bonds so far but, instead, I mean the 465 BN€ they have advanced to the banking sectors of the PIIGS-countries against some more than questionable collateral (the buying of bonds was/is debated publicly; the advancing of Target-2 funding was done behind closed doors).

      I am not yet convinced that kicking the can down the road is better than having some moments of truth (defaults, break-ups, write-downs), particularly when there is no macro-plan for down the road yet. Europe is so rich that sacrificing a couple of GDPs with a plan/purpose seems still more adequate than burdening a whole generation without a plan/purpose (but perhaps I will become convinced as time passes…).

      PS: are you going to post on the 1st Report of the EU Task Force?

    • Dear Klaus, I share your commitment to make bankers pay. This is best done not through horizontal haircuts but through the process of involuntary bank recapitalisation that we also recomment as part of our Modest Proposal. That way, the ECB effects the debt conversion and the EFSF expropriates the bankers in proportion to their sins.

    • To Klaus

      I think it is essential , everyone to write a small paragraph stating what does he/she mean when refers to Europe .

      “Europe is so rich” ?
      “that sacrificing a couple of GDP” paid by whom ?

      Please define Europe ! Are you referring to the european banks ?
      I thought they were bankrupt . Are they not?
      Are you referring to the private wealth an individual has? Show me a diagram with wealth distribution over population .

      Is Europe lending to european banks with 1% but to countries with 5% or 7% ? Is Europe a bank system or a type of federation between countries states?

      I understand your argument , i am not arguing against but …

      What you economists don’t understand is that your job is to provide alternatives . Which solution to be applied is subject to politicians . And politics should be decided upon elections . What’s the problem with that?

      Don’t underestimate people .

      Why all economists ( not referring to you personally) care so much about banks? What’s the role of a bank in a society? Based on what they have been doing the last twenty years , no one can assert that they contribute to producing real wealth . On the contrary , they have drained financial energy from the system .

      Please define what you mean Europe please .

      Personally , if i don’t see actions taken by politicians against the criminal behavior of banks all over the world , i would fight against any politician or policy . I want to see Europe or country-state control against banks to secure the living conditions and prosperity of each state .

    • Ilias, I see your point and will try to explain my reasoning. Mind you, however, that global figures about wealth are always dangerous because at the level of the individual or individual groups it may be totally different (depending on how wealth is distributed). And of course, I always generalize to make a general point.

      1) What do I mean by “Europe”? Well, I guess I mean that what people outside Europe mean when they think of Europe; essentially all of it.
      2) Why is Europe “rich”? Well, drive around the USofA and drive around Europe (even Southern Europe) and compare the quality of infrastructure, housing, etc. and you will see.
      3) The EUs GDP is larger than that of the US.
      4) Most countries produce wealth statistics. I don’t have them in front of me but they are being quoted in every other TV talk-show these days. The numbers are quite unbelievable (so is the one-sided distribution of wealth, by the way).
      5) Now, specifically: Greeks in sum are not poor. Before capital flight started in 2009, deposits in Greek banks were around 250 BN€. That comes to a higher per-capita figure than in Austria. Greeks hold hundreds of BN€ in foreign bank accounts. Our younger son worked in the “ultra-high-net-worth” department of a Swiss bank for a couple of years where they didn’t talk to a customer with less than 1 BN€. He told me that their 3 primary client groups were Russian oligarchs, Arab sheiks and — Greeks. I don’t even want to speculate on the Euros which Greeks hold under their mattresses. My understanding is that ownership of private housing is much higher in Greece than in many other countries (and not all that much burdened with debt).
      6) The Greek state may be bankrupt but it can’t be all that poor when it is expected to privatize companies worth 50 BN€ in the shorter-term and a couple of hundred BN€ in the longer term (I myself don’t believe these numbers but the Troika believes them). And the Greek Church (like churches in most countries) is in all likelihood quite wealthy as well.
      7) “Sacrifice a couple of GDPs; get it over with; start all over again and do it right the second time around” – that is, of course, not going to happen but if I had to make it happen, I would do it the following way: every country has a Banking Supervision Authority which generally acts under the auspices of the country’s national Central Bank. Every BSA sends around directives to all member banks all the time and directives have to be complied with. Suppose each BSA would send a directive (in accordance and coordination with national Central Banks and the ECB) to the member banks stating the following: “You are required to establish loan loss provisions (note: not a haircut! BSAs cannot mandate haircuts but they certainly can mandate loan loss provisions) on all sovereign debt of PIIGS-countries within 30 days. The percentages are: 50% of nominal for Greece; “x”% for Italy; “y”% for Spain; “z”% for Portugal and “zz”% for Ireland”. Based on the numbers which I hear, European banks would have losses in the area of 1-2 trillion EUR to book. That would wipe out the capital & reserves of most banks (if not all). What would that mean?
      8) It would mean that all these banks would have to walk in a hurry, with hat in hand, to their respective governments and request politely to be bailed out (instead of governments having to chase banks begging them to share in part of the losses which they are responsible for).
      9) The governments could say: “Look, here is the deal: we will recapitalize you. The capital of existing shareholders will be subordinated (i. e. in second rank) to our new capital. When, in some years, all the dust has settled, we will sell our shares and calculate a decent return for our risk. If more than that is generated through the sale, it goes back to present shareholders. If not, present shareholders have lucked out” (Obama handled GM along these lines albeit it much more generously for investors).
      10) How can the governments finance that? Well, look up Yanis’ Modest Proposal.
      11) What if the banks object? Then governments tell them: “Ok with us. You declare bankruptcy tomorrow morning. The successor companies which we have in place already will take over the operating business of your bank and it will be up and running again by afternoon. No depositor will be hurt; in fact, we will guarantee all deposits. However, your existing shareholders will be wiped out totally and immediately and they may sue you for that personally”.
      12) The legal ramifications of doing something like this would be enormous. Perhaps it could not even be done legally but I would certainly research it.
      13) In and by itself, this would do nothing to the debt of the PIIGS-countries because their debt would still be in place. But then governments, as owners of the lending banks, can steer meaningful solutions for those debts directly (reschedulings, lower interest rates, even haircuts, etc.) instead of having to accept bankers’ games like cutting the debt in half and doubling the interest rate. The losses would already be booked and when losses are already booked, banks have a lot more freedom to act.
      14) Could this realistically be done? Well, it has been done before with banks in several countries (didn’t Greece just do something similar with Proton?) and it also has been done with all banks in one country. It has never been done before on the scale described above which is why there is no way of telling whether this would work (even though the S+L bail-out by the US government many years ago was not small change, either). Chances are that no one will want to take the risk and try to find out.
      15) Before you think that this is an operation “free of charge to tax payers”, it obviously isn’t. Remember the 1-2 trillion EUR loan loss provisions? Much of that is likely to eventually turn into real losses and that is where my statement of “spend a couple years of GDP” comes in. Whose GDP? Primarily the GDP of those countries whose banks recorded the losses. If they can’t handle it, then from other countries. Losses cannot be made to disappear forever; eventually they must be paid for and then it is only a question of agreeing who pays for how much of them.

      Sorry to have been so long but I thought I owed you an answer to your valid criticism. And, by the way, I am not an economist; I am a retired banker. You tell me whether this makes it better or worse…

    • You economists that you understand economics think that “people” are stupid . What will happen if the farmer decides to distribute its products to its own people only . An engineer to find solution only for its close people ? A builder to build his own house ? What an economists will eat or find shelter?

      Economists’s duty suppose to be how to coordinate all these activities for the sake of the community .

      I don’t see any economist focusing on the role of the banks to this mess? And most importantly fix the causes that created this mess . Why recapitalize banks without any condition ?
      Are the banks subject to any kind of control ? A check on their real balance sheets? What are banks?

      Once again , i would like to state that i am not referring to you personally but … what you ‘re all talking about make no sense to the real world . Exactly due to the fact that people are not numbers and pain limit is not a threshold or a mathematical curve .

      EVEN POPE admitted the mistakes of his “institution” (with a delay) but you are not ! Realization is the first step . Otherwise there is no solution.

    • To Klaus

      And a personal exchange , even as a favor .

      As i read your blog with scrutiny and your posts here as well , irrespectively if you are German or not , but based on the merits of your arguments .
      I would like a comment of yours with respect to the “HELIOS” german investment plan and the special financial zones to be deployed in Greece .

    • Ilias, as regards HELIOS I know no more than what I have read in the media (by the way, I have found that the Thessaloniki office of the German Chamber of Commerce is very involved in subjects concerning solar energy). As a former banker, I am a bit cautious when “glamorous” 20 BN€-projects are announced. There are often glitches before 20 BN€ are spent. Other than that, I would think that solar energy should be one of THE key areas where Greece ought to have significant competitive advantages. I have always wondered why I see imported solar panels on every other roof but nothing by way of industrial activity. By the way, I am not German. Austrian by passport but lived more than half of my adult life outside Austria. Married to a Greek and spending much of the year in Greece.

    • Do not forget that the only thing bond buyers care about is the prospect of receiving their money in full and on time.

      They don’t care about their purchasing power?

  5. Κύριε Βαρουφάκη καλό μεσημέρι

    Το ανησυχητικό είναι ότι η νέα κυβέρνηση δεν κινείται προς την κατεύθυνση της δημιουργίας ενός σχεδίου διαχείρισης ρίσκου που θα αφορά την επιστροφή της χώρας στην δραχμή και την έξοδο της από την Ευρωζώνη.

    Το χειρότερο όλων είναι ότι το θεωρούν δεδομένο ότι θα κερδίσουν το παιχνίδι
    και στο τέλος λόγω σιγουριάς (Παπαδήμος) θα πάθουν πανωλεθρία !
    Είναι σαν το ποδόσφαιρο που αν μια ομάδα το θεωρεί σίγουρο ότι θα κερδίσει
    τότε παθαίνει καταστροφή!

    Το θέμα είναι ότι με την δική τους την ασχετοσύνη θα την πληρώσει ένα ολόκληρο έθνος!!
    (You cant teach old dog new tricks !!) αυτό για τους πεπερασμένους και ανεπαρκείς πολιτικούς μας.

    Εάν ήθελε να έχει έναν Administrative Consultant μια εταιρεία η ένα σοβαρό κράτος
    δεν θα έβαζε να το βγάλουν από τα δύσκολα αυτή που τα κάνανε σκα…..α !

    Επιπλέον στην πράξη θα αποδειχθεί για μια ακόμη φορά στην περίπτωση Παπαδήμου
    ότι οι Έλληνες πολιτικοί δεν μπορούν να ξεχωρίσουν το απλό ότι η Διοίκηση ” Κάνει τα σωστά πράγματα ” ενώ το management ΄΄ Κάνει τα πράγματα σωστά ”
    Μπερδεύουν δηλαδή το to do the things right and to do the right things !
    Μιλάμε για 40 χρόνια τώρα δεν το έχουν ξεμπερδέψει ………………..

    Δεν θα έπρεπε λοιπόν να καταρτιστεί ένα worst scenario plan ?
    Δηλαδή πάλι θα αυτοσχεδιάσουν ?
    Μιλάμε για το απόλυτο confused management !

    Δεν θα έπρεπε να ξέρουμε – καταγράψουμε τις καθημερινές μας βασικές ανάγκες
    σαν λαός σε πετρέλαιο , αέριο, φάρμακα, βασικά ταχυκίνητα προιόντα και είδη πρώτης ανάγκης κλπ ?

    Ποιος θα τα κάνει αυτά η στατιστική υπηρεσία ?
    Κάποιο υπουργείο ?
    Κάποια ανεξάρτητη αρχή ?
    Υπάρχει αρχή διαχείρισης κρίσεων ?

    Δεν θα έπρεπε σε αυτό το χειρότερο σενάριο να υπάρχει ένα πλάνο με συγκεκριμένα βήματα για την διαχείριση της κρίσης? (10 Steps euro-drachmass Crisis Management)

    Δεν θα έπρεπε να εμπλακούν όλοι οι νευραλγικοί φορείς της χώρας για αυτήν την διαχείριση κρίσης ? Και ο καθένας να αναλάβει να καταγράψει τα θέματα που τον αφορούν

    ΤΙ ΘΑ ΠΡΕΠΕΙ ΝΑ ΓΊΝΕΙ ΑΜΕΣΑ

    Κύριε Καθηγητά θα σας παρακαλούσα να βγείτε στα μέσα και εσείς και ο Κος Λαπαβίτσας Και άλλοι καθηγητές οικονομολόγοι Ελληνες και ξένοι της Αλλοδαπής
    και αν γίνεται να συγκεντρώσετε γύρω σας ανθρώπους που λένε τα ίδια πράγματα με σας

    πχ Ο Κος Καζάκης (έχει και βήμα στο ράδιο 9 κάθε μέρα στις 12.30 μαζί με τον Κακλαμάνο) και άλλοι και από κοινού να βγείτε στα μέσα για να ξεσηκωθεί ο κόσμος και να μην τους αφήσουμε να υπογράψουν την επαίσχυντη αυτή δανειακή σύμβαση.

    Να ξέρετε ότι υπάρχει από εχτές και ο διεγραμμένος από την Κοινοβουλευτική ομάδα της ΝΔ Κός Καμμένος που πιστεύει ότι δεν πρέπει να υπογραφεί η δανειακή αυτή σύμβαση.

    Και βεβαίως είναι όλη η αριστερά που όντας διχασμένη δεν μπορεί ποτέ να συνεννοηθεί !!

    έλεος !!

    Φιλικά

    Γιάννης Σουρβίνος
    sourvinos.yiannis@hotmail.com

    • Hello dear Sir,

      It is really a pity that you answer in Greek. Obviously you could read the original English text because you react on it. That means that you speak English as well. It would have been an nice and kind gesture to all Varoufakis’ followers, who are from all countries in the world, if you would have answered in a language that leads to “Communication for all peoples”, something where is a huge need for. Let us start with communication, here, and I would like to ask you very kindly, please write your comment also in English for all those who cannot read Greek. It is not a problem that it is not perfect. My English is not perfect (either), but language is there to communicate, not to measure it for mistakes. Translating your text with google is not an option. Google translates very bad and that creates confusion.

      Thank you in advance!

      Antoinette

    • To Antoinette

      Sourvinos post above is not referring to the above thread of Mr Varoufakis , it’s more a proposition to all greek economists to come together and support a single proposal .
      As you have probably understood , greek economists , as every economist around the world , have different opinions on identifying the problem and most importantly on which is the best solution .

      As a side effect , greek people become even more confused , which make them unable to act accordingly . There is tremendous energy in greek people to act , but we don’t know to which direction .

      There is no easy solution :(

  6. The Germans need to wake up fast

    They I think have two options:

    1)let the ECb print bonds and euro which will lead to a devaluation of the euro of 15-25% or
    2)this whole house of cards comes crashing down

  7. At this point, the weakness of the French government’s position has finally been exposed through the action of the bond markets. The other “surplus” countries, including the Dutch and the Austrians, as well as the British, have been shown to be ancillary to the operations of the Euro’s core. Money has fled to the core from the periphery of the zone and now it may have started to leak outside the zone. In the absence of sufficient popular resistance, the fate of Europe, and indeed the world economy, is mainly in the hands of a tiny group of conservative Germans in the CDU.

    At the risk of being impolitic about contemporary politicians, whether Germany’s or those of any other country, it seems that the most crucial decisions may simply come down to a question of cowardice or stupidity.

    The benefits of cowardice will appear if these CDU politicians go against their perceived best interests due to pressure from other members of the Atlantic bloc. Then they would follow US advice and perhaps a variation of UK and now French advice, and begin to address the systemic problem. In short, they would buckle under criticism of their allies and adopt a version of the Modest Proposal to save the European economy, as well as their own.

    The harm of stupidity will appear if the CDU foolishly continues with self-hypnosis about “price stability” out of perceived historical trauma and an illusion about wealth. I highly suspect that a proper interpretation of the 1930s in Germany belies the current CDU explanation for inflation. But a stubborn naive density of mind, the resistance to anything apparently misplaced in a carefully constructed worldview, may simply prove too powerful a lure.

    If cowardice rules the day, as hopefully it will, there is an additional trap: the CDU’s lies and confusion have badly misled the German people as well as sent the wrong messages to the surplus bloc. In other words, the CDU would have to be cowardly with its allies, but brave with its people to defy the domestic constraints that it has arranged for itself.

    It is for this reason that the Euro may be doomed. The CDU would have to come clean with its electorate and risk losing its position in government in order to rescue the European, and, by extension, most of the world economy. A tall order for politicians in general, but perhaps one impossible to fill for those gripped by the mentality of neoliberalism’s middle management.

  8. I don’t like Beyoncé, and if the ECB-bonds are like this then they will grow old too soon. I want something constructive, something what is really changing and has a strong fundamental quality with possibilities to expand. Beyoncé will belong to the past within some years. That where Yanis Varoufakis refers to is more than a hype (I hope) and has nothing to do with cheap female attraction. It is about common sense. Intelligence. I don’t add a video here, you can watch my favorites in my youtube channels. You can make a choice: classical music, jazz, world, Greek music, dances, all dances of the world, and no, not one with Beyoncé. Visit http://www.youtube.com/Gadoelka , my dance channel and get really inspired.

    • Antoinette:

      We have a special diet for Euro-snobs. Print Euro-bonds all day, eat McDonald’s and listen to Beyonce non-stop.

      That would certainly make you finally lose the head that you were supposed to have lost in some French square some place, some time ago. :-)

      I love it. Euro-bonds and turning Merkozy to Euro-slaves for Greece. It’s coming to a theater near you, baby!

  9. At this point, the weakness of the French government’s position has finally been exposed through the action of the bond markets. The other “surplus” countries, including the Dutch and the Austrians, as well as the British, have been shown to be ancillary to the operations of the Euro’s core. Money has fled to the core from the periphery of the zone and now it may have started to leak outside the zone. In the absence of sufficient popular resistance, the fate of Europe, and indeed the world economy, is mainly in the hands of a tiny group of conservative Germans in the CDU.

    At the risk of being impolitic about contemporary politicians, whether Germany’s or those of any other country, it seems that the most crucial decisions may simply come down to a question of cowardice or stupidity.

    The benefits of cowardice will appear if these CDU politicians go against their perceived best interests due to pressure from other members of the Atlantic bloc. Then they would follow US advice and perhaps a variation of UK and now French advice, and begin to address the systemic problem. In short, they would buckle under criticism of their allies and adopt a version of the Modest Proposal to save the European economy, as well as their own.

    The harm of stupidity will appear if the CDU foolishly continues with self-hypnosis about “price stability” out of some perceived historical trauma and an illusion about wealth. I highly suspect that a proper interpretation of the 1930s in Germany belies the current CDU explanation for inflation. But a stubborn naive density of mind, the resistance to anything apparently misplaced in a carefully constructed worldview, may simply prove too powerful a lure.

    If cowardice rules the day, as hopefully it does, there is an additional trap: the CDU’s lies and confusion have badly misled the German people as well as sent the wrong messages to the surplus bloc. In other words, the CDU would have to be cowardly with its allies, but brave with its people to defy the domestic constraints that it has arranged for itself.

    It is for this reason that the Euro may be doomed. The CDU would have to come clean with its electorate and risk losing its position in government in order to rescue the European economy. A tall order for politicians in general, but perhaps one impossible to fill for those gripped by the mentality of neoliberalism’s middle management.

  10. It will take some time for me to understand all the details you mention and explain here. I will take that time today.
    What is clear to me now from what I understand or think I understand is that only Intelligence will create New Ways.
    That is the only weapon in the financial war and the sick banking system.
    The view you create about the healthy banking system opens my heart.
    But my brains tell me that the corrupt system will be very difficult to battle.
    Where you speak about feels like an ideology, to create a better world. I love it, and I will help you to spread the news around.
    I am also going to read the fairy tale “Puss in Boots”, because it is my mind more and more and I do not know why exactly but it is also about money and unfair rules. Fairy tales contain wisdom. Maybe there is something we all can learn from?
    Have a nice day, mine is filled with studying all the details in this wonderful post. :)

    • Mevrouw Janssen,

      Neem maar lekker de tijd! dat zal verstandig zijn.
      Veel plezier! Het is wel moeilijk maar u komt er wel uit!!

      I rather think that is here more creativity needed than intelligence. We got into trouble precisely because of all the arithmetic intelligence-nature of the banking-system and the potential that exists in to the unnoticed mutation in the balance of the books. (ENRON).
      Another component would also be the emotional intelligence of the participants, also solvers of the problem.

      Kind regards,

      Stella Stellaki

  11. What I see here is a plan to make banks and financiers take a massive loss in future interest payments, as well as a shave of a haircut.

    You’re on the right track. Publicize it and it will have infinite public support.

    And all that interest money will create demand.

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