What should Germany do? Triple interview in STERN, featuring Timothy Garton Ash, Tomas Sedlacek and Yanis Varoufakis

Back in February I had the honour of participating in a debate with Timothy Garton Ash and Tomas Sedlacek, organised behind closed doors by Stern magazine, on what Germany ought to do. We spent more than an hour discussing the matter fruitfully and pleasantly. Indeed, that hour passed ever so quickly for all three of us. Two Stern journalists were asking questions and taking down our musings. Here is the published piece: STERN triple interview

57 thoughts on “What should Germany do? Triple interview in STERN, featuring Timothy Garton Ash, Tomas Sedlacek and Yanis Varoufakis

  1. It would be nice if people were will to elucidate on the content of the article (Google translate makes a mess of it) rather than snap at each other aimlessly.

    • I dislike Schäuble extremely for his ongoing efforts to give away any German sovereignity still left to the finance industry. However, with this remark he is. of course, right. And not just because I argue like him whenever I read the idiotic claim that Germany wants to control or even own other contries. BTW, in the blogosphere, such claims are raised a lot.

    • @Gray

      I’m Swedish but I live part of the year outside Athens.

      The idea that Germany is seeking to “occupy” Greece is of course absurd. Unfortunately, here in Greece the absurd sometimes passes for normal. In fact, some people think I’m foolish for not believing in an international conspiracy against Greece.

    • As if there was a possibility that Schaeuble would say “Our goal is to take over all europe…”
      You ever heard an American president telling the real reasons behind the wars usa has conducted through out the years?

      I dont really see a reason in reproducing what politicians say….Also stop thinking that whoever is accusing Germany for trying to take over Europe,is basically saying that the average SANE German is interested in doing something like that.
      Just like the average SANE Greek would never want to use false statistics to enter the Euro etc….

  2. As if German leadership would be the problem. The problem is the direction in which it is leading. Nobody should help Merkel an Schäuble to lead into the abyss of austerity and deflation. It’s a pity: Two smart guys (Varoufakis and Garton Ash) wasted for a typical pundit bullshit (sorry) smalltalk.

    • Uh huh. So, in your opinion, pumping more money into a corrupt and totally scrwed up country is a sustainable solution?

    • @Gray
      1) I read Greek media and blogs every day, and find lots of fingerpointing, but hardly any evidence of healthy self criticism among people living in Greece (Greek expats are different, though). Color me unimpressed of those “discussions”.
      2) Sorry for not fitting into your stereotype of the emotionless German!
      3) Democracy only fails in Greece because the whole political culture is a mess. Too much tolerance of corruption and shady deals, not remotely enough respect for the law. All the best for improving that! However, even if Greece would be a model democracy, there’s still the fact that you’re 11 million people in the about 500 million strong EU. Which makes it a bit difficult for you to reform the union to your liking. However, of course it would be good if you folks would start to contribute something, instead of simply passively consuming all the subsidies…

      1. Why are you so fixed on self-criticism like a Calvinist chastity monitor?

      2. Don’t go there. Germans showed their moral fiber when they stood by (those who didn’t participate directly) while people were killed and burned and made into soap in the name of Germania Uber Alles. Yes, your people’s emotion was put to the test.

      3. That’s an opinion. You are entitled to it so I leave it at that. Some points we are in agreement.

    • Well, here’s my answers, Estrangeiro:
      1) Calvin, Shmalvin, who cares. The point simply is, a serious lack of self-criticism will prevent people from improving their performance. If a guy believes he’s perfect and all shortcomings are just because others interfered, he’s unlikely to advance to better results.
      2) Do you seriously believe stereotypes about a group of people can reasonably be transferred to their descendants living 65 years later, who grew up under very much different circumstances? Sorry, but that idea is total nonsense. Polls and sociological stuudies show that’s simply false and that there are very real differences.
      3) I know my opinion sounds harsh, but it seems to be shared by many Greek people. And I haven’t talked to or read from anyone yet who praised the political system of Greece.

  3. Excuse me pls for being very critical, Prof Varoufakis – I see you’re a well meaning guy, but this interview once again makes it obvious that you both shy away from taking an honest look at the Greek misery and from drawing painful conclusions. It’s not that the other pundits are much better, not at all, but you represented Greece in that round, and so the readers have to expect more first hand insights into the problems and possible solutions from you. Sadly, you didn’t really live up to that admittedly difficult task.

    Firstly, you put virtually all the responsibility on Germany, ignoring the correct point by the others that this nation simply isn’t big enough to singlehandedly save the Eurozone. Then you emphasize that Merkel should lead, but not in an authoritarian way! You dream of a single leader who refrains from using his power? For heaven’s sake, what nonsense! How shall this work in reality, especially when it’s the rather anarchist Greeks who shall be led? They don’t even voluntarily do what their OWN government wants from them! Really, the other guys, who said there has to be a more concerted effort, made much more sense than you.

    Secondly, you obviously see more money as the single way towards improvments, but say nothing about where this money shall come from. The others rightly pointed out that after overspending for so long, the Eurozone nations haven’t much leeway anymore for Keynesian stimuli, and that this crisis showed the market won’t tolerate more of the same anymore. You stayed totally mum on this argument, not a single idea from you about how to cope with this problem! Sorry, but this almost disqualifies you as a serious advicers. You simply can’t avoid presenting a solution for the financial side and still expect to be taken seriously. That’s like a mechanic calling a race car “repaired” that’s got brand new shocks and tires, but no engine installed. Sorry, but you won’t win any prices with this.

    Lastly, and maybe even most importantly, you say viirtually nothing about what the Greek government, and the greek people, too, have to do now to contribute to the recovery. Your only point about that is that there should have been more resistance against the cuts. Well, spilled milk, even if there had been any leverage to get a better deal (there wasn’t, that’s just wishful thinking), that’s yesterday’s issue. What matters now is to improve the competitiveness of the nation and to get rid of the countless roadblocks that prevent job creation and turn investors away. Once again, you point fingers at Germany, as if its Merkel’s and the Bundestag’s job to create better conditions in Greece! OMG, really, can’t you Greek people EVER accept responsibility for your own affairs and the reality that it’s YOU, not others, who have to do the hard work of reforming your country? You people largely created the problems (through your votes, false tolerance, and exploitation of the screwed up system), you know the problems best, and you’re in the very best position to solve them, too.

    Even if you disagree with the argument that the Greeks collectively bear the responsibillity, you still have to accept the fact that it’s you all who are on the sinking liner Costa Grecia, and that of course your own actions will determine if you’ll sink or swim! Either you plug the leaks, while additional pumping is supplied by the surrounding Eurozone cruise ships, or evacuate all crew and passengers and board MS Drachme instead. Sitting in the deck chairs, discussing the shipwreck, while waiting for other crews to do make your ship afloat again isn’t an option, really! To simply ignore that the corrupt and inefficient administration has to be reformed, the economy revived, the judiciary improved, the legal system overhauled, the special interest groups and unions held responsible, etc etc etc is a luxury you can’t afford now. Time is running short, the first two years have been totally wasted, and the speed of the real modernisation efforts (instead of desperate measures like the property tax) is still too slow. But the Eurozone won’t cover the Greek deficit forever, there’s no political support for that. Stop daydreaming, focus on what can be done, on all levels, national, regional, municipal, and by entrepreneurs and people forming cooperatives. Greeks faced an even more dire situation during and after the war, why should this generation not be able to master the challenges and create a better future?

    Escuse me pls for my outbreak, but the hypocrissy with which many Greeks act in this drama really gets to my nerves. It’s always the others, most prominently Germany, who are to be blamed and who shall magically supply a brand new country for the people, but there’s almost no discussion about what the Greeks shall and have to do for the recovery themselves. With this attitude so obviously widespread, it’s rather understandable, imho, that many here in Germany see Greece as a hopeless case and a bottomless pit for rescue plan Euros. You are aware of the discussions in Germany about the Greek crisis, Prof Varoufakis, so you should be aware that Germans are willing to help. But we want to see Greece doing its own part in that. Waiting for orders from the troika, and putting the whole reponsibility on Germany, isn’t acceptable for us, sorry.

    • ” It’s always the others, most prominently Germany, who are to be blamed and who shall magically supply a brand new country for the people, but there’s almost no discussion about what the Greeks shall and have to do for the recovery themselves. With this attitude so obviously widespread, it’s rather understandable, imho, that many here in Germany see Greece as a hopeless case and a bottomless pit for rescue plan Euros. You are aware of the discussions in Germany about the Greek crisis, Prof Varoufakis, so you should be aware that Germans are willing to help”
      I presume from your answer that 1. you are unaware of the discussions right here in Greece 2. that you have a very Greek persona yourself regarding the sentinment with you approach the whole issue (that is sometimes causing troubles but as a Greek I fully undferstand it).
      Finally, when democracy will again work in Greece, we will help you to see that this place remains full of people that work hard their way as many other people in the Continent. We will prove that nothing more than the same capitalism phase has occured in Greece in recent years than the rest of the Continent. And , as professor Varoufakis envisions today, we will change a false architecture of Europe to a new one where German surpluses created of a Euro that do not suit the European south will be recycled to create sustainability.Anything other creates Kalavryta and Distomo.

    • Grey:

      Mark Twain once said “Some German words are so long, they actually have a perspective”.

      I think Twain meant German arguments also.

      On another instant, Twain again said on the same topic:

      “Surely there is not another language that is so slipshod and systemless, and so slippery and elusive to the grasp. One is washed about in it, hither and thither, in the most helpless way; and when at last he thinks he has captured a rule which offers firm ground to take a rest on amid the general rage and turmoil of the ten parts of speech, he turns over the page and reads, “Let the pupil make careful note of the following EXCEPTIONS.” He runs his eye down and finds that there are more exceptions to the rule than instances of it. So overboard he goes again, to hunt for another Ararat and find another quicksand. Such has been, and continues to be, my experience.”

      I think, again, Twain meant to include your arguments also.

    • I second that. And as for

      “[...] the hypocrissy with which many Greeks act in this drama really gets to my nerves.It’s always the others, most prominently Germany, who are to be blamed and who shall magically supply a brand new country for the people”

      it must be noted that it is not only the Greeks alone who show this annoying attitude. There are numberless more from a huge number of institutions, countries and other interested groups who share it. maybe they are instructed to share it. From the average German’s point fo view, it is relly, really enough. Stop blaming us for the mistakes others made.

    • Poor Gray!

      Of course you don’t speak Greek (the dominant language of Europe). Because if you did, you would immediately understand that your geriatric concerns are already taken care of.

      Welcome Greece as the new energy EU superpower (and I am sorry that Germany will not be allowed to play any part in it):

    • SM, certainly not surprisingly for you, I see things in a bit different way:
      1) I read Greek media and blogs every day, and find lots of fingerpointing, but hardly any evidence of healthy self criticism among people living in Greece (Greek expats are different, though). Color me unimpressed of those “discussions”.
      2) Sorry for not fitting into your stereotype of the emotionless German!
      3) Democracy only fails in Greece because the whole political culture is a mess. Too much tolerance of corruption and shady deals, not remotely enough respect for the law. All the best for improving that! However, even if Greece would be a model democracy, there’s still the fact that you’re 11 million people in the about 500 million strong EU. Which makes it a bit difficult for you to reform the union to your liking. However, of course it would be good if you folks would start to contribute something, instead of simply passively consuming all the subsidies…

    • Trying to insult me, by attacking my mother language, Dinos? :D
      Oh, yeah, it’s so my fault that I was born as a German! Why didn’t I chose to be French? C’est une langue trés élegante!

      Nice try at biting my ankles. Hey, you could be a black and tan terrier, only there isn’t room enough on you for both colors!

    • No one cares for a harsh or confrontational atmosphere here — everyone except Dean Plassaras, it seems.

      Hey Dean, you just took a cheap shot at the man’s language. Are you for real? [facepalm]

      Oh and Dean … I wouldn’t set much stock in what a racist like Mark Twain had to say — a man, btw, who had the financial acumen of a fruit fly.

      From The Innocents Abroad:

      “Greek, Turkish, and Armenian morals consist only in attending church regularly on the appointed Sabbath, and in breaking the ten commandments all the balance of the week. It comes natural to them to lie and cheat in the first place, and then they go on and improve on nature until they arrive at perfection.” (p. 212)

      “Everybody lies and cheats—-everybody who is in business, at any rate. Even foreigners soon have to come down to the custom of the country, and they do not buy and sell long in Constantinople till they lie and cheat like a Greek. I say like a Greek, because Greeks are called the worst transgressors in this line.” (p. 212)

      How do you like Mark Twain now, ol’ boy?

    • @Gray

      “Firstly, you put virtually all the responsibility on Germany, ignoring the correct point by the others that this nation simply isn’t big enough to singlehandedly save the Eurozone.”
      But it is big enough to make decisions on its own (and with France to some extent) and enforce them through out the union?

      “They don’t even voluntarily do what their OWN government wants from them! Really, the other guys, who said there has to be a more concerted effort, made much more sense than you.”
      Maybe you got it twisted?Its the governments that should do what their people want and not the other way around.So correct me if im wrong but when a government is elected based on a certain program,and then does everything opposite from what the program said,when people oppose to that they are anarchists?Why is it the people that are anarchists and not the government that is a dictatorship?

    • “How shall this work in reality, especially when it’s the rather anarchist Greeks who shall be led? They don’t even voluntarily do what their OWN government wants from them!”

      I stopped reading your comment after the above remark…

    • Crossover, Germany is a successful economy, and France, with minor differences, too. Greece isn’t. Your nation has to change, that is inevitable. If you folks don’t want to follow our example but, say, that of the UK or US (maybe Norway, once you pump oil?), push your government in that direction. Your next big chance for that is in the upcoming election. Do something for a change! But don’t simply complain that you don’t like the advices of the Germans or the French. That’s lame.

    • Gray some things need to be cleared up.
      1)They are not advices,they are orders.
      2)Success is a very tricky term.If frozen wages for 10 years is what you have connected in your brain with the word “success” then thats success to you.

      Your answer was irrelevant to my argument about “anarchists” and “dictators”.
      Yes i agree.Greece needs to change.But this has nothing to do with the crisis.You are still pretending that only Greece is having problems.Just wait…if you keep pushing everybody deeper into austerity,crisis will be soon knocking on your door too.Hopefully you will be demanding change in Germany too then?

      And lets clear another thing up Gray.We are not living in a fairy-tale.Nothing changes so simply by elections.There is a saying that says “If elections could change anything,they would be illegal”.Scheuble says “we dont know if elections are the right thing to do” and we have you here pretending that if we decide anything through elections,we will be free to do it without interventions from outside.As if having Scheuble pushing to avoid elections is not already an intervention .
      Stop pretending Greece has the ability to disengage and start over on its own.Even if it could,they wouldnt let it.

    • Crossover, those quite obviously aren’t orders! Your government CAN say no. Nobody forces Greece to accept our credit offer. You could have simply defaulted and reverted to the Drachem to finance the budget.
      And you’ll find frotzen wages everywhere around the world! Look at the US. I suspect that the stagnation in income growth for the lower and medium incomes is a direct consequence from the ugly globalisation that gve way to much leverage to international big money interests who greedily increase their profits at the expense of everybody else. Greece is much too small to change this, Germany is still to small, and not even the US is big enough to resist those dark forces. Only a concerted effort by all industrial nations could create a better and fairer system.

      But I digrees. Pls look at Greek wages. You want to deny that Germany is a major success story when compared with your own country? Hmm?

      Well, and about your point “We are not living in a fairy-tale”… Sry, but judging from an abundance of naive comments I’ve read at Greek sites, and from news showing an alarming lack of realistic counterproposals coming from the opposition and the unions, I came to a different conclusion. Your mileage may vary.

    • @Gray
      Soon people will unfortunately prefer drachma than going through more austerity.Thats how good the program is.To say they are not orders simply shows you are ignorant (or want to pretend being one) about who runs this game.Which makes me have to say again “We are not living in a fairy tale “Just the fact that 2 non-elected leaders have been put in Greece and Italy by Germany shows how sovereign we all are …Oh and let me remind you who our lovely prime-minister is.He is the guy that was in charge of the Greek CB during the period you accused us of having cooked numbers.Why would Germany prefer a guy like this?…..Maybe this can wake you up ?

      What is your point exactly about USA?
      real compensation per hour from the 50s up to now: http://research.stlouisfed.org/fred2/data/COMPRNFB_Max_630_378.png
      I dont really understand why does it have to be Greece vs Germany Gray?But nevertheless If Greece didnt succeed does it mean that Germany must have succeeded then?Why cant they both have failed or succeeded?Ok you managed to live on exports (and increase them,while people had declining real wages) to countries that now you are forcing to cut their spending and will soon not be able to keep up buying your exports…yea thats a great success congratulations!
      have a look here if its not too long for your liking: http://www.cer.org.uk/sites/default/files/publications/attachments/pdf/2011/essay_germany_eurozone_oct10-189.pdf

      I dont know (or care about) what you have read in forums or anywhere else…when you believe that a country like Greece can on its own go against the interests of the big players you are as naive as those who you are blaming to be (btw is the modest proposal naive? )

    • Crossover, you’re against a new Drachme, but apparently against the budget cuts, too? This looks like you simply want more money from the troika. Sorry, but that’s what I call “wishful thinking”. It won’t happen.

      As for Venizelos, imho he’s not doing such a bad job, under the circumstances, but of course he’s still a rather typical member of the old guard of Greek politics. I’ve written countless times here and everywhere that it sure would be a good idea to vote all those bums out. The Troika can’t put any better politicians in place in Greece. That’s the job of the Greeks themselves in the next election.

      Next: That income graph you got from the US fed provides a distorted picture because its based on AVERAGE income! But virtually all of the increase in the last decades has gone to the top 1% while the 99%’s incomes were stagnating. Here’s a graph for the MEDIAN incomes:

      Where’s that income increase in that picture? It didn’t happen for the 99%! Ask Prof Varoufakis if you don’t believe me, he’ll confirm that sad fact.

      “when you believe that a country like Greece can on its own go against the interests of the big players you are as naive as those who you are blaming”
      WHAT? I actually wrote the total opposite of that! “Greece is much too small to change this” You blind?

    • @Crossover

      We’re not all in this together

      http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance

      You assumption that trade surpluses of northern European countries is only due to deficits of southern Europe is not true. A big part of the South’s trade deficit is with the rest of the world and only 0.5 percent of the German exports goes to Greece. In fact, European Union as a whole has a very low trade deficit because the northern European countries (Scandinavia, Germany, Benelux) have a strong positive trade balance with the rest of the world. Sweden and Finland were actually running trade surpluses with China just until a couple of years ago.

      I live both in Sweden and Greece and I can tell you there’s a quite big difference in the public debate. In Sweden, the question how to remain competitive in a globalized world is something that has been debated since the 80s. In Greece, I have never heard a discussion about competitiveness. But that is really what all of you should talk about now. What reforms can we do to make Greece more competitive? What are Greece’s comparative advantages?

    • @Gray
      First I apologize because this reply might be long.
      I still don’t understand you.

      http://3.bp.blogspot.com/_otfwl2zc6Qc/SLWCRVSqwHI/AAAAAAAAFgs/aEXmkxBOraU/s1600/income1.bmp

      That’s the median income for the population in USA,not sort by education.
      I couldn’t find a graph for the household income in Greece but I found a graph with the labor cost,which happens to be the target of troika in terms of competitiveness:

      The blue line represents the wages.Maybe im blind and I cant exactly understand what this graph is showing and you can explain better..please do.

      To give you a brief history of what im against :
      I was really young back in 00 to be able to have an opinion if Drachma or Euro is better.If I had my current knowledge back then (has nothing to do with the actual crisis) I would be against the euro as long as it had the same design it has now (and ofcourse it had back then too).But now that it has been 10+ years after the adoption of the euro,a return to drachma doesn’t mean that we will be ,economically speaking, returned to 1999.More like 1929.
      With that said im against a return to drachma.

      About the cuts now.Luckilly I had an interesting brief discussion yesterday with a guy at Bill Mitchell’s blog,at the article you also read, about “German hypocricy and Lunacy”.This guy said:

      “Great post, by the way, Bill. I think the message that the Germans were early (and long-term) transgressors of the so-called ‘Growth and Stability Pact’ is one that should be repeated loudly and often. But it should also be emphasised that they were correct to do so. They may have to do so again once their main export market can’t buy any of their wares anymore.”

      My reply:
      “Ofcourse they were correct to do so due to the simple fact that the Maastricht Criteria is pure bullsh!t.There is no explanation for example,why the maximum allowed deficit is 3%?Why couldnt it be 2% or 5% ?Or why maximum allowed debt is 60% ?Seriously if the maximum allowed deficit was 5% nobody would have ever spoke of a target of 3% of gdp.That was just a limit that was decided upon no logical grounds.
      But unlike other things there is no fallacy of composition here…if Germany was correct to exceed the limit,everybody else exceeding it is equally correct.And lets not forget that the German government didnt have to “overspend” in the middle of a global crisis…budget deficits are more important now than back then.”

      To explain why government cuts are irrelevant would take an even longer post.I can only explain a few things.First of all it’s a mathematical identity that government surplus=private sector deficit.Nobody can argue on this.This merely says that when a government is running a surplus, all it does is it drains money from the economy.Ofcourse a country that has a current account surplus can run a government budget surplus without draining the private sector…instead it drains the external sector.But as we all know all the PISFIG have current account deficits.Maybe now it can become clear that the deep recession is caused by the cuts and not because they are not implemented correctly or whatever.

      Second,the euro is designed in such a way that you either must have a trade surplus or die.Why?Because in order to run surpluses (which are promoted based on euro’s design) or only small deficits up to 3% of gdp you will have to drain money from the private sector,which leads us again to my 1st point.Draining money causes recession,so you need trade surpluses.You have to face it…..we cant all be net exporters.

      The most important fact though is not the stupid Maastricht treaty and its criteria.Its the fact that it doesn’t utilize the advantages a fiat currency can give you.
      Some economists have predicted what is happening now,even before euro’s adoption in 00,due to the bad design of the euro.They are surprisingly precise and the interesting part is they don’t mention none of this propaganda of overspending and false statistics etc.I quote:

      In 1992 Wynne Godley described the inherent flaw in the Euro:
      “If a government does not have its own central bank on which it can draw cheques freely, its expenditures can be financed only by borrowing in the open market in competition with businesses, and this may prove excessively expensive or even impossible, particularly under conditions of extreme emergency….The danger then, is that the budgetary restraint to which governments are individually committed will impart a disinflationary bias that locks Europe as a whole into a depression it is powerless to lift.”
      In his must read book “Understanding Modern Money” Randall Wray described (in 1998) the same dynamic that led to the crisis in the EMU:
      “Under the EMU, monetary policy is supposed to be divorced from fiscal policy, with a great degree of monetary policy independencein order to focus on the primary objective of price stability. Fiscal policy, in turn will be tightly constrained by criteria which dictate maximum deficit to GDP and debt to deficit ratios. Most importantly, as Goodhart recognizes, this will be the world’s first modern experiment on a wide scale that would attempt to break the link between a government and its currency.
      …As currently designed, the EMU will have a central bank (the ECB) but it will not have any fiscal branch. This would be much like a US which operated with a Fed, but with only individual state treasuries. It will be as if each EMU member country were to attempt to operate fiscal policy in a foreign currency; deficit spending will require borrowing in that foreign currency according to the dictates of private markets.”
      In 2002, Stephanie Kelton (then Stephanie Bell) was even more specific in describing the funding crisis that would inevitably ensue in the region:
      “Countries that wish to compete for benchmark status, or to improve the terms on which they borrow, will have an incentive to reduce fiscal deficits or strive for budget surpluses. In countries where this becomes the overriding policy objective, we should not be surprised to find relatively little attention paid to the stabilization of output and employment.In contrast, countries that attempt to eschew the principles of “sound” finance may find that they are unable to run large, counter-cyclical deficits, as lenders refuse to provide sufficient credit on desirable terms. Until something is done to enable member states to avert these financial constraints (e.g. political union and the establishment of a federal (EU) budget or the establishment of a new lending institution, designed to aid member states in pursuing a broad set of policy objectives), the prospects for stabilization in the Eurozone appear grim.” (emphasis added)
      In 2001 Warren Mosler described the liquidity crisis that the Euro would lead to:
      “Water freezes at 0 degrees C. But very still water can be cooled well below that and stay liquid until a catalyst, such as a sudden breeze, causes it to instantly solidify. Likewise, the conditions for a national liquidity crisis that will shut down the euro-12’s monetary system are firmly in place. All that is required is an economic slowdown that threatens either tax revenues or the capital of the banking system.
      A prosperous financial future belongs to those who respect the dynamics and are prepared for the day of reckoning. History and logic dictate that the credit sensitive euro-12 national governments and banking system will be tested. The market’s arrows will inflict an initially narrow liquidity crisis, which will immediately infect and rapidly arrest the entire euro payments system. Only the inevitable, currently prohibited, direct intervention of the ECB will be capable of performing the resurrection, and from the ashes of that fallen flaming star an immortal sovereign currency will no doubt emerge.”

      http://pragcap.com/mmt-the-euro-the-greatest-prediction-of-the-last-20-years

      When did I Talk about Venizelos ?I was talking about Papademos.If Simitis must be punished for the false data you accuse him for,Papademos should go with him,since him and Simitis are the “fathers” of the adoption of euro in Greece.But instead Merkel was so happy to have Papademos in charge…yea it makes a lot of sense….As for Venizelos,don’t even worry about him.He will be the new leader of PASOK and I guarantee you he wont be the next prime-minister.I can only hope the same happens with Samaras.

      “I actually wrote the total opposite of that! “Greece is much too small to change this” You blind?”
      No im not blind.You believe that if Greece was stupid enough to choose to leave the euro,they would let us.Then why Germany was so angry about the referendum and orchestrated papademos’ appointment?Because Greece is indeed too small to do anything the big fish don’t like.So you are contradicting….

      sorry for the long post everyone

    • @Peter
      Hi.
      Lets clear a few things up.First of all trade imbalances are a big problem for the whole world (China-US) so eu is not exception.
      But now lets see the facts.2/3 of EU trade are internal.So 2/3 of the trade imbalances are due to internal trade imbalances.
      As you said EU as a single economy has mostly a balanced trade with the rest of the world.This happens both because we have exporters and importers.
      Have a look at this graph:

      “Source: IMF (in Lapavitsas et al, 2009)

      Two-thirds of German trade is within the Eurozone, while the Eurozone’s trade with the rest of the world is roughly in balance. The accompanying graph clearly shows Germany’s surplus to be mirrored by the ‘Club Med’ deficit. No devious plot is implied; this situation arises because somebody’s surplus is by definition somebody else’s deficit.

      Obviously, small surpluses and deficits are not the problem. Rather, it is when the surpluses and deficits become large and entrenched over many years that action must be taken. Clearly, reform of economic governance is required if the Eurozone is to prosper in the long term. Just as the China-US trade imbalance is best resolved by increasing aggregate demand in China and recycling surpluses rather than by means of expenditure contraction in the US (the cost of which would be further recession), the Eurozone trade imbalance cannot be resolved by inducing recession in the Mediterranean.”

      I agree with the rest of what you are saying Peter.But there are immediate problems and long term problems.If im drowning because i didnt know how to swim but instead i went far into the ocean…the 1st thing is to figure out how to save me…not teach me how to swim while im drowning.

    • @Peter
      I forgot to mention that;
      ” A big part of the South’s trade deficit is with the rest of the world and only 0.5 percent of the German exports goes to Greece.”
      I already told you that 2/3 of trade is within the zone (WTO says the trade/gdp ratio is 29.8 so even over than 2/3 of EU trade is internal).Furthermore you do realize that 0.5 of German exports equals to a larger percentage for GREEK imports,dont you ?I mean if German exports are 100bil. and 1bil comes from Greece while Greece’s imports are 10bil,then you can see that this 1bil has a bigger effect on Greece than Germany right?
      Germany would have already left if it wasnt reliant both on trade with the rest of the union and on the low price of the euro (which is low due to the southern countries keeping it low,maybe this explains why we were accepted?) compared to the price the Mark would have.But the Mark would kill the exports right away. both the exports to the other eu countries and to the rest of the world.

    • @Crossover

      My point was that northern Europe is not that dependent on southern European consumption as some people claim. Much of the South’s deficit is from other countries. If you look at Greece’s top import trade partners we have:

      1) Germany 10.6%,
      2) Italy 9.9%,
      3) Russia 9.6%,
      4) China 6.1%,
      5) Netherlands 5.3%,
      6) France 4.9%,
      7) Austria 4.5%.

      Of those only Germany, Netherlands and Austria are a northern European surplus countries. Italy and France are both deficit countries. And Russia and China belongs to the RoW.

      If you look at Germany’s top export trade partners we have:

      1) France 10.1%,
      2) US 6.7%,
      3) UK 6.6%,
      4) Netherlands 6.6%,
      5) Italy 6.3%
      6) Austria 5.7%,
      7) Belgium 5.2%,
      8) China 4.7%,
      9) Switzerland 4.5%.

      Of those only Italy is a southern European deficit country. Germany would still run a hefty surplus if you remove all of the southern European countries.

    • @Crossover

      Also, I would argue that the German industry has never relied on a weak currency. On the contrary, the Deutsche Mark was known as one of the most stable currencies in the world.

    • @Peter
      It doesnt have to be directly mirrored (although it is clearly mirrored in the graph i gave u) in the stats.We are all interconnected.First of all you have the FACT that over 70% of EU gdp is due to internal trade.With that said you dont have to be a genius.
      In wikipedia i see that the largest importer of USA is Canada.And the largest exporter of USA is China.

      You are basically saying (im trying to reflect our conversation into my example) that China doesnt and shouldnt care about Canada because its USA who is its largest client.I say that if Canada stops importing from USA,then USA becomes poorer and stops importing from China,so simple.

      As for the mark,i dont understand what you are trying to say.The euro is a weaker currency than the mark.Thats exactly the reason why german trade surplus has greatly increased after adopting the euro.Similarly its exactly the reason why Greek exports started deteriorating.If you argue you must believe that if Germany moves into a monetary union in which only nothern countries are participating,their exports wont be hit?The larger a net exporter you are the more expensive your currency becomes unless you do chinese tricks to keep the price low,artificially.

    • Crossover: And exactly for htis reason it is better to get rid of the root cause of the cirsis: THE EURO.

      Why change millions of prices by dictatorship and central planning when the solution is to have exchange rates?

      Yes there will be more people out of a job in Germany. BUT many more people will have a job in Italy, Spain and Greece!

      Central planning and distribution systems never beat free markts. Many countries in Eastern Euope were so kind and proved this by experiment for us. We do not need to try the same and expect a different result.

    • @Peter
      Maybe Paul Krugman’s article will make my point even clearer:

      http://krugman.blogs.nytimes.com/2011/11/07/wishful-thinking-and-the-road-to-eurogeddon/

      Apart from what he is saying check the graph.To be sure i checked the numbers myself from the CIA factbook and they seem precise.It is also clear that it all started after the adoption of the euro.You can ofcourse call it a coincidence..both that the deficit equals the surplus and the fact that the imbalance started growing after euro adoption.This i repeat doesnt have to necessarily indicate that this money has been spent directly from PISG to Germany…but based on the fact that the eu economy is mostly a closed system in the end thats how the money is allocated.

    • @No EU Dictatorship
      I dont agree that the root cause of the problem is the euro.Just like its not the gun but the guy that shoots it who kills someone…the problem is how the euro is being used and the rules revolving around it.Abandoning the euro should be everybody’s last choice for it would be disastrous.Lets not forget that in order for the euro to “come to life” there have been many preparations that took at least 10 years before its adoption.This indicates that such transitions require time in order to be mild.A disorderly disolution of the euro would hurt everybody.I suggest we should rather redesign it instead of abandoning it.

    • Crossover, it’s the weekend and I don’t really want to spend it writing an essay in repsonse to your comment. So, just some points, telegram-style:

      1. Graph is in nominal dollars, not inflation adjusted. Note “household income per member”. Households work more today (2 earners, people work several jobs). So, graph is distorted. You sure won’t argue that working more hours to make up for staganting wages is an increase!

      2. Where does the graph about Greek labor costs come from? What’s the explanation for the admittedly surprising decrease after the Euro introduction? And what’s your point when my argument is that increases are problematic due to pressure of globalisation? Check labor costs in neighboring nations, Turkey, Bulgaria, to get a pitcure of the competition!

      3. Return to Drachme would be “like 1929″? Oh, come on, be serious! Your sense of panic is not a rational argument.

      4. Very obviously, bond markets lose confidence if a) debts become too high (limit depending on several factors, around 80%) and/or deficit exceeds GDP growth by big margin for longer period (10% is alarming). GDP growth in the EU it typically between 2–3%. If the deficit exceeds that, this ain’t sustainable. I’m all for Keynesian spending, a one time stimulus to make up for a temporary lack of demand, but Keynes NEVER endorsed long term deficits. Read his book.

      5. “it’s a mathematical identity that government surplus=private sector deficit.Nobody can argue on this.” Come on, Krugman just recently argued about this! “identities” are a necessary part of the theoretical approach to economics. They simplify reality in order to make a complex reality more easily understood. Quite often, this simplification leaves important factors out of the picture. Like in this case, where the devil is in the details of private sector (most importantly, investor) spending.

      6. “Because in order to run surpluses (which are promoted based on euro’s design) or only small deficits up to 3% of gdp you will have to drain money from the private sector” Utter nonsense! Clinton raised taxes, created a surplus. The economy grew strongly. Who are you, one of those “laffer curve” admirers?

      7. Sorry, but enough already. I don’t want to spend my weekend correcting your strange brew of misunderstood economics and distorted logic, really. It wouldn’t serve a purpose, since much of that stuff seems to be based on ideological beliefs, so I can’t convince you anyway.

    • “it is better to get rid of the root cause of the cirsis: THE EURO.”
      The root cause is rather that some economies and governments weren’t ready for the different conditions of a unified currency. There#s nothing inherently wrong with the Euro, just like the is nothing inherently wrong with the dollar. Quite to the contrary, in this era of speculators armed with more money than many nations, a bigger surrency is more secure and stable. The problem is that you can’t be part of such a system and still act as if you could inflate your way out of trouble when your policies fail!

    • @Gray
      1)Graph says REAL median income.REAL exactly indicates it is inflation adjusted.
      2)I found it in EL.STAT but maybe it is cooked too.
      3)it was a mistake to say “1929” because thats the great depression…maybe i should say 1959?i hope you are happy now…i didnt want to say that we will relive the great depression….i only want to point that it would take us decades back from 1999…
      4)Nothing is obvious.Countries issuing their own currency are not revenue constrained and not market constrained either.Thats exactly what these economists said.That the euro makes the governments dependant on markets as if it is a foreign currency.The markets dont dictate US treasuries’ interest for example.Let me remind you Greece always had a debt/gdp ratio around 100%….why didnt the “markets” push Greece off the cliff back in drachma?
      More here if you are interested: http://pragcap.com/resources/understanding-modern-monetary-system
      I didnt even use Kaynes and you suggest i read his book in order to what?Not misquote him ?

      5) “GDP = C + I + G + (X – M)

      C = consumption

      I = investment

      G = government spending

      X = exports

      M = imports

      Or stated differently;

      GDP = C + S + T

      C = consumption

      S = saving

      T = taxes

      From there we can conclude:

      C + S + T = GDP = C+ I + G + (X – M)

      If rearranged we can see that these sectors must net to zero:

      (I – S) + (G – T) + (X – M) = 0

      (I – S) = private sector balance

      (G – T) = public sector balance

      (X – M) = foreign sector balance”

      Disagreeing with this means that the GDP must be affected by something else that is not shown here…well tell me what it is then…The devil of the details that you mention here is already in there…its the I.

      6)”Clinton raised taxes, created a surplus. The economy grew strongly”
      LOL

      http://research.stlouisfed.org/fredgraph.png?g=29U

      It grew so strongly that a recession came right when debt outstanding was at its lowest..just like any other time taxes were raised in order to achive surpluses

      “3. Fact: U.S. depressions tend to come on the heels of federal surpluses.

      1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
      1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
      1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
      1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
      1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
      1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

      4. Fact: Recessions tend to come on the heels of reductions in federal debt/money growth (See graph, below), while debt/money growth has increased when recessions were resolving. Taxes reduce debt/money growth. No nation can tax itself into prosperity, but any nation can tax itself into recession.”

      http://rodgermmitchell.wordpress.com/2009/09/07/introduction/

      7)Fair enough…although i can say the same.Germany’s critics claim that German policy is false exactly because of their ideological beliefs on what they consider a budgetary orthodoxy etc…have a nice weekend.

    • The Euro canbes dissolved very quickly. Look back into recent European history and you will find that SK and CZ did just this in notime.

    • @Gray:”There#s nothing inherently wrong with the Euro, just like the is nothing inherently wrong with the dollar.”

      this is absolutely incorrect. The Euro Zone is far less an optimal currency area tha the US.

      – There is far less mobility of labor (yes on paper) due to the language and cultural Fifferences. Just to name
      – There is (thank god) no risk sharing system such as an automatic fiscal transfer mechanism

      Of course you can enforce that on people against their will. Steal money via taxes and inflation from the North and deport workers from the South to the North. – Great future!

    • Crossover,

      1) Dunno where you found that data (it certainly isn’t directly from the Us census bureau), but either it’s totally wrong or there’s an error in the description. Looky here:

      http://www.economist.com/blogs/dailychart/2011/09/us-household-income

      2) Wby does this data

      http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Wages_and_labour_costs

      look so different from the graph yoou provided?
      4) “Countries issuing their own currency are not revenue constrained and not market constrained either.” Nonsense. Of course, the real revenue is constrained because of the limits of value created. Those countries can inflate their money volume all they like, but that creates only the illusion of additional revenue. More money that is worth less. And markets are not stupid, that charade is exposed as hokus pokus as soon as that Mickey Mouse currency’s exchange rate is taken into account. You can’t produce revenue simply by priniting money, there has to be the corresponding production of goods and services to back it up! If you produce less than you consume for decades, no monetary trick can make that sustainable in the long run. Having your own currency can only help you to improve the competiveness, but at the expense of large parts of the population losing purchasing power.
      5) I own an economics textbook, too, thx. But “Argument by accounting identity almost never works.”

      http://krugman.blogs.nytimes.com/2012/01/16/mistaken-identities-wonkish/

      6) As almost everybody except you knows, the 2000 recession came because of the bursting of the dotcom bubble. Monetary policies to cool down the markets in time could have prevented that. This had nothing to do with the tax level or the public debt, and I can’t remember ever seeing an economist making that argument.
      7) Nobody has to like Germany’s orthodox finance policies. Just ask someone else for money if you don’t like the policies that have worked rather successfully for us for years.

    • “No EU”, I guess I should have been more specific. My point is, there’s nothing wrong with a large currency zone provided there are strict rules to keep the participating nations on a ressonable fiscal and economical course. Interestngly, in the US most states have laws in place that prevent them from running dangerously high deficits (that’s the problem plaguing California now). And the golden state also shows what happens when a big contributer to the currency zone gets into trouble. Despite paying much more to the fed (and consequently to other states) than it gets back, the government in Sacramento is in dire financial states now, and there is no federal program to bail them out and no solidarity from the other members, either!

      Automated financial transfers in a currency zone create as many new problems as they solve, and I’m against implementing that failed system in the Eurozone (you seem to misunderstand me in that point). I think that economies who lag behind should rather be helped to raise up to the standard with a program that directly supports strategical investments. That money shouldn’t go into the hands of irresponsible governments at all.

    • 1) I have no clue why they are different
      2)Not sure i see a contradiction.If im not missing anything the link you gave me shows labor costs in 06 and ’10 ? The changes in labor costs through out the years is not shown.
      3)What you are basically saying is that they are inflation constrained.I didnt ever argue over inflation.But i do argue on whether money-printing is by definition inflationary,especially at times of recessions.After all,if we hypothesized that Greece had printed all this money that now consist its debt,instead of borrowing it,and spent it in the same “unproductive way,”the inflation would have been the same.If you argue by saying that if they print recklessly they would cause inflation i can argue by saying that if a government imposes a one-time 100% asset tax in order to create mega-savings (after all government surplus is a good thing aint it? ) it would cause the mother of all depressions (in reality a way lower tax can cause that).The point is that a currency issuer (which none of the eurozone countries are) cant run out of money.Money is not wealth.I wont bother keep arguing over this.I gave this link http://pragcap.com/resources/understanding-modern-monetary-system several times so you can see where im coming from, last time i repeat myself by posting it,you can either read it or throw it away.

      5)I believe you saw/will see the sectoral balance breakdown in the other post.The only problem with identities is they’re not dynamic.But end-year results arent dynamic either.

      6)You forgot 1929 and 2008.Out of 10 recessions shown in graph,and 5 more mentioned,you pick one to call the whole theory false,by not leaving room for even a tiny suspicion of possible causation between the 2 things.Way to go.

      7)I have 2-3 arguments to propose after giving up for good over whether Germany has been successful or not.If you are happy because people had stagnant or decreased wages so that the German elite could increase its earnings that were indicated by an increase in GDP then we probably have different views of what is good and what is not.Furthermore i wish you that one day Germany turns to China…since massive growth is what everyone should strive for.
      And then, lets accept that Germany is the way to go.One day we wake up from our foolishness and decide that we all want to make a living by selling our exports to other countries,effectively becoming net exporters.Even if we all decrease our wages to 0 and our productivity skyhigh…we can only be (all of us) net expoters if we find some aliens to export to.So simple.
      And i didnt even mention that if everybody imposes austerity in order to become competitive the result would be the same…

  4. What you all three are demanding (Germany to accept it’s new role as a world leader) is similar to asking a toddler to stand up and run a marathon.

    Earlier you said somewhere, Germany has to your opinion come to terms with it’s history. It hasn’t, believe me. All generations after 1945 have learned, that Germany must never ever play an important role, adopt any pride, leadership. We have all internernalised, that whenever Germany did so it was for the worst of the world. It is deeply in all of us.

    How can a political elite take over leadership in the eye of a storm when the following was and is the case: “Und wir in Deutschland sind seit dem 8. Mai 1945 zu keinem Zeitpunkt mehr voll souverän gewesen.” (And we in Germany have never been fully sovereign since May 8th 1945″). This is a quote by Wolfgang Schäuble from November 2011.

    This is how the political reality is and how the politcal elite is running Germany. Their mindset.

    Go, toddler, go, go, GO!

    Best

    Gaby

    • Yes, I totally agree, Gaby raised a very important point here. Indeed, at school, university, in TV, books and the media, Germans have been told all the time they created a desaster when they supported the crazy ideas of superiority and expansion. This still continues today. And that’s not a bad thing at all, because it effectively prevents that an ideology that is based on dominating others doesn’t have a chance here among the majority of our people. But the downside is that Germans don’t want to lead in Europe and are against playing an exposed role. Sorry, but you can’t have it both.

      So, Garton Ash is right, other EU nations have to take part in the efforts. Merkel can’t and won’t do it alone, she doesn’t have sufficient support at home for this. And, I want to add once again, the Greeks have to do more themselves, too. It’s your country, folks, and it won’t become better if you oppose all reforms and don’t contribute to the necessary change!

    • You say:
      “All generations after 1945 have learned, that Germany must never ever play an important role, adopt any pride, leadership. We have all internernalised, that whenever Germany did so it was for the worst of the world. It is deeply in all of us.”

      Are you sure? Why do I have the impression that the “mea culpa mea culpa, mea maxima culpa” happened in West Germany only? The East went from the dictatorship of Hitler to the dictatorship of communism, possibly white washing every thing with new comradeship.

    • There is a very interesting piece written by Stratfor on the German will (and ability) to be a leading power of Europe (in short: Germany does not want to …)

      http://www.stratfor.com/weekly/state-world-germanys-strategy?utm_source=freelist-f&utm_medium=email&utm_campaign=20120313&utm_term=gweekly&utm_content=readmore&elq=91eb3170a592490789ddd10459e8c4aa

      Although one might not follow Stratfor’s conclusion (Germany to be an allie of Russia), it is worth reading it.

      Best

      Gaby

  5. Great Interview with former Bundesbank CEO Schlesinger:

    http://www.welt.de/wirtschaft/article13914302/EZB-Geldflut-erinnert-an-die-Kriegsfinanzierung.html

    German media has been starting to attack the ECB since a week or so. This interview and many others (without such heavy weights as interview partners) will bring bring the ECB in even more discredit.

    Asked about the parralels of the ECB to the Bundesbank Mario Draghi draws in every press session: “Schlesinger smiles and says nothing first. then I know Draghi, a smart guy, able economist with a lot of POLITICAL EXPERIENCE”.

    Schlesinger does not mention “stability or Bundesbank”.

    others

    “The monetary expansion has a dimension we know from war financing”
    “When I was 14 I got 8 Italian Lire for 1 Euro. When we introduced the EUR it was 1.000″
    “I am astonhied how expensive some things have become”
    “Historically there are two options to get a monetary expansion of this dimension under control: (A) Currency Reform and (B) Price controls.”

    • It isn’t an attack, but criticism, and it started much earlier than last week. And there’s good reason to be concerned. It’s a fact that the ECB is going to the legal limiting in providing liquidity in exchange for bonds as a security (which isn’t much different from buying those papers) and that the moneyflows inside the EU have become worrysome (lots of Greeks bringing their money out of the country). This poses problems for the central banks of Northern countries, and if the “qantitative easing” spills over into the real economy, this can result in high inflation. Ask any honest economist, or study the books, and you’ll learn that inflation burdens the lower and medium incomes (especially in a high unemployment situation), but may even be profitable for the rich (they can expand their productive means with borrowed money). We Germans are very much against inflation, for those reasons, and it isn’t a bad thing at all that we keep an alert eye on the actions of the ECB.

  6. Ah, Yanis has arrived in the German mainstream media. Good to see that – still, when will be the SPIEGEL and FAZ interviews? Has Schirrmacher asked yet?

  7. So Eurobonds are such a smart idea (=pooling of debt) why don´t we try pooling of means of production? That must worl well too! OOps some have already tried this before!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s