Greek Success Story: The latest Orwellian Turn of the Greek Crisis

Greece’s Prime Minister recently flew to China, to woo Chinese investors. In his bid to be persuasive, he adopted a radical narrative: Greece is a Success Story. A country that almost perished in 2012  is now on the mend; on the road to stabilisation and growth; a wonderful opportunity, currently, for investors to pick up ultra cheap investments and to benefit from the forthcoming growth. How much of this is true, however?

Greek Prime Ministers and Finance Ministers have been upbeat for the past three catastrophic years. Mr Samaras’ narrative is, therefore, neither here nor there per se. Indeed, one may credibly argue that it is his job to put on a brave face and to be upbeat, especially when in a country like China where he is struggling to beat up some investments for his suffering country. However, what makes the Greek Success Story (GSS) narrative interesting is that the international press and the money markets seem to concur.

Six reasons are bandied about in support of GSS:

  1. Yields of Greek government bonds have collapsed from 30% to 8% while two of the three credit rating agencies have upgraded the Greek state’s creditworthiness
  2. The economy’s rate of shrinkage is falling
  3. Wages have fallen drastically giving a major boost to Greek competitiveness
  4. The government has managed, through an impressive series of cutbacks and tax hikes, to deliver a small but nevertheless significant primary budget surplus
  5. The Athens stock exchange has doubled in value over the past few months
  6. Greece’s banks are consolidating and are being recapitalised, with some help from international investors

Taken together, these six observations seem to support the GSS narrative. But do they? Let us look at them one at a time:

1.    Yields of Greek government bonds have collapsed from 30% to 8% while two of the three credit rating agencies have upgraded the Greek state’s creditworthiness

All this is true. But it is also ridiculously irrelevant. Greece does not issue bonds. It is well and truly excluded from money market financing. The last ten-year bonds it issued for the purposes of financing the state were before May 2010. Since then, it issued a whole pack of them in March of 2012 as part of the so-called PSI; the massive haircut of the existing government bonds (except the ones that the ECB had already purchased – see here). The newly minted 2012 bonds were used to swap for the older ones; the ones that were being haircut. Each older bond was replaced by a new one with a face value almost half that of the older bond it replaced.

Even then Greece’s debt was unsustainable. So, last December we saw another haircut – that was euphimistically presented as a ‘debt buyback’. Whatever the intricacies of that operation, the gist of it was that the Greek state borrowed €11 billion from the ESM (European Stability Mechanism) in order to buy back most of those fresh, PSI-era, bonds at… 35% of their face value. By the end of that second haircut, only 13% of Greece’s debt remains in the form of government bonds in the hands of private sector investors. In summary, when the financial press talks about the ‘yields of Greece’s government bonds’, they are referring to this ultra-thin market of bond relics.

Still, why are these few remaining Greek bonds appreciating in value (and their yields are falling)? The answer is as simple as it is depressing: Because the markets have worked out (quiet correctly) that, while Greece’s public debt still remains unsustainable (despite the two haircuts in one year), the next time it is written down it will be the European taxpayer that gets hit – not the investors who still hold on to the few Greek government bonds left in the market. Put differently, when Europe re-visits the Greek debt issue, the headache from imposing another haircut on these privateers (who will threaten Greece with expensive hold-outs) will not be worthwhile given the meagre benefits in terms of debt reduction. Thus, markets expect that these bonds will be redeemed fully and Greece’s debt to the European Union (but not the ECB or the IMF) will be haircut instead.

In summary, there are excellent reasons why the Greek government bonds remaining in the hands of private investors are appreciating in value while everyone knows that the Greek state remains hopelessly bankrupt.

2.    The economy’s rate of shrinkage is falling

When political prisoners go on hunger strike, during the first week they lose a considerable proportion of their body weight. As the weeks pass, the rate of diminution in their weight drops. On the week of their death, if they continue to the bitter end, the rate of shrinkage is at its lowest, as they is precious little fat and muscle to be lost. This is precisely what is happening to the Greek economy.

3.    Wages have fallen drastically giving a major boost to Greek competitiveness and thus heralding an investment boom

Wages have fallen sharply and labour unit costs have followed suit. The question however is: Is this a reason for investors, Greek or foreign, to loosen up their purse-strings and go on an investment spree? That investors like to see wages fall, there is no doubt. But does this suffice? Most certainly not. There are only two reasons for investing in the productive sectors of a country like Greece presently: One is if you think that, in addition to the falling labour costs, there will be effective demand for the goods and services domestically. There is no reason to expect this for Greece any time in the foreseeable future, since both the private and the public sector are continuing to deleverage. (The fact that prices are hardly falling, at a time of collapsing wages, signals a precipitoys fall in domestic demand.)  A second reason is to believe that goods and services can be produced in Greece (taking advantage of the falling costs) for the purposes of exporting them. There is very little scope for this either, since the rest of Europe is recessionary and, more importantly, excess capacity exists elsewhere so that, if there is a boost in demand outside of Greece, production can be cranked up at minimal start-up cost to cover it in countries like Germany and the Netherlands. The only exception to that is tourism in which it may make sense for smart investors to buy cheaply some boutique hotels or even resorts and take advantage of the collapse of Egypt’s tourist industry in the context of the Eastern Mediterranean market. However, such investments will make next to no difference to Greece’s macro-economy since the funds imported to purchase the properties are most likely to be exported immediately by the former owners and new investment/jobs will be negligible.

In summary, the Greek government’s own statistical agency tells us that in 2012 investment fell by 20% from the already ridiculously low levels of fixed capital investment in 2011. Moreover, the government is predicting a further fall in investment in 2013. The investment boom that is talked about is, therefore, a figment of someone’s imagination at best or a piece of vile propaganda more likely

4.    The government has managed, through an impressive series of cutbacks and tax hikes, to deliver a small but nevertheless significant primary budget surplus

This is also true. The state has reneged on its obligations to cancer patients, school children, the elderly and the infirm, its own suppliers (who are owed billions for supplies and services delivered long ago), small businesses which receive VAT rebates with many months delay, etc. Now, all that would have been understandable if the government’s task were to create, however brutally, a primary surplus in order to bolster its bargaining position with the troika, giving itself the opportunity to survive without the troika’s loans during a period of tough negotiations. But the government is not interested in the slightest in playing tough with the troika. Only with its own people, trying to impress the troika with its ruthlessness within. Even though everyone knows that these primary surpluses, built on what I call ‘blood money’, cannot be the basis for Greece to repay its loans to the troika (requiring another write down of Greece’s public debt), the Athens government is pretending it can repay everything in this manner. (See here for a recent example.)

In summary, the reported primary surpluses, built on blood money as they are, cannot be thought of seriously as a sign that Greece has returned to public debt sustainability.

5.    The Athens stock exchange has doubled in value over the past few months

So it has, alongside all stock exchanges around the world who seem determined to ‘go it alone’; to climb inexorable QE-fuelled heights in response to the news that the real economy is… faltering, stuttering, stumbling. In the case of Greece, there is of course another, important twofold element: Germany’s decision (a) not to amputate Greece from the Eurozone and (b) not to allow a proper probe in Greece’s banks (in fear of what it would show and of the potential knock on effect of such probes in the realm of Germany’s own Bankruptocracy). These two ‘signals’ have caused Athens’ stock exchange (which was almost annihilated last year) to double its value – to thelevel it had reache back in… 1995. The only genuine improvement, that adds to the rally, concerns three large monopolistic companies that have managed to regain access to international finance through a bond issue. This is of course due to (i) the removal of the immediate threat that their assets will be converted to drachmas and (ii) their monopolistic position in Greece, that guarantees them a profit stream.

In summary, the recent rise of Athens’ stock exchange is utterly devoid of any signs regarding an improvement in Greece’s economy.

6.    Greece’s banks are consolidating and are being recapitalised, with some help from international investors

This is the grossest and most monstrous of all hyperbolae regarding GSS. Greece’s banks are huge black holes, the epitome of zombie-banks. They need at least €150 billion to be properly recapitalised but only €35 is available (after last December’s ‘debt buyback’ operation ate into the recap fund to be provided by the ESM). In addition, Greece’s bankers are jostling for position, pulling political strings and entering into unsavoury deals with our wider Cleptocracy, so as to remain in control of ‘their’ banks, at the expense of course of the banks’ capacity to borrow and to lend. See here for a whiff of the coalescence of Bankruptocracy and Cleptocracy that delivers a banking system which acts as a dead weight on Greece’s private and household sector, pushing Greece’s social economy deeper and further into a mire.

In summary, Greece’s banking sector remains a black hole that destroys any source of dynamism within the country’s social economy. The recapitalisation will prove a certain failure while the consolidations are effected with the sole criterion of bolstering the social and economic power of certain ‘bankers’ who want to use it in order to extract rents from the rest of Greek society. To speak of Greece’s banking sector as a source of ‘good news’ for Greece is to molest the truth and to insult the intelligence of Europe’s taxpayers (who are providing Greece’s bankers with the funds that allow them to ‘pretend and extend’ at the expense of Greece’s economy).

Epilogue

For three years now, Greece’s establishment regime is attempting to convince the world, and the Greek people, that all is well in the best of all possible worlds. The difference now is that the international press seems to be buying this propaganda. Speaking personally,  I am tired of having to counter ‘good news’ stories with analyses like the above for four long years now. I wish I could also rejoice in the ‘good news’. Alas, it remains our moral duty to knock down ‘good news’ stories the purpose of which is to propagate narratives the explicit purpse of which is to impede policy changes that may bring us  genuinely good news.

 

57 thoughts on “Greek Success Story: The latest Orwellian Turn of the Greek Crisis

  1. Irish “success story” 26-10-2013:
    With only seven weeks to go before Ireland’s official exit from the EU-International Monetary Fund bailout, there is no consensus in the troika or among European leaders as to whether the Coalition should seek a precautionary loan programme. However, European sources said Dublin would be expected to comply with a new swathe of tough conditions even if it never used the credit line.
    …….With Ireland seen as the only demonstration the response to the debt emergency is working, the commission is wary the “success story” could be undermined if approval is sought in other countries for a credit line.
    …… Even though the prospect of tough conditions would present difficulties for the Government, the argument is made within the troika that Ireland is already obliged to run “very tight” budgets for years to come. Mr Kenny said the Government expects to decide before the bailout ends on December 15th.
    ‘Success story’ :Troika seeking tough post-bailout terms
    http://www.irishtimes.com/business/troika-seeking-tough-post-bailout-terms-1.1573913?utm_source=morning-digest&utm_medium=email&utm_campaign=digests

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  6. How did you come up with this number (150 billion) regarding the Greek Banks’ recapitalization needs?

  7. An excellent (ΙΜΗΟ) approach regarding the true state of the Greek economy and the prevailing propaganda mechanism. Please allow me a (quite serious) question. This 150 blilion number which refers to the capital requirements of the Greek Banking System, how did you come up with this? This is a crucial point in “decoding” the GSS

    • First, my ‘number’ is 40% lower, pro rata, as that of the Spanish banks’ ‘black hole'; choosing to peg it significantly lower than that of Spain’s figure due to the fact that the real estate disaster is greater in Spain than in Greece. Secondly, the 150 billion figure takes into account a rough estimate (based on figures released by the ECB and the Bank of Greece) of the sum of the hidden and the official size of unserviceable debts (current and projected). Have no doubt: the 50 billion that they admitted to is a gross underestimate.

  8. Yianni, just wanted to show my appreciation to your blogs, i am currently on a two hour train journey in the UK and was listening to an Australian interview about Greece via mobile radio, only to find that it was you who was being interviewed! I think that your blogs and opinions go beyond Intellectual Economic discussions but they make it easier for people like me who have not yet completed university to have some answers against the GSS ideology that indeed seems to recently prevail in the UK and often a subject brought towards me as the only Greek in the office where i am doing my work placement!
    Please keep it up and looking forward to the book to come through my door soon!
    Xairetismous from your old Aegina servitoro.

    • So wonderful to hear from you. Thanks for the kind words. Good luck and hope to see you again in Aegina or elsewhere.

  9. Pingback: Greek Success Story: The latest Orwellian Turn of the Greek Crisis « Economics Info

  10. I also find important, your mention of european politicians who do not want what they preach, but do it due to inertia and EU is still very popular. Not only that the politicians do not want more united EU, they actively fight any solutions, as you mention Merkel’s advisor.

    • “EU is still very popular”

      Did you miss to read recent polls on this topic?

  11. Yanis,
    That was a really great and concise interview you gave on the croatian TV

    http://www.hrt.hr/index.php?id=enz&tx_ttnews%5Bcat%5D=570&cHash=7df7b6458e

    helped by clear questions of someone who knows your writings. Interview is in english with croatian subs.

    I would like to note that in counting three crisis in the EU and the world, you use a slightly different wording on investment crisis to be contrasted with the second one, with debt crisis. Call it savings/ surplus/ investment crisis to contrast with debt/ deficit/ demand crisis as you did call it latter on in the interview.
    Those two crisis are the job of the financial sector to handle, finacial sector which is the first and the main crisis. Since banking sector is in the survival mode and not handling savings-debt distribution it is the job of the state to do it as the only one who can manage such job when banks go to survival mode due to structural economic problems.

  12. Just read a very interesting article by former minister Alekos Papadopoulos. He also seems to grasp the gravity of the situation and even makes the bold move for a mainstream politician of discarding the official “Grecovery” narative and hinting at the very real posibility of an exit from the eurozone and the need for that should it occur to be as orderly as possible through negotiations and the adoptation of apropriate measures. The article is in Greek obviosuly, but anyone who cares might find it very usefull.
    http://www.tovima.gr/finance/article/?aid=514433

    • That is a good one.

      One of very few articles written by Greek politicians that makes sense to me.

      And not his former articles. This one grasps the European and international environment today.

      But the most important is that he notes the “collective danger” the Greek society is facing.

      The solutions are well known.

  13. http://www.project-syndicate.org/commentary/european-politicians-s-return-to-the-nation-state-by-gene-frieda.
    This article is describing current state of affairs regarding Europes Generation Clash facing
    leaders to find the TUNNEL out of CRISIS mode with a public questioning current route.
    A new Book from Prof. Hankel “Die Euro Bombe wird entscharft” is advicing back to National currencies and keep EURO as a Gold Standard without relying on GOLD.
    Interesting Idea from a German prominent Economist.The mess must be unraveled one way or the other without feeding BANKSTERS on cost of a REAL ECONOMY.Back to
    stability and Growth mode and a new GOLD EURO “Who wants the FIAT USD anymore!
    The final blow to WALL Street dominio!The monster CASINO must be stopped before we face the real DISASTER!

    • A “new GOLD EURO”??? Back to national currencies while keeping EURO as a Gold Standard without relying on GOLD? These are not interesting ideas. They are idiotic ideas. What would be the point and the advantage (to anyone in the current EU periphery, for example) of returning to national currencies if they’re not floating? What does “who wants the FIAT USD anymore?” actually mean?
      The only possibly interesting idea that preserves the Euro is to turn IT into a ‘fiat currency’, coupled with a real, directly-elected Executive with a proper European Union ‘Department of Treasury’ and a properly instituted and authorized ECB. But that wouldn’t be “good for Germany” (perhaps it would be good for most GERMANS), would it?

  14. Yani,

    After four long years of the same unreasonable (unreasonable is a euphemism perhaps) economic policies, I would contend that Kalecki’s following arguments from his classic essay “Political Aspects of Full Employment” becomes extremely relevant.

    “But ‘discipline’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.”

    “Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow.”

    http://mrzine.monthlyreview.org/2010/kalecki220510.html

    Best wishes,

    Sofianos

    • This is a really old story

      … It is cruel; for, whatever may be the advantages of foreign commerce, if, in order to possess them, half the nation must languish in misery, we cannot without crime endeavour to obtain them, and it becomes the duty of a government to relinquish them. To desire to keep down the rate of wages, with the view of favoring the exportation of merchandise, is to seek to render the citizens of a state miserable, in order that foreigners may purchase its productions at a cheaper rate; it is, at most, attempting to enrich a few merchants by impoverishing the body of the nation; it is taking the part of the stronger in that contest, already so unequal, between the man who can pay wages, and him who is under the . necessity of receiving them; it is, in one word, to forget, that the object of every political society ought to be the happiness of the largest number.This motive is, moreover, ill-founded; for, in order to secure to a nation a profitable export for the products of its agriculture and manufactures, it is not necessary that the rate of wages should be reduced so extremely low, as we find it in almost all the countries of Europe. It is not the wages of the workman, but the price of the merchandise, that should be lowered, in order that this merchandise may be sold to foreign nations. But men have always neglected to make this distinction. The wages of the laborer are the price of his day’s work. The price of merchandise is the sum it costs to gather the produce of the soil, or prepare any product…

      WORKS OF BENJAMIN FRANKLIN; CONTAINING SEVERAL POLITICAL AND HISTORICAL TRACTS NOT INCLUDED IN ANY FORMER EDITION, AND MANY LETTERS OFFICIAL AND PRIVATE NOT HITHERTO PUBLISHED; . WITH NOTES AND A LIFE OF THE AUTHOR. Bt JARED SPARKS. VOLUME II. 

      This is the main cause. Fear of poverty on the other hand keeps it all wrapped up.

  15. An other excellent, and very penetrative view, on what has been written/ said in Greece last week(s) Yanis!

  16. Dear Yanis
    since the subject was brought up, could you elaborate a bit more regarding why TEDGlobal “is a pretty terrible event/organisation anyway” ? (apologies if this inquiry is “off the point”).
    Stay strong.

    • What started as a good idea (the original TED lectures) has become a sordid franchise, on a firm commercial basis, that acts as a bazaar for substandard ideas ‘sold’ to substandard audiences.

  17. @Voluntarily Unemployed: I’m sorry if my sarcasm came across as an insult to the greek people. That was not my intention at all. I was just trying to describe the overall mood in Germany, which I absolutely do not share (unlike, as it seems, Mr very serious Sam).
    What the Greek Government does by spreading the GSS is an absolute tragedy because it is nothing else than sucking up to Merkel and her cronies and sounds very much like following a premade script that was thought up by some neo- classical/liberal economists in Frankfurt in order to whitewash the obvious failure of the whole austerity concept. The tragedy lies within the futility of the whole act, because – as Mr Varoufakis so brilliantly pointed out – it will neither help Greece to pull itself out of this mess by her own Hair nor will it please Mother Merkel enough to loosen her iron grip on an already failing state. She just doesn’t care, because her voters don’t as well.

    P.S.: Unfortunately I can’t send you any money, because despite of what her majesty, the Chancellor keeps telling us over and over again, the majority of germans don’t have a share in the gigantuan profits made by their industrial elite, and I am clearly part of that majority. Sadly, most of us haven’t realized that yet.

  18. A minor correction if I may. Please don’t say that the primary surplus is true. It is just a formality…

    http://www.minfin.gr/content-api/f/binaryChannel/minfin/datastore/5a/73/66/5a7366d902caa9b114ed883095a321d4cd70058b/application/pdf/%CE%94%CE%B5%CE%BB%CF%84%CE%AF%CE%BF_3_2013_%CE%BF%CF%81%CE%B9%CF%83%CF%84%CE%B9%CE%BA%CF%8C.pdf

    As a Business Graduate from the University of Macedonia (it took me 14 years-don’t ask…!) and as a migrant in the UK on the route to qualify as an Accountant (don’t ask again!) I see this as a defiance of any logic and reason. Basically a prior year adjustment (roughly 1.7 billion) brings the adjusted primary result to a deficit of a circa 1.2 billion.

    In addition, the deficit is back on track on April

    http://www.minfin.gr/content-api/f/binaryChannel/minfin/datastore/16/9b/c6/169bc6ee2b329ee12536dcccd1afa0a5d99a2382/application/pdf/M%CE%B7%CE%BD%CE%B9%CE%B1%CE%AF%CE%BF_%CE%94%CE%B5%CE%BB%CF%84%CE%AF%CE%BF_4_2013.pdf

    Don’t give them the slightest credit of truth since they are devious mythomaniacs all the way!

    Keep doing what you do best which is to bring common wisdom to the test of common sense.

    Good luck

  19. O.K. you whingers. Stop undermining our big Greek Success Story. I have more wonderful news to share with you. There is a new draft tax legislation, the umpteenth tax law since our 2009 fall from grace, whereby professionals are to pay advance tax for the current year equal to 90% of the tax they have been set to pay for last year’s income. So, if, for example, you have to pay 100 euros this year for last year’s income, at the same time you have to pay an extra 90 euros for income you have to yet make… So the Greek State assumes that our current year will be at least as good and profitable as the last… (See Mr Varoufakis no need for “tax bond”).
    Being taxed for unrealized and fictional income is nothing new in Greece. As the law stands now this tax advance payment is already 55% for individuals. People owning a flat that is vacant and gives them no income are being taxed as well. In a dismal, falling housing market these homes are constantly been marked up by the tax office. You see here in Greece we are a sunny optimistic bunch of people.
    At the same time the Chinese COSCO enjoys a smorgasboard of tax exemptions, see EU Commission paper 2012C/ 301/04 that is practically accusing Greece for state subsidy.
    It is “fast track” for our multinational benefactors and “f**k track” for private individuals…

  20. Another successful example of the “reforms” that troika mandates comes from Sweden !

    “After decades of practising the “Swedish model” of generous welfare benefits, Stockholm has reduced the role of the state since the 1990s, spurring the fastest growth in inequality of any advanced OECD economy.
    This trickle-down is beginning to taste warm and salty.”

    http://www.guardian.co.uk/world/2013/may/23/swedish-riots-stockholm#start-of-comments

    • Sorry I do not get it. There was no Troika in 1990!

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  22. Dear professor I enjoyed this (please admit it) political rather than based on solid economic reasonance article. However, I will not argue why I perceived it like this…maybe it is just me. Please try to keep your good mind open as it was before meshing too closely with politicians of the right, cneter or the left wing…

    Also a very big detail that IMHO will change/ is changing the route of the things in Greece for the better is that: Greece appeared as a scape-goat to be blamed for all evil in Eurozone financial system and the austerity that came as remedy almost crashed the country. However, considering that the austerity model is here to stay what is needed now is to gradually bring Greek economy to a real (not made-up) very good situation one way or another (even at a high cost). This will then be used as a role-model for luring all other countries into deep austerity letting them hope that something like this will eventually lead them also to prosperity (“like the Greeks made it”)… This will give plenty of extra time to those currently feeding on austerity to decide/plan for a change for the better of all Europeans…

    Best,

    P.S1: “In reality, hope is the worst of all evils, because it prolongs man’s torments.”  ~Friedrich Nietzsche,”Human, All Too Human”, 1878

    P.S2: “Hope is necessary in every condition.  The miseries of poverty, sickness, of captivity, would, without this comfort, be insupportable.”  ~Samuel Johnson

    • Do you see what we are up against? You can try and try all you want, but..

    • From the bottom up: When Nietzsche discusses hope in that passages it referes to the hope of another better life that exists out there on its own or after death. In Zaratustra he claims the birth of hope as the man’s right to impose his will to power his life without any moral or post mortem crutches.
      As for PS2 it just vindicates Yanis’ analysis and the tiltle Orwelian truth.

      I am surprised you did not get the slightest whiff of the evidence presented. If you are a Greek speaker try the Ministry of Finance and Bank of Greece websites as well as the ELSTAT (Statistics Authority).
      Greek public debt as at 31/03/13 is 309 billion euros compared to 310 in 2010!!!In the meantime GDP has shrinked by at least 25% and the ratio right now stands at circa 160%.

      Remind me why we got bailed out in the first place????

      or maybe you are a hired commentator for a Greek banker….you know who…

  23. If Brecht was alive, this Greek Success story would have been his next work.
    Kurt Weil would have written the music for it.

  24. Great analysis profesor, unfortunately you are absolutely right again and if I may add my two cents, the situation is actually (if such a thing is possible) even worse. I really wonder how the people that look at the numbers must feel. How they can keep a straight face and lie in such a way, or if they had any shred of decency left, how the can keep their cool and not have a stroke right then and there when abysmal data comes in week after week, month after month. How is this possible? This is a thought that keeps me up at nights, along with guesses about how the endgame is going to play out. Well, we’ll see I guess. Personally, I am tired of the charade and I would hope that we should just get on with it. Alas because as they say “Hope springs eternal”, especially for stupid people and the ones that do know better are absolutely resigned, we are now in the Twilight zone of “Fake it until you make it (or at least until you become really really good at acting because pretenses are all that matter)” era of economics. Hell, if they can do it for USA, China, Japan and who knows next, they can surely put on a small show for Greece. Its free. Its other people’s money after all. Other people’s lives.

  25. Brilliant post, thank you!
    Small correction in point 4:
    What VAT rebates? There have been no VAT rebates that I know of, at least in the construction technical services sector ie architecture, engineering etc.

    Our company is owed VAT 45,000€ going back to 2010, without by the way, having received the fees for the work this represents [in Greece we pre-pay VAT on the issuing of the official invoice]. Until last month the tax office refused to allow us to offset new VAT against the VAT rebate owed.

    The “good news” is that since April, we are now allowed to offset new VAT against the un-repaid VAT rebates. Which is all well and good except that there is no new work in our sector – construction has flatlined for 4 years now – and ALL fees to our company, in our case, remain unpaid and outstanding from rich greek clients, some ‘oligarchic’, going back to 2009. (Another story!) Our company exists only in name and memory now, and it is arguable at this point if the 45k will ever be used up!

    Stefanos Manos suggested in 2010 that rich greeks have withheld consultants fees from 2008 onward, in case Greece went back to the drachma. Their reasoning was that if this was the case they would pay us in devalued drachma, leaving it to us, the consultants, to sue for the correct amount. Although Greece did not ‘grexit’ it appears now to have become a habit. Meanwhile cases in court are 4-5 years behind; one of our clients has relocated to Bulgaria; another is a successful part-owner of newly sold state assets.

    So middle class professionals are on the street too…..

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  27. Having been forced into a starvation regime, in Cyprus, I do find it disturbing to hear the government spokesmen and its affiliate journos to be heralding a diet that will make us lean and fit. Your parable of the hunger striker so to the point and revealing…

  28. Greece Crisis End Game
    Maybe the Troika have been enforcing an overdose of AUSTEROCIDE bringing patient to
    a near DEATH experiance. Truth all this sacrifices only serves to admit funding to BANKS
    holding GREEK Bonds! EU leaders have a hard time to part BANKS and Sovereign DEBT!
    Greece now with a balanced Current account at price of a suffering population,high unemployment,falling wages etc, really a state like a WALKING DEAD only supported
    by vulture BANKSTERS. Now expected next BAILOUT on Taxpayer Money will be different along CYPRUS model. After German elections when this event is scheduled
    the new BAILOUT model introduced that PROTECT TAXPAYERS not the HOLY EURO and BANKSTERS!

  29. I am not entirely sure if the “Merkel-Schäuble directorate” does even care anymore. While the german chancellor is certainly convinced that what she calls structural reform – i.e.: austerity – is the only real means for a fallen daughter like Greece to make amends for her former life of sin and gluttony to get back into the good graces of the almighty markets, what matters even more to the queen-mom of this euro-germanic empire is the fact that the german electorate doesn’t give a damn anymore. Even the dreaded BILD-Zeitung, which embodies the core of the newfound german notions of supremacy by publishing medial turds like the above mentioned call for greece to sell the Akropolis doesn’t give two sh*ts about the greek economy anymore.
    The majority of german mainstream-media has long since begun to turn the spotlights further to the west and while the Italian elections and the following confusion over the constitution of a new government has kept them busy for a while they are now starting to bring the wrath of the self proclaimed elite amongst european peoples down on France. In which they found a much better scapegoat to project upon the german taxpayers fears of losing their beloved status quo as the posterchildren of the Eurozone, since it is so much of a larger target than little Greece and therfore much harder to miss and especially since the french have dared to elect a so called socialist government though Ms Merkel had explixitly told them not to do so.
    In the meantime a new political party has formed in Germany whose only publicly transpired goal is to “help the southern europeans leave the currency union” in order to effectively turn the Euro into the new Deutsche Mark. (They also have a purely neoliberal agenda, but of course they don’t talk about that as openly and the majority of the german voters don’t have the slightest clue about what this really means anyway.)
    Wether this “Alternative für Deutschland” (alternative for Germany) will even make it past the five percent margin which prevents small parties from entering the german parliament in the september elections is highly debated, but germans on the streets have already expressed their widespread belief that this new party is in fact a much needed alternative to Merkel and the other established paries and that the new guys will teach the establishment a lesson about spending any more hard earned taxpayers money on the likes of Greece, Portugal, Spain, Italy and lately France and on anybody else who doesn’t know how to count properly.

    (Sorry, for the long rant. But as a german I am really ashamed about my fellow countrymens utter ignorance for the catastrophe that is developing all around our little Island of percieved prosperity.)

    • “They (Alternative for Deutschland) also have a purely neoliberal agenda, but of course they don’t talk about that”

      Sure? They demand that hopelessly overindebted nations (like Greece) get a debt cancellation so they can breathe again. They demand that the finance sector must bear its losses himself, not the taxpayers. And so on. Doesn’t sound very ‘neoliberal’ to me.

      https://www.alternativefuer.de/partei/programm/

    • Hubert Marcks, you seem to be a good guy. At least you call for your country to Support Greece.

      Could you please support ME and send me some of your own money instead of the money of your fellow countrymen?

  30. Thank God for your candor (i.e. Cojones) and insight Mr. Varoufakis. Expect that if these arguments against GSS, are uttered here in Greece you will be branded a “traitor”, character assassinated or literally assassinated… Even people that concede to their validity, will tell you that “it is not patriotic to speak against your own house”. The BLS that we are been fed daily by the mainstream media is overwhelming and quite sickening.
    But if someone wants to be a bit more of a stoic and make a (quick) coin in the stock market, one has to acknowledge that this kind of BLS about the GSS, is the same BLS one hears about say, Japanese Government Bonds or Ben Bernake’s perpetual QE. As long there is a greater fool who will buy, let’s extend and pretend and let’s pray that when the music stops it will our “fellow human” without a chair… Not even Marx could have foreseen that it will all come to this.

    • You are right about the same bls everywhere.

      Aspects of the same coin, the aim of it being the mobilization of savings.

      Increasing the amount of money in Japan, haircut of saving in Europe.

      But it won’t kill the Japanese.

      Greeks on the other hand are being cheated into their own grave…

    • It is Greek politicians that are being cheated into their own grave…

  31. “the international press seems to be buying this propaganda.” I am not a conspiracy theorist. But I would venture a guess that the international press is not exactly “buying this propaganda” so much as playing the we MUST reelect Merkel! game, for their own purposes.
    After all when the Greek establishment has started gleefully quoting the Bild newspaper (of sell the Acropolis” fame), then you know that there is something very much amiss here.
    I think the saddest part of this modern day Greek tragedy, because tragedy it is, is that although the Greek government have a great bargaining chip at the moment, for a short space of time, in that Merkel will do anything not to upset the apple cart till she wins her election (failure to scrutiny the banks being an important case in point) the Samaras-Stournaras duo not only fail to use this golden opportunity, even for insignificant little things like the VAT rate and consumption tax on fuel, but positively suck up to the Merkel Schauble directorate, doing their very worst, in a most obscene way, leading what is left of the Greek economy straight off the cliff.
    Your metaphor of the hunger striker is exquisite. We are indeed at death’s door.

  32. IMHO, the GSS is more of a Merkel script than Samaras’. If Merkel fails to return Greece back to market financing, then Greece is a permanent worry for Merkel.

    The big issue is the level of debt, not the financing of it. With Greek sovereign debt approaching 310 Bil. euros and with an imminent additional 50 Bil. of bank recap increase the total Greek debt by mid year would approach 360 Bil. which is an unbelievable number pointing straight to Troika’s complete failure.

    Such unsustainable debt level opens the door for serious OSI discussions as well as serious Merkel objections about its feasibility. Which brings up back to square one of the crisis. Minimalism, incrementalism and obstructionism by Merkel et al would lead to another kicking the can down the road.

    In plain English, much ado about nothing or “here we go again”. Meanwhile Greece resembles a hamster on a training wheel. Great output of effort inside the cage but not really going anywhere.

    • I think Samaras and Merkel (and many more) did a great deal to make it necessary that Yanis Varoufakis has to explain things like they really are. It doesn’t matter so much that especially this horror called Merkel, and with her a lot of german politicians from green to liberal democrats and more could persuade so many with this barbarian so-called “success story”. The real shame is that the opposition worldwide is so small. Merkel is free to do whatever she wishes….Too few people care about all the mistakes and lies…. That a “GSS” is even possible without 80% of all shouting “stop that lie” – that is the problem…

      If GSS some day should be more than lies – it would be indeed Merkel’s and many others victory, and Bush, Obama, Blair, Schröder, you can go on and find hundreds of names – to establish market-radical societies with 25-60% being some day in the future really, really poor. Our media will tell those poor then that “everyone can make it”. The typical market-radical lie, wrapped up in nice cliché films and so on..

      Like you say, Dean, “hamster wheel”. It is a horror that no majority is here to at last SEE what, in Europe, Merkel , but really not her alone, has done. In Germany only about 10-15% leftists clearly see what our block-parties in the middle-mud actually did. And as already told, we have a lot of professors who blurb about their “greek friend” who “was all for Merkel” and so on – not only our Mister Götz Aly in his columns full of hybris.
      People like those, and he is just an example, are really a danger. They pretend to be “unbiased scientists” yet follow a certain cliché. They were extreme leftists as that was cool, and are all for a market-radical system now that would make hundreds of millions poor. Nobody asks them about this change. Nobody asks them why they always follow fashion and the deep need to “be loved” that explains a good deal of this opportunism. A real person who would prefer a society where all can live well had much to wish for today – leftists are desperately needed… And exact at that time they are radicals – that wish for just what Greece suffers.

      Yet they can smile and talk rather solemnly. All these people are responsible too, it is too easy to just name Merkel, even if i get a red face and a deep feeling of horror if I only hear her name since years now. Germany’s majority sees her as a kind of “wise mother” – if that is not prove enough how stupid our mainstream media (95%) are, well, then I don’t know. Yet media in Greece were all for Samaras too, I read the translations, it was horrible… Our ARD news put a lady called Caren Miosga at the Acropolis directly after the elections and she stated smilingly “now is a good day for the greece people”. Nobody tells her how horribly she was (and my mails, ha ha, were not answered^^).

      It is always a bad thing to marginalize the leftists who are for “enough for really really all”. Merkel doesn’t just come up from no man’s land… After her another right-wing-radical would take over. The austerity politics are wrong. Sadly enough nobody has to fear to be taken to court if one makes many millions of people poor, frustrated, running around desperately in the “hamster wheel”…

      There were years and years before, making such a neoliberal politics possible… starting with things we can read about in Yanis’ book.

      Another great post, Yanis, very much appreciated since years now.

    • The damage is already done Klemperer85. The Merkel policies are winning and Schauble gives the impression that has things under control. Regardless of right or wrong, the neo-lib party line prevails. It’s unfair but that’s how things stand. And looking at the German polls, I don’t think there is any deviation at all. Merkel looks like a shoe-in. I am not even sure why the Germans are voting this September. There does not seem to be a need to vote at all. This thing is already pre-decided:

      http://en.wikipedia.org/wiki/Opinion_polling_for_the_German_federal_election,_2013

  33. “3. Wages have fallen drastically giving a major boost to Greek competitiveness and thus heralding an investment boom” I totally agree with your summary Mr Varoufaki. Though I want to add that the food industry can also profit from that. With correct marketing we can get quality products out of Greece and teach the whole that we have a lot more than moussaka, gyros and tzatziki, to offer!

    • Professor Varoufakis, Mr Papandreou will be visiting Edinburgh on June, 11th to give a talk hosted at the University of Edinburgh as part of the events organised by TEDGlobal. He will apparently be talking about “lessons learned from the Greek debt crisis as he helps guide the EU through difficult waters”. It appears very unclear to me, why and how the former Prime Minister can be invited as a figure of authority and knowledge about the matter. Activists have asked that Mr Papandreou be disinvited from TEDGlobal, to which the organisers were very quick to reply (http://blog.ted.com/2013/05/21/responding-to-the-petition-to-disinvite-george-papandreou-from-tedglobal/). Would it be possible for you to comment on this, and maybe tell us whether you think that it is legitimate and desirable that Mr Papandreou continues to inform and form public opinion after his former political decisions, both as a Prime Minister and as member of parliament for many years prior to that?

    • We have seen worse than that: George teaching a whole semester course at Harvard on ‘Crisis Management’. A little like the captain of the Titanic teaching a course on iceberg avoidance. My recommendation to you is: Boycott TEDGlobal. It is a pretty terrible event/organisation anyway. In a sense, TEDGlobal and George deserve one another.

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