Was Chancellor Merkel right (about Greece)?

Is Chancellor Merkel right when she recently said: “Greece should not have been admitted into the euro area”?

Naturally. However, the way that the euro was designed, it was not only Greece that stood no chance of surviving without a major social disaster within the Eurozone. The same applies to the rest of the Periphery and, also, to… France. In short, a common currency without a substantial surplus recycling mechanism in its midst (as the Eurozone is and remains) can only survive long term if it comprises surplus countries. The Eurozone should, in this reading, consist of Germany, the Netherlands, Austria, Finland and Luxembourg. Alternatively, if France et al were to be included, we would have needed a proper banking union (as opposed to the one currently ‘implemented’), a degree of commonality of public debt, and a large scale aggregate investment mechanism which recycles surpluses in the form of productive investments in the deficit regions/countries (see our Modest Proposal for more on this).

Is the scale of adjustment that Greece is facing (after accepting previous bailouts) unprecedented?

Yes. Especially in view that the bailouts did not have the purpose of solving Greece’s problems. The original bailout was a cynical ploy for transferring losses from the books of the German and French banks onto the shoulders of the Greek, German and French taxpayers. The second and third bailouts were merely attempts to hide the truth about the first one.

Would you say that it is remarkable that Greece has been able to (just barely) keep social cohesion? 

Not really. A Great Depression tends to depress people psychologically to an extent that they become ready to accept the unacceptable. At least for a while.

Would Germany have held together if it had to implement such draconian measures?

Under no circumstances. In any case, the German leadership was the first to set aside the Maastricht limits when it had a choice between a deep recession and a milder one. Of course, it could afford to do this being the Eurozone’s surplus nation. As is always the case, the rules do not apply equally between the surplus and deficit nations of any currency union of fixed exchange rate regime.

Why is Greece getting so much of the blame for the Euro crisis when it is the bigger economies like Spain and Italy that pose greater threats to the Eurozone?

Because it was the canary in the mine. It was the first and flimsiest economy to betray the common secret that our Eurozone project was badly flawed. It was thus a prime scapegoat candidate.

Do you believe that part of the reason why Greece’s financial crisis is so acute is because it is such a young democracy?

No, I do not. Perhaps the root problem (which is linked to our dictatorial past, but which is similar to the Italian experience) is the Greek elite’s incapacity to act as a national elite. Instead, it milks the country dry on the promise that it will pass the task of reforming the nation’s institutions to something it vaguely refers to as ‘Europe’. Alas, ‘Europe’ is neither interested in nor capable of such a feat. Initially, ‘Europe’ was only interested in Greece as a market with low levels of private indebtedness. Now, it just wants to get rid of it but knows not how to do it without losing Spain, Italy and, ultimately, France.

What do you think is the answer to Greece’s problems?

To try out a policy we have never tried out before: To tell the truth both within the EU’s institutions and in public: The Greek state is insolvent, the bailouts have created a new cleptocracy amongst our bankers, and the quadruple crisis (banks, debt, investment and poverty) cannot be addressed through more loans under the imposition of greater austerity (which shrinks the incomes from which the burgeoning debts must be repaied).

Do you think that a third bail-out can solve any of Greek problems, or the Troika is just “buying time” (even if there’s no MoU, as Mr Stournaras has suggested)?

None of the bailouts had the purpose of solving Greece’s problems. The original bailout was a cynical ploy for transferring losses from the books of the German and French banks onto the shoulders of the Greek, German and French taxpayers. The second bailout was merely an acknowledgment that the first bailout had imposed upon Greece conditions that it could never meet. Similarly with the one being prepared now: Greece has committed, as part of the second bailout, to return to the troika €27 billion from the time the loans dry out April 2014) to the end of 2016. This would necessitate primary surpluses of nearly 5% every year for three years, all of which should be transferred out of the bleeding country and to the coffers of the troika. Everyone knows that this is economically impossible and politically explosive. So, this is what they propose to do: Adopt the bankers’ favourite trick of ‘extending and pretending’ bad loans. They will, in practice, allow the Greek government not to pay anything much back between 2014 and 2016 (they will, in effect, reduce interest to zero over that period) and extend the repayment period for principal plus interest by an additional decade or so. This way, they will be extending Greece’s insolvency ad infinitum.

Is there any possibility for Greece to ‘survive’ inside de euro? Is bankruptcy inevitable?

Greece defaulted twice already and will be defaulting a third time – since the reduction in interest rates coupled with the extension of the repayment period is an effective haircut of its debts to the troika. So, the bankruptcy has already happened, in doses. Can Greece survive inside the euro? The answer is that Europe is planning to allow it to languish inside of the Eurozone, tending toward a state that resembles Kosovo. Will the Greeks tolerate this? Probably. However, the most pressing, and interesting, question is: Can the euro survive? I have no doubt that, if the present policies continue, it cannot.

Note: The above Q&A took place a week ago between a German journalist and myself. More details will be published here soon.

46 thoughts on “Was Chancellor Merkel right (about Greece)?

  1. Pingback: Janis Varufakis, ekonomista: Grčka će biti novo Kosovo | Biznis i Finansije

  2. Greece lost two spots in the newest 2013-2014 “The Global Competitiveness Report” from WEF.

    It now ranks 91 (down from 89) behind Namibia. Looks like all the promised reforms were implemented with great success.

    # 1 Switzerland
    # 2 Singapore
    # 3 Finland
    # 4 Germany

  3. Pingback: Yanis Varoufakis: Was Chancellor Merkel right (about Greece)? | Colectivo Burbuja

  4. Yanni, you say than Greece should tell the truth both within the EU’s institutions and in public.

    And then? What should it do next?

    Please, elaborate a bit more on the cure (i.e.update your modest proposal for today’s Greece) explaining in particular how (i.e. in which sectors) you propose to create 1 million jobs, how you propose to restore the demolished healthcare, school system, how you propose to save public property from the cleptocrats, etc. etc.

    Thanks.

  5. Pingback: Yanis Varoufakis: Was Chancellor Merkel right (about Greece)? « naked capitalism

  6. Pingback: Was Chancellor Merkel right (about Greece)? | gold is money

  7. Would Germany, Austria, Finland etc continue to be “surplus countries” without a common currency area to sell to? Would they all maintain their trade surplus? Or would there be some of them that would start to loose their surpluses or even turn to a trade deficit?

    • Just have a look at the trade balances the eurozone countries had *before* this misdesigned and unsustainable common currency was installed.

      You will find that yes, most of the time, the now surplus countries had a positive balance back then already. And, of course, that most of the now deficit countries had a deficit most of the time back then already.

    • Which explains the difference in competitveness culture, that has not changed since then.

    • @VSS and SoundMoney:

      I don’t understand why you guys even bother to read this blog.

      If you really think that it all boils down to ‘competitiveness culture’ or similar germanic fantasies then what’s the point? Do you really think the Greek people haven’t suffered enough so you need to add alittle insult to injury?

      If you really looked at the figures about trade imbalances before the monetary union, you would have to notice that those sacred surplusses, while they were already there, where also kept in check by frequent appreciation of the Deutsche Mark. By entering into a currency union with most of it’s customers, Germany got rid of that little problem and thus has managed to increase those already existing surplusses quite a lot.

      Since I’m sure – going by what you have been writing here in the past – that you consider any kind of economic policy that focuses on raising aggregate demand as the devil’s own work, it is propably futile to point to the fact that this export fixation of the german elite has led to an increasing decline in Germany’s domestic market, which was fueled by the widespread belief that only ‘internal devaluation’ – i.e. reduction of unit labour costs – would enable the german exporting industries to keep up their profit margins.

      Instead of accusing the rest of the world of being lazy idiots, maybe you should have a closer look at what this ‘culture of competitiveness’ has done to the majority of your own countrymen (assuming you are german), who now have 25% of their workforce described as officially ‘working poor’ (by non-german standards, of course) whose infrastructure and public education system are falling apart, who have the least equality in opportunities among all the EU-Member states except for maybe Bulgaria and whose country is one of the worst in the western world when it comes to social mobility.

      But I guess that doesn’t concern you much, sicnce all you seem to be interested in is the evil german tax system that forces you to give up your hard earned money to help finance this mess. So since you’re already revisiting the golden era before the Euro, why don’t you have a look at german corporate-, inheritance-, high income- and capital gains tax rates before 2003 and then tell us again how your precious personal money supply has been so horribly diminished by the state since then?

    • @Hubert Marcks
      Very eloquent answer. I doubt that they understand anything of what you just wrote. Probably blind fanaticism, or just internet trolling, who knows. I know some people from Germany that totally agree with what you described, meaning the large socioeconomic gap and the 25% of the workforce employed in mini-jobs. I really hope that this is going to be the central issue on the upcoming elections and not Greece and its third default. I get a sense that this issue is being used as smokescreen by everybody since the socialdemocrats where also responsible for what happened. I hope I am wrong because what Europe needs is for Germany to address its own internal imbalances.

    • @Hubert: thank you for this accurate analysis.

      For the life of me, I also don’t get why all these Germans and EU-phobes and Hellenophobes are commenting here and on other Greek sites. I suppose a good psychiatrist would be able to explain, but it beats me.

    • The difference in competiveness culture is exactly what you say. Before the monetary experiment, the South used devaluation while Germany etc. increased productivity. I do not say which is better and anyone should do what he likes, I just say they do not fit together. And this is exactly the core of the Problem of the monetary experiment, which we are all witnessing.

      Where did I say that Germany should export as much as possible? Since I do not own shares of German exporters, I could not care less! I think it is very stupid to do this. It is much nicer to be a net importer and have others pay for that!

      What the working poor are concerned: The Euro was a great tool to betray these people. Before the Euro German, Austrian etc. workers had a automatic raise with each appreciation of their currency. This was called “social dividend” by the SPD finance minister many decades ago. The Euro killed the social dividend. The sheeple were tought that they Need the Euro in order to have a job. The elites did not say that These jobs would not pay enough to live.

      For a German worker the Euro is the most anti social project in a decade. And now you ask this worker to pay for the debt other countries accumulated in order to buy the products he produced?

      You are right, German infrastructure is falling apart. But they are financing 1000 kms of roads in Portugal etc. Just for the initial cash payment for the ESM (~20 billion) Germany could have build 1000km Autobahn in Germany.

      What the tax System is concerned. Do not worry about me! I would never pay more than 25% (on the total, not incremental). I would just stop working.

    • @SoundMoney:

      “Before the monetary experiment, the South used devaluation while Germany etc. increased productivity.”

      I don’t do very well with numbers, so maybe I’m reading this completely wrong, when I claim that ever since the common currency has been effective, the exact opposite has happened:

      http://epp.eurostat.ec.europa.eu/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tsdec310&language=en

      Looking at this table from Eurostat, I can’t find any evidence for a significant increase in german productivity since the implementation of the Euro, compared to… Greece, for example? In fact, while Germany underwent it’s internal devaluation process, most of the eurozone countries were raising productivity at much higher rates.

      One could certainly reduce unit labour costs by improving overall productivity, but that’s not what has been done in Germany over the last ten years.
      That is a propagandistic fairy tale, which serves only one purpose: to lull the public into believing that we (the germans) deserve to be on top, because we are the pinnacle of efficiency, hard work and sound investments.

      It also has the very convenient side effect of helping to persuade the political leaderships of the rest of the Eurozone countries of the superiority of the german business model – which is in fact simply reducing ULC by cutting wages and social security costs.

      Besides the fact that fixed exchange rates had already been in place before the actual conversion of the national currencies, joining the Eurozone was never used by the german elites as an argument to support their structural reform agenda on the public stage.

      What they used as an excuse to dismantle the welfare state, cripple trade unions and privatize public property has always been and still is the supposedly inescapable need to stay ahead in the rat race of intra-national economic competition they call globalization.

      The Euro has certainly been helpful in pumping up our already inflated current account surplus and beggaring our neighbours, but it was by no means the cause of Germany’s still ongoing internal devolution from a halfway decent social market economy into a market fundamentalist’s wet dream. Only now is it being used to spread this kind of ‘wisdom’ amongst the other nations we cynically still call our partners from time to time.

      Ms. Merkel and her entourage (by way of releasing another flurry of premade bubbles of hot campaign air into the public sphere) have just recently again given proof of their total inability to distinguish between national economies and corporations, or between macro- and microeconomics and are continuing to try to impose that way of thinking on the rest of the EU.

      I really believe that anyone who thinks leaving the Eurozone will take things back to the way they were when German politics still had some trace amounts of an underlying ethical framework at it’s core instead of a high frequency trading calculator, is in for a big surprise when the whole thing finally crumbles to ashes.

    • “Looking at this table from Eurostat, I can’t find any evidence for a significant increase in german productivity since the implementation of the Euro, compared to… Greece, for example? ”

      That is absolutely correct. Before the currency experiment German companies were forced to innovate and increase productivity due to the DM appreciation. The Euro allowed them to become lazy.

    • Why do you think that I am aligned with German big industry, Merkel and Schäuble? I am pro business, free market. But small business and not corporate / politics alignment business like it has been on the rise in the EU and Germany. In any case I do not support French style socialism. But since I am very liberal I have nothing against socialism as long as it is not mandatory to take part in it.

      Since there are more and more people who vote for a living and fewer and fewer that work for a living, I do not work in an employment relationship anymore, because there is too little room to for legal tax optimization. So what my personal money is concerned I could not care less, if the tax rate in any country is x or y. I would just move the revenues somewhere else.

      However, what the simple German worker is concerned I really do care, because I know how much value many of them create. But 20 years ago, the at least got a share of that. Now the government takes a huge piece of the pie via VAT, other special charges and income tax, while giving less and less back while on the other hand sending billions to the EU or EURO countries directly or hidden.

      In addition EU rules and goverment “innovations” make it a nightmare to have an employee or tenant. So what do you do? Correct, you move your companies, somewhere else, make them smaller and have investment real estate off shore. Result? I guess you are smart enough to figure it out.

    • @ Hubert

      You are off track. For instance with

      “Since I’m sure – going by what you have been writing here in the past – that you consider any kind of economic policy that focuses on raising aggregate demand as the devil’s own work”

      you are precisely wrong. Quite the contrary: repeatedly I wrote that the since a dozen or so years declining buying power of most Germans is a huge contributing fact to the German and European problems and should be reversed urgently.

      Which decline is BTW thanks to the combined efforts of an ultra-great coalition of SPDGrüneSPDCSUCDU plus DGB unions plus employers’ federations.

    • @VSS

      I am honestly sorry if I wrongfully accused you of being a hardcore follower of the supply-side economic mainstream.

      However, though we seem to agree at least on the issue of the decline of german internal aggregate demand the grand coalition effectively promoting this unfortunate development, I still don’t see how getting rid of the Euro will improve the situation, either for german or southern european workers/employees.

      If the AfD and their sympathizers got their way and the deficit countries left the eurozone, what would prevent the powers that be from just continuing to redistribute wealth from the bottom to the top, like they are doing now?

      Do you honestly believe that the burden of a loss of profits caused by an immediate downturn in exports due to sudden appreciation of the northern currencies wouldn’t be shifted to the middle- and lower classes and the SMEs via tax excemptions for big corporations, increases of VAT and other taxes for everybody else and the inevitable call for a further ‘tightening of the belt’ in order to help the economy get back on it’s feet?

      What about the propable collapse of the periphery banking system through capital flight and Bank runs and the subsequent ruin of SMEs? What about the effects on the prices of vital import products like Oil or raw
      resources in the south?

      The Euro is not the cause of the desease. It’s a symptom.

    • @SoundMoney

      “Since there are more and more people who vote for a living and fewer and fewer that work for a living, I do not work in an employment relationship anymore, because there is too little room to for legal tax optimization. So what my personal money is concerned I could not care less, if the tax rate in any country is x or y. I would just move the revenues somewhere else.”

      That’s the spirit! Thank you very much for proving my point.

      “In any case I do not support French style socialism. But since I am very liberal I have nothing against socialism as long as it is not mandatory to take part in it.”

      And thanks again, see above.

    • I see. Since you want to force people to take part in a type of socialism that you think is good for them, you must be pro socialism Soviet style with a full blown iron curtain around it!

    • @SoundMoney

      What I want is for people like Ms Merkel and Mr Schäuble to stop forcing people to take part in this type of market driven mock democracy they claim is without alternative and for people to stop pretending that there’s nothing wrong with that.

      What I think would be good for people is to stop listening to full blown egomaniacs who disguise their total lack of interest in social interdependencies as liberalism and declare those who don’t follow this utterly self-centered rationale as freedom-hating minions of totalitarianism.

      And with that I shall hereby conclude this useless discussion on my side and apologize to everybody else for starting it.

    • @ Hubert

      Apology accepted. As for

      “immediate downturn in exports due to sudden appreciation of the northern currencies”

      I am pretty sure that this won’t happen. As I wrote – the exports were already very strong even before the euro was introduced. Plus: up to 70% of the exported goods are based on stuff which is pre-produced in other countries, mostly in the eurozone, a lot of that in the periphery. Thus, if the new currencies of the countries leaing the common currency depriciate, German business would have to pay less for the upstream products and could therefore in balance maintan their competitiveness for the end products.

      Another advantage of the relative appreciaton of the, let’s call it core euro, or even a new Deutsche Mark would be an increase in the buying power of the Germans for products from and holidays in the periphery.

      “shifted to the middle- and lower classes”

      What we have in Germany since almost two decades is a huge and increasing redistribution from the (non-public servant part of the) middle class to the lower and the higher classes, plus to the finance industry, certain other businesses like the medical-industrial complex, and to foreign nations. That’s why the German middle class is shrinking, in size as well as in buying power.

      There is no transfer from the lower class to anywhere. In the private sector, income and wealth accumulate faster and faster at the top few percent of earners. It is solely the middle class who foots the bill.

      “What about the propable collapse of the periphery banking system through capital flight and Bank runs and the subsequent ruin of SMEs”

      I believe that there should only be sound and healthy banks. The rest pls. go to hell instead of getting bailed out, what perverted sort of capitalism is this anyway, where bank profits are kept private and their losses are socialized? Savings up to 100k€ must be proteced. Cyprus could, partially be the role model.

      I am strictly against keeping zombie banks alive, and if the Eurozone countries, including Germany, would have started in 2008 with the same tough re-structuring of the banking sector as the USA started (far from finished yet, of course), the most problematic banks would already be liquidated since long.

      If you say now tha this might be right but the chance is gone: yes, it is gone, the more important it is to forcibly restructure the European finance industry *now*.

      Capital for the SMEs should in the meantime be provided, if necessary, by the then nationalized banks.

      “The Euro is not the cause of the desease. It’s a symptom”

      Before the Euro was introduced, none of the huge distortions we have now existed. And there was peace, there was free travel, and there was most of all not such hatred between the people of european nations. The Euro brought the unsolvable problems, so for me it is the cause, not the symptom.

  8. >>Would Germany have held together if it had to implement such draconian measures?

    Can you please compare German tax rates and Greek tax rates? Maybe it would put a bit more meat on the bone.

  9. Your “modest” proposal is misleading. Keynes proposed, with Bancor, a mechanism that would forbid excessive commercial surpluses or deficits. States had to accept modifying their exchange rates in order to return to more equilibrated balances. This modest proposal had never been accepted.
    Your recycling mechanism is slightly more ambitious : instead of reevaluing their currencies, excess states should have to abandon their surpluses and dedicate them to deficit countries.
    Technically modest maybe but politically huge.
    Instead on relying on such gamble, maybe you should advocate for an orderly breakup of the eurozone…

  10. Ok here’s another great post highlighting the loss of competitiveness hysteria:

    “Greek Imports Exports share of domestic demand”

    A quick post on the topic of Greek imports/exports and their connection to domestic demand. The graph below shows the share of intra/extra-EU Greek imports to domestic demand as well as the share of intra-EU Greek exports to EU domestic demand (minus Greek demand) and Greek demand. An increasing share of imports and a declining share of exports (in terms of EU demand) would point to a loss of competitiveness. A stable share on the contrary would be in favor of the trade/income connection:
    http://kkalev4economy.files.wordpress.com/2013/08/greek-imports-exports-share-of-domestic-demand.jpg

    What is clear is that:

    – Intra-EU imports were very stable at 12-13% share during 2003 – 2008.
    – Intra-EU exports as a share of internal demand were also very stable during the same period.
    – Intra-EU exports as a share of EU internal demand not only kept their share but also managed to increase it from 7.4% in 2002 to 10.6% in 2008 (scaled by 100).
    – Extra-EU imports was the only category showing an increase, at least after 2005 (from 8.5% in 2004 to 10.9% in 2008). This category though includes imports of oil and ships and is affected by the exchange rate.

    The idea of a loss in competitiveness does not appear to be supported by the data. This is also evident if one checks Greek Real ULC relative to competitor groups (series OLCDO in Ameco). Real ULC are very stable after 2002 with a declining trend:

    http://kkalev4economy.files.wordpress.com/2013/08/greece-real-ulc-relative-to-competitor-groups.jpg

  11. “The answer is that Europe is planning to allow it to languish inside of the Eurozone, tending toward a state that resembles Kosovo. Will the Greeks tolerate this? Probably.”

    This is truly sad for a people who were once proud and fierce fighters for their independence and for a period the shining light in WW2 repulsing the Italian invasion? What would this generation of Greeks think about a German occupation without firing a single shot! What would Penelope Delta think about Antonis Samaras, talking about trying to be credible with Merkel and Schauble…..

    • “What would Penelope Delta think about Antonis Samaras, talking about trying to be credible with Merkel and Schauble…..”

      Spot on Diran, I have often thought she is spinning in her grave – along with Stournaras’ ancestors!

    • Barry Fay, world war two is not a trope. For me it is part of my life. Besides after the Greeks started writing histories a few thousand years ago nothing is old. As I read the history the Germans were behaving the same before the WWI, before the WW2 and are behaving the same way now. After so many years and millions of dead we don’t have a change. Don’t try to cover yourself by shouting off the reality. As you say, it is not helpful.

    • @Demetre I can see why a Greek would want to live in the past seeing as how that once great nation has become a beautiful but powerless country. Your hatred of the Germans (I am an American living in Berlin) is completely irrational and the result of your having swallowed a concerted and conscious propaganda effort by the Alliesto paint the Germans after the war as being the only ones responsible. Notice how the Italians and even the Japanese have been somehow exonerated and don´t have to hear all the accusations about their past!. And to talk about pre-World War 1 and how the Germans were “behaving the same way” is absurd. The most rapacious colonialists in the world were the French and the English (oh, yea, they WON the last war so they are all right now!) – NOT the Germans. It was only when the Germans wanted to get into the game that the French and English colluded to hinder them. But, being a nation of innovators and scientists and hard workers, they were not to be so easily thwarted. (Example: at the time of WW1 the Germans accounted for 84% of the production of chemicals in the world – chemicals, I might add that went on to change human existence. If this is giving you a headache, take an ASPIRIN!). And if you are looking for scapegoats you would be much better off turning to my country which has slowly become a fascist state and a threat to the world, not just Greece. And under the rubric “my country” you should include the IMF and the World Bank! The Germans are only pawns in the game. Wake up.

  12. Most of this could have been written by me. Actually, most of it was written already by me, here in this blog. Just my wording was less eloquent than yours.

  13. Excellent interview. I liked the points about the Greek elite and the Kosovisation of the Greek economy. You predict that Greeks will come to tolerate this situation that’s fast approaching them. I am sensing the same thing unfortunately. I often wonder why this is the case. Personally I attribute it mainly to the median age of close to 41 in our society. Combine this with the fact that the most able and dynamic part of society being fed up and disgusted with what they experience is seeking a better life elsewhere and you end up with a stagnant, decaying social structure where the strong stay alive by cannibalizing the weak.

    • I have wondered about this myself, Tasos. I agree with you regarding the impact of Greece’s older demographic. Recently, I also remembered the onslaught of negative stereotypes against the Greeks that took place at the start of the crisis. Before, no one talked about the Greeks. Then, at the start of the crisis, it seemed as though people were coming out of the woodwork, posting comments describing Greek people in a most despicable way. Suddenly all the newspapers around the world were talking about what tax cheats Greeks were, and, by the way, they were lazy too. Even more blameworthy during this episode were Greek politicians who smugly talked about a “culture of corruption.” Call me a conspiracy theorist, but it is hard to believe this was not in some way orchestrated, perhaps to direct people’s attention away from who was to blame for the crisis (the government, the banks) vs. who was to pay for it (the people). This all must have affected the self-esteem of people living in Greece even worse than it did my own (having been raised in the US). Perhaps this amplified the sense of learned helplessness that Prof. Varoufakis describes as being the result of a great economic depression.

    • There was no conspiracy behind the negative campaign against Greece and the onslaught of stereotypes. What happened was 100% the fault of the Greek ruling elite. It was part of their effort to shift the blame for the state default on the Greek people as well as a conscious effort to put the masses in a state of collective guilt in order to facilitate the implementation of their neo-liberal agenda. That was the reason for the rhetoric of the Greek officials like Papandreou, Papakonstantinou and Pagkalos. The reasons behind the defamation campaign in foreign media were somehow different. First, they had no reason to challenge the narrative coming from the Greek officials. Why should they? It was very convenient. Secondly it was in accord with the narrative chosen by their ruling elites that served their national interests. This narrative was chosen by the elites of Germany, France, and so on because it cornered the Greek ruling parties and forced them to accept whatever it was presented to them. By slandering the Greek people domestically the elites of our European “partners” forced a very specific course of action on their Greek counterparts by effectively eliminating all other options by way of public outrage. This made sure that the measures found in the various memorandums were the harshest possible and that any discussion on the faulty nature of the eurozone or the fact that there is a shared responsibility between the international banks that loaned money to Greece and were now exposed to huge losses and the Greek government that borrowed the money was off the table. They did a pretty good job actually, considering what their interests were. It is not their fault that our leadership at the time was and still is completely incompetent and had only their temporary political standing in mind. At least there is some comfort in the thought that this will prove to be their final mistake. All the parties that not only failed to defend the integrity of the country and its people but also contributed to this defamation campaign eventually will die politically having alienated themselves from the people completely. The socialist party PASOK is already politically dead and will probably struggle to make the 3% limit in order to enter the parliament should elections take place. The conservatives of ND are barely hanging in there and they now depend completely on the debt relief they presented to the public as the ultimate goal for their sacrifices. When that narrative collapses as well it is game over for them also. There is a valuable political lesson to be learned here: never, ever accept and spread slanderous propaganda on your people. Nothing good can come out of it.

    • Finally, someone confronting the ugly nationalist rhetoric against Germany accusing it of fomenting negative images of the Greek people. And absolutely right – the Greek elites were in on the game from the start. But that fact is gladly ignored because it is so much more fun to hate a scapegoat like Germany (especially Germany, because then the Europeans can bring up the war, i.e. those glorious times when they were better off than the Germans!)

    • @Maria and Taso,
      I am not sure if that sudden and horrible bashing was orchestrated – from my experience I don’t think that would even be necessary in our modern media. I read, just an example, the same nonsense and prejudice about greek people I always read in Germany – in swedish media too, not in any way related to each other.
      It seemed more like ‘one repeats what the other wrote’? Seems that is more dangerous than a plot behind it would be.

      Just two examples the greek journalist Michalis Pantelouris spoke about in an interview with leftist-paper “Junge Welt” (August 14) about his frustration with his journalist job and that he’ll do something else now.
      (the great blog by Michalis Pantelouris told me first time about Yanis Varoufakis when we had only those ugly prejudice-reports available in Ger-money).
      First Pantelouris told, to illustrate his opinions on journalism today, that german BILD made a big buzz about that our green party would want 1 “Veggie day” per week. “Bild” reported this like it was something entirely new. In reality the idea was ages old! Now if it would have been only this ugly paper – but that is not how media work. Pantelouris tells us that all media, including the ones that think they are so superb, and the news agencies too jumped on that train… Thus repeating an old fart and creating – successfully – another lame hype.

      Second example is the war in Afghanistan, supported in Germany by CDU/CDU and FDP, SPD and green party alike. As Pantelouris rightly says, (he was against that war from the beginning) – nobody in Europe has a real clue about what is really happening… What it means for the families of the soldiers. (It was a media-horror – as the german left party said it was a war (what else???) followed years of bashing because of exactly that. It took Merkel and her former secretary of the defense, zu Guttenberg, quite some years to admit it finally, and a lot of journalists just repeated the official statements. Unbelievable, really. )
      Pantelouris then goes on to tell what he usually hears about Greece and german money if he asks someone in the streets here (and I heard that many hundred times too, just like everyone who asked).

      Pantelouris rightly states in his interview that the political journalists are now a part of the political class. It is the job of journalists to tell people about relevant facts many politicians do NOT let us know. Like about Greece.
      And this is a huge problem…since many years now, how people are informed – or not.

      A great interview, Yanis. It will hopefully be printed soon?

  14. Pingback: Yanis Varoufakis: Grim prospects for Greece | Arjen polku

  15. Hopefully this might be the last memorandum and last default. Coupled with the fact you mentioned, in a tweet, Euro breakup certainty is close to absolute.

    • Euro breakup? If it were indeed on the precipice would there be at least a tiny decline in its value? It has recently GONE UP against the dollar to 1.32. In fact it has remained strong for the whole time of the crisis. The gloom and doom crowd, on the other hand, have been making this “predicition” ad naseum continually during the whole period and with no sign of embarrassment – a sure sign of a fanatic.

    • Yannis, Cancelor Merkel knows very well to whom and why Germany gives money. Just explain to yourself why Germany and the other central European countries do not intend to send army to Syria as long as Russia is against this war. Are they dependent on Russian gas ?

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