Open letter to the Greek Prime Minister

Dear George,

A few days after the 2009 election that brought you to power, you told your cabinet in a televised meeting: “We are anti-authoritarians in authority”. Most of your cabinet, men and women who had been craving authority for years, looked at you incredulously, while your detractors mocked you. You seemed rather lonesome at that moment. And yet, to the degree that I know you, you were utterly authentic in uttering that thought.

Since then much poisoned water has flowed under the proverbial bridge. The utopian declarations were swamped by an angst-ridden effort to save the country. It forced you not only to clench your teeth, and to drown out your utopian self, but also to renounce some of your basic convictions about what ought, and what ought not, to be done by those in authority. To the extent that I know you, I am convinced you considered your harsh decisions to have been the best of a hideous lot. And I can imagine your loneliness just after you took each one of them.

Thus we arrived in May 2010, a juncture where you were ambushed by the most momentous decision any peacetime Prime Minister has had to face hitherto. You know that we disagreed on whether it was the correct decision. It matters little now. They convinced you that the deal you put your signature to was a genuine bailout; a lifejacket offered after a shocking shipwreck for the purposes of allowing the shipwrecked a chance to buy time and find their way, through stormy waters, toward some terra firma. I considered the same ‘bailout’ a massive ball-in-chain, attached to our collective ankles, dragging the whole of the eurozone toward the bottom (surplus and deficit nations alike, North and South bound together in a deathtrap). You chose to follow the advice of your counsellors, and of the captains of finance, judging that the ‘bailout’ was, indeed, buying you precious time. Nevertheless, to the extent that I know you, your decision filled you with angst and sadness.

For months now you knew that the ‘bailout’ was failing because it was in its DNA to fail (and not because it was not followed as best as it could have been by your government). We, economists, as you well know, disagree on almost everything. History has, however, taught us two lessons: (1) You cannot save the bankrupt by means of expensive, new loans; and (2) Swinging austerity cannot and will not reduce the deficits and debts of a macro-economy caught in a savage recession, especially when it is unable to devalue its currency and, to boot, forced to operate in a recessionary global and regional environment. Last year’s ‘bailout’ violated both principles. Is it any wonder it failed?

Did you not know that it would? It is possible that you were hoping for a miracle of an economic (e.g. some major spurt of growth in the European economy that would help drag Greece out of the mire) or perhaps a political kind (some visitation upon Mrs Merkel by the holy spirit). Alas, it did not come. And now you are being called upon, for a second time in a year, to go against the grain of you beliefs, your facts, your instincts, your experiences (of the past year, at least). They tell you, just as they did last year: “Prime Minister, think of what will befall our nation if we do not secure fresh loans. How will we pay public sector wages and pensions?” To the extent that I know you, I know that you are biting your tongue.

Some months ago you became acquainted with a simple three step policy, called the Modest Proposal for Overcoming the Euro Crisis. My information is that you think of this proposal highly, both in terms of its technical merits and of its potential political appeal (even amongst German, Dutch, Austrian and Finnish audiences). Indeed, you have been recently informed that this proposal has been adopted by the European Trades Union Council, at the behest of its German and Austrian chapters.

As you know, the three policies inherent in the Modest Proposal address effectively (and without invoking the need for any substantial amendment to the Lisbon Treaty) the three sub-crises: (A) The banking crisis that is raging within the eurozone from France to Greece and from Germany to Spain; (B) The sovereign debt crisis that is dragging the periphery down (and along with it the ECB and the surplus regions of the eurozone), and (C) The crisis of under-investment that only a pan-European investment-led recovery program can deal with, thus putting the lasts nail in the Crisis’ coffin. If I thought you disagreed with this Modest Proposal, I would not have referred to it here. But I very much… fear you agree with it. (If not, please say so.)

You may say: “Let’s say I agree with your proposal. How can I, as PM of a small, bankrupt nation, go to Brussels and propose a revamp of the whole of the eurozone? Especially when my present advisors tell me to drop any such ideas?”

If you do say this, my answer will be: How can you, as PM of a small, bankrupt nation, go to Brussels to accept a new multi-billion loan which will, under all plausible assumptions (even if all privatisation and spending cut targets are met to the full), fail to slow down (let alone reverse) the explosive path of the country’s national debt? How will you, and the other EU leaders, deal a year from now with the legitimacy crisis both in Europe’s North and South which is inevitable as the loan guarantees of the German and Dutch taxpayers end up (via the Greek state) in the coffers of quasi-bankrupted zombie banks, while all along Greek debt continues to rise, Greek GDP is falling, the Greeks are pushed further into misery without anything to show for it, and the Dutch and Germans are asked to dig deeper one more time to ‘save’ them?

You may well ask: “So, what do I do then?”

I shall answer you in a manner that will sound utopian to many but which I am convinced is your last realistic chance. If anyone can understand the realism of my suggestion, that person is you: Hop on your pushbike this evening, alone, without bodyguards or advisors, and cycle to Syntagma Square, the central square in front of our Parliament where the anti-austerity, anti-government demonstrations occur every night. Once there, people will heckle you at first but, seeing that you are alone, the crowd will part like the Red Sea and a path will form that allows you to move to the square’s centre, where a Speaker’s Corner has been set up. Request from the organisers the right to speak for twelve minutes, the length of time allotted to all comers. And address the stunned crowd.

Tell them that the time has come for Greeks to reclaim our lost dignity. Announce that your government will not accept any more loans as long as the eurozone is refusing to debate its institutional restructuring and policy orientation along the lines of a set of rational principles. Proclaim that your government, if need be, will proceed within the eurozone but without loans. If anyone asks you what are the rational principles on which the eurozone must be refounded, and how this could be achieved expeditiously, you know the answer; we have provided it in the Modest Proposal. You have already studied it, anyway. Explain it yourself to the amassed people. And add that until a debate is held in Brussels along these lines (lines that serious European politicians like J.C. Juncker and G. Tremonti have already drawn), you will not accept a single euro from our partners. State clearly that you will demand a debate on the idea of a eurobond and on the use of eurobonds in order to energise the European Investment Bank so as to effect a New Deal for Europe. Suggest that the EFSF should be recapitalising banks instead of lending to states. Show your people, and the world, that you know that there is an alternative. Make it abundantly clear that until this debate creates new prospects for growth and prosperity in the eurozone, Greece will do that which it ought to have done ages ago: To live within its means! And if they ask you about how you will pay for wages and pensions, answer that you will reduce the highest public sector salary to the level of the second largest and then both to the level of the third largest and then these three to the level of the fourth largest; and so on until all the necessary reductions are effected so that the Greek state breaks even. Add that we shall end all defence contracts till further notice. That the Greek state will do all that is necessary so as to survive without one euro of additional, expensive loans from the EU.

As you are approaching the end of your talk, raise your voice and say that it is preposterous that the same people who accuse Greece of living off borrowed money are now insisting that today’s bankrupt and humbled Greece take out many more billions of loans when everyone knows that it will be impossible to repay them. Finish up by drawing a comparison with the spivs in the US who, prior to 2008, forced expensive loans upon insolvent poor families, only this time the deed is aimed against a  whole country. Declare once and for all that as a European citizen, and Chair of the Socialist International, you do not feel you have the right to sign another loan agreement that jeopardises not only a small Mediterranean country but the whole of the eurozone and, even, the idea of a united, democratic Europe.

At the very end, look into one of the cameras trained in your direction by some member of the audience, the video of which will soon find its way onto youtube; look into its lens and address the German viewer, in English, saying: “It is a scandal of the first degree that you, the hard working German, should be furnishing loans to my government which, tragically, I am forced not to use to reinvigorate our ailing economy but which I am coerced to pay back zombie banks which, fully aware of their awful state, hoard the money, refuse to loan it to business and, thus, end up like black holes that absorb your economic energy at the same time that you Greek counterpart here is suffering with no hope for the future.”

At that point, wave a short goodbye and walk toward your parked pushbike. For the first time in a long while you will not feel lonely anymore. You will have contributed toward a moving moment of participatory democracy; the form of democracy that you and I discussed quite a few times, and shed a lot of ink as well as sweat trying to incorporate into your party’s platform all those years ago. Syntagma Square may not be, as the demonstrators would have liked it, a locus of Direct Democracy (something that requires not just participation but also real executive power) but  it does, I think, constitute a modern rendition of the Ancient Agora in which the anti-authoritarian George I know fits like a glove.

We await you tonight. Around 7pm would be nice!

PS. Now that I think of it, perhaps it is better not to come alone. Why not bring along (as long he too possesses a pushbike and wants to partake) your old friend from college, Antonis Samaras (the leader of the Official Opposition). Take turns to address the crowd, singing from more or less the same hymn book, thus making history. Did our European partners not demand of you consensus with the opposition at this pivotal juncture? Let’s give them consensus then.

53 thoughts on “Open letter to the Greek Prime Minister

  1. Pingback: La “Modesta proposta per superare la crisi dell’Euro” di Yanis Varoufakis « Verso un Mondo Nuovo

  2. Taking the bicycle to Syntagma…
    I am just a humble Greek citizen of Corfu Island. I have lived and studied economics and computers in US on my own and for many years I dealt with life’s unexpected crises most of the time with success. The only thing I want to convey to my young boy is the bicycle theory to Syntagma. Taking the bicycle to Syntagma is far more dynamic as it super exceeds an energy movement from a million people standing there. Please do not ask that of the people raised with a golden spoon…They just do not have what it takes!

  3. Pingback: Ανοικτή επιστολή στον Πρωθυπουργό « Ἐν ἀρχῇ ἦν ὁ λόγος πολιτικός

  4. An interesting speech, the issue here is how one can transform words into deeds and evaluate the repercussions of such deeds. When one is in the opposition it is easy to convey ideas and actions to your opponent who must implement such actions without taking into serious consideration the political and economic repercussions that may manifest and have dire consequences to all concerned.
    Let’s focus on why we are in this dire situation and in my opinion what events transpired that led to these economic conditions.

    Here in Greece we have to analyze what went wrong and how do we remedy the situation? I believe the recession we are enduring is not linked to the
    mechanism of the capitalist system. The major problem here (not the only
    problem) is prevalent corruption that exists in the public sector that
    spread to the private sector and wrong policies pursued in the past. The
    previous governments never endeavored to assist the private sector to be the
    engine of growth in the economy. Instead with all the red tape involved,
    inflexible labor laws, the syndicates which in many ways abuse their powers, lack of tax incentives and high interest loans led to the private sector become
    stagnant, hence as a result of the above we had factories closing down,
    for example GM Opel, Nissan, GoodYear, Pirelli, etc. The government instead
    focused on expanding the public sector to employ people and to manipulate
    situations in their favour with the result that we have a public sector (1M
    people including DEKO) which is far larger than other countries with
    similar population levels who have smaller public sectors.
    The above policy with the massive tax evasion, which according to formal
    figures is approx between 30% to 40% of GDP, is outrageous. These issues
    along with the scandals that have plagued the greek economy and society
    (from Koskotas and onwards) is totally unrelated to a communist or
    capitalist socio-economic system or even our partners in the EU. It has to
    do with ATTITUDE of all the people in this country, politicians and
    private individuals alike. If the economy ( like a profitable
    organization) was run more efficiently and we took measures to limit government spending by limiting the public sector, provide incentives to the private sector, make sure and monitor as best as possible that taxes are paid,
    etc, we may have had (lets say for arguments sake) a debt of 150B and not
    350B. In such a scenario we could have been in a situation to finance and
    control the debt without the involvement of the IMF and Co.
    Alot of the things that go on in this country from tax evasion to violation of the laws by public officials would never be tolerated in other countries. Many countries of the developed world have their banks on-line with the IRS (DOY) and they monitor everybody’s accounts.
    I am not insinuating that corruption is fully to blame for the current economic debacle in Greece, of course our creditors are to blame who are attempting to exploit our resources as was emphatically pointed out in various speeches in Syntagma. But let’s not forget that corruption is directly linked to lack of productivity that will inevitably manifest problems in the economy. Who will desire to invest here under such conditions?
    It is imperative that prior to criticizing others for our economic woes, we better look into the mirror and exercise self-criticism and try to evaluate where we are to blame.

    One last note, we should teach our students “business ethics” We can only hope that the new generation will have more integrity than the current and especially the previous generation for things to change in this country.

    • Everything you say above is true and to the point, but I have a slight problem with your use of the word “exploit”. When people or corporations are said to “exploit” resources in a politically neutral text, it means simply they are finding ways of using those assets in economic activity. The resources become assets. Without exploitation, factory would have nothing to do. However, the use of the word can be loaded with innuendo as it is a favorite word of left wing propagandists who constantly talk about the “exploitation” of the working class. Creditors are implicit in Greece’s current crisis because of their own and complacency. They simply decided that so long as Greece was in the euro zone, convergence would continue, and Greece’s credit worthiness would trend up the meet the rest. That this was not a cyniclal play on Greece’s irresponsibility is illustrated by the fact that the spreads they lent to Greece at, in no was reflected the increasingly crummy credit risk they were taking.

  5. My reply to Amadel is very simply that the Irish have a solvency crisis regarding their banks. The Greeks do not, they do have a liquidity problem based on their inability to access the inter-bank market. The Irish are vastly better off.

  6. An interesting article by Blloomberg:

    Am I the only one who sees that they have started to discuss a surplus recycling mechanism?

    ”Without some sort of fiscal union in which tax revenue can flow across borders, the common currency puts too much of a burden on economies that fall out of sync. The massive public and private debts of Greece and Portugal arose in part as a result of large trade deficits — deficits that exchange-rate adjustments could have alleviated if they had their own currencies.

    In what could be viewed as the world’s largest currency union, the U.S., automatic federal transfers such as unemployment insurance and tax credits for low-wage earners help the states get through hard times. A supra-national finance ministry could make similar fiscal transfers in Europe, helping to ease the cyclical part of the pain as countries undertake structural reforms.”

    • This would be really popular in the 3 countries that are paying for the reckless spending of the others….

      It is the best recipe for war in Europe.

  7. This is, as well as everything else, a wonderful piece of writing. I salute you, Yanis, and I hope for all our sakes that your friend agrees to do something of the sort.

  8. @Jerry Goldstein
    You are absolutely right.


    If I’m getting this right, you are saying we shouldn’t borrow any more money from our european partners,but we should threaten them that we will cause the collapse of the euro(and our self destruction) if our demands are not met.Those demands will be that someone other than us(the ecb) will pay part of our debt, 60% of our gdp(~132 bn euros),a payment that has to be guaranteed by someone(I’m guessing countries that are fiscally responsible) and that we need a surplus recycling mechanism transfering funds from countries with surpluses to countries with deficits, but it’s more like taking wealth from the north european countries and handing it to the countries in the south.Of course it is very unlikely that Greece with such a mechanism in place will ever produce any sort of surplus since it can live off the money of Germany, BeNeLux ,Finland etc.
    Basically we are asking for a huge donation from our European partners while we at the same time refuse to make any sort of change towards the free market.
    Unfortunately even if they go for it(unlikely) in a couple of years it would be irrelevant.If Greece can reduce its debt and secure an endless river of funds from Brussels our political regime will engage in the usual destructive policy of government spending.If Greece wants to get out of this crisis it’s a necessary condition to liberalise its markets.
    When asked yesterday in Syntagma square why did Greece become unable to borrow money in 2010 you answered that it is a result of the global financial meltdown of 2008.You talked about cdo’s,cds etc and you concluded that investment banks and other investors managed to socialize their losses and at the same time became reluctant to finance the goverments that bailed them out. You did not mention anything(!) regarding Greece’s economy. One easily reaches to the conclusion that were it not for the 2008 credit crunch we would have been able to keep borrowing until Greece’s gdp to ratio became 150%,200%,… I presume the sky is the limit.
    Failing to see the causes of the Greek Crisis(which is loosely connected to the euro crisis) and blaming it on someone other than the policies followed domestically will simply worsen and prolong it.Maybe we shouldn’t ask the europeans to change the structure of the euro, maybe we should ask ourselves to change.

    ps:”Last line of defence” sounds a lot like TINA.I’m glad you are warming up to Maggie.

  9. I think this is an excellent text, which also helps people like me, who live in Germany, to have arguments for the German working people against the propaganda of Merkel (and unfortunately Papandreou himself), and the mutual hate and antagonism they try to create between the people of these two states.

    Thank you Yianis! At these difficult times we need people who make constructive proposals, which address both the Greeks and Germans (in this case), and do not trigger the antagonism between people of Europe.
    I am also very happy for your participation in the conversation yesterday in Syntagma square.

    • Merkel fooled you. She is not trying to create hate. She just wants to look like she is doing her job: Avert damage from the German people.

      In reality she does not care about this. She wants to continue to uild this European dream of the political European class that normal people are staring to realize more and more is unrealistic.

      The Euro crisis will first kill the Euro and then weaken the centralistic EU movements and stronger national states will be the result.

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  11. Typical Mparoufakis, if you pardon the pun.

    Please correct me if I am wrong but it was the greek state that all those years was spending and borrowing like there is no tomorrow. The german state never obliged the greek governments to run huge budget benefits (at least not the last 30 years). It was George’s father, as the author calls him, that wanted to turn Greece into a socialist utopia with other peoples’ money. And of course subsequent governments, left and right, did not resist the temptation of ‘free’ money and are also to blame. It was after his election that George was saying to the rest of world that greeks are crooks and corrupt. He should be congratulated because his managed the unimaginable, to be a sovereign and a bond vigilante at the same time. I honestly am not aware of a historical example of a prime minister that single handedly and voluntarily downgraded his own government’s paper. And again in April 2010 it was George himself that invited the dreaded EU and IMF.

    I have therefore difficulties understanding where the author is taking us. Does he refuse to take up the tab for the party? Or does he want to turn Greece into the socialist heaven that George’s father so admired, namely Albania and Libya?

    The author obviously does not like the evil Ms Thatcher’s policies nor the ‘little’ man Mr Howard. Fair enough, it’s our right and obligation to think critically and decide for ourselves in every democratic society. What the author does not tell us is which DEBTocratic policies or leaders he does like. Is it Uruguay, Cuba, or Zimbabwe? Is the fine economist Castro or Mugabe that show the way forward according to the author?

    The author says “We, economists, as you well know, disagree on almost everything” and most of us will agree. What about armchair economists? Have they reached consensus? Where will they be the day after? Watching the looting from their ivory armchair?

    Thank you for the space

  12. Mr. Varoufakis; your open letter touched me deeply –and i hope that it will be read and heard – and spoken out loud – by as many people as possible – all the best to to you -and all people of Greece!
    Best regards from Germany

  13. Your modest proposal, Mr Varoufakis:

    1) Leaving 40% of a country’s bonds to be attacked by Credit Default Swap speculators hankering for a Greek Default seems completely barmy, wouldn’t you agree?

    2) Where is the modest proposal to tax the 280 billion Euro held by tax evading Greeks in Switzerland?

    3) Why does Greece not have a wealth tax? A modest one, say 5%, would do?

    4) Why is there nothing in your Modest Proposal about banning Credit Default Swaps? Not relevant?

    5) In fact, why do the Greeks not get on with taxing the rich and wealthy, instead of coming up with proposals of how to push the risk to someone else?

    Then the other Europeans might be more willing to help Greece with an amortising loan. 350 bn Euro payable over 30 years at 3% interest. Would take Greece off the market completely, to the complete annoyance of CDS speculators, hedgefunds and other bankster folk. Seems a reasonable suggestion to me. What do you think?

    How about that as a solution

  14. Yanis if you send me a mail address I will mail you an interesting conversation my Husband had with our kocal tax office. As an economist you will find it interesting.

  15. I read your article twice Yanis, it makes good reading anfd that’s all I can say. Maybe in a perfect world (country) this just might work, but not in Greece. Your an academic and not living in the real world. Firstly nothing will solve the problems here in Greece unless you Greeks agree the country is corrupt. The law does not work in Greece, and everybody does just what they like. The public services have become PASOK fodder and together with the unions control private business. For years private businesses have been forced to pay back handers to corrupt tax inspectors. Doctors take gifts from patients and although we have more per capita than other European countries, workers can never find one. Teachers work few hours, encourage pupils to take over schools, and give private lessons fro black money. Solicitors take bribes and run court cases even for cheques with invoices as proof for 5 years until they receive more payment than the funds due. Public jobs carry a 30 percent gift to the ministry concerned which is divided between the ‘chosen few’. Public jobs now have to be advertised but this won’t change anything as the specifications are so exact if you know anything about the product concerned then you know who’s tender will be accepted. Over the past 30 years the corruption from the top has steadely worked through the whole country. Planning permissions – where are the garages? small shops, tradesmen, taxis etc etc – where are their receipts. people upgraded in their last year of employment to take larger pensions. Public workers moonlighting. Nightclubs, strip clubs,bars, paying gifts to local authorities, fire departments, performers, police. You tell me how we can stop this yanis and I will agree to anything because quite frankly whatever we do if we can’t change this mentality, nothing will work. Our main problem in the World is the growth of China and India, we did not protect our home markets. I agree devaluation is the best mediine for Greece, but the patient has to be cured of the corruption.

    • I fully concur with your aforementioned arguments. Your comments to a large extent confirms what I have writen above (towards the top of this page – reply by Toli Cardases). We as Greeks, should stop complaining all the time about our woes by placing the blame on others, it’s about time we put our economic affairs in order and restructure the economy into the 21st century and implement proper measures that will allow both the private and public sector to function effectively.

  16. Pingback: 80,000 Greeks protest even more new government austerity proposals | Matthew Bennett

  17. Pingback: Economy Professor Sent Open Letter to Greek PM – Invites Him to Syntagma Sq | Keep Talking Greece

  18. Professor, Somehow we never met while I served as Economics Officer at the US Embassy some years back. Could have had an interesting discussion as my evaluation at the time was that Greece would not attain the EMU convergence criteria it needed, and could only get in if given a political “pass”…which is what happened. Greece was racing for last place, somebody took pity, let her in, and look at what we have now.

    • The someones are Gerhard Schröder and his French Counterpart Jacques Chirac. They are at least as guilty as everyone else.

    • Germany and France blew through the 3% deficit barrier a year or two later, and the hurdle for Greece was lifted. It was inevitable that Greece would join after the hurdle was lifted. If you think only Greece made a mistake by joining the euro, you’re wrong. People never talk about private debts, but when you account for all debt (municipal, utlitilies, private, corporate, public) there are countries in much worse shape, and austerity measures are taking root in those countries. The small adjustments (relative to the Greek one) they’ve made have brought them to a tipping point. How will unemployed people pay their mortgages and credit cards?

  19. Pingback: Economy Professor Send Open Letter to Greek PM – Invites Him to Syntagma Sq | Keep Talking Greece

  20. Papandreou does not need to speak English to the Germans. He speaks excellent German, much better than most German speak English…

    Germany will never agree to Eurobonds. The cost for Germany would be too high. But it looks like Berlin is afraid of these Eurobonds: I heard from academics in Berlin, that they are running scenarios in Schäubles department what the impact of getting out of the Euro would be for Germany.

    I assume the Fins doe the same.

  21. “We await you tonight. Around 7pm would be nice!”
    I am going to republish your letter to Breznief tomorrow, only I will change the title to: “Suddenly,last Summer” with GAP to be Catharine Holly telling “the gruesome story of Sebastian’s death by cannibalism at the hand of local boys whose sexual favors he sought, using Catharine as a device to attract the young men” Sebastian maybe Greece cannibalised in a trip to markets…

  22. A tad on the messianic side of things, but what the heck, it made Alphaville’s reading list.

    Though I, for one, would not be looking to the Greek government for an overhaul of the EU’s financial system. In fact, it would probably guarantee its demise.

    • I hope you do realize that 8 Founding Fathers of the euro presented this very idea to Europe (taken from a Greek and a Brit). People like Guy Verhofstadt, etc.

  23. More insight on the political woes of the EU in the excellent article by José Ignacio Torreblanca who joined the European Council on Foreign Relations as a Senior Research Fellow and Head of the Madrid Office in September 2007. Previously he spent three years at the Madrid-based Elcano Royal Institute for International Affairs as Senior Analyst for EU affairs.

    Five Reasons why Europe is cracking upé-ignacio-torreblanca/five-reasons-why-europe-is-cracking-up?utm_source=feedblitz&utm_medium=FeedBlitzEmail&utm_content=201210&utm_campaign=Nightly_‘2011-06-04 05%3a30%3a00’

  24. At last – the genie is out of the bottle…

    The first in the queue to buy Eurobonds would be the Chinese who are desperately seeking to move their enormous surpluses – already exerting huge inflationary pressures – away from U.S. Treasury bonds.

    And never more so than if, as pledged on June 30th, the Federal Reserve will itself cease buying them.

    For the last nine months, the Fed has been printing up new dollars and buying huge amounts of newly issued debt from the U.S. Treasury – $600 billion of bonds. And these purchases followed a $1.75 trillion program of direct intervention that ran from March 2009 to March 2010.

    If Bernanke’s decision to stop the presses coincides with a Republican political gambit – refusing to raise the debt ceiling – a default on U.S. Treasury bonds is more probable than not.

    For the first time, on April 18th, Standard & Poor’s issued an unprecedented warning to the United States government, urging Washington to get a grip on its finances or risk losing the nation’s sterling credit rating. S&P lowered its long-term outlook for the federal government’s fiscal health from “stable” to “negative,” and warned of serious consequences if lawmakers fail to reach a deal to control the massive federal deficit.

    The U.S. Treasury bond market is regarded as the ultimate barometer for the health of the global monetary system – a system based on the creditworthiness of the U.S. Federal government.

    World governments can manipulate the Treasury market but in doing so they will eventually hurt the system’s creditworthiness. And fears about the system would lead people to drop paper money asap.

    Talking about opening Pandora’s box…

    • Aftermath:
      Great presentation U gave.

      Too bad PM did not make it to syntagma. I heard he gave up biking after he had a minor accident so there was no way to ride there. -:(

  25. Dear Yanni

    Let’s do a little thought experiment for as moment. Let’s assume that the Greek government has never revealed Greece’s appalling debt and budget figures, and keeps cooking the books, and let’s also assume that no one sees through the scam, so things simply continue without change. Greece keeps borrowing to keep its debt repayments up to date, borrows more to funds its deficits, and so the debt mountain keeps cheerfully growing, Greeks keep buying luxury products, the construction industry keeps steaming ahead, and everyone is happy.

    Eventually, Greece ends up spending all of its tax receipts and all of its incremental debt, just to service interest, and then the collapse comes no matter what the government does. Greece has to go to its creditors either with a rescheduling proposal, or for a co-operative scheme to take on additional debt in a transparent way in order to through the crisis. Whatever would follow on from that, would necessarily involve imposing conditions on Greece that would address Greece’s fiscal life. So it’s pointless to rail against the imposition of conditions.

    It’s also a brave call to arms to ask GP to refuse loans and give a populist speech to the masses. The result would be instant default and greater misery.

    One can complain about the way the process has taken place, which has been dreadful, but could one have expected more from an EU so painfully bureaucratic and with such a high content of domestic politics in a first time ever crisis like the one we are in?

    I agree completely that rescheduling ie. defaulting should have happened at the very beginning.

    But my argument is that even with a default a la Uruguay, Greece would remain in a mess without a plan for growth. My point of contention with you, is that you are playing from a socialist song book in that you are prescribing centrally driven, centrally conceived and executed investment (EIB) without any reference to business investment, removal of constraints on business activity, and the energizing of the private sector, the reform of the civil bureaucracy, and in effect, the complete transformation and reduction of the Greek state. Greece can no longer laugh off being at the bottom of every metric published of OECD countries, from corruption to transparency, from education to medical care, from environment to competitivenes, from justice to tax collection.

    The EIB could play am important role, certainly, in providing funds for public projects that most importantly would generate jobs, but this will not solve the problem. Greece has got to learn to respect (if not love) free markets, to foster competition instead of cosseting oligopolies which in turn pay into the politicians coffers, to clean up its act with respect to corruption, to curb the reactionary and rent seeking unions, and the list goes on. What I would like discussed by someone, anyone in fact, is what the vision is for Greece, what the plan is, what the model is, what you would like to see at the end of all of this, and then we have to hear about how one proposes to get there. The last time I raised this point, you said it was a banker’s argument. It’s not – the role of markets is accepted by just about every country now, from China to Sweden, from Brazil to even Vietnam.

    • If I’m not mistaken Ireland has indeed “respected (if not loved) free markets, fostered competition instead of cosseting oligopolies, cleaned up its act with respect to corruption, curbed the reactionary and rent seeking unions etc.”.

      How come then that it is in the same mess as Greece?

    • Maybe monetarists have been used to pushing financial figures into reality, but the people are not companies. You may believe that, other than religion and democracy, economy can be the next thing that commands the laws people adhere to. This is not going to happen in Greece –be sure of it. The way to reduce corruption in our country –Greeece that is– is not for other europeans to set, and certainly not for “proper” international banking pricipals to dictate. There is no nation that would accept this, especially when the proposed is profoundly ill suited for the people.

      There is no political force overseing markets and banks, yet they ask to be setting the rules for sovereign borrowing, reducing democratic countries to protectorates, abusing them in the worse way –setting global competition as the primary target of society. Politicians have an obligation to reverse your questions: what will the banking system do to not suffer a self-caused domino collapse? What is your answer then and what, exactly, is the way you are going to achieve this in Europe so that there is prosperity and growth? How will the markets exist without countries? If politicians do not do their duty, the people will.

      The reason economy cannot command the laws a society “needs” is that governments and science do not know how to achieve results with society and that countries are not guinea pigs to experiment with. Even worse, societies do not know the answers, not even any reasonable questions yet! How will we reduce corruption in Greece? We do not know yet! You think you know… You are welcome to convince us. You cannot enforce harse rules that do not encompass self-determination.

      Furthermore, there are better alternatives to your global unregulated competition and this world of corrupted financial lobyists allowed to exploit countries. Countries are in debt to private banks? This monetary system fallacy is about to collapse (you do not see the reason in professor Varoufakis proposal to hide its source of illusion by guiding loan interests in real economy investments –so that banking produces something). Financial lobyists and bankers are going to lose their government shields, since they are trying to play with society. You are on a different field of expertise here! Politics may be “the art of the feasible”, but it does not produce results in fixed time. We only need to prove that a less developed economy is viable and popular. Then you will need to answer your questions!

  26. Pingback: FT Alphaville » Further reading

  27. No amount of fancy prose is going to hide the fact that this is so simplistic as to be hilarious.

  28. One of the best pieces of Utopian Reality that I’ve ever come across. Who said that economists can’t transcend Econoimics and point towards Humanism….ευκαιρια για τον τζουνιορ να γινει Γιωργος και να συμπαρασυρει ενα λαο αλλα θελεi cahones…your English is impressive by the way, your articles a chance for education for the layman..

  29. I hope the Prime Minister reads your open letter and act as real leader of our proud nation.

  30. Funny thing is, contrary to what common sense dictates, this COULD ACTUALLY WORK… Remember, the people in Syntagma are not “party-dogs”, i.e. they do not blindly take their orders from some political party… Thus, they would actually let him speak…

    Until some idiot throws the first rock, and all hell breaks out…

  31. Interesting proposal – I doubt it will work though.
    1) The banksters and self serving idiots around him will make sure it will never happen.
    2) Contrary to your view I doubt he is as intelligent as you think
    3) I am not so sure of his good intentions as you are.

    P.S. Hope to see the English version publisher here first.

  32. I must say I was almost really touched…

    (But my cynical down-to-earth inner self, suggests that this is “Holywood only” material…)

    I must also say that I admire your resourcefulness and persistence, at promoting what you believe is best for exiting this multi-crisis.

    May you be heard…


    • Sir,

      well done – profound!
      Thank you so much.

      Excellent written English, your stilistic sense is
      enormous, it`s a pleasure too.

      Greetings from Germany

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