GERMANY’S CHOICE: AUTHORITARIANISM OR HEGEMONY? (*)

For those of us who grew up under totalitarian regimes, it is noteworthy that Europeans are resorting to a time-honoured tradition: telling jokes as a form of defiance. Here is one: “Why did Europeans agree to form the euro?” “Because”, the joke goes, “the French feared the Germans, the Irish wanted to escape Britain, the Greeks were terrified of Turkey, the Finns wanted to prove they were more European than the other Scandinavians, the Spanish wanted to become more like the French, the Italians wanted to become German, the Dutch and the Austrians had all but become German, the Belgians sought to join both Holland and France, and, finally, the Germans feared… the Germans!”

The genuinely good news is that the Germans no longer fear the Germans. Germany’s elites today are confident in their capacity to fend off authoritarianism from within their nation. They have no qualms, any longer, to speak their minds on Europe but also beyond (e.g. the German refusal to join the US in Iraq or NATO in Libya). This renewed confidence has, thankfully, not been allowed to spill over into jingoism or to foster some ambition to rule over Europe. German elites cherish being thought of as good Europeans and have no interest in ordering the rest of the Europeans around.

Over the past four years, of the Eurozone crisis, the German authorities have made a habit of saying ‘Nein’ again, and again, often to the dismay of Paris, Rome, Madrid, Athens – not to mention Washington and Beijing. They have said no to Eurobonds, no to a proper banking union, no to a European Marshall Plan, no to a New Deal for Europe. Even when they agreed to intervene in the crisis, they did so reluctantly, maximizing in the process the cost of doing that to which they eventually agreed (e.g. setting up of the bailout finds, the Greek debt re-structuring).

However, from Germany’s perspective, the repeated ‘Nein’ with which Chancellor Merkel and finance minister Mr Schaüble came to be associated was not an attempt to push others around. German leaders, supported by the nation’s elites and a large majority of public opinion, kept saying ‘Nein’ because they did not feel ‘authorized’ to change the implicit contract they had signed up to with the rest of Europe. They thought there was a clear agreement, cast in stone and reflected in the relevant Treaties, which specified in no uncertain terms: that there shall be no bail-outs of governments; that national banks are the responsibility of the nation-state in which they are domiciled; that common debt issuance was simply not on; that the monetary union would explicitly come with no mechanism for fiscal transfers or for recycling surpluses and deficits across the Euro Area. All that German leaders did, in ECOFIN and Eurogroup meetings, was to remind the rest of these rules and to say ‘Nein’ to any proposal that violated them. Indeed, I have no doubt that, far from wanting to establish Germany’s hegemony over the continent, Berlin and Frankfurt were wishing that this crisis had never hit and that Germany could continue to operate as if a small, open economy minding its own business and making sparkling industrial products that foreigners craved. 

The trouble is, however, that Germany’s attempt to preserve the rules that were the basis of the formation of the Eurozone is bound to fail. These were rules that could never hold once a financial crisis hit, and then mutated into a crisis of the real economy that put the burden of adjustment onto heavily-indebted deficit member-states. Austerity, coupled with some essential ‘bending’ of the rules by the European Central Bank, may have succeeded in keeping the lid on the boiling cauldron. But the crisis’ steam is bound to win the day, blowing the proverbial lid sky high. The principle of the greatest austerity for the nation gripped by the worst recession poisons debt dynamics in the nations that are most indebted and debases our democracies (via the machinations of mass unemployment).

So, in the end, either Germany will let the lid be blown off, and reluctantly create a Neue Deutsch Mark, from which France and the PIIGS shall be excluded (dealing a death blow to the European Union itself), or it will have to accept that the Maastricht rules are dead-in-the-water and in urgent need of a drastic revamp. But to design and implement these new rules, Germany needs to become hegemonic. And to become truly hegemonic, as the United States did after the end of WW2, German elites must grasp a simple, twofold, reality:

First, being hegemonic is diametrically opposed to being authoritarian. Secondly, at a time when a majority of Europeans are suffering from depression (economic and psychological) due to the insistence on old rules that have been overtaken by reality, the German commitment on the old rules is a de facto authoritarianism that not only damages Germany’s relationship with the rest of Europe but, worse still, undermines the viability of the Eurozone which the German elites seem keen to preserve.

In short, the Eurozone cannot survive without enlightened German leadership. An atavistic dedication to ill-conceived rules will confine the euro to history’s dustbin, leading to another German trauma involving the accusation of authoritarianism. Germany can save the euro, and claim its rightful place at Europe’s high table, only by espousing a hegemonic stance. A properly hegemonic Germany must forge new rules that reflect the abandonment of the project to turn the rest of the Eurozone into Bismarck-ian net exporting nation-states. It will understand that a deep cause of its success is that the rest of Europe is not like Germany. And that this is fine, as long as our existing institutions are reconfigured in a way that several realms are Europeanised (e.g. a degree of common debt, a proper banking union and a common aggregate investment strategy); without federalism; and without the authoritarianism that is pushing the Periphery into a 1930s-like nightmare – see here for our detailed proposal.

(*) Regular readers will undoubtedly notice a recurring theme here. This is natural since the piece above was commissioned by Hungarian online daily vs.hu. Similar arguments were presented in Handelsblatt – before being updated for the purposes of the present post.

70 thoughts on “GERMANY’S CHOICE: AUTHORITARIANISM OR HEGEMONY? (*)

  1. Pingback: Nemačka bira: autoritarizam ili hegemonija? | Biznis i Finansije

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  3. Mr Varoufakis, when in front of great questions, we must understand and show the major polarities. I agree with you that this time the deepest polarity, in Europe, is found between the requirement for an economic hegemony and the German authoritarianism. This German authoritarianism is not anymore warlike; it has now to do with a blind observance of dogmatic rules of some supposedly ideal system. One can see here the insurmountable difference between a Machiavellian culture and a Lutherian culture; while the former has to do with a broad concept of democratically accepted political leadership, the last has only to do with a sterile, evangelical approach to very secular things. Every crisis (like the crisis of 1929) can be attributed to the lack of a hegemonic force, as well as to some kind of obsession on some metaphysical “truth”. We really need more pragmatism. I would advise dear Germans to read more Gramsci, more Wallerstein, and to be less (Hegelian) supporters of any “end of history”. We still live here.
    Costas Vergos

    • “Machiavellian culture and a Lutherian culture; while the former has to do with a broad concept of democratically accepted political leadership”

      Aren’t the terms “Machiavellian” and “democratic” contradictions?

  4. All Yanis has to do in resolving his issues with Germany is walk down one block to the Stratfor’s offices in Austin, TX and have a friendly chat with George Friedman. There he would be told that the EU and Eurozone nightmare has practically ended in 2008 and that is a very good thing indeed because now the world is reorganizing under new geopolitical guidelines. Therefore trying to keep the EU and Eurozone alive is way past possible and far from being desirable.

  5. The Karlsruhe Constitutional Court has just ruled that
    “… there was good reason to think OMT exceeded the ECB’s mandate and violated a ban on it funding governments…”
    (http://uk.reuters.com/article/2014/02/07/uk-germany-court-ecb-idUKBREA160CU20140207)

    How do you think they would rule on the Modest Proposal? It seems to me that a ruling on the MP would transform “good reason to think” into “no doubt” that it is illegal, according to the treaties as they interpret them. In other words, from the most authoritative body, “German Hegemony is Unonstitutional.”

    So, again, you are faced with the situation that you have refused to admit for years; for political (now, turned constitutional) and not economic reasons, the only real choices are (a) the _current_ EZ regime and (b) dissolution of the EZ. Not the sane thing, but this is how it is.

    PS. Is it wise for mainstream political parties in the crisis countries to exorcise the (b) option (“painting themselves in the corner of (a)” so to speak), thus leaving it to nationalists (or, in the case of Greece, worse) to gather political clout as the time “the lid blows” (as you put it) draws nearer?

  6. Gianis,
    Your main thrust of the argument is for Germany to realize that the rest of the Europe is not like Germany (net exporting nation-states) and Germany has benefitted by being a net exporter to the rest of Europe. Until now (i.e. before the crisis) this was balanced by net fiscal transfers and in the case of Greece by ever increasing burrowing that raised the debt as percentage of GDP from about 24% in 1974 to about 117% (?) just before the crisis hit in 2009. If the proposed solution is to go back to the same subsidization through fiscal transfers and borrowing that will never be paid back obviously this leads to nowhere and there is no willingness from the surplus countries to go for that in the name of preserving the European project as they did at the early stages. Now the challenge is how to transform the economies so as to reduce the imbalances by organically grown the economies so they can compete in the globalized economy. I understand that this will take time and unavoidably some “priming or the pump” through fiscal transfers is necessary is but it should be done so to facilitate the transformation of the economic model of each country. Europe is not an island and has to compete in the global economy and unless they can do that either the European project will fail through disintegration or Europe as a whole will decline.

    • You are right. The solution is not to go back to an unsustainable situation where Deutsche Bank and BNP Paribas were pumping northern capital into asset bubbles in Spain and government debt in Greece. This is why our Modest Proposal is recommending the Europeanisation of debt management, investment and bank rescues in a manner that pushes Europe into a sustainable recovery, rather than a return to our sinful past.

    • Costa – And it would be so easy to make Greece as competitive as Germany. Make social security contributions a percentage of income. Only tax declared earnings not implied. Reduce central government to law enforcement and national defense and to honour existing social security obligations and stop taking on new obligations. Leave all other “government” activities including setting of tax rates and collection of taxes with regional governments, with regional governments paying a percentage of their tax revenue to the central government, the opposite of the current system. Something more like city states. Move power closer to the people.

      Needless to say there will be resistance to this not because it is a bad idea but because it would smash so many ivory towers.

      Greek city states are the answer. Take the power away from politicians in Athens. Let the cities in Greece compete with each other to attract businesses. Let the Troika deal with 20 regional governments instead of one. Let us see how far they get.

  7. As I see it, the Germany is already hegemony of Europe. When the Prime Minister Papandreou wanted a referendum for people to decide themselves what to do next, the pressure from the Germany was such that no referendum could take place. The condition of any agreement between the troika and the Greek government are in a form of a dictate more like a rape then agreement. Even the fellow who participates here as sound money many times repeats that the Greeks don’t fulfill the agreements that they signed, forgetting that those are not agreements but dictates like proclamations of the victor over the defeated enemy.
    Europe in contrary what Yanis thinks needs to remove the hegemony of Germans. People want to be free and live according to their wishes and culture as it developed through the ages. The democratic principles ingrained in Greek psyche must stay intact. It is much more preferable to start redoing the condition of what people want Europe to be or not to be than what we have now. The majority of people were missing when the system of Europe was designed therefore the system is not really what they want. I like Europe but I dislike German Europe.

  8. Why do You think the Germans have the resources to finance the rest of Europe. The German NIIP is about 1250 Billion Euros. About half of that is buried in the Target2 coffin with an interest rate of 0,25%. Most of the other half is in European support funds like the ESM. Of course the Germans have huge trade imbalances, but they actually need those to pay their tributes to the american finance industry (which “produces” about 40% of the american GDP – no american president can let that go).
    Of course the German are still credit worthy, they could sell all of their industries to the american finance, but would that really help Europe?

    • I do not think they do. This is why our Modest Proposal is explicitly setting out to explain how the Eurozone can be stabilised without requesting a single euro from Germany. Germany’s authoritarianism is, put simply, costing Germany money it cannot afford.

  9. The problem is Germany – not Greece or any other European country. Germany should be forced to exit the Euro and the EU and reintroduce its old currency, the German Mark. The market would then correctly value the Mark in relation to all other currencies, including the Euro. This would bring down substantially the German trade surpluses allowing other European countries to compete effectively against the German economy. That would be a real chance for a stabilization of the present crisis. The accumulated government debts are an illusion since they can not be repaid. Everybody should default on these debts. That would free all economies from the suffocation caused by high debt levels.

    In the past, wars were initiated in order to default on the national debts. It is much smarter simply to default and avoid wars at any price. The financial wealth based on debt paying interest is an illusion anyway. The idea of income without work is the ultimate cause of the present crisis.

    • Unfortunately Germany’s unwanted, unneeded 18bn loan offer to Greece, complete with purely German ‘conditions’ which a new version of Troika will administer shows that for now Germany perceives enormous advantage in NOT leaving the eurozone.

      The debate currently underway in the German parliament as to which new policies different parties would impose on Greece – as if it is suddenly normal or legal for one EU state to determine national policy & law in another EU state (as lamented by Serious Sam above lol) – clearly demonstrates that for Germany: Greece (“a state without institutions!” as the German foreign Minister nonsensically claimed on Monday) is no longer a sovereign nation but a colony inside a German economic lebensraum.

    • The problem is not Germany. The Problem is the insane monetary Experiment called “the Euro”. Other than that you are right.

    • Sadly enough I agree, Elenits. Of course the government and the rest of the parties minus one would not put it that way, “A colony inside a German economic Lebensraum”. The politicians persuade themselves – in talk shows, not if the various NSA-like monitoring mics are out, ha ha – that they were doing something good, following an old ideology. They learnt to present themselves smart. From a political view, dear Yanis, I am afraid Germany indeed is authoritarian in that smart way again, since a few years now. Many are informed, take the Ukraine as an example, that only Putin is a half-dictator who wants to eat Ukraine and so supports Yanukovich, a corrupt politician, whereas Merkel is the freedom-fighter (what the “orange revolution” really meant for the poor Ukrainians is simply forgotten in hoooray-songs.). She is for the brave and democratic figures, oh, sure. Yet in early 2012 Merkels party (“Konrad Adenauer Stiftung”) invited the ukrainian opposition (only a Bundestag question of the left party revealed that, much later), consisting of equally corrupt people from Timoschenko’s party (her old friend and darling of the Bush-Cheney-government Juschtschenko had started to get her in prison. German media are silent about that well known fact to blame only Yanukovich, who indeed went on with that, but our praised Juschtschenko started it.). Merkel’s team further consisted of Klitschko’s “Udar” (the fist, how creative). Klitschko was trained by CDU-“Konrad Adenauer-Stiftung”. Before he had lost some votings in Ukraine. And Merkel’s partner were as the third party “Svoboda”. The leader of that nationalist-fascist party is calling Russia “a country ruled by a bolshevik and jewish mafia”. Meeting with Svoboda and the german NPD happened in 2013.

      The USA call Klitschko, a conservative man but no fascist, “Germany’s man in Ukraine”. “Noble” men indeed, they all, cough. And all are, like the horrible Yanukovich, deeply connected with those super-rich Oligarchs we forgot in our praisal of the “orange revolution” (FAZ reported about the western influence at that time after some year, George Soros was in it too.).

      What the german government wants here is nothing noble or anywhere near to a kind of wise hegemony. Germany takes into account that Ukraine is deeply divided in an old industrial, russian-speaking east and a pro-western west, and what EU offered Ukraine was the old neolib way (50% higher prices for gas in a very poor country, the privatizations and all of the well known things that “helped” Greece and Spain “so well”. A nightmare) The people would have rebelled against Yanukovich if he had agreed and the gas would have been too expensive for a lot of poor people – a nice try, by the way, let Yanukovich do that thought the EU in 2012/13.
      This is a fight between Russia and the west, and Germany/EU and the USA do not act noble (neither does, of course, Russia.) I spoke with Ukrainians, and it is sad and horrible what many of the Maidan-people think. “With Russia we will drive a Lada, with Germany a Merzedes” are ideas. And some – misinformed by the media like 95% of germans in our mainstream press – said, this: “So you help Greece. Why not us”? This all is a fight, a nightmare. They heard that Merkel is so good to Greece. Why not doing the same to Ukrainians….oh the good mother. Let’s get on our knees and pray.

      After months now the USA and Europe with Merkel in the lead finally proposed to give Ukraine money – if Klitschko will be in the next government, there will be some billions. Not authoritarian? Hmmm… Our people are so misinformed and at the same time often so uninterested or plain stupid that they shout: “Putin wants to rule Ukraine” (he of course wants to, with whoever as leader, he said). And they don’t see that Merkel at the same time says – money only and only if our man in Ukraine will lead….The stupidity is nearly endless.
      Yes, economically it means going on the old ways, one can just hope that this time it would not end in a nightmare like the so-called “orange” “revolution”. (You were poor, mate. Now you are still poor, but you got a revolution. Yeah! That’s what those FAZ and Süddeutsche and taz wrote up to 2010. Really.)

      Politically it means what Elenits says. A smart way, with a lot of oh so democratic and “humane” actions, to get Ukraine out of the russian grip and to give them the neoliberal treatment and the west new markets. Some of our media sound as if they want to kill Russia, they criticise everything (and of course, even if often the same faults are in our own countries, not unjustified in many cases, they just make a black and white form of a new cold war out if it).
      Yet they NEVER criticise the 13% flat tax, to take an example. Ein Schelm wer böses dabei denkt.
      People simply are not informed about that from our media.
      From a political view the so-called “soft” Merkel-government is only soft at the surface. Yes, if a poll gives result X, Merkel will talk like she was for X (sadly enough there is no poll voting for the modest proposal). Yet look at various countries – Merkel did not think so much about freedom and a good living for all, as she started to help to form the ukrainian opposition, Udar, Timoschenko-party, the fascists.
      There was a time where you said in some way you wished Thatcher back, dear Yanis. That would also fit perfectly here. Elenits, “Lebensraum” has no nazi-meaning today in Germany, nobody here besides the odd Arschgeigen^^ are Nazis. It is a smart way today, using “humane” rhetoric and the uniform media (95%).
      Merkel can say – at the same time – that Israel needs the walls to imprison Gaza for their security, and at the same time cooperate with Svoboda, fascists who dream of their UPA and Bandera as “freedom fighters” and certainly do not think too good about Israel. That this UPA/Bandera mob helped to kill jews, well, they simply deny that and dream of a country where they are the heroes of tomorrow.

      Merkel is still thinking – in public – she does good things for Europe since 2008. I don’t think she can even understand what would be the the difference of a somehow wise and fair hegemony – and the autoritarian way. She smiles, and fights, and just goes on.

  10. Hi Yanis,

    thanks for your article. Very intersting remarks about Germany, especially to aknowledge the inner German conflicts with the current situation. There are some thoughts I want to share, being half German myself I feel the need to comment on your remarks.
    One aspect is the understanding of German culture and German ‘way of thinking’ about daily life and the way of doing things. This centers around keeping and following rules. Of course when we speak like that we will alway be generalizing, but I wish people around Europe would understand the necessity of clearly defined rules for German people to be able to cope with life. I do not necessarily find it positive or negative, I just want your readers to understand how the majority of German people (or let’s call it a general cultural trait) work and deal on a day to day basis. So rules are the basics of German society, even absurd ones, Germans need to follow rules and love discussing rule-making, because that is the foundation to act upon whether it be business or politics. I know there are also rules in other countries, but the German attitude towards rules is what matters here, it is almost like a religion, rules are holy. You could argue that Germans are dumb, that they need rules and sticking to them to exist. There is a lot of truth in this, but this is not the point I want to stress here. The other aspect is the stigma of the past. Germans tend to be masoquists about themself and really feel alright when they preach guilt to themselfs. So I don’t think they are going to be comfortable with ‘hegemony’, since Germans are not allowed to be proud of their country and any more national approach whether in politics or education is really frowned upon (culturally and socially). It is indeed a very difficult position for German society and I am glad that some of it came through in your article. Now for the EU itself, I wish people would start to see this political monster for what it is and stop looking for an answer from without, I really belive that the nation state is the best way to organize society and then to act in an intergovernmental way with other European countries, sadly this is not the general consensus. I wish at least people would stop using Europe and the EU interchangeably, which is really very manipulative. Thanky you for your work.

    Greetings from Germany

    • I understand all this. But then again, the German government (not without the support of the electorate) was the first to violate the golden rule that it had imposed on the Eurozone: the Maastricht 3% deficit limit. And it did very well to do so, for otherwise the recession would have been worse in Germany than it had to. So, allow me to suggest that Berlin is not utterly immune to recognizing that some rules ought to be broken; especially those that were silly to agree to in the first place.

    • This is actually incorrect. Befoe Germany and France bent the rules. Many others bent the rules for entering the Euro😉.

    • You are confusing conditions with rules.

      Are you also perhaps saying that Berlin broke the Maastricht rules in retaliation to Italy’s and Greece’s not having fulfilled the Maastricht conditions for entry? Ask yourself: Why were Italy and Greece allowed by Berlin to enter the Eurozone with a debt to GDP ratio of more than 110%, when the German conditions (also known as Maastricht) demanded no more than 60%? Why did Berlin let them in? If you are interested in my answer, here it is: Italy was invited by Berlin to enter the rule, violating the Maastricht conditions. Why? Because the Euro would have been pointless, from Germany’s point of view, without Italy (as it would not have ended the Bank of Italy’s practice of competitive devaluations). As for Greece, the then Greek government simply copied everything the Italian had done. To deny Greece entry Berlin would have to deny Italy. (Allow me to suggest that, deep down, you know I am right!)

    • @R.Yuris

      I beg to differ – slightly.

      Following rules is essential to any civilized culture, wether those are written laws or unspoken agreements on a cultural or traditional level doesn’t really matter.
      Every industrialzed nation with a high division of labour and a halfway decent level of democracy needs laws and rules to keep its complex socio-economic engine from breaking down. That goes for Germany as well as other countries.

      What’s really special about me and my fellow Germans is not that we need rules to keep our lives in order but that we take special interest in OTHER PEOPLE following them and we will go to any length telling them so.

      Don’t take my word for it. Just take a look at recent reports of several german political, corporate and otherwise public figures getting caught red handed defrauding taxes, taking bribes, embezzeling money from the church, the state or their own companies or being prosecuted for manipulating interest rates and laundering money on a major scale.

      Some of these figures make a living out of publicly posing as experts on morality and rule-following, others are members of the legislation and even get to make up those rules themselves.

      Germans are no less prone to breaking the law than other people. we litter the streets, we jaywalk, we cheat on our wifes and husbands, we drive too fast, we park our cars in non parking areas, we lie on our tax returns, we employ illegal workers, we break international treaties and give a shit about the consequences and we will bribe, bully and threaten anyone who stands in the way of our own success just like anybody else. And we’re perfectly fine with that as long as we get to point our fingers at others who weren’t as lucky in covering up their own misbehavoiur.

      All this talk about following the rules is just a bullshit excuse and a smokescreen used by people who make a profit out of bending or breaking them.

    • @ Hubert

      “What’s really special about me and my fellow Germans is not that we need rules to keep our lives in order but that we take special interest in OTHER PEOPLE following them and we will go to any length telling them so.”

      Mind not to project from your presonal preferences? I have no interest at all to tell anybody any rules to stick to. Quite the contrary. As far as I am concerned, the Greeks, Italians and so on can do whatever they want. As long as it doesn’t cost more and more of my taxes.

    • @Very SS
      Public debt does not cost you more, and it is not taxing you.
      Can you comprehend the meaning of the word “public deficit”?
      It means it is not covered by taxes.
      When you find a country that ever, ever lowers its total nominal debt, then you might say that deficit will be paid by taxes. But there is almost no such case. I know of one but it was extremaly small debt to begin with-Australia.
      Please to comprehend the word PUBLIC DEFICIT before you claim that taxes pay for it.

      So, if you did comprehend public deficit and public debt, then you can not claim that bailouts of Greece cost anyone anything since it was by public debt which is not ever going to be lowered.
      Completely different issue is that those in power, who also believe as you do, or not, but use it for their own aims, claim higher morality and force conditions on others based on such fake costs.
      Higher public debt is also used to claim, baselessly, for many other punishing policies in their own country on those that did not cause it as onto other countries.

    • VSS

      Bailing out YOUR banks is costing me more and more on my taxes.
      What’s your point ?

    • You sound like the Euro was a German idea. everybody knows it was a driven by the French. The French politicians needed it in order (a) for their ego and (b) to avoid the transparency that they were Managing the Country worse than the German politicians.

      (a) They could not stand that the loser of the war had a superior currency than their banana republic FFR.

      (b) They hatet to admit with every FFR Devaluation that it was clear to everybody that France was not a superpower anymore and economically inferior to the DM block countries.

  11. This manifested EU form has nothing to do with intrinsic good and presently mostly resembles the 4th Reich (and perhaps such was the intention all along, I don’t know).

    Here is what you do now: Shoot first and ask questions later. Let the euro die and let Europe live.

    • This is it exactly. Europeans in Brussels are pretending it isn’t so but Germans who make all the money decisions for them know better. The people like the euro but they don’t understand that they are loosing all control to Germany.

  12. Can’t you see the oxymoron?
    Most economists throughout the world countries agree that euro was ill conceived, badly designed and tragically implemented. Furthermore European Union seems to follow eurocrisis suit .
    And instead of designing a coordinated and agreed euro dissolve we talk about corruption, restructuring pigs and other things that always exist regardless of currency.
    And yet we are reluctant to talk about EU itself.

    • The only way to allow Europe to live is to absolutely, irretrievably and irrefutably dissolve the euro.

      Those misguided wishing to “save Europe” in some sentimental form or another are modern day appeasers making Chamberlain look like a schoolboy on a field day to Munich.

  13. Pingback: Desperately Clinging To Straws « parina

  14. Pingback: Yanis Varoufakis: Germany’s Choice: Authoritarianism or Hegemony? (*) | Jo W. Weber

  15. “there shall be no bail-outs of governments; that national banks are the responsibility of the nation-state in which they are domiciled; that common debt issuance was simply not on; that the monetary union would explicitly come with no mechanism for fiscal transfers or for recycling surpluses and deficits across the Euro Area”

    If only… Everything would be fine BY NOW for everybody if these rules would have been strictly followed. But since the bailoutomania broke out, everything got worse and worse, and the longer this madness continues, the more expensive and cruel the inevitable blow up will be for everybody.

    As for “Re-structuring is essential”, this is what I write since years. However, apparently the Greek society refuses to apply the necessary changes. There are reports that only a very, very small portion of the changes that were agreed upon are really implemented. I would not send a single Euro more than already sent to Greece as long as she does not fulfill the existing promises.

  16. Pingback: Yanis Varoufakis: Germany's Choice: Authoritarianism or Hegemony? (*) | naked capitalism

  17. The concepts and stereotypes about corruption are in need of revisiting. No corruption in Germany, in the Netherlands or in the Nordic countries? You bet.

    There is a lot, on any level you can imagine. In my country, for example, the Netherlands, people are supposedly paying their taxes. They don’t do it joyfully, I’m afraid. They do it because they cannot escape, there is already a lot of surveillance on anything they do. To compensate for that they try to ‘economise’ wherever they can, little frauds here and there, false or understated declarations etc.

    An example from many: the state was giving money to working parents so that they can pay the kindergartens. Many families were keeping it for themselves to buy gadgets. As a result, a black hole of about 40 million euros appeared which lead many kindergartens to closure (according to a Volkskrant article).

    ‘Small and medium’ corruption is everywhere. Sometimes it is on the edge of legality, sometimes it is outright criminal. Usually, it is not even perceived as corruption. Here is an interesting article:
    http://www.eur.nl/english/news/the_issue/issuearchive/2012/kwestie_2012_48/

    And then there is big scale corruption: banks etc., large companies, housing corporations, municipalities. There is an excelllent website where journalists write about what’s happening there. It is only in Dutch, I am afraid, but I suggest you try it, even through Goog Translate. It gives a surprising insight and interesting information on what’s happening in the larger European context :
    http://www.ftm.nl/

    The role of the media is crucial. If something happens, it appears once or twice, usually in small letters, on the xth page of a newspaper. In most of the cases, it goes unnoticed and it is conveniently forgotten and nobody knows if the perpetrators are brought to justice, are in jail, or whatever. People continue to believe that everything works fine and public peace is not threatened.

    I have to admit that there is a lot of hypocrisy in the ‘North’. I totally agree with Yanis that Greeks at least have the guts to admit the corruption amidst them

  18. Yiannis,

    Your modest proposal is an interesting intellectual exercise on the macro level with the stated appeal of these measures are not based on fiscal transfers. You imply that Europeanization entails not only a collective approach at solving the stated problems but also offers the checks and balances that the proposed measures work as expected.

    To see how this would work, let us look now at the “the recycling of European and global savings into socially productive investment” you propose. What type of guarantees will be offered to investors that the that they would get a return on their capital and most importantly that the funds would not be wasted? Are you looking for European bodies managing these investments? Would these bodies supplant the national governments with the gridlock inefficiency and corruption they are known for?

    I cannot see any long term success that does not involve restructuring of the way problem states operate (or not operate..). The “Europeanization” entails reduced state sovereignty but not elimination. Which takes us to the much talked about structural changes that sovereign states (and Greece in particular) are loath to take.

    When the crisis hit Greece, I hoped that it would act as a catalyst for change. The resistance for change from entrenched interests makes me less optimistic about the future. Changing mentality may take long time.

    So my question Yianis is how do you see the proposals you make are not annulled in practice. We had fiscal transfers in the periphery for 30+ years and the results were in many cases the opposite of the intended goal (see agricultural subsidies in Greece for example). Without the called for structural changes (which I do not see them mentioned in your writings) we run the danger of repeating the failed policies of the past.

    Reply ↓

    • Let me put it simply: Our Modest Proposal is the necessary but not sufficient condition for saving the Eurozone (and allowing countries like Greece to breathe within them). Re-structuring is essential. But it stands zero chances without something like the Modest Proposal to create the ‘ecology’ within which they can happen and succeed. Clear enough?

    • Thanks for clarifying that a balanced approach is needed. I understand you wrote your proposals earlier on and perhaps did not feel the need to emphasize the restructuring part as others like the troika was asking for it. We see now is a willingness from Germany to promote more of a balanced solution. Since the incentive for changes on the part of Greece is reduced as it claims it has achieved a primary surplus (meaning the servicing of the debt becomes the problem of the credit countries) we now hear calls for additional aid coupled to implementation of the structural changes. But the rest of Europe needs to show to their electorate that Greece is changing and there in not much to show for beyond fiscal restraint.

  19. I think you are right in principle. But such an enlightened leadership will never be elected into german government. The german people, I’m afraid, are already too far gone. After more than a decade of being held hostage by internal austerity forced upon them by an increasingly authoritarian elite, the majority of voters are now under the common rule of stockholm syndrome and have accepted their tormenters as their only true friends.
    Sticking to the old rules is all they have left as a memento of the blessed “Wirtschaftswunder”. No one will take that away from them now. They will rather go down with the rest of Europe, telling everyone that it wasn’t them who sunk the ship.

    • Very well said Hubert! This all started with Tony Blair and Gerhard Schroeder. The imposed austerity on Sothern European countries is just the logical next step and he crisis was somehing like a wish comes true for the elites which drive these changes.

      One question remains though! What will be he next step?

      Any clues?

    • @Aristoteles

      “One question remains though! What will be he next step?

      Any clues?”

      Whatever it may be, it would have to come from outside of Germany. We don’t listen to reasonable arguments here anymore. All we want to hear is our elites telling us how well we have done and how important it is for us to remain on course, whatever it takes.
      Germany is lost in it’s own self-righteous illusion of having found the holy grail of eternal capitalist prosperity by means of generating a permanent current account surplus against the rest of the world. At the same time paranoia spreads like a desease as people become increasingly afraid of having all that glory taken away from them by greedy foreigners with no proper work ethics.
      And there is no amount of whitewashing statistics, self-aggrandizing and outright propaganda that german politicians and mainstream media wouldn’t go to in order to please the elites and extend this narrative for the common people for all eternity. Nothing short of another global economic crisis, which would propably have to be even worse than the last one, could ever make the Germans see the error in their current thinking.

      At this point it would perhaps be the least of all evils if the people of France and the southern european countries took whatever resolve they still have left in them and used it to say “Nein” to us Germans and exit this unholy alliance for good.

      The Modest proposal would propably be a far better solution, at least in order to even the playing field a bit and allow everyone to catch their breath and think about a long term solution. But that would require some kind of magical process to cure the german public of this all encompassing superiority complex that has befallen their collective mindset and I really don’t see that coming anytime soon.

    • @Hubert:

      ““One question remains though! What will be he next step?
      Any clues?”
      Whatever it may be, it would have to come from outside of Germany. We don’t listen to reasonable arguments here anymore.”

      Is it not a very funny coincidence that it was decided by the European Commission, Strauss Kahn, Merkel, Papandreou and many others of the elites to involve the IMF in the Eurozone?

      Ask yourself why was that and whose agenda is it to change the socioeconomic foundations of the European states?

      Than ask yourself yet another question why did the US honour Mrs. Merkel with the highest laurels? What did she do for the US?
      Very funny in fact is that Chaos Computer Club has sued her very recently for alleged assistance with the N**🙂 Read the German News.

      Now last question what is the highest priority on Merkels and the Europ. Commissions Agenda just after World Peace🙂

      What is TAFTA btw?

    • Well said Hubert…as an Australian (Ukrainian by birth)…I concur with your pointed remarks, due to circumstances beyond my control, my family has been subjected to this kind of misanthropy & fiscal squeeze

    • @Aristoteles

      “Now last question what is the highest priority on Merkels and the Europ. Commissions Agenda just after World Peace?”

      I don’t know. I do not understand these people.
      Though I would guess that they don’t really have an agenda. I think they are just blindly following their sacred neoliberal teachings by putting all their faith into some idiotic understanding of “trickle-down economics”, hoping that all this shovelling of money down the throats of the 1% will eventually come to fruition, ignite a magical fireworks of investments and job-creation and lead all of europe to the promised land of eternal prosperity which is already being promised to the german people on a daily basis.

      P.S.: As much as I appreciate the CCC standing up to her majesty and suing her personally(!) for enabling espionage by a foreign country, they will never succeed in it. The general attourney will never in a million years prosecute his own bosses’ boss and the CCC know it. They’re not stupid. It’s a publicity stunt and a good one at that – but nothing more.

    • I could have told you that! But then again, perhaps Greeks are better prepared to admit to the corruption in their midst. Unlike certain other Europeans, of a Gothic disposition that I happen to be familiar with…

    • So no corruption in Germany? No bribes to win contracts by German business?
      Only the Greek people were bribed by Germans? What about the Siemens bribes in the US?

    • Maybe you should read again. there is a score. From the score you can see that there is no Country with “zero” corruption. Big companies operate in all countries, in some countries the system, politicians or whatever is just more reciptive to bribes or many times ask proactively for them. All it says is that company XYZ is less likely to bribe in Sweden than in Albania. If the driver were where the companies come from, than the score would be the same everwhere or correlate with the share of sales.

      Even if you do notlike it. There are more bribes in Afrika than is Finland etc etc…

    • As to other countries being more/less/comparably corrupt to Greece: Remember, it’s not corruption/fraud, if it hasn’t been investigated/prosecuted😉 (if no-one’s looking, or has not taken a peek under that rock, then it did not happen)

      If there was any corruption/fraud, our leaders would already have acted and prosecuted it anyway – therefore it does not exist.

      Obviously sarcasm (yet you hear it argued seriously, on a regular basis, online), but the point is this: It’s pretty pointless trying to compare who’s worse in terms of fraud/corruption, when the entirety of Europe has shown a complete unwillingness to actually expose/investigate/prosecute fraud/corruption, in various forms – we can’t measure accurately, what we don’t see.

      Though authorities will usually find a way to prosecute/harass whistleblowers – the people who actually help us to quantify/measure it all – in Ireland, some financial whistleblowers have even been threatened with being referred to the police, by regulators, if they expose fraud.

    • There is a lot of nonsense being written generally and specifically some here, about reports on corruption. First of all, all of the reports you are referring to concern recorded *Perceptions of Corruption* gleaned from a small number of respondents. There are many forms of corruption, and it is a value-judgement to determine which sort are the most socially or economically damaging. (For my part, I would say the fakelaki extracted in the middle of the night to operate on your dying parent/child/ spouse etc.)

      Secondly, there is a big difference between corruption and tax evasion (and social insurance evasion). They are separate issues morally, legally and economically. There is also a great difference between small but consistent under-reporting of SME sales (plus Vat avoidance) and the politically approved tax and insurance evasion (and non-payment) by large companies: both exist as a norm in Greece. We should also mention here the overtaxation in Greece, concerning the very high rate of VAT, the imposition of VAT on all self-employed persons (including many university researchers) and the refusal of the Greek state to accept EU rules on VAT exemptions. Indirect taxes (as opposed to income taxes) hit the poor much much more than the rich, for a variety of structural reasons.

      Thirdly, both corruption and tax evasion are not synonymous with the informal economy. They exist as semi-autonomous phenomena with considerable overlap. In other words, not all corruption is in the informal (black) economy; not all tax evasion is automatically in the informal economy (although most is); and certainly not all informal economic activity is illegal.

      The informal economy is actually the phenomenon that is of most interest to the State, because it is unregulated and untaxed. Estimates for this as a % of GDP have been available for decades, and both Italy and Greece include a GDP supplement to account for this (Greece in a very arbitrary and foolish manner, designed to alter the debt/GDP ratio rather than to reflect reality). Looking at those estimates, some have put the UK informal activity as being up to 20% of GDP. If we were to include the criminal activities of UK banks it would go much higher.

      So, please try to specify what you think you are talking about. Don’t mix up concepts and meaurements, simply to make your cheap anti-Greece political points.

    • More interesting than this discussion would be to check if there is more corruption where there is less economic freedom (= more political influence). Strong hypothesis: Yes!

    • SoundMoney,

      Corruption comes in many flavors. In the US doctors manage the laws and regulations to ensure that they maintain average 300K+ salaries. As a result a visit to the doctor can easily cost you $500. In Greece you can see a doctor in a public hospital for free, he/she makes maybe 20K. The cost of living is roughly the same. If that doctor expects a small incentive for his service that reports as corruption.

      Swiss bankers hold accounts with bribes that were given to Greek officials. Greece requests the money back, the officials confess to the crime and also ask the money but the Swiss bankers say NO. Is that or is that not corruption?

      German company builds submarines for the Greek navy and greases the wheels all the way. Eventually the first submarine built is subpar quality and lists to one side. Who is the most corrupt, the navy officers or the German manufacturer?

      German army invades Greece. Through the occupation in Athens they collect all the food and let the citizens starve. There are killings everywhere. The help themselves to the treasury and the gold that they find. After their killings and the occupation they take the money and leave and we all forget about it. Is that or is that not corruption?

    • I strongly prefer the US situation where I know the cost and get a receipt for it. Enslaving doctors at EUR 20k p.a. is insane.

  20. “… we could say that in order to consolidate the neoliberal European economic empire, German oligarchs promote another “haircut” of multiple dimensions across Europe. They proceed into a violent cut of salaries and pensions, trying to equalize them in a first phase with those of countries of the former Eastern bloc, and disolving the welfare state. Federalism means however, that the same policies will be applied totally, definately and very soon, also against German citizens and workers.”

    http://tiny.cc/ow0pax

  21. A welcome shift in tone from the days when GREXIT NOW was both a prediction and a recommendation. Rubini who had also predicted and advised GREXIT has acknowledged he was wrong. Greece 1 Rubini 0 – he said. Varoufakis ?

  22. “In short, the Eurozone cannot survive without enlightened German leadership”. Good news: Eurozone is doomed to die, thanks god, since enlightened German leadeship is an axymoron.

  23. Difficult to put such a thing into practice. The crisis in the US, Japan and China is partly also due to centralism and ever bigger conglomerates of concentrated bureaucratic power. You seem to want more of that. The trend is, however, breaking up (cf. Catalunha, Scotland…north and south of Italy). Confidence into the doings of Brussels is running low and decreasing, the European parliament is widely seen as unyielding and hugely expensive. And after all: is the European crisis not really part of a much larger crisis: the one percent against the rest? Is any economic indicator – as manipulated it is – saying anything about the 99% such as these sentiment stuff, unemployment, inflation, econ. growth etc. or just this mirroring of interpretations of the 1%?

    In a way I read your analysis with interest whilst it is breaking ground with unconventional thinking but then you seem to be the typical classical economist, a specy that I quite often like to associate to what in the old days were the buffones of the courts of kings and emperors. You seem not to be able to grasp that your proposals keep those arrangements that lead us into crisis in Europe is only part of a much deeper crisis of capitalism and the limits to growth, at least the way the 1% define it…..
    We are incredibly overleveraged, huge debt overhang on all accounts, consumption in the West, production in the East…ill conceived globalization…amongst many other headwinds and structural imbalances. expensive energy makes part and parcel of the current impossibilities. The day when there are no traffic jams in Athens and Saloniki I am somewhat more convinced that at least Greece may move in the right direction…not by wanton but by misery. It should not come to that in the rest of Europe – but I thing the chances are that it will. It is after all the same system….

    Paul, Montevideo and Basle

    • Paul you will be happy to hear that traffic in Athens & Thessaloniki is at an all time low, thanks to so many cars being sold or taken off the road. At certain mid-morning and mid-afternoon hours one can simply stroll at leisure – jay-walking – across Vassilisis Sofias in Athens without even looking. Traffic jams are a distant memory.

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