Greece, Germany and the Eurozone – Keynote at the Hans-Böckler-Stiftung, Berlin 8th June 2015

Hans-Böckler-Stiftung

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Thank you for inviting me. Thank you for being here. Thank you for the warm welcome. Above all thank you for the opportunity to build bridges, to pave common ground, to bring harmony in the face of blatant attempts to sow the seeds of discord between peoples whose historic duty is to come together.

[DIVIDED BY A COMMON CURRENCY]

Since the end of the war Greeks and Germans, together with other Europeans, have been uniting. We were uniting despite different languages, diverse cultures, distinctive temperaments. In the process of coming together, we were discovering, with great joy, that there are fewer differences between our nations than the differences observed within our nations.

Then came the global financial disaster of 2008 and, a year or two later, European peoples, who were hitherto uniting so splendidly, ended up increasingly divided by a… common currency – a paradox that would have been delightful if only it were not so fraught with danger. Danger for our peoples. Danger for our future. Danger for the idea of a shared European prosperity.

History does seem to have a flair for farce, judging by the way it sometimes repeats itself. The Cold War began not in Berlin but in December 1944 in the streets of Athens. The Euro Crisis also started life in Athens, in 2010, triggered off by Greece’s debt problems. Greece was, by a twist of fate, the birthplace of both the Cold War and the Euro Crisis. But the causes run much wider, spanning the whole of our continent.

What were the causes of the Euro Crisis? News media and politicians love simple stories. Like Hollywood, they adore morality tales featuring villains and victims. Aesop’s fable of the Ant and the Grasshopper proved an instant hit. From 2010 onwards the story goes something like this: The Greek grasshoppers did not do their homework and their debt-fuelled summer one day ended abruptly. The ants were then called upon to bail them out. Now, the German people are being told, the Greek grasshoppers do not want to pay their debt back. They want another bout of loose living, more fun in the sun, and another bailout so that they can finance it.

It is a powerful story. A story underpinning the tough stance that many advocate against the Greeks, against our government. The problem is that it is a misleading story. A story that casts a long shadow on the truth. An allegory that is turning one proud nation against another. With losers everywhere. Except perhaps the enemies of Europe and of democracy who are having a field day.

[RECYCLING IN A MONETARY UNION]

Let me begin with a truism: One person’s debt is another’s asset. Similarly, one nation’s deficit is another’s surplus. When one nation, or region, is more industrialised than another; when it produces most of the high value added tradable goods while the other concentrates on low yield, low value-added non-tradables; the asymmetry is entrenched. Think not just Greece in relation to Germany. Think also East Germany in relation to West Germany, Missouri in relation to neighbouring Texas, North England in relation to the Greater London area – all cases of trade imbalances with impressive staying power.

A freely moving exchange rate, as that between Japan and Brazil, helps keep the imbalances in check, at the expense of volatility. But when we fix the exchange rate, to give more certainty to business (or, even more powerfully, when we introduce a common currency), something else happens: banks begin to magnify the surpluses and the deficits. They inflate the imbalances and make them more dangerous. Automatically. Without asking voters or Parliaments. Without even the government of the land taking notice. It is what I refer to as toxic debt and surplus recycling. By the banks.

[TOXIC RE-CYCLING]

It is easy to see how this happens: A German trade surplus over Greece generates a transfer of euros from Greece to Germany. By definition!

This is precisely what was happening during the good ol’ times – before the crisis. Euros earned by German companies in Greece, and elsewhere in the Periphery, amassed in the Frankfurt banks. This money increased Germany’s money supply lowering the price of money. And what is the price of money? The interest rate! This is why interest rates in Germany were so low relative to other Eurozone member-states.

Suddenly, the Northern banks had a reason to lend their reserves back to the Greeks, to the Irish, to the Spanish – to nations where the interest rate was considerably higher as capital is always scarcer in a monetary union’s deficit regions.

And so it was that a tsunami of debt flowed from Frankfurt, from the Netherlands, from Paris – to Athens, to Dublin, to Madrid, unconcerned by the prospect of a drachma or lira devaluation, as we all share the euro, and lured by the fantasy of riskless risk; a fantasy that had been sown in Wall Street where financialisation reared its ugly head.

Put differently, debt flows to places like Greece were the other side of the coin of Germany’s trade surpluses. Greece’s and Ireland’s debt to German private banks maintained German exports to Greece and Ireland. This is similar to buying a car from a dealer who also provides you with a loan so that you can afford the car. Vendor-finance, is the term used.

Can you see the problem? To maintain a nation’s trade surpluses within a monetary union the banking system must pile up increasing debts upon the deficit nations. Yes, the Greek state was an irresponsible borrower. But, ladies and gentlemen, for every irresponsible borrower there corresponds an irresponsible lender. Take Ireland or Spain and contrast it with Greece. Their governments, unlike ours, were not irresponsible. But then the Irish and the Spanish private sectors ended up taking up the extra debt that their government did not. Total debt in the Periphery was the reflection of the surpluses of the Northern, surplus nations.

This is why there is no profit to be had from thinking about debt in moral terms. We built an asymmetrical monetary union with rules that guaranteed the generation of unsustainable debt. This is how we built it. We are all responsible for it. Jointly. Collectively. As Europeans. And we are all responsible for fixing it. Collectively. As Europeans. Without pointing fingers at one another. Without recriminations.

Before 2009 the Greek media were ever so proud that Greece was growing faster than Germany. They were wrong. It was Ponzi, pyramidic, debt-fuelled growth. When our bubbles burst, the German press accused the Periphery of profligacy and of being bad European citizens who got what they deserved. It was the turn of the German press to get it wrong. The Periphery’s exorbitant debts were essential for the industrial machinery and the banking systems of Germany and France to prosper given the problematic bank-based recycling system that we had.

In summary, our Eurozone’s surpluses recycling was at the heart of the problem. Greece and Ireland took a big hit on behalf of a Eurozone that was not designed well. We took a hit to save the banks that did all the recycling so badly. To save a Eurozone economically incapable of absorbing the shockwaves of the large financial crisis that its design had brought on and politically unwilling to re-design our surplus recycling mechanism.

For five years now, Europe and three different Greek governments have been pretending that they solved the crisis while extending it into the future. Pretending that the nation’s bankruptcy can be dealt with by ever increasing loans on conditions of further income-sapping austerity that undercuts the nation’s capacity to repay. Meanwhile, a Great Depression has taken hold, the political centre has imploded, children faint at school from malnutrition and Nazis are coming out of the woodwork.

As I already said: It is truly pointless to play the blame game. Whose fault was the crisis? We are all at fault. We created a Eurozone with a surplus recycling mechanism which with mathematical precision led to a crisis with victims everywhere. The longer we take to realise this the greater our collective fault.

[AESOP RE-VISITED]

Earlier I referred to the Aesop fable that has done so much damage to our peoples’ understanding of their relation and to their appreciation of each other. Allow me to re-tell it in a manner better suited to the economic circumstances of the Eurozone.

To begin with, I hope you agree that the idea that all the ants live in the North of Europe and all the grasshoppers have congregated in the South, in the Periphery, would have been comical if it were not so offensive and so destructive of our shared European project.

What happened in Europe after we established the euro, during the good times, was that the ants worked hard everywhere, in Germany and in Greece. And the ants were finding it hard to make ends meet. Both in Germany and in Greece. In contrast, the grasshoppers both in Greece and in Germany were having a finance-fuelled party.

The flow of private money from Germany to Greece allowed the grasshoppers of the North and the Grasshoppers of the South to create huge paper wealth for themselves at the expense of the ants – of the German and the Greek ants. Then, when the crisis hit, it was the ants of the North and especially the ants of the South, of Greece, that were called upon to bailout the grasshoppers of both nations.

These bailouts cost the ants dearly. Especially the Greek ants lost their jobs, their houses, their pensions while the German ants felt cheated, hearing about all these billions going to the Greeks while their living standards refused to rise despite their productive eforts. As for the Greek grasshoppers, some of them also suffered but the big, fat ones had nothing to worry about: they took their ill gotten monies to Geneva, to London, to Frankfurt. And they laughed all the way to the bank.

This is what was so wrong with the bailouts. It is not that Germans did not pay enough for Greeks. They paid far too much. For the wrong reasons. Money that, rather than help the Greeks, was thrown into a black hole of unsustainable debts while people suffered everywhere. From debt fuelled growth we went full circle to debt fuelles austerity.

It is this vicious cycle that our government was elected to put an end to.

[THE AUSTERITY TRAP & THE INSTITUTIONS’ DEMANDS]

Since 2010 our party, and I personally, opposed the bailouts that piled new debt on the existing, unsustainable Greek public debt on condition of stringent austerity bound to reduce all incomes thus sinking Greece deeper into insolvency, depression, misery. We warned that it was pure folly to shift the Greek state’s debt from the books of private banks onto the shoulders of Europe’s taxpayers. It would turn one nation against another without doing anything to address Greece’s insolvency.

The past five years proved us right. And this is why we were elected. From the first day in office I have been making a simple proposal to our partners, in the Eurogroup and elsewhere: Given that we have been elected to challenge the program that you believe in, and which you want us to abide by, the negotiations will be protracted. Let us negotiate in good faith. But, also, let us agree in the meantime, as quickly as possible, on a number of reforms that we all agree are absolutely necessary and which the previous governments refused to implement. Let us pass through our Parliament three or four, commonly agreed, bills that deal with tax evasion, that set up an fully independent tax authority, that strike a blow at corruption, that reform the income tax code, that regulate and tax television channels etc. etc. Let us implement immediately these reforms while the ‘larger’, ‘comprehensive’ negotiation continues.

The answer I received was unequivocal: “No! You must not pass anything through Parliament until and unless the complete review of the Greek Program is successfully completed. Any such legislation will be considered to be unilateral action and will jeopardise your relation with the institutions.” And so it was that the negotiations have dragged on and on, draining our energies while the economy stagnates, while important reforms are still awaiting legislation.

I am often asked: “Be that as it may, why have you not concluded the negotiations with the institutions? Why are you not agreeing with them quickly? There are three reasons why.

First, the institutions are insisting on economically unsustainable macroeconomic numbers. Consider three such crucial numbers for the next seven years: The average growth rate, the average primary surplus and the average magnitude of fiscal measures (e.g. new taxes, benefit or pension reductions). The institutions propose to us actual numbers that are inconsistent with one another. They begin by assuming that Greece should achieve an average growth rate of about 3%. That’s fine and good. But then, in order to remain consistent with their ‘goal’ of showing that our debt can come down to 120% of our national income by 2022, they demand primary surpluses in excess of 3%, with large fiscal measures to achieve these primary surpluses. The trouble here, of course, is that if we were to agree to these numbers, and impose upon our weak economy these highly recessionary fiscal surpluses, we will never achieve the above 3% growth rate that they assume. The end result of agreeing with the institutions on their unsustainable fiscal numbers is that Greece will, yet again, fail miserably to achieve the promised growth targets, with appalling effects on our people and on our capacity to repay our debts. In other words, the past five years of spectacular failure will continue into the future. How can our new government consent to this?

Secondly, we may be an ideological government of the Radical Left but, unfortunately, it is the institutions that carry ideological fixations that make it impossible to reach an agreement. Take for example their insistence that Greece should be a labour protection-free zone. Two years ago, the troika and the government of the time disbanded all collective bargaining. Greek workers are left to their own devices to bargain with employers. Labour rights that took more than a century to win were swept away in a few hours. The result was not increased employment or a more efficient labour market. The result was a labour market in which more than one third of paid labour is undeclared, thus condemning pension funds and the government’s tax take to permanent crisis. Our government has tabled a highly sensible proposal: To take the matter to the International Labor Organization and to have them help us draft a modern, flexible, business-friendly piece of legislation that restores collective bargaining to its rightful place in a civilised society. The institutions rejected that proposal, branding our stance “backtracking from reforms”.

The third reason why we have not been able to agree with the institutions are the social unjust and unsustainable measures that they insist upon. For example, the lowest of pensions in Greece amount to 300 euros, of which more than 100 euros are made up by what is known as ‘solidarity pension’, or EKAS. The institutions insist that we eradicate EKAS while at the same time proposing that we push value added taxes on pharmaceuticals (that pensioners relay upon) from 6% to 12% and electricity from 13% to 23%. Put simply, no government that has a smidgeon of sensitivity toward the weakest of citizens can ever agree with such proposals.

I could go on and on, listing a litany of unacceptable demands by our creditors. I won’t. You get the gist of it, I am sure.

Some ask me whether we are prepared to risk Grexit so as not to sign up to the institutions’ demands. Our answer is that it will be a sad day for Europe when its integrity becomes a football to be kicked around in a game whose purpose is to force a sovereign people to accept an impossible deal. In any case, if such a terrible deal is to be imposed on our people, well at least it will not be with our signature. Immanuel Kant taught us that the majesty of duty has nothing to do with the calculus of expediency. It is an irony that it may take a Greek government to remind Europe of the great German philosopher’s dictum.

Coming back to the reforms that Greece needs, in a sense, what our government is asking our partners for is to give us a chance to reform. To do our homework. Please let us reform Greece deeply. For if you continue to insist on logical inconsistent numbers, on ideological fixations and on socially unjust measures we shall not be able to carry the Greek people along the reform path that the country needs. Greece will remain unreformable if the institutions prevail. It is that simple.

To recap, we need to agree on proper, deep reforms and to embed them in a larger package, a larger agreement, which ends the Greek crisis once and for all. Besides the deep reforms, the other two elements of this broader agreement, must be a mechanism for rendering Greece’s public debt sustainable (without haircuts and without new monies for the Greek state) and an investment package that kickstarts the economy and crowds in private investment.

[Debt restructure – debt swaps]

Greece’s crisis began with public debt unsustainability. It will only end when public debt becomes sustainable again. Here is what we propose:

Greece acquires now a new liability of 27 billion to the ESM which allows us to buy back from the ECB the old SMP bonds that the ECB purchased in 2010, and whose face value is precisely 27 billion. Then we retire these bonds immediately. Thus the ECB will be repaid in full for Greece’s remaining debt to it. The result will be an elimination of our short term funding gap and the opportunity for Greek bonds to participate in the ECB’s quantitative easing program, thus helping us return to the money markets in a manner that eliminates the need for more official sector loans in the future. Once the ECB SMP bonds have been repaid, the ECB will return to Greece, as has already been agreed, the ‘profits’ (approximately 9 billion euros) it made due to having purchased them below par initially (as per the existing arrangements for returning to Greece the ECB’s SMP program ‘profits’). Greece uses up this sum to repay, in part, its remaining debt to the IMF (19.96 billion). The remaining debt to the IMF (approximately 11 billion) will be refinanced through our regained market access.

An obvious objection to this swap is that, while no new money will be received by Greece, the ESM will have to acquire a new liability and, for this reason, a new set of conditions is necessary. This is true. But a simple solution presents itself readily: The same conditionalities, i.e. reform package, that we shall agree upon to complete the current program can also serve as the conditionalities for this new arrangement with the ESM. A common set of conditionalities, that our Parliaments approve, as the basis for concluding the current program and beginning the new arrangement. That way neither Chancellor Merkel nor PM Tsipras will have to go to our Parliaments twice. A simple, efficient and effective arrangement is, therefore, in sight.

[Investment-led Growth]

Debt management is a necessary but insufficient condition for ending the Greek crisis. Greece’s economy needs to be kick-started. While long-term recovery will need to be financed privately, getting the flow of investment funding going will require an initial boost. It will also require a vehicle for dealing efficiently with the voluminous non-performing loans that currently block the credit system. Here is our proposal on this front:

The European Council gives the ‘green light’ to the European Investment Bank to embark upon a Special Investment Program for Greece that is fully funded by a special issue of EIB bonds (waiving the requirement of national co-funding), with the ECB providing secondary market coverage for the latter (in the context of its QE program) – to be administered by the EIB and the EIF in cooperation with a new public Development Bank, in collaboration with EFSI, the Hellenic Investment Fund, the EBRD, KfW and other European investment vehicles, and in conjunction with new privatisations (e.g. ports, railways)

The great merit of this proposal is that it will come at no cost to Greece’s creditors. The EIB operates on purely banking criteria and, on this occasion, stands to benefit from Greece’s rapid economic growth and the inevitable rise in asset prices. The very ‘announcement effect’ of this package of reforms, debt management and an EIB investment package will, even before any investment funding is provided), crowd in substantial investments and, inevitably, end the Greek crisis.

[IPHIGENIA vs ANTIGONE]

With the Greek crisis behind us, Europe will still need to look at itself in the mirror and deliberate on how to solidify our monetary union so as ensure that the next crisis is not an existential one.

Clearly we need political union. But what type? Let us not forget that the Soviet Union was a political union, albeit not one that we wish to emulate. No, what Europe must aim for is a democratic political union that will appeal to its peoples.

Europeans must ask ourselves an important question: Do we want a liberal political union that engages with those (like our government) who are critical of the current European policies, but committed to the EU? Or do we want a political union that has no tolerance for dissent to neoliberal policies and which tries to snuff out ‘inconvenient’ pro-Europeans like the SYRIZA government at the expense of European democracy? Permit me to guess that if Europe opts for the latter it will end up being dominated by anti Europeans who hate Europe and all it stands for, and who want to drag Europe back towards the nationalistic tribalism that has caused so much human loss for so many centuries.

Some leading Europeans unfortunately think that sacrificing Greece as a latter day Iphigenia will help the rest set sail toward Political Union under a regime of Iron Discipline forged by the fear Grexit will have put into other Europeans’ hearts and minds. I fear that this would be an attempt to keep to an unsustainable model by means of increasing degrees of authoritarianism and recessionary macroeconomics. In then final analysis, it would split the union and bring untold economic and human costs.

Let me suggest another heroine of the Ancient Athenian tragedy repertoire: Antigone. Antigone symbolised the just challenge of unjust rules; of rules that clash with basic principles of propriety and justice. She was, of course, no anarchist. She believed in rules. Alas, she believed that when one is faced with bad rules, with rules that are detrimental to the human condition, it is our duty to challenge them and to replace them with other rules, better suited to human purposes.

Which do you think is best suited to the European project? Agamemnon’s strategy of sacrificing Iphigenia? Or Antigone’s penchant for better rules? The idea that Greece should be amputated from the Eurozone, in order to discipline the rest? Or the idea of bringing everyone closer together on the basis of sound, sensitive, humanist policies?

The major problem we are facing is that this crisis has sapped the political will to bring our asymmetrical monetary union’s economies closer together and with respect for national sovereignty. Citizens turn their back to the monetary union, understandably, and begin to recoil not behind national sovereignty but behind national chauvinism and stereotyping.

So, the great, big question becomes: Is it possible to give the peoples of our asymmetrical monetary union more sovereignty while, at once, introducing an effective, non-toxic surplus recycling mechanism?

I think it is. But it would take another long meeting to discuss explain how.

[Speech of Hope]

On September 6th 1946 US Secretary of State James F. Byrnes travelled to Stuttgart to deliver his historic Speech of Hope. It marked America’s change of heart vis-à-vis Germany and gave the fallen nation a chance to re-imagine recovery, growth, and a return to normalcy.

Until Byrnes’ Speech of Hope let rays of optimism pierce through occupied Germany, the allies were united in their commitment to convert “…Germany into a country primarily agricultural and pastoral in character.” Byrnes’ speech signalled to the German people a reversal of the punitive de-industrialization drive that, by the end of the 1940s, had seen to the destruction of seven hundred and six industrial plants.

Germany owes its post-war recovery and wealth to its people, their hard work, innovation and commitment to a united, democratic Europe. However, they would not have been in a position to stage a magnificent post-war renaissance without what the Speech of Hope signified.

Prior to Byrnes speech, and for a while afterwards, America’s allies were not keen to restore hope to the defeated Germans. But once Washington had decided to rehabilitate Germany, there was no turning back. Its renaissance was on the cards, facilitated by the Marshall Plan, the US-sponsored 1953 debt write-down, as well as by the infusion of migrant labour from Italy, Yugoslavia and Greece.

Europe could not have united in peace and democracy without that sea change. Someone had to put aside moralistic objections and look dispassionately at a nation locked into a set of circumstances that would only reproduce discord and fragmentation across the continent. The United States, having emerged from the war as the only creditor nation, did precisely that.

Seven decades later, another nation is locked into a frightful trap that is sending ripples across Europe and from which it cannot escape without a variant of Byrnes’ Speech of Hope: Greece! Moralistic objections abound and stand in the way of affording the Greek people a shot at achieving escape velocity. Greater austerity is demanded for an economy that is on its knees due to the heftiest dose of austerity any nation has had to endure in peacetime. No offer of debt relief. No plan for boosting investment. And certainly no Speech of Hope for this fallen people.

The Greek government has tabled a set of proposals for deep reforms, debt management as well as an investment plan that will kick-start the economy. Greece is indeed ready and willing to enter into a compact with Europe that will eradicate the malignancies which were responsible for Greece being the first domino to fall in 2010. We are ready to play our part in designing a proper, sustainable recycling scheme for the Eurozone, to do our homework and stick to the rules that we co-author with our German friends.

But to implement these reforms successfully Greeks need a missing ingredient: Hope!

A Speech of Hope for Greece is, therefore, precisely that which would make all the difference now.

A Speech of Hope for Greece would, in fact, also benefit our creditors, as our renaissance eliminates the probability of default.

What should it include? A Speech of Hope for Greece does not have to be technical. It should simply mark a sea change, a break with the past five years of adding new loans on already unsustainable debt on condition of more doses of punitive austerity.

Who should deliver it? In my mind, it should be the German Chancellor.

Where? In Athens or in Thessaloniki or any other Greek city of her choice.

She could use the opportunity to hint at a new approach to European integration that starts in the country that has suffered the most, a victim both of Europe’s faulty monetary design and of its society’s own failures.

On a practical note, let me ladies and gentlemen inform you that in our midst today we have my great friend and colleague James Kenneth Galbraith – the son of the actual author of Byrnes’ Speech of Hope, John Kenneth Galbraith. If need be, I am sure he could help in the drafting on a Speech that could change Europe. Just like Byrnes’ speech do in 1946.

[CONCLUSION]

Allow me to end on a very personal note.

One of the enduring memories from my early childhood is the crackling sound of Deutsche Welle radio transmissions. Those were the bleak years of our 1967-1974 dictatorship when Deutsche Welle was the Greeks’ most precious ally against the crushing power of state oppression.

Mum and dad would huddle together next to the wireless, some times covered by a blanket to make sure that nosy neighbours would not get a chance to call the secret police. Night after night these ‘forbidden’ radio programs brought into our home a breath of fresh air from a country, Germany, that was standing firm on the side of Greek democrats. While I was too young to understand what the radio was telling my mesmerised parents, my child’s imagination identified Germany as a source of hope.

And there you have it. I end this speech on this note, as a tribute to my German friends who keep the memories of those DW’s crackling sounds alive, pertinent and permanently inspiring.

44 thoughts on “Greece, Germany and the Eurozone – Keynote at the Hans-Böckler-Stiftung, Berlin 8th June 2015

    • The plagues of the earth will descend upon the Greek people if the radical-Left Syriza government of Alexis Tsipras persists in defying Europe’s creditor powers and opts for default. They will eat dirt for the rest of their lives. They will freeze in rags. They will moan and wail, forever.
      “Failure to reach an agreement would mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union,” it asserted.

      “A manageable debt crisis would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. The ensuing acute exchange rate crisis would send inflation soaring.”

      The central bank did not present these as potential dangers in a worst case scenario – something we might all accept – it asserted that they would occur unless Mr Tsipras agrees to terms imposed by Brussels before the Greek treasury runs out of money.
      “All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.”

      Never before has such a “monetary policy” report been published by the central bank of a developed country, or indeed any country. It is a political assault on its own elected government.

    • Dean you wrote: “The reason I asked Triada if she a female is because it looks like she is a lady here but is not quite clear if she is that person. Triada Samaras sounded like an alias based on Troika and Samaras….”
      Honestly I find this line of questioning mildly fascinating but alas, it is also far far far off the topic here. So far off that I can barely glimpse its relevance even with powerful binoculars. And even standing on my chair.

  1. Today, Greece’s European creditors seem ready to abandon their solemn pledges on the irrevocability of the euro in order to insist on collecting some crumbs from the country’s pensioners. Should they press their demands, forcing Greece to exit, the world will never again trust the euro’s longevity. At a minimum, the eurozone’s weaker members will undergo increased market pressures. In the worst case, they will be hit by a new vicious circle of panic and bank runs, also derailing the incipient European recovery. With Russia testing Europe’s resolve to the east, the timing of Europe’s gamble could not be worse.
    The Greek government is right to have drawn the line. It has a responsibility to its citizens. The real choice, after all, lies not with Greece, but with Europe.

    Read more at http://www.project-syndicate.org/commentary/greece-endgame-eurozone-default-by-jeffrey-d-sachs-2015-06#G4xLEqJ5kPYyIlSE.99

  2. A recent study by three researchers at the IMF addresses an important question: Under what circumstances should a country pay down its public debt? When countries face fiscal crises, they have no choice but to cut debt. When they need a Keynesian stimulus, they end up raising debt. But what about a country that is not at risk of a fiscal crisis and is near full employment – a country that is in what the researchers call “the green zone?” Should it pay down its debt (reduce its deficit) or pursue other objectives like public investment?

    The IMF researchers write down a model that says that such a country should not pay down its debt; it should increase public investment financed by debt, instead.

    http://www.brookings.edu/research/opinions/2015/06/16-imf-study-what-it-says-what-it-doesnt-gale-lim?cid=00900015020149101US0001-0617

  3. So it’s fairly obvious by now that this Greek government should not and will not yield. So what the European response minus threats and coercion? We have yet to hear any intelligent response to such.

  4. ” Not an Anti-American American, but an American who wished his country did not have the horrendous history it has had with Latin America and still does. For many Americans a real patriot.”

    Well said!

    Saying someone is “anti-country” because he or she criticizes their country — what kind of person makes such an accusation? Surely not one who has a basic understanding of what a democracy means. Speaking of my country Canada (a democracy lest Plassaras does not ) . . . if a Canadian who criticized Canadian foreign policy were accused of being “anti-Canadian,” there would be outright laughter from such an absurd accusation. Now if Canada were a dictatorship, well, then . . . “anti-Canadian”!

    • The US conspiratorial part sounds like a deliberate attempt to divest Greece from her key and only reliable ally in the western world.

      I wouldn’t trust Aljazeera about anything, let alone phony friendly advice to Greece.

      Sometimes it makes sense before publishing a newspaper article to do a background check on the author. It would appear that Weisbrot is an odd bird and has a personal vendetta against his own country and her foreign policy (regardless of who exercises it). In other words an anti-American, American.

      Bringing such people to the aid of Greece does far more harm than good. His views are irrelevant at best, highly biased and mal-constructed. Be careful who you are citing in the future and please learn a bit more about true motive:

      https://en.wikipedia.org/wiki/Mark_Weisbrot

    • There are many ways to be an American Dean. You’re a Greek immigrant in the US with a successful business. Weisbrot is a highly respected development economist with a focus on Latin America. Not an Anti-American American, but an American who wished his country did not have the horrendous history it has had with Latin America and still does. For many Americans a real patriot.

    • Here we go again: Dean Plassaras attempting to flex intellect that he does not possess: the United States is Greece’s “key and only reliable ally in the western world” . . . . LOL

    • Dean you really wish me to read Wikipedia on Weisbrot? Even Wikipedia admits it is not to be trusted: https://en.wikipedia.org/wiki/Wikipedia:Wikipedia_is_not_a_reliable_source
      As for the citation I posted that you protest: I read everything I can get my hands on and I “fully” trust nothing. If I cite something here, it is because I think some good points were made. We all know by now that the media, even the “well-known” and supposedly “reliable/trustworthy” media exaggerates and/or lies all the time. The Greece crisis is a perfect example of this, and this is an international occurrence. Best wishes, T.S.

    • Elenits:

      Weisbrot is certainly a joke. Supporting Chavez make him a patriot? Please. Weisbrot is the sort of fellow that he is totally marginal and completely ineffective as a supporter of the Greek case. He is a 100% liability.

    • Plassaras: “Weisbrot is the sort of fellow that he is totally marginal and completely ineffective as a supporter of the Greek case. He is a 100% liability.”

      Warren Mosler basically agrees with Mark Weisbrot.

      Plassaras: “Triada: I understand from you blog you are a female?”

      Why is this relevant?

      Stop your rude and creepy comments, Plassaras.

    • Last Greek in Canada:

      Why do you keep name dropping marginal and unknown people who basically have neither the tools nor the networks to do anything positive for Greece at this stage?

      Why Mosler a sportscar engineer – among other things – who lives in St. Croix have anything to do with Greece? Who ever heard of these people? Are you listening to alternative radio about UFOs and conspiracy theories in Canada?

      Here everybody talks about the danger of Greek isolation and these are the “new friends” you are introducing? This is very odd.

    • Lost Greek in Canada:

      Is this your Mosler because the guy sounds hilarious:

      “Mosler developed several luxury sports cars and supercars, including the Consulier GTP and the Mosler MT900. Starting in 1985, his cars were marketed by startup company Consulier, later renamed Mosler Automotive.[2]

      His designs were marked by excellent performance and high-speeds.Mosler was so confident of one of his models, the Consulier GTP, that he offered a bounty to anyone who could beat it in a race. Car and Driver took up the gauntlet and defeated his car. However Mosler argued that the model used in the race was a worn out Consulier and thus offered the challenge once more for a higher bounty.

      In the 90s he developed environmentally friendly vehicles including both electric cars and composite-bodied automobiles. The company was sold off in June 2013.

      Mosler also designed his own catamaran that he prides on being much lighter, faster, and more fuel-efficient than other models.”

      I get it know: Mosler has the much lighter, faster and most fuel efficient economic ideas and refuses to lose. Thank you so much for this heavyweight discovery.

  5. honestly: I follow your blog for 5 years+. I’m not a Greek(yet I’m from a non-EZ EU country, so I’m quite interested in EU working).

    you probably didn’t want the job. That I can certainly believe. Yet you accepted it. You have a certain amount of power. Start using it, because, by God, you’re already repeating yourself too much. You wasted a huge window of opportunity by “playing fair” and being naive the last months. And it’s not you who’s paying the price.

    I can afford having principles. I’m a private person. I even paid alot of this luxury. And I’ll probably pay alot more during my lifetime. You can’t(this comes with your job – check the fine print).

    It’s not that the other side doesn’t understand your point; even a 5 years old child does. It’s that they don’t want to. Stop being naive; there are 10M people(or whatever’s 98% of Greece population) paying for your luxury. And no, those 100k “elite”(because it’s not “germans” that don’t get it, it’s the European “elite” that doesn’t want to get it) won’t see the light anyway; even if you preach another hundred times and do a much better acting. They just don’t want to see it.

    either you get the majority of Europe’s leaders to back you up(they should, but they can be bribed) and push Germany back or cut your losses and get out. That’s the trade; reality won’t change if you don’t like it. So far, you’re just doubling up on a losing trade.

    You didn’t need this position to kick the can; any idiot could do that.

    • So, at the precise moment when Greece is beginning to win this game for all to see you want to “cut your losses” and get out? What for? Are you a coward?

    • win what? worse and worse fiscal position? If that’s winning, boy they are…

      the key advantage was primary budget surplus; that allowed a default while in the EZ, forcing the rest to deal with it. Now? It’s gone…

      listen, it’s easy. If they allow room for Greece, Spain and Portugal are lost this year. As both have elections this year(and look at the polls). Leaving aside Germany doesn’t have political capital for more concessions. And I guess Spain will be put alot of pressure too(as otherwise PP will lose to Podemos). Neither of the two parties(Greece/EZ) really has room to maneuver.

      all that Greece won in the last 5 months is a worse fiscal position. Don’t tell me it takes 5 months to explain the other side that current acct. must balance capital acct. and that the two, at a global level, have to sum up to 0. It takes about 1h to explain to someone who’s clueless about economy, not 5 months…

      They should move to the US block that’s being built in the Balkans, or towards Russia(whoever bids higher). That’s life.

    • Apparently you understand little about negotiations which is an art having its own rules which seem to completely escape you.

      This is not about explaining anything to a bunch of Berlin morons. This is all about drawing them as deeply as possible into a very long negotiation (which btw Greece has already won).🙂

    • “which btw Greece has already won”

      and whichever way it breaks – lol

    • ah, it’s all a negotiating ploy! phew, thank God, I’m relieved now! /sarc off

      mate, get your head out of the sand. ..

    • The majority of Greeks – unfortunately – have no clue what negotiations mean. They seem to believe that “negotiation” is some sort of give and take in an Ottoman bazaar where one is obligated to leave the bazaar with a mandatory transaction.

      You CAN NOT enter a negotiation with a frame of mind that you must have an agreement at the end – as foolishly 80% of Greeks believe – because they are clueless. If you precondition yourself to conclude a negotiation with an “agreement” then the other side all they have to do is hold their position until you are forced to accept it since you were naive and stupid enough to self-constrain yourself with an notion of an pre-agreement.

      The only way to be victorious in a critical negotiation such as this which Yanis is engaged in is to show that you care about a positive outcome but NOT THAT MUCH. Only when the other side gets a glimpse of you steely determination to not yield and consideration of other options, begins to treat you with respect and allows you an honorable outcome.

      Otherwise the bunch of faint hearted weaklings you are back home will be kicked around mercilessly from these criminal monsters that you call your “European partners” until there is nothing left of you and defeat is written all over your face.

      Read my lips: your feelings are not important; favorable national outcomes are. So let those in charge do their job and unburden them form your little fears and pronounced weaknesses.

  6. As George Friedman very astutely says here (click to listen to the audio for more full coverage), Greece has already left the EU. Her only remaining issue with the old EU structure is the status of the existing debt.

    The only issue that truly scares Germany is trade protectionism. So I would suggest to Yanis to look at imposing trade barriers to German trade vis-a-vis Greece effective immediately. It’s the only language Berlin understands.

    http://www.abc.net.au/pm/content/2015/s4251725.htm#st_refDomain=&st_refQuery=

  7. Yo Yanis, are you finding the time to chat with Doug Henwood? I’m sure he’d say Angela Merkel’s never going to lead on behalf of anything but German big manufacturers and banks.

    The EU governments are telling your government it cannot legislate. There is nothing more to say: they want your government to have implemented as little of your good ideas as possible by the time it’s gone. And they are working at making sure your government will be gone soon, by making you renege on your mandate, or blaming you for the fallout if you don’t.

    It is for you to take the initiative. Appeal to the people of Europe, tell them where public money has gone since 2008. Get Greek people to be proud to have the only government who is not sweeping the bank bailout under the rug. Get them to back you even if Eurozone membership is at stake. If you succeed, it can lead to the defeat of the establishment throughout Europe. And that’s the only path to democracy.

  8. Again, a very good political speech by a non-politician!
    I admire your ability to still convey this kind of optimism and I really appreciate your tireless campaign for a more democratic and economically sensible European Union – even when faced with such massive character assassination attempts.

    Unfortunately, the german public and most of the german media outlets have either taken no significant notice of this event at all or are already in the process of spinning your every word in order to twist this into another alleged example of greek irresponsibility and unwillingness to ‘reform’. Some are accusing you of constant ‘lecturing’ instead of acting. They typically go on proclaiming this as a result of greek (or your personal) hubris, simply denying you – or any greek (i.e.: non-german) politician – the right to even think about the bigger picture and much less talk publicly about your ideas, instead of knowing your place at the bottom end of the food chain, doing as you are told and presenting your ‘homework’ in a timely fashion. Ironically, this is a prime example of german hubris and unwillingness to accept that the world does not work according to Mr Schäuble’s fiscal budget plan.

    I dare say that while your call for a speech of hope by Ms Merkel is probably an intelligent political move it can only fail in reality.
    Even if – against all odds – the chancellor shared your views, it would mean political suicide for her to act on them. I’m afraid the german public is utterly lost to the greek cause (and probably to european democracy) and will never give a majority of votes to anybody who openly supports it. But then again, I can always hope that I am wrong.

    • I just want to remind, that Yanis has repeated his willingness many times, to accept and implement a debt-brake, as a sign for their determination to run the Greek state on balanced budgets from now on.

      The debt-brake, being Merkel’s baby, could bear symbolism enough, to make Greece acceptable again in the club of the virtuous. Interestingly for me, no one from the creditor nations has picked up this offering. I believe it could be a game changer. It could give Merkel space for her unparalleled flip-flop ability.

    • @Xenofon

      The problem is that Ms Merkel’s notorious flip-flop ability – as you so expertly phrased it – depends solely on what she perceives as public opinion and not – as her spin doctors have made everyone believe – on rational analysis.
      Unfortunately, the media campaign against Syriza and especially against Minister Varoufakis, which has been going on ever since they were elected, has been very successful in poisoning public opinion in Germany. With the exception of a small, rather leftist faction of the academical and political elite – some of whom were present on the podium when the Minister gave this speech – almost everyone now believes that he cannot be trusted and that whatever argument is brought up by a member of the greek government must be treated as a ruse to lure the creditors into lending more precious tax-payer money to the profligate south.
      And what is even worse: Although the humanitarian crisis that the greeks are suffering through now is recognized as a tragedy, it is also percieved as a harsh but just punishment for living beyond one’s means in the past, which now must be endured in order to receive deliverance from the sin of overburdening debt.
      As long as this twisted picture persists clouding the hearts and minds of the german public, the chancellor will never change course and she will keep on steering the european ship towards the iceberg, while the band merrily plays the german national anthem.

    • Hubert, in the event that you decide to change your citizenship to Greek from German, I would be more than happy to write you a glowing recommendation for fitness. I am sure the delusional formal Germany will never miss you and I am also certain that Greece could use a guy like you. Say when.🙂

  9. “It’s time to end the pretence: Greece will never fully repay its bailout loans” by Andrew Farlow for the Guardian
    “The stark reality is that Greece’s creditors must choose between two unpalatable scenarios. One is that Greece will leave the euro and default on its euro-denominated debt, its creditors will not get repaid anyway, and costly speculative pressures will mount on Portugal, Spain and Italy, while Greece itself will become more unstable politically and economically. The alternative is that Greece will stay, and its creditors will have to allow some further write-down on Greek debt. The latter scenario is surely the less painful. ”
    http://www.theguardian.com/business/2015/jun/09/time-end-pretence-greece-never-repay-bailout-loans#comments

  10. Reblogged this on Scarabocchi and commented:
    Thoughtful speech, peppered with Greek allegories, that summed up Greek debt crisis as both a political crisis for Europe, and a monetary crisis that can be managed. Pragmatic. Curious to see how it will go down in Germany.

  11. Yani, you are right in pointing out that Germany benefited in the same way as Greece during the boom years and now there is trouble for both, albeit Greece is ahead on this one with a depression more pronounced than the Great Depression that has fundamentally changed many lives already.

    It is worth thanking Germany for their support and the German taxpayers for funding that support (for two bailouts already). We all need to realise however that at a time when the ECB is creating billions and pouring them into the European economy to fight deflation, it is a morally repugnant thing to ask Greek pensioners and workers to suffer more cuts in their incomes. This problem is not a problem for faceless markets, it is a problem for real people. How would you feel if your salary went down 10% or 20% or 40%? How would you live? How would you explain to your kids the change in lifestyle? Would you say it is the fault of ‘governments’ so its ok that YOU pay? Can the German taxpayer really say that Greek families need to pay for the faults in the design of the Euro, the manipulations of Goldman Sachs, the actions of predatory elites foreign and domestic?

    I worry though that the battle for hearts and minds has been lost, and the longer things drag on, the worst it gets.

    • ” the battle for hearts and minds has been lost, and the longer things drag on, the worst it gets.”

      You wish.

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