Europe’s Vindictive Privatization Plan for Greece – Project Syndicate

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ATHENS – On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece’s remaining public assets.

Eurozone leaders demanded that Greek public assets be transferred to a Treuhand-like fund – a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state’s public property.

This Greek Treuhand would be based in – wait for it – Luxembourg, and would be run by an outfit overseen by Germany’s finance minister, Wolfgang Schäuble, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort.
Euclid Tsakalotos, who succeeded me as Greece’s finance minister two weeks ago, did his best to ameliorate the worst aspects of the Greek Treuhand plan. He managed to have the fund domiciled in Athens, and he extracted from Greece’s creditors (the so-called troika of the European Commission, the European Central Bank, and the International Monetary Fund) the important concession that the sales could extend to 30 years, rather than a mere three. This was crucial, for it will permit the Greek state to hold undervalued assets until their price recovers from the current recession-induced lows.
Alas, the Greek Treuhand remains an abomination, and it should be a stigma on Europe’s conscience. Worse, it is a wasted opportunity.

The plan is politically toxic, because the fund, though domiciled in Greece, will effectively be managed by the troika. It is also financially noxious, because the proceeds will go toward servicing what even the IMF now admits is an unpayable debt. And it fails economically, because it wastes a wonderful opportunity to create homegrown investments to help counter the recessionary impact of the punitive fiscal consolidation that is also part of the July 12 summit’s “terms.”
It did not have to be this way. On June 19, I communicated to the German government and to the troika an alternative proposal, as part of a document entitled “Ending the Greek Crisis”:

“The Greek government proposes to bundle public assets (excluding those pertinent to the country’s security, public amenities, and cultural heritage) into a central holding company to be separated from the government administration and to be managed as a private entity, under the aegis of the Greek Parliament, with the goal of maximizing the value of its underlying assets and creating a homegrown investment stream. The Greek state will be the sole shareholder, but will not guarantee its liabilities or debt.”

The holding company would play an active role readying the assets for sale. It would “issue a fully collateralized bond on the international capital markets” to raise €30-40 billion ($32-43 billion), which, “taking into account the present value of assets,” would “be invested in modernizing and restructuring the assets under its management.”
The plan envisaged an investment program of 3-4 years, resulting in “additional spending of 5% of GDP per annum,” with current macroeconomic conditions implying “a positive growth multiplier above 1.5,” which “should boost nominal GDP growth to a level above 5% for several years.” This, in turn, would induce “proportional increases in tax revenues,” thereby “contributing to fiscal sustainability, while enabling the Greek government to exercise spending discipline without further shrinking the social economy.”

In this scenario, the primary surplus (which excludes interest payments) would “achieve ‘escape velocity’ magnitudes in absolute as well as percentage terms over time.” As a result, the holding company would “be granted a banking license” within a year or two, “thus turning itself into a full-fledged Development Bank capable of crowding in private investment to Greece and of entering into collaborative projects with the European Investment Bank.”

The Development Bank that we proposed would “allow the government to choose which assets are to be privatized and which not, while guaranteeing a greater impact on debt reduction from the selected privatizations.” After all, “asset values should increase by more than the actual amount spent on modernization and restructuring, aided by a program of public-private partnerships whose value is boosted according to the probability of future privatization.”

Our proposal was greeted with deafening silence. More precisely, the Eurogroup of eurozone finance ministers and the troika continued to leak to the global media that the Greek authorities had no credible, innovative proposals on offer – their standard refrain. A few days later, once the powers-that-be realized that the Greek government was about to capitulate fully to the troika’s demands, they saw fit to impose upon Greece their demeaning, unimaginative, and pernicious Treuhand model.
At a turning point in European history, our innovative alternative was thrown into the dustbin. It remains there for others to retrieve.

Read more at http://www.project-syndicate.org/commentary/greece-privatization-plan-public-assets-by-yanis-varoufakis-2015-07#HHZZL9E3voHpScF5.99

40 thoughts on “Europe’s Vindictive Privatization Plan for Greece – Project Syndicate

  1. It makes zero sense to have a non viable debt get restructured and at the same time use sales proceeds from state assets to lower a debt which should be lowered regardless.

    Such moves actually postpone any progress on the real issue which is debt sustainability and represent a disproportionately small contribution from would be sales which require a vibrant market currently non-existent.

  2. Surprisingly in all the articles i read about Greek catastrophe caused by entering the Eurozone no one mentioned even with one word, that without the Eurozone, Greek’s GDP per capita and their standard of living would be about the level of Bulgari. (17,000 US$ in Bulgari as against 26,000 US$ in Greece after its fall of 30% since 2010). There is no real economic reasons for Greece to be economically better off, than a country, that its only industry is tourism.Yet during the 10 years of theft and deceit of the Greek political elites, with whom happily cooperated the private commercial banks, and channeled on account of rest of Europe finances, at least some of the stolen money went into Greek infrastructure and public services. As result of it, if the right decisions will be made, and the young highly educated Greeks will get jobs, and not chased out of the country by all the cartels, monopolies, oligopolies, professional unions of taxi drivers, etc. who close the labor market before them, i believe Greece will have chance to overcome its difficulties. By the way what kind of professional capacity is needed to become a taxi driver? To me with GPS and driver license everyone could do it. If the labor markets will be closed to the young educated Greeks, maybe Greece is heading towards the standard of living of a typical tourist country, like some Caribbean island.

    • @EugenR said this:

      >>Surprisingly in all the articles i read about Greek catastrophe caused by entering the >>Eurozone no one mentioned even with one word, that without the Eurozone, Greek’s >>GDP per capita and their standard of living would be about the level of Bulgari. (17,000 >>US$ in Bulgari as against 26,000 US$ in Greece after its fall of 30% since 2010). >>There is no real economic reasons for Greece to be economically better off, than a >>country, that its only industry is tourism …… …….. ……………………. ………………. …………

      In Greek we have a famous saying Eugen and it goes like this:

      Όταν γυρίσω θα τους γαμ*σω και αν αργήσω δώσ’ τους κι αυτό, είναι τ’ αρχ*δια μου τα δυο…

      Enjoy my friend!

    • Γεώργιος Καραϊσκάκης . . . Βρίζοντας και πολεμώντας! (Cursing and fighting!)

      +1

      How low Greek leaders have sunk. There is a photo, and I’ve seen it in attached to quite a few foreign articles on Greece , of Merkel waving her index finger admonishingly right in Tsipras’ face. Tsipars is all smiles. What would a man like Karaiskakis have done?😉

    • “that without the Eurozone, Greek’s GDP per capita and their standard of living would be about the level of Bulgari.”

      http://www.tradingeconomics.com/greece/gdp – you can overlap Bulgarian GDP over it. And you’ll notice that Greece’s GDP was 10 times bigger in 1980 too, when the country wasn’t even in EU.

      “There is no real economic reasons for Greece to be economically better off, than a country, that its only industry is tourism.”

      what you think things “should” be like and economy reality… sorry, they have nothing in common.

    • The comparison to Bulgaria was just a metaphor. At 1980 anyway Bulgaria was still in communistic grip, and any economic statistics from that time had no meaning.
      Sorry i don’t get what you mean by saying “what you think things “should” be like and economy reality… sorry, they have nothing in common”.
      I sincerely want to ask you, what exactly is economic reality to your opinion?

    • economic reality is that Greece is 35th or so gdp/capita even with current crisis(and with more then double that of Bulgaria). And it was a pretty prosperous country from the end of ww2 onwards without any EU. That while suffering the highest percentage of casualties from total population in all of Europe. If they managed to recover after that occupation, I’m sure they can manage to recover after EU…

      given their pretty low population and geographical position, there’s no reason why they wouldn’t be prosperous in or outside EU. At 10M, they could be fine even with tourism alone(not that they have only tourism, but even if).

    • @EugenR:

      A:
      >> And the reason to this disagreement is an economic concept i strongly believe in, that >> you make a deal where one gets a Mercedes and the other gets an obligation paper >> without any security for repayment, the one who has the Mercedes is better of.

      B:
      >>Surprisingly in all the articles i read about Greek catastrophe caused by entering the >>Eurozone no one mentioned even with one word, that without the Eurozone, Greek’s >>GDP per capita and their standard of living would be about the level of Bulgari. (17,000 >>US$ in Bulgari as against 26,000 US$ in Greece after its fall of 30% since 2010). >>There is no real economic reasons for Greece to be economically better off, than a >>country, that its only industry is tourism …… …….. ……………………. ………………. …………

      Both your mentioned economic assumptions are wrong:

      For A: The real deal was that European banks provided Greece with plenty of fiat money which was created out of thin air and when the Greeks were not able to pay it back they oblieged also other European taxpayers to pay them back their hot air money plus interest rates.

      For B: Greek GDP growth before its EEC/EC entry was much higher than after Greece’s entry to the European Community. It was in fact even higher than the GDP growth rate after Greece introduced the Euro!

      https://en.wikipedia.org/wiki/Economy_of_Greece#/media/File:Greece_GDP_growth_1961-2010.svg

    • @EugenR said this in his own blog:

      >>> The potential Greek market is too small for that. Above that, it is not the German way >>> to penetrate markets. The post WWII Germans, after learning what the Nazi >>> conspiracy have done to them and the world, they appear to distance themselves from any kind of conspiracy…

      Are you sure my friend that the Germans have changed that much over the last 70 years?
      How many ex-Nazis were ever prosecuted after WW2 in Germany and how many were in fact spared and served in the Deutsche Bundensbank, the German foreign ministry, the German secret service and many more German authorities?

      You don’t seem to have a clue about post ww2 Germany.

    • @ Aristoteles

      The old Nazi bureaucrats even served as policemen, public prosecutors, judges and – worst of all – elected politicians. And many oft them did so up to their retirement age.

      @ EugenR

      Consider this: Germany owes a lot of its ecomomic success to the fact that its exporting industry is living off other countries debt. The german current account surplus is expected to reach an all time high of 7.5 to 8 percent of GDP this year, which amounts to more than 200 billion EUR worth of german exports exceeding the amount that Germany’s economy spends on imports from other countries. As a consequence, those other countries can only afford to buy all those shiny new luxury cars, capital goods and high-tech weapons systems by borrowing money, because they do not sell enough of their own goods to Germany to earn the money that they spend on german stuff. Ironically, in the past, german banks have been handing out such loans in great numbers, which is one of the main reasons why they had to be bailed out via the so called ‘rescue’ efforts for deficit countries like e.g. Greece

      By the way, by insisting on maintaining this surplus, Germany is permanently violating one of the sacred rules that germans love to enforce so much on their european partners, which in this case is a limit of current account surplus to 6% of GDP. Germany itself insisted on that number because at the time this rule was implemented, the german surplus was at – guess what! – exactly 6 percent of GDP.

      Now the German government with its master of coin, Doc Schäuble, at the helm prides itself of a budget with zero deficit, or – as we call it “die schwarze Null” (‘ the black zero’), and scolds the Greek people for having lived beyond their means by taking up loans they cannot repay.
      Even if one were to just forget about the fact that one of the main reasons for the inability to repay those loans is the moronic idea of imposing harsh austerity on a country that is already in a depression, the german superiority complex would still be nothing but pure hipocrisy, due to the fact that german corporations have made enormous profits from this ponzi-scheme.

      And let’s not forget about the german Banks, which didn’t buy those Greek government bonds out of the sheer kindness of their hearts but because handing out credit and making money from interest rates is part of any bank’s fucking business model! (please pardon my french)

      So now we (the germans), the ones who profited the most from the common currency and whose exporting industries and their owners have been lining their pockets with what ultimately turned out to be toxic loans taken up by their customers and was then transferred to the european tax-payers, have the audacity to point our fingers at Greece and its citizens, to call them lazy irresponsible parasites and declare ourselves the poster-boys of fiscal discipline, industriousness and sound entrepreneurship.

      Now tell me again how Germany has not completely forgotten any lessons it may once have learned from its past and how it has not reclaimed its abhorrent former narcissistic notion of being better than everybody else.

    • Dear Hubert, i am not going to write any comment about German national psychology, because being a second generation to holocaust survives Jew, it wouldn’t sound serious. But i definitely disagree with your economic analysis. And the reason to this disagreement is an economic concept i strongly believe in, that if you make a deal where one gets a Mercedes and the other gets an obligation paper without any security for repayment, the one who has the Mercedes is better of. As to calling the Greeks lazy, is racism and stupidity. The Greek dysfunctional economy is due their political elites who acted out of political profligacy. Many nations, who failed in certain period of their history, after a deep crisis changed entirely their political behavior with the change of their leadership. The best example is Germany and Japan.

    • @ EugenR

      Maybe I misunderstood, but you seem to have already made an assumption on “german national psychology” – as you phrased it – by claiming that Germany’s intentions were essentially benign because it had learned from its past mistakes.
      Please don’t get me wrong, I would never compare what my country is doing now to the holocaust. That would be a horrible insult to the millions of victims of nazi mass-murder.
      But there is a revival of the german hubris, and it’s not just some politicians playing hard-ball during the ‘negotiations’ with Greece, but it is starting to show throughout all of german society.

      I don’t know if you are familiar with what has been going on during these past months in the german media, but I must tell you that the constant propaganda campaign they have been waging against Greece, its politicians – especially former Minister Varoufakis – and even the greek people as a whole, has not only influenced public opinion against Greece but it also seems to have stirred a dormant german desire to feel morally superior towards the rest of Europe and to reclaim some kind of percieved inherent right of the german people to impose their will on those people of other nations who would disagree with their way of running things.

      On top of that, there is a growing discontent among the german puplic with taking on refugees, including extreme right-wing protests and the occasional burning of refugee shelters, to which our glorious leaders had not much to say except to issue a law that will expedite deportations. There is also evidence that the german interior secret service, whose only job is to protect the constitution, was in cahoots with a homicidal nazi-terrorist group and all the government is doing about it is trying to bury the parliamentary comission tasked with investigating the case under a giant pile of bureaucracy and thereby sweep it under the rug.
      But the average german ‘tax-payer’ – as we like to refer to ourselves – doesn’t seem to care about the fact that the people whose salaries come out of these taxes are obviously permanently violating the constitution they swore an oath to protect. What does concern them greatly, however, is a small country on the south-eastern fringe of the European Union trying to regain a sense of democracy and national sovereignty against a coalition of technocrats, led by Germany, that seems to be willing to openly deny them those rights. As a second generation descendant of nationalist, racist mass murderers, I find that highly disturbing.

      As for my “economic analysis”, this is not some personal theory of mine. The German surplus problem has already been adressed by the European comission, various economists all across the globe (excluding almost all of the german ones, of course) and even by the US-Government, including the President himself.
      You wrote: “[…] that if you make a deal where one gets a Mercedes and the other gets an obligation paper without any security for repayment, the one who has the Mercedes is better of.”
      And of course that may be true from a microeconomic point of view. But with this analogy you are adhering to the same kind of neo-classical dogmatism that seems to be all the rage among german economists by discussing a macro-economic problem in micro-economic terms. It is not the Daimler-Benz corporation who got stuck with worthless IOUs for the Limousines they sold to greek customers. It is the ordinary citizens and tax-payers of Europe who would be left with worthless debt certificates, which they got in exchange for their share of the bailout funds, if Greece were to somehow ‘exit’ the Eurozone. These bailouts, as everyone should know by now, where mainly used to save greek and other european Banks, first among them german and french ones, from collapsing under the weight of all those toxic loans they had given out, some of which may certainly have helped to fuel a credit based rise in overall consumption rate in Greece prior to the crisis. But neither Daimler-Benz nor Deutsche Bank will have to deal with the results of their bad business decisions.
      And although I have never been to greece myself, I very much doubt that the streets of Athens or Thessaloniki are teeming with german luxury cars and even if that were the case – you can not blame ordinary people for trying to better their living standards if they get the chance to do so and you can also not expect them to realize the macro-economic implications of a whole country living ‘beyond its means’ as the glorious german leadership likes to put it. As a consequence, punishing those ordinary people for crimes their elites have committed is just cynical and cruel and does not make any sense economically. But that is exactly what is happening right now and a majority of my esteemed german compatriots deems this kind of collective punishment an act of justice.
      Which, as I wrote before, is especially stupid since german corporations and Banks have long secured their profit shares and shifted any kind of loss over to the public sector.

      But anyway, the argument between Greece and its creditors has long left the realm of economics and has become a purely political one, where a majority of conservative governments – most of all the german one – and a few ‘social democratic’ ones who appear to have made themselves the lackeys of their conservative overlords have essentially knocked out democracy and they made sure that it won’t recover from this blow for a very long time. And here in Germany this is not only widely accepted by the public but also applauded as sound politics.

    • Hubert:

      What is going on with Greece and Germany is very simple to comprehend.

      After failing to achieve a broad consensus government using an ND+Pasok backbone, Berlin has abandoned these old political parties in favor of an untried new Syriza government.

      Berlin gets the following advantages out of this new “arrangement”:

      1. It gets the opportunity to hand the toughest terms possible to Syriza in a manner that it understandable to all due to the natural differences in neo-liberal and leftist ideologies. It’s quite natural for Syriza t become target of the toughest Berlin policies and Berlin gets maximum output through a Tsipras government.

      2. It gets at least half of the Syriza votes by allowing Syriza to be in charge oterwise Syriza as opposition produced zero support votes.

      3. The other Greek political parties are trapped in their pro eurozone bias and therefore their favorable votes towards Berlin policies are a given (under no circumstance ND+Pasok+Potami could vote against Berlin).

      Consequently Berlin now thinks that it has finally been able to forge a Greek coalition capable of carrying out its diktats. Syriza is subdued by the seduction of power and the rest of the Greek political parties by their irreversible record of prior collaboration.

      The rest is small details and you could fill them in as suitable.

    • @Dean,

      I think I understand the german agenda pretty well. After all, it was a social-democrat and green coalition that started the whole idea of austerity in Germany 15 years ago, although with much less dire consequences to the common people as is the case now in Greece.
      Back then, when the idea of a ‘social market economy’ was still part of the german self-image, a conservative german government would never have dared to implement such drastic cuts in social security and pensions while at the same time deregulating labour markets and lowering taxes on the top income bracket, on corporate profits and on capital gains. Only a ‘leftist’ government could persuade the unions to accept stagnating wages and the majority of working class voters to agree with a policy that would eventually lower their living standards and expedite the redistribution of profits towards their employers.
      So the way it turned out in Greece may just as well be seen as a win-win situation by our glorious german leadership. However, I still refuse to judge Mr Tsipras or Syriza for acting the way they did. To me it is clear that their defeat – or their betrayal as some might call it – was orchestrated in Berlin, Frankfurt and Brussels and that they never really had a choice unless they were willing to start a real revolution and plunge the country into chaos.
      What concerns me the most is not even the refusal of Mr Schäuble and his cronies to allow an honest discussion about the failed policy that they so stubbornly keep insisting on. It is the majority of my fellow german citizens who are not just standing idly by while greek democracy is being sacrificed to an inhumane ideology, but are actively cheering and supporting this shameful act without thinking for even one second about what this could mean for their own future within this so-called European Unnion.

    • @Hubert Marcks:
      >>>> What concerns me the most is not even the refusal of Mr Schäuble and his cronies to allow an honest discussion about the failed policy that they so stubbornly keep insisting on. It is the majority of my fellow german citizens who are not just standing idly by while greek democracy is being sacrificed to an inhumane ideology, but are actively cheering and supporting this shameful act without thinking for even one second about what this could mean for their own future within this so-called European Unnion. <<<<

      Hallo Hubert,
      That is my biggest concern as well and therefor I really doubt that the Germans have learnt that much from their history.

      Now since you are one of the few in Germany who kept their humaneness here is a petition which you could also sign and please also distribute to other decent minded Germans:

      https://www.change.org/p/wolfgang-sch%C3%A4uble-bundesregierung-treten-sie-zur%C3%BCck-sie-verspielen-die-zukunft-europas

    • Dear Hubert, i think the disagreement on Greek issue between us originates from different points of view we have about the question, what is the major issue Europe has to cope with. If i understand it correctly, your position is to try to secure the Social welfare state in whole Europe, and everything that endangers it has to be removed. My opinion is different. As to me the major issues to be Solved in Europe are as follows.
      1. To secure European Union and strengthening it as much as it is just possible. I am for reducing the political-economic function of national government to minimum. So of course i am for one European central bank, one federal budget and one federal tax system and collection. The local government should act as states in federation, with limited authority, on the level of region, with its own budget, approved by the federal European government. Of course to do it Brussels has to become democratically elected, what is very difficult now to achieve, when the attendance on European election is hardly 20 %. Most of the people in Europe identify themselves on the national level, and very few on the European level. Still Europe, with its declining and aging population, cultural decline due to tendency of self denial, can hardly effort not to act as united, against the threats out of it.
      2. Europe has to integrate economically and politically the East European states, including those that are already part of EU, and those that are not, like Ukraine and even Turkey. The standard of living and infrastructure of some of these countries is catastrophic. To my opinion it is more important to invest in these countries to bring their economy closer to the EU level, than to invest in Greece to sustain their standard of living, just because they get used to it in the times when they could freely borrow without responsibility.
      3. You are right that the Greek people are not to be blamed for the wrong doings of their political elites. Still their position of “Let me die with the Philistines”, is very dangerous and egocentric. It is very amoral, in one side to demand solidarity from the rest of Europe, on the other hand to threaten Europe with destroying its economic system.

    • One other thing. To help Greece out from its economic mess, Greece have to cooperate with rest of Europe and its creditors. Their policy of claiming that Grecexit will destroy EU is not exactly cooperation. It is also very arrogant and haughty. After all except of its debts Greece has no economic significance for Europe at all. Also it’s pre crisis economic policy of creating so big economic mess that it will become a whole European problem, wasn’t very much about solidarity. Let’s take for example countries like Romania and Bulgaria. Their joint population is about 35 million. The infrastructure in this countries is in horrible state. Their GDP per capita is about half of Greece. Their standard of living is much below from all what the Greeks can imagine. I visited few years ago Romania, spoke there to a women, wife, mother of small children, academically educated, etc. To sustain her and her family’s life she had to wake up every morning at 4 o’clock, to walk 2 hours to the bus stop, to reach her working place at 7. She said in Romania that’s how it is, except maybe in Bucharest, where you have proper public transportation. And it wasn’t in some remote village, but in one of their urban regions close to the Hungarian border. I wonder how many Greeks remember this kind of reality, that few decades ago was probably very common in their country too. European solidarity is about to try to create decent life for all the Europeans and not for one kind of European on account of an other kind.

    • @ EugenR:
      >>>> …. Their policy of claiming that Grecexit will destroy EU is not exactly cooperation. It is also very arrogant and haughty. After all except of its debts Greece has no economic significance for Europe at all. Also it’s pre crisis economic policy of creating so big economic mess that it will become a whole European problem, wasn’t very much about solidarity….. <<<<>>> …. than to invest in Greece to sustain their standard of living, just because they get used to it in the times when they could freely borrow without responsibility.
      3. You are right that the Greek people are not to be blamed for the wrong doings of their political elites. Still their position of “Let me die with the Philistines”, is very dangerous and egocentric. It is very amoral, in one side to demand solidarity from the rest of Europe, on the other hand to threaten Europe with destroying its economic system….. <<<<

      Once more you hide your anti-Greek sentiments behind pseudo-economistic and pseudo-moralistic arguments.

      A. Greece hasn’t been threatening the EU with a Grexit. Exactly the opposite has been the case, the EU has threatened Greece with an uncontrolled Grexit! The ECB even went a step further and pushed the Greek banking system to collapse because of its illegal discontinuation of ELA support!
      B. If you use biblical metaphors try to use relevant biblical metaphors and not completely irrelevant ones. You don’t seem to have a clue that the Philistines have been a proto-Greek tribe which originated from the Aegean Sea. So instead why don’t you cite for example Chapter 12 verse 20-23 of the Book of Maccabees 1 or even the Jewish historian Josephus (Antiquities 12:4:10).
      C. Nearly 90 percent of all the European and IMF money went back to creditors so how can you honestly claim that money has been invested in Greece? While at the same time it was demanded that the Greek state reduces its own investments to nearly zero and also cut its social spending to third world levels. You don’t seem to have any compassion for the Greek people at all and you seem to be completely indifferent to the humanitarian disaster which is inflicted by the imposed harsh austerity!

      I really wonder why Yanis is letting you rant here against Greece and the Greek people.

    • To say that I hate Greeks is easy argumentation, but not a valid one. Why would I hate Greeks? I have no reason what so ever. In contrary, I love their music, dancings, musaka, greek food and wine and uzo. Whom I have reason to hate are the Germans, who murdered most of my family members. Not to speak about their shitty food.

    • To say that I hate Greeks is easy argumentation, but not a valid one. Why would I hate Greeks? I have no reason what so ever. In contrary, I love their music, dancings, musaka, greek food and wine and uzo. Whom I have reason to hate are the Germans, who murdered most of my family members. Not to speak about their uneatable food. Yet if Greece doesn’t want to remain to be the underdog of Germany, a fundamental change has to be done in his social-economic network. And it is not easy, but there is no real alternative. If there would be I am shure Mr. Tsipras would find it by now.

    • Dean P.:

      Very good article indeed:

      The humanitarian disaster had reached dimensions that defy any definition of a “United Europe”. With the media’s obsession with the pseudo negotiations the fact that this was an existential decision for millions of Greeks was forgotten, many of whom stood at the edge of an abyss. This became clear as affected Greeks were asking how they were to pay for their insulin and if it would soon become unavailable due to the financial embargo that was being created. This was the terrorism that Yanis Varoufakis denounced.

      The reaction of what I would term “enlightened Germans” to Varoufakis’s claim was what one expects. For them, they were being compared to ISIS. Even though the fear emanating from much of Greece’s population was palpable, there was little reflection by many of those Germans capable of doing so, with regard to the aggression conducted in the name of Germany. In the phase immediately before Syriza’s capitulation there was an increasing awareness among some Germans that something was going terribly wrong, but it was too little and too late.

      This brings me to the first main point of this posting. The history of the “good Germans” has always been one of ineffectuality. In the course of history there have been many Germans who believed in the enlightenment, be it Martin Luther, Immanuel Kant or Wolfgang Goethe. These however never questioned the authoritative role of the state against the will of the people. The class of “enlightened” Germans always regret what their nation is doing, but more often than not, in the end participate in the very actions they deplore. As A.J.P. Taylor wrote: “There were, and I daresay are, many millions of well-meaning kindly Germans; but what have they added up to politically?” In the case of Greece, this has occurred still again.

      Not that the ethical Germans have had an easy time of it lately. A few years ago there was a massive campaign in commentaries and politics condemning so called Gutmenschen (literally translated: good people), who were defined by their critics as persons following their moral conscience – regardless of being leftist, moderate or conservative. In a nation that is responsible for the holocaust, this is a very worrying development. Thus the transition of Germany’s hegemonic role in Europe, among many internal transitions such as the unjust redistribution of wealth, has been thoroughly ideologically prepared.

      It is worth mentioning a sort of landmark book written by the German historian Heinrich August Winkler, “The Long Journey to the West”, which appeared in the year 2000. It traces the purported progress of Germany becoming a responsible member of Western Europe’s democratic tradition and intellectual enlightenment. Winkler may have been too quick with his conclusion. Under German hegemony we are seeing heads of state removed by financial pressure (Italy and Greece), nations forced to take over debts from reckless private banks (Ireland and Spain) and Greece being pounded into submission and having its autonomy reduced to passing legislation dictated by Berlin. The Germany of today has little to do with Western European democracy, resembling more traditional German anti-democratic authoritarianism.

      The second point I wash to make is that the real losers with regard to the disaster in Greece are not even aware of their plight: the Eastern Europeans. What the Germans have done to Greece has its basis in racism, but the Germans have a primordial fear and hate of eastern Europeans, resulting in a commensurate brutality. When the opportunity arrives to subjugate these peoples, the process will not be as gentle as in Greece. Ukraine could already be the first example of this………..

    • My apologies for another lengthy rant. I just can’t help it.

      @ EugenR

      Of course our disagreement originates from our different views – and they differ greatly, if I might add.

      I don’t even know where to start. But let me try and make my point of view absolutely clear:

      First of all, the welfare state is not a pipe dream of luxury without responsibility conjured up by leftist romanticists – as today’s defenders of a minimal neoliberal state like to put it.
      It is the result of a long and often bloody struggle of the lower classes for more independence from the wealthy elites.
      It is (or rather: it used to be) also an essential part of european democracy because it enables all of its citizens, even those at the bottom end of society, to participate in social life and democratic processes without fear of losing the means to support themselves and their families at the whim of their capitalist employers.
      Dismantling the welfare state, as is happening all across Europe, be it rather slowly like in Germany or at ‘Blitzkrieg’-speed like in Greece, renders the ‘have-nots’ more and more powerless and – more importantly – diminishes their faith in a society that does not care for their fates, denies them equal opportunities to better their lives and does not wish for their voices to be heard.
      However, what is probably the most important part of an intentionally dysfunctional welfare state is the fact that it is being used as a threat to pressure the workforce into accepting lower wages in order to save themselves from having to join the ranks of the unemployed and become excluded from social life by lack of means to participate in it.

      Myopic neoclassical supply-side economists (like almost all of the german ones) usually welcome this development because in their universe – which is based on blind faith in mathematical models rather than on empirical evidence – low wages equals high competitiveness, which automatically leads to job creation and ultimately renders the welfare state irrelevant because the result is a society graced with full employment and optimal realization of market potential, where everybody has a job and earns a sustainable income determined by the great moderator that is the free (labour-) market.

      Back in the nineteen-sixties and seventies, when Keynesianism was still a viable alternative to neoliberalism (within a capitalist framework!) and not a derogative pinned on ‘leftist’ economists who refuse to accept an ideology as rational science, even among members of the german conservative Christian Democratic Union (Ms Merkel’s and Mr Schäuble’s Party) there existed a broad consensus about the necessity of the state to actively regulate the social economy.
      They realized that State intervention was inevitable in order to balance the tendency of a capitalist market economy to redistribute wealth from the bottom to the top against the need of a society to have decent standards of living for all its participants.
      They also understood that social security, unemployment benefits and a pension system worth its name are not just hand-outs for lazy people, but a macro-economic necessity to counter the negative effects of mass unemployment (which started to show in the seventies) on aggregate demand. In other words: poor people are very poor at being consumers or, to quote a famous capitalist: “Cars don’t buy cars.”

      Today, the welfare state is no longer accepted by (neoliberal) mainstream political economists as an integral part of democratic societies but rather treated as an annoying atavism, a relic of the past and a hinderence to economic success that responsible governments need to get rid of or shrink down to the lowest possible level in order to allow their national economies to become more ‘competitive’.
      In Germany, this change of attitude is not openly discussed but it is evident in the behaviour of the ruling political class, their economic advisory boards and the representatives of major business associations (who usually employ the most important economic experts).
      It ist also going hand in hand with a slow but steady transformation from the ‘social market economy’ of the mid-twentieth century to a market society in which every aspect of human life is expected to be open for commodification and human interactions are more and more treated like market transactions – which require sufficient funds for market participants in order to buy themselves a decent place in society.
      Consequently, the lower income class and the unemployed have already stopped caring for democratic decision making processes. At best, they have become indifferent to a society that does not care for them and they have lost their faith in democracy’s ability to change anything about that. As a consequence most of them do not even bother to vote any more.

      Those who refuse to succumb to (political) apathy often rally behind right-wing populist parties, conspiracy theorists and other demagogues who offer seemingly easy solutions to very complex problems. Those groups are also becoming increasingly efficient at making up threats like the alleged islamification of Germany, a growing ‘leftist’ Zeitgeist purportedly trying to turn god-faring, honest working, family-loving Germans into homosexual, bohemian atheists, or the imminent transformation of the EU into a Soviet-style communist(!) dictatorship. They are also very good at presenting scapegoats to their followers like greedy immigrants, a global conspiracy of (zionist) bankers, the Euro itself or the US-government, providing them wit a canvas to project all their frustration and hate onto.

      The elites are well aware of that phenomenon, but – completely lacking the will to acknowledge their failures or to make substantial changes to a running system that provides them with ever increasing profit rates – all they can do about it is set their own superior mechanisms of propaganda in motion in order to make up some scapegoats of their own, like the threat of globalized competition (i.e.: China), islamic terrorism (so far non-existent in Germany), the evil expansionist empire of the sinister Czar in the east (highly debatable), or lazy irresponsible Greeks voting the wrong people (socialists) into office. They do this in order to at least placate the middle and upper middle class, rally them behind their cause and put the fear of god into them of losing their precious savings to the world’s moochers and ‘have-nots’, should they dare to disagree with the ruling classes and their grand plan to turn Europe into a technocrat minimal state ruled by the iron fist of the markets with business contracts substituting constitutions.

      Now, one could argue – and many have done so – that the idea of the welfare state as integral part of ‘western’ societies can no longer be afforded in the face of global competition.
      But for this argument to work, one must first accept the idea that market competition between nations – especially but not exclusively those sharing a common currency – is essentially a desirable thing, both socially and economically.
      One must also share the notion that democracy, equal opportunities, and social justice may be desirable things but that in order to keep the system running, hard choices must be made and beloved achievements of civilization must sometimes be sacrificed for the greater good. And one must ultimately agree that ‘the greater good’ which needs to be maintained at all costs is a socio-economic system that – to put it bluntly – takes from the poor and gives to the rich – not just in Greece, or Bulgaria, or even Germany but all across planet Earth.
      And that last blunt statement is an empirical fact, not a mathematical theory.

      So, yes. My point of view seems to be very different from yours.

    • @ EugenR

      And while I’m at it:

      Comparing eastern european countries to Greece as a justification for the austerity programmes is probably one of the most cynical arguments one could come up with.

      I have heard this comparison being made buy countless german politicians, journalists and even ordinary people on the street many times over and it is a prime example for the disturbing efficiency of the european elites’ propaganda campaign against Greece and its leftist government.
      Have we really sunk so low as to pick the countries with the lowest possible living standards, the most miserable social security system, the worst overall level of education and most insufficient infrastructure and take that as a reference for what people in Greece, or anywhere in the Eurozone (except the surplus countries, of course), have to come down to in order to become ‘competitive’ by serving as a cheap labour force for the north-western exporting industry?

      Don’t get me wrong here. What is happening in eastern Europe is a crying shame, there is no doubt about it. But it is not the greek people who are to blame for this mess and further cutting of their wages, pensions and health insurance and raising consumer taxes will not improve the average Romanian’s standard of living one bit. And selling off state’s assets that still generate at least some kind of revenue at firesale prices will neither improve the greek government’s long-term income situation nor will it help to improve the infrastructure of Bulgaria or any other eastern european country.

      On the contrary, the one effect this will definitely have on eastern Europe is that it will make absolutely clear that any attempt to demand a more just distribution of wealth in those countries will be absolutely futile and incite harsh punishment from the powers that be.
      Any political movement from the Baltics to the Adriatic Sea that would dare to even discuss alternatives that might benefit the general public instead of the corrupt elites who enrich themselves by renting their workforce out to german corporations at minimum wages like modern-age slaves, is being nipped in the bud.

      But what do we do? We do not show solidarity with the people who are desperately trying to gain at least a little emancipation from a corrupt and inhuamane social-economic system and from the elites that this system helps to keep in power. We do not see their struggle as an example for others to follow – especially in eastern Europe.
      Instead, we turn their claim to maintain decent standards of living into a sense of false entitlement, parroting the propaganda of the ruling class.

    • HiDear Hubert, I understand your frustration about the social and political trends in Europe, and not only in Europe. This process you so correctly describe, I would call process of depossesing bigger and bigger parts of the European society, started with the globalisation, that from European point of view it brought disruption into the long established social contract, but from the global point of view it brought worldwide new population out of poverty, mainly in China and India. So maybe what we see in front of us is the long waited redistribution of the wealth between highly developed and underdeveloped countries. If the assumption of limited world resources is right as I believe it is then the alternative to redistribution of wealth is enrichment of Europe, US, Japan etc. and farther impoverishment of the underdeveloped world. You could see what happens to these countries. All the political violance we see in certain Muslim and African countries is the result of it. And also the waves of desperate refugees flooding to Europe, process that can be destructive to Europe and cause farther underlining of the social and political problems,you so well describe in your comment.
      Last years this process of transfer and spreading the world economical wealth slowed down, and started a new economic process of introduction of new technologies, that will makes new and even highly professional employments irrelevant. This process will be probably even more painful than the previous one.
      As to the situation in Eastern Europe versus Greece, your claim is that this are separated issues. I disagree. To my view when the Greek plutocracy borrowed unscrupulously to enrich themselves, these financial sources could be used for improving the situation in Eastern Europe, and not be used to purchase Mercedesess.and Porsches.

    • Dear Hubert, I was in flight, and before I replied with a not revised version of my response. Sorry for that. I understand your frustration about the social and political trends in Europe, and not only in Europe. This process you so correctly describe, I would call process of depossesing bigger and bigger parts of the European society. This started with the globalisation, that from European point of view it brought disruption into the long established social contract. But from the global point of view it brought worldwide new population out of poverty, mainly in China and India. So maybe what we see is the long waited redistribution of the wealth between highly developed and underdeveloped countries. If you believe as I believe, that the assumption of limited world resources is right, then the alternative to redistribution of wealth is enrichment of Europe, US, Japan etc. and farther impoverishment of the underdeveloped world. You could see what happens to these countries if they are impoverished. All the political violance we see in Muslim and African countries is the result of it. Also the waves of desperate refugees flooding to Europe, process that can be very destructive to Europe as you mention, disrupting the existing democratic fabric. It even more deepens the problem of breaking the existing social contract. There is real danger that it will cause farther undermining of the social and political framework in Europe, you so well describe in your comment.
      In the last years this process of transfer and spreading globally the world economical wealth slowed down, and started a new economic process of introduction of new technologies, that will make more and more, even highly professional employment jobs irrelevant. This process will be probably even more painful than the previous one.
      As to the situation in Eastern Europe versus Greece, your claim is that this are separate issues. I disagree. To my view when the Greek plutocracy borrowed unscrupulously, to enrich themselves, these financial sources could be used instead to improve the situation in Eastern Europe, and not be used “to purchase Mercedesess and Porsches”. I do agree with you, that the Greek people shouldn’t be punished because of what have been done by their elites. As to the politicians who caused this tragedy, it would be just right to punish them. But it seems, there are people who are above the law, or better said there are certain obviously unethical acts of the ruling elites that are above the law. You yourself mentioned the Nazis, who were not punished. It is again the same case. There is no justice for those abused by political abusers, even if they are cruel murderers. Actually only one case lately I remember, when the Israeli president was jailed for molesting his secretaries. I wonder how will end Berlusconi etc.
      But back to Greece, I would suggest to look rather into the Greek economic future, than into its past. As I already expressed my opinion in my blog, macroeconomics is not only about aggregate demand and supply, GDP, income distribution, public deficit, etc. These economic values are just result of social and political structures, that create the economic activities. To explain my idea I would use an example from ancient Greeks and Rome, that had technical know-how probably in much higher level in many fields than Europe of beginning of nineteenth century. And yet, economically it was not developed at all. Some say because of the slavery, that prevented to create productive social networking. It had no banking system, no developed international commerce out of the Roman empire, no mas-production industries, etc. All this was invented and established in Europe out if necessity. 
      It seems to me Greeces social and political structure is in some way fundamentally wrong. If there will not be created a necessity to Greece to make such a fundamental change, it will never happen, because it hurts to make such a change. But what is the alternative? To remain all the time the underdog of Germany?

    • @ EugenR

      I agree with your assumption that global ressources are not limitless and I also think that the world outside of the industrialized ‘western’ nations has every right to get their fair share of the profits generated through the use those ressuorces.
      However, firstly, one cannot deny the fact that the new-found wealth in developing and emerging countries is mainly concentrated on a small elite. The majority of chinese, indian, or brazilian workers serves as nothing but fuel for the profit generating machine that is global capitalism. Judging the wealth of nations solely by their GDP does not tell us anything about whether or not the majority of inhabitants of these nations really sees the enrichment of their ruling elites as an improvement of their own quality of living. I doubt that under-age girls in Bangladesh working under horrible conditions for the mass manufacturing of textile products for western markets, consider their newly found life as expendable human resources as an improvement, just to name an example.
      Besides, I have yet to hear about a credible source of statistics for any of these countries, really providing the same level of detailed demographical and sociological data we have in the ‘western world’ with its long tradition of record-keeping and its obsession with bureaucracy. And even our own statistics are often faulty and constantly being misinterpreted, doctored, or simply faked by all kinds of interest groups (including leftist ones) and used to underline completely contrary positions. So I find all that praise about the positive impacts of globalized capitalism on the societies of the developing world at least debatable.

      But even if that were the case and if indented servitude, forced labour, the lack of unions, worker’s rights or any form of workplace protection was something that people in the developing world were accepting as necessary hardships on their way to prosperity, there is simply no way that the western elites will let them become truly inependent economic forces of their own. Because our elites know full well that they would not be able to maintain their profit margins if there was real competition and if something like a ‘free globalized market’ would actually exist. Instead they support and make deals with Kings and Dictators and even ‘communist’ regimes like the chinese one, or they invent complicated trade agreements like TTIP or CETA, all to ensure that the freedom of the industrialized world to exploit the rest of the planet as they please is not seriously impeded by those lower down the food chain.

      I absolutely believe that it would be theoretically possible to distribute the wealth of this world a lot more equally among all nations – not just those of the ‘first’ world. But I absolutely do not believe that capitalism can provide such a wondrous feat. Capitalism is the rule of those who already have the means to rule and they can never stop accumulating more of those means or they will lose their power. It is not about equal opportunities for all.

      P.S.: I really fail to see how the Greek plutocracy enriching themselves by borrowing money could have had any impact on the situation in eastern europe. It’s not like there was only a limited supply of money in the Eurozone and because the greeks took so much of it there was nothing left to invest in the east. It’s fiat money, it only exists because someone has borrowed it from a bank somewhere.

    • I will start with the easy one. As banking system works, they have as any profits generating institution a goal to achieve. It was just easy to achieve this goal by “profits”, out of “secure” loans to Greece government. Why to bother then to find new markets for borrowings in the “risky” east European markets. From personal knowledge, the only banks who were ready to finance new privet investments in these countries were the small Austrian banks, that were geographically close. To my knowledge most of them had done well, until they entered the risky Russian market.
      As to the problem of capitalism etc. I myself wrote about the problem, that the capitalism, driven by need for ever higher yield, and the need to pay interest, has no model to solve the major long term economic problems, like environment and more evenly distributed wealth. So the solution should be a different economic system. I have some ideas about some directions, but not good enough for publishing it.

    • Dear EugenR,

      I’m sorry to drag this out so much but I feel a need to point out a major flaw in your whole argument.

      You wrote:
      “It seems to me Greeces social and political structure is in some way fundamentally wrong. If there will not be created a necessity to Greece to make such a fundamental change, it will never happen, because it hurts to make such a change. But what is the alternative? To remain all the time the underdog of Germany?”

      So I have to ask: What do you think it would take to create an appropriately urgent ‘necessity’ for greek society to make those hurtful changes? And, furthermore, are you really implying that the greek people have not suffered enough?

      I would like to give you the benefit of a doubt and not accuse you of purposefully following the Troika’s propaganda lines, but I’m afraid that is exactly what you’re doing

      a) by insinuating that either the Greeks have simply not yet realized that they really are in dire straits and therefore need to be told to do their homework again and again, or that they do realize it but stubbornly refuse to take responsibility for making significant changes and

      b) by approaching a social and political problem via the typical neoliberal paradigm that only given the right economic incentives can people be made to act responsibly and that any leniency given them by their overseers will result in them falling back to irrational, self-destructive behaviour.

      I wonder: why is it so hard to understand that by voting for Syriza – who have made it clear from the very beginning that things needed to be changed significantly – back in January, the greek people have already voted for change?
      That they have been denied the right to decide the nature of that change does not change the fact that a majority of them have already realized the ‘necessity’ for it. Actually it is the merry band of Doc Schäuble & the Friends of Austerity who are in complete denial about the necessity for a fundamental change in the way they think this whole european project ought to be run.

      I find it curious how you can criticize capitalism and at the same time align yourself with its staunchest supporters by using their arguments against Greece.

      As for the banking system and how it works – you are right, banks are profit generating institutions. They are also mostly free enterprises who can choose whichever way they want to achieve that goal. Buying ‘secure’ greek government bonds instead of financing bulgarian infrastructure projects was a business decision they made and not something they were forced to do by the corrupt greek oligarchy. It also enabled them to deposit those bonds as collateral with the ECB and borrrow even more cheap money from it, which they could just as well have used to invest in romanian Autobahns rather than to buy ‘secure’ asset backed securities, credit default swaps, collateralized debt obligations – you name it – from Lehman Brothers or any other one of those banks that were still awarded triple A ratings right until the very moment they almost crashed under the weight of all their toxic papers.

      You can certainly blame the previous Greek governments for having doctored their numbers to swindle themselves into the monetary union and to gain access to cheap ECB money, you could also blame Goldman Sachs et.al. for helping them do it and the rest of the Eurozone governments for knowing exactly what was going on and still sweeping it under the rug in order to expand the currency union – foolishly believing that this would promote european integration.
      You can not take all that blame, forge it into a giant sledgehammer and use it to crush a democratically elected government who had nothing to do with all of this.

      p.s.: Concerning the involvement of Austrian banks with investments in eastern Europe, please google: Hypo Alpe Adria.

    • Dear Hubert, I representing only myself and my intellectual and professional understanding as an Economist in all my assays. To your questions.
      When the Greek people suffering will be satisfactory to change some fundamentals, my answer is right now, since in these days Mr. Tsipras, the most radical opposer of European dictatum decided to except them. I hope the Europeans, including the Germans will understand what such a move means to Mr. Tsipras and the Greek people and will find the resources to help Greece out when restructuring their economy. It will give also a signal to others who my need help in the future, that problems are to be solved with cooperation and not with conflict.
      When I spoke about social-economic structures, I meant the economic networking, that is essential part of well functioning modern economy. This networking is not based on regulations and restrictions, but rather on creative social interaction. Out of this networking will rise the leading elites, who are not only looking for personal gain, but to take social responsibilities too. All this can’t be created, when institutionally it is suffocated by political structures. In the modern economy only those who have creativity can be successful. To endorse creativity you need to have competitive environment and political and economic freedom. No workers union is supporting this. Still I am against the impoverishment of the working middle class. Its thrive is essential to well functioning moden society. Ways have to be found how to eat the cake and leave it whole. It’s not easy but there are tools to do it.
      As to my opposition to capitalistic system, this forum is not exactly the place to write about it, mainly because my ideas are not fully developed. Probably a face to face discussion could be a better way, and if you are ready for the challenge, why not.

  3. Can you please elaborate what you mean “under the aegis of the Greek Parliament”?? Whilst I agree that your plan makes a lot more sense than was is proposed by the EZ, the track record of traditional political parties in Greece in managing state assets has been very poor in the past 40 years. Its so bad that Greeks often joke that they would rather that their assets were managed by foreigners…

    Quite rightly there is lack of credibility (to use a term that has been recently abused by the EZ) that would make it very difficult to raise funds on the capital markets without independent management of the assets and additional funds raised. Please don’t get me wrong I think that the EZ and the EU institutions have zero credibility (and accountability) but as a finance professional I can see how you can regain access to capital markets either as a state or in SPVs without profound governance changes.

    I don’t know much about the Greek constitution but it seems to me that the management of the fund you propose (and other key accounting functions of the state) could perhaps report to the President of the Republic who’s role should be expanded and who perhaps elected directly by the people? Perhaps that requires large constitutional changes but without something drastic I don’t see how you gain internal or external credibility.

    My 2 lepta…

    • @failedevolution:

      >>Official: Merkel wants a “Treuhand” for Europe!

      Of course Merkel and her hellhounds want to exchange their fricken worthless printed papers against real property and real assets.

      That’s how bankers were stealing peoples property and now Germany and its satellite states want to do the same with the Southern European PIGS!

      Greece should do f*ck all.

  4. On a business trip to Athens during the Thatcher era, I told my Greek colleague that Thatcherism was like a purgative. You would be aware of its effect but unsure of its efficacy.

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