Europe in Crisis

The Euro Crisis was the inevitable result of the Global Crisis which I set out to discuss in my Global Minotaur. However, the way Europe’s leadership mishandled it gave it a significance all of its own. In particular, Europe’s denial that there was something terribly wrong with the Eurozone’s architecture underpinned the stubborn commitment to austerity coupled with new institutions that proved toxic because they were constructed in the image of the Eurozone’s initial, highly problematic, architecture.

  • EURO CRISIS & EUROPE’s DENIAL: A series of posts cataloguing the comedy of cruel errors that amplified the Euro Crisis, with hideous effects for the people of Europe
  • THE MODEST PROPOSAL FOR RESOLVING THE EURO CRISIS: Presenting this proposal (co-authored by Stuart Holland, James Galbraith and myself) was the original reason for creating this blog. It constitutes our answer to those who, with no rhyme or reason, claim that there was/is no alternative to the combination of Bailouts & Austerity that has put Europe on a path to deconstruction
  • THINK BIG, THINK BOLD: Toward a Pan-European, Green New Deal
  • EUROPE’S DEMOCRACY IMPERILLED: As in the 1930s, a large-scale, systemic financial crisis, when followed by a spectacular political failure to address it, has the potential of badly damaging liberal democracy. It is not just Golden Dawn in Greece. The spectre of authoritarianism, verging on totalitarianism, is all over Europe – as hapless politicians are struggling to impose impossible policies upon Europe’s disheartened peoples.

64 thoughts on “Europe in Crisis

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  5. Pingback: “La realtà economica europea è spaventosa, ma la propaganda alla Goebbels dei governi e di Bruxelles lo nasconde”, Yanis Varoufakis. -

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  8. Geia sou suntekne, polu kala ta les. Dustuxws omws tetoia muala wsav to diko sou spavizouv stnv Ellada.

    Mou aresouv polu kai ektimw tis avaluseis sou.

  9. Dear Professor,
    First of all let me congratulate you on your Global Minotaur book, which I found very interesting and inspiring. I read your book first in English (2013 edition published by Zed Books) and then in the Italian translation published by Asterios in June 2012. I regret to inform you that the latter is the worst translation I ever encountered in my life. Being a translator myself I may certainly notice more mistakes than the average reader, but even so, there are mistakes so evident and striking that sometimes you get the impression the translator was either drunk or schizophrenic! Indeed, good passages are often followed by horrible bloopers that do not seem logically explainable even if we assume that more than one hand participated in this translating feat. If you are interested in knowing more about this, feel free to contact me privately.

  10. Hey! This is my first visit to your blog! We are a collection
    of volunteers and starting a new project in a community in
    the same niche. Your blog provided us beneficial information to
    work on. You have done a wonderful job!

  11. Dear Professor Varoufakis,

    I’m a student in economics and Management in the university of Trento Italy and I’m writing my Thesis on the causes of the greek Crisis.I would like to state that I’m a strong supporter of your ideas concerning the European dept crisis having read the Global Minotaur and most of your articles on as well as on your personal website.During my research I stepped on a matter for wich I can’t find enough information.That is the involvement of Goldman Sachs in the Greek dept masking during the years 1999-2009.I made quite an intensive research on the matter even though I was not able to find something specific and accademically acceptable to work on.I would really appreciate it if you could give me some advice on where and what to search for!
    Thank you in advance for your precious help,

  12. Pingback: Yanis Varoufakis: Europe’s Modern Titanomachy – How Europe’s Future is Being Shaped by Large Battles on Seemingly Small Matters (Part A) | Gearsoftimes

  13. Pingback: Yanis Varoufakis: Europe’s Modern Titanomachy – How Europe’s Future is Being Shaped by Large Battles on Seemingly Small Matters (Part A) | GearSoft's Times

  14. Mr. Varoufakis, why do we have to save big, bankrupt banks?
    Can’t we, taxpayers, simply save the depositors and let the sharholders handle the rest?
    After all, only the shareholders took the profits and they are the ones who should take the losses as well.

  15. what would happen if all debt everywhere was forgiven. whatever you own is yours, free and clear – business or consumer – you owe nothing as of today… when the pandemonium subsided and the vaporware that is credit was all burned off, where would we be? Just a crazy question…

  16. I think your proposals are interesting and i am especially fascinated by the tranches idea. It seems to be so simple but effective.

    But the more i read comments on your articles, the more i am questioning if we really shouldn’t be looking for the least painful way to abandon the whole ‘european union’ idea.
    So much fingers pointing at each other… I don’t think we are really ready for more of an union when i read all of this, but this might be something we need. But i guess this are just emotions.
    Sadly emotions might be one of the most important factors for the current situations and they are hard to measure for all our predictions.

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  19. Professor,

    While Geece is (at least for now anyways) a member of the EU, some commentators suggest that austerity can work. Estonia or Latvia are often suggested as a model, but I have some doubts about this comparison. Moreover, I often here that Greece had economic woes before membership to the EU and unless they shore up public/private debt (that has been quite as a % of GDP) they will continue to face economic problems. I personally view as somewhat simplistic and was curious to hear your thoughts on such matters.

    Thanks again for the last response.

    Dustin Page

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  22. Professor Varoufakis,

    I am currently finishing my masters degree in Economics from the University of Denver, and I must admit that I am a huge fan of your site and information provided about Greece and the Eurozone write large. However, I do have a question concerning the nature of currency unions.

    It is certainly true that EU did not come equipped with a fiscal transfer union or the ability of the ECB to issue eurozone bonds in a fashion like the Federal Reserve Bank in the USA. Your articles cover the last part (ECB vs FED and a debt sharing mechanism) in a thorough fashion. However, why is it that a budget shortfall in a state like California (which comprises a huge percentage of USA GDP relative to say Greece in Europe) does not threaten contagion throughout the USA? To be sure, state budget deficits are not nearly as large, but CA has an enormous GDP. While we have a fiscal transfer union here–for example California gets 0.78 cents back for every $1 it spends in federal income taxes as a potential block grant–it does not necessarily shift money to deficit zones in order to cover up budget shortfalls in states. Now ultimately, the federal government is, politically speaking, capable of ameliorating the situation yet it refrains from directly propping up states in deficit. Moreover, is fiscal federalism really the be all end all solution in Europe anyways? Mainstream news networks insist that a fiscal transfer union would provide the easy fix, but shouldn’t political realities be taken into account as well?

    If you know of any articles or you have any comments concerning the fundamental differences of currency zones (USA vs the EU) I would be much obliged for any help in the matter. It is perhaps a hunch of mine, but it seems to me that political cohesion/unification are a prerequisite for a stable, well functioning currency union.

    Keep up the great work!


    • Dear Dustin,

      The US Federal Government manages the mother of all Surplus Recycling Mechanisms. It is the military-industrial complex. Have you noticed that every large procurement contract signed by an arm of the US government comes with strings attached regarding the coordinates of new plants and manufacturing facilities? This is a clear case of directing investment to deficit regions within the US. Additionally, whenever a deal is cut in Congress (e.g. on health care, bank bailouts, whatever the issue might be), all sorts of side-payments are agreed for essentially deficit regions, counties and states. It is, I confess, a haphazard and curious SRM. But it, nevertheless, a functioning SRM which keeps the Union together.

    • Professor Varoufakis,

      Thanks again for your post. Perhaps I am reaching, but it seems that an SRM within a currency union does not accord with a market mechanism per se. Rather, it appears as a coordinated or planned political process. In other words, “directed investment” is not what I was taught in graduate level classes seeing that the market mechanism should direct surplus regions, states, etc to those of deficits. Nevertheless, I am not surprised and this further confirms suspicions I have had in regard to our old friend the invisible hand. If you have any thoughts on this idea or any paper recommendations about this process (I have obtained Krimpas’ piece on SRMs which is fantastic) please let me know.


      Dustin Page

  23. Concerning Policy 3 in The Modest Proposal.
    Why is there a need to couple the EIB with the ECB?
    Couldn’t the EIB, on its one, finance 100% of projects instead of only 50%?

    • It might well be able to. Our 50% ECB-bond financing idea, however, is meant to show respect to the current practice according to which 50% of EIB projects are financed by the member-state. Also our idea aims to expand the scope of the EIB’s investments in a manner that involves the whole of the eurozone into something resembling a New Deal for Europe. Also, if the ECB part-finances the projects with issues of bonds that are then serviced by the member-states, then there is an element of political ownership of these projects by member-states, as opposed to just a banking transaction on the part of the EIB.


  25. Yanis, I am a big follower of your insights.
    This crisis has gone from feeling like a headache to a sinking feeling in my stomach.

    Markets seem to be pinning hopes on the ECB? Is this light at the end of the tunnel an oncoming train? Will the ECB lend its credibility to Merkozy (I think this is what it boils down to) and buy Germany more time? How much more time? (No answers only questions unfortunately)

    • Probably so. But it will not be enough. Unless the ECB is given new instruments as part of a Europe-wide growth and rebalancing package, our continent is facing impending implosion.

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  31. I think you should be the PM in Greece, You understand the severity of decisions wrongfuly made by the Greek gov. for many years and the sad thing is they don’t like to listen because they are too old for the job .
    They need new blood to lead the country out of the crisis.
    I admire you and wish you the best.

  32. Yanis,

    Does your EFSF analysis still apply to the EFSF-turned-into-insurance-provider or does this somehow short circuit the contagion link?


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  35. Yanis, it seems that the German Consitutional Court has set conditions that would make euro bonds unconstiutional in Germany..have they removed the siver bullet? Does this mean the euro area will break up? Have we reached the point of no return?

    • That decision is irrelevant. For what we propose is ECB bonds, as opposed to bonds jointly guaranteed by the member states. The German court banned euro ones that we are not recommending anyway…

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  52. Mr Varoufakis
    congratulations for your report :
    ‘The Euro is not sustainable with the actual ECB and EcoFin system’ in

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  54. And what if we did not want to “boost demand”? What if the perpetual growth paradigm was wrong? Do you seriously believe it is possible to have an infinite growth in a finite world?

    • The perpetual GDP growth paradigm is wrong. Dead wrong. Having said that, allowing a chaotic collapse in economic activity to destroy the lives of a whole generation is not the answer. This is what happened in 1929 and this is what the current crisis is threatening to achieve. A deep recession, coupled with a debt crisis, is not the right background against which to hold a rational conversation about our collective priorities. First we arrest the freefall to oblivion (that would only benefit the darkest forces of society) and only then do we get the breathing space to talk sensibly about the differences between real development and its profound differences from GDP growth.

    • Unfortunately every time temporary (seeming) prosperity returns, such questions are put ‘on the backburner’ anyway as people try to get rich in the next boom, until the next bust!

      Accelerating technological development will at any rate either necessitate a rethinking of production/distribution issues, or obviate them entirely via annihilation, sooner or later.

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