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Review of “Adults in the Room” by Yanis Varoufakis (theguardian.com)
136 points by osullivj 9 months ago | hide | past | web | favorite | 125 comments



"The first revelation is that not only was Greece bankrupt in 2010 when the EU bailed it out, and that the bailout was designed to save the French and German banks, but that Angela Merkel and Nicolas Sarkozy knew this; and they knew it would be a disaster."

The treasury departments of the French and German banks had loaded up on GGBs - Greek Govt Bonds because they yielded more basis points than eg German Govt bonds, but also had AAA rating. The AAA was culpable negligence by Moodys, S&P, Fitch rating agencies. Ignoring the credit quality implication of the discount built into the market price of the GGBs was culpable negligence on the part of the treasurers at the French and German banks. Yes, the Greek Govt was culpable too. But the Greek people are bearing years of economic pain while the French and German banks and the ratings agencies have got off scot free because Merkel & Schauble put the fix in and parked the dodgy GGBs in the ECB.


Didn't Greece falsify data for years? That would explain the AAA ratings.


It borders on the impossible to fake data on this scale and in such amounts. The deficit forecast for 2009 (the year the crisis started) was 3.7 which got revised to 12.5 percent at the end of that year. Any sufficiently large institution or cooperation that wanted to have access to the real data, could have done so with minimal effort, you can't hide a 10% budget gap.

The false data Greece reported to get into the Eurozone was an open secret, I vividly remember it being talked about extensively in Greek cafes after 2001.


> It borders on the impossible to fake data on this scale and in such amounts

the more cynical among us ahem would probably say that it borders on the impossible to accurately report data on this scale and in such amounts, regardless of intention.


The cynics would be right. I've seen financial instutions report data using poorly defined regexes on bank statements. Regexes which could easily yield false positives and negatives.


> It borders on the impossible to fake data on this scale and in such amounts.

It's quite far from being impossible. Actually, it's a widely known fact that a string of greek governments systematically falsified Greece's books, and it actually culminated with Greece going as far as hiring Goldman Sachs to hide their double-digit deficits.

> The false data Greece reported to get into the Eurozone was an open secret,

That's the old attempt at diffusion of responsibility that often pops up. It's the same old tired argument: once the fact that Greece did in fact cooked its books and falsified their accounting for years, there comes the argument that they still have no responsibility for their own actions because somehow.... others might have known they were falsifying their records?

It's a lame excuse, and it never sticks.


This is silly. The idea that Greece was systematically hoodwinking the rest of Europe and no one had any idea is absurd. They're not fools.


They did get "help" from Golman Sachs to come up with numbers that allowed them to enter the Euro in the first place:

http://www.independent.co.uk/news/world/europe/greek-debt-cr...


Were the banks truly deceived, or just hoping that they could cash in and be bailed out?


1. The incentives were just so aligned that I think a lot of people might have had their private misgivings, but held their nose and went ahead.

Apart from the AAA rating, government bonds also had a very low risk rating in the Basel accords (Basel I, and Basel II that just came into effect during the global financial crisis 2008).

Basically, the Basel accords specify a minimum capital adequacy ratio, that is a certain minimum capital level to support given risk weighted assets. (Capital in the bank context basically refers to equity - i.e. funding that can absorb losses without the bank going bankrupt due to debt obligations they cannot fulfil.)

Now, the risk weight for government bonds is zero! (in Basel II, they had to be AA or AAA, and it gets complicated quick, but basically...) So you can load up on them without having to increase your equity cushion.

2. This allowed banks to increase their Return on Equity, which influenced bankers' pay.

3. Furthermore, I think they were all implicitly banking on either bailouts (directed at individual banks) or a version of "The EU would never allow a member government to go bust".

So, I think everyone was in it to an extent (while formally "correct" and "safe"), cashing out merrily, and hoping for the best.

Another great book on this, by the way, is The Bankers' New Clothes: What's Wrong with Banking and What to Do about It by Anat Admati and Martin Hellwig.

(Funny side note: I searched "bankers new clothes" on Amazon to get the author names right, and got a page with dress shirts and briefcases.... :-)


In Basel 2 indeed government bonds need indeed to have a rating of AA (AA- IIRC) or higher to be considered completely risk-free. However Greece never reached an AA rating, it was A in 2008.


Probably both. I still remember a full-time ad in The Economist around 2006-2007 by a German Landesbank, where they were promoting themselves as the coolest of things when it came to banking and managing clients' money. Not 2 years passed and that same Landesbank was by then in very serious trouble because it had invested heavily in US mortgage derivates, I think there was also talk of its general manager doing prison time. He probably didn't.


AFAIK the only guy who did jail time for crashing the world's economy and wiping out retirement savings of millions of people was a guy who copied some utility code to dropbox when he quit Goldman Sachs.


Sergey Aleynikov spent a year in prison for copying some code over. Fabrice Tourre (self-proclaimed "Fabulous Fab", a nickname that ought to be mine! :) was indicted by the SEC for his role in selling dodgy mortgage backed CDOs.

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

https://en.wikipedia.org/wiki/Goldman_Sachs#Abacus_mortgage-...

> "The whole building is about to collapse anytime now," Tourre wrote to his girlfriend in 2007, the SEC charged. "Only potential survivor, the fabulous Fab … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!"

https://www.usatoday.com/story/money/business/2013/08/01/gol...


Yanis describes in The Weak Suffer What They Must? that the situation was very simliar to the subprime crisis in the states. Giving a lot of risky loans that then could be split and re-packaged.


So did Italy and possibly France. It was a very well known, old trick. Of course it's Greece's fault, but everybody else (Germany, France, Italy, etc.) were on the same page. Greece didn't cheat anyone, it just went along with what it was proposed to in order to get in the common currency.

Accusing Greeks of false statistics and what-not was part of political propaganda in Greece and abroad more than anything else.


> Greece didn't cheat anyone,

So falsifying their accounting to hide double-digit deficits as well as tehir massive debt is not cheating anymore?


In its entire history Greece never had an AAA rating. The highest was A+/A1 in 2004. In 2008/09 it was at A/A-.


Greece has been cooking the books for a long time, even their entrance into the EU was fradulant. Greece is the blame here via its decades of fraud that finally caught up with it. As a Greek-American with an interest in Greece being successful I think all the finger pointing at Wall Street or Germany is asinine. Greece is horribly corrupt and tax dodging is like its national sport. Its like someone turned Chicago into a country. All of its out of control spending, unsustainable union perks, and unrealistic pensions finally caught up with it, just like its happening in Chicago right now. The difference is Chicago and Illinois can raise taxes and make appropriate cuts over the long term, but Greece won't unless strong-armed by Germany and others.

Ultimately, a shared currency with nations with such disparate levels of income and corruption just doesn't work out in real life like it does on paper. Arguably, Greece could have restructured its debt and engaged in inflation with its own currency and handled this much better, but that's not an option when you're wed to the Euro. Personally, I like the idea of the EU, but a shared currency is extremely questionable.

Credit ratings are just that, ratings, not investment advice and like all ratings should be understood to be of limited value. A nation state can hide quite a bit from organizations like Moody's and every election changes leadership, so there's no static "Greece." Instead its a handful of parties fighting for power with different agendas and goals and with differing levels of corruption and incompetence with a baseline being pretty bad to begin with. Heck even senior Moody's staff were warning investors about Greece and its dealings with Goldman[1]. You'd have to be a little thick to think that AAA rating meant no-risk. All investment involves risk.

I suspect the larger economies always saw Greece as their 'little brother' and countries like Germany had a sort of "Well, if we give them money, they'll build industry and catch up to us eventually," instead Greece blew it on pensions for people retiring at 50, questionable social programs, and other unsustainable and unwise spending.

I sense a high level of paternalism in general from other Europeans especially when I'm perceived as a native Greek when in Europe. Sadly, I think everyone would be better off if we were rougher with Greece and instead of seeing it as our tourist-friendly 'little brother,' but instead as our dishonest and thieving neighbor. I hope this current crisis has changed perception and paternalist attitudes in Europe and made everyone think about the limitations a shared currency creates.

[1] http://www.nytimes.com/2010/02/14/business/global/14debt.htm...

In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.

Edward Manchester, a senior vice president at the Moody’s credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.

Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”


Yes, the constant bailouts are disrupting a necessary mechanism for markets to function, price discovery. Subsidize the losses, privatize the profits, so why bother pricing risk appropriately (which may also include not pricing it at all because it's impossible to predict 10, 20, and 30 years into the future, see pensions).

>The difference is Chicago and Illinois can raise taxes and make appropriate cuts over the long term

Chicago, Illinois, New Jersey, federal, and most of the other governments will also be defaulting, just not by name because of course you have to prop up the bond markets. What has been happening, and will continue happening, is under investment in infrastructure, education, cuts to promised benefits (which is a default in and of itself), and inflating away a portion of it. Basically a continuous erosion of quality of life to keep the game going.


This is a "moral hazard" line of thinking that distracts from the underlying fundamentals of the economics here. Even without the corruption, Greece would eventually be in this situation in the EU because of the structural trade imbalance. Nations like Germany, Sweden, Norway, etc, export far more than they import and do no share the profits. The EU has become a giant capital vacuum cleaner from the poorest nations to the wealthiest. Without fundamental changes to this, the EU is doomed. Greece is just a symptom.


Correct, its also worth noting that the US do have mechanisms in place to transfer funds from surplus areas to deficit areas.


As does the EU.


It has some sharing, but it's not enough.

For example, California sends 180 billion in tax revenues to the fed while accepting approximately 30 billion in federal spending. In the EU this kind of thing occurs only in the single digit billions.


Indeed. The problem is that populist politicians in "paying" countries can use this as an argument for an EU exit. See Brexit. It's hard to sell to pay billions, especially if stuff like hours/week, retirement age etc. are often nicer in those countries that need the money.


The problem is that the populists are able to make that argument at all. Most establishment politicians in Europe are trying to be as much like Weimar as possible in all the wrong ways (austerity, wage repression, pension slashing, privatizations, etc.).


> As does the EU.

Are you trolling? What kind of mechanism does the EU have? How does Germany have such a high surplus if such a mechanism is in place?!


Trade surplus is neither evil nor a problem in itself.


Trade surplus without a safety valve (the ability to devalue a currency) is very much a problem since it leads to unsustainable debt buildups.

Germany should be running a trade deficit with the rest of Europe right now but it refuses to.


Unless your currency policy is fixed by those you buy from. That's the fundamental problem here.


It has TRADE surplus. You were talking about funds. There is a substantial amount of money flowing from Germany, France and others into less fortunate countries via EU governed programs.


Not the same kind of money, though. This is money that is part of the problem. The money goes in and the debt goes up twice as much. Not the same as the California example above.


No I'm talking about TRADE surplus.


But EastLondonCoder and davrosthedalek were not talking about trade surplus. You are yelling at them for saying something that is true, because they're not talking about what you think they're talking about.


You are going to need to be more precise there.


> I think all the finger pointing at Wall Street or Germany is asinine.

1. They knew what Greece was up to. 2. They facilitated it - or turned a blind eye. 3. They benefited from it.

I don't see how it's unreasonable for everyone to share the blame for this. Sadly the cost can't be shared as equally as the blame.


So your big argument that everyone is to blame is that somehow you assume that others might have suspected that Greece did extensively falsified their accounting to hide double-dgit deficits and massive debt?

Because I'm pretty sure that greek governments decided all for themselves to pile up even more debt and falsify their records to hide it from the public.


> So your big argument that everyone is to blame is that somehow you assume that others might have suspected that Greece did extensively falsified their accounting to hide double-dgit deficits and massive debt?

Well. Yes. And even in your reformulation, it sounds like a fairly reasonable argument.


>>I suspect the larger economies always saw Greece as their >>'little brother' and countries like Germany had a sort of >>"Well, if we give them money, they'll build industry and >>catch up to us eventually,"

Do you really believe that? After all we have seen, do you think that Germany cares about the greeks? And they say Varoufakis is naive.

Greece has lost more GDP for more time that the states in the Great Depression, and you know what? there is not end in view to that. They can't do anything because they don't control their currency.

Everybody know that the debt never will be pay, but instead of facing that, they just "extend and pretend".

All the predictions of future growth from the Euro institutions and the IMF are wrong year after year, but they just keep doing the same. What was the definition of insanity again?

If you have an interest in Greece "being successful" you should check the facts again.


People in Chicago pay taxes. You know the city well and know this isn't a valid comparison. If you have to use our shared hometown as an epithet, make it one that's relevant to the place.


Some medium to large private investors treat ratings reports as signposts nothing more. But a disturbing proportion of investment traders / dealers seem to treat them as a tick box exercise or a "nobody ever got fired for buying IBM" CYA instrument.

After one week of working on a stockbroking floor I was disabused of almost all the economics I learnt in school.


It's wasn't exactly "fake data". It's just that Greece decided to use its own custom-made "IFRS" that were conveniently misrepresenting debt (among others) to make "this year look good".

Varoufakis's tactic was "catenaccio" (for the football/soccer aficionados). What Italian football/soccer teams established in the 80s and Barcelona perfected in the 00's, meaning keep the ball, pass it around with no purpose to attack/defend, just delay till kingdom come. Because since we will never "win" (maintain an inefficient and ineffective economy), we will also never "lose" (progress, liberate professions, promote state transformation, reduce of corruption and cronyism).

And this is why Greece is suffering this brain-drain while at the same time the economy is struggling.

Don Quixote was an honorable figure. Varoufakis, Tsipras and the rest of the happy campers in government are just a useless gang feeding of a dying country.


Catenaccio is totally different to Barcelona's attacking possession based game also referred to as "tiki-taka" or "total football," popularised by Cruyff. This style is actually the counter to Catenaccio.

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

Greece won the euros in 2004 as heavy underdogs playing heavily defensive, fast counter-attacking, catenaccio style football. It's not fun to watch.


> Varoufakis's tactic was "catenaccio" (for the football/soccer aficionados).

You are Greek right? That kind of comparison of politics to soccer is something that many Greeks are accustomed to, hence my assertion.

Btw Varoufakis clearly states that this method was employed by the rest of Europe, not him. Feel free to call him a lier, but this directly contradicts his statement and so some proof is needed to substantiate your statement and provide more credibility to it than his.


We only provide ratings, they are in no way a suggestion about investing.

That is what Moody's et al always said.

We are useless but you make us profit freely! Good for you, all you stupids!


Yes, and they paid by the issuers of the securities they're rating. Surely a conflict of interest...


It is interesting to note that Varoufakis worked with Valve on the in-game economical systems for Team Fortress 2 and Counter-Strike: Global Offensive before he got pouched by Greece. His blog posts are really interesting. http://blogs.valvesoftware.com/author/yanis/ Those in the know about the economies in the mentioned games should agree that Valve probably got a good return on his paycheck.


Also of interest is Varoufakis on EconTalk[0] interview in 2013, almost two years before the Greek electoral victory of Syriza and Varoufakis taking the political position of finance minister. You might hear from this interview how Varoufakis looked at Greece's crisis negotiation-position with the EU: that for Greece, similar to the employee-management structure of Valve, there was a lack of hierarchy between peers and only a room full of equals. In that sense and through the Valve-hierarchy of equals lens, much of the tone-deaf rhetoric of Varoufakis towards his peers though the bailout talks can be interpreted with a wider spectrum of sound. Varoufakis, it seems, sincerely thought he would bring "enlightened" new ideas of successful software development management to a negotiation table of frustrated, advantaged, EU financial stalwarts.

[0] http://www.econtalk.org/archives/2013/02/varoufakis_on_v.htm...


> Varoufakis, it seems, sincerely thought he would bring "enlightened" new ideas of successful software development management to a negotiation table of frustrated, advantaged, EU financial stalwarts.

What he thought (and later stated) was that people would be interested in solutions instead of blaming, finger pointing and political games. He reminds me of a goal-oriented team member versus the team members who want so save their hides at all costs to the detriment of the company.


> people would be interested in solutions instead of blaming, finger pointing and political games.

Would anyone be interested in bureaucratic machinations over solutions? Varoufakis' ex post facto statement sounds bitter and judgemental and to be expected in the face of his failure.

If you listen to his EconTalk episode, you get a sense of an admirable and optimistic person who, when faced with the defensive positioning of EU stalwarts, represented his ideas in a naive and condescending way that denied himself and the Greek people he represented the chance to establish trust and the proper report to begin alternative negotiations in earnest. His economic ideas might be perfectly salient but his self-introduction at the bailout talks did not represent those ideas very well.


Varoufakis is a hero to the international working class. His most recent book before this one is also excellent.


He's an interesting guy no doubt, but accounts tell us he was just doing his job. When he went to Germany and tried to force their hands by feigning he might grexit, to his amazement the private response was more or less, how can we help you gtecit? Despite appearances, he did not want grexit and was a ploy to get better terms, but the ecb had already discounted Greece.

At least he tried, for sure.


> When he went to Germany and tried to force their hands by feigning he might grexit, to his amazement the private response was more or less, how can we help you gtecit?

That's very poor understanding of what he did. What he said was we won't accept any more loans that we can't pay back and requested a sort of new deal for Greece which of course, included a large debt haircut.

He was never pro-Grexit. He was arguing that even throwing Greece out of the common currency was impossible, etc.

I understand that his way of doing things might confuse some people, but if you take the time to read/watch his interview his thinking is crystal clear: He wants to change the EU from within not disintegrate it. In fact he is trying to save the EU from itself (e.g. Brussels) by democratising the processes (e.g. add mics and records to Eurogrops, etc.).

Plus, I the ECB effectively closed the GR banks he had a plan of putting the ECB (Mario Draghi) against the Bundesbank. His own party kept him down stripping on of his only weapon by re-assuring the ECB behind his back that they'll not allowing him to use it. His plan was very clever.


"but if you take the time to read/watch his interview his thinking is crystal clear"

And here is, I think, the problem. In general people don't take the time, and that's OK, but then they have not problem in having a strong opinion, that they read in some interested media.

My advice to the people so inclined is: check some of Varoufakis (and others) youtube interviews. Read a little about what is going on.

Check, for instance, how Spain was allowed to spend without consequences above the deficit limits just before the elections.

Check how, in the same way there is a limit to deficits in the treaties, there is a limit in surplus that Germany don't feel it has to respect.

Or just think how it's impossible that everybody is in surplus at the same time.

Or how all integrated monetary areas have deficit and surplus regions and that is OK because they have some way to compensate the unbalances.


Varoufakis is a kind of special case. I believe his personality combined with his charisma, puts fear in the establishment so they needed to discredit him as much as possible.

For example if you read the picture The Economist paints around him, as opposed to Dijsselbloem (Dutch Minister of Finance) who is technically several orders of magnitude inferior is astonishing.

Varoufakis said that when he went to the US, at the beginning of his tenure, someone (Larry Summers?) told him that he'll be the victim of an organised campaign of character assassination by Brussels. I found this claim a tiny bit far-fetched, but on the other hand, the amount of false claims the established media kept throwing at him is amazing.

I came across ppl who thought Varoufakis as a buffoon like Trump, Boris Johnson, etc. and other political figures who can't put two words together. V is not like that at all, he is a intellectual beast, with a surprising ability to simplify rather complex ideas.


You are correct that he is all drama but we need to see more substance. None of his positions were actually original, and his actions are constantly divisive. I m sure he s interesting as a superstar tv person, but, other than his storytelling about the eurogroup meetings, his thought is not that coherent, it changes often and he often attacks strawmen (eg his critique of piketty). It makes him a lively interviewee, but doesnt gain him academic credit.


That's not what happened.

He had a plan (allegedly it was a Plan B) for the exit of the Euro if Brussels (actually Berlin) continue with the craziness. The Greek primer minister decided not to continue with the plan and he resigned as finance minister.

The primer minister could be accused of cowardice, but we have to understand that Greece was threaded with the shut down of its financial system in what, in the opinion of a lot of people, was an illegal movement by the ECB (1). It was a really difficult decision.

(1) https://diem25.org/thegreekfiles/


> When he went to Germany and tried to force their hands by feigning he might grexit, to his amazement the private response was more or less, how can we help you gtecit? Despite appearances, he did not want grexit and was a ploy to get better terms..

That's sort of my problem with him though. I don't think of him as either a hero, or a jerk, or a guy doing his job, but simply an idiot. He was trying to bluff with a hand that everyone knew was empty, and of course it didn't work.


He's a lot of things, but not an idiot. Varoufakis was one of the few finance ministers who is actually an economist (as opposed to e.g. a jurist), so he was very qualified. But he went into the negotiations thinking that everybody was trying to solve the problem amicably, that they were trying to find a compromize everybody could live with. But no, it was pure power play. Germany and co wanted to keep the status quo of a Greece close to bankrupt that they could boss around. And I think they wanted the left-wing "experiment" to fail under all circumstances, to set an example.


I think that's part of the problem, Varoufakis is intelligent and an economist, yes, but really not a diplomat, and his job here as Greece's main negotiator was more a diplomat's than an economist's job. He was very naive, as his book somewhat admits, about how EU politics work (and to some extent about Greek politics as well, where he assumed Tsipras was on the same page as he was).

Stathis Kouvelakis, a member of Syriza's Left Platform faction that later split from the party, had this criticism [1] about both Varoufakis and his successor Tsakalotos (another economics professor), which I think has some truth to it:

Tsakalotos said he was very disappointed by the low level of the discussion. In the interview to the New Statesman, Varoufakis says very similar things about his own experience, although his style is clearly more confrontational than Tsakalotos's. From this it is quite clear that these people were expecting the confrontation with the EU to happen along the lines of an academic conference when you go with a nice paper and you expect a kind of nice counter-paper to be presented. I think this is telling about what the Left is about today. The Left is filled with lots of people who are well-meaning, but who are totally impotent on the field of real politics.

[1] https://www.jacobinmag.com/2015/07/tsipras-varoufakis-kouvel...


Yes, they were really naive thinking that the meetings of the ministers of economy were about economics and how to improve the lives of the citizens.

This is telling about what the Euroarea is about today.

I suppose, at least it's a good thing if those naive professors, now that they are not so naive, explain the rest of citizens how the system really works.


His hand was quite full as long as Tsipras agreed to do what Varoufakis thought needed to be done. The moment Tsipras decided against him he lost his hand. So, his error was probably to trust Tsipras would do what needs to be done instead of clinging to power.


As a Greek I consider him a jerk. He enforced capital controls due to his incompetence and his ideological approach to financing. Furthermore, he's a pathological liar. While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them.

If it wasn't for the group of clowns that constitute the current government and gave him the keys to the economy, nobody would give a flying fuck about what he says. He's a second rate economist at best.


> While in many occasions he had admitted the faults of the Greek economy he never took specific actions in correcting them.

By doing what, exactly? The country was bankrupt. In such a situation, the only sensible thing to do is default. Instead, Greece will be a 3rd world country with almost no public assets, and mass unemployment for decades.

Regaining competitiveness through decades of internal devaluation is, to me, far less preferable than default. What Greece was given was like Versailles on steroids.

And to make it worse, it's going to happen again, and again. I'd say we're due another club-med crisis any moment now. http://www.zerohedge.com/news/2017-02-26/european-debt-bomb-...


Yesterday, there was a news that Greece has reached an agreement for a new round of money in exchange for further cuts to pensions and removal of some tax exemptions. So yeah, it is going to happen again. And again. And again.

And all to save a few German and French banks, because politicians feared the results of telling them "you wanted to play in the casino and you lost, now the money is gone" after Lehmann.


Or rather it'll happen again and again until the casino is turned into a viable and competitive economy. I wouldn't blame the Germans and French for trying to contain a crisis at its origin..


> I wouldn't blame the Germans and French for trying to contain a crisis at its origin..

The origin is that banks can lend money without any risk. End of story.

Banks get interest for various reasons - one reason is risk of not seeing the money again and that has to be a real risk or banks will just lend money without thinking twice.


> Or rather it'll happen again and again until the casino is turned into a viable and competitive economy.

By what mechanism? Each round of cuts drives up unemployment and poverty, and cutting expenses hasn't solved the deficit because trashing the economy has destroyed tax revenues.

The first few rounds were rationalization, but they were too little too late. At this point the deep restructuring that's still needed is unapproachable - it's too slow and too unpopular, and the economy is already too weak. The recent cuts haven't been sensible and structural, they've been deadline-beating short-term moves to unlock a new tranche.

Germany gains from this, certainly, but by making an example of Greece. It deters other high-debt Euro nations from getting into the same state, but it's not moving Greece closer to functionality.


Cutting expenses has not solved the _debt_ problem, but has surely solved the _deficit_. Greece has a strong primary surplus.


> but has surely solved the _deficit_. Greece has a strong primary surplus.

No, it hasn't. The "primary surplus' doesn't include any debt repayments.


Yes, exactly. I said "too little too late" because a primary surplus doesn't resolve crippling debt - at this point it looks like the debt is far too large to handle with any kind of sensible short-term spending cuts.


I'm not sure that this approach to economics of 'beatings will continue until morale improves', it's a so good idea.

If fact, I think that, as the data show, it's in the same league of 'Trickle-down economics'.


Each round it gets exponentially bigger... There will come a time when postponing it won't work, then what?

By the way, how injecting money in the hands of a chosen handful and taking it from a country to try to pay back can make a viable and competitive economy?


> only sensible thing to do is default

The problem here was cashflow; defaulting might save you from more loan payments, although actually doing it is quite painful under international law (see Argentina). But Greece needed to take out further loans in order to meet immediate public funding needs - and defaulting would have prevented that, or made it much more expensive.

I've turned this over in my head a number of times. None of the options are particularly pleasant, but it's not a good idea to pretend that defaulting would have been trouble-free.


"The only way out" != "trouble free"

Obviously Greece needs a balanced budget for defaulting. Too bad it seems to be moving the other way.


The cynical play for Greece might have been trying to schedule their bailouts in a default-friendly way. Accept bailouts, conduct several rounds of aggressive cuts to balance the budget (while financing with tranche funds), blame the Eurozone for them at home, and then default with a balanced budget immediately after a funding unlock.

I'm not sure it was possible - the deficit was too big to close without damaging the economy - but I suspect that leaning on international support while preparing an easy default might have been the best chance.


If they'd been able to balance the budget, they wouldn't have been in that state in the first place!


Greece's problem isn't the debt. It's the competitiveness of the economy, or more precisely the lack of. Even if we had all our debt erased, the way the economy is structured we'd be back in the same place give it a couple of decades, at most. We spend so much money paying pensions that it's a given we'd default one way or the other.

Furthermore, you can't just default on the debt just by saying so. There's a naivety among mostly Greeks that just by going back to drachma and defaulting on our debt will magically solve all of our problems. In a country that imports pretty much everything that would be catastrophic.

Varoufakis never came up with a plan. He admitted that there was no substantial alternative about converting into drachma. All that he did was playing bluff for six month, dragging a whole nation under his ideology. Then he moved on to greener pastures, not giving a fuck about the havoc he wrecked with his actions.

He can act as a smart-ass all he wants in his books, but we were here and we experienced first hand the results of his reign. Once we get rid of this charade of imbeciles that act as the government, he and many of his former colleagues will end up in jail for their actions. There he will have plenty of time to write memoirs.


>Furthermore, you can't just default on the debt just by saying so. There's a naivety among mostly Greeks that just by going back to drachma and defaulting on our debt will magically solve all of our problems. In a country that imports pretty much everything that would be catastrophic.

Well thinking from a trader perspective, by defaulting and going back to the drachma (and leaving the EU), Greece would have more flexibility wrt what goods they can import and from where compared to now with all the restrictions on trading that being within the EU imposes.

Combine that with land access to the rest of Europe, I can imagine a prosperous almost black market for such goods that would provide much needed inflows of capital to the Greek economy (outside of selling junk sovereign bonds and hoping pensioners die faster).


This would require a big plunge in the greek economy that people are not willing to take. To be able to recover swiftly from such a crash, the greek economy would have to switch from a very inflexible and sclerotic one (that it is now) to an adaptible, flexible and liberal one. The demographics of Greece do not support such swift action - greece is aging rapidly and the brain drain has gotten really intense. With regards to trade, greece probably benefits from things like e.g. the common agricultural policy more than it loses through restrictions. There is little support for grexit, because of a) the rhetoric and FUD from almost all political parties (including the pro-euro syriza) and EU and b) because there is not enough consensus on the side of the people to go through what would amount to a revolution.


The thing is, Greece, IMO, doesn't even need to leave the EU, they just need leverage (in the same way Turkey's leverage is in flooding the EU with more refugees), and they can get leverage in trade by ignoring EU diktats that stipulate what goods they can import in practice (while officially denying everything). International traders would pay a slight premium to be able to have land access to the EU from shipping. Hell, I personally know a couple of traders in SE asia who would pay tens of thousands of dollars to do so.

But I guess the consensus will be in favor of trying continue to squeeze blood from stone until there is none left. And when it gets that far, compared to the threat of cheaper citric acid, steal, etc imports hurting "blessed" EU suppliers, you'll have surplus kalashnikov's coming in from the ME, which I guess is even more profitable for traders ;)


> ignoring EU diktats

yeah no, that would be equivalent to being kicked out the EU. Greece tried to use some leverage with refugees and got some money in return but that's all. Also, COSCO has already acquired the port of piraeus so there is an asian connection already.


>yeah no, that would be equivalent to being kicked out the EU.

Has there actually been any country that's been and/or in the process of being kicked out the EU (besides threats wielded in media and talked up for ad-views)?

How do you reconcile them willing to kick out Greece but trying to put a multi tens of billion euro bill on the UK for leaving the EU? Would Greece be demanded to pay a similar bill when kicked out and actually pay such? (We already know the ability for them to pay such a bill).

What about all the northern countries running a surplus to Greece, what would happen to those companies special positions due the trade restrictions in their favor?

I really doubt the folks in Brussels want at situation like that to happen, nor do I see them having absolute control over what comes in from customs, in every country, much less in any one in particular.

>Also, COSCO has already acquired the port of piraeus so there is an asian connection already.

Not really sure how to interpret what you mean by "asian connection". So having one state related shipping company from China, now satisfies all the demand for people trying to import into Europe from all over asia, as if every trader must some how just use that port/company? Besides, the issue isn't technically with shipping things, its actually having it cleared to leave the port to the buyer with the right paperwork.


The OPs perspective in the Greek's mainstream media and elite's perspective. You can't even discuss the eventually of switching currency in the TV.

At the same time other countries which are not on the brink of collapse are prepared to face an eventual break up of the Euro (e.g. LePen winning the elections in France) and the only who doesn't have a plan, and God forbid it comes up with one, is Greece...


>The OPs perspective in the Greek's mainstream media and elite's perspective. You can't even discuss the eventually of switching currency in the TV.

Pretty much how it is everywhere wrt having an actual discussion of practical options on the table (setting aside juicy ad revenue) that might not favor those whose social economic status puts their heads first in line on the not so metaphorical guillotines at some point ;)

I think the citizens of Greece should take page out of the Victoria Nuland play book.

I mean if I had means to be able to talk to the all the pensioners I would:

  - advise them the reach out to any of there family/friends who have (decision making) roles in customs/commodity importers w/ decent import volumes from other EU countries

  - work out a deal where they buy their materials from cheaper non "market economy status" places + flag them through while discontinuing imports from their northern neighbors (already profiting here, because cheaper)
  
  - then pooling their funds and shorting companies/securities with the largest exposure to their non buying before earnings calls, and close out shorts soon after. (profiting on the other end, because why not? but you have to liquidate short positions before the ECB printing press comes to the rescue :P)

Or maybe people will continue to take the raw deal while bent over a barrel with ones pants at their ankles.


Please, give me a break. It was the Greek media, and particularly TV shows, that launched Varoufakis to stardom. Even liberal-conservative stations invited him to spread his bs.

Just because some of us don't agree with defaulting it doesn't mean we're in the elite or we're serving some agenda. Please, you can do better than that.


> Please, give me a break.

You're confusing Varoufakis with Leventis. Varoufakis, to this day, is always put under unjustifiable strain by the Greek media.

As far as your previous post, it's so mis-informed and ill-conceived, that the fact that you have a right to vote in my country scares the shit out of me.

> Just because some of us don't agree with defaulting it doesn't mean we're in the elite or we're serving some agenda. Please, you can do better than that.

Of course I can, but you're a .NET developer! So I'm not sure you could follow through even if I did :-P

ps. Jokes apart, I understand there are many different opinions in a democracy and I respect that. Let's agree that we disagree...


As far as your previous post, it's so mis-informed and ill-conceived, that the fact that you have a right to vote in my country scares the shit out of me.

Sure, only people who agree with you should vote. I find it quite ironic that this comes from someone who supports a leftist government.

As for being misinformed, you could provide something useful to the conversation by arguing with facts. Because all you've done so far is attacking me personally. Isn't it his fault that we have capital controls enforced? Six months before he took charge the banks were open and working just fine.


Please stop, both of you. Internecine spats probably don't belong on HN in the first place, but if you can't address each other civilly, that's definitely not ok.


I'm Greek too and I consider him the best thing that happen to our country.


Greece had stopped getting any bailout funds way before Varoufakis or the current Government were in power. The IMF had already said that the program had failed.


Why? What did he do, apart from letting the Greeks believe they could choose not to refund the debt?


Morally it's on those who give out loans to make sure that they can be repaid. It's wrong that Greece took these huge loans as well, but also it's wrong to suggest that they have to pay them back. Everyone has the option to default when they are unable to pay and this was clearly the situation for Greece (and probably Spain and Italy, maybe even UK soon enough).


Exactly. The (German) banks gambled on a bail out; I would not even call it a gamble, since the could be dead sure Schäuble would be standing at attention with the suitcases at the first sign of trouble.


Disagree. Default is something we allow out of grace, it shouldn't be treated as something you're entitled to.


And they ARE making sure the debt is going to be repaid.


Nope, they will almost certainly default on a large proportion of it.


That remains to be seen. Until now, it was quite the opposite.


Morally it's on those who give out loans to make sure that they can be repaid.

Maybe when dealing with an unsophisticated or under-informed borrower which the sovereign states in question are not.


And you are proved wrong by the fact Greece's government clearly was (still is?) "an unsophisticated or under-informed borrower". I mean the outcome of this borrowing speaks for itself.

When I take out a loan a bank usually asks for collateral but these loans to Greece are unsecured and not worth paying back. The banking system should have been left to fail but instead we live in this world where governments bailed them out. Capitalism for the poor and Socialism for the rich.


No, the fact someone takes out loans they can't repay doesn't 'prove' they don't understand the terms of the loan. I don't think any of the major actors in this look particularly great but it's not like the Greek government found a giant bag of money on their doorstep one day and nobody told them it came with terms.


Wait...what? The Greek govt. that took out the loans was incompetent, sure. But so were the lenders. Making a loan is taking a risk for both the lender and the receiver of the loan. It is in both of their interest to ensure that the loan will be repaid.


So, I can lend money without worry and it always will be repaid?

And not only that, I will be morally right. What amazing times we live.


I'm afraid I don't follow this trenchant rejoinder.


He made a good case that the creditors were culpable and therefore must release Greece from its debt.


Varoufakis fought to find solutions that would allow Greece to actually be able to repay their debt. When that proved to be impossible, he refused to sit by and lend his name to a deal he didn't believe was in Greece or Europe's best interests.


> Varoufakis fought to find solutions that would allow Greece to actually be able to repay their debt.

Default is not a solution to repay a debt. You can choose to default, but you can't expect any credibility later. The message Varoufakis sent to Greeks was: "Let's just say we don't want to pay and everyone will forget about in a couple of years."


> The message Varoufakis sent to Greeks was: "Let's just say we don't want to pay and everyone will forget about in a couple of years."

The solution he proposed to the EU was rejected and the next day was applied by the letter on Ukraine.

Plus being accused of talking macro-economics on a Eurogroup should be like accused of liking basketball at an NBA playoff game. But then again, if the room is full of politician, who don't understand the first thing about economics and just blindly execute, that's what happens.


Shredding the paper debt and defaulting has worked before for Mexico, Argentina and Solon of Athens.


Default is a solution if you have a plan to not ever incur sovereign debt. This however is impossible with neoliberal social state governing models.


Nope, history says otherwise. As long as the debt stands Greece will not be able to get any financing exactly because it's assured that it will not be repaid.

The only way to get financing is by debt restructuring. It has happened time and again. You'd be amazed how many countries defaulted the last century. I think Germany defaulted twice.


Yeah, I just don't understand how so many people fail to see the most obvious solution: default and stop paying interest. Sure, you're credibility will be lost for now, but then you can slowly build it back up again since you're no longer burdened with paying back the defaulted loans. Its not magical: as it currently stands, Greek economy is going to die a slow protracted death anyways.


Well he fell on his blade when it became clear Greece wasn't going to default.


So quitting politics, in fact retiring, in fact bailing on Greece, to write books and give interviews to Sky is enough to make him an hero to Europe's working class?


> in fact bailing on Greece

When politicians stay it's always "bah, bah, no one ever takes responsibility". Now, someone took responsibility and it's "bailing on Greece".

Yeah. Sure.


Its a fascinating theme I see repeating in political news:

* Jah-Rule on fyre festival: "this is not by fault but I take full responsibility"

* Hillary Clinton on losing election: "this is misogyny and fake news fault but I take full responsibility"

* Heather Bresch on Mylan price gouging: "The real fault is in the supply chain but I take full responsibility"


What kind of responsibility did V-man take? He retired to an academic's cushy life of traveling around the world giving lectures and writing.


He resigned the night of the referendum, when he understood that the government is going to capitulate. Maybe in some countries that's nothing special - as it should be. When you're not on the same page with what the government does, you retire and let someone else who believes in the solution, implement it and then pay the piper.

In Greece, I know of NO politician in 50 years, who retired promptly when his views and gov's views stopped being aligned.

So regarding Greece, that's a huge deal and gives him alone more credibility that the last 10 Greek governments put together.


He's not a hero to this one Greek of the "working class". All he managed to do during his tenure was set in montion a series of events that would greatly worsen the financial condition of Greece.


Quite a statement. What does it take one to become a "hero" nowadays? And how is he in any way connected to the working class?


The Google Talk about his previous book[1] was very good. You're encouraged to give it a go and make up your own mind on Varoufakis.

[1] https://www.youtube.com/watch?v=P2Zpkz7lK-s


I'm not into conspiracy theories... but Why can't i find anywhere to buy this book in my area in the US, or online?



Grexit blackmail didn't work, so run away and got rich writing books.


Varoufakis has always been obsessed with his ego and rock-star status, never with Greece's problems.




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