05 November 2012

Yanis Varoufakis: An emergency programme for Greece

The Greek government, under intense pressure from the troika of its lenders (IMF-EU-ECB), is about to give the wheel of depression another, powerful turn, comments Varoufakis. But squeezing Greece further into the proverbial ground today will only intensify the eurozone's woes next year.

Many in Europe think that, by next year, Mr Draghi’s OMT will have somehow paved the ground for a manageable exit of Greece from the eurozone, and that this exit will be the ‘final solution’ to the Greek problem. Well, I am afraid they have another think coming: Just as now, so in 2013-4 a Grexit will be deemed potentially catastrophic. Which means that squeezing Greece further into the proverbial ground today will only intensify the eurozone’s woes next year.

Given, however, the obvious reluctance of Berlin, Frankfurt and Brussels to step back from a policy on Greece that is inane, in addition to being inhuman, what can Greece do in the short run to minimise its pain, and the pain that it will be inflicting on the rest of Europe in the months and years to come? [see full article for Varoufakis's suggestion].

Three demands

If the Greek government is, thus, granted its re-negotiation, what should it demand for its partners? Three ought to be the demands that Athens has a moral obligation (not only to itself but to the whole of the eurozone) to put on the table:

First, that the Greek banks are recapitalised directly by the EFSF-ESM, as per the June EU Summit agreement (which has fallen by the wayside since it was struck).

Secondly, that the €12 billion of unspent (due to the recession) structural funds earmarked for Greece for the period 2007-2013 (NB: €20 billion were earmarked, of which only €8 billion were spent) are passed on not to the Greek state but to the European Investment Bank for the purposes of investing directly into the Greek private sector.

Thirdly, a new schedule for repayment of Greece’s debt to the troika which binds the pace and timing of repayments to GDP growth; effectively, making Greece’s creditors equity holders in its future income and wealth.

Conclusion

These are truly desperate times for Greece. The nation is experiencing not only a vicious Great Depression but also an existentialist crisis. Other great nations, under equivalently singular threats, would even consider using the nuclear option. My suggestion here is far, far milder. Just say no to a new fiscal squeeze that is commonly known to be terrible for Greece and bad for Europe. Instead, do what it takes to regain the bargaining power the government needs in order to argue for a programme that is mutually advantageous for all Europeans. 

Full article

© Yanis Varoufakis