Prof. Varoufakis’ latest blogpost focuses on the very hypothetical question whether Germany would be satisfied if Greece were miraculously “turned-around” or whether deep down the Germans would still like to see Greeks punished for their alleged wrong-doings over the years. An extremely thought-out intellectual decision-making model was presented to help one find the answer.
A cute exchange developed. I said “Yanis, I fear you are about to go over the top”. He replied “With your hand on your heart, would you predict that the German median voter would want Mrs Merkel to press the red or the yellow button?” To which I replied “I just think it is so non-productive to devote brainpower to hypothetical constructs at a time where particularly the outstanding Greek brain power would be desperately needed for constructive purposes!” Well, that then led to the professor’s final verdict: “As long as you remain focused on Greece, at a time when Europe is being torn asunder by a systemic crisis that is aided and abetted by a 1930s like public mood in Europe’s core, your own brain power is wasted Klaus. As a Greek I am honoured by your focus on our country. As a European I dispair at your reluctance to recognise that there is something terribly rotten in the foundations of Europe; something that shows up first in flimsy places like Greece”.
I couldn’t just let that stand there. My long response to the final verdict is below.
Yanis, instead of focusing on red or yellow buttons, allow me to turn the question around.
Assume, hypothetically, that all of Greece’s sovereign debt is forgiven (at least that portion which is held by foreign creditors). So Greece would have a second chance and start all over with a clean slate. Whether Greece decides to embark on that second chance with the Euro or with the Drachma is up to Greece. In any event, Greece would again have a sufficient debt capacity.
My question to you would be: what needs to change in Greece so that the second chance is not blown like the first one?
My opinion: if nothing were to change, Greece – with the Euro – would be back to where it is today within ten years. With the Drachma, perhaps a bit longer. Either way, no long-term perspective.
So I come back to my question: what would you (and others who are in a position to make good recommendations) recommend that should change in Greece? And the follow-up question would be: why not focus on these things now and let others work on the Eurozone mess? I definitely do not buy into your premise of passivity until the big storm has settled.
I have been fascinated by some of the initiatives which Greeks have taken at the individual level such as the potato movement, the don’t-pay movement, the parallel currency in Volos, the trend to move back to the countryside and return to a “normal” life, etc. etc. I read the Greeceischanging FB site and am impressed that there are indeed people who have a forward-perspective. But individuals alone can’t do much if there is not a general movement for change.
I will not forget the point made by a student in Thessaloniki in a debate following a little talk I gave: “We know our country is in trouble; we would like to contribute something to make things better but someone has to show us what we could do!” Well, I find it saddening when all that their role models can tell them is that there is nothing they can do (except perhaps vent their frustration in blog comments).
I am not nearly as much a believer in models and structures as you are. The best structure won’t work if the users go bananas. You can have the best-structured and controlled financial sector. If intermediaries go bananas and package dodgy sub-prime debt into well-rated securities and if investors go bananas and buy the stuff like there is no tomorrow, a lot of people get hurt when it turns out that dodgy debt is dodgy debt after all.
Yes, even the most uninformed European has meanwhile gotten the message that perhaps there was something very deficient in the Euro-structure. It’s like a car whose steering wheel is slanted to the left. A good driver will compensate for that by slanting his driving to the right. A bad driver may just let the car veer off to the left and have it run into the ground. Perhaps to prove that the steering wheel was slanted.
Now, let me give you a couple of if’s how the deficient Euro-structure could have worked nevertheless. If Germany (and France) had not set the precedent that Maastricht criteria didn’t have to be taken all that seriously. If EU-politicians had not, as I understand they did, deprived Eurostat of the authority to audit national accounts. If EU-authorities had been more aware that current account deficits can be much more dangerous to an economy than budget deficits and if they had treated those imbalances with the same care that they had intended to treat budget deficits with. And so forth.
If all of those if’s (and I could list more) had been observed, controlled and managed, well, then the Eurozone wouldn’t have been torn asunder despite its structural deficiences. So if that’s the lesson which one can learn from the first go-around, why not apply it to the second chance.
I don’t exclude Germany (and France) from any responsibilities. I once wrote that should the crash come and should I lose my savings, I would not blame Greece for that. I would blame the incompetence of EU-elites for having mismanaged everything so badly. But even after the crash, Greece will still be a country of about 11 million people and unless one wants most of them to migrate elsewhere, someone will have to come up with ideas how a country of 11 million people can take advantage of its hitherto totally underutilized competitive advantages and resources, and employ its people so that they earn salaries which allow a decent living standard and pay a fair amount of income taxes; whose employers pay corporate taxes and where the owners pay taxes on dividends.
Around the corner from where we live at the outskirts of Thessaloniki there is a dream palace which, I understand, was something like the King’s summer residence. There is at least one policeman on guard 24 hours a day. I guess his job is to make sure that no one can enter to see how the palace rots away. How about allowing those students who are looking for ways to make a contribution to fix up the place; get it into shape so that some kind of revenue-generating activity can take place there; have them organize such revenue-generating activities; promise them a share of the action. Perhaps even the policeman will quit his public sector job to join the students because it is so much fun to take part in an activity which holds promise and because his cut of the action may be more than what he is earning as a policeman now?
I am, of course, oversimplifying to make a point but I insist on my point that it is not impressive at all to me when one spends all one’s resources on trying to fix other people’s problems when there are so many “own” problems that can/should /must be fixed.