Moneycab: Underneath the overriding european crisis, Greece has its own problems to solve. Which steps could Greece take by itself to get out of the crisis, like taxation of the existing wealth.
Yanis Varoufakis: The modern Greek state has been in crisis even before it was instituted, even during the revolution that led to it in the 1820s. We first acquired an unstustainable debt and then we had a state. So the debt problem predates the state. I spent my youth demonstrating against the government for not doing what you suggested.
Entering the Euro zone led to a tsunami of loans
Just for a moment imagine that in 1999 the then Prime Minister Costas Simitis would have had an epiphany in the night and woke up the next morning saying, “let’s not enter the Euro zone”. You and I would not be discussing Greece and its problems now. If we would not have entered the Euro zone, the debt would not have built up. German, french or english bankers would not be so ready to lend money to the greek state, banks, households or companies. The tsunami of loans would not have happened.
Just for a moment imagine that in 1999 the then Prime Minister Costas Simitis would have had an epiphany in the night and woke up the next morning saying, “let’s not enter the Euro zone”. You and I would not be discussing Greece and its problems now. If we would not have entered the Euro zone, the debt would not have built up. German, french or english bankers would not be so ready to lend money to the greek state, banks, households or companies. The tsunami of loans would not have happened.
“The European Parliament is not a real parliament because it has no real power to legislate.”
Instead of 5-6 percent growth rate between 2000 to 2008 we would have had 0.8 or 1 percent. It would have been a much more sustainable growth. In 2008 we would have had a mild recession like Bulgaria did.
Unstustainable debt fueled growth
The tragedy was that we had this Ponzi growth, this unstustainable debt fueled growth. When the bubble burst, this was followed by a Ponzi austerity, an unstustainable debt fueled austerity. There is nothing mysterious about the Greek problem. We have borrowed hundreds of billions of Euros and we have burned it throwing it into the black hole of debt inflation. Why we have done it? Because there is one huge deficit: Hope. No one can see any light of the end of the tunnel. If you don’t have hope, it is very difficult to reform.
The tragedy was that we had this Ponzi growth, this unstustainable debt fueled growth. When the bubble burst, this was followed by a Ponzi austerity, an unstustainable debt fueled austerity. There is nothing mysterious about the Greek problem. We have borrowed hundreds of billions of Euros and we have burned it throwing it into the black hole of debt inflation. Why we have done it? Because there is one huge deficit: Hope. No one can see any light of the end of the tunnel. If you don’t have hope, it is very difficult to reform.
“We need democratic control over economic policy.”
Are there things we could have done? Of course there are. But unless we can put a stop to the debt spiral, people in Greece react to the word “reform” like the people in Iraq to the word “democracy”. Immense crimes were perpetrated in the name of democracy in Iraq. If people hear the word, especially when it is spoken with an american accent, they hide under the table because they are afraid to be bombed. Similar with the Greeks, if they hear “reform”, they think “oh my god, they are going to cut my pension again”.
The way out
The way out is by accepting the truth. The truth we are avoiding since 2010: The greek state is bankrupt. Can we please accept that, instead of trying to cover it up with new loans? Since 2010 we have been extending and pretending. It’s the rogue banker’s policy: You don’t want to admit that the loan has gone bad, so you keep giving more bad loans to the insolvent. That has to end. My policy was simple: I proposed to do what General Motors did. First you have a debt restructure and then you immediately restructure the company. The sequence here is very important. The retort from the troika with exception of the IMF, which understood and agreed with my concept, was to insist that first we had to show that we reform ourselves and recover, then we would get helped out of debt. If that would have been the policy adopted with General Motors, the company would not exist today.
The way out is by accepting the truth. The truth we are avoiding since 2010: The greek state is bankrupt. Can we please accept that, instead of trying to cover it up with new loans? Since 2010 we have been extending and pretending. It’s the rogue banker’s policy: You don’t want to admit that the loan has gone bad, so you keep giving more bad loans to the insolvent. That has to end. My policy was simple: I proposed to do what General Motors did. First you have a debt restructure and then you immediately restructure the company. The sequence here is very important. The retort from the troika with exception of the IMF, which understood and agreed with my concept, was to insist that first we had to show that we reform ourselves and recover, then we would get helped out of debt. If that would have been the policy adopted with General Motors, the company would not exist today.
The meeting with Yanis Varoufakis took place at the Alpensymposium in Interlaken, Switzerland.
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