Wednesday, December 05, 2012

Yanis Varoufakis: Merkel's policies are turning Greece into a new Kosovo

Greek economist Yanis Varoufakis offers a very grim assessment of the latest deal by the Troika (EU, ECB, IMF) deal fronting for German Chancellor Angela "Frau Fritz" Merkel (The Eurozone after the November Eurogroup 'Greek Deal': On the current state of play 12/01/2012)

It is clear that the Eurogroup cannot be serious about either its Greek debt or its Greek GDP targets. The November 2012 decision was merely a pretext for releasing withheld loan tranches to Greece so as to buy another year or so for Europe to patch up, in similar fashion, its crisis elsewhere – in Italy and Spain in particular. Meanwhile Greece has been condemned to another year of misery, failed targets, depression etc.

The Eurogroup's underlying ‘logic’ is that, as long as the Samaras government plays well its ‘model prisoner’ role, Greece will be given its OSI [major reduction of debt held by governments, i.e., "haircut" for Greek debt] after the federal election in Germany is over, in September 2013. Many commentators, even those critical of Europe’s dithering, welcome the implicit acceptance that an OSI is inevitable. I think they are wrong. Take for instance last year’s PSI. What did it prove? It proved that a haircut can be meaningless if badly delayed. While it is true that a haircut of privately held debt in 2010 would have been helpful, Europe's insistence that there would be no such haircut (and its desperate attempts to fill the gap by huge loans and austerity) ensured that, when the haircut came (with the PSI [previous debt reduction on privately-held Greek debt]), it was too little too late. Similarly with the impending OSI: when it comes evenutally [sic], after the awful delay effected by the latest Eurogroup’s shoddy ‘Greek Deal’, it too will prove too little too late and too toxic not only for Greece but for Europe as a whole. In short, delaying the delivery of the inevitable medicine turns it into poison.

So, what will come of Greece, given the latest Eurogroup ‘decision’? It is my fear, and belief, that the country is becoming a version of Kosovo – a protectorate in which the euro remains the currency, sovereignty is minimal, the population is ruled over by a glorified kleptocracy with strong links to Berlin and, last but not least, a permanent migratory flow is established that sees the young and the skilled move to northern Europe and beyond. [my emphasis]
Varoufakis believes the deal will put more pressure on Spain and Italy's finances. And he is especially critical of the ruinous effect the structure of the deal is likely to have on Greek banks:

Beyond this ‘small’ matter, Rome, Madrid and, indeed, Paris must now reckon with a Eurogroup decision that demonstrates how bogus all talk of a Growth Pact really has been (since President Hollande raised it as an issue a few months ago). The fact that the Eurozone’s finance ministers declared, without the slightest hesitation, that substantial growth will come to depression-hit Greece without an iota of a smidgeon of a hint of fresh public investment reveals that Europe is truly blind to what it will take to deal with the recession it faces in aggregate and with the various depressions in its Periphery.

Last but not least, the readiness to sink Greece’s already bankrupt banks further into bankruptcy ..., rather than implementing the June 2012 Agenda for decoupling the banking crisis from the sovereign debt crisis, is yet another sign that the Eurozone remains on the road to ruin. And, as long as this is the case, the European Union will be increasingly buffeted by the centrifugal forces (especially those emanating from London) that may well cause its evolution into, at best, some form of NAFTA-like quasi-free trade zone. [my emphasis]
Which brings to mind what Jerry Brown said in August 2011:

... you look back at history and all the elites, the ruling families of Europe in 1914 were feeling pretty good about themselves. And yet, it wasn't just a few months into the summer when they began what was an absolute catastrophe. So blindness is compatible with good breeding, good education and good relationships. Well, we don't even have that now in much of Washington.
Nor in Berlin, Paris or London, it seems.

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