Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

Varoufakis’s Revolutionary Plan for Europe - Don't Tell Anyone in Berlin

Politics / Eurozone Debt Crisis Feb 20, 2015 - 05:56 PM GMT

By: Mike_Whitney

Politics

“The ongoing dispute between the German and Greek governments is nothing less than a democratic revolution against German hegemony and the attempt of the Germans and their paladins in the EU to dictate Greek domestic policy.” –Mathew D. Rose, It’s a revolution, Stupid! Naked Capitalism


“Germany is eating itself over Greece. It is eroding its moral authority, and seems prepared to destroy the eurozone’s integrity just to make a point.” –Paul Mason, Germany v Greece is a fight to the death, a cultural and economic clash of wills, Guardian

If you haven’t been following developments in the Greek-EU standoff, you’re really missing out. This might be the best story of the year. And what makes it so riveting, is that no one thought that little Greece could face off with the powerful leaders of the EU and make them blink. But that’s exactly what’s happened. On Monday, members of the Eurogroup met with Greece’s finance minister, Yanis Varoufakis, to decide whether they would accept Greece’s terms for an extension of the current loan agreement. There were no real changes to the agreement. The only difference was semantics, that is, the loan would not be seen as a bailout but as “a transitional stage to a new contract for growth for Greece”. In other words, a bridge to a different program altogether.

In retrospect, Varoufakis’s strategy was pure genius, mainly because it knocked the EU finance ministers off balance and threw the process into turmoil. After all, how could they vote “thumbs down” on loan package that they had previously approved just because the language was slightly different? But if they voted “thumbs up”, then what?

Well, then they would be acknowledging (and, tacitly, approving) Greece’s determination to make the program less punitive in the future. That means they’d be paving the way for an end to austerity and a rethink on loan repayment. They’d also be conceding that Greece’s democratically-elected government had the right to alter the policies of the Eurogroup. How could they let that happen?

But, then again, how could they vote it down, after all, it was basically the same deal. As Varoufakis pointed out in a press conference on Monday:

“We agree to the terms of our loan agreements to all our creditors”. And we have “agreed to do nothing to derail the existing budget framework during the interim period.”

See? It’s the same deal.

This is the conundrum the Eurogroup faced on Monday, but instead of dealing with it head-on, as you would expect any mature person to do, they punted. They put off the loan extension decision for another day and called it quits. Now maybe that was the smart thing to do, but the optics sure looked terrible. It looked like Varoufakis stared them down and sent them fleeing like scared schoolchildren.

Now, remember, Monday was the absolute, drop-dead deadline for deciding whether the Eurogroup would approve or reject the new terms for Greece’s loan extension. That means the Eurogroup’s task could not have been more straightforward. All they had to do was vote yes or no. That’s it.

Instead, they called ‘Time Out’ and kicked the can a little further down the road. It was not a particularly proud moment for the European Union. But what’s even worse, is the subterfuge that preceded the meetings; that’s what cast doubt on the character of the people running EU negotiations. Here’s the scoop: About 15 minutes before the confab began, Varoufakis was given a draft communique outlining the provisions of the proposed loan extension. He was pleasantly surprised to find that the document met all his requirements and, so, he was prepared to sign it. Unfortunately, the document was switched shortly before the negotiations began with one that backtracked on all the crucial points.

I’m not making this up. The freaking Eurogroup tried to pull the old switcheroo on Varoufakis to get him to sign something that was different than the original. Can you believe it? And it’s only because Varoufakis studiously combed through the new memo that he was able to notice the discrepancy and jam on the brakes. As it happens, the final copy was just a rehash of the same agreement that Varoufakis has rejected from the onset. The only difference was the underhanded way the Eurogroup tried to slip it by him.

Now you tell me: Would you consider people who do something like that “trustworthy”?

Of course not. This is how people behave when they don’t care about integrity or credibility, when all that matters is winning. If the Eurogroup can trick the Greeks into signing something that’s different than what they think they’re signing; then tough luck for the Greeks. “Caveat emptor”. Buyer beware. The Eurogroup has no problem with that kind of shabby double-dealing. That’s just how they play the game.

But their trickery and bullying hasn’t worked, mainly because Varoufakis is too smart for them. And he’s too charismatic and talented too, which is a problem for the EU bigwigs who resent the fact that this upstart Marxist academic has captured the imaginations of people around the world upsetting their little plan to perpetuate Greece’s 6-year long Depression. They never anticipated that public opinion would shift so dramatically against them, nor had they imagined that all of Europe would be focused laserlike on the shady and autocratic workings of the feckless Eurogroup. That’s not what they wanted. What they wanted was carte blanche to impose their medieval policies on the profligate Greeks, just like the good old days after Lehman Brothers tanked. After all, that’s how a “anti-democratic imperialist project” like the EU is supposed to work, right?

Right, except now Varoufakis and his Marxist troopers have thrown a wrench in the Eurogroup’s plans and put the future in doubt. The tide has turned sharply towards reason, solidarity and compassion instead of repression, exploitation and cruelty. In just a few weeks, the entire playing field has changed, and Greece appears to be getting the upper hand. Who would have known?

If you look at the way that Varoufakis has handled the Eurogroup, you have to admire the subtlety, but effectiveness of his strategy. In any battle, one must draw attention to the righteousness of their cause while exposing the flaws in the character of their adversary. The incident on Monday certainly achieved both. While David never really slayed Goliath, Goliath is certainly in retreat. And that’s alot better than anyone expected.

As for the “cause”, well, that speaks for itself. The Greek bailout was never reasonable because the plan wasn’t designed to create a path for Greece to grow its way out of debt and deflation. No. It was basically a public relations smokescreen used to conceal what was really going on behind the scenes, which was a massive giveaway to the banks and bondholders. Everyone knows this. Check this out from Naked Capitalism:

“According to the Jubilee Debt Campaign, 92% of €240 billion Greece has received since the May 2010 bailout went to Greek and European financial institutions.” (Naked Capitalism)

Yep, it was all just one big welfare payment to the moocher class. Meanwhile, the Greeks got zilch. And, yet, the Eurogroup wants them to continue with this same program?

No thanks.

As far as Greece’s finances are concerned, they’ve gotten progressively worse every year the bailout has dragged on. For example, Greece’s debt-to-GDP ratio has gone from 115 percent in 2010 more than 170 percent today. The country is headed in the wrong direction, which is what makes Varoufakis’s remedies so compelling. It’s because everyone knows that ‘if you are already in a hole, stop digging’. That’s the logic behind Varoufakis’s position; he simply wants to “stop digging.” But that can’t be done by borrowing more money to repay debts that only get bigger with each new bailout. And it can’t be done by implementing excruciating belt-tightening measures that increase unemployment and shrink the economy. It can only be done by reducing one’s debts and initiating programs that help to grow the economy back to health. This isn’t rocket science, but it is anathema to the retrograde ideology of the European Union which is one part bonehead economics and one part German sanctimony. Put the two together and you come up with a pre-Keynesian dystopia where one of the wealthiest regions in the world inches ever-closer to anarchy and ruin for the sole purpose of proving that contractionary expansion actually works. Well, guess what? It doesn’t, and we now have six years of evidence to prove it.

It’s worth noting that the Eurogroup hasn’t budged one inch from its original position. In other words, there really haven’t been any negotiations, not in any meaningful sense of the word. What there has been is one group of pompous blowhards reiterating the same discredited mantra over and over again, even though austerity has been thoroughly denounced by every reputable economist on the planet. Of course that doesn’t matter to the ex-Goldman swindlers at the ECB or their hairshirt counterparts in Berlin. What they want is to extract every last drop of blood from their Greek victims. That’s their game. And, of course, ultimately what they want to do is annihilate the entire EU welfare state; crush the unions, eviscerate pensions, wages and health care, and privatize everything they can get their greasy hands on. That’s the real objective. Greece’s exorbitant debts are just a means to an end, just a way to decimate the middle class in one fell swoop.

Keep in mind, the EU just narrowly avoided a triple-dip recession in the third quarter, which would have been their third slump in less than six years. How do you like that track record? It just illustrates the stunning mismanagement of the Union’s economic affairs and the incompetence of the bureaucrats making the decisions. Even so, these same leaders have no qualms about telling Greece to step in line and follow their diktats to the letter.

Can you believe the arrogance?

Fortunately, Greece has broken from the herd and set out on a new course. They’ve disposed of the mealy-mouth, sellout politicians who used to run the country and put the A-Team in their place. And, boy, are they happy with the results. Syriza’s public approval ratings are through the roof while Varoufakis has become the most admired man in Europe. The question is whether this new troupe of committed leftists can deliver the goods or not. So far, there’s reason for hope, that is, if we can agree about what Varoufakis’s strategy really is.

In earlier writings, Varoufakis said that he wants a New Deal for Greece. He said:

“Unless we have a new deal for Europe, Greece is not going to get a chance….It’s a necessary condition that the eurozone finds a rational plan for itself…. until and unless the eurozone finds a rational plan for stopping this train wreck throughout the European Union, throughout the eurozone, Greece has no chance at all.” Naked Capitalism)

Okay, so Varoufakis wants to stay in the EU, but he wants a change in policy. (Reducing the debts, ending austerity, and boosting fiscal stimulus.) But he also has more ambitious plans of which no one in Brussels, Frankfurt or Berlin seems to be aware. He wants to change the prevailing culture of the Eurozone; gradually, incrementally, but persistently. He wants a Europe that is more democratic and more responsive to the needs of the member states, but he also wants a Europe that is more united via institutions and programs that will strengthen the union. He believes that success will only be achieved if concrete steps are taken “to unify the banking system”, mutualize debt (“the Federal Government having its own debt over and above states.”) …”And thirdly we need an investment policy which runs throughout the Eurozone… a recycling mechanism for the whole thing. Unless we have these things,… I’m afraid there is absolutely nothing to avert the continuation of this slow motion derailment.” (Naked Capitalism)

So, there you have it. Nationalize the banking system, create a Euro-wide bond market, and establish mechanisms for fiscal transfers to the weaker states like we do in the US via welfare, food stamps, gov contracts, subsidies etc. to create some balance between the very rich and productive states like California and New York and the poorer states like South Dakota and Oklahoma. That’s what it’s going to take to create a viable United States of Europe and escape these frustratingly recurrent crises. Varoufakis knows this, but of course he’s not pushing for this. Not yet at least.

Instead, he’s decided to take it slowly, one step at a time. Incremental change, that’s the ticket. Just keep plugging away and building support until the edifice cracks and democracy appears.

That’s Varoufakis’s plan in a nutshell: Revolution from within. Just don’t tell anyone in Berlin.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

© 2014 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules