What would the rational thing be? For two years now we have been shouting from the rooftops (in the context of our Modest Proposal – see Policy 1) that unifying the Eurozone’s banking systems is a prerequisite for arresting the Crisis. A single currency area cannot afford to have separate banking sectors that are supervised by national governments. It is nonsensical to speak of Spanish banks, French banks, Irish banks and German banks when, by Treaty, Spanish and Irish citizens have the right to wire their deposits at will from one jurisdiction to another, with these transfers immediately switching from ‘assets’ of one national Central Bank to the ‘liabilities’ of another (i.e. the Target2 and ELA system of within-Eurozone capital movement accounting).
What would that mean in practice? It means that the moment a nation-state is incapable of keeping afloat its ‘national’ banks, following a financial and real estate disaster, the recapitalisation of banks must not only be done with European money (as in the case of Ireland and Spain, among others) but, crucially, it must be taken out of the nation-state’s business (and national accounts) altogether. In short, banks must be Europeanised. Period. That would mean three things:Read it at Yanis Varoufakis
Spain’s Blood Wedding, Ireland’s Muted Rage, Europe’s tragedy
by Yanis Varoufakis | Professor of Economics, University of Athens