Thursday, July 2, 2015

Varoufakis threatens to quit if Greeks vote "YES" in referendum. Why wait?

Do it, bro!

Greek Finance Minister, Yanis Varoufakis, went from writing obscure economic articles as an academic to the ministerial head of a country at the center of one of the greatest global monetary debacles of all time.

Let's face it: Varoufakis is in way over his head. He should go back to being an unknown academic who writes obscure economic articles.

What kind of a drama queen threat is this: "I'll quit if my country votes yes." Seriously? Varoufakis had ample time to galvanize his countrymen against the destructive and usurious demands of the Troika. He also had a lot of time to convince them it would be better to leave the euro.

Don't wait for Sunday, Yanis. Quit today. The Greek people deserve better.


Brian Romanchuk said...

I am somewhat more charitable than Mike towards Syriza. At the same time, that was a stupid move by Varoufakis. I do not have my finger on the pulse of Greek polling data, but I would guess that there will be a lot of people now motivated to vote yes just to get rid of him.

Matt Franko said...

"we are called upon to exercise our democratic right to vote on a referendum without having any tangible explanation of what will follow each decision..."

Where is the illustrious "professor" ie (alleged) educator ????

YV another hack from the academe who cant teach just a typical academic blow hard who can "profess" ...

PeterM said...

Syriza's problem is they haven't got popular support for leaving the euro.

It doesn't really matter if the vote on Sunday is YES or NO. Even if it's a NO there'll be a couple of small concessions by the EU which will then lead to the Greek government signing up to a 4.5% surplus in a couple of years time. Unfortunately, it's highly unlikely Greece will be kicked out of the EZ as threatened by the Troika.

Any surplus by the Greek Govt, which will be a deficit to the Greek people, just economic madness right now. It's better for Syriza to lose on Sunday and let someone else sign up to that. They'll then have another chance to come back in couple of years time.

Unknown said...

The polling company whose poll was published yesterday, says that incomplete results were leaked that have no validity and that the 47 to 43 yes vote is incorrect. Likely, the phone poll results were that. But with the Greek economy being in the state it is, phones polls are biased towards the wealthier segment of the population. Non phone polling is much more time consuming to coolect and analyze.

The polling company is saying that it is suing the papers that published the incorrect polls.

Also both Varoufakis and Tsipras have an 80% approval rating among the Greek people.

Mike, you are falling for the mainstream propaganda machine. That is most unlike you. I know that the negotiations haven't gone the way you wanted. But you are blaming the wrong people.

Dan Lynch said...

Euro-lovers like Varoufakis need to go !

@PeterM, Syriza has no mandate for pension cuts, lay offs, tax hikes, privatization, or bankster bailouts, yet they have been happy to agree to those things.

Syriza talks a good talk but then they turn around and agree to austerity, and refuse to leave the Euro. They're part of the problem, not part of the solution.

Dan Kervick said...

Syriza doesn't want to leave the euro because Greeks overwhelmingly don't want to leave the euro.

So where does that leave them? It means Greece needs a plan for rebooting its economy and ending its depression that doesn't involve leaving the euro.

Does such a plan exist? Nope. If Syriza managed to negotiate some kind of permanent debt reduction, would that transform the structurally weak and under-performing Greek economy into a strong economy? Nope.

Dan Lynch said...

Since when do governments passively follow the will of the people?

"A genuine leader is not a searcher for consensus but a molder of consensus." ~ MLK

Unknown said...

Two Dans,
Read about the latest from the IMF

Greece needs an extra €50bn and large scale debt relief

With three days to go before a knife-edge referendum, the IMF revealed a deep split with Europe as it warned that Greece’s debts were “unsustainable”.

Fund officials said they would not be prepared to put a proposal for a third Greek bail out package to the Washington-based organisation’s board unless it included both a commitment to economic reform and debt relief.

According to the IMF, Greece should have a 20-year grace period before making any debt repayments and that final payments should not take place until 2055.

Tom Hickey said...

Leftists government almost always cave, and Syriza is no exception. The governments that don't cave can expect to be demonized and made targets for regime change.

This leads to rightist governments, which TPTB are mostly OK with. We'll have to see how it goes in the EZ if rights governments are elected through, since most rightist parties are eurosceptical and nationalistic.

Ignacio said...

The IFM is an schizophrenic institution.

mike norman said...


Putin has an 85% approval rating, but he's still a disaster for the vast majority of Russians. The Greeks are under attack; it's normal for them to rally around their leaders even if their leaders are weak and clueless.

Nonetheless I appreciate your observations and efforts to get me back "on track." ;)

Malmo's Ghost said...

I've not heard of any plan that could possibly work while staying in the euro, because remaining in the euro requires crushing austerity into infinity.

One problem with YV is that he has been on record for years with his desire to not depart from the euro. So it really has nothing to do with Greeks wanting to stay in the euro informing his choice but rather it's YV's ideological choice alone informing him.

Thus Dan Lynch's quote is certainly apropos to a point, but apparently YV is molding consensus---only the consensus he seeks to mold is self defeating for Greece itself.

Greece simply cannot stay in the euro (and subsequently under the troika's thumb) and ever escape it's predicament. What YV and Tsipras should be doing is explain why they need to exit the euro as the antecedent to a grander plan to lift the people out of their desperate condition. They want their cake and want to eat it also. That won't happen. Ever.

Unknown said...

Malmo's Ghost,

Your logic holds for ALL of the Eurozone, and not just for Greece. The Euro is not the problem, but the assinine rules created by Mundell's ideology. So the question is "How can the Euro rules be changed." That is the current fight. Your scenario only happens if the Euro cannot be "saved" It is quite possible that it cannot be saved. But that is for another day, and a lot more suffering has to take place before that happens

Tom Hickey said...

I've not heard of any plan that could possibly work while staying in the euro, because remaining in the euro requires crushing austerity into infinity.

As I have been saying, this is not about economics. An economic solution is not very difficult and there are a variety of ways to do it. The eurocrats are settled on one way — my way or the highway and it involves replacement of the welfare state with the market state.

Let me emphasize again this is not a matter of economics but politics. It is based on a a political theory known as neoliberalism that advocate setting policy based on economic liberalism irrespective of political liberalism (democracy). However, it is not actually based on economic liberalism other than in name. It is about elite monopoly power based on institutional arrangements that are determined on the basis of conflicts of interest wrt public purpose that favor the ownership class on the rationale that capital is both scarce and valuable and must therefore be privileged.

As a result no amount of economic or financial jiggling can resolve the fundamental issue, which is imposing a market state upon Greece, which requires cutting the benefits of workers, students and pensioners, that is, just about everyone but the Greek oligarchs, who are the actual source of Greece's problems.

Joe said...

Well the obvious solution is for greece to exit the euro, and get every brewery/winery/distillery running at 110%, put fresh linens in all hotel rooms, get china to send over some rickshaws and enjoy the tourist boom that will occur due to the massive devaluation of the drachma. 75 cent beers anyone? Nice hotel accommodations for $60 a night? First class beaches and beautiful mediterranean sea? Sign me up. It'll be tough for a while, but it's better than selling islands and being debt slaves to foreign masters. (ok, maybe it's not as simple as that, but it's a start)

This should have been done years ago, when it all could have been managed, instead of waiting for a crisis.

Malmo's Ghost said...


The euro can be saved if a fiscal union is created, which won't happen of course. Given the present euro metrics Greece cannot get out of its catastrophic depression absent leaving the euro. If YV is counting on the sadistic overlords running the euro project to play nice while Greece remains its currency user, then I'm afraid he's simply deluded.

To YV, leaving the euro project is tantamount to creating a vacuum for a neo Nazi uprising to fill the void axiomatically. That's why he's so vehement with his desire to not bolt the project. What he fails to understand is that the very concept of a monetary union alone, benefiting the big countries at the expense of the little ones, is the very condition leading to hyper nationalistic rage. He's simply trapped in his ideological vortex of irrational fear. Unfortunately his desire to stay within the European project is the very thing that will lead to possible genocidal monsters that haunt his every thought.

Unknown said...

"and enjoy the tourist boom that will occur due to the massive devaluation of the drachma."

What massive devaluation of the drachma?

The value of the drachma at the moment is infinite. You can't get it no matter how many US dollars you own. Because none has been issued yet.

This devaluation thing is truth by repeated assertion. Nobody can articulate a mechanism by which it comes about that isn't also an incompetent way of introducing a new currency.

I could introduce the Drachma and make sure it went *up*, by making sure that there is swingeing taxation placed in Drachma on the wealthy in Greece with the military turning up to ensure that it is paid. I would run a surplus in Drachma with the central bank trickling them onto the market in exchange for Euros, with the banks banned from lending money to anything other than capital projects.

Greece has to introduce a war economy. The demand side is easy. Getting the domestic supply side sorted out less so. Making taxation work in Greece effectively even less.

Malmo's Ghost said...

Given PA in stock and bond market my guess is that the bet is that Greece says yes to endless austerity.

Dan Lynch said...

Good update on the ground in Greece

"Greek companies have been excluded from the electronic transfers of Europe's Target2 system. The entire Greek business community is unable to import anything, and without raw materials they can't produce anything,"
"Three of our containers have been stopped at customs control because the banks can't give a bill of landing. .... We don't know how we are going to execute and export an order of 60 containers for the US."
"I can't import anything. Restaurants are starting to close down because they can't obtain food and we are going straight into the peak tourist season. It is going to be utterly horrendous."
'One [Syriza] MP appeared to have lost confidence in the party leadership. "We have had months of childish tactics. They thought they could blackmail Europe into making concessions instead of going to the root of the problem facing this country and accepting that we have to break free altogether. They don't know what they are doing,"

Ryan Harris said...

In a modern monetary system, a government can issue short term bills in exchange for hard currency to even out cash flow. In Greece, they aren't allowed to. I wonder why that is.

Unknown said...

I will be surprised if the referendum solves anything of substance.

The democratic will of the Greek people have not been a concern of the Troika, as has been aptly demonstrated. For that matter, the democratic will of the member nations is irrelevant to German diktat and the enshrined treaties, rules etc.

It seems to me that Germany is the single and only player that can change Greece's destiny, while Greece remains a member of the EMU.

Syriza, Golden Dawn or the next party in power cannot alter this reality.

Tom Hickey said...

Mostly likely, the result of the referendum will decide whether Syriza stays in power as presently constituted. Both Tsipras and YV has implied that a yes vote will prompt their resignations. This could lead to an other election, which is the objective of the eurocrats. In the meanwhile, they would work to install an interim technocratic government.

I don't think that it makes too much different to the big picture in the long run. It is looking to me like the EZ as presently constituted is mortally wounded. The rightist in Europe shouldn't have too much trouble finishing it off as deflation sets in.

Joe said...

true, the value of the drachma is infinite or zero.. But you're trying to say if they re-introduced drachma, it could trade at 1:1, or better, with the euro in the markets?

Run a surplus in drachmas? How could you even do it, who's going to run the deficit in drachma? Isn't the whole point of leaving the euro, that you can run deficits domestically?

PeterM said...


You shouldn't confuse the value of any new possible drachma with the spending power of the Greek people now who use the euro. The $ is less valuable than the £. That doesn't mean British people have more spending power than Americans.

So the Greek government could base its new currency on the eurocent or on 100 euros, or whatever. That would make no difference at all in economic terms.

But do the Greeks really need a new currency? YV seems to think he's stuck with the euro because it would take too long to reintroduce a new currency. But what if the Greeks just carried on creating euros in defiance of the ECB? Their euros have different codes on the banknotes and different lettering on the coins.

Sort of military intervention, what can the EU and ECB do other than refuse to guarantee Greek euros on a par with other euros? So hey presto! A new currency is born. The Greek euro.

I agree it wouldn't make any sense to not let find its new and almost certainly new lower value. That's what the Greek economy needs right now.

Dan Lynch said...

Most money is electronic and hence the real challenge in setting up a new currency is creating a new (or joining an existing) electronic payments system, including transfers between countries. Right now Greece is locked out of that payments system.

It took Russia several months to set up its own payments system. It's something Tspiras and Varoufakis should have been working on from day one, but nooooooooo ...

Dan Lynch said...

Paypal has stopped working in Greece.

So there is no electronic money in Greece now. And electronic money is what, 95% of the economy?

Joe said...

Peter - I'm not confusing spending power with nominal values.. Which is why I don't see how Neil could possibly make any new greek currency go up in real terms relative to the euro. Part of the point of devaluing your currency is to make foreigner's money go further in real terms to attract investment/tourism/exports etc. Tourism is already 18% of its gdp. Brings in a lot of euros/dollars that they'll need to import stuff, if tourists could get twice the vacation for their money.... Tax enforcement, yeah is a big problem...

Unknown said...

"Isn't the whole point of leaving the euro, that you can run deficits domestically?"

That's a misunderstanding. The whole point of leaving the Euro is to free up the government to create *circulation*.

Remember that any deficit in the government accounts is caused by people *saving* the currency the government spends. If they don't do that then you run a balanced budget since they will spend the currency to destruction via taxation. If you push a surplus, by hard taxes on pre-existing wealth for example, then you can create a demand for the currency in excess of the supply - forcing people to bid up the currency. You can then use open market operations to bring it back down and ensure there is sufficient supply.

That's just the same trick the central bank uses to hit interest rate targets.

This is the basis of the 'Tax Anticipation Note' idea Rob Parenteau put forward. It is a notionally-pegged liability spent by the government that is actually *non-convertible*. It's effectively a new currency. But the way you introduce it matters.

All of this is straightforward once you stop seeing countries and start seeing currency zones. At the moment the Greek currency zone is infinitely small - because there are no Drachma in existence. What you do is slowly widen that out over a population based upon your tax collecting powers and infrastructure. As you construct the latter, you can start causing circulation and real output by spending. The currency zone slowly grows until in encompasses the country. Done well it then starts to drive out other currencies due to the efficiency gains of using the local scrip.

Ignacio said...

They should have joined the Russian payment system already. Bunch of idiots and incompetents. Now they will be cut down of raw materials and their society will collapse within days forcing regime change. Good game, the troika wins and installs a puppet government.

The West is so weak... we can be easily blackmailed by the elites controlling the system with moves like this as we don't really have the resources to maintain our societies so financiers and banksters can play at their will with the population.

At the end is the supply side problem other were talking about, we live in a very resource-constraint system dependant on international flows and trade. This debases the power of the nation states greatly and translates it to the international capitalist class.

We are so fucked up.

Unknown said...

I agree with Mike...Instead of just the quick, cauterizing, creative destruction needed (leaving the Euro, painful reforms, selling assets, privatizing), this Greek drama by these two drama queens has all along only been about creating a narrative that someone else is at fault, to conjure the bogeyman to blame for all their problems.