2015 July 14 Tuesday
How Eurogroup Set Up Greece To Fail

This Yanis Varoufakis interview about his negotiations with the Eurogroup finance ministers is very eye-opening.

We felt, the government felt, that we couldn’t discontinue the process. Look, my suggestion from the beginning was this: This is a country that has run aground, that ran aground a long time ago. … Surely we need to reform this country – we are in agreement on this. Because time is of the essence, and because during negotiations the central bank was squeezing liquidity [on Greek banks] in order pressurise us, in order to succumb, my constant proposal to the Troika was very simple: let us agree on three or four important reforms that we agree upon, like the tax system, like VAT, and let’s implement them immediately. And you relax the restrictions on liqiuidity from the ECB. You want a comprehensive agreement – let’s carry on negotiating – and in the meantime let us introduce these reforms in parliament by agreement between us and you.

And they said “No, no, no, this has to be a comprehensive review. Nothing will be implemented if you dare introduce any legislation. It will be considered unilateral action inimical to the process of reaching an agreement.” And then of course a few months later they would leak to the media that we had not reformed the country and that we were wasting time! And so… [chuckles] we were set up, in a sense, in an important sense.

Varoufakis says for months the Eurogroup refused to propose a set of requirements and instead just kept rejecting whatever the Greeks proposed. I think Tsipras was naive about the sorts of people he was dealing with.

The socialists have screwed up Greece and made it more corrupt. On top of that the Euro zone lend it too much money (the money itself strengthening government over the private sector and government-to-government aid almost always does) and then the Germans and their allies used Greece as a tool to teach the rest of the southern Europeans a lesson. Sad tale.

I suspect the Greeks are going to be forced out of the Euro zone sooner or later. They'd be better getting out sooner so that they hit bottom sooner. The longer they wait the deeper the bottom will be.

Share |      By Randall Parker at 2015 July 14 09:39 PM 

bob sykes said at July 15, 2015 4:53 AM:

Tsipras, Varoufakis and the other members of the Syriza coalition are old school communists who are committed to internationalism. They will submit to any Troika demands no matter what in order to keep Greece in the EU. The elimination of nationalism and nations is a prime Marxist goal and a bedrock policy of Syriza. The Greek people be damned.

Wolf-Dog said at July 15, 2015 5:01 AM:

Here is the latest article that George Friedman wrote yesterday, where he explains how exactly Germany forced Greece to sell its national assets to pay down its debt to Germany: appropriately, the article has the title "An Empire Strikes Back":


In a nutshell, the Greek banks had so little cash leftover that there was not enough time to reinstate their national curreny (drahma) and to a new financial and economic system, which meant that an immediate exit from euro and the German-dominated economic system would have meant a humanitarian catastrophe where millions of people would have starved within a few months. And in this article Friedman explains how exactly Germany used this technical vulnerability of Greece (i.e. the limited amount of cash and therefore limited time) left in Greek banks) to blackmail Greece to concede its national assets to be sold under German management. And Friedman further clarifies in this article that the real goal of the Germans was to make an example of Greece to other (richer) members of the European Union so that they do not attempt to leave the current economic system that is rigged to favor German domination. And note that the real target of this very successful tactic that Germany employed against Greece was not even Spain and Italy, the real target was France and UK! Yes, you heard it right, the real target is France and UK because according to this article the recent annual trade surplus of Germany against France is $50 billion and against UK it is $47 billion:
But if we consider the fact that the GDP of the US is 7.35 times larger than that of France and 6.35 times smaller than that of UK, it becomes apparent that the annual trade surplus of Germany against France and UK combined ($97 billion), when considered as a percentage of the GDPs of France and UK is much greater than the trade deficit of the US against China, Japan and Germany combined! To be exact, although the annual trade deficit of the US against China Japan and Germany is $445, if we multiply the trade deficits of France and UK against Germany by the ratios 7.35 and 6.35 (to make them comparable to the US GDP in scale) and then sum them up, then the renormalized comparative figure would be $665 billion per year, which explains what Germany is trying to protect. As we speak, Germany is doing to France and UK what China is doing to the US, causing the French and British industries to get slowly dismantled and to cause French and British know-how and technical expertise to vanish slowly.

That being said, it seems to me that Germany made a small miscalculation here: UK already has its own currency (UK had anticipated this situation decades ago and kept its own currency instead of using the euro) and UK is the sleeping giant that can defend itself, unlike France that is more vulnerable to blackmail. So this means that the future collapse of the EU and disintegration will start from a disagreement between France and Germany.

Jonathan Portes said at July 15, 2015 9:02 AM:

No, Wolf-Dog.

I don't know if you can remember, but virtually the entirety of the UK business/political establishment, including The Economist magazine, fought tooth and nail to make the UK join the Euro.
It was only the dogged resistance of a handful of right wing Tory MPs, lead by Bill Cash, and inspired by Enoch Powell which stopped the UK from joining up.

Wolf-Dog said at July 15, 2015 10:01 AM:

In that case, the "dogged resistance of a handful right wing MPs", were absolutely correct. :) The business establishment always applies short term thinking, and they would even sell the rope that will be used to hang them. And the economist magazine is not one of the deep thinking place on earth. :) But in any case, UK is in much better protected from the coming catastrophe.

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