My October 2012
interview with the New Greek Finance Minister Yanis Varoufakis shows that the
new government of Greece will have a much deeper economic base than markets
anticipate. Indeed, Varoufakis is likely to be a breath of fresh air in a
greatly troubled European community.
In essence Varoufakis
explained that upon leaving the euro, Greece would face many months without an
effective banking system or currency and the damage to an already weakened
economy would make it almost impossible to recover.
The New Greek
government has come to power on the basis that it will relieve the suffering of
the Greek people. But its Finance Minister believes with a passionate intensity
that the Greeks can’t leave the euro. In other words those in the market
predicting such an event are highly likely to be wrong.
Varoufakis says that
it would be better if Germany left the euro but that is not an option he favour.
Back in 2012 there was not a deep understanding that Europe had more than one
problem and that its banking system crisis was quite separate to its government
debt problem.
Varoufakis was adamant
that the banking crisis had to be handled separately and to a large extent that
is what happened in the years that followed. Frankly the European banks are in
a far better position than they were when the interview took place so, at least
when it comes to banking, the Varoufakis strategy has largely been implemented
even though when he set this strategy out it was not universally accepted.
If you want to have a
feeling for what it has been like in Greece and why Greek voters rejected
further austerity, watch the 2012 video of their new Finance Minister. The
misery in Greece is far deeper than the statistics indicate. Official wages
might look similar but real wages have been smashed and there has been a
massive business exodus. Greece is in a deep depression so the election outcome
is no surprise.
The good news is that
the presence of Varoufakis as Finance Minister means that the Greeks have not
simply elected a group of rat bags as so easily could have been the case. He
has a very clear solution for the European problem and frankly it is far more
advanced and better argued than the idea presented by the ECB chief Mario
Draghi. Varoufakis in 2012 was not in favour of money printing and he believed
that once the banking crisis was settled it would be possible for the ECB to
manage the debt of European countries.
I didn’t press him
hard enough as to how this would take place but I have absolutely no doubt that
he has a most detailed plan. So when he goes to Brussels seeking relief for
Greece he will make that relief as part of a logical overall plan to get Europe
moving again.
Instead of buying debt
Varoufakis will be advocating investing in infrastructure. I don’t know to what
extent he will canvass these ideas around the European community but if he
links relief to Greek austerity to a new plan for Europe he will get tremendous
support including support from Germany because under his plan Germany is not
sucked dry guaranteeing European debt.
Markets have smashed
Greek shares and are very nervous about what has taken place. Varoufakis is
only one man and there will be a lot of ragbag elements in the new government.
As we have seen from Australia, governments can have well thought out advanced
plans and forget all about them when they get to power. But my assessment after
half an hour with the man who became the New Greek Finance Minister is that he
has taken on this onerous job with the clearest possible plan and it is a plan
that will benefit not only Greece but Europe and the world.
(Πηγή: www.businessspectator.com.au)
