Yanis Varoufakis, the
new finance minister of Greece, has been dubbed a "rock-star" by
newspapers as he begins negotiations with his European partners over securing a
new bailout deal for the country. But what do we really know about his views on
the problems facing both Greece and Europe as a whole?
Although the narrative
of "a master game theorist taking on Europe's elites" is tempting, it
tells us little about how he actually views Europe's core problems, and what we
might expect him to push for. Instead, his work on the euro crisis in recent
years might be more illuminating.
In an interview I did
with him in 2013 he told me that the greatest trick eurozone leaders had pulled
was convincing the world that Europe's problems were really those of individual
countries within the monetary union:
They are prepared to
spend quite a lot of money in order to remain in denial about the systemic
nature of the crisis. In the case of Greece, for example, they have spent a
huge amount of money failing to fix the situation but what they have succeeded
in doing is convince people that it is fundamentally a Greek crisis.
So what does he think
are the central problems facing the single currency? Basically, he believes
that giving Greece aid in the form of debt creates a debt burden larger than
the Greek economy will ever be able pay off.
In a 2013 paper he listed some of flaws in the euro's design:
(a) A monetary union
whose very design removed internal shock absorbers while, at once, magnifying
both the probability and the magnitude of a future crisis,
(b) A political
response to the (preordained) crisis that involved the creation of toxic
bailout funds which accentuated the crisis,
(c) The underlying
macroeconomic imbalances which are in fact deepening, thus rendering the
European Union’s fiscal and monetary strategies logically incoherent, and
(d) A European Central
Bank whose decisive intervention to offer medium term financial stability came
at the price of reinforcing long term disintegration.
The paper claims that
the interplay between these factors helped to drive Europe's crisis and, more
importantly, that the previous efforts made by politicians and the central bank
to alleviate the region's economic woes have in fact exacerbated the underlying
problems. That is, the price of supporting a country in trouble is deepening
the fissures between creditor countries and the recipients of the aid.
This explains the
reluctance of the new Syriza-led administration to continue with the plan
agreed by Greece's previous government with the Troika (the European
Commission, the European Central Bank and International Monetary Fund) and
their refusal to accept €7 billion in bailout money the country was due to
receive. In his analysis, accepting that money would simply be prolong or
worsen the problems that his country and the eurozone currently face.
But Varoufakis also
has a theory of how Europe can save itself from repeating the mistakes of the
past. He calls his manifesto - the Modest Proposal.
In it he and his
co-authors propose a European New Deal which would provide the much-needed
support for the region's economy but also, crucially, "fall entirely
within the constitutional framework to which European governments have already
agreed". The key elements are:
- recapitalisation of
struggling banks directly on a case-by-case basis by the European Stability
Mechanism bailout fund, rather than having to go via national governments,
- investment for small
and medium firms in struggling states financed through existing European bodies
such as the European Investment Bank (EIB) and the European Investment Fund
(EIF), and
- guaranteed access to
nutrition and to basic energy needs for all Europeans, by means of a European
Food Stamp Programme.
Though Varoufakis will
clearly be focusing on the immediate requirements to secure a new agreement for
Greece as he meets with the ECB today, it is nevertheless interesting to see
how he views the ultimate solution to Europe's rolling crisis. In the end it
comes down to whether there remains sufficient commitment to the euro project
by both creditor countries and recipients of aid to prove the trust necessary
for further integration.
As he told me in 2013:
"It’s clear that European leaders are pinning all their hopes on a global
recovery lifting them up, but I don’t think that’s really possible. I think
they will be seriously disappointed."
Whether you agree with
it or not, his work clearly demonstrates that Varoufakis is at heart an
optimist about the single currency. He just thinks that the people charged with
ensuring its future could be doing a much better job.
(Πηγή: www.businessinsider.com)
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