Germany wants a Grexit.
Yanis Varoufakis, formerly the finance minister of Greece, has a new op-ed in The Guardian breaking down his view of what Germany — the most powerful voice at the Greek debt negotiatinig table — really wants. And that is Greece out of the euro.
But the twist is that Germany wants Greece out of the euro in order to teach a lesson of sorts to the French, of all people.
And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. [German finance minister Wolfgang] Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.
What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.
So what is Varoufakis saying?
Well, a few things. But the biggest takeaway we’re seeing is that Germany wants to use Greece as an example so that it can impose its vision of what the euro is on other members. This is the “existentialist angst” Varoufakis refers to.
Is the euro just a glorified exchange-rate mechanism — which Europe used to have and broke down spectacularly in the early 90s — or is it a federation of nations that will do what is needed to ensure mutual success?
In writing the above, Varoufakis is saying that Germany, a euro member that thinks all debts must be repaid no matter what, is hoping to use Greece as a way to convince other euro members — like France — who may have suggested that debt forgiveness is acceptable that this path is not, in fact, ok.
Throughout the piece, Varoufakis breaks down how he saw his 5 months of negotiations. Which is to say Varoufakis saw this process as basically a long attempt from the existing European powers — people like Schäuble and Eurogroup president Jeroen Dijsselbloem — to get Varoufakis to “get with the program.”
And the “program,” in Varoufakis’ view, is paying back your debt in full, no haircuts, while running big budget surpluses.
Varoufakis writes that, “To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in ‘tough love,’ record austerity was imposed on Greece, whose national income, in turn — from which new and old debts had to be repaid — diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.”
Looking at the most recent proposal put forth by the Greek government, it looks like we’re going to be seeing more of the same: there will be higher taxes, less spending, and larger surpluses in the Greek budget.
Of course, this is basically what the Greek people voted against when they voted “No” in last week’s referendum on whether to accept the latest bailout proposal from Greece’s European creditors.
And so it looks like the last six months, then, were a big waste of polticial energy for Greek prime minister Alexis Tsipras, and a bunch of false hope for Greek citizens who thought Tsipras’ Syriza government could put an end to Greece’s austerity programs.
But as Varoufakis writes, European leadership made clear to him that the outcomes were going to be either: more of the same or an exit from the euro.
And the latter option is what Varoufakis thinks Germany actually wanted. And still wants.
Leaving the euro and starting another currency, however, is not something that Greek peple are particularly enthused about. Varoufakis tells of the difficulty setting up a new currency in occupied Iraq, a process that took 18 months, the US military, and 3 different printing firms.
In short, a total nightmare.
Right now, we’re waiting on approval of the plan from Greece’s parliament and other Eurogroup parliaments ahead of a meeting on Saturday.
And on Sunday, we have a full European Union meeting where all 28 members, not just the 19 members of the monetary union, will be represented.
For Varoufakis, Greece is basically right where it started 6 months ago, and where it’s been for the last 5 years. Throughout his time as Greek finance minister — and even now — Varoufakis made clear that he though the best path for Greece was to stay in the euro; but it seems that other euro members might not agree.
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