Saturday, February 7, 2015

Walls Have Ears: Wednesday’s Private Meeting between Wolfgang Schäuble and Yanis Varoufakis

The the post-meeting press conference was pretty dispiriting, but behind closed doors there was a clash of weltanschauungs.  I’m privy to everything and can report it as it was.

YV: On behalf of my government and from my own personal, deep respect, I’d like to say hello and convey my wishes for collegial, constructive work.

WS: Please pull up a chair.

YV: Before we get down to business I want to make it clear that, while I come here as a representative of the Greek government, I am not interested in trying to reach a deal that’s good for Greece but not Europe as a whole.  In fact, I think we can find a solution that is really in the interest of the German people as well as the Greek people.

WS: That’s good.

YV:  So let’s begin.

WS: Yes, I was hoping I’d hear that.

YV: As you already know, my government has a clear mandate from the Greek people to seek a new debt arrangement, one that can allow our country to emerge from an economic nightmare.  Of course, we don’t expect that this will be quick or easy.

WS: This discussion may be quicker and easier than you expect.

YV: This isn't a meeting to find a solution.  I just want to put some ideas on the table and talk about how we can go from here to set up a constructive dialog.

WS: Young man, take that smile off your face.

YV: All right, this is not the tone I was hoping for, but we won’t let that get in the way.  As I was saying—

WS: I know all about your ideas.  You tell them to the whole world in your blog.

YV: Yes, but now we are going to discuss the ideas of the Greek government, which are not exactly the same as mine, but which I am going to express as well as I—

WS: I don’t think the answer will be any different for your ideas or the ideas of Tsipras or anyone else in your party.  Let’s get to the point.

YV: As you wish.  The point is that Greece cannot repay the loans under the terms it faces.  We can’t afford any longer to pretend that this program is working; it’s not working for us, and it’s not working for you.

WS: We disagree.  Greece is repaying the loans as we speak.  You are making payments.  You have a program to follow.

YV: We are taking on ever more debt to maintain the illusion that we can repay the existing debt.

WS: Yes, and you will have to repay that debt too.

YV: We cannot repay what we cannot repay.

WS: You are not at the end of your means.  Your government chose to borrow the money, and now you must live with the consequences.  It is the same for everyone.  No one is allowed to escape the responsibility of repaying their debts.

YV: Do I have to remind you of the wise decision the Allies made to release Germany from—

WS: Don’t give me lectures on German history, young man.  That was different.  I don’t think it’s such a good idea for the Greek finance minister to come here to request special favors and then give us speeches about something we know far better than you do.

YV: Well then—

WS: I told you not to smile.

YV: Right.  Where were we?  Oh yes.  Let’s not talk about the debt right now.  As you know from reading my blog, I think that Europe as a whole can take responsible actions to pull all of our economies forward and reduce debt burdens through growth.  I’m talking about a substantial expansion of the European Investment Bank financed by bond purchases by the ECB.

WS: I know.  You think wealth can be created by printing money.  We think wealth is created by hard work and frugality.  When you start saving your own money you can talk about making investments.

YV: I take this as a signal you aren't interested....

WS: You’re getting better.

YV: Well, let’s try something else.  Syriza, as you know, was elected on a platform of radically reforming the Greek state and subjecting the oligarchy in our country to the rule of law.  We want to make it possible to collect taxes on the wealthy, to have honest bidding for government contracts, and to—

WS: Yes I know.  We will help you collect these taxes, but you didn't come here for that.  I want to know right now: are you going to go through with the privatizations you've agreed to, with further reductions in public employment, rescind these ridiculous wage increases—

YV: Sir, we were elected.  We have a mandate.  This is democracy.

WS: We know something about democracy too, Dr. Varoufakis.  And people are free to express whatever opinion they want.  That’s the democratic way.  But voting for this party or that one doesn't change reality.  And the reality is that you have to follow the program.

YV: If we have to do what you tell us no matter how we vote, what’s the point of voting?

WS: As I said, voting does not change reality.

YV: But voting has already changed reality, and not only for Greeks but Germans as well.  Germany’s economy depends on its exports to us and to the other indebted countries.  In fact, these are two sides of the same coin: our debts financed your exports.  It’s basic macroeconomics, surely you can agree with that.  Our economies are intertwined, what happens to Greece—

WS: No, you’re wrong.  German exports have nothing to do with Greece; they are due to the productivity, the hard work of the German people and their willingness to save for the future.  There are no shortcuts, Dr. Varoufakis.  When Greeks learn how to work hard and save they will have a successful exporting economy too.  And it’s the same for every country.  And if you don’t like listening to us telling you this, you are perfectly free to refuse our generous support and let your economy go to hell.  We will sell our goods to someone else who is more responsible.  And one more thing.  You have a lot to do in Athens.  Don’t bother scheduling any more meetings in Berlin.  If you noticed the little message you got from the ECB, your days are numbered.  You will be heroes for another week or two, and then I can schedule a meeting with the finance minister of the next Greek government.

YV: This isn't going anywhere, is it?  What are we going to tell the press in a few moments?

WS: We agree to disagree.

YV: I don’t think we even got to that.

WS: Do your job.  This is what we always tell them.  Oh, and one more thing.

YV: What's that?

WS: Tuck in your shirt.


Peter said...

JW Mason:

"Indeed, we can certainly hope that central banks are philosopher-kings who only want what's best for everyone."

The Greek people sent a message with the election of Syriza. We can hope the ECB gets the message that Europe's austerity program isn't working. That's Krugman's point. If the ECB ignores the message, then Europe really isn't as democratic as they believed or aspired to be.

Myrtle Blackwood said...

so, we can rule out:

i) austerity;

ii) printing money (causes inflation in areas of high employment and fails to stimulate depressed areas, for one thing);

iii) growth (that ended with climate change, resource depletion and 'peak child').

That leaves debt forgiveness. (However, this solution is incredibly unpopular amongst those who hold the bulk of the world's wealth and money. Who cares, but they do hold power despite our delusions of democracy.)

The other option is for the mass of people to exit urban areas, find a place in the country with lots of water and wood, and settle down as peasants until this whole thing blows over.

After that, I'm out of solutions. Maybe there's something I haven't thought of?

blissex said...

It is a very nice and humourful summary of their official positions, but I doubt that WS is that idealistic, even in private.

However discussions about debt restructuring and "austerity" always omit several vital details, which have been however at least in part listed in Simon Johnson's celebrated article in The Atlantic.

Some of these are:

* The greek situation is nothing new, it is a well know playbook that nearly always plays the same way.

* In that playbook the critical issue is whether the bankrupt country can pay for a reasonable level of imports just with the hard currency they earn with their exports. Greece cannot, they already have difficulty paying for oil and medicines.

The greek playbook has some (fairly common) variants:

* The debt owed by public and private greek debtors has been largely pocketed by a pretty large nomenklatura of insiders, perhaps 40% of the population have looted borrowed money and then put it in Swiss accounts. Swiss accounts owned by greeks hold more than the total debt owed by greek public and private entities...

* The insiders in that nomenklatura with large amounts of hard currency in swiss accounts will be very happy if Greece goes fully bankrupt because then prices of greek assets will collapse, and they being insiders they will be able to choose the best to buy at firesale prices and become far wealthier.

* While german politicians know fully well that the poorer 60% of greeks have been in effect looted by their nomenklatura and will be looted even harder if there is a greek bankruptcy and are mostly blameless for the past, they have the argument that Greece is a functioning democracy and all citizens have to take responsibility for the consequences of legitimately elected governments, and that 60% of poorer greeks have been shafted hard by the 40% of richer looters is an internal greek matter.

JW Mason said...

We can hope the ECB gets the message that Europe's austerity program isn't working.

But perhaps from the ECB's point of view, it is working just as designed?

Myrtle Blackwood said...

The irony is that much of the debt and unemployment crisis around the world is often a direct result for the push for greater and greater efficiency.

I believe Ghandi was right when he encouraged Indians to keep their handlooms and boycott manufactured textiles. It did diminish poverty and the lack of employment (caused when the industrial mills began to function in India).

Quotes from Barry Jones' book 'Sleepers Wake' (1982)

"Technological innovation tends to reduce aggregate employment in the large scale production of goods and services...after reaching maturation..."

"...the continued reduction of necessary labour inputs will lead to chronic unemployment...unless new forms of work...are encouraged."

The phase of economic 'growth' appears to be over.

Barry Jones declares that the most appropriate analogy for economic processes is found in biology:
- growth -->maturation-->nourishment-->excretion-->decline

"on the basis of the historical record we would have to assume that long-term instability in employment will be the norm.

Greece is but one example of a nation failing to pay for its import bill.

Myrtle Blackwood said...

Re: "The debt owed by public and private greek debtors has been largely pocketed by a pretty large nomenklatura of insiders, perhaps 40% of the population have looted borrowed money and then put it in Swiss accounts. Swiss accounts owned by greeks hold more than the total debt owed by greek public and private entities..."

Do you have links to articles on this subject, Blissex?

TARP's looting in the US was very open. From a 'market' ideology to welfare bailouts for the most rich and powerful. And incredible scene!

Myrtle Blackwood said...

+ Greater 'efficiency' leading to climate change and ecological destruction.

--> vast areas of land converted from native forest to industrial monucultures. Biomass piled up and burnt.

--> air flight as a mass form of transit;

everything speeded up. No time for natural forms of regeneration.