Varoufakis, the Greek minister of finance, is one of the few who does understand monetary policies. He has no problem with expressing his opinion. His visions will be determining for the future of the EMU, the European Monetary Union. The current Greek government seems not willing to play the game of extend and pretend. The confrontation between Greece and Germany is not only about those two countries, it is about the EMU at large.
Whatever the outcome of the negotiation end up to be, the euro crisis will not be solved within the coming weeks. In the oncoming days it will only be decided if and how Greece is able to break the German hegemony on European Monetary policy. If Greece is being forced to leave the Euro zone, it will cause a huge damage on Greece and the EMU. If Greece is staying in the Monetary Union, Greeces current political leaders will keep challenging Germanys financial leadership.
Varoufakis at US conference in 2012 about; Greece, the Euro, and the failing European policy.
The Euro as an unified currency has already ceased to exist, in modern societies the Banking system is the backbone of its monetary system. Almost all transactions are done through banks and not with cash. Most corporate and private savings are stored at banks deposits. One has to realize that the euro is not about notes and coins, but about bank accounts and bank transactions. It is not the paper euro that matters, but the Euro as a deposit at a bank account. It is not hard to see that one euro on a Greek Bank account has a lower expected value than one euro on a German Bank account. Without the willingness to create a real single currency, the EMU is at risk.
Varoufakis is quite candid about the state of Greek banks, he admits that the bank are insolvent beyond any repair. He regards the European and the Greek Bank bailouts as a way to transfer private bank loses to the taxpayers. Countries like the Netherlands are well able to bear the cost of those bailouts, however countries like Greece, Spain and Portugal are simply not. With the re-privatization and re-capitalization of the Greek Banks the European Banking elite pretend that the problems have been solved. According to Varoufakis, insolvent Greek Banks became a symbol for the European banking sector at large, a sector that is still skating on thin ice.
Private American hedge funds as John Paulson & Co were willing to invest in the Greek Banks because they knew the ECB turned a blind eye on the Greek banking system and exempted them from stress tests. By turning a blind eye on the Greek banks, the European Banking authorities were inflating Greeks paper bank assets, and thus generating a nice profit for John Paulson & Co Hedge Funds and others a likes. According to Varoufakis the assets bubble created in the Greek banking system, since 2013, will burst again. If this happens the German and Greek taxpayers have to bailout the Greek banks again or it will end in a Euro zone break up.
The Greek crisis should have never been tried to be solved by putting Bankers’ losses on the taxpayers and setting up countries against each other, according to Varoufakis.
The European elite did not realize what was really going on during the 2008 financial crisis and the 2011 Euro crisis, and once they understood they where not willing to admit the truth.
Mr. Junker could not acknowledge what happens and trying to solve the European Banking crisis, while at the same time staying in power.
Varoufakis’ critic is not limited to the Banking sector. In his view, a real Monetary Union needs a mechanism to recycle deficits and surpluses. Countries like Greece and Spain will never be able to compete against Germany.
If you have a currency union, you need a way to recycle production surplus and production deficit. Economical strong regions support weak regions through:
- National social security programs
- Bank bailouts at state level
- National industry policy gives incentives (tax reductions or granting new order) to industries willing to invest in deficit areas.
This mechanism is lacking within the Eurozone, the nation states in the EMU are not able to “protect” their industry by a devaluation of their currencies.
According to Varoufakis the German industry is the big winner of the Euro-project. Thanks to the Euro it was able to globalize, while Greece, Spain and Portugal absorbed German deficit. The growth of those countries between 2002 and 2008 was financed by Wall Street’s and London’s Bankers, the derivative market and with the profits of German companies. During this period Greek’s productivity did not grow, their economic growth was based on the creation of debt.
Yanis Varoufakis & Harald Schumann expose the Euro disaster and offer solutions. The interview with Varoufakis was held before he became the minister of finance.
Varoufakis is quite outspoken on Germany’s role in the EMU. He sees the Germans as the sole winners of the Euro. Germany is the only country, according to Varoufakis, that can withstand the end of the EMU. France is in a better position than Greece but would never survive the break up of the EMU. This explains the submissiveness of France to the German elite. According to Varoufakis, France has no choice but to obey the Germans.
It is the outspoken vision of the current Minister of Finance of Greece that will determine the ongoing negotiations. Greece has absolute no future in the current European Monetary Union, according the current Greek leadership. The present financial authorities see Greece as a monetary failed state and realize that a Greek euro is not the same as a German euro. They see Germany as the biggest obstacle to a real currency union, the have only two choices: let Greece collapse right away or they are being submissive to the German banking authorities and let Greece suffocate slowly.
