http://yanisvaroufakis.eu/2015/07/14/on-the-euro-summits-statement-on-greece-first-thoughts/

An interview with Varoufakis about the actions of Schäuble will be published on Thursday. With every additional interview, he seems to be less inclined to pull any punches, so it ought to be interesting.

*related=http://videosift.com/video/Greek-Euro-Crisis-Explained

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Not sure what you mean by demand. Printing money is supplying demand out of nothing, or could be but usually backed by something tangible like gold. I think Greece has a great case for making there our own way. To start with, walking away from all that debt would balance the country for a short time to print. The country has oil for the people so the currency can be backed by that somewhat. Agree to farm and fish for new currency and people eat. The country is in a perfect climate zone so shelter is doable... in fact, I think most of the world would spend money to sleep on the beach of Greece for a vacation. Speaking of vacations, Greece could take all the Euro and Dollars in from tourism and back the new currency. The Gov would need to work extremely hard to pull it off but I think it could do it better then most of the rest of the EU.

I am German myself and I am disgusted how the German media and politicians are only blaming Greece. Some conservative papers (like welt.de) are ticking out completely and are turning to phrases that are very close to our Nazi history and are not allowing overly critical comments.

How Germans could chop down wages so quickly and without much opposition from the people and other parties?
The main reason is Hartz IV. https://en.wikipedia.org/wiki/Hartz_concept
Its a reform for the unemployed people, which at first sight doesnt have much to do with wages of the working people. But it does have everything to do with it. Let me explain:
Before Hartz IV unemployed people didnt have much to fear from the state. They got their unemployment (Sozialhilfe) money every month which was enough to live without much fear of anything. It didnt mean much to be unemployed. But people found a job if they wanted to. Of course, like every country, it was exploited by a tiny minority. People were happy with it and many countries were envious of that system because it provided so much social security that people got very peaceful and crime rates were pretty much non-existent.

Hartz IV was planned to cut the massive costs of that social system. The left wing government (which turned out to be massive hypocrites), a coalition of a socialist party and a green party, claimed it would decrease unemployment rates massively and save lots of tax money and they would force those lazy useless unemployed people to get jobs. They emphasized on "the hard earning people whos tax money is stolen by lazy unemployed" and used the tiny minority of exploiters to get Hartz IV under way. Hartz IV was basically a cut for unemployed people where they would barely have enough money to live from or pay the rent from it. It also allowed the government to use many tricks to adjust the unemployment rate. They for example excluded people who were unemployed at a certain age or people who were send on useless trainings (like how you write a job application or how you use a PC), which were forced on them from the government. If they didnt attend, they would get cuts on the already not enough Hartz IV money.

They got it through the parliament (since there was no oppositon of mention thank to their "democratic" coalition) and it went all downhill from there. Unemployed people were suddenly massively discriminated, even by the politicians, because they had created so much hate against unemployed and built many stereotypes in the process, supported by stupid fake shows in the media, just to push Hartz IV through. As I said before, they only used the minority that exploited the system before in their arguments, and didnt care about the majority. That also lead to companies falling for the created stereotype and not employing people who had been using Hartz IV at one time and even going as far as them looking at older employees as inferior. They got rid of them in a massive purge, which also led to the trick of excluding old people near pension-age from the unemployment statistics. Pensions dropped because those old fired people didnt get a job anymore and had to use Hartz IV. That meant that they had to use up their savings before they get Hartz IV money (that rule is part of Hartz IV), which drained old people of their money and also caused them to get caught in an even worse trap:
After a few years of getting Hartz IV money, they dropped to the lowest pension rate, which was barely above Hartz IV. It didnt matter if they worked 40 years of their life in a well paid job. Now they were poor and would never get a pension that was appropriate to their former job. That lead to a massive shift in wealth away from the normal people (middle class and poor), to the rich people. The buying power of Germans was destroyed, and it became even worse after the socialist/conservative government (yes, a stupid coalition like that is possible here) increased the sales tax by 3% to a whopping 19%. As result of this living costs exploded and black labor skyrocketed. Cost of energy of any kind, taxes, food prices, gas, rents, every day stuff you need increased massively. The Euro was to blame too, because prices of many things (especially food) were just exchanged 1-1 to the Euro. So for example if there was cheese before that cost 1 Deutsche Mark, it would now cost 1 Euro, even though 1 Euro was worth 2 Deutsche Mark. Wages collapsed, while everything got much more pricy. Hartz IV made all that worse.
Now for the main reason how Hatz IV pushed wages down:
The fear of dropping into Hartz IV (for the reasons I mentioned) was massive. Nobody ever wanted to drop into Hartz IV because they knew then everything was over. So they accepted extremely low wage jobs, even if that meant they would get less money than they would from Hartz IV, which already was barely enough to live a crappy live from. They took 2, 3, 4 shitty paid jobs instead, and the companies loved it, because they saved a lot of money with that. The problem with that was that even well educated people had fear of Hartz IV and accepted lower wages because of it. Wages didnt rise for 20 years (and they dont rise much now either). Yet living costs, as I said, increased massively. It all came together.
Germanys economy was very low at one point, yet they still tried to tell us that the unemployment rate dropped again (even 2007/08 and every year after that). People started to learn how they manipulated us and now we are here. Companies making revenue records after revenue records, yet nothing is arriving at the people. The media claims everything is well, the statistics still lie to us that the unemployment rate is low, but its not.
And now they are trying to blame the Greeks for our problems. Just like the unemployed Germans before, and the stupid masses fall for it again.
Yet they still wonder why Germans are a dying breed (population has been dropping for years now), and dont get that having children is very expensive in Germany and only few people still have money or time for that (since both women and men have multiple jobs to be able to live) because of these developments.

Pure quality by John, as usual.

There are a few points I'd like to add, in order of appearance.

5:10 – Greek default or Grexit could be manageable by the rest of the EZ, economically. Italy looks a bit shaky and Spain still looks like shit, so things could spiral out of control, but chances would be better now than they were in, say, 2010.

However, Grexit would be a political nightmare. EZ membership is supposed to be irreversible, so Grexit would reduce the Euro from a common currency to a peg when viewed from the outside. That's open season on the rest of the PIIGS. If Greek then rebounds, other people might very well decide to give Germany the finger and leave as well. If Greece fails, you have a NATO member turn into a failed state, which not only gives NATO the shivers, but also buries any notion of solidarity within the EU. This union survives because of the promises it makes, which include increasing standards of living and solidarity among different peoples. Without it, we're left with... what exactly?

And nevermind the humanitarian catastrophe taking part in Greece. We've conditioned ourselves to block out the pain and suffering of people in Africa. We even manage to shrug at the cesspool of corruption that is Kosovo. But if we do that to Greece as well, what little moral authority Europe might still have left would be gone then.

5:32 – The last payment Greece received was in August, long before Syriza took over. The previous government was in disagreement with the Troika and therefore transfers were frozen.

5:57 – Troika payments are required to service previous debt obligations. They are separate from what the Greek banks require to maintain their liquidity. That would be Emergency Liquidiy Assistance (ELA) from the ECB, which is a different thing entirely, even though it comes from a member of the Troika.

The ECB is bound by law to maintain and ensure the stability of the banking system(s) within the EZ. If a bank runs into liquidity problems, support is provided by the national bank of the respective country, which funnels funds from the ECB to the troubled bank. That's ELA, and a limit on ELA is a limit on the amount of funds that banks can draw from through this process. If an illiquid bank is cut off from ELA, it goes belly up. Bad idea.

Some argue that the ECB should not provide ELA to those Greek banks anymore, since they are insolvent, and ECB rules forbid ELA to insolvent banks. But as Varoufakis said, even the ECB's own Single Supervisory Mechanism (SSM) department, which is the new banking oversight, declares the four large Greek banks to be solvent. So there is no reason for the ECB to cut ELA to Greek banks. It's all political, and the ECB is designed to be outside of politics. That's also a reason why its membership in the Troika is so controversial.

The political argument for cutting off ELA is that Germany et al. are on the hook for the total amount should Greece itself go belly up. Somewhere along the line, someone made the glorious decision to install the ECB as a currency issuer without providing it with the attributes of a regular currency issuer. If the Bank of Japan or the Bank of England racks up losses, noone cares. They issue their own currency, they cannot go bankrupt, whatever debt they have in their books is irrelevant, for this discussion anyways. But the ECB has to balance its books, it has to receive funds from its members to balance losses, and in proportion to their economic size.

They made sure that politicians can scare the demos by pointing out how they have to foot the bill for this shit, even though it's the one entity where debt truly doesn't matter at all.

By the way, the funds that Greece is hoping to acquire are meant, primarily, for two purposes: making debt payments and to provide financial room to convert ECB(?) debt into EFSF debt (4% interest down to 1%). That's all. No spending.

6:54 – "Printing" money is generating demand out of thin air. There is a shortage of demand throughout the entire continent. So yeah, if the folks at the ECB could type in a few numbers, that would be swell.

Even Germany has a shortage of demand. We are merely hiding it behind the €200b+ of demand that we steal from other countries, i.e. our current account surplus. But the infrastructure and investment spending over here is at all time lows. We'd need an additional €200b+ just to get the infrastructure back to the state it was in a decade ago.

There is no productivity growth in Europe. The UK actually lost a lot of productivity by its introduction of zero hour jobs and other forms of slavery. Without sufficient demand, there is no need to improve production capacities – they can't even sell what they could produce right now.

First of all, Flassbeck is the only(!) prominent economist in Germany arguing strictly against the madness of austerity. But he's living in the border region between France and Switzerland, so he's a European more than a German.

Among all the economic think tanks in Germany, only the union-sponsored IMK makes a credible case against this madness. Everyone else is more or less in line with the neoclassic perspective. Not a Keynesian in sight, much less a post-Keynesian group.

But now to the meat of the issue. There will be no major political shift in Germany in the near future. As Flassbeck stated, only a single party opposes the financial inquisition commonly known as the Troika. Unfortunatly, it's the socialists, and despite overwhelmingly popular policies, they are still an absolute no-go for large swaths of the demos thanks to the authoritarian regime in East Germany. Sucks, but it is what it is.

So it's up to the French people once again to save the continent from itself. Noone else has the balls or the influence to put an end to this misguided union. How likely is it for the French government to openly challenge German hegemony soon? I wouldn't bet on it. Which means the Greeks are fuuuucked².

In any case, what would it take for Greece to stabilise? And by stabilise I'm talking about a return to a manageable level of unemployment, a working healthcare system and social safety net. A conservative guesstimate would be a public deficit of ~10% of GDP for at least 5 straight years. Alternatively, the EIB would have to prop up Greece with €50b a year for the same number of years. To get a working bureaucracy, to undo four decades of nepotism, Greece would basically need a generation to reestablish itself as a state – and it would require appropriate financing.

Now remember which of Syriza's demands is painted as most controversial right now: debt restructuring. Debt restructuring, while neccessary at some point, is entirely pointless as long as the fiscal policy remains contractionary. Greece needs austerity to stop, right the fuck now. Greece needs to provide income-generating jobs for its people. All the talk about debt is utterly pointless, because at 25% unemployment, we're looking at permanent damage in every way imaginable. The social toll alone should be completely unacceptable within Europe if we truly gave two shits about human dignity.

So, even if Syriza get their way tomorrow, Greece would still be flushed down the shitter. Syriza's proposal is contractionary. Any primary surplus in this situation is contractionary.

Greece is done within the Euro. The use of a foreign currency makes it impossible to use appropriate fiscal policy on their own. Unfortunatly, but also intentionally, the currency issuer, the ECB, is placed outside the democratic control of the European Parliament, or any national parliament for that matter. Fiscal policy within the EZ was taken out of the control of our elected representatives to ensure that the neoclassic/neoliberal approach was irrevocably built into the system. We can thank Germany for that, by the way.

There is a shortage of spending in Greece. There is a shortage of spending in Spain. There is a shortage of spending in Portugal, Ireland, Italy, France. There is a shortage of spending in Germany, for fuck's sake. Put the ECB under control of the EP, add full employment (2-3% unemployment) to its mandate, and have them finance the appropriate programs at the national level. The output gap in Europe is so massive, the un(der)employment so vast, they could spend a trillion Euros and inflation would still not reach the agreed upon target value of 2%.

All it would take to change the rules is consent from every national parliament in the union. Might as well go skinny-dipping instead.

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I'm quite happy that Denmark isn't part of the Euro currency.

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Let's ignore for the moment what led to this current mess within the Eurozone. You point out, correctly, that Greece is too poor to service its debt. And yes, for the German government to do whatever is required to get back their loans is to be expected. However, Greece was incapable of servicing its debt five years ago. Yet the subsequent programs, all supported or even demanded by the German government, reduced Greece's ability to pay back at least portions of its debt. At the end of the day, goods and services are what it's all about. And by dismantling the Greek economy, nevermind the Greek society, they actively undermined what they publicly claimed to be working for: a self-reliant Greek economy, capable of financing the needs of Greece. And capable of paying back what is owed.

The question inescapably poses itself: was it done intentionally or are they blinded by ideology?

One doesn't have to be as far left as I am to see that it didn't work, doesn't work, and never could have worked. Even the likes of Krugman and Stiglitz are perfectly clear about it.

Varoufakis, as you note, has been just as clear about this at least since late 2010, when he published the first draft of his Modest Proposal with Stuart Holland. There was a very good discussion about it in Austin in 10/2013 under the topic "Can the Eurozone be saved?" Participants included Varoufakis, Tsipras, Flassbeck, Holland and Galbraith, amongst others. I submitted a short clip back then.

His argument that Germany won't see a dime when Greece is shoved off a cliff, as correct as it is, never had any bite to begin with. The German government, and large parts of parliament, are operating in a parallel universe, economically. Over here, mercantilism is the road to success. Monetarism works. Surplus good, deficit bad. Saving good, spending bad. Everyone should have a current account surplus.

It's horseshit by the gallons, and it's the official economic policy of the largest economy in the EU.

And we're not even getting into the political aspects of it. Throwing a member of the EU into debt bondage, suspending its democracy to please the gods of the market... that's a travesty and a half. Yet it's also inevitable if they insist on going down the road of neoliberalism.

Worst of all, Greece is just the canary in the coal mine, as Varoufakis likes to point out. Greece had plenty of issues before they joined the EZ, but when they chose to adapt the same currency as a much larger economy hell bent on competitiveness, which is the favorite euphemism for Germany's beggar-thy-neighbour policies, they were doomed to be crushed. The rest of the PIIGS are next in line, unless this whole mess explodes beforehand. Maybe Rajoy's Franco-esque repression techniques fail, maybe le Pen wins in 2017, who knows. Maybe Schäuble finds the 100k of bribes that he conveniently forgot about back in the '90s and chokes on them.

Last but not least, 208 billion Euros – that's the projected current account surplus of Germany this year. That's 208 billion Euros of debt foreign economies have to accumulate, so that the German public and private sector can run a combined surplus of €208b. That's the elephant in the room. Systematic undercutting of the inflation target through suppression of unit labour costs and a dysfunctional focus on exports.

Greece accumulated debt in a foreign currency (Euro). Had they been using a free-floating currency with Greece as the sovereign issuer, it would have been much less of a problem. But that's a different discussion.

You brought up retirement benefits. These benefits have been a major talking point over here in mercantilistic Germany. Unfortunatly, a lot of inaccuracies crept into the debate over time. A closer look reveals that it's not as black and white as it is made out to be. One point at a time...

The effective retirement age, if we look at OECD stats, is basically the same for men in Greece and Germany. The age of 56 is often thrown around as the expected average retirement age for workers in Greece, but that's only for the totally messed up public sector. The average for the private sector is significantly higher, as the OECD numbers indicate.

Yet the size of retirement benefits is even more controversial. There are, in fact, some very dubious practices going on in Greece, which result in rediculous retirement benefits for a select group of people, even at very young ages. Decades of nepotism, that's what it produces. But even so, pension expenditure as a % of GDP was not significantly higher in Greece before the GFC than in Germany. When Greek GDP collapsed, expenditures as a % increased, naturally. Some have gotten absurd benefits, but the majority got a pittance. And as if that wasn't bad enough, Greece doesn't have a social safety net, unlike Germany. There is no welfare. Many people have to take early retirement at reduced benefits to have any income at all.
So I'll say it's bad in Germany. Last decade's changes to our retirement system have a metric fuckton of people (~40% of workers) heading straight into poverty when they retire. It's social security for them, and nothing else. Still, it's bliss compared to what the plebs in Greece now ended up with.

However, even all those beautiful OECD stats have to be taken with a grain of salt. Germany has a working bureaucracy. Everything is documented. Greece is a mess. Therefore, all comparisons are guesstimates at best.

Finally, as long as the Greek economy produces enough goods and services, it is for them to decide how to distribute their wealth. If they want a lavish retirement system, so be it. Our governments opted to create a true underclass of the working poor, and gutted a retirement system that made it through two world wars unscathed. If German retirees want to bitch about their benefits, it should be aimed squarely at our governments and their intentional deconstruction of our social welfare state.

Man, those 60s F1 cars were just beautiful.

One of my friends fathers went to the Monaco Grand Prix a few years ago. All his friends and family chipped in and got him the trip as a 60th birthday present. Cost of the whole weekend? 20,000 euro.