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In which way he crashed Greece? I'm not knowledgeable on this enough and would like to know more in details. I thought that the situation in Greece prior to him

In which way he crashed Greece? I'm not knowledgeable on this enough and would like to know more in details. I thought that the situation in Greece prior to him being instantiated as MoF (for a rather brief period of time) was not necessarily on a good track.

pessimizer 6y ago
By suggesting that a road not taken should be taken, he's committed the sin of being a possible source of regret. Without him, Greece could just pretend their situation since is due to the weather. If you're an ideologue, you can somehow twist that regret into blaming him for German banks making massive loans to Greece to pay for things like military equipment that they didn't need, and the inability of Greece's currency to adjust in order to keep this from happening. That's a lot accomplished for an economist who was mostly ignored, except by the voters who his party ultimately ignored.
deleted 6y ago
[deleted]
LatteLazy 6y ago
That's a fair question. This is a long and semi boring answer but I think it's accurate. I shouldn't have used the word "crashed", a more nuanced description would have been "made the crash much worse, longer and more painful for people leading to excess deaths and a great deal of suffering for no actual gain". But that's not as piffy. Background: Portugal, Italy, Ireland, Greece and Spain all spent more than they took in in taxes after they joined the euro. Greece was especially bad, tax evasion was endemic, public sector workers all retired at 50 etc. These countries kept borrowing and borrowing. Until the credit crunch happened (when the sub prime mortgage bubble burst in the US). When that happened there was suddenly a lot less cash available AND lenders got quite risk averse. So suddenly (it took about a year I think) all 5 countries had difficulty borrowing. When a country can't borrow, it had a few options: it can cut expenses, it can raise taxes or it can print money. Since the euro came in, no one in it can just print money. So these countries all needed to cut a lot of spending and raise a lot of taxes to replace their borrowing. The other option is to default on the debt. But that's a double edged sword because it saves you interest payments but it also means you can't borrow at all. So then you need to completely balance your books overnight. For comparison, Greece in 2009 was borrowing about 30% of its gdp per year. Thats about 60% of its tax base. So it would need to either halve its spending or more than double its taxes to close this gap. Imagine if you earned 40k a year, but then borrowed another 60k and spent 100k a year. Huge problem right? At the same time, here in the UK, we were implimenting an austerity program because although we were a lot better positioned than Greece et al, we didn't ever want to slip even 10% toward where they were. But remember, Greece got itself in this position by constantly lowering taxes and increasing spending for decades. No one made them do that. Some countries have dictators waste/steal money. Some have natural disasters like earthquakes that cause a sudden issue. Greece has no such excuse. Greece was in the worst position but Italy wasn't far behind. Spain wasn't far behind them etc. And these countries were sort of linked together: Italian banks owned Greek debt, so if Greece defaulted, Italian banks would need a bailout and the Italian government would need to borrow to do that which it couldn't really do. So a Greek default would likely mean an Italian default and so on. In order to make these unfortunate events less brutal, the IMF offered these countries loans. No one else would lend to them, and its that IMFs job: lender of last resort. But the IMF are strict, they won't just lend you money, they want to see how you'll cut costs and increase revenue and borrow less next year. They want it done and done quick. And that's understandable, you can't just keep lending someone money that they have no plan to repay right? And no one forces anyone to take these loans, they take them because its a better deal than not taking them and doing everything the IMF asked for plus more when you have no money at all... The EU (really Germany under Merkel) stepped in, and said that they would part fund (a third roughly) the loans with the IMF if the IMF made the terms lighter. The IMF agreed and most countries were pleased. Ireland actually went further than the new terms because they wanted to get their act together and get back to economic growth asap. To be clear here: the terms were tax increases and spending cuts. Spending cuts means reducing people pensions and spending less on schools and hospitals. It's not "nice", but you can't spend money you don't have. And Greece especially had some pretty corrupt programs (people were paid a 13th month, like a whole extra pay packet for no reason, state worker retirement age was 50 for many jobs, tax evasion was endemic). That sort of sets the stage for what was going on in southern Europe. Yanis Varoufakis's Part: All the other countries grumbled but took their medicine, because they didn't have a better offer. Greece refused, because Varoufakis (and the government he wad part of) refused to accept reality. He gave long speeches calling the IMF the problem and talking about how people have a right to whatever they want for free. He even made off colour comments about the Nazis while in Berlin "negotiating" with Germany, who owed Greece nothing and were making a pretty selfless effort to spare Greece some pain. Sort of like slapping the firefighter trying to put out the fire in your house. For about a year, it actually sort of worked. Greece were able to avoid actually cutting their spending or increasing revenue and Germany bailed them out, not because he was a genius at economics as he claimed, but because it was cheaper to loan (give) Greece another chunk of cash and keep them from defaulting than it was to bail out Italy and the others when Greece defaulted. But after a year or so, Italy and the others had cut spending and upped taxes. They were recovering. And the risk of a Greek default no longer meant problems in other places. So Germany stopped writing cheques. Then Greece had to enact harder, longer, more sudden austerity than it would have, because they could no longer extort Germany etc. That austerity ultimately worked. But there was a lot more pain and it all took longer than it could have. All because Varoufakis was a popularist who ran around convincing people that Germany/The IMF/Capitalism was the problem instead of simply saying "we should live within our means". Doing so of course increased support for him and crazy right wing parties and there were a bunch of xenophobic incidents. If he hadn't done that, if he'd done the opposite (like Ireland) then Greece would have had a much better time of it, exited austerity sooner and had less austerity in general. That's what I meant by crashed Greece. He didn't cause the core long term problem. But he, personally, made it much worse and made it last longer. On a personal note, I am a leftist. I really believe in markets working for people not the other way around. But to make that work, countries need to be self disciplined, spend within our means and make hard choices. Varoufakis is exactly the opposite of that: loud and rude and short termist and popularist. He and people like him are the reason we can't have more social programs and less inequality. That's my personal dislike of him. He's wrong and dangerous, but he's confident and everything he says sounds easy, so people believe it. Then you end up in turbo austerity with the IMF running your budget. I think he falls under that rule that it "exponentially more time to refute bullshit that to produce it". Thanks for reading.
- hgoury 6y ago
  I would not consider your view of the problem as "leftist". I'm not challenging your self-designation, but the way you present the situation. In my opinion, there are a few points that are dubious in this analysis: - A country is not like a person. It doesn't make any sense to compare the situation of a state to that of an individual. - Different countries are engaged in trade together. If one, say Germany, has commercial surplus, it is because others buy its production. Hence, all countries can't produce like Germany : who is going to buy everything? - According to mainstream economic doctrine (Keynes), cutting government spendings does not lead to growth especially amidst a crisis, whereas you have an alternative that does create growth and does not condemn people to starvation. This is done instead by increasing the spendings in the right way. - Various officials have falsified economic documents in order for Greece to enter the Eurozone (and was helped by Goldman Sachs [0], for example). Why should people suffer from acts of this nature ? [0] https://www.independent.co.uk/news/world/europe/greek-debt-crisis-goldman-sachs-could-be-sued-helping-country-hide-debts-when-it-joined-euro-10381926.html https://www.independent.co.uk/news/world/europe/greek-debt-c...

pessimizer 6y ago

By suggesting that a road not taken should be taken, he's committed the sin of being a possible source of regret. Without him, Greece could just pretend their situation since is due to the weather. If you're an ideologue, you can somehow twist that regret into blaming him for German banks making massive loans to Greece to pay for things like military equipment that they didn't need, and the inability of Greece's currency to adjust in order to keep this from happening. That's a lot accomplished for an economist who was mostly ignored, except by the voters who his party ultimately ignored.

deleted 6y ago

[deleted]

LatteLazy 6y ago

That's a fair question. This is a long and semi boring answer but I think it's accurate. I shouldn't have used the word "crashed", a more nuanced description would have been "made the crash much worse, longer and more painful for people leading to excess deaths and a great deal of suffering for no actual gain". But that's not as piffy. Background: Portugal, Italy, Ireland, Greece and Spain all spent more than they took in in taxes after they joined the euro. Greece was especially bad, tax evasion was endemic, public sector workers all retired at 50 etc. These countries kept borrowing and borrowing. Until the credit crunch happened (when the sub prime mortgage bubble burst in the US). When that happened there was suddenly a lot less cash available AND lenders got quite risk averse. So suddenly (it took about a year I think) all 5 countries had difficulty borrowing. When a country can't borrow, it had a few options: it can cut expenses, it can raise taxes or it can print money. Since the euro came in, no one in it can just print money. So these countries all needed to cut a lot of spending and raise a lot of taxes to replace their borrowing. The other option is to default on the debt. But that's a double edged sword because it saves you interest payments but it also means you can't borrow at all. So then you need to completely balance your books overnight. For comparison, Greece in 2009 was borrowing about 30% of its gdp per year. Thats about 60% of its tax base. So it would need to either halve its spending or more than double its taxes to close this gap. Imagine if you earned 40k a year, but then borrowed another 60k and spent 100k a year. Huge problem right? At the same time, here in the UK, we were implimenting an austerity program because although we were a lot better positioned than Greece et al, we didn't ever want to slip even 10% toward where they were. But remember, Greece got itself in this position by constantly lowering taxes and increasing spending for decades. No one made them do that. Some countries have dictators waste/steal money. Some have natural disasters like earthquakes that cause a sudden issue. Greece has no such excuse. Greece was in the worst position but Italy wasn't far behind. Spain wasn't far behind them etc. And these countries were sort of linked together: Italian banks owned Greek debt, so if Greece defaulted, Italian banks would need a bailout and the Italian government would need to borrow to do that which it couldn't really do. So a Greek default would likely mean an Italian default and so on. In order to make these unfortunate events less brutal, the IMF offered these countries loans. No one else would lend to them, and its that IMFs job: lender of last resort. But the IMF are strict, they won't just lend you money, they want to see how you'll cut costs and increase revenue and borrow less next year. They want it done and done quick. And that's understandable, you can't just keep lending someone money that they have no plan to repay right? And no one forces anyone to take these loans, they take them because its a better deal than not taking them and doing everything the IMF asked for plus more when you have no money at all... The EU (really Germany under Merkel) stepped in, and said that they would part fund (a third roughly) the loans with the IMF if the IMF made the terms lighter. The IMF agreed and most countries were pleased. Ireland actually went further than the new terms because they wanted to get their act together and get back to economic growth asap. To be clear here: the terms were tax increases and spending cuts. Spending cuts means reducing people pensions and spending less on schools and hospitals. It's not "nice", but you can't spend money you don't have. And Greece especially had some pretty corrupt programs (people were paid a 13th month, like a whole extra pay packet for no reason, state worker retirement age was 50 for many jobs, tax evasion was endemic). That sort of sets the stage for what was going on in southern Europe. Yanis Varoufakis's Part: All the other countries grumbled but took their medicine, because they didn't have a better offer. Greece refused, because Varoufakis (and the government he wad part of) refused to accept reality. He gave long speeches calling the IMF the problem and talking about how people have a right to whatever they want for free. He even made off colour comments about the Nazis while in Berlin "negotiating" with Germany, who owed Greece nothing and were making a pretty selfless effort to spare Greece some pain. Sort of like slapping the firefighter trying to put out the fire in your house. For about a year, it actually sort of worked. Greece were able to avoid actually cutting their spending or increasing revenue and Germany bailed them out, not because he was a genius at economics as he claimed, but because it was cheaper to loan (give) Greece another chunk of cash and keep them from defaulting than it was to bail out Italy and the others when Greece defaulted. But after a year or so, Italy and the others had cut spending and upped taxes. They were recovering. And the risk of a Greek default no longer meant problems in other places. So Germany stopped writing cheques. Then Greece had to enact harder, longer, more sudden austerity than it would have, because they could no longer extort Germany etc. That austerity ultimately worked. But there was a lot more pain and it all took longer than it could have. All because Varoufakis was a popularist who ran around convincing people that Germany/The IMF/Capitalism was the problem instead of simply saying "we should live within our means". Doing so of course increased support for him and crazy right wing parties and there were a bunch of xenophobic incidents. If he hadn't done that, if he'd done the opposite (like Ireland) then Greece would have had a much better time of it, exited austerity sooner and had less austerity in general. That's what I meant by crashed Greece. He didn't cause the core long term problem. But he, personally, made it much worse and made it last longer. On a personal note, I am a leftist. I really believe in markets working for people not the other way around. But to make that work, countries need to be self disciplined, spend within our means and make hard choices. Varoufakis is exactly the opposite of that: loud and rude and short termist and popularist. He and people like him are the reason we can't have more social programs and less inequality. That's my personal dislike of him. He's wrong and dangerous, but he's confident and everything he says sounds easy, so people believe it. Then you end up in turbo austerity with the IMF running your budget. I think he falls under that rule that it "exponentially more time to refute bullshit that to produce it". Thanks for reading.

hgoury 6y ago
I would not consider your view of the problem as "leftist". I'm not challenging your self-designation, but the way you present the situation. In my opinion, there are a few points that are dubious in this analysis: - A country is not like a person. It doesn't make any sense to compare the situation of a state to that of an individual. - Different countries are engaged in trade together. If one, say Germany, has commercial surplus, it is because others buy its production. Hence, all countries can't produce like Germany : who is going to buy everything? - According to mainstream economic doctrine (Keynes), cutting government spendings does not lead to growth especially amidst a crisis, whereas you have an alternative that does create growth and does not condemn people to starvation. This is done instead by increasing the spendings in the right way. - Various officials have falsified economic documents in order for Greece to enter the Eurozone (and was helped by Goldman Sachs [0], for example). Why should people suffer from acts of this nature ? [0] https://www.independent.co.uk/news/world/europe/greek-debt-crisis-goldman-sachs-could-be-sued-helping-country-hide-debts-when-it-joined-euro-10381926.html https://www.independent.co.uk/news/world/europe/greek-debt-c...