Varoufakis spreads gospel of radical reform to Italy’s capitalists
THE FINANCIAL TIMES Mar 15 2015
By John Thornhill in Cernobbio
Fresh from his appearance in the glossy pages of Paris Match as a model of militant chic, Yanis Varoufakis pitched up at the luxurious lakeside Villa D’Este this weekend to spread his gospel of radical reform to Italy’s capitalists.
Greece’s flamboyant finance minister has incensed some of his eurozone counterparts by his provocative grandstanding (as they see it) and the divergent rhetoric he adopts when speaking in Athens or Brussels.
But his bravura performance at the Ambrosetti finance forum in Cernobbio on Saturday appeared to win over a sceptical audience of Italian business leaders. Styling himself as a truth-telling democrat, Varoufakis appealed for a more imaginative approach to tackling the eurozone’s worsening crisis. EU leaders, he said, had “to escape from the prison of false choices” between fiscal rectitude and Keynesian stimulus, between stability and growth.
Acknowledging that successive Greek governments were to blame for many of his country’s problems, he said: “We blame ourselves. That is why this government was elected. We are the leftwing riff raff that has been arguing for decades that the Greek oligarchy is the greatest impediment to growth.”
But he added that the greatest tragedy would be to keep pretending that Greece was suffering from a liquidity, rather than a solvency, problem. No democratic country could indefinitely run a primary budget surplus of 4 per cent of GDP to pay down foreign debt. Even successful export-oriented Greek companies were now starved of credit and needed financial support, he argued.
Mr Varoufakis praised the European Central Bank for launching a full-blown quantitative easing programme but said that monetary activism alone could not solve the eurozone’s problem. Instead, he proposed an alternative form of QE in which the ECB would buy the AAA-rated bonds of the European Investment Bank to finance a massive investment-led recovery programme. “I would like to call it the Merkel plan,” he said, to laughter in the hall.
(The ECB’s QE programme actually already involves buying EIB bonds).
Mr Varoufakis outlined the basis for a new development plan for Greece that he hoped would win the support of its eurozone partners this summer. This involved an investment stimulus, restructuring sovereign debt into GDP-linked bonds, breaking up monopolies, reforming product markets, and implementing a sensible fiscal consolidation plan.
He ended his comments with an appeal to European solidarity, which always goes down well with such an audience. “The only way we can move forward in Europe is by retelling the story of Aesop about the ants and the grasshoppers. The belief that all the grasshoppers are in the south and all the ants are in the north is quaint and toxic. The grasshoppers in the north and south caused the problems. And the ants in the north and south are trying to solve them. We should think in European terms.”
Afterwards, Richard Koo, chief economist at Nomura Research Institute and a long-time critic of the eurozone’s approach to tackling the crisis, described Mr Varoufakis as “the best chance for Greece”. “He understands that Greece is bankrupt and needs a bankruptcy lawyer. For a country that has lost 30 per cent of its GDP based on some of the most incorrect policies ever proposed, Greece has some right to say it cannot continue this approach any more. Growth has to come first before it can pay foreigners.”
But others suggested that the SYRIZA-led government in Athens had lost a great opportunity to shift the terms of the debate because of its provocative approach in eurozone talks that had left it isolated. Some countries hit hard by the crisis would have supported an easing of austerity but they would not back special dispensations for Greece.
One former Italian official, well versed in the ways of the EU, said: “Being right does not always win you the argument.”
Yanis Varoufakis presenting an agenda for Europe at AMBROSETTI
(Lake Como, 14th March 2015)
Prominent Economists Who Advocate a Different Type of Quantitative Easing, www.positivemoney.org 15/3/2015
THE FINANCIAL TIMES Mar 15 2015
By John Thornhill in Cernobbio
Fresh from his appearance in the glossy pages of Paris Match as a model of militant chic, Yanis Varoufakis pitched up at the luxurious lakeside Villa D’Este this weekend to spread his gospel of radical reform to Italy’s capitalists.
Greece’s flamboyant finance minister has incensed some of his eurozone counterparts by his provocative grandstanding (as they see it) and the divergent rhetoric he adopts when speaking in Athens or Brussels.
But his bravura performance at the Ambrosetti finance forum in Cernobbio on Saturday appeared to win over a sceptical audience of Italian business leaders. Styling himself as a truth-telling democrat, Varoufakis appealed for a more imaginative approach to tackling the eurozone’s worsening crisis. EU leaders, he said, had “to escape from the prison of false choices” between fiscal rectitude and Keynesian stimulus, between stability and growth.
Acknowledging that successive Greek governments were to blame for many of his country’s problems, he said: “We blame ourselves. That is why this government was elected. We are the leftwing riff raff that has been arguing for decades that the Greek oligarchy is the greatest impediment to growth.”
But he added that the greatest tragedy would be to keep pretending that Greece was suffering from a liquidity, rather than a solvency, problem. No democratic country could indefinitely run a primary budget surplus of 4 per cent of GDP to pay down foreign debt. Even successful export-oriented Greek companies were now starved of credit and needed financial support, he argued.
Mr Varoufakis praised the European Central Bank for launching a full-blown quantitative easing programme but said that monetary activism alone could not solve the eurozone’s problem. Instead, he proposed an alternative form of QE in which the ECB would buy the AAA-rated bonds of the European Investment Bank to finance a massive investment-led recovery programme. “I would like to call it the Merkel plan,” he said, to laughter in the hall.
(The ECB’s QE programme actually already involves buying EIB bonds).
Mr Varoufakis outlined the basis for a new development plan for Greece that he hoped would win the support of its eurozone partners this summer. This involved an investment stimulus, restructuring sovereign debt into GDP-linked bonds, breaking up monopolies, reforming product markets, and implementing a sensible fiscal consolidation plan.
He ended his comments with an appeal to European solidarity, which always goes down well with such an audience. “The only way we can move forward in Europe is by retelling the story of Aesop about the ants and the grasshoppers. The belief that all the grasshoppers are in the south and all the ants are in the north is quaint and toxic. The grasshoppers in the north and south caused the problems. And the ants in the north and south are trying to solve them. We should think in European terms.”
Afterwards, Richard Koo, chief economist at Nomura Research Institute and a long-time critic of the eurozone’s approach to tackling the crisis, described Mr Varoufakis as “the best chance for Greece”. “He understands that Greece is bankrupt and needs a bankruptcy lawyer. For a country that has lost 30 per cent of its GDP based on some of the most incorrect policies ever proposed, Greece has some right to say it cannot continue this approach any more. Growth has to come first before it can pay foreigners.”
But others suggested that the SYRIZA-led government in Athens had lost a great opportunity to shift the terms of the debate because of its provocative approach in eurozone talks that had left it isolated. Some countries hit hard by the crisis would have supported an easing of austerity but they would not back special dispensations for Greece.One former Italian official, well versed in the ways of the EU, said: “Being right does not always win you the argument.”
Yanis Varoufakis presenting an agenda for Europe at AMBROSETTI
(Lake Como, 14th March 2015)
Prominent Economists Who Advocate a Different Type of Quantitative Easing, www.positivemoney.org 15/3/2015
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