yanisvaroufakis.eu / By Yanis Varoufakis / December 1, 2012
On November 27th, 2012, the Eurogroup (comprising the Eurozone’s finance ministers) reached a decision on Greece. Its essence is a guarantee that Greece will remain in the Eurozone (and therefore off the Northern European agenda) for another ten to twelve months; at the very least until the German federal political cycle has seen through the election of a new Bundestag. The repercussions of this short-sighted agreement are grave not only for Greece but for the Eurozone, and indeed the European Union, more broadly.
To accomplish the task of taking Greece off the minds of markets and Northern European electorates for this space of time, Eurogroup ministers came to an agreement with the IMF on how to patch up their conflicting agendas on Greece by means of a joint communiqué according to which Greece’s de-railed Bailout Mk2 is, supposedly, back on track. The basis of their agreement is twofold:
- The IMF will pretend it believes Europe’s claims to have rendered Greece’s public debt viable without an OSI (i.e. a haircut in the loans provided to Greece by the troika, aka its European partners), while
- Europe will pretend that it can do this without an OSI.
The idea here is that, yet again, the Eurogroup-ECB-IMF alliance is not ready, politically, to reveal the truth to its various constituencies.
- The German and Dutch governments (not to mention the Finnish) feel it is impossible to tell their Parliaments, and voters, the terrible truth that some of the money they have put up as part of Bailout Mk1 & Mk2 will not be retrieved.
- The IMF cannot admit that it allowed Europe to involve it in a country program that does not fulfill the debt-viability conditions that any IMF program ought to.
- The Greek government has invested its survival on misleading its constituency into believing that the tailspin of the Greek macro economy can be arrested under the current arrangements.
- And, finally, the ECB is struggling to maintain the illusion that it can remain faithful to its no bailout clause vis-à-vis governments, especially in view of the great challenge awaiting in relation to Spain and Italy.
This holly alliance of subterfuge and double-speak raises a pressing question: What does this new ‘Greek Deal’ mean for the Eurozone in the medium to long run? Before discussing this question, a quick look at the latest ‘Greek Deal’ may be helpful.