Yanis Varoufakis talking:
We were elected to say no to the creditors. No to what? Not to an agreement, to an honorable agreement, but no to the extending and pretending, to the continuation of the depression. And the agreement that Tsipras and I had was that we were going to be steadfast in that, no? We would compromise, compromise, compromise, but we will not be compromised on this. We will not give the debt deflationary great depression cycle another spin. And we had agreed amongst ourselves that if the pressure gets too much, we may even have to resign. But we are not going to be the ones that sign on the dotted line of yet another deepening magnification of our country’s, of our people’s misery and depression.
At some point, the creditors, it became spectacularly clear that they were only interested in the—in a coup d’état, in overthrowing our government. In 1967, we had a coup d’état in Greece using the tanks; now we had a coup d’état using the banks. They closed down the banks to asphyxiate our government. And we put it to the Greek people. We said to them, “This is the ultimatum that we are being given. You decide: yes or no. We recommend no. But if you say yes, then we will make way for a surrender.” By the way, I didn’t expect them to say no, because they were being terrorized on a daily basis by the media, who were saying to them that if they dare vote no, then Armageddon will happen the next day. And their banks were closed. You had pensioners who had no access to their small bundle of savings. And yet, the magnificent Greek people, on the Sunday of 5th of July, gave us a resounding 62 percent no. Even constituency in the land, even constituencies of the right wing and never voted for us, backed us. On that night, I was levitating with enthusiasm, because the Greek people had energized us.
My prime minister saw things differently. He said to me in his office that night, “It’s time to surrender.” I spent two or three hours trying to dissuade him. I didn’t manage it. He was the prime minister; I was just a finance minister. So I decided to resign and to go back to my apartment and script this letter of resignation. That letter was the hardest text I ever had to script, because, on one hand, I had to register my total, utter, vertical opposition with the prime minister’s decision to surrender; on the other hand, I didn’t want to write a letter that clashed with my comrade and friend. And I phrased it in such a way as to say that the creditors clearly have an interest in my removal—which is perfectly understandable, because they were simply interested in overthrowing our government, and our determination to say no to another extend-and-pretend loan. The prime minister thinks he’s going to get an agreement, and therefore I’m going to make his life easier by removing myself.
Of course, there has been no agreement. What there has been is a complete and utter surrender, and a surrender document which will go down in European history as a very black spot on Europe’s democracy. You only have to read the first page of it. It reads like a genuine surrender-to-an-enemy document. And even as we speak, is it not true that even that surrender has not resulted in some kind of agreement? The IMF and Berlin are still at loggerheads on whether they should turn Greece into a stable desert or a constantly declining, miserable, depressed state. This is the difference of opinion between the creditors. And the Greek government, once it surrendered, is simply watching the show of the two elephants tussling, waiting to be told whether we’re going to be a desert or an economy in a permanent state of depression.
fiscal waterboarding is something quite separate from austerity. Austerity is a self-defeating process. You cut government spending, you increase taxes in order to balance the other governments’ books, but you fail. Why? Because, yes, you reduce government expenditure, the cost of running the government, but on the other hand, the economy shrinks, so tax take is also reduced, and therefore your books don’t balance, and then you cut even more, and then national income shrinks even further, and then you have to cut even more. So it’s a never-ending downward spiral. That’s the problem with austerity.
Fiscal waterboarding is something quite different. It’s the predatory relationship, the coercive relationship, between the creditors and the Greek government. In order to push the Greek government into even further austerity, in order to keep pretending that the original program works, what the creditors do is this. They have lent Greece a huge amount of money, and Greece has to make repayments every month, every year—the Greek state. Of course, the Greek state is bankrupt. It cannot make these repayments. So it has to keep borrowing from the creditors to be giving money back to the creditors every month, every second month, to pretend that it is ahead of its repayment schedule. But the creditors, every second month, every third month, bring the Greek state to the state of asphyxiation by refusing the loans which are necessary for the Greek state to repay them, so that the Greek state is not declared to be in default. So they bring the Greek state to the verge of not being able to pay pensions, of not being able to pay the electricity bill in schools, and then—or to have to default to the IMF, to the European Central Bank. Then they, at the last moment—this is waterboarding, isn’t it? What is waterboarding? You subject the subject to a process of asphyxiation, and just before death comes, you give the subject a gulp of oxygen, and then you repeat. This is precisely what they’re doing. Instead of oxygen, it’s liquidity, not to run the Greek state, but to keep giving your torturer money back so that the torturer can carry on torturing you ad infinitum. That’s fiscal waterboarding.
after the Second World War, the New Deal is in power, initially the Roosevelt administration, then the Truman administration, then even the Eisenhower administration, that accepted the New Deal principle. They designed a global system, a global financial and economic system, which was actually quite remarkable in its design, audacity and rationality, to a large extent. The idea was, we have—we dollarize the whole of the capitalist world. Maybe in Britain they have pounds, in France they have francs, but they are all linked to the dollar. The dollar is the currency of capitalism. And in addition to that, you have the surplus country of the time, which was of course the United States of America, taking part of its surpluses and monetizing, dollarizing Europe and Japan, helping them out, not out of philanthropy, but because they understood that unless you take surpluses from where they’re produced to give them to—to channel them, to funnel them to the deficit regions, to create the incomes which are necessary to keep buying American goods, in order to maintain and replenish and recycle the American surpluses, the whole system will no longer be sustainable.
But that system ended with the famous Nixon shock of the 15th of August, 1971. Why? Not because Nixon made a mistake, but because America lost its surpluses. So you can’t recycle surpluses if you don’t have them. And then we moved to the second phase of postwar global U.S. hegemony, which was exactly the opposite of the first. Instead of recycling its own surpluses—America didn’t have surpluses—it was recycling other people’s surpluses. And how did it do it? By means of the United States’ trade deficit. The trade deficit of the United States, which was ever-expanding, operated as a huge vacuum cleaner that was sucking into the United States the net exports of Japan, of Germany, later China, of Saudi Arabia—oil and so on and so forth. And how was it paying for it? How can you keep expanding your deficit? Well, if you are the United States, you can, as long as you create circumstances that attract the profits of the German firms, the Japanese firms, the Saudis, the Chinese firms, into Wall Street, and you close the circle.
But what happens when you give Wall Street a few billion dollars every 10 minutes to play with? They create instruments—you know, financial derivatives and all those beautiful toys of financialization—to make it really expand exponentially and to create, print their own money, in a sense. That’s financialization. And as long as that worked to stabilize a very unstable global capitalism, we had this semblance, this illusion. Remember the great moderation of Ben Bernanke? It was the most immoderate capitalist world you can imagine, but it seemed moderate because you had this recycling. You had capital flowing into Wall Street, constantly paying for the expanding trade deficit of the United States. But the pyramids of financialized money, private money minting, that started on Wall Street, combusted under the weight of their own hubris in 2008. And ever since, the global economy is in disarray.
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Yanis Varoufakis
former finance minister of Greece and a professor of economic theory at the University of Athens.
— source democracynow.org