Yanis Varoufakis has a tirade on his blog today against Germany’s Constitutional Court. The long and the short of his piece is that the Constitution of Germany should be forgotten if it gets in the way of banks being funded by taxpayers.
Varoufakis believes that because Germany wants to stay true to its constitution it must mean that Germany and specifically the Bundesbank wants to destroy the Euro.
Yanis Varoufakis does not see the connection between the actions of the ECB and the destruction of the Greek economy.
Namely the ECB indebted the Greek government to levels it knew it would not be able to service due to its use of numbers that were obviously overoptimistic. A fact the Yanis Varoufakis is happy to admit.
The ECB and Yanis Varoufakis is now calling for the ECB to be granted sweeping new powers over the Eurozone financial system to “stabilise” the Euro.
Or to put in another way, the ECB has created chaos in the Eurozone and specifically in Greece and its answer is for it to be given even more power.
The ECB is a private institution with no accountability to be the people of Europe, it has shown itself to act in ways that have been deliberately destructive to the economy of Greece and yet Yanis Varoufakis wants to give it more power. This makes no sense.
The shame is that Yanis Varoufakis is unable to see the blindingly obvious.
In the Bundesbank’s deposition to the German Constitutional Court Yanis Varoufakis quotes the Bundesbank as saying
Statement 1: It is not the role of a central bank to guarantee the irreversibility of the currency
To the man in the street this would seem obvious but to Varoufakis this is an “incendiary” comment.
He then goes on to say that the mandate of the ECB is “price stability”
Varoufakis is correct.
I cannot imagine why price stability is not a good enough goal for the ECB.
But Varoufakis not only wants the ECB to maintain stable prices he also wants it to be able to give unlimited funds to banks as he believes this will save the Euro.
To state the obvious you cannot have both!
You either want a stable currency or you want to be able to inflate the currency at will in order to bail out failed and insolvent banks.
Of course Varoufakis is much more open to inflation than he is to stable prices, this can be the only explanation to his objection to the ECB’s “irreversibility” statement.
Commenting on point 2 of his comment Varoufakis says
What Mr Weidmann is saying is that, in the above case, the ECB played fast and loose with its own rule book, accepting collateral that is worthless and, even when it could no longer bring itself to do this, allowing the Greek Central Bank to create euros on behalf of clearly bankrupt Eurozone entities (the Greek banks). And if the ECB played fast and loose with its rulebook on that occasion, why should we trust it not to do the same with OMT? What will stop Mr Draghi from purchasing Italian bonds even if the Rome government is less than diligent in the implementation of agreed spending cuts, tax hikes and ‘reforms’? One must admit that Mr Weidmann has a point. But, imagine what would have happened if Mr Draghi had proposed to the ECB’s Governing Council to veto the Greek Central Bank’s ELA liquidity provisions in June, in August, in September?
Greece would have exited the Eurozone overnight, defaulted on the ECB’s Greek bonds (the first time that would have happened in the Eurozone’s short history), Italy would have crashed, and the euro would have been history.
What is exactly is Varoufakis suggesting here?
Does he believe that the EU would not guarantee deposits in Greek banks if the Greek government were to default?
Is he saying that Greek depositors are only insured on condition the ECB is allowed to give money to is clients, the major banks in Greece?
If so then again, this is would be text-book fascism, where private business have assumed governmental powers on the use of force against citizens.
There is nothing to suggest that depositors in Greece are not insured should their government default.
Varoufakis’s third point quotes this of the Bundesbank
Statement 3: Mr Draghi, and almost every other commentator, laments often that the interest rate transmission mechanism of the ECB has broken down; that unprecedented reductions in ECB refinancing interest rates are not passed on even to profitable and efficient firms in the hard-hit Periphery. Uniquely amongst all European financial and economic authorities, the Bundesbank told Germany’s constitutional court this: “the question arises as to whether and why such a development must be corrected”.
to which Varoufakis commented
The reason it does not want the transmission mechanism to be ‘corrected’ may be because it is more useful to the Bundesbank’s strategy while ‘broken’. Useful in what sense? Useful in the sense that, while broken, the political climate in Europe becomes increasingly amenable to the idea of a Eurozone break-up; without the Bundesbank ever having to propose such a break-up….Do we behold a BundesbankGrand Error or a Grand Strategy, the purpose of which is to bring about a new hard currency east of the Rhine and north of the Alps, unencumbered by the deficit countries and France?
Varoufakis then concludes the piece with this
Some readers may feel inclined to dismiss my hypothesis as too far-fetched; too conspiratorial….my interpretation: Mr Weidman can see only too well that the above hold unequivocally but is tabling this deposition at the constitutional course knowingly and as part of a strategy that leads the euro to a death by a thousand, almost silent, cuts.
Varoufakis exposes himself here almost completely.
He has commented on his blog before that he believes it is possible that Germany could be deliberately inflicting pain on the Greek government as a form of punishment and not to help the Greek government reform.
And his conclusion to this article is that it is the plan of the Bundesbank is to destroy the Euro.
The only logical conclusion one can come to is that Varoufakis has an irrational and illogical dislike of Germany and its institutions and that he is deeply suspicious of their motives.
It is easy to believe this of Varoufakis because of his obsession with blaming German actions for the problems in Greece & the Eurozone. For Varoufakis the source of all of Greece’s problems is the Euro and specifically Germany and it unwillingness to recycle its surplus.
To anyone remotely familiar with the situation this is obviously nonsense.
Varoufakis wants to accuse the Bundesbank of breaking away from the Euro.
I do not believe that to be the case but so what if it was?
Surely Germany is free to do what it wants and other countries are free to respond or to make their own arrangements.
Varoufakis says his idea is “too conspiratorial” for some.
The fact is there is a blatant conspiracy, a conspiracy of which Varoufakis is aware of all the facts. His problem is that he is unable to get past his prejudices against Germany to connect the dots.
He is unable to comprehend even the possibility that Germany is doing the best thing for Greece by demanding the government balance it books.
In short, Varoufakis has completely lost his objectivity with regards to the ECB-Euro-Greece-Bundesbank dynamic.
Again, to highlight his obsession with what Germany is doing rather that what is going on in Greece.
He implies that it is a bad thing if Germany wants to rid itself of using the same currency as the deficit countries in Europe.
What difference does it make to him? Why does he care if this is what Germany wants? Does he want to control want Germany does?
And the answer is yes. His grand plan to solve the Euro crisis is for Germany to subsidise governments in Europe that underperform.
Again, there is a conspiracy but Varoufakis is completely unwilling to join the dots.
Instead he has simply subscribed to the propaganda that has been pumped out by the mainstream media. For someone who claims to be a professional economist I would expect to hear something more insightful than what I get from the BBC or France 24.
Germany is not a conspirator in the Euro crisis. The position of the Bundesbank is very simple. To maintain stable prices and this means no quantitative easing and no monetizing of worthless assets.
If you want to see the damage that is done when worthless assets are monetized you only have to look as far as Greece and its government.
If on the other hand you believe that wealth and prosperity does not come out of a printing press and instead comes from hard work, research and investment then you have to categorically say that Varoufakis has completely lost the plot.
From a very simple policy he has managed to come to the conclusion that the Bundesbank is trying to destroy the Euro when he himself admits the Bundesbank is trying to maintain the value of the Euro rather than inflating it away.
If Yanis Varoufakis truly believes that maintaining the value of a currency is a way to destroy it I urge him to reassess his analysis.