The Varoufakis Vortex

July 31st, 2015
in econ_news

Econintersect:  When we put together yesterday's Early Bird Headlines devoted entirely to Greece, almost half were devoted to a Greek Member of Parliament.  That MP, Yanis Varoufakis, was formerly Finance Minister for Greece - he resigned early this month.  In this article we have collected recent articles about Mr. Varoufakis and tried to organized them into better groups than is done in the Early Bird format.  Some of the articles from yesterday morning's post are included here, but additional ones are as well.


Follow up:

What Is in The Vortex?

From yesterday's Early Bird:

Yanis Varoufakis faces criminal prosecution over clandestine 'Plan B' currency plot (The Telegraph) The Greek Supreme Court sends a legal case to Greek parliament as "treason" charges escalate against former finance minister. See following articles. From The Telegraph:

Greece's state prosecutors have set their sights on former finance minister Yanis Varoufakis who faces possible criminal charges over plans to set up a parallel payments system inside the monetary union.


The Greek parliament received two sets of legal complaints about the economist's "surreptitious" blueprint to introduce a euro-denominated alternative currency as a precursor to an exit from the eurozone.

The cases were bought to the parliament by the Supreme Court following complaints from a Greek lawyer and mayor, and separately by a group of opposition conservative parliamentarians.

As an MP, Mr Varoufakis has immunity over criminal prosecution. But this could now be overturned by the Greek parliament which is set to review the allegations.

The self-styled "erratic Marxist" convened a five-man team to oversee clandestine plans to introduce "parallel liquidity" in Greece in order ease the credit strangulation imposed by the European Central Bank.

Mr Varoufakis' team included respected US economist James K. Galbraith, and touted the use of smartphone apps to allow the state to continue making its domestic obligations to suppliers and collecting tax revenues. Mr Galbraith could also be facing a criminal trial over his involvement.

Criticism of Varoufakis

There have been many critical commentaries written, including somethat purport to be reporting news. So we have selected what we consider to be a particularly strong criticism to include in this review - it mentions several of the more common criticisms of Mr. Varoufakis' efforts to negotiate better terms for Greece as well as specifically criticizing the parallel currency efforts undertaken.

Varoufakis' Plan B was worse than a crime - it was half-baked nonsense (Fortune) This was written by Geoffrey Smith, a senior editor at Fortune. From the article:

Tsipras' gamble with his country's future was backed up only by a stunted, half-formed plan for a new currency. It's a measure of how far into the realm of the absurd the Greek crisis has gone that Yanis Varoufakis' surreptitious plan for taking Greece out of the Eurozone should have made so many headlines over the weekend.

It seems only hours ago that the many critics of the former finance minister and his boss Prime Minister Alexis Tsipras, were complaining precisely that they hadn't prepared for a "Grexit" scenario. But now a new political row has erupted because they had.

But the real scandal is not that the government laid secret plans to leave the Eurozone, it's that it realized they were unworkable, but continued to play chicken with its creditors as if they were convinced of their infallibility for another two months, while the country's economy spiralled into another disaster.

Support for Varoufakis

In Defense of Varoufakis (Mohamed El-Erian, Project Syndicate) El-Erian says that it is important to take note of the ideas of Yanis Varoufakis and the agenda he has espoused.  El-Erian says "the essence of that agenda was - and remains - largely correct".  El-Erian opened his essay with:

From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece's exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country's former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece's ability to recover and prosper - whether it stays in the eurozone or decides to leave.

Yanis Varoufakis is being pilloried for doing what had to be done (The Guardian) The former finance minister devised an ingenious - if unorthodox - fallback plan to ensure liquidity for Greece's economy.

Indicting Varoufakis: The World Upside Down (The Automatic Earth)

There's always a great irony in anyone at all coming under pressure for doing exactly what they should be doing. Still, it happens a lot. The irony gets that much greater when the party in question is a government, and a much maligned one at that.

Of course Syriza had to look into options, possibilities, eventualities if ever the moment might come that Greece had to (were forced to) move beyond the euro. They would have been entirely in fault, and entirely remiss, if not outright criminally negligent, if they had never looked into this.

And of course this had to be done in secret. There is no other way. The proof is in the pudding: just look at the reactions to Varoufakis' explanation to a group of investors of how he went about Tsipras' pre-election-victory green light for exploring 'beyond euro' scenarios.

Just imagine what political opponents and international media would have made of it all had they known back in December. There are simply far too many ill-informed and/or sensationalist and/or political-gains-hungry voices out there to not do these things in secret.

Varoufakis' Own Defense

Treason charges: What lurks behind the bizarre allegations (Yanis Varoufakas)

The bizarre attempt to have me indicted me on... treason charges, allegedly for conspiring to push Greece out of the Eurozone, reflects something much broader.

It reflects a determined effort to de-legitimise our five-month long (25th January to 5th July 2015) negotiation with a troika incensed that we had the audacity to dispute the wisdom and efficacy of its failed program for Greece.

The aim of my self-styled persecutors is to characterise our defiant negotiating stance as an aberration, an error or, even better from the perspective of Greece's troika-friendly oligarchic establishment, as a 'crime' against Greece's national interest.

My dastardly 'crime' was that, expressing the collective will of our government, I personified the sins of:

  • Facing down the Eurogroup's leaders as an equal that has the right to say 'NO' and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condition of self-defeating austerity
  • Demonstrating that one can be a committed Europeanist, strive to keep one's nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one's country in austerity-driven debt-bondage
  • Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions
  • Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.

It is amply clear that the Greek government has a duty to recover national and democratic sovereignty over all departments of state, and in particular those of the Finance Ministry. If it does not, it will continue to forfeit the instruments of policy making that voters expect it to utilise in pursuit of the mandate they bestowed upon it.

In my ministerial endeavours, my team and I devised innovative methods for developing the Finance Ministry's tools to deal efficiently with the troika-induced liquidity crunch while recouping executive powers previously usurped by the troika with the consent of previous governments.

Instead of indicting, and persecuting, those who, to this day, function within the public sector as the troika's minions and lieutenants (while receiving their substantial salaries from the long-suffering Greek taxpayers), politicians and parties whom the electorate condemned for their efforts to turn Greece into a protectorate are now persecuting me, aided and abetted by the oligarchs' media. I wear their accusations as badges of honour.

Econintersect commentary

Former Greek Finance Minister Yanis Varoufakis has become a lightning rod in the stormy world of Eurozone politics, and Greek matters in particular. This is not happenstance, for primarily two reason: (1) He has been outspoken, both during his tenure as finance minister and since. That was just not a new trait; he has been a prolific writer for many years on political economy issues. (2) He is a professional economist with a successful academic career and a competent economic analyst, dealing in political circles with many who are political scientists, lawyers or simply politicians. Many of these people do not think in economic terms; rather their view of world function is more related to contracts and agreements. An economics professor who thinks in terms of markets, economic group behavior and sectoral accounting can be considered quite peripheral to the core of the political world - more likely an advisor, not a minister.

Note: Sources are linked throughout the article.


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