Former Finance Minister Of Greece Reveals The Current State of The Greek Economy – And It's Not Good


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Answers by Yanis Varoufakis, Professor, Greece’s former finance minister, and initiator of DiEM25, on Quora.

Q: How is the Greek economy doing today?

A: Terribly, heartbreakingly badly.

Let’s begin with a fact that the EU establishment has been at pains to sideline: The reason people like me were elected in January 2015 to lead Greece’s negotiations with the troika is simple – the troika’s policies in Greece caused the greatest depression that the world has seen since the 1930s (arguably, it may have been worse!).

See the graph below. The horizontal axis shows the degree of austerity undertaken in each of the Eurozone member-states during 2009-14. Greece is, by far, champion here. Now, look at the vertical axis, which shows the total increase (or decrease when below 0) in national income (measured in actual euros). The picture could not be clearer: unsurprisingly, the most indebted state (the Greek one) practised the most severe austerity and, as a result, saw its national income collapse with hideous human costs (that are tantamount to a humanitarian catastrophe). This is why the Greek people voted us in.

Now, interestingly, the mainstream media, the Eurogroup etc. are trying to convince you that Greece was recovering and would have been out of the woods if Syriza had not won in January 2015 and Varoufakis had done as the Eurogroup instructed him/me. Nothing could be further from the truth. Greece was in a free fall before we were elected, and remains in one now because our attempts to renegotiate the world’s most failed ‘program’ were crushed by an ironclad troika determined not to ‘lose’ Spain, Portugal, Ireland etc. To defeat us they went so far as to shut down the Greek banks, dealing another huge blow to a shrinking social economy.

So, once I had resigned and my Prime Minister had surrendered, the troika imposed the following: Increases in corporate taxes to 29% (when neighbouring Bulgaria has a rate of 10%), pre-payment by all business (small, medium and large) of all 2016 estimated taxes in the last month of 2015, increases in VAT to 23% for almost everything, further cuts in pensions. And all that while imposing a gargantuan target of 3.5% primary budget surplus for the next decade – a sure signal to business that they will be taxed even more in the future (to extract that surplus from the private sector).

In view of the above, it takes the analytical power of a smart 10 year old to understand that Greece’s economic policies – that the Eurogroup and the Troika imposed last summer – were designed to fail. And that this is why they are failing.

Q: Are we experiencing the beginning of the end of the EU?

A: I hope not but I fear we may very well be experiencing the EU’s disintegration.

The Eurozone has been, for some time now, in an advanced state of deconstruction. Think about it: If someone were to hand you over a gift of 10 million euros (that would be nice, wouldn’t it?), and you were given a choice between having it credited to a German, an Italian, a Portuguese or a Greek bank account, would you be indifferent? Of course not. You would rather you had the money in a German ot Dutch bank account, fully aware of the fact that the probability of a haircut of your deposits is much higher in Italy or Greece. This is a sure sign that the Eurozone is fragmented. There is plenty of evidence that it is fragmenting further (instead of consolidating). For instance, if you look at the concentration of public debt, it is clear that public debt is being concentrated more and more in the banks of the said state (which is the opposite of what should be happening if we had a proper monetary and banking union).

Beyond the Eurozone, Schengen has already been suspended and is under enormous strain as the forces of xenophobia, ultra-nationalism and plain paranoia are taking over. The EU’s inability is come to terms with what is, after all, a mild refugee crisis (as compared, for instance, with that facing Jordan or Lebanon) speaks volumes in this regard.

At the political level, on multiple issues, the EU’s disintegration is everywhere to be seen. Eastern European governments openly declare their opposition to the very principle of solidarity, the British electorate is alienated from Brussels (and will vote to stay in only out of fear of the unknown), Europe’s Southern Periphery is ravaged by an unnecessary depression that is fully due to the toxic macroeconomic management of a Brussels-Frankfurt establishment that is far more interested in pretending to enforce unenforceable rules than to serve the Union’s interests.

To recap, recall the Soviet Union experience. When a non-viable economic architecture is maintained through authoritarianism and brute political will, its collapse is postponed. But when it comes it is very fast and very painful. I hope that Europeans manage to democratise the EU before we have a repeat performance.

Q: In the future, what lessons does the Greek crisis have for other Europeans who seek to resist European austerity in the future?

A: 1. That the EU establishment will stop at nothing to preserve its authoritarian capacity to continue to implement policies they know to be futile.

2. That, unless we mobilise at pan-European level, the prospects of Reason and Humanism are severely circumscribed.

3. That austerity is not real. Greece has been lent (since 2010) 325 billion euros (when our national income is only 178 billion). This is not austerity! It is profligacy galore!!! (What is really going on here is a cynical – and hugely expensive to the average European taxpayer – transfer of economic and banking losses from the shoulders of those who caused them to the innocents who had nothing to do with it.)

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