Fri May 11th, 2012 at 04:32:00 AM EST
In his two last blog posts, Yanis Varoufakis (h/t Migeru) looks at two sides of the coin of the use of the Eurozone periphery as an object lesson to back opposing views:
Europe’s potential gains from a silent alliance between Paris and Athens « Yanis Varoufakis
Greece offers Mr Hollande a precious case in point. He can use it as an example of what happens when the EE insists that a bankruptcy is not a bankruptcy, and piles up huge loans and unbearable austerity on a national economy that can, simply, not bear it without collapsing into a heap. He can then argue, convincingly, that ‘staying the course’ is simply infeasible – quite independently of the political will of the local elites (recall how determined the Greek elites where to do so, until they were booted out last Sunday by a despairing electorate). Mr Hollande can conclude, from the Greek case, that Europe must find a new strategy that gives the deficit countries a sporting chance without asking of the Germans to bankroll any of the bad debts or the burgeoning deficits. For ideas of how this can be done, see here, here and here.
Fiscal austerity and structural reforms will drive economies over the cliff before any (hypothetical) positive results may occur. Fair point. But
A one-word explanation on why the eurozone cannot inflate its way out of trouble: Spain! « Yanis Varoufakis
...Spain’s insolvency (and Greece’s, Italy’s, etc.) is still seen by certain German policy makers as a golden opportunity to impose upon France (via the Periphery) their views on how things should be. You don’t need to take my word for this. Jens Weidemann said so in today’s FT piece (that I already quoted above): “…relieving stress in the sovereign bond markets eases imminent funding pain but blurs the signal to sovereigns about the precarious state of public finances and the urgent need to act.”
Anyone want to be François Hollande?