North Korean Woes and the US

It is not so much that Kim Jong-un and his North Korean regime stand at the precipice of deploying their nuclear weapons that cause heightened anxiety among people all over the world, but the fact that the US has the brain of a toddler in the highest political office. Donald Trump’s rash impulsiveness had catapulted him into political office, as his supporters were thinking that he would finally deliver on political changes that the spin-doctored rival candidates would not even dare to think about.

But in foreign policy such rash impulsiveness could be enormously dangerous, as when Trump responded to the nuclear test in North Korea by promising “fire and fury” to rain down on the paranoid regime in Pyongyang. This was in response to Kim’s announcement to want to strike US territory at Guam, where the US has a military base.

Luckily the conflict could be contained, primarily thanks to China’s intervention. China being the only reliable ally left for North Korea has declared that if North Korea were to strike the US first, and the US retaliated, China would not intervene to help North Korea as it did during the hot phase of the Korean War in the 1950s. Only if the US struck first would China respond with intervention. In that case, World War III would rain down on us and we could be wiped off the face of the earth.

Kim, as crazy as he might appear, could read the signs and called off the threats of confrontation. The reason why North Korea had now dissipated from the headlines is because we have had a new string of terrorist attacks in Europe, then the racist attacker in Charlottesville, Virginia, and all of a sudden our news focus shifted to Trump supporting white supremacists, a concerning yet unsurprising trend by itself.

But where are we really going with North Korea? Is there a possibility that we could get into another war with this country? Trump recently rolled out his Afghanistan strategy, which is basically an increase in US troop size, thus tying the country further down in the Middle Eastern morass. There is no political stability in Afghanistan whatsoever, as the Islamic State and various Taliban groups continue to control large parts of the country, thus nullifying any efforts of so-called “liberation” by the US since 2001. Afghanistan could mean that attention is diverted from North Korea.

But given the mental instability of Kim as well as Trump, as exemplified by their duel of words, we might be back onto war path, which is rather concerning to say the least. For Collins (2017) the solution lies in integrating North Korea into the western consumption model, which would require western investments in the country as well as flooding it with cheap mass consumer goods. Some people would say that capitalism requires wars, but the opposite is just as true, namely that greater economic integration makes wars much less palatable, for businesspeople relying on commerce need peace. The mass consumer goods could dilute the heightened tension by transforming the politically brainwashed masses (Kim family over all!) into economically brainwashed masses (the I-Phone 8 will finally make me happy!). The continued political and economic isolation of North Korea, however, create the Stockholm syndrome, whereby the masses get whipped up by the leader, who promises strength and unity against the foreign hostility.

China is by no means a politically liberal regime, but the economic opening has resulted in a rise in overall living standards as well as an overarching lack of appetite for warfare. Among a certain segment of the Chinese population there is a great desire to learn English and study in the US or another western university. For these individuals, a military conflict with the US is undesired. But given that there are barely any North Koreans living abroad (if we count out the defectors that live in South Korea or China), there is no such emotional barrier to supporting a war-hungry leader to fight the US.

In any case, this economic integration strategy of North Korea would probably take some time to realize, but the very short term requires a return to the negotiating table, and that would require some minimal trust among the top leaders in the US and North Korea. One would wonder how different the world would be if there would be more capable people running foreign relations in both countries. We all remember the photo where Mao Zedong and Richard Nixon encountered each other to begin bilateral relations between China and the US, but the real impetus behind the Sino-US relations was the work of Henry Kissinger and Zhou Enlai. We need such capable people in the current period.

Left: Premier Zhou Enlai with National Security Adviser Henry Kissinger. Right: Chairman Mao Zedong encounters President Richard Nixon.

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Pillars of Sexual Attraction

We have all encountered physically attractive people and it is much easier to pay attention to these people than other kinds of individuals that lack such attractive features. In this post, I identify the pillars of sexual attraction, which I think is applicable for both genders.

Look in the eyes: 

The attractive person will look into one’s eyes at great intensity and without many interruptions and breaks. There is some gender distinction as women tend to look at other people’s eyes longer regardless of whether there is any emotional attraction, while for the men an eye lockdown is usually a serious indicator of interest.


The simplest non-verbal action is a smile, as it ensures that the person receiving the smile gets positive attention. A smile can come in a variety of ways and can sometimes be fake when it only engages movement around the lips, but a natural smile will engage the eyes as well as the mouth.


Physical closeness indicates trust in that person, and we would only want to be close to a person if we are really interested in that person.


An occasional touch also indicates interest. Among couples during the early phases of a relationship the touches become more frequent and involve more intimate body regions. Aside from sex, kiss forms a natural form of indication of attraction. A less intrusive form is the holding of hands.


Enthusiasm is an emotion, which may be communicated in word or non-verbally (smile, touch). It can only be transmitted during a face-to-face encounter.

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How Brain Cancer Saved the Lives of Millions of Americans

At this point the US political system has become so absurd and so much dominated by oligarchic politics that only fortune’s strike on a Republican senator, John McCain, led to the demise of the disastrous health care bill brought before the Senate. I am not celebrating McCain’s brain disease and personally wish him the best in his recovery efforts, but do find it ironic that he became the crucial vote to avert the Republican health care bill. Was his brain cancer making him have the sympathy for the more than 20 million Americans that were immediately going to have their insurance coverage terminated (and their lives endangered) upon passage of the Republican health care bill after realizing that he got great insurance coverage from the government to have his brain cancer treated? We cannot know for sure, because we lack the counterfactual of how McCain would have voted without illness.

We should first discuss what the Republican bill (American Health Care Act or AHCA) contains. From what we know of the bill that passed the House, it forms a repeal of the Affordable Care Act (ACA), which contains several important pillars. (1) Repeal of the individual mandate, which removes fines on individuals not obtaining health insurance, which could destabilize the existing insurance markets, where many loss-making insurers had already decided to withdraw leaving individuals purchasing their plans on the exchange not able to obtain any insurance. (2) Insurance companies are still prohibited from charging customers more for pre-existing conditions but only if insurance had not “lapsed” for more than 30 days in a year. (3) Eliminate income-based subsidies and replace them with the far less generous age based insurance subsidies ($2000 for young people and $4000 for older people, considering that medical bills are way higher than that). (4) Repeal all taxes associated with the ACA, including tax surcharges on high-income earners amounting to nearly 600 billion dollars in tax savings (i.e. redistribution of income back to the upper 1% of earners). (5) Introduce state waivers, i.e. allow states to repeal any provision of the ACA as they see fit. (6) Convert Medicaid into a block-grant program. Thus, instead of guaranteeing a certain percentage of a state’s Medicaid costs to be funded by the federal government, the federal government would instead pay a fixed amount proportionate to the number of residents to the state’s Medicaid program, which would result in substantial cost savings for the federal government. But this also means either substantial cost burdens for states or for Medicaid recipients, who are left holding the bag after allocated Medicaid funds run out.

While all these provisions in the AHCA sound very complex the intention is very simple: (1) cut more than 20 million people with current insurance from the rolls, (2) increase the cost burden on individuals and families to obtain their own insurance coverage and cover their medical expenses even if they can’t afford it, (3) massively slash taxes on the wealthy, whose lifestyle will not change an iota after adding these tax benefits to their cozy bank accounts.

It is no surprise that most American people are opposed to the AHCA, and so are most of the greedy insurance providers, but also doctors and health care providers. Who would thus favor such a draconian social policy reversal? We should not underestimate the role of the Koch brothers and other wealthy donors, who want to repeal every social legislation and transfer these public program funds into the coffers of the billionaire class that cannot care less about rising political instability resulting from their endless greed.

It has become common knowledge that this billionaire class controls virtually the entire political class (except some odd figures like the widely popular Bernie Sanders from Vermont), which includes Democrats and Republicans. But there are some notable partisan differences. The Democrats are an internally split party that want to please the big donors on Wall Street, Silicon Valley, Big Pharma and law firms at the same time as they want to win the support of the little guy but without exploding the public budget deficit. How does that become feasible? Via identity politics. Hillary Clinton’s campaign generated the lackluster support among some segments of the urban, middle class voter base by appealing to LGBT, minority and women’s rights. These are certainly worthy causes, but they don’t replace the bread-and-butter issues that Sanders was consistently stronger on than Clinton.

With the Republican agenda, it is hard to discern any sympathy for the little guy. There used to be a time when Republicans would make the effort to involve the little guy, and the Tea Party was such a faint attempt, closely mobilizing diffuse anger against political and economic elites mixed with racial hatred against the first black president. But these days, serious Republican presidential contenders and candidates for Senate and House races have become the employees (or paid shills) of the powerful Koch brother network of donors, as they have to pitch their crazy right-wing ideas in the Koch fundraising events.

Republicans tended to dominate the electoral map since 2010 mainly by evading political arousal and mass mobilization. They did that largely by actively suppressing the vote via voter ID requirements (that do nothing to stop fake voting, but do stop Democratic-leaning poorer and minority constituencies less likely to own government IDs from voting), redrawing the political districts in a way to maximize their number of seats, also known as gerrymandering, and keeping all political details of their agenda behind closed doors with as few hearings and public inquiries as possible. More recently, the Republicans are proposing to defund the Congressional Budget Office, which assesses the economic implications of government policies and pointed out the number of people that would lose health insurance as a result of repealing the ACA. If people don’t know how much they are harmed, how should they complain about it?

It is, therefore, not surprising that there will scarcely be anybody who would want to vote for the Republicans unless, of course, it was for the tradition of always voting Republican. But then Donald Trump came along and changed the game of US politics. Hitherto the establishment Queen Hillary thought that she had a safe passageway to the presidency. It wasn’t so much that Trump had any better ideas than the other Republican candidates. In fact, some of these plans were even worse and made no sense, such as building a wall across the US-Mexican border when the net migration of Mexicans had actually become negative or canceling trade agreements on which the US economy depended. It shall be no surprise that the crazy parts of his agenda had not been carried out, as his fellow plutocrats also opposed these measures.

Trump successfully appealed to the white working class that had been left in the gutter by politicians in both parties. They were sold on Trump because he spoke differently and more “honestly” than other politicians, who spin doctored their oratory on every campaign trail event, while Trump spoke off-the-cuff, incoherently and with repetitive, simple language to the entertainment of the masses, who were intent to vote against the establishment as opposed to the fluffy “hope” and “change” that Obama did not deliver 8 year prior. However, Trump is mostly show with very little political substance. That is also clear in the current health care debate where he angrily tweets against anybody opposing the health care bill even as he does not actually know what is in it. As long as there is a health care bill on his desk he will sign it, no matter how many people it will hurt.

And that makes Trump as nefarious if not more so than the other Republican politicians, who are intent to “deconstruct the administrative state” as per Steve Bannon, Trump’s White House adviser. This is a code word for plundering the state assets to benefit the rich and harm everyone else. With an outwardly respectable politician like Jeb Bush or John Kasich, the political discourse might have revolved more around the policy content, which could actually hinder the passage of the nefarious agenda as people wake up to the negative implications on their lives and resist it. But with the erratic and narcissist Trump the corporate media becomes obsessed with any nonsense that comes out of the president’s mouth, while the Republican donors and their employees called elected representatives in Congress are working overtime to carry out their right-wing agenda behind closed doors.

Methods of public resistance against the Trump administration largely remain ineffective, especially in the absence of another major economic crisis. The last major anti-establishment convulsion happened with the Occupy Wall Street movement, which was a direct response to the outgrowth of many years of neoliberal policy which combines the growth of low-wage and insecure work with rising private debt (home purchase, health care and student loans), growing wealth and income inequality and government transfer policies benefiting the very rich and the financial sector. But it was also made possible by the outrage against the Wall Street bailout and the major financial crisis. It is the apparent improvement in the labor market, which seems to quiet overall dissent, even as people are not much safer economically as the underlying economic challenges persist.

Now, what about the health care bill process? The House had passed the AHCA back in May with the aforementioned provisions. The Republican Senate leadership under Mitch McConnell wanted to copy and paste the House resolution to bring forward a vote. The Republicans have 52 senators to 48 for Democrats, but 2 Republicans, Lisa Murkowski and Susan Collins, oppose the AHCA because they did not want to face the electoral backlash for ripping health insurance from their constituents. All Democrats oppose the AHCA (subsequently called American Health Care Freedom Act), so the vote to get a vote scheduled passed narrowly with 51-50, with Vice President Mike Pence casting the tie-break. But from then on, Republican efforts to pass their bill went downhill. The house bill had been opposed by 7 more Republican senators, which was thus killed with 43-57.

The Republican leadership then brought forward a second “skinny” bill, which would only repeal the individual and employer mandate while defunding Planned Parenthood and allowing states to opt out of ACA provisions. Taxes and subsidies and other provisions in the insurance market would remain in place, but repealing the mandate will undermine the insurance market, because healthy people will opt out of insurance and not bear the burden of paying for the sicker population, the precise point of obtaining insurance. The skinny bill brought some of the Republican senators back to the support side, but Murkowski, Collins and all Democrats would still oppose the skinny bill. But McCain also did not switch sides. In his speech, he pushed for bipartisan cooperation to get a health care bill passed. On his left eye brow, you can see the surgery cut as he is still recovering from an unfolding brain cancer treatment. Whether he would have voted the other way if he were healthy, we cannot say for sure, but on that day the disastrous AHCA was killed 49-51, but the Republicans might still find a way to pass it later.

There is no doubt that the AHCA is disastrous, but so is the ACA. The ACA is merely an improvement to the previous health care system, where patients’ treatment could have their insurance claims denied because they have preexisting conditions. But the key weakness of the ACA is now becoming apparent, especially as the current administration attacks its pillars by signaling that they refuse to subsidize loss-making insurance providers, who take on a sicker population.

Free market fundamentalists argue that we have to introduce more market elements into the health insurance system in order to bring costs down, but these people fail to mention that such a free market produces perverse outcomes. A so-called free market would firstly create unequal access to health care, whereby poor and sick populations would regularly be priced out of the market. Secondly, the inevitable creation of multiple tier insurance pools would segregate healthy and younger populations from sicker and older populations, as the former cluster in low premium, high deductible plans and the latter in high premium, low deductible plans. The lack of healthy people in the latter pool would drive up costs, such that premiums would continue increasing, which pushes even more healthy people out of the sick insurance pool. This death spiral of the insurance pool will push up the uninsured rate, which is known as adverse selection.

The way how you solve this problem is by a single-payer health care system, which would combine the entire population in the same insurance pool, thus allowing the government to charge all people the same proportion of their income to fund the common health care system. Single-payer would also eliminate the inefficient and profit-hungry insurance system, and limit health provider and drug costs through central bargaining of medical prices.

People think that America is incapable of providing common insurance to all people, yet Medicaid and Medicare that has existed for more than 50 years now already provides the government infrastructure upon which any single-payer system would be based. The problem is of a political nature, as most people would benefit from a single-payer system, but are unlikely to all be activists for reform, while the sick might want to be activists but are too few and probably too concerned about their disease to demand political reform. The prime culprits and beneficiaries of the system (insurance, hospitals and pharmaceuticals) have the most resources to influence the system, but don’t want any changes. The only thing that makes me hopeful is the dialectic process, by which as things get worse and problems can no longer be denied, some change will eventually happen.

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Book Review, Yanis Varoufakis, Adults in the Room (London: Penguin, 2017)

On May 4, 2015, I had argued (Liu 2015) that Yanis Varoufakis was the best finance minister in Europe, as he was one of the few people in political power that knew that continuous extend and pretend policies of the troika (European Central Bank, European Commission and IMF, along with the powerful Eurogroup) would wreck Greece further while ensuring that the creditors would never get their money back. I had argued that it was a mistake that prime minister Tsipras had on April 27, 2015 decided to sideline the only person in the cabinet who was so committed to the ending this extend and pretend, hoping that by being somewhat more conciliatory to the troika he would be able to get a better deal. It was all for naught. What I wrote back then, is as true as ever, having now read Varoufakis 500 page memoir, recounting his experiences as Greek’s finance minister from January to July 2015. On the back of the book, Jeffrey Sachs, one of Varoufakis key foreign advisers, had called him the “Thucydides of our Times”.

Just a comment on the style of his writing: Varoufakis writes in a very unpretentious style, explaining the complex economic relations between his bankrupt state and the intransigent negotiators at the troika such that even people without a PhD in economics can grasp the fundamentals. He includes rather entertaining episodes of personal encounters he had with European and international officials, revealing how the powerful were very reasonable and made intelligent comments about the Greek debt crisis, while in public statements they would shoot down any proposal that Varoufakis and his team had put forward.

Unlike normal political autobiographies which are self-congratulating acts of self-vindication, Varoufakis does not have the pretentiousness of a typical politician, and has retained the honesty of an academic, who wants to debate ideas and defend views as he sees fit. He also tells very little about his personal life or some other Oedipus complex that normal politicians suffer from, but focuses entirely on the fate of his country’s economic and political situation. That makes his memoir infinitely more valuable than what can be expected from a normal politician’s memoir.

The book read like a political thriller and ultimately like a Shakespearean tragedy with enough hints at foreshadowing of a bad ending. It unfortunately is not a novel, though it took such style, but the very sad reality of Greek and ultimately European political economy of the last 2 years, and a reflection of the last 20 (at least since the euro was introduced). His witty analogies range from John Steinbeck to Aesop to George Orwell, and his political economic insights are lucid with no obfuscation.

As Varoufakis himself portrays it, the tragedy comes precisely from the fact that all the actors that were putting stones on his way and wanted to force the Greek government into capitulation were at the same time quite reasonable in personal dialog with the finance minister. There were always some people that really wanted to be hard on the Greeks and force them to accept the bailout-cum-austerity (extend and pretend), while there were other people, who probably would have relented, but thought that they could not speak up for fear of being shot down by the other actors.

There is a really deep web of individuals that were in positions of power, which made it impossible for Varoufakis and his government to get the debt restructuring he thought that his country needed. Before naming names (which is the heart and the meat of the tragedy/ memoir) and how each of these actors within the troika interacted with Varoufakis (only told from his point of view, obviously) to produce the sorry outcomes, the reader will likely benefit from a brief summary of how Greece ended up being boxed up by the troika, how Syriza got to power and how they were defeated.

How the Greek Crisis Started

It all began with Greek membership in the eurozone in 1999. Hitherto Greece had a weak export economy, which was reflected in a weak currency and repeated rounds of drachma devaluation to restore competitiveness. Greece really wanted to be part of the eurozone, but Germany would only agree to a common currency if all member states bring their public budget deficits and debt down. Greece was not capable to do it in such a short period and instead took advantage of the Italian and, of all cases, German accounting strategy to shift the deficit off the books into the future. Greece was subsequently included into the eurozone, even as it did not fulfill the financial convergence criteria.

What followed was about 10 years of increasing capital imports, which Greece had never experienced before. The export-strong Germans had their products made more competitive by the euro that was weaker than the D-mark and could sell many more products into Greece and other parts of the peripheral eurozone countries clustered in the Mediterranean. The swelling profits among German manufacturers (and to smaller extent French) was converted into loans of German and French banks given to the Greek government (to some extent Italy and Portugal, and the private real estate market in Ireland and Spain). Greece could now consume above its means (while Germany kept wage rises in check, which was made simpler by cheap East German labor and the Hartz IV reforms), and wages could be inflated by the expansive fiscal policy made possible by the greater loans from northern Europe.

The party came to an end in 2008 when Lehman Brothers went bust. The German and French banks were facing financial abyss as they were sitting on toxic (non-performing) loans, so their governments generously bailed them out. The ripple effect on Greece was that the northern European banks called in their loans, while demand in the economy and national income was shrinking amid the recession. The Greek government could not pay up, and the northern European banks were facing an abyss again.

But instead of agreeing to a second direct bank bailout, German chancellor Merkel and French president Sarkozy convinced the IMF and the EU to organize a bailout of Greece, selling it to the public as a solidaristic bailout for their Greek brethren. It was a sham operation because the IMF got involved when Dominique Strauss-Kahn, a potential French presidential contender, wanted to bail out Greece, even as a bailout to a bankrupt country without restructuring violated the IMF statute. Greece at that point was clearly bankrupt, and so were the exposed French and German banks, but Merkel and Sarkozy wanted to save the latter, so that all states paying into the IMF (most countries in the world) and the eurozone (27% stake for Germany, 20% for France, and smaller stakes for other countries) had to come up with the first bailout for Greece in 2010. Germany and France were able to force smaller eurozone economies (like Slovakia and Latvia) plus world economies via the IMF to pay for a Greek bailout out of which almost the entire proceeds went to bailout the German and French banks! By 2015, the private creditor (non-troika) share of Greek government debt was lowered to 15%, and the German and French banks with the biggest debt exposure were basically of the hook.

Bailing out a bankrupt country now created a follow-up problem of how Greece can manage their new debt to the troika creditors. What is worse is that the troika demanded rapid privatization of Greek public goods (at firesale prices!), massive cuts to social programs such as pensions and health care, layoff of civil servants, VAT tax rises and greater efforts toward tax compliance (which most Greek governments and later even the troika ignored!). We’ll give you a bailout, but only if you perform austerity and continue paying us back the loans. But the government saving money during an economic crisis, when the private actors are pulling back on spending merely exacerbates the public debt problem.

The principle of why austerity is self-defeating can easily be illustrated by an example: imagine a country with a debt of 60 dollars and a national income of 100, which creates a debt-to-GDP ratio of 60%. We also assume that 50% of the national income comes from government spending, which is not an unreasonable assumption in most European economies. Now, imagine you force down austerity, which would slash government spending in half. Government spending is reduced from 50 to 25, total national income decreases from 100 to 75, thus the debt-to-GDP ratio has gone from 60/100 to 60/75 or from 60 to 80%. The debt load here has not increased (unrealistic assumption given the expected interest payments that accumulate as the country is incapable of paying even just the interest on the debt), but the debt burden has increased as income decreases.

Soon enough the Greeks after having been on the verge of default in 2010 nearly defaulted again in 2012. By that time, the German and French banks were already off the hook, but after having committed the first crime, the EU leaders had to come up with a second crime to cover up the first crime: pass a second bailout, not out of solidarity but to allow the Greeks to repay the old loans, and tie them down with even more austerity. Varoufakis claimed, rightly, that the extend-and-pretend loans kept the Greeks in a debtors’ prison, and it was time to leave this prison.

At the same time, many southern European economies could not allow relenting on the Greeks and give them a much needed debt restructuring because it could empower the political left in Spain, Italy or Portugal, who can overthrow their political leaders by accusing them of having sold out to the troika while the Greeks have gotten a nice deal for themselves. France was cautiously interested in debt restructuring, but could not offend the Germans, whose cooperation was needed to support the French banking system (p.519, F11). The Germans simply did not want to own up to the fact that they were bailing out their banks, and Angela Merkel also refused a Grexit option, which would have gone along with debt restructuring (while Schauble was notably open to Grexit). Only the IMF noted in internal reports and discussions (including Poul Thomsen, see pp.482-3) that debt restructuring in Greece was unavoidable, but in practical discussions always deferred to the Eurogroup. Strange political calculations were thus blocking good economic solutions.

While the political situation did not favor debt restructuring, Syriza led by Alexis Tsipras won the election on 25 January, 2015. This was the first time that a party of the left, consisting of socialists, social democrats and communists, won the plurality of the vote. PASOK (social democratic) and ND (conservative) had been in power for most of the post-dictatorship democracy since 1974. But PASOK destroyed itself with the acceptance of the first bailout-cum-austerity in 2010, and ND was demolished after first campaigning against the first bailout and then accepting the second bailout with the associated austerity. Had there been an earlier opportunity for elections, Syriza would have won big beforehand, though they blew their first real chance in 2012.

Varoufakis had attacked Syriza at the beginning for their lack of economic competence. He had been advising Syriza’s economic policy during the 2012 elections and saw them essentially ignore his disciplined message to negotiate for a debt restructuring with the EU partners. Instead Syriza had campaigned on expanding popular social programs that the incumbent government had savagely cut.

But in January 2015, it became serious. Tsipras and his team were capable of convincing Varoufakis to become finance minister in the case that Syriza got elected (as the polls suggested), and Varoufakis had accepted the offer but only when he could run for a parliament seat himself. He was invited to run for a parliament seat and won it with the biggest vote for an MP.

Some cynics abroad claim that Greece had been on an economic recovery trajectory before Syriza got elected and their daring negotiation stance had threatened such recovery. But the small increase in GDP was hiding the fact that prices were shrinking faster than nominal incomes such that the economy did not recover. The lower prices did not help the Greeks given that the debt repayments continued to suck income from the Greeks. The other counterargument is that austerity pushes down labor unit costs and makes Greek exports more competitive, and with a positive foreign trade balance they could pay off the debt. However, while labor costs were coming down, it was not exports that increased but imports that decreased.

The Home Front

Alexis Tsipras became prime minister. Yannis Dragasakis, became deputy prime minister. Minister of state was Tsipras confidante Nikos Pappas. Influential was also the cabinet secretary Spyros Sagias, and Varoufakis chief ally Euclid Tsakalotos, who became deputy foreign minister for economic relations. Stathakis became economy minister, and George Chouliarakis became chair of the Council of Economic Advisers. All these people formed the inner circle of the “war cabinet”, which met daily to discuss the next step forward in the economic negotiations with the troika.

Photos: Inaugural ceremony for the Greek cabinet in January 2015. Pictured below at the center in the front is prime minister Tsipras, to the left of him stands Dragasakis, the vice premier, and the bald guy on the very left in the second row is Varoufakis.


Source: Irish Times (2015)

This war cabinet, if we are to believe Varoufakis narrative, was initially nearly united in their negotiation stance. On their first day in office, Varoufakis had visited Tsipras, who told his inaugurated finance minister. “Listen! Don’t get comfortable in here. Don’t learn to love the trappings of office. These offices, these chairs, are not for us. Our place is out there, on the streets, in the squares, with the people. We got in to get a job done on their behalf. Never forget that this is why we are here. For no other reason. And be ready. If the bastards find a way to stop us from delivering what we promised, you and I must be ready to hand back the keys and get out on the streets again, to plan the next demonstration.” (pp.147-8)

Photo: Tsipras (left) and Varoufakis (right). Varoufakis’ wife, Danae Stratou, assured him in a phone call, “If Alexis and you stick together, you can do it.” Varoufakis remarks in his memoir, ‘To this day I think she was right’ (p.172).

Alexis Tsipras, Yanis Varoufakis

Source: Financial Times

The determination at the beginning was huge, especially among Tsipras, Pappas and Tsakalotos. Dragasakis, the deputy was wary of supporting a too aggressive stance against the quasi bankrupt Greek banks, which is the approach that Varoufakis would have favored. Chouliarakis, the economic adviser, was the most concessionary and had been temporarily removed by Varoufakis only to be restored at the end of April at the behest of the troika. Chouliarakis agreed with the unrealistic growth targets that the IMF and the troika had proposed, thus giving a blank cheque to the bailout-cum-austerity packages.

Varoufakis went to the European capitals to negotiate debt restructuring for Greece, but as the situation became more and more hopeless and the pressure against the Greek government increased substantially, Syriza’s high leaders gradually gave up. Tsipras, Pappas and Sagias backed Dragasakis and Chouliarakis in demanding a full-scale surrender to the bailout demand (the third one). Varoufakis still believed in getting a debt restructuring deal, and if threatened by the shutdown of the Greek banks (by the ECB refusing to release euros to the Greek banks) he would have liked to activate a parallel payment system, which works like an IOU for the duration of the bank shutdown. He would have also demanded the non-payment of the SMP (Securities Market Program) loan to the ECB. With such a tough negotiating stance he was hoping to avert a Grexit and get debt restructuring, though Grexit was still better than the Memorandum of Understanding (MoU, i.e. continue bailout-cum-austerity).

But as the political pressure on the Greek cabinet continued, Tsipras and his colleagues sidelined Varoufakis in favor of Tsakalotos to the relief of the Eurozone partners around April 27. (Ironically, Tsakalotos was the only major cabinet member to side with Varoufakis on policy, though he rarely spoke out in cabinet meetings and when he became finance minister he faithfully did his party’s bidding of surrender.) The final gamble happened as the Greek cabinet agreed to a bailout referendum to be put in front of the Greek people in July 5. The ECB, thus, shut down the banking system as the loans became due and as a political warning to the electorate that they should vote ‘yes’ to the referendum. The political leadership was fairly restrained (likely hoping to “lose” the referendum, i.e. a yes vote), though Varoufakis campaigned on a no vote. The voters voted no with 61.5% of the vote, thus defying the troika once again despite having gone through a week of closed banks.

Varoufakis pressed for the implementation of the parallel currency and cutting the ECB loans, but Syriza leaders would have none of it.

Tsipras and his inner circle panicked and decided to ignore the referendum results and sign the bailout agreement regardless. What a sham to call the referendum, when Tsipras did not care about the result except if he had “lost” it with a yes vote, which would have been easier on his conscience. But given that voters rejected the extend and pretend, the Syriza government was now in a position to openly have to betray the electorate that had put their trust in them. Tsipras noted in a conversation with Varoufakis that he was scared of a coup d’etat (p.469). But the more likely explanation (and here Varoufakis offers no more than speculation given that he can’t look into the mind of his boss) is that Tsipras and the inner circle were simply tired of half a year of bad news from the overpowerful troika, which seemed to hold all the cards in their hand. Better to capitulate and not face pressure from an intransigent troika and hope that the voters will put them back to power given that the political alternatives are even worse. Varoufakis compares his Syriza colleagues to Orwell’s 1984 character, who came to love Big Brother regardless of how oppressive he is (p.461).

Tsipras reasoning is quite bad because a Greek pensioner, who had seen his pension cut by 40%, will not care whether it is a Syriza or ND or PASOK or technocratic government which had imposed these cuts. It’s all equally bad. Unbelievably, when Tsipras called out snap elections in September 2015, his party was returned to power with the loss of merely 4 seats. There just wasn’t any alternative, but they had 300,000 fewer voters, which reflects a voter turnout that was 7 points lower (56%) than in January (63%).

Furthermore, Tsipras had offered Varoufakis another cabinet position (while pushing him out of the finance ministry), which Varoufakis rejected as he was no longer interested in participating in a government that would agree to extend and pretend, violating the original mandate of why voters would support Syriza. This is the final reasoning for Tsipras’ U-turn. While at the beginning he was skeptical about power, after having sat long enough in the prime minister chair he was beginning to become comfortable in power and did not want to leave. I doubt that if the elections were to happen again, he could rely on such broad electoral support. With the removal of Varoufakis, the prison rebellion was over.

Varoufakis has bitter memories of his Syriza colleagues, largely welcoming the hatred of the European establishment, but not easily accepting the self-undermining disunity of his own government. Martin Luther King said, “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” We are all left-wing revolutionaries in our dream, but when David is fighting Goliath, will David hold onto his dream or surrender in the face of adversity?

The Foreign Front

Varoufakis at the beginning had the thankless task to negotiate with the Eurogroup finance ministers and the troika to get debt restructuring. Thanks to his rich account (again, very one-sided by definition as it is a memoir), we can paint the colors, i.e. who plays an important role in the negotiations and how could the troika view prevail?

I begin with Varoufakis’ allies, who used to work for the other side, and were thus steeled in their negotiation strategy: Elena Panariti, a former World Bank economist, who opposed the bailout and had experience in imposing austerity on other countries, thus being especially resistant to the ways of the troika (p.119). Natasha Arvaniti, a Greek civil servant and EU technocrat, who also gathered experience with the devastating troika policies. Glenn Kim was a banker, who was involved in the bond deals between Greece and the eurozone (p.120). The French investment bank Lazard led by Daniel Cohen and Matthieu Pigasse, who had charged the Greek state enormous sums for consulting on the second bailout, had a guilty conscience and lent a helping hand to Varoufakis (p.121).

Other useful friends were the former UK conservative Chancellor of the Exchequer, Lord Norman Lamont; Columbia University economist and World Bank economist in the 1990s when pushing for rapid privatization in Russia, Jeffrey Sachs; Thomas Mayer from the Deutsche Bank (one of the big beneficiaries of the bailout); former US treasury secretary and economic adviser, Larry Summers; US senator from Vermont, Bernie Sanders (who wrote letters to Fed chair Janet Yellen to demand an easing on austerity); and Texas economist and friend, Jamie Galbraith. Sachs accompanied Varoufakis to many meetings with high officials, and so did Galbraith. In addition, Galbraith also helped Varoufakis draft a parallel currency program, which ultimately was not activated.

There is another peripheral actor that is worthy to mention:

Emmanuel Macron, France’s economic minister, now president of France, made a very positive impression on Varoufakis, understanding the Greek plight and similarly advocating for an investment program that could help Greece and Europe end the financial crisis, regretting that he was the economy minister as opposed to the finance minister, where he could have done more to help Greece (p.191). In another important intervention in June 28, Macron wanted to travel to Athens to consult with Varoufakis and his government directly, and also tried to get president Hollande to intervene on behalf of Greece to avoid the bank shutdown. Hollande and other higher circles shut him down and cancelled his planned trip.

At a summit meeting he had argued that the troika deal with Greece was a “treaty of Versailles”, which resulted in Merkel calling on Hollande to neutralize Macron (pp. 453-4). Macron subsequently resigned from the socialist government in 2016, decided to run for president himself, won the election this year, and is slated to gain a landslide from the French parliamentary elections. Now, being on par with Merkel, it is questionable whether he can pursue such an aggressively pro-investment, anti-austerity agenda, especially given that his agenda is about slashing public employment, loosening labor protections.

Photo: Varoufakis (left) and Macron (right) meet a year after the end Varoufakis tenure, Macron running for president of France. Macron had a sympathetic ear to Varoufakis cause, but was rebuffed by Merkel after calling the troika agreement a “treaty of Versailles”


Source: Le Parisien

Now for the opponents among the troika (even as individuals within them were sympathetic to the Greek position):

The first part of the troika Greece faced was the International Monetary Fund:

Photo: Christine Lagarde (left), Yanis Varoufakis (center), Poul Thomsen (right): Lagarde was conciliatory in personal conversations but toed the line during the crucial Eurogroup meetings to demand more austerity, even as IMF-internal reports warned against it. Thomsen was less conciliatory, even though Wikileaks revelations show his own skepticism against the unrealistic growth target assumptions of Greece

Source: Aripaev

Christine Lagarde, leader of the IMF, former French finance minister, succeeded the disgraced Dominique Strauss-Kahn (at the IMF), who fell after a sex scandal. Lagarde had some sympathies for Varoufakis and Greece during their meeting, but was shot down by Thomsen. She was personally quite skeptical about the Greek ability for meeting its financial obligations and paying off the debt, falling in line with many IMF internal assessments that said the same. But, more importantly, during the negotiations, she deferred to the Eurogroup and the ECB. There is also incongruence in the IMF, namely that internal reports criticize bailout-cum-austerity while the IMF staffers on the ground promote it insistently. Lagarde only wants “adults in the room”, i.e. sign the MoU, give up, Yanis.

Poul Thomsen, director of IMF’s Europe department, was very strict in the personal conversations with Varoufakis and Lagarde, but in their first encounter, he was surprisingly open to lower primary surplus targets (which would make it easier for Greece to budget). He also favored debt cancellation and targeting tax evasion (pp.183-5). Though this never came through in the decision-making. He was responsible for creating unrealistic economic projections, which assumed high growth rates and thus make harsh austerity technically feasible. According to Wikileaks tapes, Thomsen has admitted to other staffers that the third bailout is not economically sustainable, and that the IMF’s economic projections were fallacious.

The second group included the Eurogroup, consisting mainly of finance ministers of the eurozone countries

Photo: Thomas Wieser (left), Jeroen Dijsselbloem (right). Varoufakis claims that Wieser was the real power broker making up policy in the background, while Dijsselbloem led the Eurogroup meetings and did the bidding of Wieser and Schauble (p.135).


Source: TV News Room, Eurogroup

Thomas Wieser is the president of the Eurogroup Working Group. The Eurogroup Working Group is an advisory body to the Eurogroup finance ministers and is very influential in formulating policies. Wieser is an Austrian Social Democrat, but having worked in the banking sector most of his life has developed quite a favorable view toward repaying loans to the creditors in full. One exchange between Wieser and Varoufakis is noteworthy: Merkel had dispatched Wieser to chat with the Greek officials in Athens. Varoufakis noted that without EU funding, Greece would have to default on debt repayment, to which Wieser replied that Greece could last longer by plundering the reserves of pension funds, universities, utility companies and local authorities. Thus, more austerity please.

Jeroen Dijsselbloem is the president of Eurogroup finance ministers and Dutch finance minister. He has become well known for his encounter in February 2015 with Varoufakis in Athens. Dijsselbloem thought that he could bring the newly elected Syriza government to immediately cave in and accept the Memorandum of Understanding. “The current program must be completed or there is nothing else.” (p.162) During the press conference, Dijsselbloem insisted on the current program, while Varoufakis insisted on renegotiating the deal. Dijsselbloem then took of his translation device, leaned over and whispered in Varoufakis ear, “You just killed the troika.” (p.170)

Photo: Jeroen Dijsselbloem (left), Yanis Varoufakis (right): Dijsselbloem walks out of the press conference after whispering, “You just killed the troika.” Varoufakis replied, “Wow, this is an unearned compliment.”


Source: Zero Hedge

Wolfgang Schauble, the German finance minister, is the most powerful finance minister in Europe. He is from the conservative CDU and the southwest German province of Baden-Wurttemberg, where Merkel’s famous and proverbial Swabian housewife lives and saves diligently. He is a lawyer rather than an economist and enjoys being the bad cop (p.210). The Eurogroup meetings are dominated by Schauble, who disciplines Greece and other peripheral Eurozone countries to keep their deficit in line and enforce austerity. His natural allies are the Austrians, Dutch, Maltesians, Belgians, Luxembourgians, Finns, Latvians, Estonians, Lithuanians, Slovakians, Slovenians, Porguguese who agree with Schauble on all policy statements. The recipients of discontent are the Irish, Italians, Spanish, Greek, Cypriots and to a smaller extent the French. The latter group, however, rarely dared to speak up for Varoufakis, because they feared rebuke from Schauble and were also concerned that if the Greeks got a debt restructuring the left in their own country would throw them out of office for not having gotten such a debt restructuring themselves.

Varoufakis writes,

While some, including the Lithuanian, Slovakian and Slovenian finance ministers, clearly believed Schauble’s pronouncements on economic policy to be sound and self-evident, it became apparent that even those who disagreed with the economics of austerity would support him- in the case of Italy, Spain and Ireland out of fear that upstart Greece might escape having to do what they had been forced to do already, in which case their own people might demand to know why they had not resisted austerity too- and in the case of a small but significant group, with France at its centre, out of fear that Schauble would force austerity upon them in the future if they undermined him. (p.237)

I quote Varoufakis on the seating arrangements in the Eurogroup meetings:

At one end, to my left, sat the Eurogroup president, Jeroen Dijsselbloem. On his right was Thomas Wieser, the Eurogroup Wirking Group president and the real power at that end of the table; on his left were the IMF representatives, Christine Lagarde and Poul Thomsen. At the other end of the table was Valdis Dombrovskis, commissioner for the euro and social dialogue, whose real job was to supervise (on behalf of Wolfgang Schauble) Pierre Moscovici, the economic and financial affairs commissioner, who sat on the Latvian’s left. On Dombrovskis’s right, meanwhile, sat Benoit Coeure and beyond him Mario Draghi representing the ECB.

At the same corner of the table as Draghi, but on the longer side at at right angles to him, sat Wolfgang Schauble. Their proximity would on occasion give rise to intense heat, though never any actual light. Along the same side as Schauble were what I came to see as his cheerleaders: the Finnish, Slovakian, Austrian, Portuguese, Slovenian, Latvian, Lithuanian, and Maltese finance ministers. My seat was almost diagonally opposite Schauble’s, alongside the other profligates, nicely lined up together: to my left was Ireland’s Michael Noonan, to my right Spain’s Luis de Guindos, and next to deGuindos was Italy’s Pier Carlo Padoan. France’s Michel Sapin also sat on our side, next to Padoan. (p.232)

When Varoufakis proposed the debt swap agreements to lighten the Greek debt, Schauble did not even consider this proposal deferring to the “institutions” (troika). Schauble in a personal meeting with Varoufakis, however, noted his preference to solve the Eurozone crisis and end the extend and pretend primarily via a Grexit. Varoufakis opposed Grexit because the reintroduction of the drachma would be like announcing a currency devaluation a year before it happens, giving Greeks enough time to withdraw all their euros and keep them in a northern European bank account.

The chaotic shift of currency would require the Greek government to impose stringent capital controls, which would create a painful short-term economic uncertainty. Though he also thought it was better than the alternative of continuing extend and pretend. Schauble would have favored a little break for the Greeks, leave the currency for a while, get their household finances in order and then return back to the euro at a later point. When Merkel had heard of Schauble’s plans she immediately rejected it. Schauble, thus, had his hands tied and ultimately pressed Varoufakis for the signing of the MoU. In a notable exchange between Schauble and Varoufakis the latter asked whether Schauble would have signed the MoU as Greek finance minister. “As a patriot, no. It’s bad for your people.” (p.413)

Photo: Varoufakis (right) visits Schauble (left) in Berlin in February 2015. Schauble- the most powerful European finance minister- said, “We agreed to disagree.” Varoufakis replied, “We didn’t even agree on that.” (p.213) Schauble favored Grexit, but was overruled by his boss, chancellor Merkel.


Source: Zimbio

Michel Sapin, the French finance minister, was ideologically siding with Greece, but only behind closed doors. In a personal meeting with Varoufakis, Sapin confided, “Your government’s success will be our success. It is important that we change Europe together; that we replace this fixation with austerity with a pro-growth agenda. Greece needs it. France needs it. Europe needs it.” (p.188). But when Sapin and Varoufakis appeared for the press conference, Sapin’s tone changed and he admonished Greece for not being earnest enough in applying austerity. Varoufakis was shocked. Sapin did not want to cross the Germans by being too helpful to the Greeks.

Photo: Varoufakis (left) visiting his colleague Sapin (right) in Paris, heading in brotherly connection to the common press conference, where Sapin surprised Varoufakis with calls for austerity contrary to what he said in their tete-a-tete conversation. “Who are you and what have you done to my Michel?”, Varoufakis asked his colleague after the press conference. “Yanis, you must understand this. France is not what it used to be.”


Source: LeMonde

Sapin also confessed to Varoufakis that he did not know much about economics and wrote his postgraduate thesis on the “numismatic history of Aegina” (coins in ancient Greece). During Varoufakis’ first Eurogroup meeting, Sapin briefly defended the Greek proposals, but then was shut down by Schauble, who replied, “Elections cannot be allowed to change economic policy.” (p.237)

Angela Merkel, the federal chancellor of Germany, is not a member of the Eurogroup and is hereby listed as the only head of government in Europe, because of her influence and power. The Eurogroup finance minister meetings are led by her colleague Wolfgang Schauble, but given that the two disagree on the handling of Greece, she deserves a special mention. It was her intervention that ensured a February 20 agreement to extend the Greek loans (which would otherwise have resulted in bank closures in February as opposed to July) and blocked Schauble’s Grexit proposal, as she was more concerned about holding the currency union together at all political/ economic costs, even if it meant more bailout-cum-austerity. Varoufakis claims that Tsipras became too overreliant on Merkel’s help, though it can ultimately not be established what happened in the interactions between Tsipras and Merkel, as he only had personal dealings with Schauble. Even today, with Varoufakis gone and replaced by Tsakalotos the same pattern emerges: Tsipras intervenes personally to get Merkel to make concessions to Greece while she defers to her finance minister (Spiegel 6/14/2017).

Photo: “Will she give us a good deal?, ” PM Tsipras might wonder, expecting favorable treatment from the most powerful European leader, chancellor Merkel. While considering an alliance with Merkel crucial to overcome Schauble’s intransigence in the Eurogroup, Varoufakis also viewed Tsipras overreliance on Merkel problematic, which Varoufakis also partly blamed for Tsipras surrender after the bailout referendum (see p.250).


Source: Wall Street Journal

The second part of the troika consist of the European Central Bank:

Photo: The official photo of the European Central Bank Executive Board. Front row from left: Sabine Lautenschlager (Germany), Mario Draghi (Italy; President), Vitor Constancio (Portugal; Vice President). Back row from left: Yves Mersch (Luxembourg), Peter Praet (Belgium), Benoit Coeure (France). In Varoufakis’ account, only Draghi and Coeure figure prominently, with the former being stiff, formal and dismissive, and the latter being warm and sympathetic, at least behind closed doors


Source: ECB

Mario Draghi, chairman of the ECB, former Goldman Sachs banker and chairman of the Bank of Italy, presented himself as a technocrat, who was not making political decisions which would be left to the Eurogroup, when in fact his decision to launch the QE bond-buying program and the refusal to extend liquidity to Greek banks, which forced the shutdown of their banks, due to the unwillingness of Varoufakis to sign the MoU, are deeply political interventions. Draghi had no interest in debt swaps, and when pressured deferred to the ECB Governing Council which tied his hands in making decisions.

While going out for dinner with two German officials, Varoufakis received a phone call from Draghi. “Hello Mario, what can I do for you?”

“I wanted to let you know, Yanis, before you learn it from the media, that as I foreshadowed this morning, the Governing Council voted to withdraw your banks’ waiver [which foreshadowed a bank run]. But this does not mean much since your banks will continue to be supported by your central bank via emergency liquidity assistance, ” Draghi reported on the phone (p.207). The waiver was restored after the February 20 agreement, which continued liquidity and continued financing until the July shutdown of the Greek banks.

Benoit Coeure, is the French member of the ECB executive board, and in private meetings was very “mild and agreeable” (p.185). He also entertained the debt swap proposal that Varoufakis put forward in a private meeting (p.186). During the meeting with the ECB board, Coeure also lobbied Draghi to take seriously the debt swap proposal, which Draghi ignored by changing the subject (p.204). In another personal encounter, Varoufakis told Coeure that he would activate the parallel payment system in case of the ECB denying liquidity to the Greek central bank, and Coeure thanked him for telling him this and promised to ask the EU council to push for more favorable monetary action to give the Greek government more breathing room (pp.382-3). It went nowhere because even as the Greek banks were denied liquidity, the Syriza government refused to entertain the parallel payment system and instead capitulated to the demands of the troika.

In the decisive Eurogroup meeting on 18 June, Draghi and Coeure both conspired to worsen the bank run that was building up in Greece.

Nothing speeds up a bank run more effectively than a central banker [Draghi] reciting its progress while his deputy [Coeure] signals their intention not to intervene except perhaps by closing the banks in three days’ time. (p.430)

A minor set of actors were the EU commissioners, as they had very little practical input in policymaking, and their conciliatory tone with Greece was overruled by the more powerful Eurogroup (p.262). (Ironically, the EU commission is counted as third part of the troika, though in Varoufakis’ account it is the Eurogroup which holds the practical power.)

Photo: Jean-Claude Juncker (left) greets his commission colleague Pierre Moscovici: both commissioners favored a conciliatory approach with the Greek government, but were shot down by the Eurogroup that called all the shots whenever they tried to be of help.


Source: Daily Express

Jean-Claude Juncker, the president of the European Commission, was personally very sympathetic to Syriza’s cause, having issued a draft communique, which read that “the economic and social impact of the crisis on Greece and its citizens has been immense” and that “there is a need to move to a new relationship based on a mutually beneficial agreement for Greece and for Europe as a whole” (p.257). Juncker’s message also demanded a restoration of liquidity for the Greek banks and an end to troika officials unilaterally imposing humiliating policies as if Greece were a minor colony. In late June, right before the bailout referendum and the bank shutdown, Juncker issued another communique, which approved of the Greek debt swap proposal, but that was shelved either by the Eurogroup or by the Greek government ministers willing to capitulate (pp. 452-3).

Pierre Moscovici: The Frenchman is the EU commissioner for Economy and Finance, and has also been sympathetic to the Greek cause, endorsing the Juncker communique. Varoufakis was gleeful, but soon realized that without Dijsselbloem’s and especially Schauble’s support the communique is as valuable as a white paper in an obscure academic journal. Moscovici and Varoufakis took the communique into Dijsselbloem’s office, who had no interest to entertain the commission communique and instead submitted the MoU proposal to Varoufakis. The following scene is best quoted in full,

Turning to Pierre [Moscovici], who was already looking downcast, I asked what was going on. “You just showed me a draft communique that I was happy to sign on the spot. You are the EU’s commissioner for economic affairs. I am the finance minister of a stricken EU member state. Can I please have some clarity from the only person in this room that has official status to represent the EU.”

Without looking at me, Pierre turned to Jeroen and made his first and last attempt to salvage the European Commission’s dignity. “Can we combine some of the phrases in your draft and this?” he implored in a broken voice, pointing at the draft he was holding in his right hand.

“No!” Jeroen cut him down with what could only be described as controlled aggression. “Everything that could be taken from the draft has been taken”, he stated categorically.

“Pierre”, I asked, “are you just going to submit to the enforcement of this totally one-sided communique against the commission’s views and the draft that you prepared?”

Avoiding eye contact and in a voice that quavered with dejection, Pierre responded with a phrase that might one day feature in the European Union’s tombstone: “Whatever the Eurogroup president says.” pp.260-1

Moscovici also assured Varoufakis to speak with Coeure to find a more conciliatory position on ECB liquidity, which resulted in a phone call between Coeure and Varoufakis, promising potentially some higher intervention favoring Greece (p.382). Varoufakis ultimately compared Moscovici with Sapin: sympathetic but helpless and without ideas themselves (p.404).

Declan Costello: EU commission mission chief for Greece did not figure prominently in Varoufakis’ account, but was described as a hardliner on indebted countries. He was in charge of drafting the Memorandum of Understanding, or the pretend and extend list.


Varoufakis’ memoir is a true tragedy, as many political actors, especially the French ones (Lagarde, Sapin, Moscovici, Macron, Coeure) were rather favorable to the negotiation position of his government, which was made abundantly clear in tete-a-tete exchanges behind closed doors. But none of these actors could dare to go against the overarching logic of the troika, and the politically short-sighted logic that ending the bailout scam could reveal the stupid criminality of officials, who had decided to save their banks and cover it up from their own taxpayers. Ending the austerity scam could have also exposed countries that have undergone harsh austerity or might face it in the future as too weak to resist the unreasonable demands of the troika. In a true tragedy, the outcome is not only bad, but the actors in it know the consequences of their actions, but still can’t depart from the already reached consensus.

If there is to be any realistic hope to resolve the Greek debt crisis the leaders will be forced to accept a different paradigm, revolving around either a painful Grexit or debt restructuring. We might hope that another political faction rises up in Greece to replace Syriza, which is rather unlikely, and the Greek suffering had increased in the mean time such that it will be harder to face another period of financial uncertainty for pensioners, workers and unemployed Greeks that had lost so much. The uncertainty in Greece, which the bailout-cum-austerity agenda enforces, is also applicable for the Eurozone taxpayers, as Greece will be expected to request a fourth bailout with which to repay the loans from the third bailout that they were in no better position to afford back then.

Varoufakis has gone on to help found his own left-wing political party (DiEM25), which is designed as a pan-European movement to demand an end to austerity, debt restructuring in the weak economies, a new investment agenda, better social and workers’ rights, higher taxes on companies and the wealthy and, most importantly, democratic accountability and transparency for the ruling political class. With this book Varoufakis has made a contribution to the latter demand to an extent that is unusual for a person who had been in power. He also shows that it is possible for a political outsider to be in a position in power, even though the actual policy changes are not there. While participation in the levers of power for the good has to be lauded and encouraged, Varoufakis ultimate political failure rests from the inability of the political left to mobilize on a united front to challenge the European technocrats, who have made a sham out of democracy, and made the Brexit decision even somewhat plausible. One can only wish the best to DiEM25.

As my book report has taken on mostly positive tones (as I don’t hide my left-wing sympathies), I have to address an important and valid objection: how can one make valid conclusions about the actors in the Eurozone tragedy when these descriptions all come from one person’s account? To make valid statements for scholarship or even investigative journalism one has to corroborate these accounts by reading all the accounts, including from people that were described by Varoufakis and may appear in a very negative light. That would certainly be a worthy project and would require me probably to devote an entire career to study the Eurozone crisis as opposed to reading a book in a few days. I certainly don’t deny that the Varoufakis story has to be read with a grain of salt.

But to be fair there are not many comprehensive accounts of the Eurozone crisis. What we have instead are the purely academic perspectives that are focused on broader political economy patterns (as opposed to the daily minutiae of actors making political decisions) or are only relevant in econometric, economic and finance journals, or the journalistic encounters with meaningless statements of political leaders made in rehearsed press conference settings. In the absence of having a ubiquity of smart people within the circles of power narrating how the architecture of power works (think of John Perkins “Confessions of an Economic Hit Man”) while eschewing the unreasonableness of a conspiracy theory, Varoufakis’ account remains an important contribution to the public understanding of the Eurozone crisis.

In a telling encounter, Larry Summers told Varoufakis that he better choose whether he wants to remain a political outsider, where he can say whatever he wants but does not get heard by people in power, or a political insider, who will get heard by the powerful and might be able to change the outcomes, but cannot tell on insiders or criticize them behind their back. For six months of his life Varoufakis accomplished the rare feat of being a political insider while having been a political outsider all along. Government insiders are trying all they can to squash any attempt to inform the masses about what’s happening inside the circles of power, see the continuing prosecution of Wikileaks founder Julian Assange. As Congressman Charles Binderup (1937) said in a paraphrase of Henry Ford, “It is perhaps well enough that the people of the Nation do not know or understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning.”

Assange and Varoufakis are radicals to the extent that their efforts are reducing the distance between the rulers and the ruled, thus making the distinction between the political insiders and outsiders less relevant (for how could there be insiders if governance is made transparent to the public). That is a threat to any ruling class. We owe individuals like Varoufakis or Assange a great deal of gratitude for insisting on leaders to be accountable to a public that has confided in its leaders to watch over it.


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May’s Sad Face, Corbyn’s Happy Face

The SNP and Conservatives are losing seats, Labour is winning seats. The Tories will likely form a coalition government with DUP from Northern Ireland, but May will go into Brexit negotiations weakened. I am waiting for the overthrowers in the Tory ranks, though I suspect they have not nurtured a real political talent in their own ranks (Boris Johnson, seriously?). With 29 seat gains, the Labour backbenchers will have a hard time unseating Corbyn and I suspect a longer campaign would have given him an outright majority given May’s unpopularity and disastrous campaign.

But politics is after all also about emotions. Collins (2017) analyzed campaign photos of Donald Trump on the election night. Everyone in his family and political circle is visibly elated and looking forward to the presidency, except Trump. Trump was looking serious, and actually was sad for leaving behind his business empire. He visibly had fun while giving his half-sentences and audience-irritating statements on the campaign rallies, but was sad that he now had to take the reins of a very powerful political office, where he could no longer keep things as secret as in his business empire.

For the seasoned politician Theresa May the insight is precisely the opposite. She was banking on snap elections to increase her majority in the House, and the polls were telling her a 20-25 point landslide against the Labour Party, which she hoped was thoroughly discredited by a left-wing leader, who did not fit the ruling opinion of Rupert Murdoch and his media empire. Naturally, the strategy did not work out for her, and her own personal incompetence at the campaign brought about her downfall based on: (1) disingenuity about cuts to the social care and pension budget (hitting her old voter base), (2) disingenuity with a hard Brexit being better for Britain (“no deal is better than a bad deal”), (3) refusal to participate in the leader TV debate, (4) the repetition of empty platitude without positive messaging (in contrast, to the social justice plank of Jeremy Corbyn).

If we only read May’s press statements, she says that she wants to have a period of political stability in Britain and that would require a coalition government with the DUP (unionists in Northern Ireland), many of which favored terror campaigns against Irish nationalists in the past. That is not really a harbinger of stability. Given the Tories lost more seats than the DUP has in total, the governing majority for May is also less than it is pre-election. This is everything but stability, which shows again that we can’t trust anything that comes out of her mouth.

So let’s turn to her face.


Source: Sky News

The first remark is that May is not a very good actor, and she does not hide her feeling of sadness. She looks down. Her mouth is pulled down on the sides. There is perhaps some embarrassment. She is not pleased about the election result, having clearly failed in her gamble to generate a bigger majority in parliament. Not even the pro-Conservative right-wing papers deny it, and say it as is:



In the next photo, May is looking up, but the expression is very grave. Examining other photos of her, she usually does not have a double chin, and this suggests that her head is tilted forward permanently on that election night, at least in front of the cameras. Again the lips are together and tilted downward on the sides. Even though she has enough votes to form another government, what matters in politics are also the overall impressions or the optics, and they look bad for her. She might continue to govern but with a lack of credibility. Whatever Brexit deal she will want to put together, what will haunt her is the lack of legitimacy that she has, having gone to the voters and not receiving a majority for her party.



May’s sadness stands in contrast to Corbyn’s relief and happiness. In the next photo, he is posing next to another Labour candidate, he pointing at her and she pointing at him.


Source: Telegraph

In this photo, he is smiling, and facing a cheering audience. The smile is genuine, because the eye lid is folding as well. He is quite exhilarated after gaining 29 seats for his party.

Britain Election


What is remarkable is that the overall power constellation is not really changing, as May remains PM, while Corbyn will likely remain opposition leader. There is still a 57 seat margin between Conservative and Labour, and so Conservative has the best claim to power. After people no longer have reason to support UKIP after Brexit, the LDP (the only pro-EU party) not having recovered from their coalition experience with the Tories, and the SNP losing seats after continued insistence on a new independence referendum (which scared many Scots people), the vote share for Conservative and Labour has increased to old levels, suggesting a consolidation of the established party system.

Source: BBC

What matters above all else is not just the facts on the ground but the optics. May wanted the increase in seats, but was not able to get it. The Labour leadership suggests that the hung parliament creates an opportunity for the Labour Party to run the government and replace the Conservative government, though if the DUP backs the Conservatives, then this constellation is very unlikely. An anti-Tory block in parliament would have to consist of all the other political parties, including Greens, SNP, Plaid Cymru and LibDems, which will be very difficult.

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Is Neoliberalism a Useful Word?

In one of the many heated Facebook debates I have had with friends the major question arises whether it makes any sense to use the word “neoliberalism” to describe anything. It is naturally important to define in each case what we mean by neoliberalism and if it is clear in the mind of the readers and discussants what is meant by neoliberalism in each case, we can make an authoritative statement about whether we should use the terminology.

But first to directly answer the question: ‘yes’, for me personally, and ‘it depends’ for whether it is generally useful. The usefulness of the term neoliberalism depends entirely on the political perspective of the person. People, who hate neoliberalism, use the word all the time (just do a Google Scholar search and get 253,000 results), while people, who like neoliberalism, hate the word. Thus, we have an interesting distinction between the word, the meaning and political perspective.

A normal word has a close association to its meaning and ideology often plays no role. If I say ‘table’ and assuming your knowledge of the English language, you will likely think of an object made out of wood, plastic or metal with a flat surface and one or a few legs to hold it up. We can have a different viewpoint around how many legs an ideal table should have or what the best material is, but we would not politically contest the basic definition I have given here. But in neoliberalism there is a clear distinction between word, personal ideology and meaning. Liking the ideology reduces one’s liking for the term, while hating the ideology increases one’s liking for the term.

Is neoliberalism a scientific term? People with a more natural scientific inclination would frown and dispute that a term that is so laden with personal feelings and ideological background can have any usefulness in science. If the theory of relativity were not E=mc2, implying E=Energy, m=mass and c=speed of light in a vacuum, because we have different political ideologies, then we don’t have a useful concept. Observations in nature that follow a particular rule have to be summarized in a theory that makes sense to all individuals and by replication of experiments can be repeated precisely.

Clearly, another important scientific domain- where we need to have full agreement over the content regardless of political ideology- is climate change. Here it is superbly difficult given that there is an extreme political faction in the United States that denies the existence of climate change, claiming that there is a political ploy to reduce US competitiveness (see President Trump and the Republican Party). The lack of deference to climate scientists, who have devoted their careers to study these very questions, creates the dilemma that we are ineffectively doing things to tackle and counteract climate change.

But let me just make the statement here that neoliberalism can be used as a term in the social sciences regardless of the diversity in views on its usage. My argument here is that we are naturally not applying the standard of the hard sciences, which says that all people regardless of political ideology have to agree on its meaning. For neoliberalism to be made social scientifically useful, all we have to do is to find a definition in a given article that can describe social phenomena of interest and is clearly communicated to the reader. In the most ideal case, this means that at least among the neoliberalism-haters or anti-neoliberals, mostly on the political left, who are throwing around the term like we regularly gulp down water to quench our daily thirst, we all agree on what it means. This does not necessarily happen, so the only way how we can keep the term in our daily discourse without losing scientific credibility is if we rigorously define it in the context that we are using it.

So after beating around the bush, I have arrived at the hard question at the heart of the matter. What is neoliberalism? It may be described as

  • a political ideology (the glorification of markets, the individual, the private entrepreneur, the investor, the capitalist; the detestation of government regulation of business and the welfare state; the penetration of the market logic/ consumerism in all elements of life, such as family, religion and social relations) and
  • an economic practice (promotion of free trade, deregulation of firms and financial institutions, privatization of public goods, tax cuts for the affluent, the creation of winner-take-all markets, the growth of technological forces favoring the capitalists, the shift of risk from the society, government and firm to the individual, the weakening of social welfare services, the precarization and insecurity of employment relationships in the labor market, the growth of income and wealth inequality and the degradation of the natural environment, especially in the form of climate change).

Also see Harvey (2005); Saad Filho and Johnston (2005)Dumenil and Levy (2011)Centeno and Cohen (2012)

Naturally, neoliberalism-concept-supporters or neoliberals (who are neoliberalism-word-haters) will focus on the political ideology, which like the belief in any religion revolves around some desirable features that have to be taken on faith (i.e. ideology), while discussions on economic practice remain by nature fragmented. Surely, free trade and privatization sound good, but precarization of the workforce and concentrating wealth at the top are undesirable, so they either remain silent on it or claim that neoliberalism or obsession with ‘free’ markets favoring the capitalist class have nothing to do with these undesirable social developments. Or they might acknowledge these social developments but accept it as a cost of an “innovative” society.

Conversely, neoliberalism-concept-haters or anti-neoliberals (who are neoliberalism-word-supporters) will focus on the economic practice, especially where the evidence for socially nefarious consequences is the strongest. But even where the neoliberals think they have a strong hand, there is criticism from the anti-neoliberals, e.g. free trade is criticized as not as desirable as ‘fair’ trade, or privatization benefiting a few big owners is not as desirable as state or worker-owned enterprises. Politically moderate anti-neoliberals (e.g. of the Keynesian social-democratic variety) might be inclined to be silent on the political ideology element, and good examples here is the Third Way of the 1990s led by people like Blair, Jospin and Schroder. “We are not against the market, and we are for labor market activation and an inclusive economic policy” etc. Left-wingers will attack both economic practice and political ideology at the same time, as a more communitarian, solidaristic ideology is incompatible with the principles of neoliberalism.

We may conclude that the social sciences are deeply political and that our own personal viewpoints pierce through every element that we analyze. For those, who have been socialized in Marxist thinking, this is the nature of the game. Social science is the analysis of social phenomena at the same time as it is the advocacy of social change based on underlying moral-political desiderata. For those, who want to hold onto the Weberian ethics of value-free science, we are still salvaged by my definition rule, i.e. define the word neoliberalism in the context of the argument/ article in which it is used to give readers a clear idea of what it means. It is only for natural science standards, which wants to eradicate all ambiguity in meaning and political intention, that neoliberalism cannot hold up to strict scrutiny. Too bad.

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British Election Tragedy (?)

Theresa May had set an election on June 8, and the polls indicate that it could very well backfire for her. When she had announced the election in April and had the parliament vote for it on April 19, the Tories were leading by 20-25 points. Now the polls narrowed to 5-10 points, and some polling agencies would go as far as predicting a hung parliament. The gap had narrowed as the electorate is searching for a political alternative amid the turbulent Brexit negotiations. It still takes some time for people to link their political dissatisfaction with the Tory policies of austerity, especially for local, social and health services. In this article, I claim that the British people are better off voting for Labour and have them negotiate the Brexit than the Conservatives.

Needless to say, it would be a tragedy for the Conservatives to win re-election (and they might given that polls tend to skew Labour, while election results favor Conservative), but there is now mounting evidence that May had miscalculated and that the expected expansion of a Tory majority was too ambitious. May had thought she could wing the elections and be guaranteed more support in the current leadership, so she “can negotiate a good deal for Britain” amid Brexit. Part of the challenge for her comes from the poor handling of the conservative campaign. Because she thought that she would win by a landslide, she refused to participate in a leadership debate, which to her is not as useful as “being quizzed by the British people”, even as she cancels the last interviews right before the election. May is clearly not a seasoned politician, as she excels better sitting behind closed chambers as opposed to performing in public and debating with an opponent that has better arguments than her.

Her second mistake was that her smug attitude had emboldened her party to put forward a draconian social agenda, which revolves around reducing social care and pensions spending, both areas hitting the core Tory voters (senior citizens) really hard. Will her loyal voters call out the Tories for their stupid austerity? The conservatives backtracked on these cuts, but who will believe them?

Relatedly, the third problem is a matter of credibility. It was the Conservatives, who called for the EU referendum, hoping to undercut the EU-skeptic Tories and the UKIP, which had much more support back then (now no longer, because the independence desires of the Independence Party are realized by the Brexit, so what’s the point of voting for them now?). Blaming EU migrants was also a convenient way to cover up the folly of austerity. (“You lose your pension because of the benefits for EU migrants and the EU contributions.” No, because of Tory austerity!) Then they (both David Cameron, then-prime minister, and Theresa May) had campaigned for remain, but now that the narrow Brexit vote was realized, Cameron retreated and May announced to carry out the Brexit, even as she was opposed to it.

How are people going to trust the Tories when they are so unreliable, and with the full extent of the Brexit might have caused the greatest economic calamity in recent British history? Also, why does May first say she does not want to vote until 2020, and now says that this is what she will do? Her reasoning was that there are some people in her own party and in the opposition that want to undermine her political position (and she really trusted the polls to get the landslide).

The political weakness and lack of credibility of the May administration is counter-balanced by the growing popularity of her nemesis, Jeremy Corbyn’s Labour Party. Having been shouted down by the Blairite centrists, who are only different from conservative policy in that they support moderately greater social spending, but otherwise support the same neoliberal initiatives, Corbyn had risen to the Labour leadership since the last parliamentary elections two years ago to return to a more classic social democratic agenda. Corbyn is not a charismatic figure, as his speeches appeal mainly to more intellectual audiences, who rightfully attack austerity policies.

The Blairites were in the Parliamentary Labour Party (PLP) and fought back against Corbyn by pushing for a second leadership election after the Brexit referendum. The Blairites were represented by Owen Smith, who ironically supported a similarly populist agenda to Corbyn, claiming that he would be taken more seriously by the mainstream media, i.e. he will fake left (for the public) and act right (for the media and the powerful), the oldest trick in the hat. Corbyn’s party supporters were not fooled and mobilized for a second time to re-affirm Corbyn at the party leadership, but this time all of the attempted caesar-murderers in the PLP resigned their positions, and Corbyn had to fill the shadow cabinet positions with younger and less experienced allies.

Corbyn is not only opposed by his own party but also by the entire business community and the powerful media conglomerates, who control the political discourse in Britain (some newspapers like Independent and Guardian have exceptionally pro-Corbyn coverage). No wonder that Corbyn had been viewed so negatively by the public. But the election campaign changes the picture, as Labour more successfully mobilizes in their campaign trips. The young voters are overwhelmingly favoring Corbyn, though they are not voting in the same numbers. Now the older voters will have to recognize their self-interest and give their vote for the Labour Party, which could create a political upset. Further, the higher the vote participation rate the better for Labour.

On the other hand, the overall strategic position for the Labour Party is less favorable than for the Tories, because the Tories rely on the English heartland, which has the most amount of seats. Labour is fighting off Plaid Cymru in Wales and, more importantly, was literally wiped off the map in Scotland after the SNP had won most of the Scottish seats. It would be big if Labour could even receive some more seats and thus undermine a possible new Conservative administration.

There is a genuine choice for the British electorate, though I am not so sure whether the short amount of time that is given to the campaign (less than two months) will give people enough time to think about their choices. To some extent, that is what the Tories think will directly benefit them. The short campaign will lower the public exposure that the destructive Tory agenda will receive and time for the public to recognize the utter incompetence of the May administration. Also, Labour benefits from a high voter participation, while the Tories want a lower voter participation, because in that case it tend to be the older Tory voters, whose vote carry the biggest weight.

More importantly, the May administration justifies the short campaign with the 2 year time frame that Britain has to negotiate a Brexit deal with the EU. Article 50 was triggered in March, so March 2019 is the deadline for the Brexit negotiations. May argues that she needs to have a big majority, so she can negotiate the Brexit and have it be rubber-stamped by the parliament. But why is she the person and the party that should have the majority? Further, what can the UK expect from a Brexit?

The downside risk is substantial, because losing access to the single market will force the British to potentially pay tariffs for exports and reduce overall trade as parts and goods that seamlessly cross the channel are now subject to border checks. The UK government prefers access to the single market, but knows that it probably won’t work without guaranteeing the right of all EU nationals to stay, live and work in Britain. May can’t bring herself to sell it to the voters given that the sentiment for Brexit derives from the angst and anger against EU migrants taking British jobs. The fear has no basis in reality, and, in fact, by making it harder for qualified EU migrant workers to enter Britain, the health or transportation service will face shortages that can’t be filled by British nationals.

Within the EU there is not much of an appetite to be lenient on the British, given that the Eastern Europeans have sent a large contingent of their people to Britain, and the Poles are not really keen to welcome all of their compatriots back given that they have more opportunities and income in Britain. Poland is thus unlikely to back a weakening of the free movement of people within the EU. But even other EU countries are unwilling to grant a generous Brexit deal, given that they all belong to the pro-EU political establishment and are unwilling to have more countries leave, thus resulting in a full implosion of the EU. That’s where we would be had Marine LePen won the French presidential elections.

The European leaders, who want to maintain the EU, therefore, have every interest to make it as difficult as possible for the British to leave the EU to discourage more countries from taking that step. But that is really a reflection of the failure of the EU at the present moment. The EU used to inspire people based on the idea of peace and unity, but they have now gotten to a stage to have to defend a construct by the barrel of a gun. “We are bad, but the alternative is worse.” If the EU leaders can’t come up with better ways to address dissatisfaction (e.g. by easing on austerity, promoting eurobonds, and a new Marshall plan), the EU will fall apart in a matter of a decade or two.

British nationalists will latch onto the apparent crisis of legitimacy of the EU, and merely state that they are about to end a project on which they had always been quite lukewarm. But the death of the EU is a long-term process of decline, while the immediate pain to the British population is acute and might not be worth the sacrifice. To be quite frank, I thought the worst thing that would happen with Brexit was that Britain would become another Switzerland or Norway. Naturally, given the relative size of the British economy (second largest behind Germany), they would get some nice deal, such as perhaps a British negotiator working in “consultation” with EU negotiators for international trade deals, but the four freedoms would remain untouched (including access tot he single market and free movement of people). But that’s not the intention of the May administration.

“No deal is better than a bad deal”, says Theresa May over and over again with little regard for the negative repercussions for Britain. May has no basis on which to walk out from negotiations given that its economic fate is so closely linked to what happens across the channel. And how is Britain going to negotiate the over 700 trade treaties that the EU currently has across the world? It is another empty bluff, or let’s call it a lie.

Now the relevant question for the British electorate (given that the EU-internal issues can’t be solved in the next few days) is whether prime minister Corbyn would produce better results for Britain in a Brexit negotiation? Corbyn clearly backs the Brexit, having himself only lukewarmly endorsed the remain campaign. Corbyn’s reservation is similar to my own position, which is that EU workers rights do make sense, but that when it comes to the essential topics of public interest the EU is incompetent at best (no common social policy) and harmful at worst (permanent austerity and pro-business “competition” policy).

We can’t know whether Corbyn will be a skillful politician, and I suspect that a left-wing leader leading the Brexit negotiations is in no more of a desirable position than Syriza when it won elections the first time in 2015 and having to negotiate with hyenas at the IMF and the EU without pity or economic foresight. The only thing that would endear a Corbyn premiership to the electorate is that he would argue for a soft Brexit, which would be in line with what I had proposed. The Tories will put him up as a sell-out, and any residual dips in the economy in the form of a recession will be blamed on him, yet the Tories would have to account for a counterfactual of even more economic deterioration under a hard Brexit.

A soft Brexit may also allow the Corbyn administration to promote a greater investment agenda, higher taxes on corporations and high-income earners, and a needed shoring up of university and health care funding. That in turn will make the British people more relaxed, and I subsequently wish the Labour Party the best in the general elections.

On a final note, will the three recent terrorist attacks (two in London and one in Manchester) swing the vote either way? One might think a terrorist attack helps the governing party, but one does not get the feeling in the polls, which means that either voters are more concerned about other issues or that voters realize the gross incompetence of the Tory government, which has slashed public security and police spending amid these terrorist attacks.

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