Wednesday, January 28, 2015

Yani Varoufakis, Secretary of Economic Affairs

SYRIZA leader A.Tsipras picked him as his new Secretary of Economic Affairs, the most critical cabinet post next to his own of the Prime Minister. This is simply so because of the audacious promises he repeatedly made to the Greek electorate during campaigns, eventually leading to his sweeping landslide victory this past Sunday. His main theme was braided around (a) getting rid of the Troika monitoring and policy recommendations, (b) renegotiating the servicing of Greece’s debt with its creditors, and (c) rolling back lost benefits and jobs to the "victimised" members of his electorate. In other words, promising to bring back a large part of the "welfare state" that Greeks have been used to during long years of uninterrupted and unverified funding by the EU and its agencies/institutions. Only time will show whether this brand new and youngest ever Greek PM, Alexis Tsipras, «the great white hope of certain European leftwing movements» to bring «change» to the mainly rightwing governing EU Establishment, and «teach ‘em a lesson» remains to be seen. By nature, I don’t believe much in miracles, other than those related to Divine «intervention». However, for sure I am prepared, like millions of other Greeks, to give SYRIZA the benefit of the doubt. Like Belgians here say, «hope helps you live…» Maybe, just maybe, it would take a Leftist Radical Party like SYRIZA, that never governed anything before, to become the government that Greece needs right now. Since the remaining of the larger political parties have miserably «failed» in the past, and almost brought the Greek Nation to its knees, then, what else is left to do? From this point of view, last Sunday’s polls seem to have been, at the least, ...righteous!

The position of Minister of Economic Affairs, under the circumstances, is indeed this cabinet’s most critical ministerial position. It was also critical in each and every cabinet before, certainly ever since «the feces hit the fan» (2008), but, it is far more so now that the new cabinet needs to deliver the (unsustainable to many) promises an ambitious Alexis conveyed to his cheering supporter crowds during the election campaign. Worst of all the «average Greek on the street» genuinely believed him. His landslide proves this.

I haven’t ever heard of Yanni Varoufakis, as I am a Greek of the Diaspora myself, but I learned about him by talking to friends and reading his blogposts and CV, after today's announcement. He seems to have made quite a name for himself, internationally as an economist, and in Greece as a blogger about subjects of national interest focused on finance. He eventually amassed more than 55K votes in the last elections… not bad at all for a newcomer!

Varoufakis is a mathematician and a macro-economist with (a shedload of) academic level studies and published papers and books, especially with math-stats in spades. Also, he PhDed in everything you'd like to know about Industrial Actions. Suitable and valuable know-how, even if it's only theoretical for the most part, if you are made a Finance Minister in Greece right now. He doesn’t seem to have considerable people management experience though (I recall he mentions somewhere that he managed a small team of lecturers in a certain educational project), and he is indeed the stereotype of a reasonably successful career academic, by all means. In other words, he's got lots of experience "talking about things", if you know what I mean. He taught undergraduate and postgraduate classes in various Economics Schools internationally, in capitalist countries (UK, Australia and the US… even worse, in Austin, TX in the US, the epitome of the Capitalist Free World). Despite this type of rightwing credentials and exposure, he was eventually stamped a «Radical Economist» by the International Press earlier today, following announcement of his appointment. In all my ignorance, I am trying to understand what "radical economist" really means. I would have preferred him to be stamped a liberal capitalist, not necessarily a GOP libertarian, but a free market capitalist nonetheless. This is at least what I concluded based on his CV bullets.

I also picked one of his recent works from his personal blog, a paper in PDF format. It was in its latest revision (4th in fact), humbly titled «A Modest Proposal for Resolving the Eurozone Crisis» co-authored with Stuart Holland (UK), and James K. Galbraith (US), two fellow economists and academics like himself (Holland was also a UK MP for sometime). You see, reading a paper like this helps you find out a lot about someone’s core beliefs. Reading someone’s sentences, analysing the words and terms he uses and trying to understand why he said what he said, and how he said it. Simply reading a CV is not enough if you are trying to figure out someone’s skills and merits. Most of us make a habit of boasting unreasonably in our CVs. Especially career Academics are off-the-charts in describing each and every ‘thing’ they ever got involved into. So, since I can’t possibly look Yanni in the eye and chat with him to see, hear and deeply feel him talking about stuff (like we do with candidates we interview to hire), I decided that the best way to get under his skin was to read what he had to say to the World and how he's been saying it. The aforementioned paper and his various blogposts were the best sources available at hand, I reckoned.

So, I first read his declaration (in Greek) in his blog about why and how he decided to quit his current life and join SYRIZA in last Sunday’s polls, and then I studied (not simply read) his co-authored paper mentioned earlier. Since he was the first author in the list, I’ve reasonably assumed that he actually edited its lion’s share, with the remaining authors simply verifying/correcting.

The strategies Varoufakis describes in his paper seemed to me very much along the lines Tsipras has consistently followed on the question of Greek debt, I must admit… (That would also explain the latter’s decision to appoint him at the post of Finance Secretary.) It’s not too long a paper, and you don’t have to be a rocket scientist to understand what they try to convey. Actually they unravel the Eurozone crisis in four components, ie. banking, sovereign debt, investment and social crises, and they try (all but modestly) to formulate solutions to each and every issue with (a slight degree of) intellectual arrogance and (extreme degree of) self-confidence, I’d say. In other words, the author(s) go that far as to suggest to the leaders of the Troika (Commission, IMF and ECB) how to… do their job... properly. Very daring indeed! Now then, some of the arguments they used make occasionally logical sense, but we have heard most of them time and again, even from the likes of liberal, stimulus hungry, anti-austerity evangelists like Paul Krugman, a primus inter pares among my personal favourite economists, for some time now.

However, there is nothing mentioned in the paper to suggest that the current unsustainable position in which peripheral EU countries found themselves has, for the very large part, been caused in the past by their own cabinet programmes and the execution of such programmes and policies. The authors conclude that it is mainly the fault of the better performing countries (the so called «surplus», with Germany on top) and of Troika’s stubborn austerity doctrine that eventually brought badly performing countries to the abyss. IMHO, not admitting openly the huge responsibility of local governments in this clusterf@ck is very much a mono-dimensional SYRIZA-line argument, that proposes that the peoples of problem periphery nations are innocent victims of the riches and the surpluses (not many, but some) of this European Union. To a certain degree, many might agree with a similar point of view, but, knowing my own Greek DNA well, I also know for a fact that, although Greeks have been somewhat victimised by the riches of certain surplus EU members (yep, nobody denies the billions paid to creditors due to exorbitant spreads when times got rough), they got mainly themselves to blame for the largest part. As an Academic, only focusing and offering advice about only one side of the problem, and not mentioning the other side not even once, while being aware of the objective truth (unless he lived under a Parthenon stone for the last 35 years), then what can I say? This paper in my eyes, as a casual non-expert reader, does not discuss the factual truths completely, but rather examines a partial version of these truths, most probably inspired by political motives.

As for the merits of their recommendations, I don’t know… most seemed to me like calling certain old subjects with new names to make them appear different (the cloth doesn't make the priest). What is the benefit, for instance, if investment projects funded by the EIB/EIF fall outside formal national debt? Does this make the actual total debt appear less than it is? C'm on! Is it going to solve the issue that the country is factually bankrupt with no remedy in sight? I’d give it to them though that a couple of their proposed "tricks" were aiming at reducing interest amounts paid to some of their creditors, and all this might be still helpful, at least if, at the minimum, a serious effort is done to ensure LONG TERM national recovery and job creation. Talking about Greece, with virtually no heavy Industry, a castrated agriculture, and only the weather and tourism on their side, these suggested "tricks" are indeed very short term remedies. Not a panacea! It is just an aspirin tablet to cure the Nation's pancreatic cancer.

I pray, when Alexis, with Yanni under his arms, appears in Brussels to (hopefully) re-negotiate the current debt servicing, that they both indeed maintain, above all, an attitude of humility. Tsipras was so far quite successful to get where he wanted by supplying abundant (populist) rhetoric for internal consumption that seems to have worked. However, Greece’s creditors have the International Law on their side. The last five years Greece has received a lot of help by its creditors. At the same time, these same creditors, having lost billions in the haircut, learned their lesson well, recapitalised their operations, and reconfigured their investment portfolios by better spreading risks. For sure, non-Greek banks did that in spades. I recently heard a financial reporter on the local (Flemish) TV say that, although the previous Greek debt haircut factually bankrupted one of the banks here, this time over the Belgian banking exposure to Greece defaulting would remain sub-minimal… now, if this is true for Belgium, it must be true everywhere else. That means, from a negotiating point of view, the only thing that can play to Tsipras advantage is simply a spirit of «humility» and of realistic argumentation that won't drive his creditors up the walls... Unfortunately for him, his creditors have not been sampled out of his supporter electorate. And above all, such creditors love their money, very much indeed. Too much to be accurate, as they are born and raised devote capitalists, who don’t believe either in charity, or listen to any arguments of "social inequality and wealth redistribution". For Greece’s sake, both Alexis and Yanni will have to forget what they have been preaching until now domestically, or else they both risk to experience personally the wrath of the same voters who gave him a landslide last Sunday. History, clearly teaches them that. Not any history… simply the 3 thousand year long history of their own homeland. Amen.

UPDATE: Unfortunately my prayers weren't heard. Not even a week passed since they 've been in charge and the gaffes performed by a whole array of new Ministers are beyond belief. Without an official announcement yet by the PM of his cabinet's planned programme, ambitious fresh ministers rushed to irresponsible statements about new measures that will kill the vast majority of troika inspired policies implemented by the previous two cabinets. How do you spell 'populist' my dear?

Our man Yani Varoufakis announced formally today to Eurogroup Chairman Jeroen Dijsselbloem that the cabinet rejects troika altogether and demands an international conference of creditors to decide a proposed 50% haircut of the debt. Dijsselbloem reacted stating that the Eurogroup is the proposed 'Conference'  and there was no need for another one. And he then rushed literally out of the room. BTW, Varoufakis intends not only to negate everything the previous governments implemented but also launch his own new style of business attire, with casual jackets, no ties at all and colorful shirts hanging above his jeans trousers. The ridicule so far knows no limits. I have no idea what these people continuously smoke for breakfast, but they are either too stupid to understand the seriousness of the situation and the damage they are inflicting to their homeland or extremely arrogant and equally incompetent, or all of the above! I'd put my vote on "all of the above" and some more...