Yanis Varoufakis on Bloomberg: A Great Political Interview

Yanis Varoufakis is not a politician. He is an academic who has published several books on game theory and global economics. In January 2015 he moved from teaching at the University of Texas to being the Finance minister of Greece, a country that has been in a debt crisis since 2010. Prime Minister Alexis Tsipras appointed him despite Varoufakis not even being a member of Syriza, the party that won the election. Not being a politician means that he has not built up years of experience in obfuscation, but is able to speak clearly and incisively on the economic crisis and the upcoming referendum.

With Greece going to a referendum on Sunday the 4th of July 2015, the government is aiming to convince the people to vote “No” to the current debt-restructuring proposal. Varoufakis gave an interview to Bloomberg this week where he dismantled many of the arguments made by the Eurogroup, the financial industry and the media. He made the important point Greece will never be able to recover as long as they have an unsustainable debt load. The IMF belatedly confirmed this when they said they would not put another bailout proposal to the board unless it contained debt relief. http://www.theguardian.com/business/2015/jul/02/imf-greece-needs-extra-50bn-euros

Varoufakis had the financial world on hold for 20 minutes as he gave this interview. I am sure that that his straightforward approach would have changed the minds of many in the financial industry that view him as a left wing pariah. He is critical of the approach to the crisis since 2010, which has been one of denial and short term fixes (“Extend and Pretend”). IMF, Euro commission and the ECB have imposed a program that is one of the great failures of economic history. Greece has been insolvent since 2010, but the programs to bailout out private sector banks while barely altering Greece’s debt burden have caused a great depression in Greece. Five years later and Greece is still not growing, as no one is willing to invest in productive capacity in Greece while they are insolvent. The IMF, the United States and Global Investors all do not believe that the Greek debt is sustainable, but the Eurozone institutions, fearing a knock on effect in other indebted nations such as Italy and Spain, refuse to acknowledge this or propose a deal that will solve the problems.

Greece has to say “NO” to the status quo and seek deal that will set them on a sustainable path, either inside or out of the Euro.

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