July 30, 2016
Typing the headline above feels like a very bold and controversial statement, but your author has been thinking for a long time that the former Greek Finance Minister might just be the smartest person involved in the story of the eurozone crisis.
For some examples of my thoughts, please see these three posts from this blog in July 2015:
Two additional events have happened recently to make me write this post. The first has been my reading of his book, “And The Weak Suffer What They Must?”. In it he explains in quite some detail the structural flaws that have created the eurozone crisis and the reasons why things just keep on getting worse and why the forecasts of economic growth keep failing to come true. With this in mind, he introduces a new phrase that I have not previously heard to economics, that of an “asymmetrical recession”. After all that I have read and the experts I interviewed over the years about the eurozone crisis, I can’t help but think that Varoufakis is right and the rest are wrong.
The second event was the publication of a report by the IMF about their understanding of the Euro and their handling of the Greek crisis (reported on here). It seems that the IMF now recognise that they misunderstood the structure of the eurozone, leading them to make poorly judged decisions and take the word of EU member state representatives at face value. This would seem to vindicate Varoufakis’ long-held opinion that the eurozone has structural flaws.
Hopefully, we can now come to a collective agreement that just because he disagrees with the consensus, rides a motorbike and wears a leather jacket, he ought to be listened to as an expert and a voice of reason.
Secondly, I have believed for a long time that the eurozone needs to be handled like a football club. Football clubs buy in the best talent, no matter the cost, to improve their performance. In contrast the eurozone is hampered by civil service rules, national interest, pay scales and blah blah blah.
During the years of 2009 to 2012 when I was regularly involved in writing about the crisis for a number of publications and so followed the events closely, one thing was clear: if you wanted to know what was actually happening, you ignored the press conferences of Olli Rehn (former Commissioner for Economic and Monetary Affairs), you ignored anything being said by the IMF or Troika, and instead you read the columns of Martin Wolf and Wolfgang Munchau as carefully as you could.
Or to put that another way, it always seemed as though the brightest minds were not in the employ of the EU, but instead were sat on the outside with no power to actually influence events. This is in direct contrast to how things used to work, when someone like J.K.Galbraith or John Maynard Keynes was in the room making decisions on behalf of a government.
Therefore, I have believed for several years that the EU should simply offer whatever amount of money is necessary to hire four or five of the best economic minds on the topic as consultants and advisors, treat them like primadonna footballers if needed, and actually follow their recommendations. Let’s be clear, the eurozone needs something and this might just be it. Anyone who understands economics will know the names of the most able candidates (Munchau, Wolf, Varoufakis and for some variety, perhaps someone like Joseph Stiglitz).
What is clear is that with the next downward leg(s) of the crisis building up steam (Italian banks? German banks? Greek debt? Something else?) the EU needs something different.financialguy