segunda-feira, junho 15, 2015
Varoufakis - Greece, Germany and the Eurozone – Keynote at the Hans-Böckler-Stiftung, Berlin, 8 June 2015
Some ask me whether we are prepared to risk Grexit so as not to sign up to the institutions’ demands. Our answer is that it will be a sad day for Europe when its integrity becomes a football to be kicked around in a game whose purpose is to force a sovereign people to accept an impossible deal. In any case, if such a terrible deal is to be imposed on our people, well at least it will not be with our signature. Immanuel Kant taught us that the majesty of duty has nothing to do with the calculus of expediency. It is an irony that it may take a Greek government to remind Europe of the great German philosopher’s dictum.
Coming back to the reforms that Greece needs, in a sense, what our government is asking our partners for is to give us a chance to reform. To do our homework. Please let us reform Greece deeply. For if you continue to insist on logical inconsistent numbers, on ideological fixations and on socially unjust measures we shall not be able to carry the Greek people along the reform path that the country needs. Greece will remain unreformable if the institutions prevail. It is that simple.
To recap, we need to agree on proper, deep reforms and to embed them in a larger package, a larger agreement, which ends the Greek crisis once and for all. Besides the deep reforms, the other two elements of this broader agreement, must be a mechanism for rendering Greece’s public debt sustainable (without haircuts and without new monies for the Greek state) and an investment package that kickstarts the economy and crowds in private investment.
[Debt restructure – debt swaps]
Greece’s crisis began with public debt unsustainability. It will only end when public debt becomes sustainable again. Here is what we propose:
Greece acquires now a new liability of 27 billion to the ESM which allows us to buy back from the ECB the old SMP bonds that the ECB purchased in 2010, and whose face value is precisely 27 billion. Then we retire these bonds immediately. Thus the ECB will be repaid in full for Greece’s remaining debt to it. The result will be an elimination of our short term funding gap and the opportunity for Greek bonds to participate in the ECB’s quantitative easing program, thus helping us return to the money markets in a manner that eliminates the need for more official sector loans in the future. Once the ECB SMP bonds have been repaid, the ECB will return to Greece, as has already been agreed, the ‘profits’ (approximately 9 billion euros) it made due to having purchased them below par initially (as per the existing arrangements for returning to Greece the ECB’s SMP program ‘profits’). Greece uses up this sum to repay, in part, its remaining debt to the IMF (19.96 billion). The remaining debt to the IMF (approximately 11 billion) will be refinanced through our regained market access.
An obvious objection to this swap is that, while no new money will be received by Greece, the ESM will have to acquire a new liability and, for this reason, a new set of conditions is necessary. This is true. But a simple solution presents itself readily: The same conditionalities, i.e. reform package, that we shall agree upon to complete the current program can also serve as the conditionalities for this new arrangement with the ESM. A common set of conditionalities, that our Parliaments approve, as the basis for concluding the current program and beginning the new arrangement. That way neither Chancellor Merkel nor PM Tsipras will have to go to our Parliaments twice. A simple, efficient and effective arrangement is, therefore, in sight.
Debt management is a necessary but insufficient condition for ending the Greek crisis. Greece’s economy needs to be kick-started. While long-term recovery will need to be financed privately, getting the flow of investment funding going will require an initial boost. It will also require a vehicle for dealing efficiently with the voluminous non-performing loans that currently block the credit system. Here is our proposal on this front:
The European Council gives the ‘green light’ to the European Investment Bank to embark upon a Special Investment Program for Greece that is fully funded by a special issue of EIB bonds (waiving the requirement of national co-funding), with the ECB providing secondary market coverage for the latter (in the context of its QE program) – to be administered by the EIB and the EIF in cooperation with a new public Development Bank, in collaboration with EFSI, the Hellenic Investment Fund, the EBRD, KfW and other European investment vehicles, and in conjunction with new privatisations (e.g. ports, railways)
The great merit of this proposal is that it will come at no cost to Greece’s creditors. The EIB operates on purely banking criteria and, on this occasion, stands to benefit from Greece’s rapid economic growth and the inevitable rise in asset prices. The very ‘announcement effect’ of this package of reforms, debt management and an EIB investment package will, even before any investment funding is provided), crowd in substantial investments and, inevitably, end the Greek crisis.