(June 2011 interview)
One year ago we heard for the very first time about rumors of Greece leaving the Eurozone. What has changed in one year to go from considering it just gossip to taking it as a real fact?Something very simple: at long last the truth bubbled up to the surface of the murky pond of subterfuge that is Europe’s response to the Crisis.
In May 2010 Europe decided to pile onto the insolvent Greek state the largest loan in history on condition that Greece would reduce its national income (from which new and old loans would have to be repaid).
A year later, in 2011, it became clear that the policy was simply delaying the inevitable default. It was at that time that rumours of a Greek expulsion were first uttered. Europe’s response was to repeat its error: with one hand to write down around 95 billion of Greek debt while with the other adding another 130 billion to the same pile of debt, again on condition of further diminutions in Greece’s national income (also known as ‘austerity’)!
It only took a few months for the world to realise that this was simply a form of organised madness, and that the Greek state’s insolvency was a growing black hole. Naturally, the rumours of a Greek exit turned into a raucous cacophony. Of course, it is all smoke and mirrors. Again! For if Europe were ready for a Grexit, as per the latest neologism, there would be no need for rumour-mongering: Greece would have been forced out overnight and without much fanfare or early warning. Alas, it is not that simple. The Eurozone is simply not up to it, despite the threats and protestations of assorted Frankfurt-based bankers. And so the rumours of a Grexit get louder in a sad relection of Europe’s astonishing capacity for what I call reverse alchemy (i.e. beginning with gold and ending up with lead).
This interview from 2011 with the the man who is now Greece's Finance Minister gives us insights into Syriza's thought processes and likely actions.
Two things are immediately apparent - Greece with default on its debt and Greece will attempt to stay in the Euro.
German reaction to this will prove to be the making or breaking of the European Union.
Clearly, the Greek debt is so large it is not repayable.
This also causes a huge problem for shaky German bank Deutche Bank that has loads of Greek debt swaps.
Over the next few months expect even more volatility in the stock market and a surge in gold prices as fear mounts and a new banking crisis threatens.