Follow up on Greek debt

This post is a follow-up to this post.

I read a very interesting article in FAZ during the weekend (unfortunately only in German). It quotes Mr Varoufakis, the Greek finance minister, saying that the letter to the Eurogroup was deliberately formulated in an opaque way. He further claims that he was encouraged to do so by various representatives of EU governments, as this would make it easier for them to push “this trough” their respective parliaments. Checks and balances anyone?

Is he lying?

I sincerely believe Varoufakis is telling the truth. As I have written here, the representatives of the creditor countries have an interest in pushing out the inevitable write-off. This is made possible because of nonsensical GDP accounting practices that do not know the concept of provisioning against expected losses and losses are only recognized when definitely acknowledged. I wrote that the rules are deliberately nonsensical such that the ruling classes can stay in power despite unsustainable policies. Voters will only realize that the money is lost when it increases their budget deficits and leads to tax increases, until then the loans are just (abstract) headlines in newspapers. So much for homo oeconomicus and policy irrelevance

No doubt, money will continue to pour down this bottomless hole, unfortunately it will do nothing to revive the Greek economy…


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