 We're very pleased to have this evening, Dr. Yanis Farifakis, former Greek finance minister and currently professor of economic theory at the University of Athens. My name is Mary Hanley and I'm a program officer here at World Affairs. World Affairs seeks to explore problems and expand opportunities at the intersection of international policy, philanthropy, and commerce. Where solutions to hard problems lie, learn more at worldaffairs.org. Please take a moment now to silence your cell phones and any other noise making devices. We are recording for radio and I'd like to thank KQED's audio engineer David Ogledy. Please also make use of the blue comment cards you'll find on your chairs. Staff will collect them throughout the program and share your questions with the moderator. I'd also like to remind everyone that tonight's program will feature an extended discussion. At the end of the event, we'll open up the floor for your questions and comments. I'd now like to introduce our moderator for this evening, John Wilson is partner of Shearman and Sterling and served as the managing partner for Shearman and Sterling Bay Area offices from 2001 to 2010. In addition, he has worked in their London, Paris, and New York offices. He is also a trustee of World Affairs. Please join me in welcoming John Wilson, who will introduce our speaker. Mary, thank you. We're going to have fun this evening. Thank you for joining us. It is my great pleasure to introduce tonight's guest. Dr. Yanis Varoufakis is a professor of economic theory at the University of Athens. From January to July 2015, a relatively important time in the history of Greece and Europe. He served as Greece's finance minister and he represented the Greek government in numerous high-level talks with other European Union member state representatives during the Eurozone crisis. He has recently launched DM-25, and by that I mean within the last few months, an ambitious pan-European grassroots movement intended to democratize Europe and increase public representation in the European Union by the year 2025. His most recent book is entitled, And The Week Suffer What They Must. For those of you here tonight, please see tonight's program flyer for his full biography. Please join me in welcoming Yanis Varoufakis for a conversation about the complex Greek economic landscape and the controversial and, we hope, hopeful future of the Eurozone in the global economy. So for those of you who haven't read the book, I highly recommend it. It is a good read in 250 pages. He takes you from Bretton Woods through the various twists and turns of international sort of financial theory and the various agreements and rubrics that have been devised to try to deal with surpluses and deficits, trade imbalances, and the political realities in Europe and the United States and elsewhere. If you enjoy Michael Lewis, if you enjoy The Big Short, if you enjoyed Stress Test, books like that about financial theory, about economics, you will thoroughly enjoy this book. It's extremely well written, very entertaining, very concise, and very informative. So with that introduction, I'd like to start with a very fundamental distinction that you make in the book at the outset about the difference between the tools that are available in the United States when we have an economic crisis similar to 2008 and the system and the tools that are available for the European model and essentially the hurdles that you faced and that the Europeans faced when trying to deal with the very significant economic crisis of 2009, 2010. Well, let me just begin by thanking you, John, and thanking everyone for being here. It's heartwarming. Let's go back to 2008 in response to your question. Imagine if the dollar zone, also known as the United States of America, were structured according to the rules and institutional framework of Europe. Let's go not too far away from here to Nevada, the great state of Nevada. Then approximately the same as Ireland. The climate is very different to Ireland, but the economy is not far off. Both economies concentrate a great deal on real estate and the financial services sector, and they both experience the major boom in these two sectors prior to 2008. Imagine what would have happened if in 2008, once the bubble in real estate collapsed and the banking sector imploded, if the state government of Nevada had to go cap in hand to the international money markets, trying to borrow the money that was necessary in order to salvage, to bail out the bank's domiciled in Nevada, while at the same time unemployment burgeoned as a result of the collapse of the developers, construction work is becoming unemployed, and the state government having also to find the money to pay for the increased unemployment benefits in an environment of collapsing revenues as a result of the downturn. It is very simple. The state of Nevada would not be able to borrow the necessary money. Now let's take it a bit further. So imagine the governor of Nevada flying to Washington, DC, cap in hand, saying, please help. And imagine if the response by the Fed, by the Treasury was, you are not allowed to default on any of the loans, you have to save the banks, you must pay the unemployment benefits, and we are going to give you a loan which is one of the largest in history because it would have to be in order to cover for all those losses on condition that you slash all pensions, you slash Social Security, you slash salaries, and you consolidate your budget by 30%. Now what would have happened if that were the case? Nevada would have been emptied of people. The recession would be so stinging that you would have a massive migration of people from Nevada, and the state of Nevada would be, as well as the banks of Nevada, would be perpetually broke. This is precisely what happened in Europe. And of course, if that was what happened in the United States, the markets would immediately look at what's happening in Nevada, and they would start fearing about Missouri, about Mississippi, eventually a domino effect would happen, and California would be hit, and, and, and, and. I think that answers John's question, just, I drew this parallel in order to make the, the, the simple point, that the Eurozone is a remarkable design, remarkable and remarkably idiotic, in the sense that we've created a central bank for all of us, which is not allowed to come to the rescue, no FDIC, no capacity to purchase bonds, quantitative easing, and we have states without central banks, and states with, without central banks, which are supposed to salvage the banks, which finance them. John, let me just give you one little snippet of the, the, the, the incredible, um, subterfuge wrapped up in irrationality of the Eurozone. Every time a government in Europe, whether this is Greece, Ireland, Spain, is clashing with the creditors, the creditors what they do in order to gain leverage over you, over the government, is they switch off liquidity to the government, and because you don't have a central bank, this is a serious problem, right? There were times, even when I was in the ministry, but when some of my predecessors were in the ministry, too, over the last seven years, when the following happened, the state would owe money to the central bank because the loan in the end came, but it was a loan from the central bank, unlike, unlike quantitative easing, it was a loan, can you imagine? Can you imagine Jack Lew borrowing from Janet Yellen? Just imagine for a second. We had these loans, and of course we couldn't repay them because the whole point was that we were bankrupt, so if you're bankrupt and you get a huge loan, um, that doesn't get you out of your insolvency, does it now? So we had to repay loans to the ECB, to the European Central Bank, which we couldn't. The only way we could was if we got more loans from, from Europe, so we would get more loans from Europe to pay Europe, take money out of one of the pockets of Europe and give it to another, yeah? But they were, remember, they're trying to asphyxiate us to accept more austerity cuts, lower pensions and so on, so what they do is they, they stop these, these loans. But then how can you repay them? So this is what they, what they did. This is, this is what I'm going to describe to you has been happening. It is unimaginable, but it's true. The Greek state would issue t-bills, treasury bills, that no sane investor would ever buy because the Greek state was bankrupt, right? The banks that were, the Greek banks, which were bankrupt, would take a piece of paper and write an IOU on, yeah, I, the president of such and such bank, of Alpha Bank or National Bank of Greece, solemnly declared that the holder of this piece of rubbish paper has a claim of 40 billion from me. Yeah, right. That was a worthless piece of paper. Who would ever buy that? No one. But they would bring it to me to the finance minister, the finance minister of the bankrupt government to guarantee, to give the guarantee of the bankrupt Greek state to the bankrupt bank. The bankrupt bank would take this IOU with a phony guarantee from the bankrupt Greek state and would give it to the ECB, to the European Central Bank, as collateral, for money that the bank would get, loans. And then the bank would buy my treasury bills that no sane investor would buy so that I could take this money and give it to the ECB. You can't make this up, can you? These are the tools and instruments we had to play. But it's, you know, it's an interesting workaround because you actually in your, in your chapter that covers this mechanism and maybe it's because I'm a finance lawyer and I sort of followed the different steps. I understand what they were doing. They were really getting around the legal gaps in the existing structure, right? Because going back to the Maastricht Treaty, the European Central Bank doesn't have the powers that, you know, the Fed has in this country, right? And you also have a very different relationship with the Bundesbank, with the German authorities, in that they seem to be in this veto power or position with respect to so many of these initiatives. And so when it actually comes to putting together a package, you know, it's not a function of a few policy makers at the Fed working with treasury and so forth as we had in the United States. By the way, a system that has come under some criticism in this country, right? But it's much worse and certainly much more complex and much more difficult. And I think in the case of Greece because you were first, I believe, right? You were also being made an example of it. And one of the points that I find so interesting is this notion that the austerity package had to be part of the, or the austerity measures had to be part of the, you know, the overall package for even this very complicated indirect financing mechanism, right, which is, you know, a little bit like, you know, one of these collateralized bond structures, you know, that prevailed in these markets because they were transferring the credit risk, right? And I find it interesting, my question really is, were the austerity measures, you know, were those imposed simply to deal with the political fallout in the European states that the regulators in Germany and elsewhere, the political fallout that they would face if they went ahead and offered even this indirect type of relief to Greece without some price to pay or some, you know, pain being exacted? How do you, or was it truly a question of a policy view that these austerity measures, you know, would help solve the problem? Oh, I think it's a combination. The ideological part is there. Remember in Europe during the Black Death, the church was convinced that the Black Death was due to the sinfulness of Europeans and it was prescribing bloodletting as a solution. And if the bloodletting didn't work, it must have been because there wasn't enough of it. So there had to be even more bloodletting. There is this element, the Old Testament kind of harshness, ideological background. There is also, let me say that when you have a bubble that bursts like we did, like we all did here in the United States everywhere, there's going to be some pain. There's no doubt about that. And my view, my feeling, my sensation is that the Greeks overall were ready to take pain in 2010. But they were ready to take it as an investment into turning things around. So there's a difference between drinking bitter medicine and drinking poison. We drank poison and the result is that still, since 2008, every single quarter sees a shrinkage of our nominal income when our debts are rising. So we are in the class of a major depression. But let me try to answer your question in terms of what is the basic essence of the motivation behind what happened in Greece from the perspective of the Chancellor of Germany, of the Central Bank, of the Commission and so on and so forth. Just like here in the United States, in 2008, the authorities could not believe their eyes and their ears when the financial system imploded. They didn't see it coming. It was no conspiracy. They just did not see it coming. They had believed their own narrative about risk and risk and about all that. Similarly in Europe, the people in authority had believed that the eurozone was constructed soundly when it was not. In, after 2008, when Lemons collapsed, the Europeans were almost triumphant. They felt that, ah, those Anglo-Saxons, they have been lecturing us now for years about competitiveness, about the new paradigm, about financialization and about that. Now they're getting their comeuppance until they looked inside their own banks and they realized that they were in a far, far worse state than Lehman Brothers was. So Lemons had what, a leverage ratio of 1 to 37, and Deutsche Bank 1 to 78. I mean, unbelievable, unbelievable. So here we have Angela Merkel. Angela Merkel is a very interesting politician. I have a lot of time for her personally, even though I disagree with almost everything. No, but she's impressive, her work ethic, her attention to detail, and the way she maneuvers politically, and out maneuvers her own folks, her own people, like Saubel and the others. But she had, she was projecting the image of the Schwabian housewife, make sure that not one euro is misspent or misallocated, that everything is done by the book, the rules and the regulations are respected, that there is parsimony and all that. Suddenly she receives, so in the context of this, she was very harsh with her own ministers, with her own party not to overspend, to keep their lives on government expenditure and borrowing and all that. She gets a phone call in every 2009 saying Deutsche Bank, Finanzbank and another 20 banks are going under. We need 500 billion by two o'clock this afternoon, 500 billion, that's 600 billion, sorry, dollars. So more or less the same package that Hank Paulson went to Congress and sought. And why? I mean these banks have been making loads of money every quarter. Why Chancellor, let's not talk about it now, we'll do the anatomy later, but now we have to give them 500 billion. So she goes to the Buddha stack and drinks the poison, the political poison of looking into the eyes of her own conservative, said the Christian Democrat MPs, and saying to them, don't ask questions, we need to give 500 billion to those people who until yesterday were making loads of money. So she does that. She goes home, she doesn't even know what happened, what hit her. Four months later she gets another phone call, Chancellor will probably need another trillion. What? And the story is told that to her is explained that the Greek state is going bankrupt and that's around 250 billion owed to French and German banks. The Greeks can't pay and the reason why they can't pay is because their growth rate from being plus eight became minus 10% in nominal terms, from plus eight to minus 10. And nobody wants to lend them because all the financiers are panicking, credit crunch, remember Dubai at the time and all that. So the country financed their loans, so they'll have the default. And if they default, then Deutsche Bank is finished yet again and there will be a domino. Societe General is going to go under, Portugal is going to go under, Ireland is going to go under, Spain. We estimate we need about a trillion in order to contain this capacity. And wasn't a similar conversation taking place in Paris as well with the French banks? True, true. But in the end the French banks were bailed out by the rest of Europe and they didn't get the same kind of bailout. So the French state was fiscally stressed in the way that the German state was not. So they got far less directly from the French national budget. In Germany they got 500 billion, I'd say a very large amount. And then, so, could she have gone back to the Buddha stag, the federal parliament and say, remember what I said to you a few months ago that 500 billion would be enough to save those financiers? Well, I was lying. We needed more. She couldn't do that. She just could not do that. Politically it would have been suicide. So what she did was to go to the Buddha stag and to use ISOP, the ants and grasshoppers story. Europe is populated by ants who work very hard and by grasshoppers who sit under the tree in the Mediterranean playing their guitar, singing along merrily. And demanding a bailout during the winter from the ants. All the ants live in the north and all the grasshoppers live in the south. So these Greek grasshoppers, having spent their summer, some baking and singing and dancing, now need to be bailed out. So I need 110 billion to begin with, to begin with, for starters, for those Greek grasshoppers. They are terrible. We hate them. They are undeserving. They are unworthy. But in the name of European solidarity, we can't let them die. So Greece got 110 billion. Of course, to convince them, and this is going to the point of your question about austerity, to convince the Buddha stag that we are going to save the grasshoppers, we have to be harsh on the grasshoppers as well, so they don't do it again. So what we do is we introduce exceedingly harsh austerity measures, which, however, can do something really quite tragic. They put Greece into a nosedive, Greek national income. We lost 28 percent of national income, 28 percent. When Thatcher caused a furor in Britain with a recession in the early 80s that saw unemployment rise from 750,000 to 4.5 million, the consolidation, the loss of income was 1.5 percent. We lost 28 percent. So we have a humanitarian crisis in Greece. And what happened to the money that the Greek state got from the Buddha stag? It went to Deutsche Bank, to Société Générale. But what was also quite sinister, John, as many people don't understand that, is because the eurozone operates on the basis of shareholdings. So for instance, the ECB is owned, 27 percent of the ECB is owned by Germany. Why? Because the German GDP is 27 percent of the GDP of the eurozone. Similarly, whenever the eurozone borrows to give a bailout loan to someone, 27 percent comes from Germany that has to spread out. So poor Portugal, poor Ireland was made to borrow on behalf of Greece so that Deutsche Bank could be saved. So they spread out the burden of the bailout of the French and the German banks. That's why the French didn't have to pay that much. They had the Slovaks paying for it, the Greeks of course. Okay, you can say that the Greeks are the loans, but the Portuguese, the Irish. So to cut the long story short, austerity was a political justification that was necessary in order to convince the Buddha stag a few short months after they had already given 500 billion to give more because it was portrayed as solidarity to Greece. Now how much, let me just finish up this story. In the reason why I'm not finance minister anymore was because last July I refused to sign another of these agreements. Had I signed and my good friend and successor, Euclid, it's like a lot was signed. That's why he's still there. What exactly did he sign? Another 85 billion loans. Now how much of that will go to Greece? It's a radical number, zero. Of all the loans that have been given to Greece, 91% went to the banks, 91%. The rest went to the Greek state, but it wouldn't have been needed if the Greek state had not shrunk as a result of the recession, the depression that was caused by austerity. So when they say, oh, we bailed Greece out. What? Greece was never bailed out. You know, when you say, I had Jean-Claude Juncker, the president of the European Commission say to me, we are going to give more solidarity to your country. Just go along with us and say, Jean-Claude, enough solidarity. We don't need any more of the solidarity. Please, no more solidarity. One of the interesting notes that you make in your description of your own experience is that, in fact, while you were meeting with the representatives of Shroika and they were outlining this program, you say that in private, they were quite open with you that these measures would not work. I don't want to put words in your mouth, but I believe that's the way you describe it. And yet they were not prepared to alter their positions. What was going on there? Was it really just politics within Europe, as you've just described, or was there more to it than that? The beginning was the scene that I described, and a political imperative to bail out the French and German banks without seeming to be bailing them out, to present it as solidarity with Greece, Ireland, Portugal, and so on, when in reality they were bailing out the banks. Now, the thing is, why did the banks need to be bailed out? Because the states had become insolvent. But as I was saying before, you cannot overcome an insolvency by means of loans. So they knew that they wouldn't get their money back. They were giving this money to Greece to give it to Deutsche Bank, knowing that they wouldn't get it back from Greece. So they lied to their people. They lied to the Greek people and they lied to the German people and to the Dutch people. Okay. So let's step back a minute, because just in order to answer your question. So that's the original scene. Lying to parliaments, disguising a bailout for banks, that the money was irretrievably lost once you did that bailout, disguising it as a loan that would be repaid with interest. Okay? And once Merkel accepted that and the rest went along with it, it was very difficult and remains very difficult to go back to these parliaments and say, you know what? We lied to you. We're not going to get the money back. This money went to the banks. We won't get it back. You can't really expect the insolvent, who's be given an extended pretend loan to repay the old loans and the new loans, especially when the loan has been extended to them under conditions of shrinking their income. So this is the conundrum that they face. The people that I was negotiating with, the Troika, Christine Lagarde, the managing director of the IMF, Mrs. Merkel, Dr. Schoibler, the finance minister of Germany, the commission, the Eurogroup, this Troika of Lenders, as we call them, they admitted to me in private, as John said, that I'm right, that these policies cannot possibly work. This is an expression that was used. And I really freaked out when I heard it, because it's one thing for me to say that these policies of yours will not work. It's quite another for them to say, you're right, they can't work. Can't work is a very big statement. It's not the same. It's difficult for them to work. Can't work. It's like squaring the circle. It's not a question of willpower, expertise, how good a mathematician you are. It cannot be done. So they said to you, it can't work. And then immediately add the following, but Janis, you must understand that politically it is impossible for us to confess this. We have invested a lot of political capital in this program, and your credibility, my credibility, depends on you accepting it. So let's step back. One of the things you do extremely well in the book is that you articulate some fundamental principles of macroeconomics in ways that even I found understandable. You discuss in some detail this notion that in a worldwide, a global system of modern economies, you are always going to have significant imbalances, trade surpluses and trade deficits and so forth. There will be long periods of surpluses in one area, but these things shift, and it's a complex system. But that without some sort of mechanism or a series of shock absorbers, I think is the term you use, that provide for the recycling of the surpluses in the surplus nations effectively to the deficit nations, you really have an unsustainable system that will ultimately build to a certain point and then crash and burn. And you point out that in the United States we do have certain shock absorbers that are helpful, but that in Europe you don't have those same mechanisms in place. Can you just elaborate on that and in particular give some examples or some of the reasons why this set of issues was so acute in Europe? Well, since we're here, Arizona will always be in the deficit in relation to California. Always was, always will be. Similarly Vermont will be deficit in relation to the state of New York. London is in surplus in relation to Yorkshire. Eastern Germany is in deficit in relation to Western Germany. Always was, always will be. Greece is a chronically deficit country vis-a-vis Germany. Even within a city, if you look at different suburbs, they are not balanced. Some are in deficit and some are in surplus. But what keeps a union together is exactly what John said, a surplus recycling mechanism. Let me give you a very simple example, one that has been working increasingly well in the United States since the 1930s, the military industrial complex, which is a magnificent surplus recycling mechanism. So when Boeing gets a contract for the next generation fighter jet, it comes with strings attached. You're going to have a new greenfield development factory, building the wings, and it will be in a deficit area. And the engines will be made there. And you will invest this, that, and that in Missouri, in Mississippi, in Arizona, somewhere. You're not going to put everything in Washington state or in California. And the purpose of this is not philanthropy towards the deficit state, towards Arizona. The only way that the surplus regions can maintain their capacity to have surpluses is if there is investment in the deficit regions so that there are jobs, not handouts. So when a Boeing factory is built in a deficit state, people get jobs there. They actually develop skills. They have an income, and they use that income to keep purchasing stuff from California so that California can maintain surplus. And this is a political surplus recycling mechanism. You can have apolitical or bank-driven ones, where the banks, the private sector banks, on banking principles alone, recycle. But what the new dealers understood with Roosevelt onwards is that bank-based surplus recycling is a bit like fair weather sailing. So when everything is going well, the weather is good, there's a lot of it, the first clouds appear on the horizon, the whole thing breaks down because bankers abandon the recycling process, especially if there are insolvencies. So the first 20 years after the war, the so-called Bretton Wood system, was designed by new dealers as a global financial system that recycled surpluses worldwide in order to ensure that the emerging superpower, the United States of America, would not sleep into another great depression. And the only way to ensure that that would be the case was if there was sufficient demand in Europe and in Japan for American products. And the only way that this would be possible is if some of the surpluses of the United States of America were recycled in Europe and in Japan. That's the Marshall Plan as one of many different examples. Europe never learned that lesson. The lessons that the United States learned from Roosevelt onwards were completely and utterly ignored by European policymakers. You see, and this is something that doesn't endear me to my fellow Europeans. We in Europe think that the European Union is a magnificent European design implemented by heroic Europeans. Not true. It was an American design which was implemented by Americans, taking Europeans by the scruff of the neck, clashing their heads against one another and saying, you do this. This is how the European Union was created. So for the first 20 years, the Bretton Wood system that was designed by new dealers was creating the global environment in which the European Union could grow, could become established. But that finished in 1971 with the collapse of Bretton Woods. And why did the Bretton Woods system collapse? Because America lost its surplus. It became a deficit country. So it could no longer recycle a surplus that they didn't have. From that moment onwards, Europe was jettisoned from the dollar zone and it had to fend for itself. And they tried in Europe from 1971 onwards, they tried to recreate fixed exchange rates, the Bretton Woods system in Europe, except they missed out the surplus recycling. So instead of creating a European Bretton Woods, they created a gold standard, what had collapsed in the 1920s, and what the new dealers tried to prevent from happening again by introducing the surplus recycling. So as you trace the history of the development of the euro, starting with the early attempts by, I guess, the French when they approached the Germans in what, 1964, I think it was, and then ultimately the Maastricht Treaty and so forth, one of the things you do very well is you talk about the different smaller steps that the European regulators took to try to, for example, have the individual currencies trade in relation to one another and so forth. And the idea was that as long as their fiscal policies were structured in a certain way and so forth, these bans would stay in tandem and everything would work, right? But then of course, things from time to time would fall out of bed. Because you though, when you articulate, or at least as I read your thesis, when you talk about the European equivalent to our Fed, you seem very focused on having greater control by a European political entity than at least in this country most people believe should be the case with respect to the Fed. There's always been this tension between having a Fed that's independent of Congress and in a position to set its own policies based on what it believes is best for the economy and having a Fed that's responsive to the needs of the public and so forth. As you, now that you're thinking about essentially devising a new system and you have your own plans, right, this modest proposal which is set forth in the back of the book toward really a totally new rubric for these kinds of regulations in Europe, how do you envision that entity interacting with the different nation states and the individual populations of Europe? What is actually workable as a practical matter in that context? Well, for a start we should stop doing what we're doing at the moment because, come to think of it, the reason why our government was crashed was because our central bank closed down our banks. Why? Because they were insolvent? No. Just because it was their way of convincing us to reduce fiscal policy that was even more austerity. So where is the, the central bank independence cut both ways, you know. That's what I kept saying when I was in the ministry that I dream of a situation where I do not interfere with the central bank but the central bank does not asphyxiate me to reduce functions. But the central bank did interfere in this way. So it's, we have a myth of central bank independence in Europe, a complete myth. And it, I don't blame the central bank for this. When you have a giant with one leg, the giant is the Eurozone, it's a very large economy, probably the largest in the world, and there is only one leg, the central bank. There's no, no treasury, nothing, nothing else. This is a very unstable configuration. And the central bank is trying within its remit to do its best. So I have great deal of respect for the current president of the European central bank, even though he closed down my banks and throttled me. He's a very smart man. He's trying to do his best to keep this Eurozone beast going. It is important to know the profound difference between the Fed and the ECB. The Fed, firstly, it makes its own rules, the ECB does not. It's politicians that make the rules of the ECB, and I'll give you an example in a minute. But secondly, it's also very important, you have the double mandate, the twin mandate here. The Fed has a duty to preserve price stability, to prevent inflation, but at the same time full employment. The ECB doesn't. So as long as all prices are stable in Europe, everybody may die in Europe, but the ECB has done its job. And that is a small little problem. Now let me give you an example now of what I was saying about the rules that are created by politicians in a way that the central bank is asphyxiating itself. Rule number one, no state financing, which means the central bank cannot print money to buy government debt. In other words, Euro-loud QE. What Ben Bernanke started doing here is simply not allowed in Europe. It's happening now, because Mario Draghi is bending the rules. He's portraying it differently. That causes a lot of clash, a clash between himself and the German government, or parts of the German government, not all of it, it's very complicated. Let me give you an example of the distortion introduced by this political interference in the central bank. The way he's doing it is to say, okay, CISA cannot buy government debt because I'm not allowed to finance governments. I'm going to say that I'm going to buy government debt in order to fulfill my mandate for price stability, because prices are falling in Europe, we have deflation. But to keep prices stable, I need to buy government debt. But so that the Germans or the French or the Greeks do not accuse me of bias, I'm going to purchase, for every thousand euros that I purchase, 270 will be German debt, because remember, 27% of Euro area GDP is German. So I will buy government debt in proportion to the size of the economies. This is a trick he conjured up in order to be able to do it. But this is terrible. It's very silly, because it destroys the pension funds in Germany, because he buys mostly German, because Germany is the largest economy, he buys the bonds of the country that doesn't need its bonds to be bought, because it creates a shortage of government bonds in Germany, and the government bonds in Germany are the ones that the pension funds are obliged to hold by law, but when there is excess demand, because the central bank is buying so many of them, interest rates are pushed below zero, and the pension funds are destroyed. And doesn't it also blunt the policy impact of the very purchases that he's tried at? Of course. Because it's all proportional. That's why we still have deflation in Europe. So the modest proposal that you mentioned is just three or four very simple proposals on what we can do within the existing rules. All it needs is some interpretation, creative interpretation of the rules, but that doesn't sound, it's not as sinister as it sounds, because they are interpreting the rules all the time. I just gave you an example of Draghi's reinterpretation of the rules. Purchasing bonds is not purchasing bonds. That's a pretty liberal interpretation of the rules. In order to stabilize the situation before we can move on. And yet, through all of this, if I understand your position historically, you have not advocated Greece leaving the Euro. Is that right? That's exactly right. My usual answer to this is, yes, we should not have created it. It was a terrible idea. It's an awful, frightful architectural design. But it's one thing to say you should not have created it. It's another to say you should get out. Because the path that took us in no longer exists once we've traveled it. If we try to reverse, we will fall off a cliff. And I can explain this in more practical terms, but if you want it at the discursive level, since I'm in California, it's what I call the Hotel California Dictum. You can check out any time you like, but you can never leave. So tell me a little bit about DM-25. Now you're no longer sitting in these long and I would assume somewhat stressful meetings in Germany and Paris and elsewhere dealing with the day-to-day crises. You've had some time to think and you've developed this new movement just within the last few months. How do you envision DM-25 developing and what are your hopes and objectives? After my resignation, I'll just tell you my personal story on this. After my resignation I had a lot of pressure. I received a lot of pressure from colleagues, friends, voters. For some reason, I got a lot of votes when I stood in the parliament. Search me, why? But anyway, I got a lot of pressure to start a new political party, in opposition to the government, in opposition to the opposition, and so on and so forth. And I just could not be motivated to do that. And then I started asking myself a question, why am I not motivated to do this? I want to be in politics. I think that I was really shocked by why I saw in politics. The reason why I could not be motivated to do anything was to do anything, to start a party in Greece. Because it occurred to me that our government had a tiny window of opportunity to change things, to reboot Europe. Because if we had successfully known to this perpetuation and recapitulation of misanthropic idiocy, Europe would have changed. Exactly the same way that the euro crisis began in Greece, the end of the euro crisis, or a new approach to it would have started in Greece. We failed. We were crushed, we were divided, we lost. Okay, say I was to create a new political party in Greece. What would I say to my voters? Vote me in to do what? If that question was put to me, I would have to say exactly the same things I said a year before, when it did vote me in. And then, of course, my voters would have said, but we did vote you in last time and you didn't do it or you failed. Why do it now? And by the way, by that time, we had already signed a new loan agreement. We were prisoners of a new silly agreement. So that was thought number one. Then a French politician, a former economy minister of France, or no more more, good friend, invited me to go to France in August, just to recover a little bit after the turmoil. And he said to me, oh, we will have a meeting open air in my hometown, a tiny little place very close to Switzerland, Frangier-Hombres, it's called. And there were 10,000 people in the rain who came to hear what I had to say. And I realized that they didn't come out of solidarity with me, with Greece. They came because they were worried about themselves. They were worried about their town, their hospital, their pension, their jobs, their children, their children's education, their country, Europe. And after two or three such trips around Europe, especially in Germany, when I had similar responses in Germany, I thought, you know, what we started in Greece is spreading. There is a realization throughout Europe that we are facing common problems in Europe that no one is looking at from a joint perspective. Everybody is in it for themselves. So the French government is thinking, oh, what can we get from Germany or from Brussels? The German government, how are we going to extend our control of the French national budget? And nobody is asking this simple question. What are the main threats for Europe? And how can we deal with them together? That discussion, I can tell you in the months, and there were not years, but I can tell you I went to many, many meetings. Not once was there such a conversation in Brussels, in Frankfurt, in Paris, in Berlin. And that's scary because the crisis is common. It takes different forms and manifests itself differently in Germany. The pension funds get crushed, and Greece will have great depression. But it's different symptoms. It's like an organism that has different pains and aches, but it's the same malaise. It's the same disease. And so from this, if you put all these experiences together, together with another two or three people, we came to the conclusion that it's utopian, but it's worthwhile trying to create a movement that is cross-border and across political party affiliations for the purpose of coming up with a European agenda. What should the European New Deal be? And how do we design it and how do we create a movement that pushes for it? Now, you may say that, and you would be right to say that, that this is really pie the sky, that this is highly utopian. It is. But then again, what's the alternative? Europe is disintegrating under the democratic vacuum, because we have democratic states. But those states have no power. The decisions are made now in the European Union institutions, which are democracy-free zones. There is no democratic deficit in the European Union. It's like saying that there is, imagine you are on the moon, you take your helmet off, and you think, oh, there is an oxygen deficit. There is no oxygen deficit, because there is no oxygen. There is no democracy, no democratic process, no checks and balances in Brussels. Now, zero. There is deep contempt for the demos, for the people, and for public opinion. Public opinion is there to be manipulated. It's not there as a source of insight as to what we should be doing. So this disintegration, you can see now, we have the economic crisis taking a turn for the worse. We have new borders being erected between countries that had no borders between them. We have the Austrian government sending soldiers to the Greek Macedonian border to seal off Greece from a country which is not in the European Union. I mean, what kind of union is this? You know, Mahatma Gandhi once was asked what he thinks about British civilization, and he said it would be a good idea. The European Union, it would be a good idea. So the way we are moving, I can see a replay of the 1930s, with the rise of the most toxic, misanthropic, xenophobic, racist, horrible political forces everywhere. Fascists, neo-Nazis, people who hate themselves, gaining power, or not government power. You don't need to be in government to be in power. The political spectrum is all shifting in an awful direction. With the same people being elected, you don't even need to have the sinister forces being elected. So the alternative to our European projects is an awful dystopia. So that's what keeps us motivated and happy to wake up in the morning and do things. Can you talk a little bit about, within Greece, the rise of the new dawn party and essentially how you see all of this playing out domestically in terms of the domestic politics of Greece? Well, Golden Dawn is a Nazi organization. It's been around for a while. Most countries have some Nazis, somewhere forgotten. But when you have a combination of deep national humiliation, the whole world pointing their fingers at the Greeks and the grasshoppers who are lazy, who are corrupt, who are this, that, and the other. And at the same time, the same people are caught up in a vortex of debt deflation, debt bondage, and depression. Those seeds of Nazism start growing. This is what happened in Germany in the 1930s. This is what's happening in Greece today. In parliament, my seat would be here as a minister in front of me. There would be the thugs of Golden Dawn. They were elected. With roughly a 25%? No, no, 7%. 7%? Oh, really? 10%. 10%. Oh, I'm sorry. MS Redmond. OK. But 10% is a lot. Yes. Especially given that they are a criminal organization. And there are court cases against them. They've killed people. So the fact that they get so many seats in parliament is astonishing. But I was in a taxi going to the airport a few weeks ago. And I was talking to the taxi driver. And the taxi driver was actually very pleasant with me. He knew who I was. And halfway to the airport, however, he said, but I vote for Golden Dawn. I thought, oh my god, I better jump out. And it became clear to me that he was not a Nazi. But he was choosing whom to vote for on the basis of answering a very simple question. How can I piss off the establishment? Whom do I vote for to annoy the establishment the most? And his answer was Golden Dawn. A bit like Trump in this country. So what has happened to your party, your colleagues, after your resignation within Greece? We split up in three parts. One part of us voted against the surrender document, as I call it, the new loan agreement, and left the party and did not stand again in the parliamentary elections that followed. Another part stayed in the government. And they are the government. And the third part imploded emotionally and stayed at home. That's the largest part. The largest part of our party's activists have gone home. And it's just a very sad occasion when I meet them. When I see them, we go out and eat and talk. And the depression is not economic. It's purely psychological. Even within those who stay in the government, there are different varieties. There are those who stay because, to somebody who said to me, 68 have been through three different splits of the left. I just can't afford to split again emotionally. But again, the depression. It's a party that's fading. History is going to confine it very quickly to the dustbin. Simply because, you know, for how long can you say to your people, this piece of legislation is toxic. It's terrible. It is antisocial. Vote for it. So it's once, twice, three times, 10 times. After a while, it becomes just does not compute. So this may be an unfair question. But at this point, do you know what your next step will be in terms of reentering politics or running again for a seat in parliament or some other position? Or are you going to step away from getting elected and focus instead on building this new movement? On the 20th of September, when the last election took place and I announced I was not running, I said, I am not running for parliament because I want to concentrate on politics. So it's not a question of stepping back into politics. It's true. You know, I mean, I'm sure congressmen and women will tell you this, senators will tell you this. Being in Congress, being in parliament, it's just not politics. There's so much. It's just a chore. You go from one meeting to another. There is very little politics involved in it. I do a lot more politics now than I did when I was even in the ministry. The period of negotiation was politics. But if I were to stay in the ministry now, my colleagues who remain in the ministry now, they don't do politics. It's all administration of a program they don't believe in. This is not politics. As far as running for elected office, that is a question. It's an abeyance. When I was all my life, I was an academic. As a professor, I always find it difficult to understand why people wanted to be dean or head of department. If you're a professor, you shouldn't want to do this. And if you wanted to do it, you shouldn't be a professor. You should be disqualified immediately, because it means you don't enjoy teaching, writing, researching, publishing. Why do you want to be an administrator? Administrator for Google. You make more money, too. But of course, somebody has to be dean. So this is something I always consider to be a chore that one does as public service. But you should always be a reluctant administrator, but not an enthusiastic administrator. I believe the same thing about government. You should be a reluctant minister, a minister who is doing it for a short period of time, only if you think you can make a difference. And you don't like doing it, but you do it because you have a moral duty to do it. So I'm not in any rush to go back into government. I will go into government only when the circumstances are such that I think, firstly, I can make a difference, and secondly, that somebody else can do it. But you, if I understand what you've said previously anyway, you do plan on turning out a book, another book, on the experiences of the last 24 months. Indeed. Firstly, it's therapy for me because this was a very tumultuous period. And also, I think that I have a duty to let people know out there what went down. Not just Greeks, but you should know as well the role that the American government played, the German government, how these things hung together. I'll do it in the summer at some point. I need some space, some distance from those events so that everything percolates in my head, and that will be my next book. Well, having just. But writing books is part of politics, isn't it? Absolutely. Absolutely. Having just finished your current book, I do look forward to the next one. I'm sure it'll be a great read. Before we open the floor for discussion, with those of you in the room, I'd like to say good night to our radio listeners, and thank Yanis Verifakis for his excellent discussion. Thank you. Thank you.