The defeat of Europe
In 2010 the Greek state lost the capacity to service its debt. Put simply, it became insolvent and thus lost access to capital markets. To prevent a default on fragile French and German banks that had irresponsibly lent billions to irresponsible Greek governments, Europe decided to grant Greece the biggest loan in world history on condition of the largest ever fiscal consolidation (better known as austerity) which, naturally, resulted in a world-record loss of national income — the greatest since the Great Depression. And so began a vicious cycle of austerity-driven debt deflation, spearheading a humanitarian crisis and a complete inability to repay the nation’s debts.
For five years the troika of Greece’s official lenders (the International Monetary Fund, European Central Bank and European Commission, representing creditor member-states) were committed to this dead-end strategy that financiers label “extend and pretend”: lending to an insolvent debtor more and more money in order to avoid having to write off a bad debt. The more the creditors insisted on this strategy, the greater the damage to Greece’s social economy, the less reformable Greece became, and the larger the creditors’ losses.
This is why our party, Syriza, won last January’s election. Had the electorate believed that Greece was on the mend, we would not have won. Our mandate was straightforward: to stop the “extend and pretend” loans and the associated austerity, which were driving Greece’s private sector into the ground. And to lift the fog of doom in which it was impossible to carry the people with us along the road toward the crucial, deep reforms that Greek society needed.
In my first Eurogroup meeting (1), on 11 February, I delivered a simple message: “In our government you will find a trustworthy partner. We shall strive for common ground with the Eurogroup on the basis of a three-plank policy to tackle Greece’s economic malaise: deep reforms to enhance efficiency and defeat corruption, tax evasion, oligarchy and rent-seeking; sound state finances based on a small but viable primary budget surplus that does not impose too heavy a burden on the private sector; and a sensible rationalisation, or re-profiling, of our debt structure so as to allow for the viable primary budget surpluses consistent with the rates of growth necessary to maximise the true value of our repayments to our creditors.”
http://mondediplo.com/2015/08/02varoufakis