Yanis Varoufakis, the former finance minister of Greece, writes: In the past two years, the debate in Europe has focused exclusively on issues that sound technical and minor: will there be “conditionality” attached to the purchases of Italian and Spanish bonds by the European Central Bank? Will the ECB supervise all of Europe’s banks, or just the “systemic” ones?
These are questions that ought to be of no genuine interest to anyone other than those with a morbid interest in the interface between public finance and monetary policy. And yet these questions (and the manner in which they will be answered) will probably prove as important for the future of Europe as the treaties of Westphalia, Versailles or even Rome. For these are the issues that will determine whether Europe holds together or succumbs to the vicious centrifugal forces that were unleashed by the crash of 2008.
Even so, they are not issues that are worth expounding upon here. All they do is to reflect a tragic, underlying reality that can be described in simple lay terms without the use of any jargon whatsoever: Europe is disintegrating because its architecture was simply not sound enough to sustain the shockwaves caused by the death throes of what I call the Global Minotaur: the system of neoliberal capitalism centred on Wall Street, extracting tribute from the world after 1971.
It is quite obvious that the insolvency of Madrid and Rome had nothing to do with fiscal profligacy (recall that Spain had a lower debt than Germany in 2008 and Italy has consistently smaller budget deficits) and everything to do with the way in which the eurozone’s macroeconomy relied significantly for the demand of its net exports on the Global Minotaur. Once the latter keeled over in 2008, and Wall Street’s private cash disappeared, two effects brought Europe to its knees. [Continue reading…]