Eurozone: Varoufakis discusses the ‘greatest beneficiary’ in 2018
The eurozone is on course for a devastating double-dip recession after the second wave of the coronavirus pandemic during the last quarter of 2020. It sent the bloc’s currency recovery into reverse. Eurozone national income, or GDP, fell by 0.7 percent from October to December as governments across the continent introduced strict lockdown measures.
In the wider EU, GDP fell by 0.5 percent in the last three months of the year.
Yet, in Germany, Chancellor Angela Merkel’s country faced a shrinkage of just five percent, according to official figures.
This was among the smallest declines anticipated in Europe.
The German recession is thus expected to be one of the least severe in Europe.
Financial analysts credit a decisive fiscal response and the avoidance of overly optimistic forecasts, according to The Guardian.
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By contrast, national output in the UK is expected to drop by 11.3 percent – the worst performance for more than 300 years.
The trend is something Greece’s former finance minister, Yanis Varoufakis, has warned over for years.
A staunch critic of the EU – largely spearheaded by France and Germany – Mr Varoufakis previously claimed that the eurozone would not break up as a result of the flailing economies of Italy, Spain and Greece, but rather a result of the wealthy German and French banks realising that they no longer needed to rely on the euro as a main currency.
During his Oxford Union address in 2018, he explored the theme and explained how Germany has built for itself a “lake of surplus euros”.
He said: “Germany is the greatest beneficiary of the eurozone.
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“Between 2000 when the euro began and now – because effectively the euro is another form of the Deutsche mark, let’s not fool ourselves – the fact that the riff riff of Europe was part of the euro, of the Deutsche mark, it was out currency, the Mediterraneans, it kept the value of the currency low.
“That was a great boon to German exporters.
“The total net export surplus of German industry between 2000 and 2018 was €2.2trillion, which isn’t bad.
“Now, what do you do if you’re constantly in surplus with somebody? If you’re in surplus with someone it means you keep selling stuff to them.
“But, if I keep selling more stuff to you, then I end up with your money, and I don’t have anything to do with that money.
“The result was a lake of euros accumulating in the banks of Frankfurt.
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“The frost nightmare of a banker is of money they are not lending – they don’t sleep at night if they have money and there is not enough demand for it.
“So what do they end up doing? Lending it to the Greeks, lending it to the Irish.
“What did Greece, Ireland, Portugal bring into the eurozone? We brought low levels of debt.”
The low levels of debt and relative economic stability, he said, enabled lenders in Germany a market they could flood with money and credit.
Until it all came crashing down following the 2008 banking crisis.
Country’s like Mr Varoufakis’ Greece suffered the worst.
In order to avoid default, the country reached out to the European Central Bank and International Monetary Fund (IMF) for help.
It was granted €110billion (£96.7bn) in loans that came with hefty interest rates.
Germany provided the largest sum, around €22bn (£19bn).
In exchange for the loans, the EU required Greece to roll-out crippling austerity measures and cuts to public funding.
Mr Varoufakis previously said during a TedTalk while holding his ministerial post: “I was told in no uncertain terms that our nation’s democratic process – our elections – could not be allowed to interfere with economic policies that were being implemented in Greece”.
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To this day, Greece is still paying back the sum.
Its final scheduled payment is not until 2040.
The effects have been devastating for the country, with the worst youth unemployment in Europe.
Currently, 40 percent of those aged 15-24 are unemployed – the average for the same age group across the entire continent is just 14 percent.
Robert Tombs, the renowned British historian, said the faulty nature in which the eurozone appears to operate under the EU could later lead to “discontent”
The problem, he said, was that for countries like Greece, “there’s no obvious way out”.
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This is something that has piqued the concern of eurosceptics across the continent after the bloc’s coronavirus recovery package was given the green-light by the bloc last month.
The package means that the 27-member states will now share collective debt.
This is despite the EU’s predecessor – the European Economic Community (EEC) – being founded on the promise of financial restraint, with shared debt against the rules.
Sergio Montanaro, Italexit Party spokesman, told Express.co.uk that the EU funds “bind countries to the EU”.
Italy looks set to receive the bloc’s largest loan and grant – a €222billion (£194bn) package, €85bn (£74bn) of which is a grant, while €124bn (£108bn) will be given in low-interest loans.