Last Wednesday (July 1, 2015), the ABC radio presenter, Phillip Adams, in a wide ranging interview about the upcoming referendum in Greece and the prospects for the nation, asked the then Greek Finance Minister: “My jokes about printing drachmas in the cellars, remain jokes?” The then Finance Minister replied: “Of course they do … we don’t have a capacity … because … Maybe you don’t know that. But when Greece entered the euro in the year 2000 … one of the things we had to do was to get rid of all our printing presses … in order to impress on the world that this is not a temporary phenomenon … that we mean this to be forever … we smashed the printing presses, so we have no printing presses”. The interchange occurred at the 49:46 minute mark in the – following program. In my research for my Eurozone book, which was published in May this year, I studied in some detail how the euro was introduced, how it is disseminated, how the notes are printed and the coins minted and how nations in other contexts had introduced their own currencies. When I heard that interview I wondered why the then Greek Finance Minister would want to mislead the Australian listeners, even though interviews like this are no longer geographically restricted and that he was clearly intent on convincing the world, a few days before the referendum, that Syriza was committed to the euro and exit was not an option. Earlier in the week, I had railed against the lies and misinformation coming out of the EU leadership. The boot was on the other foot in this case. But it also raises questions of how an exit might occur in the event that Syriza actually stand up for its electoral mandate (anti-austerity) and refuse to agree to any further austerity. I doubt they will do that but hope springs eternal.

It has been argued for some years that one of the important consequences of Germany’s obsession with fiscal surpluses in recent years, articulated by Chancellor Merkel and Finance Minister Schäuble as the “Schwarze Null” austerity policy, is that Germany has been under-investing in its physical infrastructure. But it has taken the recent industrial unrest to bring that to the fore into the public debate. Even the IMF is now getting on the bandwagon. In its in-house journal (Finance and Development, Vol.52, No.2, June 2015) there was an article – Capital Idea – which says that “By increasing spending on infrastructure, Germany will help not only itself, but the entire euro area”. At present, Germany is trying to take the high moral ground in the Greece negotiations, but its motivations are obvious – it doesn’t want the generosity that the rest of the world has shown to it in the past (debt forgiveness) to be given to Greece now because that would allow the Greek government to stimulate growth and demonstrate that the austerity path is destructive and myopic. It doesn’t suit Germany’s own vision of itself (as articulated by its own crazy government) for an anti-austerity stance to be given any oxygen. But if it looks at itself in the mirror it would see an economy that is barely capable of economic growth itself, most recently has zero employment growth, has decaying physical infrastructure such that bridges are roads are becoming dangerous, has generated no meaningful real wages growth in years, and as a consequence, has a workforce that is now showing signs of open revolt. Some moral high ground.

The ECB had another lavish annual talkfest in Portugal over the weekend just gone in the guise of their – Forum on Central Banking. Like all these EU-type gatherings there was plenty of fine food and wines. They even provided footage along those lines. The President of the ECB Mario Draghi gave the opening speech – href=”http://www.ecb.europa.eu/press/key/date/2015/html/sp150522.en.html”>Structural reforms, inflation and monetary policy – on May 22, 2015. There was also talk about how “structural and cyclical policies … are heavily interdependent” but then a denial of the same. The message from the President was like a record stuck on the turntable – “to accelerate structural reforms in Europe … even in a weak demand environment”. Well here is my message – similarly like a stuck record – structural imbalances occur because of weak demand and the best time to assess structural policy is when you have first attained full employment by appropriate setting of fiscal deficits, not before. It is madness to deliberately constrain fiscal balances to levels that ensure high and entrenched unemployment and rising underemployment and then expect citizens to support microeconomic policies that further undermine their welfare and damage what job security they have. But that is the EU way and that is why the Eurozone is a massive basket-case failure.