A response to Mr. Viliardos by Othon Koumarellas

In a recent article, the well-known economist Vasilis Viliardos poses certain questions regarding the transition to a new national currency. These questions are, in particular, posed to the General Secretary of the United Popular Front [EPAM] Dimitris Kazakis, in response to a recent radio interview of his. It is my firm belief that the best response can only come from Mr. Kazakis himself, as the indirect target of these questions—if, of course, he chooses to respond. However, since I have, for a number of years now, systematically written articles in favor of a return to a national currency and have also written a book on this issue (“The Euro or a National Currency? A Thousand Lies and One Truth”), I feel that I not only am qualified to respond, but have the obligation to do so, clearing up all of the issues which are posed in Mr. Viliardos’ article.

To begin, I do believe that it is the case that Mr. Viliardos indeed believes in the nature of the issues which he raised in his piece: that the debt, its potential write-off, and the transition to a national currency, are not issues of a technocratic nature, but are instead political issues of national importance and significance. These issues have greatly impacted all of our lives in the past, continue to do so today, and will continue to do so in the future, and therefore they must be recognized as such.

Truly, all of the questions which were posed arise not out of the technical difficulties that would arise from the implementation of a different and opposite set of policies from the destructive policy of internal devaluation, but from the manner in which the suitable political decisions for the implementation of such a set of policies would be implemented, and the ability to do so. These political decisions will, in turn, provide answers to the technical matters which may potentially arise.

The Debt and its Write-Off

Mr. Viliardos begins the second part of his article (which concerns us) with the following: “If we now assume that Greece was able to unilaterally write off its public debt via revolution and departure from the EU…” By writing “if we now assume,” he essentially if indirectly questions our ability to renounce our debt and to cease its repayment, once and for all. It is not possible for someone to claim that, with regard to this issue, there is some problem of a “technical” nature, some sort of equation, which economists are unable to “solve.”

We all know that the problem of the debt is a matter of national sovereignty and of international law. Accordingly, the loan agreements—at least in theory—are based upon this international law. Otherwise, they would not possess even the slightest legal authority and they would not be upheld in any court of law anywhere in the world. As a result, the decision to not recognize the debt and the unilateral, on our part, write-off of this debt is eminently a political decision; one that would be a sovereign act on the part of our country which will be directly related to the interests which are at stake and the power balances which develop as a result of these interests. It is a decision which is directly tied into the faith we would have in the goals which we must achieve, and in the knowledge, courage, and determination of the individuals who will proceed with the toppling of this balance of power.

In essence, Mr. Villiardos—regardless of whether he realizes it or not—is questioning this very issue: whether the requisite power balance exists for the implementation of a different set of policies from those of the status quo. He clearly demonstrates this later in his article, in the section regarding the governance of the country, although he attempts to conflate this issue with the supposed technocratic questions, which we will of course address in turn.

Politics, however, is not simply the art of “what’s possible” or the management of “day to day life.” It is the ability to eventually make possible and feasible something which might seem like an impossibility today.

Politics, however, is not simply the art of “what’s possible” or the management of “day to day life.” It is the ability to eventually make possible and feasible something which might seem like an impossibility today. Power relations which might at the present time seem to be embedded into place, resulting in paralysis and the belief that “nothing is possible,” can be proven to be easily overturned if a political decision is made and, even more so, if a political plan of action exists for this “something.” Such a course of action indeed exists! This, at the very least, is evident from life experience even if it is not mentioned in the textbooks of modern-day economic theory.

At this point, a reasonable question can be raised as to why Mr. Viliardos rejects in its entirety the possibility of a renunciation of the debt and permanent stoppage of payments, arguing that this could have only been possible prior to the debt haircut (PSI) agreement, indeed through a gradual reduction in the debt amount via a return to a national currency and the issuance of inflationary currency. He makes this claim without presenting any credible evidence, instead concluding that economic conditions following the PSI agreement are irrevocable, as if governed by some inviolable law. Such an argument more closely resembles dogmatism rather than policy or economic theory.

Since Mr. Villiardos has requested that we base our argument on real-life examples, I will refer to the example of our own country, Greece, which in 1936 rejected and wrote off its debt towards the Belgian banks which had in their possession Greek bonds. At the time, those banks appealed to the Permanent Court of International Arrangements (of the League of Nations). On June 15, 1939, this court issued a verdict in which it claimed a lack of competence to render a decision, as a result of a lack of knowledge regarding the true economic condition of Greece and its ability to repay its debt. This decision, in essence, was a victory for Greece, because it fully accepted the argument put forth by the Greek legal team, headed by professor Ioannis Gioupis, which claimed that a nation-state, when faced with a decision whether to repay a debt or to meet the basic needs of its citizens, has an obligation to choose the latter. The decision of this court has served as a strong legal precedent which has been used by numerous other nation-states which faced similar circumstances.

Oddly enough, this argument is “coincidentally” included in numerous decisions issued by the General Assembly of the United Nations, including that of September 2014.

To conclude regarding the issue of the debt and its repudiation, it is now accepted by most observers that Greece’s debt is illegal, abusive, and illegitimate in its entirety.

To conclude regarding the issue of the debt and its repudiation, it is now accepted by most observers, including the United Nations and the “debt truth commission” which was convened by the former president of the Hellenic Parliament, that Greece’s debt is illegal, abusive, and illegitimate in its entirety, the product of duress, delusion, and fraud. On this point I believe that Mr. Villiardos is in agreement, but further analysis on this issue can be found here. Accordingly, the issue of the debt is not one where our views are in opposition, in terms of whether it can or should be written off. The write-off of the debt is an absolute necessity and a national imperative! This is not a case of theatrics or taking risks. It is a necessity. No economist—nor any other individual which does not represent the interests of the lenders—can refute this necessity and this imperative on any sort of economic basis. Economics, just as any other science, has an obligation to recognize its possibilities and areas of implementation, otherwise it ceases to operate scientifically and instead acts as a form of propaganda.

Borrowing on the Global Markets

Moving on beyond the issue of the debt, Mr. Villiardos focuses on Greece’s trade deficit and questions how this deficit could be eliminated. Indeed, he proceeds to provide an answer to his own question, claiming that this would not be possible through borrowing from the global markets (because Greece will be isolated from the markets).
Mr. Villiardos may be correct on this point. However, what he overlooks is that Greece, from 2010 on, has been isolated from the international markets. The loan agreements and the funds that Greece received based on these agreements with the troika and the so-called “institutions” were utilized almost entirely for the repayment of the debt—which, in the meantime, ballooned and continues to increase. Only a small percentage of these funds, approximately 8%, entered the national budget, if my figures are correct.

If I am not mistaken—and I’m not—the problem of the trade imbalance is not as great and as insurmountable as it is presented to be. Even if we accept—and it is quite possible, if not certain—that due to the turbulence that will follow [Greece’s departure from the euro and the European Union] the deficit will increase, this is not an intractable problem that could serve as a barrier that would prevent any decision to depart from the Eurozone, to write off the debt, and to introduce a national currency.

First, who ever said that following such a radical political change, any sort of borrowing from the international markets will even be desirable?

Second, how would it be possible to, on the one hand, not recognize the existence of the debt and to unilaterally write it off, and on the other hand, to seek out new loans, and indeed from the very same lenders?

Such an obvious contradiction would strip away any credibility from entire proposal for the debt write-off and exit from the Eurozone and EU. Indeed, it would be quite ludicrous. We are not so naive, nor are we fooling the public in such a brazen manner, as is frequently claimed by those who oppose a return to a national currency. Naturally, one of the basic pillars of an independent set of policies which will lead the country out of the crisis and on a path towards recovery and gradual restoration of the prosperity and well-being of the Greek people is the avoidance, in the future, of any and all forms of international borrowing. This proposal, of course, terrifies all those who have learned to survive based on borrowing, and clearly it is an undesirable outcome for the loansharks.

Mr. Villiardos continues by referring to the example of Argentina, in an effort to confirm his hypothesis, in which he claims that we supposedly would not be able to survive without being able to borrow on the global markets. What he ignores, however—willfully or not—is that Argentina’s current desire to borrow once more on the global markets does not stem from any sort of economic necessity which may have arisen out of mistaken policies followed by the previous Kirchner regime (and we have a lot to say about the weaknesses of these policies), but from a radical turn back towards a neoliberal policy landscape in Argentina on the part of the new government. From the first moments following its election, the new government demonstrated its intentions to “come to an understanding” with the international capital markets. What will follow in the near future in Argentina is both predictable and easy to anticipate…

Argentina, therefore, does not serve as a credible example, nor does it offer proof of anything. Iceland may perhaps be a country that we should instead focus upon more closely. Of course, anyone can choose to utilize the example which he feels most suitably supports his argument. This, however, does not mean that the example that is being used is valid.

Continuing on, Mr. Villiardos, in an attempt to corroborate his claims, refers to the destroyed productive base of Greece and in the difficulties which he says will appear in terms of Greece’s ability to import basic goods, such as pharmaceuticals, industrial parts, and energy. In addition, he refers to a lack of foreign currency reserves which would allow these necessary imports to be financed.
Aside from the fact that Mr. Villiardos ignores, without comment, the causes of this destruction and the dire need to reverse this situation, he also questions the existence of any instruments which could be used as emergency foreign exchange reserves. Since, however, the existence of these reserves is proven from the official data provided by both the Bank of Greece and the European Central Bank, he instead chooses to immediately proceed to his personal estimation that the potential utilization of these reserves would be akin to a “coup” against the ECB, while he sets as a prerequisite the “revolutionary” nationalization of the entirety of the Greek financial system.

Mr. Villiardos is correct—not in terms of his characterization of a policy of nationalization as a “coup,” but in terms of the necessity of the enactment of these policies! As a Greek proverb goes, one cannot prepare an omelet without shattering some eggs. Despite this though, let’s analyze the specific term that was used and its meaning. How, exactly, does the nationalization of the Bank of Greece and the liquidation without dissolution of the systemic banks, plus the subsequent confiscation of their assets, constitute a “coup”? Aren’t the policies being enforced against our country by the “institutions”—including the ECB—an ongoing and very real coup, one that has driven our country to a level of destruction comparable to wartime, resulting in over 30% real unemployment, the rapid impoverishment of the middle class, the migration of hundreds of thousands of young people out of the country, thousands of suicides, many thousands of additional deaths due to the lack of basic health care, demographic ruination, the total devaluation of all public and private assets, and the predatory seizure of all of our resources?

No, Mr. Villiardos, such a policy of nationalization and liquidation of the usurious banking system of Greece would be an act of restoring justice and reversing the dire consequences of the foreign occupation of our country, above and beyond the economic necessity of such a policy. As an act of national and popular sovereignty with pride and self-respect, which can be accomplished with one law and one act from the first 24 hours of such a government coming into power. Whoever disagrees can choose to appeal to any international court they wish, in an attempt to find justice.

And of course, the foreign currency reserves which are existence are our own national assets, income which our country has earned and which does not belong to the likes of Stournaras, Tsipras, Mitsotakis, Merkel, or Draghi! Money which does not belong to the ESM or to the IMF! One only needs to recall just how much money we paid in the three recapitalizations of the Greek banking system which took place in the previous years. Let’s also remember the theft that took place as a result of the “debt haircut” (PSI agreement). Why is it that we forget so quickly?

It is time to begin to speak based on real life experience and not on the basis of ideology cloaked in scientific terms

It is time to begin to speak based on real life experience and not on the basis of ideology cloaked in scientific terms; ideology which is no longer convincing to anyone. Here I am not referring to Mr. Villiardos, but to all of those erudite “professors” and “scholars” who are invited to appear in televised panel discussions, as well as the pathetic political personnel who have the gall to lecture us because we refuse to accept their “reforms.”

Aside, however, from the foreign currency reserves and other convertible securities which can be immediately utilized as foreign exchange to cover the trade deficit, an additional and immediate objective of such a comprehensive national political reorientation would be the restoration of the domestic marketplace and the implementation of strict measures to protect domestic production.

We are in agreement with Mr. Villiardos that “protectionism” in the marketplace creates an “allergic reaction” for certain economists and politicians. Despite this, let’s examine the policies that are enforced by other countries, such as the United States and even Germany. The infamous “conditions” of the European Common Market are nothing more than a form of indirect protectionism of the industries of the powerful countries, against their weaker counterparts. We, as the “useful idiots” of European unification, were presented with a set of policies which could be characterized as “come one, come all.” The same thing is now occurring with the refugee crisis, if I am not mistaken.

Besides this though, our country also has a number of comparative advantages which we have been unable to take advantage of within the colonial system which was imposed upon us. For instance, Greece has a very high level of agricultural self-sufficiency and the ability to restore its primary productive sector in a very short period of time. Additionally, Greece possesses tremendous potential for energy self-sufficiency and independence. The existing lignite reserves and hydroelectric capacity of the country already surpasses demand, without even considering renewable energy sources (which are not desirable in the form that they have been implemented thus far). We have, therefore, nutritional and energy self-sufficiency, and in combination with the restoration of our monetary sovereignty, our country will find itself in a very strong position vis-à-vis those who are hoping for its isolation. It is now, where we are at the mercy of our dominant overlords within the “European common framework,” that our country finds itself in isolation. This remains the case whether one chooses to realize this, or whether the dogmatic attachment to the ideas of federalism, neoliberalism, and the neonazism of any and all forms of “open society” which are hidden under the guise of so-called “open borders” prevents one from overcoming their blindness.

Furthermore, it should be stated that the Greek pharmaceutical industry is able to meet a large percentage of domestic demand and has the capacity to further develop.

On the other hand, many options exist in the international marketplace to develop transnational trade agreements and to identify alternative means of sourcing necessary goods and equipment. For a small country such as Greece, globalization actually presents significant advantages in this regard. Here, Mr. Villiardos makes a mistake by not evaluating correctly the many possibilities what will exist as a result of breaking free from the bondage of the European prison. These issues must be judged on a “global” basis and not with a narrow, European focus. Why should we be obligated to import expensive beef from France and Holland and deprive ourselves from reaching out to other markets which can provide us with less expensive and higher quality goods? Is it because such markets don’t exist? Or is it because the infamous “rules” which we are obligated to follow in order to receive the next “installment” of our “bailout” prevent us from doing so?

Here, I will add one additional detail that is worthy of further investigation: the price of an electric motor, manufactured by Siemens, for usage by the Athens metro (subway) is, give or take, approximately €1 million. The cost of an engine built to the same technical specifications and characteristics at a workshop based in Piraeus totals no more than €100,000 (for as long as such workshops still manage to exist, at least). I invite you to investigate this further, because aside from theories, there also exists economic reality!

The restoration of the domestic marketplace, the implementation of strict restrictions on the transfer of capital in and out of the country, the protection of domestic production and industry, the signing of transnational agreements, and the identification of alternative means of importing equipment and basic goods, will together quickly lead to the achievement of a balance of trade, or perhaps even a trade surplus. This, in turn, will make the new domestic currency a strong and stable currency. The example of the Cypriot lira in the years immediately following the invasion and occupation of 40% of the country’s territory by Turkey, might just provide answers, for those who choose to seek them out.

Of course, for all of the aforementioned goals to be accomplished, a very well-thought out plan is needed, as well as strict adherence to all policy decisions that are reached.

The Financial System

Even though the subject matter of this section were in large part covered previously, the writings of Mr. Villiardos demonstrate a lack of understanding regarding such an effort and the advantages that it could provide to the party which finds itself in an advantageous position. In this case, this party would be none other than the new national, democratic, and patriotic government of Greece, which will take the leading role, while the global financial behemoth (as Mr. Villiardos himself termed it) will be scrambling to salvage whatever it could from the bubble that would be about to burst. This is not just an answer that happens to suit our interests, but instead, an estimation of the financial system’s weakness and inability to respond—not to theoretical threats and Varoufakis-esque theatrics, but to irrevocable realities and the exacting cost-benefit calculations that will take occur, step-by-step, as they attempt to react to a nation and to a truly patriotic government that would be demonstrating tremendous determination to achieve this transition.

I will, however, agree that as part of such a transition, we must take into account the worst-case scenario and be prepared for it. We have accounted for and examined the various potential consequences of such a transition, although this analysis does need to be updated in order to account for recent developments stemming from the refugee crisis.

Additionally, in this section the inability of many analysts to break free from the “logic” that has been imposed from within the context of European unity is clearly evident; an inability which leads to passivity and servility.

The Exchange Rate of the New Drachma and the “Threat” of Inflation

In this section, Mr. Villiardos’ lack of understanding regarding the role that currency plays in the development of a society, and its preeminent role with regard to any possibility of national sovereignty, democratic governance, and the development of a series of priorities for a society which wishes to develop and prosper.

Furthermore, Mr. Villiardos’ lack of understanding of how inflation appears in an economy, or the simple fact that the exchange rate of a national currency—one that is being introduced for the first time—with other currencies, has no bearing on inflation.

It is not the currency which provides value to products and assets, but instead, the actual labor which accompanies their creation. This is what provides value to currency as a medium of exchange, and not the opposite.

The exchange rate of the new currency is determined administratively by the state—who will also be its sole issuer—in relation to prevailing conditions at the time of recirculation. For the sake of example, let’s assume the exchange rate will be fixed at 1:1 with the euro, even though the actual exchange rate actually is inconsequential. What actually matters is the circulation of enough currency to meet the needs of the economy and the redevelopment of its productive capacity. For instance, if an exchange rate of 1:1 is fixed and the economy needs €60 billion, then 60 billion worth of the new currency will be minted. If the exchange rate is fixed at 1:2, then 120 billion worth of the new currency will be circulated, and so on and so forth. It is not the currency which provides value to products and assets, but instead, the actual labor which accompanies their creation. This is what provides value to currency as a medium of exchange, and not the opposite.

Until the moment that the new currency is created and circulated in the marketplace, there will be no reason for any alteration in the exchange rate. This, of course, assumes that the exchange rate will have been administratively set and that the new currency will not be introduced to the international Forex (foreign exchange) marketplace, where it will be vulnerable to speculation that will result in devaluation. Furthermore, the new currency will not be used, in the period immediately following its introduction, for the country’s external transactions, which will instead take place utilizing existing foreign currency reserves and via transnational agreements which are, at the moment, prohibited by the EU despite being a common economic practice internationally. In this way, the issue will be how the economy will develop from the moment the new currency enters circulation and thereafter. Either a complete plan will be implemented for the redevelopment of the country’s productive capacity and the fulfillment of societal needs (restoration of wages, the funding of education, health, social welfare and insurance, an all-out effort to combat unemployment, a comprehensive set of public investment projects, etc.), or alternatively, the economy will once again be turned over to the whims of the cartels and speculators, while the currency that will be produced will be directed towards the servicing of the debt, as is the case today. If the latter turns out to be the case, then even with a new currency, we will face serious problems, that will potentially be even worse than those which we face today (such as the so-called “Schauble solution” that will introduce a parallel currency; an option which has become fashionable” lately). This latter scenario is even more likely to become reality if the country’s productive base is not radically altered. In the event that Greece continues, in parallel, to service its debt, the productive sector will have to reach levels of productive surplus which are impossible even for the strongest economies to achieve. For this reason, the write-off of the debt is necessary and is an integral part of a solution involving the introduction of a national currency.

Assuming that the marketplace today is thirsting for “clean money” that will not create new debt obligations or lead to usury, then there will be no threat of inflation until the marketplace itself begins to peak. With the ongoing economic crisis and deflationary spiral, the economy is very, very far from such a “peak” level, where inflation will be a threat. Furthermore, it is a well-known economic reality that inflation is more easily dealt with than deflation, which is what the Greek economy is facing today. Are we forgetting that the most economically productive period for our country was during the 1980s and 1990s, during which we faced double-digit inflation? And while some may blame “overspending” and the misuse of European structural funds during that period for our current crisis today, these factors merely account for a small portion of blame with regard to the dismantling of our country’s productive base. Indeed, “overspending” really began in earnest only following Greece’s induction into the European Monetary Union (EMU). This was the primary factor which resulted in the rapid increase of Greece’s debt within a period of merely seven years, at an amount equivalent to the total debt which had accumulated over the previous 140 years combined. In this way, Greece went bankrupt in 2009 and was driven into the first memorandum agreement.

The income which will enter the market and which will initially target the basic needs of households will not create inflationary problems, because the revenues that will arise from this will provide a tremendous boost to Greece’s productive sector, just as long as protectionist measures are concurrently implemented and enforced in order to restore a truly competitive marketplace. As a result, this will create ideal conditions for rapid economic growth, which will stabilize and secure the new currency.

Contrary to what Mr. Villiardos may believe, the new currency will likely face upward pressures, when, following a suitable period of time, the government will decide to finally trade the currency in the global markets.

The Governance of the Country

Here, Mr. Villiardos gets right to the heart of the problem. Indeed, all of the aforementioned possibilities might turn out to be mere empty promises to the extent that there is not in existence any political institution that can rally the Greek populace and lead the country out of the crisis.

Greece’s political personnel, which is subservient and completely sold out to its domestic and foreign overlords, can only deliver more harm.

It is true that nobody can expect this to be delivered by the existing political parties, the ones which indeed comprise the so-called “constitutional axis” of the country. Greece’s political personnel, which is subservient and completely sold out to its domestic and foreign overlords, can only deliver more harm. Furthermore, a society that after so many years has been corrupted as a result of the system of patronage and which has been essentially paralyzed from the successive shocks it has received over the past six years, will likely be unable to easily stand on its feet again and to anoint from its ranks new, healthy political personnel which could lead a new national effort of growth and development. Disappointment and a sense of resignation are the main characteristics of our society during the current period, as we see through our day-to-day experience.

This, however, does not mean that there are not still healthy elements to be found within society, or a plethora of individuals who could, through their knowledge and experience, contribute to an effort to reverse this ongoing societal trend.

The United Popular Front (EPAM), its General Secretary Dimitris Kazakis, and many others, have from the beginning found themselves in the front lines of the efforts to inform the public, to eliminate the fear which has been prevailing as a result of the mainstream media’s continuous propaganda, and o develop a reliable and capable political force which can overcome today’s outdated political party system, uniting the populace, providing hope, and leading the Greek people to Victory and a new “Greek Spring.” It goes without saying that anyone who wishes to contribute to such an effort and to help us achieve these goals is welcome to do so.

he who is left standing at the end will be the one who emerges victorious.

We are, of course, not under the false impression that this effort will be a mere “walk in the park.” We are facing a difficult uphill battle, and there will be some who will not be able to make it all the way to the end. However, he who is left standing at the end will be the one who emerges victorious.

With regards to Greece’s territorial sovereignty, which Mr. Villiardos says would be under threat—therefore justifying the chains which are keeping us in bondage—we provide our answer in this piece; an answer which is confirmed by the refugee crisis today. Today, more than ever before, we are facing the threat of a new national security threat and a resulting loss of territory.

However, there is no possibility of Mr. Villiardos’ fear—that is, of Greece being isolated from the Western world. We have an obligation to complete the effort begun by our forefathers and to make every friend and ally understand deeply that from this point forward, they will be dealing with a truly independent country, whose people are in sovereign control. A real nation-state and a real democracy! The threat of this supposed “isolation” strikes us as more than a bit outdated, equally as outdated as the justifications put forth by Greece’s subservient political class in order to continue a situation which is beneficial for them: the continued subservience and dependency of Greece.


It is heartening to note that, having followed Mr. Villiardos’ writings, he is gradually “coming around” towards accepting the only true solution for Greece’s crisis. Of course, he is wrong in hoping, still, that a realistic solution could arise out of a stoppage of payments within the Eurozone. Such a possibility is non-existent, and this is proven by the “hard” negotiations of Mr. Tsipras, and previously in the case of Cyprus.

As for if the solution will come via the “grace of God”—in other words, through the dissolution of the Eurozone before Greece itself makes any effort to depart, this is a possibility which cannot be counted upon, nor should we remain in a state of complacency, waiting for such a development to occur. A development which is far from certain to deliver a positive outcome for Greece, in the manner in which it may ultimately take place.


Othon Koumarellas is an architect, civil engineer, and author. He is a member of the Political Secreteriat of the United Popular Front (EPAM) and a member of EPAM’s Programmatic Committee.

Original source: http://www.epamhellas.gr/2016/04/10/τα-ερωτηματικά-της-δραχμής-μια-απάντη/