AN INFLUENTIAL Greek economist who will be speaking in Dublin tonight has said the current response by EU leaders and institutions will not resolve the crisis in the euro zone.
Yanis Varoufakis, professor of economic theory at Athens University, has suggested an alternative approach by Europe to tackle what he says are its three major crises – banks, sovereign debt and underinvestment.
Mr Varoufakis will be speaking tonight at a public meeting "Understanding the euro crisis" along with Sinn Féin's finance spokesman Pearse Doherty and Irish Timescolumnist Fintan O'Toole. The meeting, at the Shelbourne Hotel, starts at 7pm.
Yesterday Mr Varoufakis said Greece had been hit by a “triple whammy” in 2008 of the global credit crunch; a slowdown in growth in its domestic economy; as well as suffering from the impact of the sovereign debt crisis in Dubai.
He says the EU-IMF bailout for Greece has been “profoundly disastrous” as it defies logic.
“A bankrupt state imposing austerity will lower GDP and it was always going to make the crisis worse.” He has advocated a three-pronged approach that has won support from senior politicians in several euro zone countries.
On banking, he said a version was required of the programme for banks in the US following the collapse of Lehman Brothers.
“Banks are recapitalised by pumping capital into them in exchange for equity. The European Financial Stability Facility can later sell that equity at a profit.”
The problem of sovereign debt could be solved by getting the ECB to manage or service the debt of each state, but not own it. All bonds would be issued by the ECB which would lead to much lower interest rates for sovereign debt, about 2 per cent, he said.
He said the third of the crises, the underinvestment problem in Europe, could be dealt with by a “new deal for Europe”.