Yanis Varoufakis: "There is no such thing as a debt crisis"

OECD Secretary-General Angel Gurría meets with Greek Prime Minister Alexis Tsipras and finance minister Yanis Varoufakis to discuss reform cooperation program.

"There is no such thing as a debt crisis: The Euro Crisis, Asia's Woes and America's Dilemma in a Global Context". This was the title of a presentation given by economist Yanis Varoufakis at the OECD in March 2013, nearly two years before he became Greece's finance minister. Part of The Coffees of the Secretary-General series, you can read the complete transcript of Mr Varoufakis's presentation below.

It is a great honour to be here at the OECD. This is an Organisation which historically had a significant role in fashioning the kind of ideas on which I will be basing my talk today. A Greek economist speaking on the theme “There is no such thing as a debt crisis” sounds a little bit like a hanged man disputing the concept of rope, but if you bear with me I will try to convince you that I am not in the business of denial; unlike the EU and my government.

I know that Greece, as well as other countries, have been twisting in the wind and hanging by the neck from the proverbial rope of debt. Nevertheless at the same time, allow me to say that I truly believe that the notion of a debt crisis is analytically unhelpful and discursively dangerous. It is detrimental to our society’s chances of recovery and of shared prosperity. When I say there is no such thing as a debt crisis I do not mean that there cannot be a debt crisis; indeed in the so called third world in the 70s, 80s and 90s there was a major debt crisis which could be uniquely and legitimately described as such. What I am saying is that in our generation’s 1929, which is of course what happened in 2008, we did not have the creation of what can be usefully termed as a debt crisis, at least in the west – in the EU, the US and in Japan. Instead, we had what I call the twin peaks crisis. We have a mountain of un-payable debts and banking losses, which is what provokes people to talk about the debt crisis. Behind that mountain there is a second peak, a mountain of idle savings of surpluses too frightened to be invested productively and in a manner that produces the income by which to repay the losses and the debts.

So what we have is a failure of recycling of surpluses which are flooding the private sector banks and various other instruments, incapable and too paralysed by fear to be invested in the economic activity which would generate the income from which the current debts would be repaid. I suppose we can talk about a debt crisis today, but equally, we can also talk about an accumulation of too much money – nobody of course talks about a crisis of too much money and of idle savings, it is however the other side of the same problematic coin. I prefer to state that instead of a debt crisis, we have a crisis of recycling. Economists like to assume that markets have the capacity to sort out these lumps automatically and through suitable adjustments in various prices, and to create the circumstances by which the idle savings get energised through suitable movements of interest rates, of profit rates, of wage rates and of all sorts of price signals that will cancel these two mountains out.

This has not happened, these mountains remain and the fact that one is not cancelling the other out is the real reason that wherever on the planet you scratch the surface, what you find underneath is either explicit crises or terrible angst; as in China for instance.

Why can’t markets sort out this mess?

Get the full transcript here

©OECD/Hervé Cortinat

Short biography

Professor Yanis Varoufakis is a Greek-Australian political economist. He was born in Athens in 1961 where he attended the Moraitis School before leaving to study in the UK in 1978.  

He obtained a Bachelor’s degree in mathematical economics from the University of Essex in 1981; a Master’s Degree in mathematical statistics from the University of Birmingham in 1982; and a PhD in economics from the University of Essex in 1987.

Between 1982 and 1988 Mr Varoufakis taught economics at the University of Essex, the University of East Anglia and the University of Cambridge. Between 1988 and 2000 he moved to Sydney where he taught Economics at the University of Sydney. During this time, he was also an economics fellow at the University of Glasgow and the Université Catholique de Louvain.

Since 2000 he has been teaching political economy at the National and Kapodistrian University of Athens and has been chiefly responsible for setting up the university’s doctoral programme in economics.

Mr Varois also a visiting Professor at the Lyndon B. Johnson Graduate School of Public Affairs at the University of Texas at Austin.

Between 2004 and 2007 Mr Varoufakis served as economic adviser to George Papandreou, before he became Prime Minister of Greece. He is a recognised speaker and often appears as guest analyst for news media like the BBC, Sky News, Russia Today and Bloomberg TV among others. He has also published several books on economics, game theory, and the financial crisis.

Mr Varoufakis is the co-founder (with his partner, the artist and photographer, Danae Stratou) of VitalSpace.org, a non-profit organisation aimed at promoting the role of artists in today’s society through the organisation of art projects, research programs, conferences, and publications.

Mr Varoufakis was appointed finance minister of Greece by Prime Minister Alexis Tsipras on 27 January 2015. In the January 2015 parliamentary election, he was elected to the Greek parliament, representing SYRIZA.

Mr Varoufakis blogs regularly on yanisvaroufakis.eu and on blogs.valvesoftware.com/economics

©OECD Observer February 2015

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

To order your own paper editions,email Observer@OECD.org

Online edition
Previous editions

Don't miss

  • MCM logo
  • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
  • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019