Yanis Varoufakis on the political ‘death’ of DSK. Varoufakis quotes DSK in a BBC Radio 4 interview broadcast in Jan 2011 where the (soon departing?) MD of the IMF supported Keynes’ recommendation of a Surplus Recycling Mechanism (SRM) to the 1944 Bretton Woods conference:
“Keynes, sixty years ago, already foresaw what was needed; but it was too early. Now is the time to do it. And I think we are ready to do it!”
The Surplus Recycling Mechanism is designed to deal with the systematic destabilising effect of deficits and surpluses, through a mechanism which would rebalance it by transferring surpluses from the surplus to the deficit countries.
Varoufakis takes from the section of the interview the idea that DSK understood that Germany, as the surplus country in a fixed exchange rate area, is as much of a problem as Greece is with its chronic deficits. “For if systematic surpluses have the capacity to undermine a common currency (or fixed exchange) area, then Germany’s developmental model is undermining the eurozone.” He also argues that DSK as a French President would finally recognise that the debt crisis is a symptom, not the cause of the string of failures that threaten the eurozone’s very existence.
Worth quoting this note from Yanis on the SRM and what the US thought of it:
“The United States proved that they did not reject the idea of surplus recycling by effecting the Marshall Plan (a fabulous example of massive surplus recycling) and by taking a myriad steps between 1947 and 1970 to recycle a large percentage of American surpluses in Europe and in Japan. What they did reject was the idea of a supra-national institution that would do the recycling outside Washington’s political control.”