Varoufakis misses an opportunity to state clearly the source of this dependence: a negative and deteriorating current account balance since 1986. How could a sovereign ever be dependent on lenders in his own currency? The answer is he never is: he is dependent on them bringing foreign currencies to exchange for his currency. The debt is just a show – it is the foreign reserves that are key.
The UK’s massive trade in commodities deficit is almost made up for by its surplus in services trade. The bulk of those services sold are however ‘financial services’ from the City. Further, the balance on primary income (earnings from direct investment overseas) tends to surplus – a further bulwark against the trade deficit provided by the financial class.
The UK is not dependent on anyone because of financial shenanigans – they are dependent on the financial shenanigans because their industrial base is been destroyed. Their economy isn’t competitive. We in Australia face a similar logic. Government deficits are fine – but the growth in the trade deficit is food for speculators.
An overvalued currency also isn’t helping Australia. But most of all we too need an industrial policy to re-balance value-added trade.