University of Athens Economics Professor, Yanis Varoufakis, is widely recognized as one of Greece’s most prominent and respected advocates for change in European economic policy. Since the outbreak of the Euro crisis, Varoufakis has taken his pedagogical skills outside the classroom into the world’s leading news media outlets and think tanks to promote a different way to handle Europe’s woes: from fervently criticizing the bailout programs in Greece, which he describes as “cynical attempts to shift losses from private banks to the weakest shoulders of the weakest taxpayers in Europe,” to co-authoring “A Modest Proposal”, a toolbox of economic guidelines aimed at overcoming the Euro crisis.
“Europe needs a jolt”, Varoufakis said when endorsing Alexis Tsipras’ candidacy for the presidency of the European Commission in the spring of 2014. Last week, the outspoken university professor announced it was time to actually join the team of people driving the action to set off that jolt: he is now officially running for a seat in Greece’s Parliament under the Coalition of the Radical Left political party (SYRIZA), “with a view to play a role in Greece’s negotiation with Berlin, Frankfurt and Brussels.”
It’s victory or else
The current chapter in Greece’s latest political crisis began last month, when Prime Minister Antonis Samaras was forced to call early elections after failing to obtain a parliamentary majority to appoint a candidate as the head of state.
Samaras was already between a rock and a hard place in terms of the troika’s demands for continued financial support and keeping his fragile governing coalition alive. The move to precipitate a process that would result in snap elections represents a risky political gamble on his part. However, New Democracy appears to be betting on passing the “hot potato” to SYRIZA while hoping for chaos in order to ensue for a comeback.
Should the gamble play out well, it could mean the last twist in Greece’s final submission to what Varoufakis calls “the powers that be.”
Does Varoufakis recognize the potential for such a twist if SYRIZA misses the target? “Absolutely. Whenever good people fail to defeat malignant forces evil returns triumphantly. So, it turns out that we better succeed!”
In Varoufakis’ view, at stake in next January 25th elections are nothing less than “Europe’s integrity, democracy’s delicate fabric, the prospect of averting the emergence of postmodern 1930s, and a chance to reclaim our continent as a locus of shared prosperity.”
Playing hardball with Europe’s masters
So what makes Professor Varoufakis feel he can navigate from academia, think tanks and media outlets to the halls of power and arm-twisting politics in Europe and succeed? “Nothing!” he admits.
“There are no guarantees of success,” Varoufakis says. “The reason I accepted the challenge was that I did not have the right to turn it down. When the leader of a political party about to win government offers you the opportunity to implement policies you have been advocating for years, it is pure cowardice to shirk the task. Will I succeed? I shall only know if I try.”
The prospect for SYRIZA winning the elections (all polls indicate that will be the case, though the party’s ability to summon the necessary political alliances to form a government remain a question), have generated a cascade of reactions outside the country with most of them discouraging. Indeed, Varoufakis may be knocking on the doors of a tough crowd.
Immediately after Samaras dissolved parliament and set the date for the upcoming elections, the IMF decided to suspend Greece’s financial assistance until after Greeks went to the ballots; a move which has been interpreted as an unfair and antidemocratic positioning of the institution against SYRIZA, as well as a warning to the Greek people as to what is to come should they vote ‘the wrong way.’
It just may be that the IMF is simply being cautious before a potential SYRIZA government, which has openly stated its will to review Greece’s financial commitments. Either way, the IMF is one of the institutions the Economics professor is to face should he indeed become an active player in the new Greek government’s effort to negotiate everything from debt relief to further financial stimulus to jumpstart the economy.
“The IMF is a mixed bag these days,” Varoufakis says. “On the one hand they are pushing for inane neoliberal so-called reforms as if there is no tomorrow. On the other hand, they acknowledge that Greece was demolished by the Europeans’ insistence that huge loans with hard austerity attached should come first and then much later, in dribs and drabs, some minimalist debt restructuring.”
A potential credit event in Greece would mainly affect the public entities holding most debt (i.e., the IMF, the ECB, the EU and some central banks). Is that an advantage to advancing a debt restructuring process? “Definitely,” Varoufakis asserts.
“A Syriza government will leave the private creditors alone. After all they hold less than 20% of our debt. It makes no sense to open a front against them, with all the legal ramifications that would entail. The fact that the bulk of the debt is in the hands of the official sector means that, if there is the political will, it can be restructured in a long afternoon.”
Another instant reaction to the current political scenario in Greece came from Germany. Berlin was quick to dismiss the ramifications for a potential new crisis in the euro zone stemming from Athens by implying that Greece is not systemic to the monetary union and that its potential risk to the single currency is virtually null.
Despite subsequent statements from Berlin reassuring its desire for Greece’s continued EMU membership, as well as a willingness to discuss the country’s debt burden “after the elections,” it seems clear, at least in appearance, that Germany remains reluctant to allow any challenge to the prevailing narrative of austerity for sorting out the euro zone’s problems; even if it means letting Greece go.
Varoufakis is not completely sure about Germany’s apparent tough stance, however: “German officials have always barked louder than their bite,” says Varoufakis.
“Mrs. Merkel is a highly pragmatic, very skilled politician. The moment she feels the tide is shifting away from her, she shifts with the tide too. Our task must be threefold, so as to minimize conflict and maximize the chances of a mutually beneficial agreement. First, we must make sure that the changes to the ‘Greek program’ are large enough to be meaningful, in the sense of rendering Greece sustainable. Secondly, we must offer Mrs. Merkel a way of packaging the new deal that she can then sell to her parliamentarians. Thirdly, we must ensure that whatever therapeutic changes are made on the ‘Greek program’, they are not confined to Greece but are, instead, part of a Euro-wide package which helps the whole continent escape from its never ending crisis.”
According to Varoufakis, this time around Greece is a better position to change Berlin’s mindset because of “the brute fact that the present arrangements are unworkable, the agreed measures are un-implementable and ‘life’ has overtaken Berlin’s plans for stabilizing Greece in particular and the rest of the Periphery (including France) more generally.”
A Spanish ally
SYRIZA’s counterpart in Spain is Podemos, a new political party on the left, which currently leads the polls ahead of this year’s general elections. Indeed, there has been a very public show of mutual support and close ties between SYRIZA’s Alexis Tsipras and Podemos’ leader Pablo Iglesias. Both have even intervened in some of each other’s political rallies in Athens and Madrid. It is not surprising that Spain’s traditional political parties, in panic over Podemos’ meteoric rise, eagerly await for a political shipwreck in Greece with SYRIZA at the helm.
There is no doubt about Spain’s systemic character in the European Monetary Union (EMU). Is there potential for a SYRIZA-Podemos alliance to up the ante in Brussels and Berlin? Varoufakis thinks so.
“This alliance, which sprang out of the common crisis our two countries suffered, is Europe’s great big hope. Hope that European democracy can be saved from the destructive forces of debt-deflation and bureaucratic authoritarianism that follows in its steps.”
Precisely because of the potential for a ‘SYRIZA/Podemos contagion’ elsewhere in the periphery, the “crush the Greeks” attitude Tim Geithner so graphically described in his account of the outset of the Euro crisis back in 2010 could become a reality – the need to make an example of Greece before the eyes of, say, Spanish citizens. Isn’t that a concern? “Yes. But then again, what should we do?” says Varoufakis.
“Do we want to live in a European Union which sees it as its task to beat proud nations into a pulp so as to keep other nations in a state of debilitating terror? We have faced such dilemmas before and responded magnificently. We must do so again.”
No “Grexit” card up the sleeve
Polls continue to show that Greeks wish to keep the euro as their currency. It is difficult to see SYRIZA truly play hard-ball with Brussels knowing that the scenario in which Greece would abandon the euro is not a real threat. Can a voluntary exit from the EMU be completely ruled out for Greece? According to Varoufakis, there is no “Grexit” card up the sleeve.
“If it is in my power to determine,” he explains, “Greece will neither want to leave the euro nor threaten to do so. We should not have entered the euro – this is crystal clear, but once in, the Eurozone is disastrous to get out voluntarily.
“That does not mean we should lower our heads and do as we are told lest we are thrown out. No, we should veto misanthropic policies within the euro, demand debt restructuring within the euro, and never give them the opportunity to claim that we opted out of the euro voluntarily. If they want us out, they should kick us out with no help from us. In so doing, however, they will be bringing down their own houses too…”
The Eurozone is dying
During the height of the Greek euro crisis in 2011 that led to the fall of George Papandreou’s government, Varoufakis told me that if anyone had the power to leave the euro, that would be Germany. His assessment at the time was: “If Berlin comes to the conclusion that it wants ‘out’, it will get out itself before giving the green light to Athens to leave.” Does he still stand behind such an assessment?
“Yes. If anything that assessment has become even more pertinent today. Bond yields may have collapsed since then. But this is so because the crisis migrated from the bond markets to the real economy and took the form of a vicious deflation that makes countries like Italy unsustainable.
“The Eurozone is at a very advanced stage of decomposition and unless we something quickly, it may be too late.”
Photo: Yves Herman / Reuters.
Interview first published in OpenDemocracy.