Europe needs a circuit breaker: Interviewed by ABC TV's The 7.30 Report

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Australian Broadcasting Corporation

Broadcast: 20/10/2011

Reporter: Leigh Sales

Greek economist Yanis Varoufakis discusses the renewed protests in Greece against austerity cuts.


LEIGH SALES, PRESENTER: In Greece authorities are bracing for a second day of mass protests against moves to impose harsh government spending cuts on the population.

Greece is on the verge of defaulting on its debt and there are fears that will send all of Europe into a full-blown recession.

The IMF and the European Union have given money to help bail Greece out of its woes, but the condition is that the Greek Government pass austerity measures to get its budget under control.

The Greek population isn’t impressed because they’re the ones at the receiving end of cuts to pay cheques and pensions.

To discuss where this is all going I was joined a short time ago by Yanis Varoufakis, an economist at the University of Athens.

Yanis Varoufakis, what’s different with this round of protests in Greece – it’s not just the scale of them, but the range of people who are involved: what does that signify?

YANIS VAROUFAKIS, ECONOMIST, UNIVERSITY OF ATHENS: It signifies a loss of legitimacy of the Government, but more generally the political system. It means that the depression, which has been the characteristic of everyday life of the average Greek is once again flaring up, transforming itself into anger, and it means that the days of this continuing vicious cycle of more austerity which leads to more recession which then feeds into more austerity are numbered.

LEIGH SALES: What in your view is causing the Greek Government to lose legitimacy? Because aren’t these conditions that it has to impose an austerity package being imposed on it from outside?

YANIS VAROUFAKIS: They’re being imposed from outside, but the big question concerns whether it is wise for the Greek Government to be seeking the next instalment as if it is the Holy Grail of the Greek nation. To give you a parable that you – that Australian – the Australian audience may understand better, it’s a little bit like the loss of legitimacy of the generals in Gallipoli – sacrifices are being expected from the troops, from the people on the ground, but the people on the ground cannot see that these sacrifices are an investment into victory, into a turnaround of this terrible crisis.

LEIGH SALES: So what then do you think is the alternative to an austerity package, particularly given that the Greek Government doesn’t exactly have a lot of its own money to play with?

YANIS VAROUFAKIS: When you’re in a vicious cycle, I think the only alternative to continuing within that vicious cycle is a circuit-breaker, something that will break that vicious cycle, and at the moment I think the only rational course of action for the Greek Government would be to say no to the measures that are being imposed upon it by the troika, by the European Union and the IMF. Let me put it very succinctly: the whole of Europe is caught in co-centric vicious cycles. Something has to give; if it’s not Greece, it will be a French bank; if it’s not a French bank, it will be the Italian debt. I think the sooner that this vicious cycle or sequence of vicious cycles is broken, the better for Europe as a whole.

LEIGH SALES: And when something gives, what do you think will happen?

YANIS VAROUFAKIS: Well, go back to September 2008. Something gave, it was called Lehman Brothers and there was a cascade of insolvencies and bankruptcies. And then suddenly the powers that be pulled out of a hat a very large rabbit and political action was taken to resolve what was a financial catastrophe. This is what’s going to happen here. Something will give. I don’t know whether it’s going to be a French bank, as I said, or some state within the eurozone, but once that happens, I think it will force the hand of our European leaders and perhaps, hopefully, convince them that the time to dither has ended and the time for action has begun.

LEIGH SALES: So what exactly then are the protestors in Greece asking for at this stage?

YANIS VAROUFAKIS: They’re asking for the end of the shadow play, of the fraud of pretending that if these new austerity measures are pushed through Parliament then Greece will be saved because we’re going to get a great big loan that is going to tie us over. This has been played again and again and again, this shadow play, since May 2010. It is clear that the more that this shadow play continues, the deeper the crisis in which people find themselves in and the deeper the crisis of the eurozone as a whole. So what they are saying is the best strategy for Sisyphus is to stop rolling and pushing the rock up the hill.

LEIGH SALES: How much strain do you think that this financial crisis is placing on the European Union? Could it undo 60 years of European integration? 

YANIS VAROUFAKIS: Absolutely. What is happening at the moment is an inability of the political class and the political elite of Europe to handle and to manage a process of disintegration that began with the great – the Global Financial Crisis a few years ago. The euro system was never designed to sustain such a major earthquake and now it is collapsing. The political class is not up to the task of shoring up, of injecting cement into the foundations of the euro system. And the tragedy is that the euro, however badly-designed and ill-conceived it might have been, if it collapses in the effects few weeks, months, whenever, is going to drag down with it the whole concept of a European Union. Europe is going to turn into a postmodern 1930s of everybody hating everybody else, or the war of all against all, hopefully not a war involving tanks and machine guns, but at least a process through which the peoples of Europe, instead of finding a common home and a common interest, they indulge in a kind of Hobbesian tit-for-tat between themselves.

LEIGH SALES: Alright, Yanis Varoufakis, we’ll have to leave it there. Thank you very much for joining us.