POLITICO: Interview

23/09/2015 by

Screen Shot 2015-09-23 at 09.40.18VAROUFAKIS TOLD YOU SO

Varoufakis is welcoming. He makes us coffee and puts a box of chocolates on the table, next to Joseph Stiglitz’s book on inequality, “The Great Divide.” He’s dressed in a dark red T-shirt and dark trousers, and pads around in his socks. When we arranged this meeting, he told me he didn’t want to talk about Greece’s election because he thought it a sad affair. After Sunday’s vote, though, he’s willing to speak.

I ask why he found it so depressing. After all, the voters didn’t punish his former government colleagues in Syriza or Alexis Tsipras, the prime minister. “I don’t want to reduce the significance of Alexis’ triumph,” he says, “but compared to the referendum, we had 1.6 million people who abstained. The party lost 363,000 votes since January. The democratic deficit has grown substantially. Even those who voted for [Tsipras], did so with sorrow and apprehension in their hearts. It was just a very sad election.”

“The great winners of this election,” he continues, “besides Alexis, were the Troika [the IMF, European Commission and ECB].”

* * *

What will come of all this? “A deepening of the crisis, which is a certainty, and Tsipras knows this. The question is: How is he going to position himself in relation to reality? Because there’s rhetoric and there’s the reality, when you ask small businesses to pay 100 percent of their future taxes in advance when they are impecunious and have no access to capital markets. Either they’ll have to move to Bulgaria or they’ll close down. It’s when you ask householders, who are also illiquid, to pay the property tax. So what are we doing? We already have €80 billion worth of tax evasion. This way you’re just going to create a lot more. And it’s not evasion when people can’t pay.”

“Debt relief is a lost cause. There will be a substantial haircut because a debt that’s unpayable will not be paid.”
So what are Tsipras’ options now? “Well, point number one is that his narrative is that the bailout [agreed this summer] or Memorandum of Understanding [MoU] has many holes in it and there are degrees of freedom for further negotiaton. Number two: He’s banking on debt relief sometime in November, which he’ll herald as success. Third: He’s going to make a big deal out of how uniquely positioned he is to take on the oligarchy and tax evaders because Syriza has no strings attached.”

Feet on his desk, flaunting socks with a spider pattern, he continues: “The problem is that the first paragraph of the MoU says the Greek government is committed to these conditions. You can’t have much of a negotiation when you’ve committed to agreeing with the other side. You can hope to petition them — Greek governments have been petitioning them for five years. What we did was try to negotiate and they decided to strangle us to teach us a lesson.”

“Debt relief is a lost cause. There will be a substantial haircut because a debt that’s unpayable will not be paid. But there are ways of effecting a haircut: One is therapeutic, which is to have it up front; the reason for heavy debt relief is to allow yourself to have lower primary surpluses as a signal to investors that Greece is on the mend. But they agreed on stupid primary surpluses of 3.5 percent — you have to be lobotomized to believe that this is reachable in Greece. The government is going to have to increase taxes or reduce spending again. So why would you do it? It’s not going to work.”

Varoufakis is exercised about the Greek “oligarchy.” The Troika, he believes, “is in cahoots with the oligarchs. Since 2010 the oligarchs have been the greatest supporters of the Troika and the Troika has been sheltering them.”

“Tsipras himself kept saying that he didn’t remember the Troika ever threatening the Greek government with a cessation of liquidity if the government didn’t find a way of attacking the rich. Never. They threatened a cessation of liquidity if they didn’t cut pensions or increase VAT on food.” Here he shows emotion: “During the five months I was minister, who was attacking my attempts to counter the Troika? The oligarchs. The oligarchs were the Troika of the interior.” The MoU, he says, “has given up all the instruments the state has to fight a war against them.”

* * *

Where does Varoufakis see Greece five years from now? “Further down the deep black hole if nothing changes. If we continue along the lines of this MoU [we’ll have] ‘Kosovization’: By which I mean we become more and more of a protectorate that has the euro — like Kosovo — but our only export will be people and tourism, with zero investment in productive activities, banks that operate only as vaults and not as credit institutions, and fire sales everywhere. Unless there’s a reaction.”

“Schäuble is right in one respect: The current eurozone is not sustainable. But Merkel will probably manage to keep the thing going while she is chancellor for a few years because Europe’s rich.”
I ask him for his thoughts on Germany’s Angela Merkel and Wolfgang Schäuble. Once again, he barely pauses before answering. “Schäuble’s had a vision for decades about Europe. It’s the wrong vision but it’s a consistent one and an interesting one. Make no mistake, I reject his vision but I find it intellectually interesting to engage with. Merkel has no vision. She simply operates on the basis of whatever works to keep her in power and maintain the status quo under her watch. The clash between those two is remarkable. One has a vision, the other doesn’t, and this creates a chasm between them which is evident.”

And who will win? “It looks like Merkel, except that Schäuble is right in one respect: The current eurozone is not sustainable. But Merkel will probably manage to keep the thing going while she is chancellor for a few years because Europe’s rich; it can continue throwing good money after bad and waste its potential while falling behind the rest of the world in order to maintain this unsustainable architecture.”

“Where he’s wrong is in what he’s proposing to improve it. His fundamental error is that he has absolutely no concept of macroeconomics and is totally unabashed about his ignorance. That’s a terrible mindset for someone who’s in effect running the largest macroeconomy in the world.”

And what about Jean-Claude Juncker? “Let’s talk about something significant,” Varoufakis replies. “Juncker doesn’t exist, he’s just a figurehead of a Commission that has subsided so deeply in terms of significance. I don’t even believe he’s informed of decision-making processes, [though] at some point he’s informed of the decisions.”

* * *

Does Varoufakis have thoughts on Vladimir Putin? The Russian president “has been mightily strengthened by NATO’s inane approach to former Soviet republics, egging Georgia to take Putin on, bringing the Baltic states into NATO. And the Ukraine conflict — to me it’s catastrophic. Firstly because it’s conducted in a manner the West cannot win. But my main concern is for Russian democrats. I grew up under a dictatorship here, and I’m very sensitive to the needs of local democrats who are subjected to tyranny. I think we should always ask ourselves the question, whether we deal with Iraq, Libya, or North Korea: How will our actions impact democrats in those countries? By giving Putin the excuse to address Russia’s people and say the West is conniving against Russia, you’re pushing Russian democrats into a corner and that can never be good for us.”

How should Europe handle the refugees? “How about humanely?” he shoots back. “How about throwing our borders open to people drowning at sea and looking after them. In Greece we have a concept of filoxenia, ‘kindness to strangers.’ I named my daughter Xenia for this reason. I believe you should always consider yourself a foreigner in your own country because that’s the only way you can pass critical judgment on it. So open the bloody borders to those in need and stop bickering about who’s going to do less.”

But can Germany absorb 2 million? “Of course it can. Throughout history, from the Paleolithic period, the places that benefited were those that welcomed migrants and the ones that lost out were those that exported people. The U.S. would not exist today as a power if it had built fences in the 19th century.”

* * *

What will Varoufakis do next? He is clearly a man of genuine charisma and intellect with much still to offer. A professorship somewhere? He laughs. “I’m staying in politics. I don’t have to be in Parliament to be in politics. When I threw my hat in the ring in January, I said I’m not going to abandon Greece again. I will now live out my years in Greece, among the people who trusted me. I’m going to finish my book, then another book and then another. I’m going to lecture. But primarily I’m going to take the fight for democracy to the European level.”

“One lesson I learned during the negotiations was that nothing good can come from a member state fighting alone. Europeans at large are particularly worried — and Greece helped cement that worry — that democracy has become an empty word, and unless we find a way of networking across countries, along the lines of a very simple campaign of democratizing Europe, the continent is condemned to fragmentation. The only beneficiaries will be the racists, the bigots, the National Front, Golden Dawn, those forces that are pushing Europe toward to a postmodern 1930s.”

I circle back to Greece, and to his former partner Tsipras. “He has a great struggle on his hands against history and reality,” Varoufakis says. “He won government but he has to prove he can be in power. The two aren’t the same. There’s no doubt he’s aiming to become a François Mitterrand who made an amazing U-Turn to embrace austerity and managed to maintain command of the Socialist Party after turning against the principles that saw him elected. There’s no doubt that Tsipras would like that. I very much fear, however, that he’ll become, instead, a Ramsay Macdonald [the unpopular British prime minister during the Great Depression.]”

David Patrikarakos is a frequent contributor to POLITICO and author of “Nuclear Iran: The Birth of an Atomic State.”

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