Last Friday, Yanis Varoufakis was in Italy to promote European Spring, a list of candidates standing across the continent in next May’s European election. The former Greek finance minister visited Rome just days after the European Commission had struck down the Italian government’s budget, sparking further rows over Brussels’ authority to curb member states’ spending. At his press conference, Varoufakis called for a “radical Europeanism,” as an alternative to both the populist right and the neoliberal center. Built around the DiEM 25 movement which he launched in 2015, his European Spring initiative brings together forces from Benoît Hamon’s Génération.s in France to Alternativet in Denmark. Jacobin’s David Broder caught up with Varoufakis to talk about the European institutions’ handling of the Italian budget, the prospects for building a progressive alternative within EU structures, and what future lies ahead for post-Brexit Britain.
We’re in Rome, where the key political battle of the moment has set the Five Star/Lega government on a collision course with Europe over its budget. Deputy prime minister and Lega leader Matteo Salvini has a tax cutting agenda yet has picked a fight with Brussels over plans to run a 2.4 percent deficit, thus allowing him also to posture as a defender of Italian public spending. European Commission chief Pierre Moscovici has seemingly played into Salvini’s hands by condemning the Italian government’s irresponsibility.
Absolutely, Moscovici plunged headlong into the trap!
But in your preferred vision of Europe, would the European Commission have a role in setting limits on national budgets at all, or maintain control mechanisms like the Semester?
Let’s look at the example of the United States. You can only have balanced budgets for the state governments, because you have the federal government looking after the shop. In Europe, balanced budgets — which is effectively what the Semester process is, with the Fiscal Compact — are an abomination, an assault against rationality. Because you’ve got governments that have to look after banking systems and have to bail them out and have to look after public investment. It is impossible to do this with a balanced budget. So, the rules are created as if they are there to be violated — by the deficit countries at least.
Imagine if in the United States you didn’t have the Federal Reserve bailing out banks, if you did not have public infrastructure spending, spending on Medicare and so on being funded from federal budgets. It would be impossible for Missouri, Mississippi, even California for that matter, to remain within the union. So, we have a serious problem.
To answer your question, yes, you can have limits for the [EU member] states, as long as at the eurozone level you have the Europeanization of the banking system, of the bailout system, of overall public investment — hopefully, green investment — and of anti-poverty schemes, like food stamps for instance in the United States.
You have in the past, including in your Modest Proposal, spoken about such mechanisms as Eurobonds as part of a Europe-wide response to the crisis. At the same time, you have said such a response doesn’t demand the creation of a transfer union or, as it is often described, German taxpayers having to pay out for Southern European countries. You also talk in terms of acting within the existing European treaties rather than proposing a general reorganization of those treaties.
So what mechanisms actually exist to change course in the eurozone? And, at a more strictly political level, how can they be “sold” to the public across the continent?
Well, the treaties do have to change, and the rules must be changed. They are idiotic; they cannot work. But! Politically speaking, if you go out there and say to people, “Vote for us, because we believe that we need to change the rules so as to ameliorate the crisis that is destroying you,” people will look at you and say “Well, changing the rules will take twenty years: do you want us to die in the meantime?”
So, this is why I have been working on the Modest Proposal. The question is, what can be done tomorrow morning to stabilize the crisis effectively, to stabilize the lives of citizens — to stop this punitive austerity, within the rules. That’s not because I don’t want to change the rules, but because the only way of changing the rules is by creating a kind of green-investment-led growth [to boost] the incomes of the victims of the crisis so that we can have the political space in which we can then start having a genuine discussion about what kind of rules we want, once we have changed them.
To give you an example, take green investment: it’s not that we need something like FDR’s New Deal. 5 percent of GDP can be spent on infrastructure. In the present era, unlike in the 1930s, we need green infrastructure. Green energy, a green transport system: Europe is really very much behind in all these areas. So, we need something like five to six hundred billion [euros] a year. Where does the money come from? The [EU’s member] states can’t afford it, and there’s all sorts of rules. Is there anything we can do, legally, tomorrow morning, to get that five hundred billion? We think, yes.
We are making a very clear proposal. You have the European Investment Bank, which belongs to all of us. It’s been issuing junk bonds now for twenty-five, thirty years, they are AAA rated even by these terrible credit agencies. Say it issues five hundred billion every year. But some say, “No you can’t do that, the price [of the bonds] will fall, the yields will go up” and so on.
But it just takes one press conference. The European Central Bank could announce just for those bonds, and for no others, that if the yields start going up, it will buy them. Indeed, if this announcement is made (namely that the ECB would buy these bonds if their yields rise), the ECB will not have to buy them since the announcement itself will ensure that the yields do not rise. The point here is that in Europe today we have around two and a half trillion euros in the banking and financial system doing nothing, sloshing around, just bidding up house prices and doing damage but not being invested. So, we just need one press conference so that this liquidity can be mopped up by the EIB and put to good use.
Of course, you need the political will, for the leaders to give the orders for that to happen. But here is an example of what you can say to people out there who ask, “So what’s the solution?” I’m not saying that it will be implemented. But to get people angry with the establishment, not with the foreigners, the other, the Muslims, the Jews, the Greeks, the Germans, and so on, what you have to do is to channel the anger properly, into a rational anger.
This crisis is unnecessary: we could change it tomorrow morning. It’s not that we’ll have socialism, it’s not that we’ll have the best of all possible worlds. But it’s something far, far better than what we have today. That is how you build up your political capital as a progressive.
In terms of political will, though: obviously the experience of Greece’s Syriza government showed the difficulties of a single EU country taking on the others or seeking to remodel Europe without allies. You are now proposing a pan-European political movement and in this sense differ from the likes of Jean-Luc Mélenchon, whose basic idea holds that either France alone or France and other states could impose some sort of rupture, also by threatening to leave. You, however, are planning to build up a movement across Europe at the same time, including by standing candidates for the European Parliament across the continent. But if not through wielding power in one particular nation-state, how do you foresee a process of continent-wide political change actually playing out, even in an ideal scenario?
The establishment’s great success over the last ten years of crisis is that they took a banking crisis — a crisis of an international group of people, of internationalists, the bankers — and in order to bail out those guys they turned the Greeks against the Germans, the Italians against the French. They took the victims and turned them against each other.
The only thing we can do as progressives is to run across Europe saying that there is no conflict between Greeks and Germans, there is no conflict between North and South. There are however innocent victims in both North and South. That is why we have opted for a transnational movement.
The problem with Jean-Luc Mélenchon and the reason for our disagreement has to be the fact that when you start talking about going back to the nation-state, you are blowing fresh wind into the sails of Le Pen. The only ones who are going to benefit from the disintegration of the European Union today are the forces of the Right. Even if you are a well-meaning left-winger who thinks in terms of socialism in one country [laughs], in the end you are not going to be the one who gains power in this revived nation-state. It will be Le Pen, it will be Salvini. We are absolutely convinced of this.
This is why, even though our Lexit friends have a very good point in criticizing the European Union — the European Union sucks, there’s no doubt about it, it is a regressive set of vile institutions — its disintegration is not going to propel progressives.
On Lexit, it’s notable that October 20 saw a large “People’s Vote” march in London calling for another referendum over Britain’s decision to leave the European Union. But while you are a self-described radical Europeanist, you have said that you are opposed to such a vote. Why is that? And what future relations do you see between Britain and Europe?
Full disclosure: I fought against Brexit, and I was in disagreement with my friends like Tariq Ali and others who supported leaving the European Union, from the Left. My view was the same as the view I have here in Rome — that is, [in favor of] Italy remaining within the eurozone. The disintegration of the European Union is, in the end, going to have detrimental effects on the weakest members of British society.
The reason why I think the second referendum is a terrible idea is that, by nature, referendums are binary choices. We have at least four choices now: no Brexit; a no-deal Brexit [i.e. the UK and EU reach no agreement on future relations in time for March 29, 2019, the formal date of Brexit]; whatever rubbish solution Theresa May comes back from Brussels with; or the “Norway plus” solution that we have been proposing [i.e. Britain would have a relationship with Europe similar to Norway’s, remaining part of the single market, customs union, and accepting free movement of capital and people but without directly participating in EU decision-making structures].
So, when you have more than two alternatives, what you need is a new government. This is why we support Jeremy Corbyn’s call for a new election. We need a clear accounting, a full discussion of what should be done, so that the House of Commons can make a decision.
Do you think Jeremy Corbyn can draw any opportunities from Brexit? Meaning, even beyond the question of respecting the referendum that took place in June 2016, there are also positive things that can be gained from Britain leaving the European Union?
Well, to the extent that he can nationalize railways more easily, that is a plus, and there’s always a silver lining to every cloud. But let’s not re-run the referendum debate: I think that we should respect the outcome of the people’s vote. I really despise the way that they [campaigners for another referendum] talk about [the need for] a “People’s Vote” as if the first one was the wrong people’s vote. This kind of toxic language does not suit progressive politics.
To me what is now essential is for Britain — and this is possibly something Jeremy and I don’t agree on — to maintain freedom of movement. The Left should always fight to keep borders away and not to create new borders among people. So, for me a “Norway plus” solution would be ideal for Britain and even if that doesn’t happen, our New Deal for Europe, proposed by DieM 25, details how even after a hard Brexit [the UK breaking from all EU-related structures] British institutions and European institutions could coordinate in such a way as to simulate a European Union in which Britain is an integral and progressive part.
Two corrections by Yanis Varoufakis
Please note that the text above differs from the one published in Jacobin in that I corrected two errors in the transcription of what I said.
(1) Jacobin‘s site has me saying “You have the European Investment Bank, which belongs to all of us. It’s been issuing junk bonds now for twenty-five, thirty years, they are AAA rated even by these terrible credit agencies.” The word ‘junk’ was never uttered by me and is wrong. The EIB bonds are high grade investment bonds and very safe. Thus, it was removed from the above.
(2) Jacobin‘s site has me saying: “The European Central Bank could announce just for those bonds, and for no others, that if the yields start going up, it will buy them. But they will not be divided.” The last sentence is not mine. What I did say is that, if the announcement is made (namely that the ECB would buy these bonds if their yields rise, the ECB will not have to buy them since the announcement itself will ensure that the yields do not rise. Thus, in the above the text was edited to reflect that point.
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