Project and content management for Contemporary Authors volumes
WORK TITLE: Adults in the Room
WORK NOTES:
PSEUDONYM(S):
BIRTHDATE: 3/24/1961
WEBSITE: https://www.yanisvaroufakis.eu/
CITY:
STATE:
COUNTRY: Greece
NATIONALITY: Greek
Married to installation artist Danae Stratou; one daughter from marriage to married to installation artist Danae Stratou.
RESEARCHER NOTES:
LC control no.: n 90638346
LCCN Permalink: https://lccn.loc.gov/n90638346
HEADING: Varoufakis, Yanis
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670 __ |a Game theory, 2004: |b CIP t.p. (Yanis Varoufakis) data sh. (b. Sep. 4, 1956 [sic]; does not match earlier info) galley (sr. lect., economics, U. of Sydney)
670 __ |a Theōria paigniōn, 2007: |b t.p. (Γιάννη Βαρουφάκη = Giannē Varouphakē; teaches econ. theory at Panep. Athēnōn; directs doctoral program in econ. science at UADPhilEcon; has taught in England, Australia, Scotland and Belgium)
670 __ |a Hē genesē tēs mnēmoniakēs Helladas, 2014: |b t.p. (Γιάνης Βαρουφάκης = Gianēs Varouphakēs) spine (G. Varouphakēs) p. 2, cover (b. 1961 in Athens)
PERSONAL
Born March 24, 1961, in Athens, Greece; son of Georgios and Eleni Varoufakis; married Margarite Anagnostopoulou (marriage ended); married Danae Stratou; children: one daughter.
EDUCATION:University of Birmingham, M.Sc., 1982; University of Essex, Ph.D., 1987.
ADDRESS
CAREER
Economist, educator, and writer. University of Essex, England, instructor; University of East Anglia, England, instructor; University of Cambridge, England, instructor; University of Sydney, Australia, instructor, 1987-2000; University of Athens, Greece, instructor, 2000-05, professor, 2005—; Valve Corporation, Bellevue, WA, economist-in-residence; University of Texas, Austin, instructor. Previously, served as the finance minister of Greece, 2015, and advisor to George Papandreou. Cofounder of a political movement called DiEM25. Has taught at other colleges, including the University of Glasgow, Stockholm University, and the Université Catholique de Louvain.
WRITINGS
SIDELIGHTS
Yanis Varoufakis is a Greek economist, educator, and writer. Born in Athens, he moved to the U.K. to attend college. Varoufakis holds a master’s degree from the University of Birmingham and a Ph.D. from the University of Essex. He went on to teach at the latter. Later, Varoufakis served as an instructor at the University of East Anglia, the University of Cambridge, the University of Sydney, Australia, and University of Athens, the University of Glasgow, Stockholm University, and the University of Texas, Austin. He is perhaps best known for his role in the Greek government’s response to austerity measures during the aftermath of the global financial crisis at the end of the 2000s. Varoufakis served as an advisor to the Prime Minister of Greece, George Papandreou and, during the first half of 2015, was the minister of finance for Greece. He became disillusioned by the reluctance of his colleagues to adopt his proposals, so he resigned from his position as minister of finance. Since then, Varoufakis has cofounded a political movement called DiEM25, which emphasizes the importance of democracy in Europe. In an interview with Tom Upchurch, contributor to the Wired website, Varoufakis warned against the dangers of relying too heavily on technology in governance and advocated for democracy. He stated: “We can not subcontract the discussions about what is proper, what is just, what is fair, what is right, to some algorithm, to any algorithm—even to the most fascinatingly brilliant algorithm. These are always going to be the result of debate, of dialogue, of ‘agora’ in the ancient Greek tradition. Of sitting around and discussing until the cows come home—there is no escape from that.” Varoufakis added: “I have to say that I’m not very optimistic about the capacity of technological innovation, on its own, to change the course of history.”
And the Weak Suffer What They Must?
In his 2016 book, And the Weak Suffer What They Must? Europe’s Crisis and America’s Economic Future, Varoufakis identifies the global implications of the European financial crisis. In the same interview with Upchurch, Varoufakis lamented the European Union’s response to the financial crisis and its decision not to infuse more money into the system. He stated: “Effectively you are choosing to shift the burden of a crisis onto the debtors and usually the weakest and poorest of debtors. So effectively you are redistributing power and wealth against the weaker members of society.” Varoufakis added: “These decisions are fundamentally political that change the political economy and the distribution of income across a society. Whether you want to make these decisions or not, you end up with political decisions, even if the decision is not to do anything—which is also a political decision.”
In a review of the book in Foreign Affairs, Andrew Moravcsik compared it to Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe by James K. Galbraith and The Euro: How a Common Currency Threatens the Future of Europe by Joseph Stiglitz. Moravcsik suggested: “These three books advance compelling critiques of the current euro system and creative suggestions for alternative policies. And yet ironically, they make for depressing reading, because in the end, they suggest that there is no easy way out of Europe’s predicament, given the current political constraints. In the long run, muddling through may be the worst outcome, and yet it is the most likely.” Moravcsik added: “Despite their creativity in suggesting alternatives, these authors concede that in the end, everything comes down to choices made by self-interested sovereign states. Governments have little incentive to make charitable and risky concessions, even in a united Europe with economic prosperity on the line. Politicians simply lack the strength and courage to make a genuine break with the status quo, either toward federalism or toward monetary sovereignty.” Moravcsik continued: “Thus, one is forced to conclude that short of a catastrophic economic crisis, Europe can do little more than continue to muddle through in a self-induced state of austerity, thereby undermining its future prospects and global standing.” “While it’s tempting to view Varoufakis as a mere sideshow, his scathing critiques of Europe’s troubled monetary union and the questionable efforts to salvage it shouldn’t be dismissed,” asserted Chris Sorensen in Maclean’s.
Adults in the Room
Varoufakis recalls his time as minister of finance in Adults in the Room: My Battle with Europe’s Deep Establishment. He explains his proposals to fix the Greek economy and expresses his frustration that they were not put in place.
A Kirkus Reviews critic remarked: “It helps to have both a scorecard and an economics degree to follow some of the thornier arguments … but this is an eye-opening look at the recent economic crisis in the eurozone.” Writing in Management Today, Howard Davies suggested: “You will find a long and over-detailed apologia pro his 162-day vita as finance minister, including apparently verbatim records of his meetings with Wolfgang Schaeuble and other assorted wicked Germans and Dutchmen in horns, with whom he vainly attempted to negotiate a new deal for Greece, which would allow its economy to breathe again. In among the self-justifications, there is an important and valid argument.” Davies supports Varoufakis’s suggestion that the austerity measures proscribed to Greece were too tough. However, Davies stated: “To argue, as Varoufakis does, that the Greek tragedy has had serious consequences for the UK, radically overstates the case.” New Statesman reviewer, Tom Nuttall, commented: “It’s not clear what audience Varoufakis has in mind for this carefully written but overlong book. Its value as a record for historians hinges on the minister’s often-questioned reliability as a narrator. The blow-by-blow accounts of his battles with the hated ‘troika’ (the IMF, ECB and European Commission) are of nostalgic interest only to the small number of us who were immersed in the drama in 2015. Eurosceptics, at least, will find much to confirm their hunch that the EU is a bureaucratic monster incapable of brooking democratic dissent.” Writing on the New York Journal of Books website, Adam Tooze opined: “Varoufakis gives an engaging picture both of the palace politics within Athens and of his desperate willingness to believe in Tsipras’s historic mission that held him in place.” Tooze described the book as “a deeply reflective, first-person insight into the workings of modern power and politics.”
BIOCRIT
PERIODICALS
Foreign Affairs, November-December, 2016, Andrew Moravcsik, “Europe’s Ugly Future: Muddling through Austerity,” review of And the Week Suffer What They Must? Europe’s Crisis and America’s Economic Future, p. 139.
Kirkus Reviews, September 1, 2017, review of Adults in the Room: My Battle with Europe’s Deep Establishment.
Maclean’s, May 2, 2016, Chris Sorensen, review of And the Weak Suffer What They Must?, p. 57.
Management Today, July 1, 2017, Howard Davies, “Books: A Greek Tragedy,” review of Adults in the Room.
New Statesman, May 19, 2017, Tom Nuttall, “Do as I Say, Not as I Do,” review of Adults in the Room, p. 45.
ONLINE
David Higham website, http://www.davidhigham.co.uk/ (June 4, 2018), author profile.
New York Review of Books, http://www.nybooks.com/ (March 8, 2018), Adam Tooze, review of Adults in the Room.
Penguin website, https://www.penguin.co.uk/ (June 4, 2018), author profile.
Wired Online, http://www.wired.co.uk/ (December 23, 2017), Tom Upchurch, author interview.
QUOTED: "Effectively you are choosing to shift the burden of a crisis onto the debtors and usually the weakest and poorest of debtors. So effectively you are redistributing power and wealth against the weaker members of society."
"These decisions are fundamentally political that change the political economy and the distribution of income across a society. Whether you want to make these decisions or not, you end up with political decisions, even if the decision is not to do anything—which is also a political decision."
"we can not subcontract the discussions about what is proper, what is just, what is fair, what is right, to some algorithm, to any algorithm - even to the most fascinatingly brilliant algorithm. These are always going to be the result of debate, of dialogue, of ‘agora’ in the ancient Greek tradition. Of sitting around and discussing until the cows come home—there is no escape from that."
"I have to say that I’m not very optimistic about the capacity of technological innovation, on its own, to change the course of history."
Blockchain
Yanis Varoufakis: 'Bitcoin is the perfect bubble, but blockchain is a remarkable solution'
In an exclusive interview with WIRED, Yanis Varoufakis discusses Bitcoin’s bubble, the fantasy of apolitical money and the opportunities for the blockchain to reform Europe
By TOM UPCHURCH
Saturday 23 December 2017
LOUISA GOULIAMAKI/AFP/Getty Images
When I first met Yanis Varoufakis in the summer of 2014, he was a highly respected but relatively obscure economist. Back then, the price of one bitcoin fluctuated around $440. Fast-forward three years and his career has followed a similar trajectory to bitcoin’s valuation. Both have experienced a meteoric rise in popularity, characterised by high-drama and volatility. Varoufakis would be thrust into the limelight as Greece’s finance minister; battling the austerity programme put forward by the Troika and today pursues the lofty ambition of trying to reform Europe. Reaching similar heights, just two weeks ago the price of one bitcoin broke $20,000 for the first time.
Varoufakis may have been one of the very first senior political leaders to explore the use of blockchain-based payments for a national economy. At the height of Greece’s financial crisis, he developed a plan for creating a peer-to-peer parallel payments system, based on the blockchain. Yet he wants to make one point very clear: “I was never impressed by bitcoin itself; but from the beginning I was saying that blockchain is a remarkable solution to problems that we have not even imagined yet.”
As bitcoin’s price continues to fluctuate, it has come under a steady barrage of criticism. Varoufakis is no less damning of the cryptocurrency but on very different grounds.
Bitcoin is “the perfect bubble”
Citing the 17th Century Dutch financial bubble in tulip bulbs, Varoufakis sees bitcoin’s current valuation as, “the perfect tulip bubble.” His explanation is simple. “Just take a look at two graphs. Graph one is a time-series of the dollar price of bitcoin, which has been growing exponentially. Graph two is the number of transactions and the quantity of goods and services that are sold and purchased by bitcoins.” The juxtaposition between these two graphs, suggests that the price of bitcoin is grossly inflated relative to its actual use. This leaves Varoufakis to conclude that, “without a shadow of a doubt, this valuation is the perfect bubble.”
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What the hell is Facebook doing on the blockchain?
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By GIAN VOLPICELLI
What is driving the belief behind bitcoin? Some suggest that bitcoin is becoming a “safe haven” from national fiat currencies, particularly those that have been inflated through Quantitative Easing (QE). But Varoufakis is quick to reject this narrative. The fact that similar safe-haven assets such as gold and the dollar are not matching bitcoin’s wild price swings is a clear indication to Varoufakis that investors are not fleeing fiat currencies for fixed assets. As he argued, “If there was a correlation in the price of gold and bitcoin, then of course you could make the case that investors are fleeing fiat currencies towards fixed supply assets. But that is not what is happening.”
In Varoufakis’ view, what is really happening is the formation of a classic self-perpetuating bubble. It can be explained by one of Varoufakis’ primary intellectual influences, the British economist, John Maynard Keynes. Keynes famously studied the irrational and emotionally charged decisions that investors make when overcome by speculative fever, greed and hubris. Varoufakis believes bitcoin’s valuation is underpinned by the same irrational exuberance; “as Keynes argued, this is the kind of bubble that forms when average opinion is trying to guess what average opinion will be.” This self-referential game is what continues to erratically drive the price of bitcoin. But in terms of guessing when this bubble might burst, Varoufakis is adamant; “In non-linear dynamic systems, to predict when the bubble will burst, is actually impossible.”
"We can not subcontract the discussions about what is proper, what is just, what is fair, what is right, to some algorithm, to any algorithm – even to the most fascinatingly brilliant algorithm"
Yanis Varoufakis
Whilst it may be impossible to anticipate its bursting, Varoufakis remains less concerned that the bitcoin bubble will trigger a wider financial crisis. Despite the intense media attention and a rapid rate of growth, the size of the bitcoin market remains miniscule, compared to the overall financial sector. The crypto-currency’s market capitalisation is roughly 0.25 per cent of the $73 trillion global stocks market, 0.083 per cent of the $217 trillion global real estate market and 0.033 per cent of the $544 trillion global derivatives market.
Bitcoin is also unlikely to cause the “chain reaction effect” that Collateral Debt Obligations (CDOs) and Credit Default Swaps (CDSs) caused in the run-up to the financial crisis of 2008. Varoufakis maintains that it was the interconnection of CDOs and CDSs, with almost every other aspect of the financial sector, that caused such a widespread financial crisis in 2008. However he raises one note of caution; “I’m worried and I hear lots of noises about the creation of new financial instruments based on bitcoin, including CDOs based on bitcoin and so on. If that grows with the vengeance that we saw in 2007, then we will probably be having such worries, but I don’t think we will.”
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To get rich in crypto you just need an idea, and a coin
To get rich in crypto you just need an idea, and a coin
By GIAN VOLPICELLI
The fantasy of apolitical money
Critics of bitcoin have tended to focus upon the technical limitations of the technology; its energy expenditure, its anarchic structure, its slower transaction speeds and its user anonymity. Yaroufakis agrees that there are numerous design flaws with the currency. Not least, he adds, “the fact that there are no controls, no democratic checks and balances of a bit issue and no way of back-stopping financial transactions by means of some kind of insurance policy for those that get defrauded.” Yet his central criticism focuses upon what he refers to as “the fantasy of apolitical money.”
To Varoufakis, money is inherently political. The decisions regarding whether money is produced or not, how it is distributed and who receives it, all have significant political consequences, benefiting certain social groups over others. Bitcoin’s central design feature, that it is not governed by a central bank or decision-making authority, means that responsibility for its distribution is forfeited. This can have profound social and political implications in times of crisis.
To understand what Varoufakis means by the political nature of money, consider how governments respond to financial crises. When a major financial crisis occurs, it is usually caused by the failure of widespread and interconnected debts. Once these debts fail, what happens is that a large part of the money supply effectively disappears. With this money gone, governments have a choice whether to replace it or not. Choosing not to replace it through the creation of new money (inflation) becomes a political decision with political repercussions. As Varoufakis suggests, “effectively you are choosing to shift the burden of a crisis onto the debtors and usually the weakest and poorest of debtors. So effectively you are redistributing power and wealth against the weaker members of society.”
If the decision is made to replenish the money supply, like it was in 2008 through Quantitative Easing (QE), then how this money is channeled through the economy will also influence the political economy. In Varoufakis’ opinion, QE was engineered in a way to benefit large corporations. Alternative options, such as creating a new public investment bank which invests in infrastructure, education or healthcare, would have had very different political repercussions. To Varoufakis, “these decisions are fundamentally political that change the political economy and the distribution of income across a society. Whether you want to make these decisions or not, you end up with political decisions, even if the decision is not to do anything - which is also a political decision.”
If the bitcoin bubble bursts, this is what will happen next
Bitcoin
If the bitcoin bubble bursts, this is what will happen next
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To Varoufakis, the moment you adopt bitcoin’s fundamental philosophy, which sets the quantity of money separately from the business cycle, the economy and the political process, in effect you, “make it exogenous from anything that has to do with our collective decision-making systems. You’re making a political decision, that during times of crisis, our society is opting for a shift of power and wealth to the creators and the richer members of society.” Thus by removing the creation of money away from human decision making systems, bitcoin’s algorithm risks cementing and even accentuating current inequalities in wealth.
As an economist inspired by the theories of Karl Marx and John Maynard Keynes, Varoufakis is chiefly concerned with the distribution of wealth and the impact this has on relationships between creditors and debtors. So, what if someone designed an algorithm that not only controls the production of money (like bitcoin) but also the distribution of money? If an algorithm could be designed to redistribute wealth more equitably, would this allay Varoufakis’ concerns with technical systems that operate outside of human decision-making processes?
Even if such an algorithm could be designed, Varoufakis insists that “democracy and the democratic process, in my mind, is irreplaceable.” This is because humans can never settle upon a precise and defined notion of justice, fairness or equality. Even in the case of the redistribution of wealth there are various competing theories of how wealth should best be redistributed. Consequently, human societies will never perfectly agree upon an apolitical, algorithmic and technical process by which to redistribute wealth. As Varoufakis warned, “we can not subcontract the discussions about what is proper, what is just, what is fair, what is right, to some algorithm, to any algorithm - even to the most fascinatingly brilliant algorithm. These are always going to be the result of debate, of dialogue, of ‘agora’ in the ancient Greek tradition. Of sitting around and discussing until the cows come home - there is no escape from that.”
Despite Varoufakis’ criticisms of bitcoin, the crypto-currency is gaining traction. Crisis-ridden countries, like Venezuela, are beginning to turn to it, as a surrogate to their ailing national currencies. So does Varoufakis believe that bitcoin could supersede national fiat currencies in the near future? “It’s perfectly feasible that a small nation can adopt a currency whose money supply can not be manipulated or controlled. But the real question is whether it’s desirable. On this question, I’m categorically negative.”
In the case of Venezuela, Varoufakis advises, “Venezuela must solve its interminable political affairs before it starts thinking about bitcoin.” Rapprochement between the government and opposition must come first, for without it the polarisation in Venezuelan society makes any currency system impossible. Again, Varoufakis emphasises the primacy of politics and the limitations of technical solutions to political problems; ‘Let’s not forget that our market economies require a degree of political consensus and legitimacy in order to function. And without that there’s no technical solution that you can bring to bear upon a crisis like that in Venezuela’s.”
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What is the blockchain? WIRED explains
What is the blockchain? WIRED explains
By MATT REYNOLDS
Some bitcoin enthusiasts have suggested that bitcoin may one day challenge the dollar reserve global system upon which America’s economic might is based. But again, Varoufakis sees this vision as pure fantasy. “Bitcoin would never undermine the exorbitant privilege of the US dollar or indeed any currency backed up by strength,” he says. In Varoufakis’ view currencies are supported, not only by the “soft power” of institutions, but also by the “hard power” of military might and geopolitical power. As he explained, “if you’re a Saudi oil king or an industrialist from China or Korea, you want to put your money in the bonds and assets that are denominated in the currency of the superpower that has the military might and the geo-political strength, to back-up its own currency.”
Blockchain and the future of Europe
While acknowledging the limitations of bitcoin and other technical solutions to political problems, Varoufakis does see potential in blockchain technologies. For him, “the algorithm that operates behind bitcoin, caught my attention right from the beginning. I consider this to be a remarkable technology.”
As early as 2012, Varoufakis was toying with ideas for using blockchain to help solve Europe’s financial woes. By the time he was appointed Finance Minister of Greece in 2014, within days his anti-austerity programme was met with the direct threat from the Troika to close Greece’s banks. With no banking system, the country would grind to a halt. To counter this threat, Varoufakis devised an audacious plan to keep Greece’s financial system operating.
Effectively Varoufakis proposed creating an alternative, peer-to-peer payments system based on the blockchain. This would disintermediate the financing they were receiving from the Troika and from the money markets. But with no money coming from the Troika, Varoufakis would need to create a parallel payments system, that would leverage the tax that all citizens and companies of Greece need to pay, as a new form of money. This is what he would eventually brand, “fiscal money.”
To understand how fiscal money works, imagine that a pharmaceutical company in Greece is owed money by the state. Due to the constraints of the crisis, it may take years to pay the company in normal central bank euros. However what if there was an alternative option? What if the Greek State created a reserve account for the company under its tax file number, in which it placed tax credits of one million euros? This IOU could then also be used by the company to pay other organisations and individuals within the country.
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"Every financial system is abused and used for purposes of propagating corruption. The 500 Euro note is jokingly referred to as the ‘al-Qaeda’ – it is a remarkable tool for the mafia and for terrorism"
Yanis Varoufakis
One of the most disruptive aspects of this unrealised plan, was to enable the state to borrow directly from citizens and vice versa. In effect, Varoufakis was attempting to use new digital technologies, such as blockchain, to cut out the European lending authorities and build new lending relationships between citizens, companies and the state.
The risk this system faced was the threat of corruption and the subsequent decline in public trust of authorities, something that Varoufakis admits is “in very limited supply” in a country like Greece. For example, what if Greek authorities abused these tax credits and began to distribute this new fiscal money to close allies and friends? This is where Varoufakis saw blockchain’s potential. “If the payments system was based on the blockchain, this would allow the combination of anonymity but perfect transparency, regarding the total aggregate size of the transactions of the currency….blockchain would overcome the trust problem as we know it.”
For Varoufakis, herein lies the great potential with blockchain. Not only has it the ability to disintermediate incumbent middlemen, but it can also improve the overall transparency of systems. Make no mistake, Varoufakis does not believe that blockchain will completely solve the problem of corruption. In his opinion, “every financial system is abused and used for purposes of propagating corruption. The 500 Euro note is jokingly referred to as the ‘al-Qaeda’ - it is a remarkable tool for the mafia and for terrorism.” However what Varoufakis believes we must do is to try and embrace technologies that allow us to limit corruption. In his opinion, “the blockchain has many qualities and capacities that could help us limit this abuse.”
To change how you use money, Open Banking must break banks
Money
To change how you use money, Open Banking must break banks
In designing future digital systems, like blockchain, Varoufakis calls for “coordination” and “openness” amongst technologists, designers and citizens. He also advises that organisations, “do the opposite of what Silicon Valley is trying to do, which is secure the profit stream, by trying to create property rights over everything they do.” Yet when it comes to the contentious debate of whether blockchains should remain public (such as bitcoin and Ethereum) or private, he anticipates a mixture of systems based on public, consortium and private blockchains. According to Varoufakis, “any useful tool should have a use at all levels: private and public”. And he predicts blockchain will be used by central banks to create national currencies, by private banks and companies to expedite settlements and by cooperatives for internal payments and transactions.
Looking to the future, Varoufakis is now leading the charge for a newly reformed Europe. His organisation, DIEM25, aims to create a more homogenised European system. In his view, “federal structures are essential - they are like the foundations of an edifice of a building.” But currently they only pertain to trade, industry standards, environmental standards and, of course, the currency. For Varoufakis, Europe needs full political, fiscal and constitutional union. Otherwise, “If we don’t have the whole thing, it will constantly threaten to collapse on top of our heads.”
Blockchain does feature in Varoufakis’ vision of a newly homogenised Europe. Ideally it would be used to create a two-tier monetary system. Individual member states would move towards a blockchain based version of Varoufakis’ concept of ‘fiscal money’. Atop of this, the European Central Bank (ECB) would create an over-arching, European-wide digital currency. As he surmised, “my dream for the monetary reconfiguration of the European Union, in particular for the eurozone, is blockchain based nation-state, euro-denominated fiscal money, hanging under a broader blockchain based euro.”
Technologies such as blockchain, may also help fulfill Varoufakis’ vision of a Europe that is at once homogenized to tackle the big problems (like the banking system, fiscal redistribution and poverty) whilst decentralized for the smaller, day-to-day decisions. Indeed DIEM25 is calling on Europeans to “imagine the European Union, not as a union of governments but as a union of cities, a union of regions, where power is simultaneously decentralised while problem solving of basic common problems is done at the broader level at the level of Europe.”
Blockchain can play a role in delivering this vision but as Varoufakis confesses, “I have to say that I’m not very optimistic about the capacity of technological innovation, on its own, to change the course of history.” For Varoufakis, politics and people come first.
Yanis Varoufakis
Yanis Varoufakis is the former finance minister of Greece and now the figurehead of an international grassroots movement, DiEM25, campaigning for the revival of democracy in Europe.
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Biography
Yanis Varoufakis is the former finance minister of Greece and the author of several international bestselling books. And the Weak Suffer What They Must?: Europe, Austerity and the Threat to Global Stability reveals the underlying problems that led to the Eurozone crisis and its ongoing catastrophic mishandling. Adults In the Room: My Battle with Europe's Deep Establishment is an explosive memoir that reveals what goes on behind the scenes in Europe's corridors of power. Talking To My Daughter About the Economy: A Brief History of Capitalism (forthcoming) explains through vivid stories and easily graspable concepts what economics actually is and why it is so dangerous in the form of a letter to his teenage daughter. Born in Athens in 1961, Yanis Varoufakis was for many years a professor of economics in Britain, Australia and the USA before he entered government and is currently Professor of Economics at the University of Athens. Since resigning from Greece's finance ministry he has co-founded an international grassroots movement, DiEM25, campaigning for the revival of democracy in Europe and speaks to audiences of thousands worldwide.
yanisvaroufakis.eu / @yanisvaroufakis
Yanis Varoufakis
In 2015, Yanis Varoufakis became the world’s most prominent opponent of austerity when, as finance minister of Greece, he refused to accept the terms of the loan agreement dictated to his bankrupt country by the Eurozone’s leaders.
Since resigning his post he has become the figurehead of an international grassroots movement, speaking to audiences of thousands in cities across Europe.
Born in Athens in 1961, for many years he was a professor of economics in Britain, Australia and the UK before he entered politics. He is currently Professor of Economics at the University of Athens.
Yanis is the author of several books including The Global Minotaur, And the Weak Suffer What They Must? (2016), and Adults in the Room (2017), his riveting account of his negotiations with the EU over Greece’s debt and bailout. His most recent book is Talking to My Daughter About the Economy, again published by Bodley Head.
Yanis Varoufakis
From Wikipedia, the free encyclopedia
Yanis Varoufakis
Γιάνης Βαρουφάκης
Photograph of Yanis Varoufakis sitting in front of microphone
Varoufakis in Berlin on 5 February 2015
Minister of Finance
In office
27 January 2015 – 6 July 2015
Prime Minister Alexis Tsipras
Preceded by Gikas Hardouvelis
Succeeded by Euclid Tsakalotos
Member of the Hellenic Parliament
In office
25 January 2015 – 20 September 2015
Constituency Athens B
Personal details
Born Ioannis Georgiou Varoufakis
24 March 1961 (age 57)
Palaio Faliro, Athens, Greece
Nationality
Greek Australian
Political party Syriza (formerly), MeRA25
Alma mater
University of Essex
University of Birmingham
Website Official website
Academic career
Field
Game theory Political economy Marxian economics
Influences
Marx Keynes Robinson Kalecki Papandreou Galbraith Mirowski Sweezy Hayek Leijonhufvud Wolff
Ioannis Georgiou "Yanis" Varoufakis (Greek: Ιωάννης Γεωργίου "Γιάνης" Βαρουφάκης, translit. Ioánnis Georgíou "Giánis" Varoufákis, pronounced [ˈʝanis varuˈfacis]; born 24 March 1961)[1][2] is a Greek economist, academic and politician, who served as the Greek Minister of Finance from January to July 2015, when he resigned. Varoufakis was a Syriza member of the Hellenic Parliament (MP) for Athens B from January to September 2015.
Varoufakis was born in Athens in 1961 and attended Moraitis School before moving to the United Kingdom where he studied mathematics at the University of Essex, before attaining a postgraduate degree in mathematical statistics at University of Birmingham and a PhD in economics at Essex. He began a career in academic economics, teaching at the universities of Essex, East Anglia and Cambridge between 1982 and 1988. Following Margaret Thatcher's third election victory in 1987, Varoufakis left the UK and moved to Australia, where he taught at the University of Sydney until 2000. He returned to Greece that year to teach at the University of Athens, where he led a doctoral program and was promoted to full professor in 2005. Following this, Varoufakis had periods of advising George Papandreou and working as the economist-in-residence for Valve Corporation before moving to the United States to teach at the University of Texas at Austin. Varoufakis has published a number of texts on economics and game theory, such as The Global Minotaur.
In January 2015, Varoufakis was appointed as the Minister of Finance, and led negotiation with Greece's creditors during the Greek government-debt crisis. However, he failed to reach an agreement with creditors, leading to the 2015 Greek bailout referendum. The day following the referendum, on 6 July 2015, Varoufakis resigned as Minister of Finance and was replaced by Euclid Tsakalotos. On 24 August, Varoufakis voted against the third bailout package, and in the ensuing September snap election, did not stand for re-election. Varoufakis has since appeared in numerous debates, lectures, and interviews. In February 2016, he launched the Democracy in Europe Movement 2025 (DiEM25), and subsequently backed a Remain vote in the UK's European Union membership referendum 2016.
Contents
1 Early life and education
2 Academic career
3 Minister of Finance and the Syriza government (January–August 2015)
3.1 Commentary on appointment
4 Later political career (2015–present)
5 Personal life
6 Works
6.1 A Modest Proposal
6.2 The Global Minotaur
6.3 Books in English
6.4 The Globalizing Wall
6.5 Essays
6.6 Selected interviews and reviews
7 References
8 Further reading
9 External links
Early life and education
Varoufakis was born in Palaio Faliro, Athens, on 24 March 1961, to Georgios and Eleni Varoufakis.[3]
Varoufakis's father, Georgios Varoufakis, was a Greek Egyptian who emigrated from Cairo to Greece in the 1940s, arriving in the midst of the Greek Civil War. One day, he was "roughed up" by the police and asked to sign a denunciation of communism. In response, he said: "Look I am not a Buddhist, but I would never sign a denunciation of Buddhism".[4] He therefore ended up spending several years imprisoned on the island of Makronisos, which was used for the political re-education of people who fought on the communist side in the war.[5] After being released in 1950, he completed his university studies and found employment as the personal assistant to the owner of Halyvourgiki, Greece's biggest steel producer. He is now, at the age of 90, Chairman of Halyvourgiki's Board of Directors.[5][6]
Varoufakis's mother, a student at the University of Athens School of Chemistry at the time she met Georgios, abandoned her conservative background[3] after meeting her husband who was, at the time, allied to United Democratic Left (EDA). In the mid-1970s Eleni Varoufaki became an activist for the Women's Union of Greece, which promoted gender equality and had been set up by members of PASOK.[5] By the early-1980s, the couple had converged politically to the same political centre-left views and engaged with the socialist PASOK.[3] Eleni was elected Deputy Mayor of Palaio Faliro a few years before she died in 2008.[citation needed]
Varoufakis was six years old when the military coup d'état of April 1967 took place. Varoufakis later said that the military junta showed him a "sense of what it means to be both unfree and, at once, convinced [me] that the possibilities for progress and improvement are endless". The junta collapsed when Varoufakis was in junior high school.[7] Attending the private Moraitis School, Varoufakis decided early to spell his first name with one 'n', rather than the standard two, for "aesthetic" reasons. When his teacher gave him a low mark for that, he became angry and has continued spelling his first name with one 'n' ever since.[8]
Varoufakis finished his secondary education around 1976, when his parents deemed it too dangerous for him to continue his education in Greece. Therefore, he moved to the United Kingdom in 1978 where he entered the University of Essex. His "initial urge was to study physics" but he decided that "the lingua franca of political discourse was economics". He therefore enrolled in the economics course at Essex, but it has also been suggested that he decided to enroll in economics after meeting Andreas Papandreou.[5] After only a few weeks of lectures, Varoufakis switched his degree to mathematics.[7] Whilst at the University of Essex he joined a variety of political organisations including ComSoc (the University Communist Society) and the Troops Out Movement, which campaigned for a British withdrawal from Northern Ireland. He also became involved with the African National Congress, Palestine Liberation Organization, and other organisations such as those in solidarity with Chile. Varoufakis was also elected as secretary of the Black Students Alliance, a choice that caused some controversy, given that he is not black, to which he responded by telling them, according to his PhD supervisor Monojit Chatterjee, "that black was a political term and, as a Greek, on the grounds of ethnicity he had as much reason to be there as anyone else."[6] Varoufakis also took part in student debates, where one of his rivals was John Bercow, who later became the Speaker of the House of Commons.[6]
He moved to the University of Birmingham in October 1981, obtaining an MSc in mathematical statistics in October 1982. He completed his PhD in economics, writing a thesis on Optimization and Strikes, back at the University of Essex, where his PhD supervisor was Monojit Chatterjee. He completed his PhD in 1987.[9]
Academic career
Varoufakis at Subversive Festival 2013 in Zagreb, Croatia
Between 1982 and 1988, Varoufakis taught economics and econometrics at the University of Essex and the University of East Anglia, and also taught at the University of Cambridge. He did not wish to return to Greece for fear of conscription, and so accepted an offer to lecture at the University of Sydney, where he remained until 2000. From 1989 to 2000, he taught as senior lecturer in economics at the Department of Economics of the University of Sydney, with short stints at the University of Glasgow and the Université catholique de Louvain. Varoufakis, during his time in Sydney, had his own slot on a local television show where he was critical of John Howard's conservative government. He also acquired Australian citizenship.[5][10]
In 2000, a combination of "nostalgia and abhorrence of the conservative turn of the land Down Under", led Varoufakis to return to Greece where he was unanimously elected an associate professor of economic theory at the University of Athens.[5] In 2002, Varoufakis established The University of Athens Doctoral Program in Economics (UADPhilEcon), which he directed until 2008. In 2005 he was promoted to full professor of economic theory.[10]
From January 2004 to December 2006, Varoufakis served as economic advisor to George Papandreou, of whose government he was to become an ardent critic a few years later.[11]
Beginning in March 2012, Varoufakis became economist-in-residence at Valve Corporation. He researched the virtual economy on the Steam digital delivery platform, specifically looking at exchange rates and trade deficits. In June 2012, he began a blog about his research at Valve. In February 2013 his function at Valve was to work on a game for predicting trends in gaming.[12][13][14][15] From January 2013 he taught at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin as a visiting professor. In November 2013, he was appointed guest professor at Stockholm University, Department of Computer and Systems Sciences, to work within game and decision theory at the eGovLab.[16] In 2013, he was appointed the Athens desk editor of the online magazine WDW Review,[17] in which he contributed until January 2015. On 22 January 2015,[citation needed] the International University College of Turin awarded to Varoufakis an honorary professorship in comparative law economics and finance for his extraordinary theoretical contribution to the understanding of the global economic crisis.[18]
Minister of Finance and the Syriza government (January–August 2015)
Greek debt crisis
Greek economy
Tax evasion and corruption in Greece
Global financial crisis
European debt crisis
Financial audits, 2009–10
Anti-austerity movement
Election articles
Proposed economy referendum, 2011
May 2012 election
Government formation
June 2012 election
January 2015 election
Greek bailout referendum, 2015
September 2015 election
Greek government debt crisis articles
Greek eurozone exit
Greek crisis timeline
Greek crisis countermeasures
v t e
Varoufakis was elected to the Greek parliament, gathering the largest number of votes (more than 142 thousand) of any Greek MP, representing Syriza,[19] and took office in the new government of Alexis Tsipras two days later, on 27 January 2015.[20] He was appointed Finance Minister by Tsipras shortly after the election victory. The party promised to renegotiate Greece's debt and significantly curtail the austerity measures which had led to the longest recession in post-war global history.[21][22]
The new government had to negotiate an extension on its loan agreement, due to expire on the 28th February 2015. Had it expired without renewal, the European Central Bank would have pulled its liquidity provisions from Greece's commercial banks, ensuring that they closed their doors to the public. Varoufakis led this negotiation at the Eurogroup and with the International Monetary Fund. On 20 February, at the Eurogroup, an agreement to extend the Greek loan "facility" for four months, until 30 June 2015, was struck and Varoufakis hailed it as crucial – because it represented a fresh start by specifying that the terms of the loan would be renegotiated and its conditions would be re-drawn on the basis of a new list of reforms to be provided by the Greek government. That list was submitted by Varoufakis on 23 February and was approved by the Eurogroup on 24 February. On those grounds, Varoufakis signed the official document by which the loan agreement's expiry date was to be extended from 28 February to 30 June 2015 – a four-month period during which a new agreement was to be negotiated.
Varoufakis' view on Greece's public debt, and the 2010 crisis which began as a result of the Greek governments' inability to fund it, was that EU bailouts were attempts to take on the largest loan in history on condition of austerity measures that would shrink the incomes from which old, un-serviceable loans and new bailout debts would have to be repaid. Varoufakis argued that the "bailout" loans of 2010 and 2012, before restructuring the debt properly and putting in place a developmental program (including reforming the oligarchy, creating a development bank and dealing with the banks' non-performing loans) would lead to deeper bankruptcy, a great depression and a harder default in the future. His explanation of why the troika of Greece's lenders (the IMF, the ECB, and the European Commission) insisted on these bailout loans was that they represented a transfer of losses from the private banks to Greece's and Europe's taxpayers. In his view, the 20 February 2015 Eurogroup agreement that he negotiated, "was an excellent opportunity to move forward."[23]
However, the troika of lenders were not happy to let the new Greek government change the previous terms of the agreement, nor to agree to a debt restructuring. Varoufakis claims that, soon after the extension was granted at the end of February, the troika reneged on its alleged promise to consider a new fiscal and reform program for Greece, demanding of the Greek government that it implement the old one (which the Syriza government was elected to re-write). In March 2015, the Wall Street Journal pointed to several tensions between Greece and the other Eurozone countries, saying that some countries feel they have taken the "tough medicine" and the €195 billion owed is not insignificant. Further, they stated other governments have philosophical differences with Varoufakis and his Anglosphere and Keynesian leanings. Peter Ludlow said Varoufakis and his colleagues "turned instinctively... to the U.K. and the U.S. even before they called on the European Left."[24]
In a discussion with Nobel laureate Joseph Stiglitz on invitation of U.S. economic think tank Institute for New Economic Thinking, Varoufakis stated on 9 April 2015 that "the Greek state does not have the capacity to develop public assets." Therefore, he announced that his government was "restarting the privatization process." However, unlike the former governments they would insist on establishing public–private partnerships with the state retaining a minority stake to generate state revenues. They would also require a minimum investment on behalf of the bidder, and "decent working conditions" for workers.[25] Varoufakis also said that although the government needed to avoid a primary budget deficit, the bailout program's target of a surplus of 4.5 percent of GDP was outlandish and should be reduced to no more than 1.5 percent.[26]
After many weeks of negotiations during which the Greek government, often against Varoufakis' advice, made many concessions to the troika of Greece's lenders, no agreement was in sight. One reason was that the members of the troika did not have a unified position. For example, the IMF insisted that the Greek government's demand for a public debt restructure should be granted, while powerful finance ministers in the Eurogroup (Germany's, for instance) refused this. Another alleged reason was that, with elections approaching in Spain, Ireland, and Portugal, various politicians within the EU did not want to see Greece's radical new government emerge as successful. Moreover, the differences in economic ideology will have contributed to the lack of progress towards a mutually-agreeable solution.[27]
On 25 June 2015, Varoufakis was presented with an ultimatum in the Eurogroup. It included a fiscal proposal, a reform agenda, and a funding formula that Varoufakis, his government, and several other ministers of finance sitting in the Eurogroup, considered to be non-viable. The next day, the Greek Prime Minister, Alexis Tsipras, called for a referendum on the Eurogroup's proposal on 5 July.
On 5 July 2015, the bailout referendum took place. Varoufakis had campaigned vigorously in favour of the 'No' vote, against the united support for the 'Yes' of Greece's media. To make his position clear, he declared on television that he would resign as finance minister if Greeks voted 'Yes'.[28] The outcome of the vote was a resounding 61.5 percent vote in favour of 'No'. Varoufakis went on television, soon after the result was announced, and declared that the government was determined to honour this new mandate for a different agreement with its creditors. However, a few hours later, Varoufakis resigned. In his resignation statement the following morning he claimed that "other European participants" had expressed a wish for his absence.[29] Later he explained that he decided to resign during a meeting with the prime minister, on the night of the referendum, during which he discovered that the prime minister, instead of being energised by the "No" vote, declared to Varoufakis his decision to acquiesce to the troika's terms. Unwilling to sign such a "surrender" document, Varoufakis chose to resign.
His explanation, published later by Harry Lambert, New Statesman, 13 July 2015, was this: "I'm not going to betray my own view, that I honed back in 2010, that this country must stop extending and pretending, we must stop taking on new loans pretending that we've solved the problem, when we haven't; when we have made our debt even less sustainable on condition of further austerity that even further shrinks the economy; and shifts the burden further onto the have nots, creating a humanitarian crisis. It's something I'm not going to accept, I'm not going to be party to."
In a 16 July teleconference with private investors that was later made public, Varoufakis described a five-month clandestine project he ran as finance minister involving hacking into Greece's independent tax service's computers. The project's goal was to develop a parallel payment system that could be implemented as a contingency plan if the Greek system failed, and was dubbed "Plan B". In it, individuals' private identification numbers were accessed and copied to a computer controlled by a "childhood friend" of Varoufakis.[30]
On Friday 14 August, the government (without Varoufakis) pushed successfully through parliament the third Greek bailout agreement. The bailout bill received 222 votes to 64 (as the conservative opposition voted in favour). Up to 40 Syriza members including Varoufakis voted against the bailout.[31] Just prior to that vote, Varoufakis rose in parliament to offer the Prime Minister of Greece his resignation from his parliamentary seat, saying that this was the only way he knew how to combine his strong opposition to the new bailout with loyalty to the party and the prime minister. On 20 August, the prime minister himself resigned and called a snap election due to the loss of support from rebelling Syriza MPs.[32] Varoufakis had already declared that he was not interested in standing again for Syriza. At the same time, Syriza announced that any MP who voted against the bailout package would not be standing for the party. Varoufakis did not go on to represent Popular Unity, unlike many of his ex-Syriza colleagues, as he considered the party too isolationist. Varoufakis choose not to stand in the election, saying he would focus on creating European network that would 'restor[e] democracy' in Europe.[33] A month later, the national election was held and despite a low voter turnout, Tsipras and his Syriza Party won just over 35 percent of the vote. Combining with the Independent Greeks Party, a majority was achieved and Tsipras was returned to power.[34]
Commentary on appointment
The Adam Smith Institute, a leading free-market think tank in the United Kingdom, "enthusiastically" supported Varoufakis's debt-swap plan and asked the then British Chancellor of the Exchequer George Osborne to support it. Varoufakis had proposed debt swap measures, including bonds pegged to economic growth, which would replace the existing bonds of the European bailout programme.[35]
Bloomberg said that Varoufakis was a "brilliant economist", but he had difficult interactions with other politicians and the media.[36] Galbraith, referring to Varoufakis's expertise in game theory, has said that he knows as much about this subject "as anyone on the planet", and that "[he] will be thinking more than a few steps ahead" in any interactions with the troika.[36] Two weeks later Varoufakis wrote an op-ed in the New York Times saying that using game theory would be "pure folly" and that he wanted to "shun any temptation to treat this pivotal moment as an experiment in strategizing and, instead, to present honestly the facts concerning Greece's social economy...."[37]
Later political career (2015–present)
In September 2015, Varoufakis appeared on the British topical debate show, Question Time, and was praised for his performance by Mark Lawson in The Guardian, who wrote: "...several of the sentences he spoke in a second language were more impressive than most that his fellow panellists managed in their native tongue."[38] He appeared on the show again in October 2016.[39]
Varoufakis attended an event in London hosted by The Guardian on 23 October 2015, where he spoke about the UK's upcoming European Union membership referendum. He said that the UK should remain in the EU, but also campaign to democratise it: "My message is simple yet rich: those of us who disdain the democratic deficit in Brussels, those of us who detest the authoritarianism of a technocracy which is incompetent and contemptuous of democracy, those of us who are most critical of Europe have a moral duty to stay in Europe, fight for it, and democratise it."[40] He would return to the UK, in May 2016, in the final stages of the campaigning to again urge a remain vote.[41] On 9 February 2016, Varoufakis launched the Democracy in Europe Movement 2025 (DiEM25) at the Volksbühne in Berlin.[42]
On 2 April 2016, in reaction to tension between German Chancellor Angela Merkel and the IMF, Varoufakis said there was underway "an attrition war between a reasonably numerate villain (the IMF) and a chronic procrastinator (Berlin)" as to Greek debt relief.
In April 2016, Varoufakis publicly supported the idea of a basic income.[43]
In March 2018 Varoufakis announced the launch of his own political party MeRA 25, with a stated aim of freeing Greece from "debt bondage". He stated that he hoped the party would be based on an alliance of "people of the left and liberalism, greens and feminists".[44] The party, whose name stands for "European Realistic Disobedience Front", is affiliated to DiEM 25.[45]
Personal life
Varoufakis is married to installation artist Danae Stratou and has a daughter who is growing up in Sydney, from his first marriage to academic Margarite Anagnostopoulou (Poulos).
Works
Varoufakis is the author of several books on the European debt crisis, the financial imbalance in the world and game theory. He is also a recognised speaker and often appears as an analyst for national news media. A film is planned based on his book Adults in the Room directed by Costa-Gavras.[46][better source needed]
A Modest Proposal
In November 2010, he and Stuart Holland, a former British Labour Party MP and economics professor at the University of Coimbra (Portugal), published A Modest Proposal, a set of economic policies aimed at overcoming the euro crisis.[47]
In 2013, Version 4.0 of A Modest Proposal appeared with the American economist James K. Galbraith as a third co-author. This version was published in late 2013 in French with a supporting foreword by Michel Rocard, former Prime Minister of France. Since September 2011, Truman Factor features select articles by Varoufakis in English and in Spanish.[48]
The Global Minotaur
First published in 2011, The Global Minotaur constructs a historical narrative and metaphor which Varoufakis uses to describe the world economy from the mid-1970s to the 2008 crash and beyond. He argues that the global economy since the 1970s can be viewed as being built around the financing of the twin deficits of the United States – its trade deficit and government deficit. Varoufakis argues that the United States powered the global economy by consuming the exports of the rest of the world, and then the surpluses flowed back to the United States by going to institutions on Wall Street or being used to buy U.S Treasury debt. He suggests the recycling back to the U.S happened naturally due to the status of the dollar as the global reserve currency, and because of the profitability of U.S corporations and returns on Wall Street. However, when the U.S economy and banking system faltered in 2008, the United States’ ability to consume vast quantities of imports decreased, and investing in Wall Street became a much less inviting prospect, so the system seized up. This explains why the 2008 recession was felt so heavily around the world. The metaphor of the Minotaur is used as Varoufakis characterizes the flows back to the U.S as a "tribute" to a great power.
Books in English
Talking to My Daughter About the Economy. The Bodley Head Ltd, 2017 (ISBN 9781847924445)
Adults in the Room: My Battle With Europe's Deep Establishment. London and New York: Random House, 2017 (ISBN 9781473547827)
And the Weak Suffer What They Must? Europe's crisis, America's economic future. New York: Nation Books, 2016 (U.S. edition, ISBN 9781568585048); And The Weak Suffer What They Must?: Europe, Austerity and the Threat to Global Stability. London: The Bodley Head, 2016 (UK edition, ISBN 9781847924032)[49]
The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy. London and New York: Zed Books, 2011 (translations in German, Greek, Italian, Spanish, Czech, Finnish, French, Norwegian, and Polish); 2nd ed, 2013; 3rd ed, 2015[50]
Europe after the Minotaur: Greece and the Future of the Global Economy. London and New York: Zed Books, 2015 (ISBN 9781783606085)
Economic Indeterminacy: A personal encounter with the economists' most peculiar nemesis. London and New York: Routledge, 2013 (ISBN 0415668492)
Modern Political Economics: Making sense of the post-2008 world. London and New York: Routledge, 2011 (with Joseph Halevi and Nicholas Theocarakis)
(ed.): Game Theory: Critical Perspectives. Volumes 1–5, London and New York: Routledge, 2001
Foundations of Economics: A beginner's companion. London and New York: Routledge, 1998 (translation in Mandarin)
Game Theory: A critical introduction. London and New York: Routledge, 1995 (with Shaun Hargreaves-Heap), ISBN 978-0415094023. 2nd rev ed, 2004 (Game Theory: A critical text), ISBN 978-0415250955 (translated also in Japanese)
Rational Conflict. Oxford: Blackwell, 1991
(ed.): Conflict in Economics. Hemel Hempstead: Harvester Wheatsheaf and New York: St Martin's Press, 1990 (with David P. T. Young)
The Globalizing Wall
In 2005 and 2006, Varoufakis travelled extensively with his partner, artist Danae Stratou, along seven dividing lines around the world (in Palestine, Ethiopia-Eritrea, Kosovo, Belfast, Cyprus, Kashmir and the US–Mexico border). Stratou produced the installation CUT: 7 dividing lines, while Varoufakis wrote texts that then became a political-economic account of these divisions, entitled The Globalizing Wall. In 2010 Stratou and Varoufakis founded the project Vital Space.[51]
Essays
Varoufakis, Yanis (18 February 2015). "How I became an erratic Marxist". The Guardian. The Long Read. Archived from the original on 20 April 2018. Retrieved 20 April 2018.
Varoufakis, Yanis (20 April 2018). "Marx predicted our present crisis – and points the way out". The Guardian. The Long Read. Archived from the original on 20 April 2018. Retrieved 20 April 2018.
QUOTED: "It helps to have both a scorecard and an economics degree to follow some of the
thornier arguments ... but this is an eye-opening look at the recent economic crisis in the eurozone."
Print Marked Items
Varoufakis, Yanis: ADULTS IN THE
ROOM
Kirkus Reviews.
(Sept. 1, 2017):
COPYRIGHT 2017 Kirkus Media LLC
http://www.kirkusreviews.com/
Full Text:
Varoufakis, Yanis ADULTS IN THE ROOM Farrar, Straus and Giroux (Adult Nonfiction) $28.00 10, 3
ISBN: 978-0-374-10100-8
A Greek economist-turned-politician looks at the neoliberal forces arrayed against the developing world,
from the central banks to the European Union."Greeks did splendidly when we lived austere lives, when we
spent less than we earned, when we channeled [sic] our savings to the education of our children," said
incoming finance minister Varoufakis (Economics/Univ. of Athens; And the Weak Suffer What They Must?:
Europe's Crisis and America's Economic Future, 2016, etc.) on the surprise victory of the leftist Syriza Party
in the spring of 2015, in a time when it seemed that Greece was on the verge of leaving the EU. The
sentiments were conservative--until, that is, the author went on to say that austerity is one thing, while
"Ponzi austerity" is quite another, and that his government had no intention of giving the country's oligarchs
and wealthy tax evaders a free ride on the backs of the Greek people. Public austerity imposed by the World
Bank and other outside institutions in order to prevent the Greek economy from failing, he argued, was
destroying private parsimony, and off he went to Brussels and Berlin to argue a kind of neo-Keynesian case
before the country's key creditors. He received little sympathy from the likes of Merkel, Macron, and
America, though privately, officials told him that the demands for austerity were unreasonable and doomed
to fail. Indeed, although President Barack Obama had said "you cannot keep on squeezing countries that are
in the midst of depression," U.S. Treasury actively opposed Greek efforts to set their own house in order.
The story is a tangled one full of many threads both political and economic--and even historical, since
Varoufakis traces some contemporary domestic issues to the dawn of the Cold War and a Greece torn
between East and West. It helps to have both a scorecard and an economics degree to follow some of the
thornier arguments on debt structure and liability management, but this is an eye-opening look at the recent
economic crisis in the eurozone.
Source Citation (MLA 8th
Edition)
"Varoufakis, Yanis: ADULTS IN THE ROOM." Kirkus Reviews, 1 Sept. 2017. General OneFile,
http://link.galegroup.com/apps/doc/A502192362/ITOF?u=schlager&sid=ITOF&xid=0dc204fd.
Accessed 20 May 2018.
Gale Document Number: GALE|A502192362
QUOTED: "You will find a long and over-detailed apologia pro his 162-day vita as finance minister, including apparently verbatim records of his meetings with Wolfgang Schaeuble and other assorted wicked Germans and Dutchmen in horns, with whom he vainly attempted to negotiate a new deal for Greece, which would allow its economy to breathe again. In among the self-justifications, there is an important and valid argument."
"To argue, as Varoufakis does, that the Greek tragedy has had serious consequences for the UK, radically overstates the case."
Books: A greek tragedy
Howard Davies
Management Today.
(July 1, 2017):
COPYRIGHT 2017 Haymarket Media Group
http://www.haymarket.com/home.aspx
Full Text:
In this lengthy account, Greece's former finance minister Yanis Varoufakis attacks the EU for its handling of
the bailout crisis Whatever you think of him, this is a sad tale, says Howard Davies
Adults in the Room: My Battle with Europe's Deep Establishment
Yanis Varoufakis
Bodley Head, pounds 20
In the institutions of the European Union, and among those who observe them closely, Yanis Varoufakis is a
man-sized jar of Marmite. Some commentators cannot get enough of him. They praise his clear-sighted
analysis of the economic incoherence of the Eurozone, and particularly its attitude to the Greek sovereign
debt problem. Martin Wolf, Jeffrey Sachs, Norman Lamont and Joe Stiglitz (a group of unlikely bedfellows)
are all fans.
Others see him as a giant wrecking ball, who delayed an agreement on extending Greece's debt, at huge cost
to its economy. Klaus Regling, the head of the European Stability Mechanism, the agency now empowered
to lend to distressed EU countries and provide capital to their banks, regards him as a destructive force. He
argues that Varoufakis cost his country EUR100bn - calculated as the value of the economic growth lost
from his period of posturing as finance minister. Yannis Stournaras, the current governor of the Greek
central bank, takes a similar view, but thinks Regling is over-egging his sums, and puts the cost at only
EUR86bn. In a recent speech at the LSE, he described the achievements of Varoufakis's term of office as
being 'a change of name from 'the troika' to 'the institutions' and their move from ministerial buildings to the
Hilton'. The chief economist of Berenberg bank, Holger Schmieding, says he 'drove capital worth one-third
of Greek GDP out of the country in six months and virtually destroyed the banking system'.
How to determine which assessment is nearer the mark? Difficult. You pays your drachmae and you takes
your choice.
Varoufakis himself, even after his resignation, is in no doubt that he was right all along, and will be proved
so in the end. He is no shrinking violet. He famously made a bit of a Greek charlie of himself by doing a
Paris Match photoshoot at the peak of the crisis, showing him and his installation artist partner at home in
their elegant apartment overlooking the Acropolis, drinking wine and eating an elegant supper.
You will not find that episode in Adults in the Room. Instead you will find a long and over-detailed apologia
pro his 162-day vita as finance minister, including apparently verbatim records of his meetings with
Wolfgang Schaeuble and other assorted wicked Germans and Dutchmen in horns, with whom he vainly
attempted to negotiate a new deal for Greece, which would allow its economy to breathe again. In among
the self-justifications, there is an important and valid argument. The terms imposed on Greece as a condition
of their bailouts are very tough and probably unrealistic. They require Greece to run a large primary surplus
into the indefinite future, something no developed country has achieved. The 'extend and pretend' approach
to Greek government debt is not sustainable. Greece will never repay its debts in full, but the Eurozone is
what it is. There is no debt mutualisation, Greece joined the single currency with its eyes open, and
borrowed incontinently when times were good. Remember the Olympics? Varoufakis barely mentions these
antecedents, which weigh heavily in the minds of German politicians.
So the only deals on offer when he came into office were Grexit, which he did not want, or something like
the one they have, perhaps somewhat more generous if Syriza had been more forthcoming on economic
reform, and prepared to launch a major privatisation programme. Varoufakis was keen on collecting taxes
from the rich, which would be a good start, but was unable to convince the Commission, the IMF and the
ECB that that would be enough. His game-theoretical approach to exposing the intellectual incoherence of
his opposite numbers in the end yielded little or nothing, and the economy, which had shown signs of
picking up at the end of 2014, drifted back into recession. The figures cited for the costs of the exercise look
far too high to me, but it was undoubtedly a setback. Does this matter? To the Greeks, certainly, many of
whom are unemployed and impoverished, it matters a great deal. But to argue, as Varoufakis does, that the
Greek tragedy has had serious consequences for the UK, radically overstates the case. He says that 'having
observed the EU's callous disregard for democracy in Greece, many supporters of the Labour Party in
Britain then went on to vote for Brexit'. I wonder. There was a strand of argument advanced by the more
intellectually upmarket Brexiters about the flaws in the Eurozone, but I doubt it took many tricks in
Skegness. I do not recall the evil troika featuring largely in our debate.
So it is a sad story, but it is a Greek one. The Germans have not won many friends in Attica, but arguably
they were simply following the age-old precept: 'beware Greeks asking for gifts'.
Howard Davies is chairman of RBS and a columnist for MT
--------------------
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information or visit www.haysubs.com
Source Citation (MLA 8th
Edition)
Davies, Howard. "Books: A greek tragedy." Management Today, 1 July 2017. General OneFile,
http://link.galegroup.com/apps/doc/A497599236/ITOF?u=schlager&sid=ITOF&xid=8a530e5e.
Accessed 20 May 2018.
Gale Document Number: GALE|A497599236
QUOTED: "It's not clear what audience Varoufakis has in mind for this carefully written but overlong book. Its value as a record for historians hinges on the minister's often-questioned reliability as a narrator. The blow-by-blow accounts of his battles with the hated "troika" (the IMF, ECB and European Commission) are of nostalgic interest only to the small number of us who were immersed in the drama in 2015. Eurosceptics, at least, will find much to confirm their hunch that the EU is a bureaucratic monster incapable of brooking democratic dissent."
Do as I say, not as I do
Tom Nuttall
New Statesman.
146.5367 (May 19, 2017): p45.
COPYRIGHT 2017 New Statesman, Ltd.
http://www.newstatesman.com/
Full Text:
Adults in the Room: My Battle With Europe's Deep Establishment
Yanis Varoufakis
Bodley Head, 560pp, 20 [pounds sterling]
Halfway through this book my mind drifted to Arthur Dent, the hapless hero of Douglas Adams's
Hitchhiker's Guide to the Galaxy series. Seeking enlightenment, Arthur is directed to a half-blind crone
battling giant flies in a cave. She gives him a pile of paper and tells him to photocopy every sheet. Confused,
he asks if this is her advice. No, she replies--it's the story of my life. Do the exact opposite of what I did, and
then you won't end your life in a smelly old cave.
It is tempting to interpret Yanis Varoufakis's account of his tempestuous period as finance minister of Greece
in the same vein. The "erratic Marxist" spent his brief time in office, in the first half of 2015, locked in battle
with Greece's eurozone creditors as he vainly attempted to convince them to release his country from
"Bailoutistan", the debtors' prison it had occupied since 2010. Confronting his adversaries with grand
reforms and exotic debt-swap proposals, Varoufakis encountered a dogmatic refusal to engage. He resigned
amid capital controls (not yet lifted), a chaotic referendum and the Greeks' final capitulation. Some will see
his gambit as an honourable attempt to restore dignity to a nation battered by years of austerity. But few
could argue that his efforts amounted to anything other than ignominious failure, though he finds little room
here to interrogate his own decisions.
It is hard to gainsay Varoufakis's critique of the bailouts. The fiscal measures they entailed sucked demand
from a shrinking economy and saddled Greece with unpayable debt. But if Varoufakis was a reasonable
economist, he made for an appalling politician. As his minutely detailed accounts of meetings of the
Eurogroup (the 19 eurozone finance ministers) indicate, he treated the gatherings as quasi-academic
exercises, in which he would subject his counterparts to hectoring. It is hardly surprising that few were
minded to play along. Greece's perilous situation--Varoufakis took office just a few weeks before the bailout
was due to expire--left him with little time for the patient coalition-building that is the only way to get
business done in Brussels. But a good negotiator calibrates his approach to the cir; cumstances. Varoufakis
merely lectured.
How could Varoufakis, representing a nation worth just 2 per cent of eurozone GDP, have hoped to win his
detractors over? First, by the power of his arguments; this is not a man crippled by self-doubt. But if that
failed, he had in his back pocket credible threats he thinks would have forced Germany, the European
Central Bank and, by extension, the rest of the eurozone to offer Greece better terms. (One wacky scheme
involved an electronic payments system that could have served as a temporary parallel currency, should the
ECB have shuttered Greece's banks.) Whether his outlandish plans would have brought Angela Merkel to
her knees we will never know. Ultimately Varoufakis's humiliation lies in the treachery of his own side:
notably Alexis Tsipras, the prime minister, whose early promises to support him crumble, we are told, in the
face of looming default and Grexit.
It is Tsipras's referendum, on a final offer made by the creditors as a hard deadline approached, that does for
Varoufakis. Outside observers saw clearly that the referendum was a gun pointed at Greece's own head. No
electoral mandate, however thumping (over 60 per cent of Greek voters followed their government's
suggestion to reject the bailout proposals), will nudge the other side into compromise if they hold the better
negotiating hand--as Theresa May will soon learn. Greece's mighty Oxi ("No"), celebrated by Varoufakis,
led directly to Tsipras's capitulation at an all-night summit in Brussels in July 2015, and the signing of a
third bailout on worse terms than the creditors were previously prepared to offer. (A fourth is now heaving
into view.)
It's not clear what audience Varoufakis has in mind for this carefully written but overlong book. Its value as
a record for historians hinges on the minister's often-questioned reliability as a narrator. The blow-by-blow
accounts of his battles with the hated "troika" (the IMF, ECB and European Commission) are of nostalgic
interest only to the small number of us who were immersed in the drama in 2015. Eurosceptics, at least, will
find much to confirm their hunch that the EU is a bureaucratic monster incapable of brooking democratic
dissent. And one curiosity of the book is the enduring bond Varoufakis forms with Norman Lamont, today a
gung-ho Brexiteer. It is also fun to see Emmanuel Macron, then France's economy minister, make the odd
cameo as a pro-Greek rebel powerless to shape events.
Greece was the first sign that all was not well in the eurozone, and it remains the last country in the sickbed
today (though Italy is looking a little green). Its detractors say that its governments never tried seriously to
tackle Greece's deep-rooted ills of clientelism, corruption and tax evasion. Their critics, like Varoufakis,
argue that the crushing austerity forced on Greece made it impossible to do anything other than struggle to
stay afloat. Lost in the middle are the millions of Greeks dumped into poverty or forced to emigrate by an
endless recession in which GDP slumped by a quarter after 2008. Varoufakis's input is useful in weighing
the balance of blame for Greece's woes. But when it comes to negotiating, his is an example of what not to
do.
Tom Nuttall writes the Economist's Charlemagne column
Caption: One-man army: Varoufakis gives a blow-by-blow account of his clashes with Europe's "troika"
Source Citation (MLA 8th
Edition)
Nuttall, Tom. "Do as I say, not as I do." New Statesman, 19 May 2017, p. 45. General OneFile,
http://link.galegroup.com/apps/doc/A497729365/ITOF?u=schlager&sid=ITOF&xid=51175e44.
Accessed 20 May 2018.
Gale Document Number: GALE|A497729365
QUOTED: "These three books advance compelling critiques of the current euro system and creative suggestions for alternative policies. And yet ironically, they make for depressing reading, because in the end, they suggest that there is no easy way out of Europe's predicament, given the current political constraints. In the long run, muddling through may be the worst outcome, and yet it is the most likely."
"Despite their creativity in suggesting alternatives, these authors concede that in the end, everything comes down to choices made by self-interested sovereign states. Governments have little incentive to make charitable and risky concessions, even in a united Europe with economic prosperity on the line. Politicians simply lack the strength and courage to make a genuine break with the status quo, either toward federalism or toward monetary sovereignty."
"Thus, one is forced to conclude that short of a catastrophic economic crisis, Europe can do little more than continue to muddle through in a self-induced state of austerity, thereby undermining its future prospects and global standing."
Europe's ugly future: muddling through
austerity
Andrew Moravcsik
Foreign Affairs.
95.6 (November-December 2016): p139+.
COPYRIGHT 2016 Council on Foreign Relations, Inc.
http://www.foreignaffairs.org
Full Text:
And the Weak Suffer What They Must?
BY YANIS VAROUFAKIS. Nation Books, 2016, 368 pp.
Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe
BY JAMES K. GALBRAITH. Yale University Press, 2016, 232 pp.
The Euro: How a Common Currency Threatens the Future of Europe
BY JOSEPH STIGLITZ. Norton, 2016, 448 pp.
Some foreign policy decisions hang like albatrosses around the necks of the states that made them. For the
United States, the war in Iraq offers the prime example of a costly and seemingly irreversible blunder. For
Europe, it is the adoption of the euro. Fifteen years ago, when the EU established its single currency,
European leaders promised higher growth due to greater efficiency and sounder macroeconomic policies,
greater equality between rich and poor countries within a freer capital market, enhanced domestic political
legitimacy due to better policies, and a triumphant capstone for EU federalism. Yet for nearly a decade,
Europe has experienced just the opposite.
Even in good times, economic growth under the euro was unexceptional, but with the global financial crisis,
the situation grew dire. Since 2008, inflation-adjusted GDP in the eurozone has stagnated, compared with an
expansion of more than eight percent in European countries that remain outside. Greece's economy is more
than 25 percent smaller than it was in 2008. Italy's is almost ten percent smaller, and its financial system
may be the next to melt down. The loss of European output totals about six trillion euros--a massive figure,
reflected in the shattered lives of unemployed youth, bankrupt business owners, and vulnerable citizens
unable to maintain their standards of living. Although losses from short recessions are often offset by
higher-than-average growth thereafter, that process does not typically occur after prolonged depressions
such as the current one. In this situation, a lost decade may well become a lost generation.
Nor has the euro reduced inequality among European countries. Since 2007, the German economy has
grown by almost seven percent, whereas the economies of Belgium, France, and the Netherlands have
remained stagnant, and those of Finland, Greece, Ireland, Italy, and Portugal have all contracted more than
they did during the Great Depression. Inequality has also increased within countries--to a stunning degree in
the worst-performing ones, such as Greece, but even in Germany, too.
The prolonged depression has helped fuel the rise of right-wing nationalists and Euroskeptics. In Austria,
Finland, France, Germany, Greece, the Netherlands, and elsewhere, radical right-wing parties now enjoy
more success at the polls than at any time since the 1930s. In Italy and Spain, left-wing antiestablishment
parties, such as the Five Star Movement and Podemos, have prospered. Trust in EU institutions, traditionally
higher than the popularity of national political institutions (even in the congenitally Euroskeptical United
Kingdom), has fallen through the floor. Anti-European radicalism is spreading. A catastrophic collapse of
the whole monetary system may yet lie ahead.
Most observers now attribute these troubles to the euro. Yet more than eight years after the financial crisis
began, the EU has done little to fundamentally reform its single-currency arrangement. Three new books, all
by Keynesian economists, are among the first to argue that more radical change is necessary and that the
euro system must be replaced. Yanis Varoufakis, who served as Greece's finance minister during the first
half of 2015, and his erstwhile economic adviser, James Galbraith, base their critiques of the system on their
firsthand experience guiding the country most ravaged by it. Joseph Stiglitz, a Nobel Prize-winning
economist and former chair of the U.S. Council of Economic Advisers, lays out the euro's failures and flaws
and advances original proposals to repair it. All three would prefer that the system be reformed. Yet all three
reluctantly conclude that since that option is off the table, the best remaining choice may be to scrap the
system altogether.
DECLINE AND FALL
How did Europe fall into this trap of low growth, high inequality, and political discontent? Galbraith offers
the most succinct explanation of why the system has benefited Germany at the expense of weaker
economies:
Without a currency that could appreciate against those of her trading
partners, German productivity increased and its technical excellence
produced a declining real cost of exports, while in its European
trading partners, deprived of currencies that could depreciate, stable
purchasing power and easy credit produced a corresponding increase in
demand for German goods. Meanwhile, Germany held down its internal wage
levels while other countries allowed wages and unit labor costs to
rise. The flow of goods from Germany... was matched by a flow of
credit, either directly to state purchasers of arms and infrastructure,
as in Greece, or indirectly via private financing of residential and
commercial construction booms, as in Spain and Ireland. In all cases
the unbalanced flow of goods matched the accumulation of debts; the
Greek instance was merely the most extreme. The Greek story is properly
a European story in which, as in all European stories, Germany takes
the leading role.
In short, Germany depresses the value of its currency to promote exports, just as China is often accused of
doing--yet in this case, the euro makes Berlin's policy seem more legitimate and deflects the blame.
Varoufakis, Galbraith, and Stiglitz differ on the details, but they all blame the euro system and, especially,
Germany.
Such a failure of international monetary design is hardly unique to today's Europe. Stiglitz shows that
international systems of pegged currencies, of which Europe's single currency represents only an extreme
example, "have long been associated with recessions and depressions." In the 1920s, many countries
returned to the gold standard, which culminated in the Great Depression. In the early 1970s, the Bretton
Woods system of pegged currencies once again slowed economic growth in a deficit country--in this case,
the United States. To restart growth, President Richard Nixon decided to destroy the system unilaterally.
And in 1991, Argentina hoped to curb inflation by pegging its peso to the U.S. dollar, which triggered a
severe economic crisis from which the country has still not entirely recovered.
The reason currency pegs often depress economic growth lies in the essential nature of monetary
arrangements. Currency pegs force a common policy on countries, and almost all economists agree that this
works properly only when the macroeconomic performance of the participating countries converges. If
countries have similar levels of wage and price inflation, public and private deficits, exposure to external
shocks, and competitiveness, it is relatively easy to find a common policy response to a shared threat that
suits all and shares the pain and relief more or less equally. In the real world, however, countries have
diverse market positions and domestic institutions, which means that macroeconomic convergence is hard to
come by.
That's a problem, because a currency peg prevents the governments of countries that run trade deficits and
incur debt from pursuing healthy economic policies to correct the problem. When a country faces a
recession, a negative external shock, or eroding competitiveness, its government would normally loosen
domestic monetary policy (thereby lowering interest rates and stimulating investment), let its currency
depreciate (thereby boosting exports, reducing imports, and transferring income to the sector of the
economy that produces competitive goods), and increase government spending (thereby stimulating
consumption and investment). But if a country belongs to a single-currency zone, the first two options are
by definition unavailable. And in the eurozone, the third option is difficult thanks to the EU's stringent fiscal
requirements.
Deficit countries are thus left with only one way to restore their competitiveness: "internal devaluation," the
politically correct term for austerity. The country must reduce wages, government spending, consumer
demand, corporate investment, imports, and, ultimately, growth itself. Stiglitz concedes that austerity may
eventually work, but he argues that even if it does, the cost is too high. Better to allow countries to declare
bankruptcy and start over, just as individuals and firms can do in a domestic economy. Varoufakis and
Galbraith dismiss austerity as flatly self-defeating, because low growth simply ends up increasing the debtto-GDP
ratio. In such cases, including Greece in recent years, permanent austerity becomes the only way to
maintain international equilibrium.
In the acknowledgments to his book, Varoufakis promises a forthcoming tell-all about his negotiations with
the EU and the International Monetary Fund, but he and Galbraith say enough to make it clear that the selfinterested
way in which France and Germany handled Greek debt only served to exacerbate the crisis. At the
time, the IMF was led by Dominique Strauss-Kahn, and the European Central Bank by Jean-Claude Trichet-
-both nationals of France, the country whose banks were most exposed in Greece. German banks also faced
large potential losses. As Galbraith tells it, the French and German governments, loath to accept
responsibility for the misjudgments of their own private investors or the design flaws of the monetary union,
and seeking to avoid the unpleasant task of asking their parliaments to bail out domestic banks directly,
formed a "creditors' cartel" that foisted the costs on taxpayers across the EU, as well as on the IMF.
As Varoufakis and Galbraith detail from the inside, the punitive combination of debt, depression, and
inequality has rendered Greece and other debtor countries all but ungovernable. Centrist governments have
lost political legitimacy, as has the EU. Citizens grasp at increasingly radical new parties and lack the faith
in Europe required to enact needed reforms.
Germany has emerged almost unscathed--at least so far. Berlin has preserved the existing euro system,
which advantages it as an international creditor, an exporter of high-quality goods, and a country that
suppresses wage increases. It has enjoyed lower interest rates and higher growth than the rest of Europe,
which has depressed the real cost of its exports, resulting in a trade surplus larger in absolute terms than
China's.
Yet the costs of a flawed monetary system may eventually boomerang and depress growth even in Germany.
Austerity is slowly reducing Germany's ability to sell its goods to other European countries, which buy more
than half its exports. German citizens, stuck bailing out foreign governments and, indirectly, their own
banks, are also starting to lose faith in the EU. The possibility that the entire system could collapse spreads
fear and worry. Yet such concerns take a long time to develop--a longer time frame than most German
politicians seem to be thinking in. In the interim, decisions continue to be driven by capital markets,
European rules, and dictates from Paris and Berlin.
REFORMING THE SYSTEM
So what should Europe do? Stiglitz offers the most thorough evaluation of the possible options. There are
three. The first entails reforming the fundamental structure of the euro system so that it generates growth
and distributes the benefits fairly. Stiglitz details how the EU and the European Central Bank might rewrite
tax laws, loosen monetary policy, and change corporate governance rules in order to boost wage growth,
consumer spending, and investment. Such policies could push the euro exchange rate downward, enhancing
the entire region's competitiveness in relation to non-European countries.
Yet since the basic problem is the divergence of national economies, sound common policies are
insufficient. National policies must be made to converge. The crisis has already placed pressure on deficit
countries to adjust through internal devaluation, but to eliminate macroeconomic imbalances within the EU,
any such program would also have to force the German economy into line. To do so, the EU could
discourage trade surpluses by imposing a tax on them. The German government, meanwhile, could
unilaterally engineer a rise in domestic wages (by, say, strengthening unions' bargaining rights) and increase
deficit spending. Over time, such moves might help deficit countries stimulate growth and restore the
competitiveness of their exports, both vis-a-vis Germany (by increasing German demand and raising the
relative price of German goods) and vis-a-vis the rest of the world (by further lowering the real exchange
rate of the euro).
Another set of structural policies would encourage large fiscal transfers and migration in order to offset the
inequities that the euro has induced. In essence, this would replicate the movements of capital and people
that make single currencies viable within individual countries. In the United States, for example, federal
spending on unemployment insurance, welfare, infrastructure, and industry bailouts, along with progressive
taxes, adds up to sizable fiscal transfers from richer and more economically vibrant regions to poorer ones.
The EU might establish a similar system of fiscal transfers from creditor countries such as Germany to
deficit countries such as Greece and Italy. Varoufakis, for example, favors massive European investment and
antipoverty programs.
An even more important factor that makes the dollar work in the United States is internal migration. When
sectors in some regions decline--such as farming in the Midwest or manufacturing in the rust belt--people
move to places with more jobs. In Europe, Stiglitz proposes, Germany and other surplus countries could do
more to accept and encourage continuous migration flows from deficit countries. Germany might even
benefit from such policies, since its growth has also slowed recently, in large part due to its dependence on
exports to other European countries suffering under austerity.
In theory, deep structural reforms represent the optimal choice--so much so that the phrase "monetary union
requires fiscal union" has become a cliche among European federalists. Yet such reforms have little chance
of being adopted. Germans are unlikely to renounce the export-led growth that has stemmed from their 60-
year tradition of high savings, low inflation, and modest labor contracts. They are even less likely to accept
massive fiscal transfers to other countries. The net contribution of Germany to the EU totals just over 0.6
percent of GDP. To match the transfer levels from rich to poor states within the United States--hardly a
generous welfare state by European standards--that net contribution would have to be at least 40 times as
high. Moreover, German technocrats protest, with some justification, that fiscal transfers simply encourage
irresponsible behavior by debtors--so-called moral hazard. Even if the German government were inclined to
support such policies, its own electorate and business elites would surely block them.
Just as unlikely is a major uptick in migration from Europe's south to its north. To be sure, a few percent of
the Greek labor force has already fled, mostly to countries outside the eurozone. Yet for migration to have a
major macroeconomic effect, many more millions of Greeks, Italians, Portuguese, and Spanish would have
to move to Germany. Cities the size of Phoenix would have to pop up in northern Europe--an unthinkable
prospect in the current political climate. Despite the EU principle of free movement, many informal barriers
to mobility still protect special interests. Political opposition to immigration is already strong in Austria,
Denmark, Germany, and the Netherlands, and these countries would not tolerate many millions of additional
foreigners. Even if the north were more welcoming, most southern Europeans have little desire to leave
home.
MUDDLING THROUGH
If major structural reform is unrealistic, then the only way left to save the euro is to turn to a second policy
option: muddling through. In this scenario, member states would strengthen the EU's ability to manage the
crisis. Governments have already taken initial steps in this direction. In 2012, the EU created the European
Stability Mechanism, an institution responsible for bailing out member states. The European Central Bank
has engaged in monetary easing. And by putting in place greater central oversight and regulation, the EU
has finally taken the early steps toward a real banking union.
Yet as Stiglitz rightly insists, such changes are insufficient to make the EU's single-currency system work
properly. The burden of the current system on deficit countries must also be eliminated--a change that
requires far more serious reform. Eventually, Europe would have to restructure its debt, perhaps by
swapping existing debt with GDP-indexed bonds, which reward investors if a given country's economy
grows, or by issuing so-called eurobonds, which would make all European governments responsible for the
debts national governments incur. At the same time, the EU could more stringently regulate and guarantee
the solvency of national banks, thereby decoupling them from national governments.
Yet Germany and other creditor governments are naturally hesitant to accept financial responsibility for
debtor countries. With some justification, they view guarantees for banks and the mutualization of debt as
ways of sneaking major structural reform and European fiscal union in through the back door, resulting in
greater costs for Germany. Such reforms would also require the EU to massively expand its oversight over
national financial systems, so as to avoid the possibility that irresponsible behavior and moral hazard would
create costs for others. No country likes this idea, because in every member state--Germany no less than
Greece or Italy--the government is loath to accept any external controls that might call into question quiet
political deals it has made with specific banks.
THE END OF THE EURO
If neither of the two options to save the single currency and restart growth is viable, this leaves only a third
option: abolishing the euro. Almost all European politicians, and majorities in every member state, reject
this course. Most contend that it not only would prove unimaginably expensive in the short term but also
would spark another economic crisis and deal a fatal blow to European integration.
Yet various governments have already come closer to abandoning the euro than many people realize.
Galbraith recalls the Greek government preparing to withdraw from the eurozone ("Grexit") both in 2011
and in 2015. Italian Prime Minister Silvio Berlusconi seriously contemplated withdrawal in 2011, as did the
Spanish government at various times. Although Stiglitz would prefer that the euro be reformed, he admits
that "there is more than a small probability that it will not be done" and therefore argues for breaking up the
system.
A unique virtue of Stiglitz's book is that he takes this option seriously, advancing original proposals for a
"friendly separation." Such options range from Grexit to his preferred alternative of breaking the eurozone
into several subgroups, each with its own currency. Stiglitz makes the controversial argument that
eliminating the euro as currently constituted, if implemented properly, would be feasible without speculators
gaming the system or triggering catastrophic bank runs--and that the move may be the only viable way to
save Europe. Varoufakis and Galbraith would likely sympathize with his proposal and clearly regret that
Greece lacked the political courage to forsake the system earlier, when it could have done so more easily
Yet even the radical step of breaking up the eurozone, Stiglitz makes clear, would probably help deficit
countries only if Germany agreed to increase domestic spending, rein in speculation, and reduce deficits.
Recall that European governments originally embraced a single currency in part to limit the self-interested
use of German monetary power. Abolishing the euro might slightly improve the options for deficit countries,
but absent deeper structural reforms, it would not eliminate the underlying problem.
The truth is, politicians want to be reelected, and no European leader will risk his or her future by pursuing a
policy that is costly in the short term but possibly beneficial in the long term. The result of muddling
through by politicians with short time horizons can thus only be more of the same: austerity and slow
growth, punctuated by intermittent economic and political crises.
FROM HERE TO AUSTERITY
These three books advance compelling critiques of the current euro system and creative suggestions for
alternative policies. And yet ironically, they make for depressing reading, because in the end, they suggest
that there is no easy way out of Europe's predicament, given the current political constraints. In the long run,
muddling through may be the worst outcome, and yet it is the most likely.
In response to such a bleak prognosis, many European federalists, particularly on the left, contend that
Europe's real problem is its "democratic deficit." If only EU institutions or national governments were more
representative, they argue, then they would enjoy sufficient legitimacy to solve these problems. The EU
needs more transparency in Brussels, more robust direct elections to the European Parliament, a grand
continent-wide debate, and political union, the argument runs, so that the resulting European superstate
would be empowered to impose massive fiscal transfers and macroeconomic constraints on surplus
countries. Alternatively, if more radical alternatives could be fully debated in national elections, then
member states might muster the power to pull out of the eurozone or renegotiate their terms in it.
These three books show how far from reality such schemes for democratizing Europe really are. Despite
their creativity in suggesting alternatives, these authors concede that in the end, everything comes down to
choices made by self-interested sovereign states. Governments have little incentive to make charitable and
risky concessions, even in a united Europe with economic prosperity on the line. Politicians simply lack the
strength and courage to make a genuine break with the status quo, either toward federalism or toward
monetary sovereignty. As Varoufakis writes, "All talk of gradual moves toward political union and toward
'more Europe' are not first steps toward a European democratic federation but, rather, and ominously, a leap
into an iron cage that prolongs the crisis and wrecks any prospect of a genuine federal European
democracy."
Thus, one is forced to conclude that short of a catastrophic economic crisis, Europe can do little more than
continue to muddle through in a self-induced state of austerity, thereby undermining its future prospectsa
and global standing.
ANDREW MORAVCSIK is Professor of Politics and Public Affairs and Director of the European Union
Program at Princeton University's Woodrow Wilson School of Public and International Affairs.
Source Citation (MLA 8th
Edition)
Moravcsik, Andrew. "Europe's ugly future: muddling through austerity." Foreign Affairs, Nov.-Dec. 2016, p.
139+. General OneFile, http://link.galegroup.com/apps/doc/A477460846/ITOF?
u=schlager&sid=ITOF&xid=52100f47. Accessed 20 May 2018.
Gale Document Number: GALE|A477460846
QUOTED: "While it's tempting to view Varoufakis as a mere sideshow, his scathing critiques of Europe's troubled monetary union and the questionable efforts to salvage it shouldn't be dismissed."
And the Weak Suffer What They Must?
Chris Sorensen
Maclean's.
129.17 (May 2, 2016): p57.
COPYRIGHT 2016 Rogers Publishing Ltd.
http://www2.macleans.ca/
Full Text:
AND THE WEAK SUFFER WHAT THEY MUST?
Yanis Varoufakis
Yanis Varoufakis burned brightly during his short stint as Greece's finance minister. The motorcycle-riding
Marxist defiantly voted against a third European bailout package, necessary to keep Greece's banks from
collapsing, and famously compared the austerity foisted upon the debt-ridden Mediterranean country as
"fiscal waterboarding." Though Greeks also voted No to the bailout in a hastily called referendum,
Varoufakis resigned a short time later in an apparent bid to mollify the so-called "troika" of the European
Commission, European Central Bank and the IMF. "I shall wear the creditors' loathing with pride," he said
in a blog post announcing his resignation last year.
Yet, while it's tempting to view Varoufakis as a mere sideshow, his scathing critiques of Europe's troubled
monetary union and the questionable efforts to salvage it shouldn't be dismissed. Even the IMF is now
rethinking Greece's punishing bailout deal because of the impact of "highly unrealistic" austerity targets on
the Greek people.
Few economists would disagree with Varoufakis's core assertion that the eurozone's fatal flaw was its
attempt to bind together more than a dozen dissimilar countries with a common currency--the euro--without
any meaningful political and fiscal integration to underpin it. Indeed, the 2008 global financial crisis quickly
exposed the eurozone's creaky architecture, which Varoufakis compares to a riverboat trying to navigate an
ocean storm, by preventing Greece and other countries like Ireland, Italy and Spain from devaluing their
currencies to give exports a boost and rekindle economic growth. (Imagine how much worse Canada's oilinduced
pain would have been if the loonie had been shackled to the rising U.S. dollar and the Bank of
Canada couldn't lower interest rates.) Making matters worse, Varoufakis says, is Germany's insistence on
deep budget cuts given the chilling effect on Greece's economic growth and therefore its ability to pay back
bailout loans.
Many say Greece is simply paying for years of foolishly living beyond its means. But Varoufakis argues it
takes two to dance and that Germany deliberately drove down its labour costs to make its myriad exports--
VW cars, Miele dishwashers--more competitive. That, in turn, resulted in a trade surplus that German banks
aggressively lent back to countries like Greece so they'd continue to buy its products, he says. Not all
Greeks lived the high life either. Poorer Greeks fell increasingly into a poverty trap, Varoufakis writes.
Not everyone will agree with his attempt to sidestep blame, let alone his radical-sounding prescriptions for
eurozone reform, but his concerns about punishing the mostly innocent are ominous given the rise of
Greece's far-right movement, with a migrant crisis adding fuel to the volatile mix. Varoufakis recalls a
conversation in Berlin last year with the German finance minister. He reminded his colleague: "When I
return home tonight, I shall find myself in a parliament in which third-largest party is a Nazi one."
Caption: 'And the Weak Suffer What They Must?' The eurozone's fatal flaws are documented in a scathing
critique by Greece's former finance minister
----------
Please note: Illustration(s) are not available due to copyright restrictions.
Source Citation (MLA 8th
Edition)
Sorensen, Chris. "And the Weak Suffer What They Must?" Maclean's, 2 May 2016, p. 57. General OneFile,
http://link.galegroup.com/apps/doc/A451634816/ITOF?u=schlager&sid=ITOF&xid=864733b7.
Accessed 20 May 2018.
Gale Document Number: GALE|A451634816
QUOTED: "Varoufakis gives an engaging picture both of the palace politics within Athens and of his desperate willingness to believe in Tsipras’s historic mission that held him in place."
"a deeply reflective, first-person insight into the workings of modern power and politics."
A Modern Greek Tragedy
Adam Tooze MARCH 8, 2018 ISSUE
Adults in the Room: My Battle with the European and American Deep Establishment
by Yanis Varoufakis
Farrar, Straus and Giroux, 550 pp., $28.00
Yanis Varoufakis
Yanis Varoufakis; drawing by Siegfried Woldhek
On January 25, 2015, after five years of debt crisis and economic and social decline that left half the country’s young people unemployed, the Greek electorate handed power to the most radical coalition to govern a European country in decades. Under the leadership of the youthful Alexis Tsipras, the Coalition of the Radical Left (Syriza) won 36.3 percent of the vote, qualifying it for the fifty-seat bonus awarded to the party with a plurality. To the horror of bien pensant opinion in Berlin and Paris, it chose as its partner in government a right-wing nationalist party, the Independent Greeks (ANEL).
In Greece the left was jubilant. The memory of the heroic anti-Nazi resistance, the civil war, and the students who rose up against the dictatorship of the colonels in the 1970s was vindicated. Syriza was the toast of the radical chic from Berlin to Brooklyn. Centrists were bemused. Had such left-wing enthusiasm not had its day? NATO hawks were up in arms. With Ukraine and Syria in mind, columnists fretted over Syriza’s possible ties to Moscow. The oligarchs who controlled much of the Greek media were on the warpath. Tens of billions of euros fled Greek bank accounts.
Meanwhile, Greece’s new finance minister, the ferociously charismatic and thoroughly Anglophone Yanis Varoufakis, became a global celebrity. His glamorous lifestyle, motorcycle, and tight T-shirts delighted the media. In Brussels, European officials still fume about his disruptive impact on their staid proceedings. In Greece he would face charges of treason. The appearance this fall of Varoufakis’s memoir, Adults in the Room, stirs old memories. The legendary Greek-French filmmaker Costa-Gavras has pronounced himself so “enraged by the violence and indifference of the Eurogroup members [i.e., the eurozone finance ministers], especially the German side, to the…unsustainable situation in which the Greek people live,” that he will turn Varoufakis’s exposé into a film.
ADVERTISING
1.
The financial situation Syriza and Varoufakis inherited in January 2015 was dire. The outgoing conservative government of the New Democracy party had failed to satisfy the demands of the troika of Greece’s creditors—the International Monetary Fund (IMF), the European Central Bank (ECB), and the European Commission (EC). As Tsipras and his cabinet took office, the EC was withholding €7 billion that Greece urgently needed to make payments on debts owed to the IMF and the ECB.
The Syriza administration did not dispute the need for reform. Indeed, it was far less entangled with Greece’s old corruption than were the established parties it displaced. But Syriza demanded that it be allowed to put a priority on the Greek social emergency and that it be treated as a government among governments, not as an object of the troika’s administrative discipline. Most fundamentally, Varoufakis insisted, the creditors had to acknowledge the obvious fact that the restructuring of Greece’s debts in 2012 had been inadequate. At over 170 percent of the country’s GDP in 2015, the debts were unpayable. They needed to be rescheduled and reduced. Varoufakis suggested separating out the cost of recapitalizing Greece’s banks or linking debt service to future economic growth. In any case, before Syriza would make further rounds of painful social and economic changes, Varoufakis demanded a promise of long-term sustainability.
For six months the Syriza government held out, demanding changes to the Memorandum of Understanding with the troika. To bolster its position, on July 5, 2015, the government staged a referendum in which 61 percent of Greeks voted to reject the creditors’ terms. France and Italy might have been willing to grant concessions, but a bloc of conservative Eurogroup members, led by Germany, took a hard line. Although the IMF publicly declared that Greece’s debt was unpayable, the EC, the ECB, and Germany held firm. Rather than face expulsion from the eurozone, after a draining marathon of negotiations, on July 13 Prime Minister Tsipras accepted further concessional loans in exchange for another round of troika discipline. There was no debt writedown, only the promise that one might be considered at a later date.
The hashtag #ThisIsACoup spread across Twitter. Jürgen Habermas proclaimed in an interview that Germany had forfeited any claim to moral authority. The intransigent Greek far left split away to form a new party, Laiki Enotita (Popular Unity). Varoufakis resigned in July and in February 2016 launched his own pan-European movement, DiEM25. Meanwhile, Tsipras lost his majority and was forced to call new elections. But the Syriza story was not over. On September 20, 2015, Tsipras was reelected. In the face of immense external pressure, he remains in power today.
Even the party’s most severe critics acknowledge that the survival of the Syriza government is a remarkable feat. But is it any more than that? The European mainstream welcomes the humbling of the radical left and looks forward to a future in which a tamed Greece may finally be released from its debt program. For many of the left-wing activists who rallied to Syriza’s cause in January 2015, Tsipras presents a sad spectacle. His government is yet another example of social-democratic betrayal, a repeat of the cycle that brought ignominious electoral defeat not just to the Panhellenic Socialist Movement (PASOK), which before 2015 had been one of Greece’s two major parties, but also to French, Dutch, German, and British socialists. Not everyone on the left shares this view. Syriza retains the loyalty of articulate spokesmen such as Costas Douzinas, another Greek expat academic and member of the Greek parliament, who rejects any thoroughgoing condemnation of the party.1 For Douzinas the Syriza project was always multipronged and must be judged accordingly.
The recalcitrant working-class culture of Syriza’s strong labor wing, rooted in the docklands of Piraeus and northern Thessaloniki, is far removed from the globe-trotting, cosmopolitan milieu of Varoufakis and Douzinas, but also from the Marxist intellectualism of Popular Unity. But Syriza is also a party of the rainbow coalition. It is committed to environmentalism, prison reform, and LGBT rights and seeks a humane solution to the refugee crisis. Though the government’s resources are pitiful and the “deep state” is profoundly uncooperative, these are the issues on which Syriza has made the most difference, at least by holding at bay far worse alternatives. But to operate with any real freedom the Greek government needed to do more. It needed to loosen the troika’s financial discipline. Above all it needed to achieve debt reduction. It was on this front that Varoufakis’s battle was fought and lost.
If one asks European officials, the consensus is harsh: Varoufakis was a self-aggrandizing time waster who helped ruin the Greek economy before Tsipras got rid of him. The hard-edged intellectuals of Popular Unity agree that Varoufakis was as much a part of the problem as he was a part of the solution. They also agree that it was a mistake for Syriza to have haggled with the eurozone creditors. Their preferred option was for Syriza to have broken with the creditors from the beginning.2 A “rupture,” an exit from the eurozone, in January or February 2015 might have sustained the momentum of Syriza’s election victory.
The opportunity for a break was there. Germany and its allies seemed ready to countenance immediate Grexit. But on February 20, Varoufakis thought that he had found the basis for a serious renegotiation of terms. Days later it was clear that the creditors had no intention of making the least concession. Why did the Greek government not simply walk away? Why did it stay at the table in a doomed attempt to reason with the Eurogroup? Given his identification with the left, Varoufakis is haunted by these questions. It is the struggle to answer them that makes his frank memoir not only engrossing but an important contribution to the library of modern politics, as a case study in the limits of radicalism and the forces that hold the status quo in place.
2.
To understand Varoufakis’s motivations, we have to understand how he defines what was at stake in the battle between Greece and its creditors. For many on the left, the struggle was between the “forces of capital” and democracy. That made a good rallying cry. But it is far from the situation that Syriza actually confronted in 2015. Due to the 2012 debt write-down, when Syriza took power three years later only 15 percent of Greece’s debts were owed to banks, insurance funds, or hedge funds. Eighty-five percent were debts to official agencies and other European governments. The struggle was not with the capital markets but with official creditors and the other national governments assembled in the Eurogroup.
Disconcertingly for the left, Varoufakis turned the tables. Rather than confronting “capital,” he started the negotiations by going to London to reassure the remaining private holders of Greek debt that their interests would be protected. Cultivating the Anglophone media, Varoufakis pitted market rationality against the conservative dogma of the creditors who demanded that Greece pay the unpayable. His aim was to align global business opinion with the Syriza government in demanding a fresh start for both Greece and Europe.
But this invites the question: How had the eurozone crisis become so confused? The creditors pointed to decades of Greek financial incontinence. It was a mistake to have admitted Greece to the rich club of the eurozone in the first place. On the need for domestic reform, the radicals of Syriza did not disagree. Their discredited predecessors had presided over a shambles from which the Greek upper class profited more than anyone. But for Varoufakis, the real origin of the eurozone imbroglio was to be found not in Greece but in the creditor countries. The huge losses suffered by German, French, and Benelux banks between 2008 and 2009 forced their governments into ruinously unpopular bailouts. Twelve months later, when the Greek crisis hit the headlines, it was the same German, French, Dutch, and Belgian banks that were on the hook.
In order to avoid a comprehensive restructuring of their banks, the governments of Northern Europe decided to, as they viewed it, rescue Greece. They funneled funds to Athens, most of which then flowed back out to Greece’s creditor banks in Northern Europe. The troika staffers who swept through Athens in what Varoufakis calls their “convoys of Mercedes-Benzes and BMWs” were claiming to bring rational reform to a backward Greece. In fact their program was illogical. It was neither sustainable for Greece nor did it deliver stability for the eurozone. Its ultimate rationale, dictated by political convenience, was to give Northern Europe a roundabout bank bailout.
Extending Greek debts and pretending that they were payable became the basic modus operandi of the eurozone. It is this pattern of denial, which persists today, that Varoufakis repeatedly encountered when negotiating with his European counterparts. In private, government ministers, EU commissioners, and IMF economists would agree that Greece’s debt had to be restructured. But once in public they reverted to the familiar mantra that Greece must prove its “credibility” by “reforms” and “savings” that tore apart the social fabric of Greece and wrecked its economy.
Beyond the self-serving logic of a bureaucracy bent on preserving its own authority and control, what wider purpose has this strategy served? It is essential to the interpretation of the crisis offered in Adults in the Room that this question has no clear or good answer. In Varoufakis’s rendering, Europe’s “bailoutistan” is a madhouse, an Alice-in-Wonderland world. It is propelled by the narrow self-interest of politicians, oligarchs, and small-minded technocrats. It is perpetuated by the exclusion and opacity that define the “black boxes” of modern power networks. But the system in its entirety lacks all logic. Greece, Europe, and the world economy would all be better off if the eurozone would sort itself out.
Alkis Konstantinidis/Reuters
Greek Finance Minister Yanis Varoufakis arriving at Maximos Mansion for a government council meeting, Athens, June 2015
This conclusion ultimately justified Varoufakis’s determination to negotiate. Perhaps, with his brilliance and clarity, and armed with his personal proposal for an overhaul of the eurozone, little Greece and its left-wing government would lead Europe out of confusion and impasse, back toward freedom and prosperity. Not for nothing did Christine Lagarde of the IMF once tease Varoufakis that he sounded like John Maynard Keynes. She apparently did not mean it as a compliment.
It was certainly a bold gambit. What Varoufakis does not openly contemplate, even in his memoir, is the alternative. What if there was no misunderstanding, no muddle? What if there was method to the apparent madness of the eurozone’s actions? Only in passing does Varoufakis allow his readers to glimpse that grimmer scenario. The most important flash comes early on in the book, during his first encounter with Angela Merkel’s finance minister, Wolfgang Schäuble. To Varoufakis’s surprise, Germany’s elder statesman did not dwell on day-to-day affairs. Schäuble wanted to talk about more fundamental issues, particularly the cuts that Europe had to make to its welfare state for it to compete with India and China.
Varoufakis was ready with the standard progressive answer. If welfare costs are the issue, the obvious solution is to raise wages and welfare benefits in the emerging markets, such as those of India and China, not to lower those in the advanced economies. But Schäuble was unrelenting. As Helmut Kohl’s interior minister during reunification, he had had a hand in winding up the German Democratic Republic’s economy. If Western Europe did not make the necessary adjustment, Schäuble opined, it would follow the Communist Eastern bloc into oblivion.
Once again Varoufakis had a quick comeback. To compare Greece’s welfare state with communism was tendentious. The democratic socialists of Syriza had as much in common with the GDR as Germany’s ruling Christian Democratic Party (CDP) did with General Pinochet’s dictatorship in Chile. Tired of arguing, Schäuble backed off, leaving Varoufakis to congratulate himself on having disposed of his opponent’s anachronistic views. In retrospect Varoufakis is so anxious to convince us that he won the argument that he fails to convey Schäuble’s message: restructuring first Germany and then Europe was a historic project that would not stop at the behest of a radical left-wing government in Greece.
At the height of the crisis—between 2010 and 2012—there was indeed a spectacular confusion in the eurozone that might have been resolved by means of a grand bargain. But even then, the idea that the solution could have come from Greece was fanciful. In 2012, it took the combined weight of France, Italy, Spain, the European Central Bank, the European Commission, and the Obama administration to convince Germany to accept the ECB’s commitment to do “whatever it takes” to save the eurozone. What emerged in the aftermath of that crisis was neither a muddle—as Varoufakis suggests—nor a conspiracy. Europe’s political economy came to be dominated by the “reform” project first launched by Germany’s main political parties in the early 2000s, which centered on labor market liberalization and fiscal consolidation.
This project was motivated by the lessons from the aftermath of communism and the perceived pressures of globalization—precisely the themes that Schäuble was harping on and to which Varoufakis turned a deaf ear. In 2015 no one in the Eurogroup wanted to revisit the mess of 2010–2012, certainly not at the behest of a Greek government that rejected the entire premise on which the eurozone had finally been stabilized. Why should the Eurogroup make concessions to such a government in Greece when they had been denied to far more cooperative partners in Ireland, Portugal, and Spain? If Greece was still struggling, what it needed was not radical experimentation, but more reform. First of all, Syriza would have to be ground down.
Europe’s bureaucrats are masters at the dark arts of prevarication and obfuscation, and the ramified and opaque structure of the EU offers them every conceivable device for diversion. One favorite maneuver in 2015 was to ping-pong Greece back and forth between the national governments assembled in the Eurogroup and the institutions that make up the troika. When Varoufakis attempted to cut a deal with Schäuble, the German would refer the Greeks to the “institutions.” Following this lead, Varoufakis would then enter into amiable discussions with the European Commission. Assuming he had an agreement, he would then arrive at the Eurogroup, where the Commission would be overruled by a conservative bloc of national governments, led by Germany. Varoufakis’s efforts to propose “constructive” modifications of the troika program were met with silence. As Varoufakis discovered, it is a breach of protocol in the Eurogroup to present formal proposals, since doing so would require that national parliaments be notified. It might even require that the status of the Eurogroup be clarified. Already prepared and overly substantive contributions from those actually attending the Eurogroup meetings are therefore frowned upon.
Seeking an escape from the claustrophobia of the EU, the Syriza government went beyond it. The old left wing of the party looked to Russia. Varoufakis, with an eye to the shifting balance in the twenty-first-century economy, sought to make a deal with the Chinese. But from Moscow and Beijing, Greece received the same answer: you must come to terms with Germany. The same message came from Washington.
Varoufakis leans toward Britain and the US. His closest advisers were Americans: James Galbraith and Jeffrey Sachs. Adults in the Room starts with a Chandleresque description of an encounter in a D.C. bar with Lawrence Summers, whom Varoufakis invokes as a remote but authoritative mentor. When Syriza took office, Obama made sympathetic comments. But when Germany made its position clear, the US pulled back. As one American official told Varoufakis, Washington would not meddle. Greece belonged in Germany’s “sphere of influence.”3
3.
Did Greece have any way of breaking out of Germany’s grip? The common criticism of Varoufakis’s period in office is that he was an intellectual who took the knife of logic to a political gunfight. He was ill equipped from the start. Adults in the Room is at pains to show that this interpretation is mistaken. Varoufakis insists that he had prepared a response in case his efforts to negotiate a debt write-down with Germany failed. Indeed, it was only because he had this weapon on hand that he was willing to accept Syriza’s invitation to become finance minister and to enter the labyrinth of negotiations in the first place.
The plan that caused a scandal in the summer of 2015 and earned Varoufakis notoriety was a scheme to replace the euro with a new drachma. That scheme was in fact little more than due diligence, a reserve measure Varoufakis held on to in case the negotiations took the worst possible turn.
The far more dangerous weapon was one that Varoufakis proposed to direct against the European Central Bank. In a coincidence that would prove fateful, three days before Syriza was elected in January 2015, the ECB’s president, Mario Draghi, announced a new policy of quantitative easing for the eurozone (purchasing bonds in order to reduce interest rates). Long resisted by Europe’s monetary conservatives, notably in Germany, this was the ECB’s way of keeping deflation from spreading to Europe from the ailing emerging-market economies of Latin America and Asia.
By buying sovereign and private bonds, the ECB propped up their prices, pushed interest rates down, and flushed hundreds of billions in euro liquidity into the financial system. The primary aim was to stimulate the eurozone economy, but quantitative easing also had political ramifications. As long as the ECB kept buying their bonds, Spain, Italy, and Portugal were immune to contagion from the uncertainty surrounding Greece. Quantitative easing thus deprived Syriza of one of its chief bargaining weapons. Ironically, it was the ECB’s action—made in defiance of the conservatives in the Eurogroup—that freed those conservatives to lay siege to the left-wing government in Athens. They could force Greece to the brink of a disorderly Grexit without fear of destabilizing the rest of the eurozone and fight Greece’s political contagion without having to worry about the financial kind.
The response that Varoufakis devised to break out of this siege was truly Machiavellian. Draghi’s bond-buying had a fragile political and legal basis. The German Supreme Court and the European Court of Justice had only grudgingly approved it after repeated legal challenges by German right-wing euroskeptics. What Varoufakis proposed was to unhinge that delicate legal and political equilibrium. To do so Greece would default on the Greek bonds that the ECB had purchased in 2010 and 2011 during earlier rounds of bond market stabilization. That part of Greece’s sovereign debt had not been written down in 2012. The bonds were under Greek law. Their face value was roughly $33 billion. If Greece defaulted on all or part of those bonds, the ECB would be forced to reevaluate its entire portfolio of eurozone sovereign bonds, and the door would be thrown open to a new legal challenge from the German right wing, putting quantitative easing into jeopardy.
Varoufakis had outlined a strategy of this type on his blog as early as 2012. It was vaguely hinted at in the press in 2015.4 But Adults in the Room gives the first full-fledged account of his intent. Varoufakis wants us to know that whatever we may think of his bargaining tactics, he was not so naive as to go into the Eurogroup negotiations unarmed. The question is why his weapon was never used.
The answer turns on the cabinet politics around Prime Minister Tsipras. Conservative elements in the Greek state bureaucracy put powerful pressure on Athens not to break with the eurozone. They were joined by members of the Syriza coalition that had too much at stake in the status quo. When Varoufakis and his team were absent from Greece, Tsipras fell under the influence of more cautious advisers.
In April Varoufakis was dispatched to Washington with orders to inform the IMF of a pending default on Greece’s latest debt payment. But when he arrived in Washington his orders were revoked. Repeatedly, Tsipras shrank from the ultimate confrontation. By May he had succumbed to pressure from Germany to remove his troublesome finance minister from the front line of the eurozone negotiations.
Varoufakis gives an engaging picture both of the palace politics within Athens and of his desperate willingness to believe in Tsipras’s historic mission that held him in place. What he does not discuss are the wider implications of his proposed strategy of confrontation with the ECB, notably its likely repercussions for the other stressed peripheral borrowers. Had Greece defaulted, it is hard to say whether the loss would have been inflicted on the ECB or merely on the Greek central bank. But as far as Portugal, Spain, and Italy were concerned, the Greek strategy carried considerable risks. The entire point of Varoufakis’s proposal was to put them in harm’s way and to widen the Greek crisis, thereby forcing Draghi and the Germans to back off. His plan was to deliberately unleash a civil war in Europe over the one promise that since 2012 had been holding the European currency together—Draghi’s commitment to do “whatever it takes”—thus exposing the other weaker eurozone members to the full force of the bond markets.
How this would have worked out politically and what consequences it might have had for the left in Portugal and Spain are not questions that Varoufakis takes up. That he even considered such a tactic points to the extraordinary pitch of tension that eurozone politics had reached. Given Greece’s subordinate position, it would be bombastic to call his scheme a “nuclear option.” But it was certainly a dirty bomb.
4.
From its inception after World War II, the European Union has always been marked by a combination of high ideals, economic logic, and power politics. The balance has shifted over time depending on circumstance. In the early 2000s Brussels preened itself as the capital of the “good Europe”: a prosperous, unified, peaceful Rechtsstaat of continental scale. It was saccharine. But Europe was making up with soft-power appeal for what it lacked in hard-power clout.
That self-image did not survive the crisis of 2008. The EU today is no longer the “good Europe” of a decade ago. But neither is it the technocratic and neoliberal machine that it is variously caricatured to be. As Varoufakis’s memoir starkly reveals, it has become an arena for a political clash between contending visions of socioeconomic change. As is commonly observed, the EU does not have a democratic constitution. But to harp endlessly on the fact that Europe has no demos is an obfuscation in its own right. Like any large, complex polity, it is made up of multiple constituencies governed by different and conflicting logics. National politics today, whether in Greece, Germany, France, or the Czech Republic, take place within a European force field.
Within that force field, Syriza’s challenge mattered. It still does, as does the lower-key progressive project in Portugal. But both of these challenges are small, weak, and opposed by powerful enemies. The idea that countries like Greece and Portugal have an equal voice in the EU is a pious fiction. To make themselves heard, they have to use means fair and foul. One should not be scandalized by the lengths to which Varoufakis was willing to go. They suggest what he was up against: the dogged determination of the Eurogroup, its conservatism, and also its contradictions.
The divide between the European Central Bank and the factions that influence policymaking in Germany has strategic implications. Europe’s rescue from the acute phase of the eurozone crisis between 2010 and 2012 depended on Merkel and Draghi’s ability to balance the demands of such factions. Varoufakis’s threat to expose the contradictions in that balance was well directed. But it was also dangerous, and for that reason Tsipras pulled back.
Varoufakis clearly considers Tsipras naive for imagining that he could strike a deal with Germany. But Tsipras was at least half right. On the night of July 12, 2015, at the climax of the Greek debt crisis, Merkel did not push Schäuble’s proposal to exclude Greece from the euro for a “time out.” As Tsipras correctly judged, the majority of the Greek population did not want to risk a rupture, and Merkel knew that the same was true in Germany. Tsipras and Merkel struck a deal that would allow both countries to muddle through. The fury of the German right says as much about the nature of that compromise as does the disappointment of the Greek left.
For Germany’s new right, Merkel’s surrender over Greece was a prelude to her impetuous open-door response to the refugee crisis. Both constituted a betrayal of the conservative foundations of the Federal Republic. The Alternative für Deutschland was founded in the spring of 2013 not as a party of anti-immigrant resentment. The “alternative” it purported to offer was an escape from Merkel’s endless compromises over the eurozone. The huge losses suffered by both the Social Democratic Party and Merkel’s CDU in the Bundestag election of September 2017 confirm how deeply the crises of 2015—Greece on top of Ukraine topped by the refugee crisis—shook even the most stable European polity. That the future of Europe now hangs on Merkel’s ability to construct yet another unlikely coalition in Berlin suggests the extent to which the status quo in Europe depends not only on economic interests and technocratic calculations—however those may be defined—but also on the endlessly shifting play of electoral politics and governmental negotiation.
Varoufakis adorns his narrative with references to Greek tragedy mixed with denunciations of the black boxes within which technocracy conceals its power. As far as the eurozone is concerned these are largely beside the point. What he has actually given us is something more prosaic but no less important: a deeply reflective, first-person insight into the workings of modern power and politics.