In his first interview
since resigning, Greece's former Finance Minister says the Eurogroup is
“completely and utterly” controlled by Germany, Greece was “set up” and last
week’s referendum was wasted.
BY HARRY LAMBERT PUBLISHED
13 JULY, 2015 - 09:54
Yanis Varoufakis sitting
on the floor looking stressed during negotiations. Photo: Getty
Yanis Varoufakis says this
deal "will be worse". Photo: Getty
Read the full Q&A
transcript of our interview with Varoufakis here.
Greece has finally reached
an agreement with its creditors. The specifics have not yet been published, but
it is clear that the deal signed is more punitive and demanding than the one
that its government has spent the past five months desperately trying to
resist.
The accord follows 48
hours in which Germany demanded control of Greece’s finances or its withdrawal
from the euro. Many observers across Europe were stunned by the move. Yanis
Varoufakis was not. When I spoke with Greece’s former finance minister last week,
I asked him whether any deal struck in the days ahead would be good for his
country.
“If anything it will be
worse,” he said. “I trust and hope that our government will insist on debt
restructuring, but I can’t see how the German finance minister [Wolfgang
Schäuble] is ever going to sign up to this. If he does, it will be a miracle.”
It’s a miracle the Greek
people are likely to be waiting for a long time for. On Friday night, when
Greece’s parliament agreed to an austerity programme that voters had overwhelmingly
rejected in a referendum five days earlier, a deal seemed imminent. A partial
write-off of its debt owed to the so-called "Troika" – the IMF, the
European Central bank and the European Commission – was unlikely but possible.
Now, despite its government’s capitulation, Greece has no debt relief and may
yet be thrown out of the Eurozone.
Varoufakis, who resigned a
week ago, has been criticised for not signing an agreement sooner, but he said
the deal that Greece was offered was not made in good faith – or even one that
the Troika wanted completed. In an hour-long telephone interview with the New
Statesman, he called the creditors’ proposals – those agreed to by the Athens
government on Friday night, which now seem somehow generous – “absolutely impossible,
totally non-viable and toxic …[they were] the kind of proposals you present to
another side when you don’t want an agreement.”
Varoufakis added: “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.”
In Varoufakis’s account,
the Troika never genuinely negotiated during his five months as finance
minister. He argued that Alexis Tsipras’s Syriza government was elected to
renegotiate an austerity programme that had clearly failed; over the past five
years it has put a quarter of Greeks out of work, and created the worst
depression anywhere in the developed world since the 1930s. But he thinks that
Greece’s creditors simply led him on.
A short-term deal could,
Varoufakis said, have been struck soon after Syriza came to power in late
January. “Three or four reforms” could have been agreed, and restrictions on
liquidity eased by the ECB in return.
Instead, “The other side
insisted on a ‘comprehensive agreement’, which meant they wanted to talk about
everything. My interpretation is that when you want to talk about everything,
you don’t want to talk about anything.” But a comprehensive agreement was
impossible. “There were absolutely no [new] positions put forward on anything
by them.”
Varoufakis said that
Schäuble, Germany’s finance minister and the architect of the deals Greece
signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not
discussing the programme – this was accepted by the previous [Greek] government
and we can’t possibly allow an election to change anything.
“So at that point I said ‘Well perhaps we
should simply not hold elections anymore for indebted countries’, and there was
no answer. The only interpretation I can give [of their view] is, ‘Yes, that
would be a good idea, but it would be difficult. So you either sign on the
dotted line or you are out.’”
It is well known that
Varoufakis was taken off Greece’s negotiating team shortly after Syriza took
office; he was still in charge of the country’s finances but no longer in the room.
It’s long been unclear why. In April, he said vaguely that it was because “I
try and talk economics in the Eurogroup” – the club of 19 finance ministers
whose countries use the Euro – “which nobody does.” I asked him what happened
when he did.
“It’s not that it didn’t go down well – there
was point blank refusal to engage in economic arguments. Point blank. You put
forward an argument that you’ve really worked on, to make sure it’s logically
coherent, and you’re just faced with blank stares. It is as if you haven’t
spoken. What you say is independent of what they say. You might as well have
sung the Swedish national anthem – you’d have got the same reply.”
This weekend divisions
surfaced within the Eurogroup, with countries split between those who seemed to
want a “Grexit” and those demanding a deal. But Varoufakis said they were
always been united in one respect: their refusal to renegotiate.
“There were people who
were sympathetic at a personal level, behind closed doors, especially from the
IMF.” He confirmed that he was referring to Christine Lagarde, the IMF
director. “But then inside the Eurogroup [there were] a few kind words and that
was it: back behind the parapet of the official version. … Very powerful
figures look at you in the eye and say ‘You’re right in what you’re saying, but
we’re going to crunch you anyway’.”
Varoufakis was reluctant
to name individuals, but added that the governments that might have been
expected to be the most sympathetic towards Greece were actually their “most
energetic enemies”. He said that the “greatest nightmare” of those with large debts
– the governments of countries like Portugal, Spain, Italy and Ireland – “was
our success”. “Were we to succeed in negotiating a better deal, that would
obliterate them politically: they would have to answer to their own people why
they didn’t negotiate like we were doing.”
He suggested that Greece’s
creditors had a strategy to keep his government busy and hopeful of a
compromise, but in reality they were slowly suffering and eventually desperate.
“They would say we need all your data on the
fiscal path on which Greek finds itself, all the data on state-owned
enterprises. So we spent a lot of time trying to provide them with it and
answering questionnaires and having countless meetings.
“So that would be the first phase. The second
phase was they’d ask us what we intended to do on VAT. They would then reject
our proposal but wouldn’t come up with a proposal of their own. And then,
before we would get a chance to agree on VAT, they would shift to another
issue, like privatisation. They would ask what we want to do about
privatisation: we put something forward, they would reject it. Then they’d move
onto another topic, like pensions, from there to product markets, from there to
labour relations. … It was like a cat chasing its own tail.”
His conclusion was
succinct. “We were set up.”
And he was adamant about
who is responsible. I asked whether German attitudes control the outlook of the
Eurogroup. Varoufakis went further. “Oh completely and utterly. Not attitudes –
the finance minister of Germany. It is all like a very well-tuned orchestra and
he is the director.
“Only the French minister [Michel Sapin] made
noises that were different from the German line, and those noises were very
subtle. You could sense he had to use very judicious language, to be seen not
to oppose. And in the final analysis, when Dr Schäuble responded and
effectively determined the official line, the French minister would always
fold.”
If Schäuble was the
unrelenting enforcer, the German chancellor Angela Merkel presented a different
face. While Varoufakis never dealt with her, he said, “From my understanding,
she was very different. She tried to
placate the Prime Minister [Tsipras] – she said ‘We’ll find a solution, don’t
worry about it, I won’t let anything awful happen, just do your homework and
work with the institutions, work with the Troika; there can be no dead end
here.’”
The divide seems to have
been brief, and perhaps even deliberate. Varoufakis thinks that Merkel and
Schäuble’s control over the Eurogroup is absolute, and that the group itself is
beyond the law.
Days before Varoufakis’s
resignation on 6 July, when Tsipras called the referendum on the Eurogroup’s
belated and effectively unchanged offer, the Eurogroup issued a communiqué
without Greek consent. This was against Eurozone convention. The move was
quietly criticised by some in the press before being overshadowed by the
build-up to the referendum, but Varoufakis considered it pivotal.
WhenJeroen Dijsselbloem,
the European Council President, tried to issue the communiqué without him,
Varoufakis consulted Eurogroup clerks – could Dijsselbloem exclude a member
state? The meeting was briefly halted. After a handful of calls, a lawyer
turned to him and said, “Well, the Eurogroup does not exist in law, there is no
treaty which has convened this group.”
“So,” Varoufakis said, “What we have is a
non-existent group that has the greatest power to determine the lives of
Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no
minutes are kept; and it’s confidential. No citizen ever knows what is said
within . . . These are decisions of almost life and death, and no member has to
answer to anybody.”
Events this weekend seem
to support Varoufakis’ account. On Saturday evening, a memo leaked that showed
Germany was suggesting Greece should take a “timeout” from the Eurozone. By the
end of the day, Schäuble’s recommendation was the conclusion of the Eurogroup’s
statement. It’s unclear how that happened; the body operates in secret. While
Greeks hung on reports of their fate this weekend, no minutes were released
from any meetings.
The referendum of 5 July
has also been rapidly forgotten. It was preemptively dismissed by the Eurozone,
and many people saw it as a farce – a sideshow that offered a false choice and
created false hope, and was only going to ruin Tsipras when he later signed the
deal he was campaigning against. As Schäuble supposedly said, elections cannot
be allowed to change anything. But Varoufakis believes that it could have
changed everything. On the night of the referendum he had a plan, Tsipras just
never quite agreed to it.
The Eurozone can dictate
terms to Greece because it is no longer fearful of a Grexit. It is convinced
that its banks are now protected if Greek banks default. But Varoufakis thought
that he still had some leverage: once the ECB forced Greece’s banks to close,
he could act unilaterally.
He said he spent the past
month warning the Greek cabinet that the ECB would close Greece’s banks to
force a deal. When they did, he was prepared to do three things: issue
euro-denominated IOUs; apply a “haircut” to the bonds Greek issued to the ECB
in 2012, reducing Greece’s debt; and seize control of the Bank of Greece from
the ECB.
None of the moves would
constitute a Grexit but they would have threatened it. Varoufakis was confident
that Greece could not be expelled by the Eurogroup; there is no legal provision
for such a move. But only by making Grexit possible could Greece win a better
deal. And Varoufakis thought the referendum offered Syriza the mandate they
needed to strike with such bold moves – or at least to announce them.
He hinted at this plan on
the eve of the referendum, and reports later suggested this was what cost him
his job. He offered a clearer explanation.
As the crowds were
celebrating on Sunday night in Syntagma Square, Syriza’s six-strong inner
cabinet held a critical vote. By four votes to two, Varoufakis failed to win
support for his plan, and couldn’t convince Tsipras. He had wanted to enact his
“triptych” of measures earlier in the week, when the ECB first forced Greek
banks to shut. Sunday night was his final attempt. When he lost his departure
was inevitable.
“That very night the government decided that
the will of the people, this resounding ‘No’, should not be what energised the
energetic approach [his plan]. Instead it should lead to major concessions to
the other side: the meeting of the council of political leaders, with our Prime
Minister accepting the premise that whatever happens, whatever the other side
does, we will never respond in any way that challenges them. And essentially
that means folding. … You cease to negotiate.”
Varoufakis’s resignation
brought an end to a four-and-a-half year partnership with Tsipras, a man he met
for the first time in late 2010. An aide to Tsipras had sought him out after
his criticisms of George Papandreou’s government, which accepted the first
Troika bailout in 2010.
“He [Tsipras] wasn’t clear back then what his
views were, on the drachma versus the euro, on the causes of the crises, and I
had very, well shall I say, ‘set views’ on what was going on. A dialogue begun
… I believe that I helped shape his views of what should be done.”
And yet Tsipras diverged
from him at the last. He understands why. Varoufakis could not guarantee that a
Grexit would work. After Syriza took power in January, a small team had, “in
theory, on paper,” been thinking through how it might. But he said that, “I’m
not sure we would manage it, because managing the collapse of a monetary union
takes a great deal of expertise, and I’m not sure we have it here in Greece
without the help of outsiders.” More years of austerity lie ahead, but he knows
Tsipras has an obligation to “not let this country become a failed state”.
Their relationship remains
“extremely amicable”, he said, although when we spoke on Thursday, they hadn’t
talked all week.
Despite failing to strike
a new deal, Varoufakis does not seem disappointed. He told me he is “on top of
the world.”
“I no longer have to live through this hectic
timetable,” he said, “which was absolutely inhuman, just unbelievable. I was on
two hours sleep every day for five months. … I’m also relieved I don’t have to
sustain any longer this incredible pressure to negotiate for a position I find
difficult to defend.”
His relief is
unsurprising. Varoufakis was appointed to negotiate with a Europe that didn’t
want to talk, no longer feared a “Grexit” and effectively controlled the Greek
treasury’s bank accounts. Many commentators think he was foolish, and the local
and foreign journalists I met last week in Athens spoke of him as if he was a
criminal. Some people will never forgive him for strangling a nascent recovery
by reopening negotiations. And others will blame him for whichever harsh fate
awaits Greece this week.
But Varoufakis seemed
unconcerned. Throughout our conversation he never raised his voice. He came
across as imperturbably calm, and often chuckled. His conservation wasn’t
tinged with regret; he appears to be treating the loss of power as ambivalently
as he treated its acquisition.
Now he will remain an MP
and continue to play a role in Syriza. He will also return to a half-finished
book on the crisis, mull the new offers publishers have already begun to send
him, and may return to the University of Athens in some capacity after two
years teaching in Texas.
By resigning and not
signing a deal he abhorred, he has kept both his conscience free and his
reputation intact. His country remains locked in a trap he spent years opposing
and months fighting, but he has escaped.
Harry Lambert
(@harrylambert1) ran the New Statesman's UK election site, May2015.com.
This article was corrected
at 14.18 on 13/7/15 to say it was Jeroen Dijsselbloem, not Tusk, who issued the
communique, and was also changed to reflect the fact that Varoufakis wishes to
continue being in politics.
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