Former Greek Finance Minister Yanis Varoufakis Explains How Debt Crisis Was A Greek Tragedy

Former Greek Finance Minister Yanis Varoufakis was probably the most leading character during the Greek debt crisis. The economist resigned in the summer of 2015 after a tumultuous period.

He is currently Professor of Economics at the University of Athens and recently published a book titled “Adults in the Room: my battle with the deep European and American establishment. “

He spoke with Marketplace Morning Report host David Brancaccio about how the story he tells looks like a Greek story or Shakespearean tragedy, and how Europe lacks a “moral union”. Below is an edited transcript of their conversation.

David Brancaccio: What do you think of what I would say is conventional wisdom right now regarding the eurozone? Things are generally going pretty well there. We don’t have to worry much about these guys anymore.

Yanis Varoufakis: A regime’s inability to reproduce itself manifests itself at times when reality and the narrative of reality become so huge. It’s very similar to the early 1980s in the Soviet Union. The official version of the real truth was so hopeless that you knew the system couldn’t reproduce itself. Europe today is in a situation where numbers are thriving and people are suffering, with over 3.5 trillion in nonperforming private and public loans. We have a banking system that needs about a trillion and a half dollars to be properly capitalized, and you have a political system that is absolutely doomed to its own pride.

Brancaccio: Now the bad guys in your story are the forces that put bondholders and big banks first over the people of Greece. But you also blame the Greeks for getting into trouble in the first place. Do you finally see – it does not seem to be the case – structural changes in Greece which will perhaps strengthen the country for the future?

Varoufakis: Well, we are responsible for the fact that we were the first domino to fall. We were not responsible for the domino dynamic, which started in Greece and then went, for example, to Italy. Insolvent, in a sense. Structural reforms. What is structural reform? Do you think that reducing a retiree who lives on $ 300 a month to $ 200 constitutes a reform? It is confusing butchery and surgery.

Brancaccio: The austerity we have talked about so much has not gone away if you go to Greece.

Varoufakis: It’s actually getting deeper and deeper. But look, that’s totally understandable because when you’ve got a failed state, failed banks, failed businesses, and failed households, and everyone is pretending or we are forced to pretend that we can to escape this bankruptcy by borrowing more, an 8 year old will tell you that our tally will not end well and that this cycle – austerity leading to insolvency, insolvency creating more austerity and so on – this downward spiral cannot end on its own.

Brancaccio: In the book there is a crucial scene: you and one of the most powerful figures on the world stage, German Finance Minister Wolfgang Schaeuble. In the heat of the negotiations, he tells you privately on several occasions that he understands how “badly for your people”, ie the Greek people, accepting the EU-ECB-IMF terms will be. I thought it was interesting. He sees you as Greeks, not Europeans. Have you noticed this? I mean the euro means Greece can’t use its own central bank to get out of dire straits like an ordinary sovereign nation. Yet in this situation, it is you, the Greeks.

Varoufakis: This is precisely the crux of the matter. We have a monetary union, but we don’t have a political union and we don’t have a moral union.

Brancaccio: A moral union?

Varoufakis: Well imagine if in the United States you treated the people of Arizona like non-Americans or like people who have to fend for themselves and whose banking system is their own problem. Then you wouldn’t have the United States of America.

Brancaccio: And this is the enigma in which Europe is still. That didn’t solve it.

Varoufakis: Indeed, we have created the common currency, but we have not created everything that is necessary not to make the common currency a place of shared prosperity. But you mentioned Schäuble. Let me say one thing that I think is important – that’s why I wrote the book. My book is sort of a story about the powerlessness of the powerful. What he was actually telling me at the time – he wasn’t happy to say it – was that he was powerless to do what he himself believed was the right thing. This is why I consider my book to be a tragedy, in the ancient Greek or Shakespearean understanding of the word tragedy.

Brancaccio: Wolfgang Schaeuble, one of the most powerful humans on the planet when it comes to finances, couldn’t do what he knew to be right, that’s what you say.

Varoufakis: And he was absolutely, utterly dejected – as dejected as I was. I didn’t write my book as a story of good guys and bad guys, bad guys and virtues. Everyone in my book tries to do their best in circumstances that are not of their own choosing, circumstances to effectively force people like Schäuble at doing horrible things in the name of the exact opposite.

Brancaccio: Just so we know part of the story, what did Germany’s finance minister want to do but his chancellor wouldn’t let them?

Varoufakis: Wolfgang Schaeuble, ddecades ago, was a committed federalist, but a combination of Angela Merkel – who usurped and effectively stole him, it is in his opinion, the Prime Minister, the Chancellery of him, as well as the French, do not did not want a real federation.

They wanted all the benefits of a common currency, but without the obligations of a federal democratic political system. Schäuble was against it. But over the years he has grown into a cynical man, using the Ministry of Finance to do what he would have liked to do as Chancellor of Germany. And his No. 1 priority has become to tame Paris. His argument was very simple: “They want our money. This is how he sees the euro – like a deutsche mark. “I will have to have control over the national budget. It’s very, very simple. And Greece was collateral damage. He said this to me explicitly, “How can I get you out of this mess?” What will the French think?

Brancaccio: Taming Paris, taming the French – the other center of power.

Varoufakis: This is a point you mentioned before – when you treat a European people as a expendable commodity and as collateral damage in some kind of war, a dirty war against another great country like France, you are actually condemning the Europe in constant fragmentation and disintegration at the economic, financial and moral level.

Brancaccio: Now you are a proud left winger. And I note the subtitle of your book: “My Battle with the European and American Deep Establishment”. It echoes a phrase the American right wing likes to use. The deep state, the apparatchiks in government, as they see them, thwarting real reform. Is this deep state, this deep establishment one of the examples of a loop and a meeting of the left and the right?

Varoufakis: There is a big difference, of course. As you very well know, at your expense these days, in this country, it is because the right only wanted to penetrate the deep establishment to seize it and use it for its own ends. We leftists as humanists want to dissolve it and we want real democracy.

Brancaccio: Such a profound difference is what you are telling me.

Varoufakis: I would say so.

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