‘From bad to worse’: Greece hurtles towards a final reckoning

Helena Smith in The Guardian


Dimitris Costopoulos stood, worry beads in hand, under brilliant blue skies in front of the Greek parliament. Wearing freshly pressed trousers, polished shoes and a smart winter jacket – “my Sunday best” – he had risen at 5am to get on the bus that would take him to Athens 200 miles away and to the great sandstone edifice on Syntagma Square. By his own admission, protests were not his thing.

At 71, the farmer rarely ventures from Proastio, his village on the fertile plains of Thessaly. “But everything is going wrong,” he lamented on Tuesday, his voice hoarse after hours of chanting anti-government slogans.

---For Background Knowledge read:

Yanis Varoufakis and the Greek Tragedy

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“Before there was an order to things, you could build a house, educate your children, spoil your grandchildren. Now the cost of everything has gone up and with taxes you can barely afford to survive. Once I’ve paid for fuel, fertilisers and grains, there is really nothing left.”

Costopoulos is Greece’s Everyman; the human voice in a debt crisis that refuses to go away. Eight years after it first erupted, the drama shows every sign of reigniting, only this time in a new dark age of Trumpian politics, post-Brexit Europe, terror attacks and rise of the populist far right.

“I grow wheat,” said Costopoulos, holding out his wizened hands. “I am not in the building behind me. I don’t make decisions. Honestly, I can’t understand why things are going from bad to worse, why this just can’t be solved.”

As Greece hurtles towards another full-blown confrontation with the creditors keeping it afloat, and as tensions over stalled bailout negotiations mount, it is a question many are asking.

The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.



Farmer Dimitris Costopoulos in front of the Greek parliament in Athens. Photograph: Helena Smith for the Observer

Amid the uncertainty, volatility has returned to the markets. So, too, has fear, with an estimated €2.2bn being withdrawn from banks by panic-stricken depositors since the beginning of the year. With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest.

From his seventh-floor office on Mitropoleos, Makis Balaouras, an MP with the governing Syriza party, has a good view of the goings-on in Syntagma. Demonstrations – what the former trade unionist calls “the movement” – are a fine thing. “I wish people were out there mobilising more,” he sighed. “Protests are in our ideological and political DNA. They are important, they send a message.”

This is the irony of Syriza, the leftwing party catapulted to power on a ticket to “tear up” the hated bailout accords widely blamed for extraordinary levels of Greek unemployment, poverty and emigration. Two years into office it has instead overseen the most punishing austerity measures to date, slashing public-sector salaries and pensions, cutting services, agreeing to the biggest privatisation programme in European history and raising taxes on everything from cars to beer – all of which has been the price of the loans that have kept default at bay and Greece in the euro.

In the maelstrom the economy has improved, with Athens achieving a noticeable primary surplus last year, but the social crisis has intensified.

For men like Balaouras, who suffered appalling torture for his leftwing beliefs at the hands of the 1967-74 colonels’ regime, the policies have been galling. With the IMF and EU arguing over the country’s ability to reach tough fiscal targets when the current bailout expires in August next year, the demand for €3.6bn of more measures has left many in Syriza reeling. Without upfront legislation on the reforms, creditors say, they cannot conclude a compliance review on which the next tranche of bailout aid hangs.

“We had an agreement,” insisted Balaouras, looking despondently down at his desert boots. “We kept to our side of the deal, but the lenders haven’t kept to their side because now they are asking for more. We want the review to end. We want to go forward. This situation is in the interests of no one. But to get there we have to have an honourable compromise. Without that there will be a clash.”

It had been hoped that an agreement would be struck on Monday at what had been billed as a high-stakes meeting of euro area finance ministers. On Friday, EU officials announced that the deadline had been all but missed because there had been little convergence between the two sides.

With the Netherlands holding general elections next month, and France and Germany also heading to the polls in May and September, fears of the dispute becoming increasingly politicised have added to its complexity. Highlighting those concerns, the German chancellor, Angela Merkel, attempted to end the rift that has emerged between eurozone lenders and the IMF over the fund’s insistence that Greece can only begin to recover if its €320bn debt pile is reduced substantially.

In talks with Christine Lagarde, the Washington-based IMF’s managing director, Merkel agreed to discuss the issue during a further meeting between the two women to be held on Wednesday. The IMF has steadfastly refused to sign up to the latest bailout, arguing that Greek debt is not only unmanageable but on a trajectory to become explosive by 2030. Berlin, the biggest contributor of the €250bn Greece has so far received, says it will be unable to disburse further funds without the IMF on board.

The assumption is that the prime minister, Alexis Tsipras, will cave in, just as he did when the country came closest yet to leaving the euro at the height of the crisis in the summer of 2015. But the 41-year-old leader, like Syriza, has been pummelled in the polls. Persuading disaffected backbenchers to support more measures, and then selling them to a populace exhausted by repeated rounds of austerity, will be extremely difficult. Disappointment has increasingly given way to the death of hope – a sentiment reinforced by the realisation that Cyprus and other bailed-out countries, by contrast, are no longer under international supervision.

In his city centre office, the former finance minister Evangelos Venizelos pondered where Greece’s predicament was now. “[We are] at the same point we were several years ago,” he joked. “The only difference is that anti-European sentiment is growing. What was once a very friendly country towards Europe is becoming increasingly less so, and with that comes a lot of danger, a lot of risk.”

When historians look back they, too, may conclude that Greece has expended a great deal of energy not moving forward at all.

The arc of crisis that has swept the country – coursing like a cancer through its body politic, devastating its public health system, shattering lives – has been an exercise in the absurd. The feat of pulling off the greatest fiscal adjustment in modern times has spawned a slump longer and deeper than the Great Depression, with the Greek economy shrinking more than 25% since the crisis began.

Even if the latest impasse is broken and a deal is reached with creditors soon, few believe that in a country of weak governance and institutions it will be easy to enforce. Political turbulence will almost certainly beckon; the prospect of “Grexit” will grow.

“Grexit is the last thing we want, but we may arrive at a point of serious dilemmas,” said Venizelos. “Whatever deal is reached will be very difficult to implement, but that notwithstanding, it is not the memoranda [the bailout accords] that caused the crisis. The crisis was born in Greece long before.”

Like every crisis government before it, Tsipras’s administration is acutely aware that salvation will come only when Greece can return to the markets and raise funds. What happens in the weeks ahead could determine if that is likely to happen at all.

Back in Syntagma, Costopoulos the good-natured farmer ponders what lies ahead. Like every Greek, he stands to be deeply affected. “All I know is that we are all being pushed,” he said, searching for the right words. “Pushed in the direction of somewhere very explosive, somewhere we do not want to be.”

Europe and the Austerity Fallacy

Yanis Varoufakis

All the good stuff that cannot be measured

Yannis Varoufakis

Brexit won’t shield Britain from the horror of a disintegrating EU

Yannis Varoufakis in The Guardian


Leave won because too many British voters identified the EU with authoritarianism, irrationality and contempt for parliamentary democracy while too few believed those of us who claimed that another EU was possible.

I campaigned for a radical remain vote reflecting the values of our pan-European Democracy in Europe Movement (DiEM25). I visited towns in England, Wales, Scotland and Northern Ireland, seeking to convince progressives that dissolving the EU was not the solution. I argued that its disintegration would unleash deflationary forces of the type that predictably tighten the screws of austerity everywhere and end up favouring the establishment and its xenophobic sidekicks. Alongside John McDonnell, Caroline Lucas, Owen Jones, Paul Mason and others, I argued for a strategy of remaining in but against Europe’s established order and institutions. 

Against us was an alliance of David Cameron (whose Brussels’ fudge reminded Britons of what they despise about the EU), the Treasury (and its ludicrous pseudo-econometric scare-mongering), the City (whose insufferable self-absorbed arrogance put millions of voters off the EU), Brussels (busily applying its latest treatment of fiscal waterboarding to the European periphery), Germany’s finance minister Wolfgang Schäuble (whose threats against British voters galvanised anti-German sentiment), France’s pitiable socialist government, Hillary Clinton and her merry Atlanticists (portraying the EU as part of another dangerous “coalition of the willing") and the Greek government (whose permanent surrender to punitive EU austerity made it so hard to convince the British working class that their rights were protected by Brussels).
The repercussions of the vote will be dire, albeit not the ones Cameron and Brussels had warned of. The markets will soon settle down, and negotiations will probably lead to something like a Norwegian solution that allows the next British parliament to carve out a path toward some mutually agreed arrangement. Schäuble and Brussels will huff and puff but they will, inevitably, seek such a settlement with London. The Tories will hang together, as they always do, guided by their powerful instinct of class interest. However, despite the relative tranquillity that will follow on from the current shock, insidious forces will be activated under the surface with a terrible capacity for inflicting damage on Europe and on Britain.

Italy, Finland, Spain, France, and certainly Greece, are unsustainable under the present arrangements. The architecture of the euro is a guarantee of stagnation and is deepening the debt-deflationary spiral that strengthens the xenophobic right. Populists in Italy and Finland, possibly in France, will demand referendums or other ways to disengage.

‘The markets will soon settle down, and negotiations will probably lead to something like a Norwegian solution that allows the next British parliament to carve out a path toward some mutually agreed arrangement.’ Photograph: Leon Neal/AFP/Getty Images

The only man with a plan is Germany’s finance minister. Schäuble recognises in the post-Brexit fear his great opportunity to implement a permanent austerity union. Under his plan, eurozone states will be offered some carrots and a huge stick. The carrots will come in the form of a small eurozone budget to cover, in some part, unemployment benefits and bank deposit insurance. The stick will be a veto over national budgets.

If I am right, and Brexit leads to the construction of a permanent austerian iron cage for the remaining EU member states, there are two possible outcomes: One is that the cage will hold, in which case the institutionalised austerity will export deflation to Britain but also to China (whose further destabilisation will have secondary negative effects on Britain and the EU).

Another possibility is that the cage will be breached (by Italy or Finland leaving, for instance), the result being Germany’s own departure from the collapsing eurozone. But this will turn the new Deutschmark zone, which will probably end at the Ukrainian border, into a huge engine of deflation (as the new currency goes through the roof and German factories lose international markets). Britain and China had better brace themselves for an even greater deflation shock wave under this scenario.

The horror of these developments, from which Britain cannot be shielded by Brexit, is the main reason why I, and other members of DiEM25, tried to save the EU from the establishment that is driving Europeanism into the ground. I very much doubt that, despite their panic in Brexit’s aftermath, EU leaders will learn their lesson. They will continue to throttle voices calling for the EU’s democratisation and they will continue to rule through fear. Is it any wonder that many progressive Britons turned their back on this EU?

EU referendum full results – find out how your area voted



While I remain convinced that leave was the wrong choice, I welcome the British people’s determination to tackle the diminution of democratic sovereignty caused by the democratic deficit in the EU. And I refuse to be downcast, even though I count myself on the losing side of the referendum.

As of today, British and European democrats must seize on this vote to confront the establishment in London and Brussels more powerfully than before. The EU’s disintegration is now running at full speed. Building bridges across Europe, bringing democrats together across borders and political parties, is what Europe needs more than ever to avoid a slide into a xenophobic, deflationary, 1930s-like abyss.

Interview with Yanis Varoufakis

Courtesy The Economist 

Greece’s former finance minister talks Greece, Europe, the Labour Party and the future of social democracy

YANIS VAROUFAKIS is a Greek economist who served as finance minister in his country's Syriza government from January to September last year. After this approved the third bailout package, which he described as a surrender, he declined to stand in fresh elections and set about founding DiEM25, an international "movement" committed to overhauling the European Union's institutions and agenda. Recently he gave a wide-ranging interview to The Economist at his flat in Athens. This concentrated primarily on the poor state of social democratic parties across the continent (the subject of a briefing in this week’s issue) but also ranged across events in Greece last year, DiEM25 and politics in Spain, Germany and Britain, where it was recently revealed that he is advising Jeremy Corbyn, the Labour Party leader.

The Economist: We’ve gone through a crisis in which the limitations of untrammelled capitalism were made clear. Back in 2008-09 the social democrats thought they were living through a social democratic moment. But here we are a few years later and they have tanked. What’s your explanation for that?

Yanis Varoufakis: A few years ago I was invited to Vienna to address the Kreisky Forum [a social democratic Austrian think-tank]. That’s where I first articulated what I am going to tell you now. Social democracy is the result of the split of the Second International, between the traditional Marxist-Communist line that capitalism could not be civilised and the social democratic path of proposing change through the ballot box and some accommodation—the mixed economy. When I was a young man the dominant theme was pretty social democratic (even the Tories had accepted it). It was the idea of a mixed economy, i.e. that certain areas of the economy need to be left to the market and others that have to be dominated by the state. Behind that was this notion that started in Germany with Kautsky and the social democratic tradition that began in the 1910s, -20s, -30s with the SPD, which spread out and influenced the Labour Party and so forth. The main idea was that yes, there is class conflict, there is a tug of war between profit and the wage bill, but the role of the state is to regulate this, to forge a social contract, to press capital to deliver part of its return to the state so the state can provide the welfare net and some redistribution of profits towards wages. That was the social democratic project. During the Bretton Woods era, the post-1950 period, it was put in practice. It was dominant. You had the government mediating between trades unions and employers (primarily the industrial sector) to effect this transfer, and to convince industrialists to give up a percentage of their profits to the state to fund welfare institutions. Harold Wilson did it in Britain. Willy Brandt did it in Germany. Bruno Kreisky did it in Austria.

That was the electoral high point as well. That is what social democracy was about. But then Bretton Woods died in the 1970s and all hell broke loose. My next book will be about that (it’s out in April). And we entered the era of financialisation. How it came about is a long story. It has to do with American global dominance. But for the purposes of our conversation what matters is financialisation. The most potent moment in this phenomenon was the shift from options to sell to options to buy. This transition was critical. You have an option to sell as an insurance when you are buying. If you buy shares, you buy an option to sell at a minimum price; you’re hedging in case the share you purchased tanks.


But an option to buy is speculation?

Yes. So by moving from one to the other we licensed the financial sector to print its own money. And to make a great deal of profit on the upside. It was at that point that various social democratic parties cottoned on to this. Put simply, being the prime minister in Britain—Callaghan, or Blair later, or Schröder in Germany—and constantly having to fight with industrialists to keep taxing them more, being badmouthed by them, by the press they influence, is not pleasant. Much easier to say: “OK, stuff that. I’m going to have a Faustian bargain with the bankers, with the financial sector. I will turn a blind eye to your shenanigans and you will give me a cut.”


That bargain was struck out of electoral necessity. 

No. It was the path of least resistance. It was much easier to do that than to continue mediating between industrial capital and labour… OK, you are right in a sense: the industrial sector was suffering in places like Britain. So there was not much you could squeeze out of it. In Germany it wasn’t declining but it was still easier to turn a blind eye to what Deutsche Bank does and fund, through its super-profits (paper profits but nonetheless profits) part of the expansion of the social welfare system in Germany, than to keep pressing Siemens for greater transfers to the state and to wages.


Well the Third Way was all about redistribution instead of fiddling with wage levels and profit levels. 

Redistribution on the basis of what? On the basis of taxing the City. If you depend on tax from the City you cannot at the same time regulate the City. This is why I call it a Faustian bargain. You turn a blind eye to everything they were doing and then finance the NHS from a cut of this pyramidic pseudo-value production. The moment social democrats stopped playing the role of mediators between capital and labour, the moment they turned their back on the class struggle (which social democracy always accepted but tried to regulate) it was the end for social democracy. Because all it took was the 2008 implosion and suddenly, the same people that they were in bed with had all gone bankrupt.


So you’re saying the Third Way sowed the seeds of the current crisis of social democracy. 

The Third Way everywhere, not just Labour. And when those same bankers that (instead of industrial profits) were bankrolling the welfare state picked up the phone and said to Schröder, or to Blair or to Brown or whoever, “we need a few hundred billion or there will be no functioning ATMs tomorrow”, at that point the social democrats in power lacked both the analytical power to understand what was going on and the moral courage to oppose their bid to be bailed out along with their institutions. Their analytical power was “blown” the moment they bought all the rubbish about riskless risk and all that. Thus, when 2008 happened, they had no idea how that had happened. They had believed the rhetoric about boom and bust having been ended. And they lacked the moral authority to say to the bankers: “Sorry, you’re out. We’re salvaging the banks but not you.”

When you study the decline in support for social democrats across Europe, you notice the remarkable uniformity of that trend in a continent that still contains myriad sorts of capitalism ranging from the Nordic model to southern Europe. Why is that the case?
That’s financialisation for you.


It transcended borders?

It penetrated everything. It was like a colony of termites that had eaten the foundations from within.


So it undermined that social democratic formula. 

Yes, for example the social democratic model in Sweden was severely bruised after the banks there had gone crazy as well.


1994. 

Yes. In 1992-93 the Swedes, the Finns, dealt very well with the banking collapse. But then once they privatised them again, they set them free of proper regulation. And the wall of money that was coming from Wall Street, which was all being manufactured in the financialisation machine, was so large that these people had no resistance. The bankers themselves didn’t even know what was going on.


At the time of the crisis? 

No, before the crisis. Between 1993 and 2007. They had no idea. They just knew that all the other bankers around the world were making all this dough. And if they couldn’t show similar returns they were goners, their shareholders would have got rid of them. So they started mimicking. And I don’t believe they even knew what they were buying.


The Swedes?

The Swedes, Deutsche Bank, Societé Générale… I don’t think they understood what they were doing. Because they were not creating the stuff, they were just buying it. The people at Goldman Sachs always knew what they were doing, because they were manufacturing it. Their European “clients” did not have a clue.


Weren’t the ratings agencies the ones that were really in the dark? 

It’s one thing to be in the dark. It’s another to have your salary depend on you being in the dark.


Let me play devil’s advocate. The case for Blair, Schröder, even Persson in Sweden was: the right is in power in a way it has not been before (in Britain and Germany it had been almost hegemonic), we are in despair, the working class is fragmenting and the electorate is evolving in a more consumerist, more market-liberal direction. The party has to move with that. Notwithstanding what has happened since, is there any part of you that sympathises with that impetus in the 1990s to make what you call this “Faustian pact”? 

Look, I sympathise with Faust when I read Goethe, or even Marlowe for that matter. I completely sympathise with Faust. Don’t you? It’s a very compelling story. You can see things from his perspective. You can see why he was lured. So yes, I do. But this does not change anything: Faust erred badly.

I can see you there, in Auerbach’s Cellar, cheering Faust on. 

[Laughs] Look, take the Labour Party in Britain. And that’s self-criticism too because I was part of the demonstrations from 1978 to 1988. We were defending a model that was finished. We were defending coal-powered electricity generation. That wasn’t going to end well. Of course, that is not to say it was right to jettison hundreds of thousands of people—whole communities—without any period of transition to some other model. But we were fighting a losing battle. You have a point. People like Blair saw this. In that sense: yes, to that extent I’m sympathetic. Where I’m not sympathetic is where they lost sight of capitalism. The Left is supposed to be critical of capitalism. If it isn’t critical of capitalism it has no reason to exist. Why not be a Tory, a compassionate one-nation Tory, if you have no problem with capitalism? So they lost the capacity to be critical of capitalism. And being critical of capitalism does not mean saying that capitalism is a bad thing. Being critical of capitalism means being critical in the Marxist sense of looking at it as a system that produces crises and knowing that the greater the growth rate, the harder the fall around the corner. They had a duty to maintain this critical attitude towards capitalism while at the same time doing as you said: trying to find ways of escaping the defeatism of the Left, of embracing what Thatcher offered people. It’s against my aesthetic, but Thatcher offered them a vision of new vistas of pleasure and commercial endeavour. That we should take account of. You can’t say to people: it’s wrong to aspire to buying a new car, a new television set, a new computer or whatever. So yes, you should go along with this. But not lose sight of the fact that growth cannot be consistently fuelled by the proliferation of these financial products. It cannot be consistently fuelled by selling off council houses, by selling British Gas shares for a pittance to ensure that those who take the shares experience a 100% return the next day. At some point you “run out of other people’s money.”

Indeed… [Laughs]

[Laughs] Well, that’s also a criticism of liberalism, of neoliberalism.


To return to your point about that traditional social democratic demeanour towards capitalism, towards profit. Is it possible for that basic principle, in whatever evolved form, to coexist with globalisation?

That’s the trillion dollar question, isn’t it? Globalisation is not an exogenous force. It is not something that comes from Mars. It is what we allowed to happen on planet Earth. And in the same way that social democratic forces shaped the global financial system under Bretton Woods, they had a historic duty to shape what followed Bretton Woods, once Bretton Woods collapsed. But they didn't do that. They simply lost sight, firstly of the global financial system. They were far more interested in: “What can we do today to win the next election here?” Whereas the forces of neoliberalism had a global, almost Marxist perspective, an internationalist perspective which used to be typical of the Left.


A dialectical one!

A dialectical one. So no, I am not letting us off the hook by saying: “Oh, this was inevitable."


When you say “us”, you mean the Left? 

The Left, broadly defined. From Blair to anarchists. Syriza and Greece


Turning to the Greek situation, to what extent can we say that Syriza has moved into that space vacated by the collapse of Pasok? 

Completely.


Really?

Of course. [Laughs]


Were you surprised by that?

No. I wasn’t surprised. I was impressed but not surprised.


Impressed in what sense? 

Impressed that what I was predicting happened. Often what I predict doesn’t happen. [Both laugh] What I find interesting, from the Greek perspective was not so much the January [2015] election that brought us to power. That was expected. PASOK had been so totally delegitimised. I joined PASOK as a very young person in 1974-5, when it was first inaugurated by Andreas Papandreou. It was a very radical party. Papandreou’s thinking back then was very impressive.


Really? You helped put his party out of business. 

You’ve got to remember that Papandreou [senior] was an excellent mathematical economist. He was head of the department at Berkeley University (not to be scoffed at). He mathematised economics with Kenneth Arrow and others in the 1950s. He wasn’t radical back then. He became radical because of the Greek experience here, seeing how the CIA was manipulating politics here. Now, in the early 1970s he brought to Greece a very interesting mixture of good quality economic thinking—Nobel-prize winning levels of economic thinking—with an anti-colonial mentality. A kind of Gandhi narrative against Empire, where Greece was also part of the colonial periphery of the Empire.


A forerunner of the Latin American “pink wave” in some respects. 

Yes, indeed. So many of us had joined PASOK back then, on that basis. It was a clean party, because it was new and it wasn’t corrupt. And then it became exactly the opposite. It became completely “establishment”, dirty, and subservient to the colonial logic of the Troika. So it was only a matter of time before the people who had joined it—people like my parents, for example, who joined it with enthusiasm—would abandon it for something like Syriza which was reclaiming the ground that PASOK had forfeited.


You’re talking about the post-crisis period. 

Between 2011 and 2015. When the party went from 4% to 40%. A magnificent rise. And now it’s going to go back down to 4%, the way it’s going.


You think?

Oh yes. There’s no doubt about that.


It’s behind New Democracy, but… 

It will collapse. It’s a new PASOK. And it’s going down that way. I don’t know what will replace it but it has no future. The referendum [on the EU bailout offer in July 2015] was unique in Greek history, and in European history. Why? I’m not going to go into the issues, but will only refer to the social-class composition of the vote. Usually the working class is divided between conservatives, social democrats, communists and so on. So you have working-class Tories, social-democratic working class people and you have the Left. The 62% No vote at the referendum consisted of the under-privileged Greeks across party lines. Poor Greeks that may normally vote for New Democracy voted No. And a considerable number of bourgeois leftists, with money in the closed banks, voted Yes. This is something impossible to fathom if you don’t live here. I noticed that some of my MPs who were quite well to do voted Yes. And New Democracy supporters who have nothing to lose voted No. The working-class New Democracy voters did not go with their leadership. And well to-do, bourgeois Syriza voters voted Yes.


Is that so unexpected? Those who have less to lose are more radical. 

Sure, it all boils down to: do you have money in the bank? If you have a lot and you think that No means you will never get it out, you vote for Yes. But I wasn’t expecting such an alignment around self-interest. Because it doesn’t happen nowadays.


It’s Thatcherism in reverse. Thatcher’s priority was to give people capital—the “property owning democracy”—to give them a stake in the status quo. 

Maybe it’s exactly the same. But it wasn’t capital, it was bank deposits. I was just struck by that: that there were Syriza supporters who live near here, in very nice penthouses, who voted Yes.


But presumably in Piraeus the Syriza supporters backed No. 

Absolutely. Actually the No side won every constituency in Greece; the first time that there was such uniformity.


That begs the question: isn’t Syriza’s fate the fate of every party that tries to bend the rules of globalisation? 

Oh no, that’s not why Syriza is collapsing. The reason why Syriza is collapsing is because it has been co-opted to an unworkable fiscal policy. Greece went bankrupt in 2010 and we have had a “pretend and extend” programme since then. So it is just like a company that has totally failed and is given another loan by a banker who feels that if he declares the bankruptcy his books will be in trouble, so keeps extending loans and pretends that the loan is performing. That’s Greece, with our creditors (the infamous Troika) in the role of rogue banker. Any government that adopts this stance and is co-opted in this project fails and disappears from the political map. And this is what it is. It has nothing to do with globalisation. It is Europe remaining in denial about the bankruptcy of the Greek state and the inability of the Eurozone to function according to rules that were not up to standard.


What would a different path have looked like? 

Well, what we tried to do. To say this: we’re not playing games, this is what we are proposing. It’s very moderate and we are open to discussing the details. The basis of our position is that we will not have any more fiscal deficits but our primary surplus will be modest, at around 1%. Forget the surplus targets of 3.5% and 4.5% of GDP. These are simply impossible. And if you declare that this is your target nobody will invest in this country because they interpret such targets as a signal that you’re going to tax them through the nose. The problem in Greece is investment. The only way to recover is investment and everything beyond a 1% primary surplus target is inconsistent with recovery. So we’re not going to sign on the dotted line any agreement which involves 3-3.5% primary surpluses. It’s very simple. And in order to make our debt sustainable with only 1% we want a debt restructure that is based on simple financial engineering, no haircuts or anything like that are necessary. We even told them what needs to be done in a way which Wall Street functionaries understand and with which they agree. And then let’s come to an agreement on the question of reforms. Instead of hitting small-time pharmacists and pensioners, let’s hit the oligarchy, where we really need reform. So that is what I went to Brussels with: “This is it. Take it or leave it. If you want to crush us, crush us.”


But you are saying it wasn’t Brussels, it was choices made by legislators and leaders in Athens. 

No, that was 2010. We were elected in 2015. We could have changed all that. We could have gone—and I did go—to the Eurogroup and said just that: “Help us reform Greece, but to reform Greece we need to stop the debt-deflationary cycle. And to stop that we need targets which are reachable, credible and which do not deter investment. Within that everything is negotiable.” But they didn’t want that. They didn’t even want to consider this possibility. Because, for them, the recovery of Greece was not the issue. The issue was not to give a signal to the Spanish, the Irish, the Portuguese that a government can be elected which goes to them with ideas of its own. My idea was to stand our ground and make it public that we were flexible and reasonable. (This is not a left-wing agenda, this is what any sensible policy-maker would recommend and was not far from what the IMF was saying; there were moments when the IMF was saying things more radical than me, but then for political reasons [Christine] Lagarde, to maintain her relations with Schäuble, went back on it.) You want to throw us out of the euro zone? Do it. I’m not leaving the euro zone. You throw me out. You have no way of doing it, except by violating the rules of the EU. Good. Be my guest. That was what I was elected to say. That was why I was so desperately disliked in Brussels. But if we had done that and stood our ground, that would have had a €1 trillion cost. I don’t believe Draghi would have been able to keep things calm; not only because €1 trillion is a lot of money but because his QE would have been wrecked. Because if we had restructured the €27 billion that we owed the ECB, Jens Weidmann [the President of the Bundesbank] would have attacked him on the basis of: “See, you purchase government paper? A chunk of it defaulted or was restructured. And therefore you have violated the charter of the ECB which prohibits any public debt financing.” This is why I stand convinced that Draghi would have never done this, if we remained resolute.


Because they would have had to pull QE?

Yes, and the Euro would be finished. So I think we had good leverage. But I was not allowed to use it.


That brings me back to my point: that the fault lies with those in your former party, in Athens. 

Not even my party. Just three or four people in the inner cabinet.


What motives possessed them? 

Really, I don’t know. I dislike interpreting other people’s motives. I had not seen it coming. If I had I would not have entered government. I watched it happen in front of me. The banal explanation is fear and a relative ignorance of basic economics. There were some people there who thought, like the previous government: “we can go to a 3.5% primary surplus; it’s not going to kill us if we grant this, that and the other.” If this was their genuine thinking, they were badly mistaken. You announce that silly surplus target, investment doesn’t happen and then you’re dead in the water. As we are now.


On Spain


You have links with Podemos in Spain. They are saying no to government options with PSOE and Ciudadanos. Do you think that’s the right move? 

Yes. Look, government is a chore. And all good people should see office as a chore. If you crave to be in office, you are dangerous. We should all be reluctant ministers. So why should you do it? You should do it only if you think you can change something for the better. If, even before you enter the ministry, you have to accept policies you know don’t work, what is the point? And also, it is a terrible thing for democracy. Imagine if Pablo Iglesias [the leader of Podemos] entered office tomorrow and implemented the same policies as before. Why was there a change of government? Why did the people make the courageous choice of jettisoning the previous government? If people change governments but policy remains the same, and is equally ineffective, this undermines the democratic process.


On Germany


Is that a problem more broadly? Is it the case that the SPD in Germany is just too indistinguishable from the CDU? 

The SPD, under its current leadership, is much worse than the CDU. Much worse. I’d much rather deal with Merkel and Schäuble than the SPD’s leaders.


They have been quite obstructive on the migrant question.

They have been appalling. I grew up in awe of the SPD, because we lived in a dictatorship here in Greece and Willy Brandt was a great supporter of Greek democrats. The SPD showed immense leadership. For me, the SPD is part of my milieu. When I saw them and I met the dearth of honesty, the lack of ideas, the 19th century shenanigans that they were engaged in…


19th century in what way?

(19th century as in power relations rather than political relations.) …their manipulation, their twisting of what you said. Whereas with Schäuble, compared with my dealings with the SPD, I knew what I was dealing with. And I also had interesting conversations with him. I could not have had an interesting conversation with [Sigmar] Gabriel. So you can see the decrepitude of the social democratic tradition. They are the least interesting, the least innovative, the least sincere of the whole political spectrum.


Why?

They sold themselves to Mephisto, and then at some point even he didn’t care for them.


It seems astonishing that a political family with such an heritage, with so many clever people on board, could accept its defeat.

Yes. But there is something else which went along with that. The same process of financialisation that depleted the analytical and moral authority of the social democrats was precisely the process that diminished the value of political goods more generally and turned talented people away from politics.


Because you could achieve less from a position of power. 

Yes. If Harold Wilson was an 18-year-old today, he probably wouldn’t want to go into politics. If Willy Brandt was an 18-year-old today, he wouldn’t want to go into politics. And this is why politicians aren’t what they used to be. It’s not because our DNA is degenerating. It’s that there is a natural Darwinian process, a natural selection process. Politics attracts the least well-meaning and least talented people because the political sphere has been devalued.


On the Labour Party


It has been in the news that you are helping the Labour Party. What can you say about what you are working on with them? Or is it under the hat? 

It isn’t under the hat. I believe in full transparency! I have had a number of conversations with them and I think it is fair to say my engagement with the Labour Party concentrates on two issues. Firstly investment. And secondly Brexit. Now, my view—not just about Britain but about the whole of Europe—is that investment is the key. We have a major discrepancy between savings and investment.


Especially in Britain. 

Even in Germany. Germany has the lowest level of investment since 1945. This is absurd, given that they have negative interest rates. It actually reveals the depth of the deflationary spiral in which we are. Same in Britain, France, Spain. Here [in Greece] we have negative investment, and we don’t have negative savings so the excess of savings over investment is proportionately huge. So my advice to the Labour Party is: don’t focus on austerity. Austerity is the symptom. What matters is the low level of investment. And if the Labour Party is going to push ahead and escape this constant bickering between Blairites and Corbynistas, escape the trap set up for it by the toxic right-wing press, escape the attempt by the BBC to play on the divisions within the Labour Party, my message to them is: you have to do what Harold Wilson did in the 1960s, which is to recast the Labour Party as the political force behind renewal through investment in modern technologies. Back then it was the “white head of technology”. Now it should be the “cool breeze of sustainable technology”. And this should be the mantra. Because if that investment happens, the whole austerity debate becomes secondary. At the moment Osborne is caught in a trap of his own making. With every week that goes by the rising PSBR [public sector borrowing requirement] is a problem because the tax take is always lower due to greater cuts. And he has nothing to say about that. Labour should say something about that. And it shouldn’t simply say to the Brits: we will tax and spend more. Because this doesn’t wash. You’ve got to talk about how to crowd in private investment through a public investment bank which operates like the European Investment Bank, like the World Bank; that is, at arm’s length from government and whose purpose is not to tax in order to spend, but to issue bonds that are assisted through QE (I had a piece in The Economist about this some time ago, about how QE could be utilised to keep the yields of a public investment bank low) in order to mop up savings and hand them over to private sector firms; to start ups, this that and the other. So this is one thing I’m discussing with Labour: investment. No-one can accuse me of being an austerian. But I say: “austerity is a boring issue, don’t keep telling people you are anti-austerity”.


On Brexit


It really killed them in the last parliament, even though they weren’t that anti-austerity.

Yes. Talk about something positive. Investment. On Brexit, I lament the fact that the Labour Party is not leading the debate. It has been cornered. The main debate now is between different factions of the Tory Party (and they are both wrong). For me the great calamity is that the more intellectually interesting and solid view comes out of the Brexiters. They have a Burkean argument about sovereignty (with which I disagree, but nevertheless is philosophically interesting). Cameron has nothing to say of any interest whatsoever. He brought the worst kind of fudge back from Brussels and is simply banking on fear and small-c conservatism: no change because change is dangerous. This is not a reason to be in the European Union. We at DiEM25, the Democracy in Europe Movement, are planning an event in May, a month before the election in Britain, to bring together people who would not otherwise come together; from the Labour Party, Caroline Lucas and the Green Party, the Scottish National Party, people who are not party-aligned, to argue the radical case for staying, which is: Britain needs to reclaim its democracy and to do this it must stay in Brussels and fight for the democratisation of Europe. Because you can’t say you’re going to stay in the Single Market and opt out of the European Union. That way you are effectively forfeiting even what you have left in terms of sovereignty to an alien power. So we are going to be working on this. And what DiEM25 can offer the Labour Party, the Greens and other progressives in Britain is an answer to a pressing question. I was in the House of Commons recently and I heard MPs tell me: “Our constituents are writing to us that they hate the EU, that they want to get out. They asked us: Why are you recommending that we stay?” And: “Look at what happened to the Greeks—shouldn’t we get out?” Now, no one can accuse me of being an austerian or being pro-EU. So when it comes from me that Britain should stay and join forces with us within the European Union, that carries some weight among a certain section of the British political scene.


On DiEM25


Nixon goes to China. That brings me on to what you call the “movement”. I have read the manifesto. What does the practical plan for the next year look like? You’ve set yourself these milestones; how do you get there? 

The first one [happened] on March 21st to 23rd in Rome, on transparency. The second one will be in Barcelona on the EU constitution and the process we are proposing. There will be an event in London on sovereignty. But primarily we will stage six large “assemblies”, beginning with transparency, then moving onto investment, migration, currency, monetary policies and so on. It will take 18-24 months for all six to convene. These are our markers in the calendar and before each Assembly —this is our ambition—there will be hundreds of small town hall meetings in the run-up to each. The purpose is to produce a white paper for each one of these six pivotal issues. If that works, and we have this sequence of town hall meetings culminating in large Assemblies where a substantial policy paper is approved, then within 18-24 months we will have a fully fledged Programme for Europe, a European Agenda. This is the conversation we want to have and the consensus we want to come up with. And if we do that, and if this consensus is interesting, then this consensus will find a way of expressing itself.


Will you be working with political parties? 

We are already doing so. But we do not co-opt political parties. We do not say: the Labour Party is part of DiEM25. Anybody from the Labour Party who wants to be part of this process can come and have this conversation, without co-opting the whole party. Because there are people in the Labour Party that are not even Europeanists. Same with Die Linke. Die Linke is split between those who are with us and those who want return to the Deutschmark, for instance.


And the idea is that this programme will provide a touchstone for campaigners and politicians?

We don’t know yet. My hope is that this consensus is powerful enough and revitalises the conversation in Europe, then it could even find electoral expression and could even stand for European Parliament or local government elections or in association with parties that adopt this programme, this consensus. But this is completely open-ended. As Brian Eno said in Berlin: “Start cooking, recipe to follow!”


You have some big names on board. Zizek?

Zizek is a great supporter, indeed an active DiEM25 member. In Berlin we had a video message from Zizek rather than Zizek himself. As Eno said, it was the shortest speech he had ever heard Slavoj give!


On the future of social democracy


Returning to where we started, do you think social democracy has a future? Has it run its course? Or is it just that “social democrats” by name have run their course. 

The truth is, I don’t know. “Social democracy” as a label is finished, because it has been tainted. Just like “communist”. Communism died in 1991 because it was associated with a particular manifestation which killed off an original idea, from back in 1848, that I think was good. Similarly “social democracy” has been too tainted as a term. But I also do believe that social democracy is very 20th century. Now, what we are facing is a major technological upheaval within global capitalism, in which the old-fashioned way of thinking about capital and labour and their tussle - which is central to social democracy, or ought to be if it is to be revived - is becoming disrupted, as they say, by the third or fourth machine age. Very soon we are going to have to be thinking in different terms. And as Gramsci used to say, “the old is dying but the new is struggling to be born.”


We’re in an “interregnum”, then? 

Yes. Which is always a very dangerous period.


Of course we do not know exactly what the impetus for government and politicians will be in the coming years but what do you think this shift means for how the compassionate state should look in 50 to 100 years? 

Look, it’s not a question so much of “compassionate” as one of a state capable of regulating social conflicts. Because that is what the state always did, beginning with Magna Carta. It was all about regulating conflicts between the barons and the King and the merchants and the trades unions and so forth. Today we are facing a serious danger of large masses of people who have low economic value. This is a powder keg in the foundations of society. Making sure that the great wealth-creation which capital is capable of does not light this dynamite—the basic income approach—is absolutely essential, but it is not part of the social democratic tradition. Think about it. The post-war consensus was all about national insurance, it was not about basic income. Now, either we are going to have a basic income that regulates this new society of ours, or we are going to have very substantial social conflicts that get far worse with xenophobia and refugees and migration and so forth. But I do not think that social democracy has the analytical skills to come to terms with this. Even Keynes…


He was a liberal.

The working class was one lump for him, and consumption was one thing. Now we have gradations, different qualities, lots of conflicts and possibilities that emanate from this multi-layered, multi-dimensional evolution of the old categories. And I don’t think social democracy is up to this. I don’t know what is.


It used to be a lot easier to pull together a sufficiently large coalition of voters to win an election, when you had clear class distinctions. You could add one to one and make two quite easily, whereas now the arithmetic has got a lot more complicated. The question is: what sort of political force has the right “glue” to build a coalition on the scale needed?

That’s right. Mind you, it was large minorities that ruled.


But 20 years ago it was parties like Labour, the SPD getting 40% where now they get 20%. It changes the character of the political family. 

I am still under the influence of last year, when we had a 75% approval rating. So I cannot agree it is impossible. We didn’t put out a very radical package. Hope is what is in deficit. Britain, the British public, has no hope. When they voted for Cameron last year it was not hopefully. It was reluctantly and because they did not like Ed [Miliband] and they did not trust the Labour Party. Now they will vote to stay in Europe out of fear, not out of hope. So what do we need to do to capture hope? That is the issue. In the 50s and 60s the dream of shared prosperity was that which gave hope. Even the Tories latched onto it: Ted Heath, the one nation Tories and so on. So I think the basic income approach is capable of doing this as long as (and this is what I emphasise when I talk to the Corbynistas) you can explain to them where the money will come from, that it will not be simply debt, that we are going to generate a lot more income and a chunk of it is going to fund this. But we, the Left, must not be fearful. I gave a talk some time ago in the United States and said: yes, surfers in California must be fed by the rest of us. We may not like that, we may feel they are bums, but they deserve a basic income too.

[Laughs]

OK, they don’t “deserve”, but they should have a basic income, because this is the way to stabilise society. But you need politicians that are capable of going out there and saying: “You see that lazy bum over there that you hate? We should feed him. And we should make sure he has a house. Because if he does not have a house and he gets sick and so on, he is a greater burden for all of us. And if there are lots of them and technological innovation produces a lot more of them, that would be macro-economically unsustainable. Those of us who want to work—because we enjoy it and have the opportunity—have the technology to produce so much wealth that we can feed the surfers.” But who says that?


That can be your slogan: “feed the surfers”. Yanis Varoufakis, thank you. 

Thank you.

Why we must save the EU

Yannis Varoufakis in The Guardian

The first German word I ever learned was Siemens. It was emblazoned on our sturdy 1950s fridge, our washing machine, the vacuum cleaner – on almost every appliance in my family’s home in Athens. The reason for my parents’ peculiar loyalty to the German brand was my uncle Panayiotis, who was Siemens’ general manager in Greece from the mid-1950s to the late 1970s.

A Germanophile electrical engineer and a fluent speaker of Goethe’s language, Panayiotis had convinced his younger sister – my mother – to take up the study of German; she even planned to spend a year in Hamburg to take up a Goethe Institute scholarship in the summer of 1967.

Alas, on 21 April 1967, my mother’s plans were laid in ruins, along with our imperfect Greek democracy. For in the early hours of that morning, at the command of four army colonels, tanks rolled on to the streets of Athens and other major cities, and our country was soon enveloped in a thick cloud of neo-fascist gloom. It was also the day when Uncle Panayiotis’s world fell apart.

Unlike my dad, who in the late 1940s had paid for his leftist politics with several years in concentration camps, Panayiotis was what today would be referred to as a neoliberal. Fiercely anti-communist, and suspicious of social democracy, he supported the American intervention in the Greek civil war in 1946 (on the side of my father’s jailers). He backed the German Free Democratic party and the Greek Progressive party, which purveyed a blend of free-market economics with unconditional support for Greece’s oppressive US-led state security machine.

His political views, and his position as the head of Siemens’ operations in Greece, made Panayiotis a typical member of Greece’s postwar ruling class. When state security forces or their stooges roughed up leftwing protesters, or even killed a brilliant member of parliament, Grigoris Lambrakis, in 1963, Panayiotis would grudgingly approve, convinced that these were unpleasant but necessary actions. My ears are still ringing with the rowdy exchanges he often had with Dad, over what he considered “reasonable measures to defend democracy from its sworn enemies” – reasonable measures that my father had experienced first-hand, and from which he would never fully recover.

The heavy footprint of US agencies in Greek politics, even going so far as to engineer the dismissal of a popular centrist prime minister, Georgios Papandreou, in 1965, seemed to Panayiotis an acceptable trade-off: Greece had given up some sovereignty to western powers in exchange for freedom from a menacing eastern bloc lurking a short driving distance north of Athens. However, on that bleak April day in 1967, Panayiotis’s life was turned upside down.

He simply could not tolerate that “his” people (as he referred to the rightist army officers who had staged the coup and, more importantly, their American handlers) should dissolve parliament, suspend the constitution, and intern potential dissidents (including rightwing democrats) in football stadia, police stations and concentration camps. He had no great sympathy with the deposed centrist prime minister that the putschists and their US puppeteers were trying to keep out of government – but his worldview was torn asunder, leading him to a sudden spurt of almost comical radicalisation.

A few months after the military regime took power, Panayiotis joined an underground group called Democratic Defence, which consisted largely of other establishment liberals like himself – university professors, lawyers, and even a future prime minister. They planted a series of bombs around Athens, taking care to ensure there were no injuries, in order to demonstrate that the military regime was not in full control, despite its clampdown.

For a few years after the coup, Panayiotis appeared – even to his own mother – as yet another professional keeping his head down, minding his own business. No one had an inkling of his double life: corporate man during the day, subversive bomber by night. We were mostly relieved, meanwhile, that Dad had not disappeared again into some concentration camp.

My enduring memory of those years, in fact, is the crackling sound of a radio hidden under a red blanket in the middle of the living room in our Athens home. Every night at around nine, mum and dad would huddle together under the blanket – and upon hearing the muffled jingle announcing the beginning of the programme, followed by the voice of a German announcer, my own six-year-old imagination would travel from Athens to central Europe, a mythical place I had not visited yet except for the tantalising glimpses offered by an illustrated Brothers Grimm book I had in my bedroom.

Deutsche Welle, the German international radio station that my parents were listening to, became their most precious ally against the crushing power of state propaganda at home: a window looking out to faraway democratic Europe. At the end of each of its hour-long special broadcasts on Greece, my parents and I would sit around the dining table while they mulled over the latest news.

I didn’t fully understand what they were discussing, but this neither bored nor upset me. For I was gripped by a sense of excitement at the strangeness of our predicament: that, to find out what was happening in our very own Athens, we had to travel, through the airwaves, and veiled by a red blanket, to a place called Germany.

The reason for the red blanket was a grumpy old neighbour called Gregoris. Gregoris was known for his connections with the secret police and his penchant for spying on my parents; in particular my Dad, whose leftwing past made him an excellent target for an ambitious snitch. Strange as it may sound today, tuning in to Deutsche Welle broadcasts became one of a long list of activities punishable by anything from harassment to torture. So, having noticed Gregoris snooping around inside our backyard, my parents took no risks. Thus the red blanket became our defence from Gregoris’s prying ears.

A few years later, it was from Deutsche Welle that we learned what Panayiotis and his colleagues had been up to – when the radio announced that they had all been arrested. Dad would joke for years to come about the pathetic inability of these bourgeois liberals to organise an underground resistance group: only a few hours after one of the Democratic Defence members was accidentally caught, the rest were also rounded up. All the police had to do was read the first man’s diary – where he had meticulously listed his comrades’ names and addresses, in some cases including a description of each subversive “assignment”. Torture, court martial and long prison sentences – in some cases the death sentence – followed.

A year after Panayiotis’s capture, the military police guarding him decided to relax his isolation regime by allowing me, a harmless 10-year-old, to visit him once a week. Our already close bond grew stronger with boy-talk that allowed him a degree of escapism. He told me about machines I had never seen (computers, he called them), asked about the latest movies, described his favourite cars.

In anticipation of my visits, he would use matchsticks and other materials that prison guards would let him keep to build model planes for me. Often, he would hide inside his elegant artefacts a message for my aunt, my mother, on occasion even for his colleagues at Siemens. For my part, I was proud of my new skill of disassembling his models with minimal damage, retrieving the message, and putting them back together.

Long after Panayiotis’s death, I discovered the last of these: a matchstick model of a Stuka dive-bomber in my old family home’s attic. Torn between leaving it intact and looking inside, I decided to take it apart. And there it was. His last missive was not addressed to anyone in particular.

It was a single word: “kyriarchia”. Sovereignty.

 
A tank outside the parliament building in Athens during the military coup in 1967. Photograph: Bettmann/Corbis

It was almost 50 years after those childhood evenings under the red blanket that I made my first official visit to Berlin as finance minister of Greece, in February 2015. My first port of call was, of course, the federal finance ministry, to meet the legendary Dr Wolfgang Schäuble. To him, and his minions, I was a nuisance. Our leftwing government had just been elected, defeating a sister party of the Christian Democrats – New Democracy – on an electoral platform that was, to say the least, a form of inconvenience for Schäuble and Chancellor Angela Merkel, and their plans for keeping the eurozone in order.

Our success was, indeed, Berlin’s greatest fear. Were we to succeed in negotiating a new deal for Greece that ended the interminable recession gripping the nation, the Greek leftist “disease” would almost certainly spread to Portugal, Spain and Ireland, all of which had general elections looming.

Before I arrived in Berlin, and only three days after I had assumed office as minister, I received my first high-ranking visitor in my Athens office: Schäuble’s self-appointed envoy, Jeroen Dijsselbloem, the Dutch finance minister and president of the Eurogroup of finance ministers. Within seconds of meeting, he asked me whether I intended to implement fully and unwaveringly the economic programme that previous Greek governments had been forced by Berlin, Brussels and Frankfurt – the seat of the European Central Bank (ECB) – to adopt.

Given that our government had won a mandate to renegotiate the very logic of that disastrous programme (which had led to the loss of one third of national income and increased unemployment by 20%), his question was never going to be the beginning of a beautiful friendship.

For my part, I attempted a diplomatic reply that would be my standard line of argument for the months to follow: “Given that the existing economic programme has been an indisputable failure, I propose that we sit down together, the new Greek government and our European partners, and rethink the whole programme without prejudice or fear, designing together economic policies that may help Greece recover.”

My modest plea for a modicum of national sovereignty over the economic policies imposed on a nation languishing in the depths of a great depression was met with astonishing brutality. “This will not work!”, was Dijsselbloem’s opening line. In less than a minute he had laid his cards on the table: if I were to insist on any substantial renegotiation of the programme, the ECB would close down our banks by the end of February 2015 – a month after we had been elected.

The Greek finance ministry’s office overlooks Syntagma Square and the House of Parliament – the very stage on which, in April 1967, the tanks had crushed our democracy. As Dijsselbloem spoke, I caught myself looking over his shoulder out to the broad square teeming with people and thinking to myself: “This is interesting. In 1967 it was the tanks, now they are trying to do the same with the banks.”

The meeting with Dijsselbloem ended with a tumultuous press conference in which the Eurogroup’s president lost his cool when he heard me say that our government was not planning to work with the cabal of technicians the troika of lenders habitually sent to Athens to impose upon the elected government policies destined to fail. The die had been cast and the battle for reclaiming part of our lost sovereignty was only beginning. Berlin, where I was to meet the troika’s real master, beckoned.

As the car that was driving me from Berlin’s Tegel airport approached the old headquarters of Goering’s air ministry – now the home of the federal ministry of finance – I wondered whether my host, Schäuble, could even begin to imagine that I was arriving in Berlin with my head full of childhood memories in which Germany featured as an important friend.

Once inside the building, my aides and I were ushered briskly into a large lift. The lift door opened up into a long, cold corridor at the end of which awaited the great man in his famous wheelchair. As I approached, my extended hand was refused and, instead of a handshake, he ushered me purposefully into his office.

While my relationship with Schäuble warmed in the months that followed, the shunned hand symbolised a great deal that is wrong with Europe. It was symbolic proof that the half-century that had passed since my red blanket days, and those prison visits to Siemens’ man in Athens, had changed Europe to no end.

I have no idea what role Siemens played in securing my uncle’s release some time in 1972, two years before the regime’s collapse. What I do know is that my parents were convinced that the German company had played a decisive role. For that reason, every time I saw the word “Siemens” around our home, I felt a warm glow. It is the same kind of warmth I still feel when I hear the words Deutsche Welle. Indeed, back then, in the exciting, bleak years of my childhood, Germany featured in my imagination as a dear friend, a land of democrats that, under Chancellor Willy Brandt, did what was humanly possible to help Greeks rid ourselves of our ugly dictatorship.

Returning home to Athens from my first official visit to Berlin, I was struck by the irony. A continent that had been uniting under different languages and cultures was now divided by a common currency, the euro, and the awful centrifugal forces that it had unleashed throughout Europe.

A week after our first bilateral meeting in Berlin, Schäuble and I were to meet again across the long, rectangular table of the Eurogroup, the eurozone’s decision-making body, comprising the common currency’s finance ministers, plus the representatives of the troika – the ECB, the European Commission, and the International Monetary Fund. After I had recited our government’s plea for a substantial renegotiation of the so-called “Greek economic programme”, which had the troika’s fingerprints all over it, Dr Schäuble astounded me with a reply that should send shivers up the spine of every democrat: “Elections cannot be allowed to change an economic programme of a member state!” he said categorically.

During a break from that 10-hour Eurogroup meeting, in which I had struggled to reclaim some economic sovereignty on behalf of my battered parliament and our suffering people, another finance minister attempted to soothe me by saying: “Yanis, you must understand that no country can be sovereign today. Especially not a small and bankrupt one like yours.”
This line of argument is probably the most pernicious fallacy to have afflicted public debate in our modern liberal democracies. Indeed, I would go as far as to suggest that it may be the greatest threat to liberal democracy itself. Its true meaning is that sovereignty is passé unless you are the United States, China or, maybe, Putin’s Russia. In which case you might as well append your country to a transnational alliance of states where your parliament is reduced to a rubber stamp, and all authority is vested in the larger states.

Interestingly, this argument is not reserved for small, bankrupt countries such as Greece, trapped in a badly designed common currency area. This same noxious dictum is today being peddled in the UK – supposedly as a clinching argument in favour of the remain campaign. As a supporter of Britain remaining in the EU, nothing upsets me more than the enlistment to the “yes” cause of an argument that is as toxic as it is woolly.

The problem begins once the distinction between sovereignty and power is blurred. Sovereignty is about who decides legitimately on behalf of a people – whereas power is the capacity to impose these decisions on the outside world. Iceland is a tiny country. But to claim that Iceland’s sovereignty is illusory because it is too small to have much power is like arguing that a poor person with no political clout might as well give up her right to vote.

To put it slightly differently, small sovereign nations such as Iceland have choices to make within the broader constraints created for them by nature and by the rest of humanity. However limited these choices might be, Iceland’s citizens retain absolute authority to hold their elected officials accountable for the decisions they have reached (within the nation’s external constraints), and to strike down every piece of legislation those elected officials have decided upon in the past.

 An alliance of states, which is what the EU is, can of course come to mutually beneficial arrangements, such as a defensive military alliance against a common aggressor, coordination between police forces, open borders, an agreement to common industry standards, or the creation of a free-trade zone. But it can never legitimately strike down or overrule the sovereignty of one of its member states on the basis of the limited power it has been granted by the sovereign states that have agreed to participate in the alliance. There is no collective European sovereignty from which Brussels could draw the legitimate political authority to do so.

One may retort that the European Union’s democratic credentials are beyond reproach. The European Council comprises heads of governments, while Ecofin and the Eurogroup are the councils of finance ministers (of the whole EU and of the eurozone respectively). All these representatives are, of course, democratically elected. Moreover, there is the European parliament, elected by the citizens of the member states, which has the power to send proposed legislation back to the Brussels bureaucracy. But these arguments demonstrate how badly European appreciation of the founding principles of liberal democracy has been degraded. The critical error of such a defence is once more to confuse political authority with power.

A parliament is sovereign, even if its country is not particularly powerful, when it can dismiss the executive for having failed to fulfil the tasks assigned to it within the constraints of whatever power the executive and the parliament possess. Nothing like this exists in the EU today.

For while the members of the European Council and the Eurogroup of finance ministers are elected politicians, answerable, theoretically, to their respective national parliaments, the Council and the Eurogroup are themselves not answerable to any parliament, nor indeed to any voting citizens whatsoever.

Moreover, the Eurogroup, where most of Europe’s important economic decisions are taken, is a body that does not even exist in European law, that keeps no minutes of its procedures and insists its deliberations are confidential – that is, not to be shared with the citizens of Europe. It operates on the basis – in the words of Thucydides – that “strong do as they please while the weak suffer what they must”. It is a set-up designed to preclude any sovereignty derived from the people of Europe.

While opposing Schäuble’s logic on Greece in the Eurogroup and elsewhere, at the back of my mind there were two thoughts. First, as the finance minister of a bankrupt state, whose citizens demanded an end to a great depression that had been caused by a denial of our bankruptcy – the imposition of new unpayable loans, so payments could be made on old unpayable loans – I had a political and moral duty to say no to more “extend-and-pretend” loan agreements. My second thought was the lesson of Sophocles’s Antigone, who taught us that good women and men have a duty to contradict rules lacking political and moral legitimacy.

Political authority is the cement that keeps legislation together, and the sovereignty of the body politic that engenders the legislation is its foundation. Saying no to Schäuble and the troika was an essential defence of our right to sovereignty. Not just as Greeks but as Europeans.

How ironic that this should also have been the last missive I received from Siemens’ long forgotten man in Athens.


Supporters of a no vote in Greece’s referendum on its bailout, outside the Greek parliament in Athens last summer. Photograph: Nicolas Koutsokostas/Demotix/Corbis

Coming into the highest level of European decision-making from the academic world, where argument and reason are the norm, the most striking realisation was the absence of any meaningful debate. If this was not bad enough, there was an even more painful realisation: that this absence is considered natural – indeed, considered a virtue, and one that newcomers like myself should embrace, or face the consequences.

Prearranged communiques, prefabricated votes, a solid coalition of finance ministers around Schäuble that was impenetrable to rational debate; this was the order to the day and, more often, of the long, long night. Not once did I get the feeling that my interlocutors were at all interested in Greece’s economic recovery while we were discussing the economic policies that should be implemented in my country.

From the day I assumed office I strove to put together sensible, moderate proposals that would create common ground between my government, the troika of Greece’s lenders and Schäuble’s people. The idea was to go to Brussels, put to them our own blueprint for Greece’s recovery and then discuss with them their own ideas and objections to ours.

My own Athens-based team worked hard on this, together with experts from abroad, including Jeff Sachs of Columbia University, Thomas Meyer, a former chief economist at Deutsche Bank, Daniel Cohen and Matthieu Pigasse, leading lights of the French investment bank Lazard, the former US treasury secretary Larry Summers, and my personal friend Lord Lamont – not exactly a group of leftist recalcitrants.

Soon we had a fully-fledged plan, whose final version I co-authored with Jeff Sachs. It consisted of three chapters. One proposed smart debt operations that would make Greece’s public debt manageable again, while guaranteeing maximum returns to our creditors. The second chapter put forward a medium-term fiscal consolidation policy that would ensure the Greek government would never get into deficit again, while limiting our budget surplus targets to levels low enough to be credible and consistent with recovery. Finally, the third chapter outlined deep reforms to public and tax administration, product markets, and the restructure of a broken banking system as well as the creation a development bank to manage public assets at an arm’s length from politicians.

I am often asked: Why were these proposals of your ministry rejected? They were not. The Eurogroup and the troika did not have to reject them because they never allowed me to put them on the table. When I began speaking about them, they would look at me as if I were singing the Swedish national anthem. And behind the scenes they were exerting pressure on the Greek prime minister, Alexis Tsipras, to repress these proposals, insinuating that there would be no agreement unless we stuck to the troika’s failed programme.

What was really going on, of course, was that the troika could simply ignore our proposals, tell the world that I had nothing credible to offer them, let the negotiations fail, impose an indefinite bank holiday, and then force the prime minister to acquiesce on everything – including a massive new loan that is at least double the size Greece would have required under our proposals.

Tragically, despite our prime minister’s acceptance of the troika’s terms of surrender, and the loss of another year during which Greece’s great depression is deepening, the same process is unfolding now. Only a few days ago WikiLeaks revealed the troubling transcript of a telephone conversation involving the International Monetary Fund’s participants in the Greek drama. Listening to their discussion confirms that nothing has changed since I resigned last July.

Once I put it to Schäuble that we, as the elected representatives of a continent in crisis, can not defer to unelected bureaucrats; we have a duty to find common ground on the policies that affect people’s lives through direct dialogue. He replied that, in his perspective, what matters most is the respect of the existing “rules”. And since the rules can only be enforced by technocrats, I should talk to them.

Whenever I attempted to discuss rules that were clearly impossible to enforce, the standard reply was: “But these are the rules!” Once, while I was pushing hard for the argument, resulting from our team’s policy work, that primary budget surplus targets of 4.5% of Greece’s national income were impossible, and undesirable even from the creditors’ perspective, Schäuble looked at me and asked me, perhaps for the first and last time, an economic question. “So, what would you like that target to be?” At last, I rejoiced, a chance to have a serious discussion.

In an attempt to be as reasonable as possible, I replied: “For the target of the government budget primary surplus to be credible and realistic, it needs to be consistent with our overall policy mix. The budget surplus number, when added to the difference between savings and investment, must equal Greece’s current account balance. Which means that we can strive for a higher budget primary surplus if we also put in place a credible strategy for boosting investment and delivering more credit to exporters.

“So, before I can answer your question, Wolfgang, on what the primary surplus target ought to be, it is crucial that we link this number to our policies on non-performing bank loans (that impede credit to exporters) and investment flows (which are reduced when we set the primary budget surplus target too high, scaring investors off with the implicit threat of higher future taxes). What I can tell you at this point is that the optimal target cannot be more than 1.5%. But let’s have our people study this together.”

Schäuble’s response to my point, addressing the rest of the Eurogroup while avoiding my eyes, was remarkable: “The previous government has committed Greece to 4.5% primary surpluses. And a commitment is a commitment!”

A few hours later, the media was full of leaks from the Eurogroup, claiming that “the Greek finance minister infuriated his colleagues in the Eurogroup by subjecting them to an economics lecture”.


 
Wolfgang Schäuble and Yanis Varoufakis before a finance ministers’ meeting in Brussels in 2015 Photograph: Olivier Hoslet/EPA

There is a reason why I began this piece with the story of my Uncle Panayiotis. That reason is a question asked by a journalist towards the end of the press conference after my first meeting with Wolfgang Schäuble in Berlin.

The question was about Siemens and a scandal that had broken out some years earlier, when an investigation initiated in the US found evidence that a certain Michalis Christoforakos, a successor of Panayiotis, was actively pushing bribes into the hands of Greek politicians to secure government contracts on behalf of Siemens. Soon after the Greek authorities began investigating the matter, the gentleman absconded to Germany, where the courts prevented his extradition to Athens.

“Did you, minister,” asked the journalist, “impress upon your German colleague” – that would be Wolfgang Schäuble – “the German state’s obligation to help the Greek government snuff out corruption by extraditing Mr Christoforakos to Greece?” I tried to honour the question with a reasonable answer. “I am sure,” I said, “that the German authorities will understand the importance of assisting our troubled state in its struggle against corruption in Greece. I trust that my colleagues in Germany understand the importance of not being seen to have double standards anywhere in Europe.” Looking terribly put out, Schäuble mumbled that this was not a matter for his finance ministry.

On the aeroplane back to Athens, my mind travelled to the late 1970s. After his release from prison, Panayiotis returned to the helm of Siemens Greece. He was happy in that job, as he kept telling me, and proud of his work. Until he stopped being proud of it – so much so that he resigned in anger.

I remember asking him why he had resigned. His answer still resonates. He told me that he was facing pressure from his superiors in Germany to pay bribes to Greek politicians to ensure that Siemens would maintain its dominant position in Greece, getting the lion’s share of contracts related to the lucrative digitisation of the Greek telephone network.
There is a touching faith in the European north that Europe comprises ants and grasshoppers – and that all the frugal and cautious ants live in the north, while the spendthrift grasshoppers have congregated mysteriously in the south. The reality is much more muddled. A mighty network of corrupt practices has been laid over all of our countries – and the collapse of democratic checks and balances, due in part to our receding sovereignty, has helped hide it from public view.

As legitimate political authority retreats, we fall in the lap of brute force, inertia and demonisation of the weak. Indeed, by the end of June of 2015, the ECB had shut our banks, our government was divided, I resigned my ministry, and my prime minister capitulated to the troika.

The crushing of the Athens spring was a serious blow for an already wounded Greece. But it was also a wholesale defeat for the idea of a united, humanist, democratic Europe.

Our European Union is disintegrating. Should we accelerate the disintegration of a failed confederacy? If one insists that even small countries can retain their sovereignty, as I have done, does this mean Brexit is the obvious course? My answer is an emphatic “No!”

Here is why: if Britain and Greece were not already in the EU, they should most certainly stay out. But, once inside, it is crucial to consider the consequences of a decision to leave. Whether we like it or not, the European Union is our environment – and it has become a terribly unstable environment, which will disintegrate even if a small, depressed country like Greece leaves, let alone a major economy like Britain. Should the Greeks or the Brits care about the disintegration of an infuriating EU? Yes, of course we should care. And we should care very much because the disintegration of this frustrating alliance will create a vortex that will consume us all – a postmodern replay of the 1930s.

It is a major error to assume, whether you are a remain or a leave supporter, that the EU is something constant “out there” that you may or may not want to be part of. The EU’s very existence depends on Britain staying in. Greece and Britain are facing the same three options. The first two are represented aptly by the two warring factions within the Tory party: deference to Brussels and exit. They are equally calamitous options. Both lead to the same dystopian future: a Europe fit only for those who flourish in times of a great Depression – the xenophobes, the ultra-nationalists, the enemies of democratic sovereignty. The third option is the only one worth going for: staying in the EU to form a cross-border alliance of democrats, which Europeans failed to manage in the 1930s, but which our generation must now attempt to prevent history repeating itself.

This is precisely what some of us are working towards in creating DiEM25 – the Democracy in Europe Movement, with a view to conjuring up a democratic surge across Europe, a common European identity, an authentic European sovereignty, an internationalist bulwark against both submission to Brussels and hyper-nationalist reaction.

Is this not utopian? Of course it is! But not more so than the notion that the current EU can survive its anti-democratic hubris, and the gross incompetence fuelled by its unaccountability. Or the idea that British or Greek democracy can be revived in the bosom of a nation-state whose sovereignty will never be restored within a single market controlled by Brussels.

Just like in the early 1930s, Britain and Greece cannot escape Europe by building a mental or legislative wall behind which to hide. Either we band together to democratise – or we suffer the consequences of a pan-European nightmare that no border can keep out.