The Greek canary in the European coalmine: An interview with Yanis Varoufakis

Over at Ricochet, I’ve transcribed my podcast interview with Yanis Varoufakis, economist and Syriza candidate in tomorrow’s Greek elections. With Syriza looking to get the most votes and possibly an outright parliamentary majority, I asked Yanis about the Greek economy, Syriza’s economic plans, his views on what these mean for Europe and how we can expect Greece to take its place in Europe come Monday. Here is the interview in full.

Michal Rozworski: I know this is an enormous topic but what is the current economic situation on the eve of the elections in Greece? Can you give a kind of snapshot?

Yanis Varoufakis: In brief, everyone owes to everyone, and no one can pay. The banks are bankrupt; they owe money to the state, to each other, to foreign banks. Citizens owe money to the banks and owe money to the state. The state owes money to everyone. So we have a triple insolvency: bankrupt banks, a bankrupt state and a bankrupt private sector. There are of course pockets, like everywhere, within society of people who are really well off. They have money in banks in Switzerland, in the city of London, on Wall Street, in Frankfurt, and even some money in the Greek banks.

But the overall situation is that — even though in the last year or so there’s been a small rebound, not in terms of income but in terms of expenditure — the economy is quite clearly still in a downward spiral that is filling everyone’s soul with negative expectations.

It’s interesting you mention that slight rebound. What I found interesting is that there seems to be a bit of a reversal of 2012. So, on the one hand, now some of the economic indicators have improved in minimum ways, if we can even use that word, but on the other hand, the population seems to be more immune to the fear-mongering on behalf of Greek and European elites against the left. What’s changed? What’s led to Syriza actually having a chance of gaining a majority in parliament? 

Well, two things mainly. Firstly, Syriza has matured over the last two years; there is no doubt about that. So it has inspired more confidence in the electorate. Secondly, and perhaps even more significantly, now it is abundantly clear that the whole narrative of a “Greek-covery” — if you remember a year ago or so — was just utterly bogus. It was a piece of propaganda, a bubble that burst and Greeks are sick and tired.…

Look, I was in a taxi this morning. The taxi driver said to me — he recognized me as a candidate — “Look, Greeks fall into two categories. There are those who are really scared of losing what little they have left. The rest don’t give a damn; they just want to vote in a way that states it in a way for everyone outside of Greece to see that we’re not interested in this vicious cycle anymore.”

Let’s move to the future a bit. As you mentioned, you’re a candidate for Syriza in the elections. Let’s say Syriza wins the elections with a majority. What would be the most important tasks facing a hypothetical finance minister in a Syriza government in the first few months or year? 

There are three things. Firstly, to conduct thorough, tough negotiations with our European partners, the IMF, the European Central Banks in order to revise, radically, the illogicality of our loan agreement with our creditors. Task number one is renegotiation to put it bluntly.

Task number two is to address, somehow, the humanitarian crisis by spending what’s really a small amount of money feeding the hungry, making sure that children don’t have to work by candlelight at night doing their homework and looking after the weakest and more innocent victims of this crisis. That’s the second task: the humanitarian crisis in brief.

And thirdly, to ensure from a fiscal point of view that the revenues of the state do not collapse as a result of some kind of strike by those who have the capacity to pay taxes.

How realistic is this third point? What kind of pressure can you expect to be brought to bear and what kind of means can be used by those who, as you say, have the capacity to limit revenue collection and stop this program?

We are already in receipt of a number of threats from the oligarchs, who feel extremely uneasy about the prospect of us forming a government. We receive threats daily at the level of the leadership, at the level of us personally, even threats to our families. There is no doubt that the kleptocracy is going to fight tooth and nail against an incoming Syriza government, whose purpose it is to enact proper reforms.

By proper reforms I mean to smash this triangle of sin between the contractors — the state’s contractors; the bankers — the bankrupt bankers, who live off money given to them by the state and borrowed by the hapless taxpayer; and, thirdly, the mass media — the television, radio and newspaper networks, who are all bankrupt and who are being kept alive in a zombified state by the zombified banks, who in turn take their money from the bailout loans. So this triangle of sin is out there to get us, and we are going to have to wage a war against them come Monday morning if we win this election.

What can the situation in Greece now do for Europe? What are its broader implications, especially for the economic policies that we’ve seen implemented across Europe, not just in Greece but also at the level of European institutions? 

Let me remind you that Greece was the canary in the mine. In 2010, we were the weakest link in the chain. Even if we didn’t exist in the Eurozone, someone else would have taken our place because this was a systemic crisis that Europe steadfastly refused to deal with as such.

The social costs of this denial throughout Europe have been enormous and actually growing. So it doesn’t actually matter whether it is a Greek prime minister, an Irish prime minister or a French prime minister who stands up at a European Council meeting or another Europe group meeting and says, “No, we are not going to feed unsustainable debt with unsustainable debt on a condition of austerity that reduces the income from which these debts will be repaid.”

We need to have a rational discussion in Europe that deals with the problem that we constructed the Eurozone, a monetary union that was incapable of addressing the financial crisis of 2008/2009. Our denial after that, in 2010 onwards, took the form of the Greek memorandum — the Greek bailout number one — and then became the template that was applied to all the other states in the Eurozone. That approach has failed demonstrably.

Let’s have a discussion right from the beginning, instead of insisting that we have had agreements over the last years that now need to be implemented. They can’t be implemented any more than the Versailles Treaty could be implemented after 1919.

You’re still talking about agreements. At this point, does the future of Greece lie within or outside the euro and the Eurozone? 

We’re determined that we have a place in Europe and that we are going to seek policies that are good for Europe as well as for Greece. We believe that the fragmentation of the Eurozone or the European Union — whatever one might think about the history or the rationality of the design of the European Union and the Eurozone — would be absolutely detrimental for every European nation and indeed for the global economy as a whole.

Do not forget that the global economy has not really managed to climb out of the hole that the financial sector’s implosion caused in 2008. Europe is one third of the global economy and it is stuttering. It is faltering. It is exporting deflation to the rest of the world. China is slowing down; the United States is doing what it can to remain in a kind of quasi-growth situation. And Europe is perfectly capable of inflicting major damage upon the global economy. We’ve done it before: twice in the last hundred years, Europe has done a great deal of damage to the rest of the world.

It is about time that we stopped doing this, and Greece on the 25th of January, this coming Sunday, presents a glimmer of hope that the conversation can begin. We are not going to dictate to the rest of Europe what needs to be done. All we can do is open a small door through which the rest of our colleagues in Europe can pass into a conference room where we can have a decent conversation: the kind of conversation that we have refused to have so far.