Yanis Varoufakis depicts a greek tragedy

In his latest book, Greece's former finance minister attacks the EU for its handling of the bailout crisis. Whatever you think of him, this is a sad tale.

by Howard Davies
Last Updated: 06 Jul 2017

In the institutions of the European Union, and among those who observe them closely, Yanis Varoufakis is a man-sized jar of Marmite. Some commentators cannot get enough of him. They praise his clear-sighted analysis of the economic incoherence of the Eurozone, and particularly its attitude to the Greek sovereign debt problem. Martin Wolf, Jeffrey Sachs, Norman Lamont and Joe Stiglitz (a group of unlikely bedfellows) are all fans.

Others see him as a giant wrecking ball, who delayed an agreement on extending Greece's debt, at huge cost to its economy. Klaus Regling, the head of the European Stability Mechanism, the agency now empowered to lend to distressed EU countries and provide capital to their banks, regards him as a destructive force. He argues that Varoufakis cost his country EUR100bn - calculated as the value of the economic growth lost from his period of posturing as finance minister. Yannis Stournaras, the current governor of the Greek central bank, takes a similar view, but thinks Regling is over-egging his sums, and puts the cost at only EUR86bn. In a recent speech at the LSE, he described the achievements of Varoufakis's term of office as being 'a change of name from "the troika" to "the institutions" and their move from ministerial buildings to the Hilton'. The chief economist of Berenberg bank, Holger Schmieding, says he 'drove capital worth one-third of Greek GDP out of the country in six months and virtually destroyed the banking system'.

How to determine which assessment is nearer the mark? Difficult. You pays your drachmae and you takes your choice.

Varoufakis himself, even after his resignation, is in no doubt that he was right all along, and will be proved so in the end. He is no shrinking violet. He famously made a bit of a Greek charlie of himself by doing a Paris Match photoshoot at the peak of the crisis, showing him and his installation artist partner at home in their elegant apartment overlooking the Acropolis, drinking wine and eating an elegant supper.

You will not find that episode in Adults in the Room. Instead you will find a long and over-detailed apologia pro his 162-day vita as finance minister, including apparently verbatim records of his meetings with Wolfgang Schaeuble and other assorted wicked Germans and Dutchmen in horns, with whom he vainly attempted to negotiate a new deal for Greece, which would allow its economy to breathe again. In among the self-justifications, there is an important and valid argument. The terms imposed on Greece as a condition of their bailouts are very tough and probably unrealistic. They require Greece to run a large primary surplus into the indefinite future, something no developed country has achieved. The 'extend and pretend' approach to Greek government debt is not sustainable. Greece will never repay its debts in full, but the Eurozone is what it is. There is no debt mutualisation, Greece joined the single currency with its eyes open, and borrowed incontinently when times were good. Remember the Olympics? Varoufakis barely mentions these antecedents, which weigh heavily in the minds of German politicians.

So the only deals on offer when he came into office were Grexit, which he did not want, or something like the one they have, perhaps somewhat more generous if Syriza had been more forthcoming on economic reform, and prepared to launch a major privatisation programme. Varoufakis was keen on collecting taxes from the rich, which would be a good start, but was unable to convince the Commission, the IMF and the ECB that that would be enough. His game-theoretical approach to exposing the intellectual incoherence of his opposite numbers in the end yielded little or nothing, and the economy, which had shown signs of picking up at the end of 2014, drifted back into recession. The figures cited for the costs of the exercise look far too high to me, but it was undoubtedly a setback. Does this matter? To the Greeks, certainly, many of whom are unemployed and impoverished, it matters a great deal. But to argue, as Varoufakis does, that the Greek tragedy has had serious consequences for the UK, radically overstates the case. He says that 'having observed the EU's callous disregard for democracy in Greece, many supporters of the Labour Party in Britain then went on to vote for Brexit'. I wonder. There was a strand of argument advanced by the more intellectually upmarket Brexiters about the flaws in the Eurozone, but I doubt it took many tricks in Skegness. I do not recall the evil troika featuring largely in our debate.

So it is a sad story, but it is a Greek one. The Germans have not won many friends in Attica, but arguably they were simply following the age-old precept: 'beware Greeks asking for gifts'.

Howard Davies is chairman of RBS and MT's diarist

Adults in the Room: My Battle with Europe's Deep Establishment by Yanis Varoufakis is published by Bodley Head, £20

Image: Klovovi/Flickr

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