Greece's Former Finance Minister Yanis Varoufakis on the Danger & Irrationality of European Austerity

The following is an excerpt from the new book And the Weak Must Suffer What They Must? by Yanis Varoufakis (Nation Books, 2016): 


Europeans have taken far too long to understand that 2008 was our version of the tragic generation’s 1929. Wall Street was the epicenter on both occasions and, once finance melted, credit evaporated and paper assets went up in smoke, the common currency began to unravel. Before long the working class in one nation turned against the working classes of all other nations, looking to protectionism for succor. In 1929 protectionism took the form of devaluing one’s currency vis-à-vis others. As we shall see, in 2010 it took the form of devaluing one’s labor vis-à-vis others.

Unremarkably, 2008 began a depressingly similar chain reaction. It was not long before underpaid German workers hated the Greeks and underemployed Greek workers hated the Germans. With the eurozone buffeted by massive economic downturn, the whole world watched eagerly to see how this postmodern version of the 1930s would pan out. They are still watching.

“A debt is a debt is a debt!” was what another high official of the Federal Republic of Germany told me during that first official visit to Berlin.

Upon hearing this, it was impossible not to be reminded of something Manolis Glezos, Greece’s symbol of the resistance against the Nazis, wrote in a book in 2012 entitled Even If It Were a Single Deutsche Mark. It carried the same message as the German official’s pronouncement. Every deutsche mark of war reparations owed to Greece must be repaid. Even one deutsche mark that is repaid can help undo a gross injustice. Just as in Germany, once the euro crisis erupted and it was considered self-evident that the Greeks were insufferable debtors, so too in Greece, Germany’s unpaid wartime debts may remain forever unforgiven.

The last thing I needed, as I was attempting to establish common ground with Germany’s finance ministry, was this clash of moralizing narratives. Ethical issues are central to bringing peoples together. Closure must be achieved so as to heal festering wounds, as South Africa’s Truth and Reconciliation Commission so vividly demonstrated. But when it comes to managing modern finance and a complicated, ill-designed monetary union, biblical economics is an insidious enemy. A debt may be a debt but an unpayable debt does not get paid unless it is sensibly restructured. Neither German teenagers in 1953—when the United States convened a conference in London to “write down” (meaning simply to reduce without payment) Germany’s public debt to, among other nations, Greece—nor Greek teenagers in 2010 deserved a life of misery because of unpayable debts amassed by a previous generation.

My argument in response was that restructuring Greece’s public debt was essential for creating the growth spurt necessary to help us repay our debts; otherwise Greece would have nothing with which to pay. The proposal went down like a lead balloon.

Upon hearing his statement I thought, “Yikes! Using these meetings to bring about a rapprochement will not be easy.” A tale of two debts was turning into a morality play with no end. Europe is an ancient continent and our debts to each other stretch decades, centuries and millennia into the past. Counting them vindictively, and pointing moralizing fingers at each other, was precisely what we did not need in the midst of an economic crisis in which large new debt, piled upon mountains of legacy liabilities, was a mere by-product.

Capitalism, lest we forget, flourished only after debt was demoralized. Debt prisons had to be replaced by limited liability, and finance had to ride roughshod over any guilty feelings debtors were encumbered with, before “the rapid improvement of all instruments of production . . . [and] the immensely facilitated means of communication” could draw “all, even the most barbarian, nations into civilization”—to quote from none other than Karl Marx.

Ghosts of a Common Past

On the day our government was sworn in, in late January 2015, Prime Minister Alexis Tsipras laid a wreath at a memorial commemorating the execution of Greek patriots by the Nazis. The international press considered this a symbolic gesture of defiance toward Berlin and insinuated that our government was attempting to draw parallels between the Third Reich and a German eurozone imposing a new iron rule on Greece. This didn’t help my job of making friends in Berlin, especially in the ultra-austere Federal Ministry of Finance.

Convinced that it was essential to emphasize that our government was not drawing any parallels between Nazi Germany and today’s Federal Republic, I scripted the following text, which became part of my statement in the joint press conference with Dr. Schäuble. It was meant as an olive branch. As finance minister, in a government facing emergency circumstances caused by a savage debt-deflationary crisis, I feel that the German nation is the one that can understand us Greeks better than anyone else. No one understands better than the people of this land how a severely depressed economy, combined with ritual national humiliation and unending hopelessness, can hatch the serpent’s egg within one’s society. When I return home tonight, I shall find myself in a parliament in which the third-largest party is a Nazi one.

When our prime minister laid a wreath at an iconic memorial site in Athens immediately after his swearing in, that was an act of defiance against the resurgence of Nazism. Germany can be proud of the fact that Nazism has been eradicated here. But it is one of history’s cruel ironies that Nazism is rearing its ugly head in Greece, a country that put up such a fine struggle against it.

We need the people of Germany to help us in the struggle against misanthropy. We need our friends in this country to remain steadfast in Europe’s postwar project; that is, never again to allow a 1930s-like depression to divide proud European nations. We shall do our duty in this regard. And I am convinced that so will our European partners.

Call it naïveté, but I confess I expected a positive response to my short speech. Instead there was a deafening silence. The next day, the German press was lambasting me for daring to mention the Nazis in the Federal Ministry of Finance while much of the Greek press were celebrating me for having called Dr. Schäuble a Nazi. Reading these divergent reactions back in Athens, I allowed myself a brief moment of despair.

Incensed by Europe’s introversion and the ease with which we turned against each other, in a bid to let off some steam I decided to blame it all on another Greek: Aesop. For his simplistic fable was evidently casting a long shadow on the truth, turning one proud European nation against another. Under his influence, foes were made of partners, every European risked ending up a loser and the only winners lurking in the shadows were racists and those who never made their peace with European democracy.

I aim to provide another narrative in the hope that it can do the opposite. It’s not too late. We still have everything to lose.

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