Q&A with Yanis Varoufakis

  1. 'Economics ... plays the role that theology used to in the middle ages'
  2. 62 percent referendum vote against austerity was a 'sophisticated response'
  3. Real estate development as engine of growth leaves only problems

Yanis Varoufakis served as Greece’s Finance Minister for less than seven months, when the country was negotiating its third, and final, bailout agreement. In that time, he negotiated strongly for an end to EU-imposed austerity. In combination with what was perceived as a “bad boy” attitude, he found a new level of fame. 

Before that he had spent most of his professional life lying low as an “economics professor, quietly writing obscure academic texts for years,” according to his Twitter biography. Until, in 2015, he was “thrust onto the public scene by Europe’s inane handling of an inevitable crisis.”

Now Varoufakis travels the world to spread his opinions about capitalism and is a prominent figure in DiEM25, a pan-European political movement. He spoke to WikiTribune on all things Greece, Europe and fame.

The article has been edited for length and clarity, and is part of WikiTribune’s round-up of 10 years of bailouts in Greece. The full transcript is here.

WikiTribune: You have talked about how economics and the economy are caught in a feedback loop, because the economists’ predictions are a very significant part of how economics eventually plays out … What do you think your responsibility is toward the Greek people and how do you think your relationship with them and your life has changed since your tenure as finance minister?

YV: Well, starting from the beginning, economics in our days in the era of capitalism plays the same role that theology used to in the middle ages. The narrative of politics and power was couched in terms of theological language in the middle ages, therefore theology had an impact on the affairs of state and the day to day life of people in the middle ages and vice-versa. Economic history, and political history, and military history affected the theological treaties and wars in exactly the same way.

The feedback loop, as you put it, between our ideas about the economy on one hand and the economy on the other. On to your question about my role, we are all [inaudible 00:02:48], we are all part of this great arena, where ideas clash as part and parcel of the greater political struggle. The political struggle has only one objective and that is the distribution of income and wealth between groups, different companies, different sectors, different social classes, and so on and so forth.

So, what is my responsibility in this? Firstly, and that was always a responsibility that I felt very strongly when I was just a professor and a lecturer all over the place. My responsibility as an economist is to bring to light the subterfuge of economic language, to expose the true meaning behind technocratic lingo, the purpose of which is to keep the demos out of democracy, to confuse other people so that they are not active participants in economic decisions that save our lives.

That is what I’ve always done since the 1980s, ’90s and so on. I continued to do once I entered political life, public life, as a finance minister and beyond …

‘History is written by political actors. We citizens empower them to do it’

WT: Considering exactly how obsessed with celebrities our society is — you know this first-hand, I’m sure, and you don’t particularly enjoy it — do you think that writing about the personalities in the eurozone facilitates people’s distractions from the real problems?

YV: No, not at all. History is written by political actors. We citizens empower them to do it, we vote for them, we tolerate them, we support them, we listen to them, we allow them to furnish opinions, and we are active participants in whether we like it or not. So giving my readers, my audience, a glimpse of what those particular individuals are doing behind closed doors has absolutely nothing to do with lifestyle issues, gossip or anything like that.

I went to great lengths in writing about them in the book to leave out any kind of sensationalism. There were lots of stories that could be very lurid and have a lot of journalistic cache, but I only included incidents and exchanges that pertained to the exercise of power on behalf of an electorate.

WT: You have said many times that you felt like you received a mandate from the Greek people. My question is what exactly did you think at the time the mandate was, and what do you think it is now, looking back?

YV: My interpretation of the mandate that we had is quite simple, really. The majority of those who voted no, [in the 2015 Greek referendum on the austerity agreement] what they said to us was, we do not want you to take us out of Europe. We certainly don’t want you to take us out of the European Union. But lo and behold, don’t you dare put your signature on the dotted line of an agreement that buys you unsustainable debts … non sustainable debts pushing us further into debt into another 30, 40 years. Don’t you dare do that. Stand your ground at least. And if part of being in Brussels, in Berlin, wherever, Frankfurt, decides that the price for not consenting to our permanent debt bondage is that they must throw us out of the euro, well let them do it. That’s my interpretation. It’s a very sophisticated response by the Greek public …

WT: Why do you think that it was a particularly sophisticated decision, considering what we’ve already discussed: people don’t really understand eurozone finance? 

YV: I talked to a lot of people and I was very surprised. Don’t succumb to them. Since 2010, they are pushing us deeper and deeper into a black hole from which there will be no escape. At the same time they were saying, no we do not want to get out of the euro. We do not want to get out of the EU. Now, if the price of staying in the euro is that we succumb to their ridiculous demands, then of course we want to exit. That is a very sophisticated point of view. People say to me outside of Greece, “but look, the Greeks were inconsistent, they want to stay in the EU and in the euro, and on the other hand, they didn’t want the austerity measures.”

I say there’s nothing inconsistent about that. The European Union was damaged by the Greco state. The European Union and the eurozone were heavily heavily undermined by the policies imposed upon Greece. The people have always understood that what the Troika was doing, the Dijsselbloems and the Schaubles were against the interests of the European Union, not against just the interests of Greece. And that is a pretty sophisticated position to have.

‘We got a lot of loans to pay off our oligarchy and also to sustain a lifestyle that was unsustainable’

They did not understand that there was a European central bank, they did not understand the minutiae of the memorandum of understanding, they did not understand target two accounting and quantitative easing but they didn’t need to understand it. They understood something very very simple, and that is that the Euro Zone was really badly constructed. The moment we entered the eurozone, oil prices went up magnificently and wages rose, not to the same extent, and that reduced the competitiveness of the economy.

Then we got a lot of loans to pay off our oligarchy and also to sustain a lifestyle that was unsustainable. They understood that this was a mistake. Most Greeks regretted that. They could see that the oligarchs were the ones that benefited the most and they didn’t really.

Then they saw that when the whole bubble burst, the eurozone was simply kicking the can down the road. It was pushing them further and further into insolvency while imposing austerity and shrinking their incomes, therefore making the insolvency even worse. People understood that. They did not understand the technicalities of it but they understood the very basic proposition, which is you cannot escape bankruptcy by means of more loans and austerity that shrinks incomes. A ten-year-old can understand that. I think that the people of Greece understood it. And they still understand it.

WT: How do you weigh policies such as the reduction on VAT on [Greek] islands? I understand how it makes sense from an economic perspective, but what about fairness?

YV: Nothing else makes sense. Let me put it this way. If you’re going to carry goods from Stuttgart to Cologne in Germany, the kind of transport costs that we incur are minimal compared to the cost of shipping stuff from Piraeus to Nisiros, from Nisiros to Kos and from Kos to Rhodes. Especially in the winter when you may have to wait for two weeks before a ship comes.

So the flow, the circular flow of domestic trade on the islands, is so difficult, so desperately expensive, and lumpy and dependent on the weather and dependent on ship owners – that are in important ways blackmailing Greek states for subsidies before they allow goods to be produced in Nisiros to be moved to Piraeus.

That’s the least we could do, there should actually be no VAT at all in those islands. And I’m not talking about Mykonos, but speaking about Mykonos, a point of information because Mykonos does not belong to Greece. It’s only in name part of Greece. The Mykonos economy is part of Manhattan in New York, London, and so on and so forth.

You know that when a house goes for sale in Mykonos, it is traded in New York or London, the money never comes to Greece. It goes from one bank account to another bank account abroad. Real estate development in Mykonos, Santorini and there are other examples, are irrelevant in this part of the Greek economy at all.

It’s a bit like the shipping magnates’ money. They may be Greek, they may have a nice house in Greek and spend their holidays here. But from an economic point of view they’re not in Greece. Their bank accounts are in London, the companies are actually in London, the Cayman Islands, Panama and so on. From the perspective of the Greek economy, they don’t exist. And let’s face it, Greece is never going to escape this crisis. Real estate development, whenever it has been the engine of growth has left battles, not any kind of benefit.

‘There is no investment, there is only speculation’

WT: Can you give me your take on where we are right now in 2018 just before the bailout ends. Where is the growth that predicted and we have seen coming from? 

YV: There is going to be no growth. This is a big lie. There will be no investment, there is no investment, there is only speculation. If you look at the money that comes in, and I’m not talking about Mykonos and Santorini, because as I said, they’re not part of the Greek economy in any sense of the word. There is absolutely no patient investor that is prepared to invest in the country that has already announced that after 2030, it is going to be spending two-thirds of its tax take on repaying creditors. No sensible investor ever does that.

This commitment to of government simply says after 2030, whoever is producing stuff in Greece is going to be taxed through the years. And that brings with it no prospects of growth. There’s only prospectors of speculation and the result of that is what we at DiEM25 call the process of desertification. Capital flees the country, productive capital not speculative capital. Human beings flee the country.

WT: How do you think Portugal and Ireland were different – politically, economically – in a way that allowed them to avoid another bailout agreement? Why is that now they are seeing more growth? In fact, Ireland, I think this figure is wrong, but according to the EU commission had 25 percent growth in 2015.

YV: It’s not wrong. It is not wrong. It is criminally fraudulent. It is true, and criminally fraudulent. Ireland is a floating tax haven. Facebook, Google, Amazon and Apple are booking their worldwide intellectual property profits into Ireland. That becomes part of Ireland’s GDP. Of course the money never goes to Ireland. The Irish never benefit from it, except for the few thousands employees.

The reason why the 25 percent figure struck you as very strange, is because it is very strange. When Apple booked billions of its worldwide profits as the revenues of its Irish subsidiaries so as not to pay tax anywhere in the world, suddenly, nominal Irish GDP shot through the skies. But that doesn’t mean that there was growth in Ireland right? Let’s not allow the accountants to fool us.

‘[Merkel] has been an appalling leader of Germany during the financial crisis and the Europe crisis’

WT: Moving into wider Europe, how do you judge Angela Merkel’s handling of the refugee crisis? What will Europe be without Merkel? It looks like she won’t be around for much longer…

YV: Angela Merkel’s instinctive reaction to let them in was laudable. I even wrote an article in the German newspaper that week saying that I feel proud of her, even though she’s been an appalling leader of Germany during the financial crisis and the Europe crisis.

Unfortunately, having a laudable humanistic approach to Syrian refugees only lasted two weeks. Within two weeks, it became clear to her that her own political party would overthrow her. Then she did what Merkel knows how to do very very well, which is to go with the flow, to rope other countries in to do her dirty work, like Austria closing down the western Balkans corridor. And then proceeded to sign an agreement with President Erdogan of Turkey that is contemptible, it’s scandalous, it is probably placing Europe in great disrepute. …

WT: Right now when you look at Europe, do you see it moving towards further unification or do you just see fragmentation?

YV: We are in the advanced stage of disintegration, one that is accelerating. The Italian government is monumentally important because it is hell-bent on speeding up the unification of Europe. Very cleverly from their perspective, using their misanthropic racist anti-migrant Trojan horse in order to create an alliance with the extreme right-wing government in Austria … with the rest of the Visegrad countries. They have every intention to undermine Italy’s membership of the eurozone. At the very same time, the Macron reforms have been in the water. Germany is the most insular mode because of events since 1945. …

WT: Do you think that we will ever … see a united Europe rise from these ashes?

YV: I’m not in the business of prediction, because I don’t believe that in politics, we don’t have the moral right to predict. This is not a spectator sport …

Politics is what happens when we all get together and do things. What will happen depends on what each one of us does. Therefore, we have all a collective responsibility to stop the constant slide of Europe into a post-modern 1950s abyss. In this task and in this process, we just don’t have the right to sit back and issue predictions. We have an obligation to act.

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