GEORGE VLACHONIKOLIS
Varoufakis is the former Greek finance minister (January to August 2015) who became infamous for his unconventional style when he led his country’s debt negotiations with the European establishment. He is, it is fair to say, a very polarizing figure: Like Russell Brand, he is loquacious and loves peacocking. Like Donald Trump, he is arrogant and narcissistic. But he is also a well-regarded economics professor and self-confessed Marxist.
Hence, we are obliged to pay attention and Adults in the Room does not disappoint. It is a fascinating insight on a host of levels: From an international politics point of view, it really challenges those old political debates of who is in charge of a country. And what are the real intentions during political decision-making?
Varoufakis begins his story in a Washington meeting with Larry Summers, the former secretary of the treasury. Summers asks him point blank: Do you want to be on the inside or the outside? “Outsiders prioritise their freedom to speak their version of the truth,” Summers explained, “The price is that they are ignored by the insiders, who make the important decisions.”
With this, Varoufakis sets the narrative arc for his book: He is not an insider by nature, but he was prepared to go along with the pretence of being one as long as he could to get the job of restructuring Greece’s debt done. Nevertheless, Adults in the Room is the ultimate outsider’s book. It blows open the closed doors that hide the political mechanisms of “democratic” decision-making in Europe which – as Varoufakis contends – gives no consideration whatsoever to the needs and wants of the demos. Varoufakis is certainly speaking his version of the truth, but one wonders if, in so doing, he has lost any opportunity to be an insider (and thus a decision-maker) ever again.
The first chapter illustrates the insider-outsider dichotomy perfectly. In the aftermath of the 2008 financial crisis, the Greek debt crisis started to unfold. In two deals in 2010 and 2012, Greece received €240 billion in bailout money from the European Commission, European Central Bank, and International Monetary Fund (collectively known as the troika). It is Varoufakis’ claim, however, that these first two bailouts were all about protecting French and German banks rather than saving Greece from economic ruin. In fact, he argues that both the German Chancellor Angela Merkel and French President Nicolas Sarkozy knew this, and understood it would be a disaster for Greece. Varoufakis further alleges that Dominic Strauss-Kahn (then head of the International Monetary Fund) persuaded his own institution to turn a blind eye to its most sacred rule: Never lend to a bankrupt state before its debt has been restructured. Why? Varoufakis claims that Strauss-Kahn had his eyes firmly on the French presidential race in two years’ time and it would not do to anger French banks. In short, Varoufakis paints a picture of a political process which bears no real relation to the needs and wants of the people but rather reflects the interests of the rich and powerful. This is but the first example in the book of insider political jousting that would go on to steam-roll any attempt to seriously analyse the economics of the Greek debt crisis.
Varoufakis really opens the black box of European politics when he recounts becoming finance minister in 2015. He recalls being told in his first meeting with European creditors that there was no negotiating to be done and that failure to toe the line would mean Greece’s expulsion from the Eurozone. That meeting eventually ended with an infamous press conference in which Varoufakis was accused of failing to calm the markets and thereby “destroying the troika.” The exchange even inspired a YouTube rap video.
As the crisis plunged further into the abyss, the Greek government was told to sign a memorandum that would essentially keep the debt conditions of austerity firmly in place. Varoufakis’ claims that, in private, German Finance Minister Dr. Wolfgang Shauble admitted that the memorandum was “bad for [Greek] growth. It will not allow you to recover.” Shauble is said to have explained that he still wanted to press ahead with the deal because it would the rest of the Eurozone a lesson: “[T]he euro must accept discipline.”
The dialogues between Varoufakis and Schauble are a remarkable example of how discussions between two finance ministers can end up going well beyond the normal boundaries of their authorities. It is interesting to note that both Varoufakis and Schauble saw their role as guiding their “muddling” leaders. Both seem implicitly to have been arguing for government by economic technocracy.
In some ways, Varoufakis is like any economist – looking for the answer in costs and benefits. In his own words:
[T]he motives of the troika and the domestic oligarchy are obvious. Debt is creditor power and unsustainable debt gives creditors exorbitant power.
For him, the Greek debt crisis was little more than a power-play. The bailouts were never about Greece. Rather, they were about maintaining power over Greece and, with an impending Grexit crisis threatening to destabilise the Euro area, maintaining power over other indebted European countries such as Portugal, Italy, Ireland, and Spain.
From a national security point of view, Varoufakis’ book raises some alarming questions. Desperate times clearly call for desperate measures and Adults in the Room shows how an indebted country will look for ways to “breathe,” even if it means securing money from countries that makes others nervous.
In the depth of the crisis, Greece was scrambling around for money to stave off bankruptcy and keep its banks open. Varoufakis explains how he went to great lengths to get a Chinese investment deal by offering opportunities in the shipyards and railways. Beijing passed up the offer. Then-Prime Minister Alexis Tsipras actually paid a state visit to Moscow in order to butter up President Vladimir Putin for his petrodollars. Fortunately for European security concerns, Putin also passed. Had either of these decisions gone the other way, Greece might have had the financial ability to leave the European Union without fear of insolvency. One wonders then whether a key NATO ally would come under greater political influence from their new lenders and also whether it would have paved the way for other indebted countries to follow.
Overall, Adults in the Room offers its readers a unique insight into the decision-making process in Europe at a critical time and into the state of European democracy as a whole. Given some of the claims being made, the recriminations will surely follow. But, in truth, the knives have been out for Varoufakis since his resignation in mid-2015. He has already been labelled as a “Marxist clown” and a “national traitor.” This isn’t a total surprise. This is, after all, the price that one must pay must for being an outsider and defying the Establishment. And, ultimately, this is the nub of Adults in the Room: It is a book about the personal interaction between the career politicians and suited automatons who were challenged by a defiant outsider who refused to play their “inside game.” This is no better illustrated than when Varoufakis was emailed by a European central banker who tried to assert his authority by claiming Greece could be asked to repay its loans at any time. Varoufakis simply replied with two ancient words: μολὼν λαβέ (“Come and get them”). This was the same the defiant response that King Leonides gave to the Persian Army at the Gates of Thermoplyae. Varoufakis – defiant to the end.
George Vlachonikolis is the Head of Economics at the Headington School, Oxford. He is also the author of the soon-to-be-published Tears of Austerity – a Greek tragi-comedy based on the 2015 troika negotiations.
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