Wednesday, July 15, 2015

Now Vindicated by the IMF, Former Greek FinMin, Yanis Varoufakis Weighs In and He's Not Pulling Any Punches

He was the burr under Angela Merkel's saddle until the Troika said he had to go. Now Yanis Varoufakis has given an interview to Britain's New Statesman, the first since he's been truly free to speak his mind.

Varoufakis, who resigned a week ago, has been criticised for not signing an agreement sooner, but he said the deal that Greece was offered was not made in good faith – or even one that the Troika wanted completed. In an hour-long telephone interview with the New Statesman, he called the creditors’ proposals – those agreed to by the Athens government on Friday night, which now seem somehow generous – “absolutely impossible, totally non-viable and toxic …[they were] the kind of proposals you present to another side when you don’t want an agreement.”

...In Varoufakis’s account, the Troika never genuinely negotiated during his five months as finance minister. He argued that Alexis Tsipras’s Syriza government was elected to renegotiate an austerity programme that had clearly failed; over the past five years it has put a quarter of Greeks out of work, and created the worst depression anywhere in the developed world since the 1930s. But he thinks that Greece’s creditors simply led him on.

...Varoufakis said that Schäuble, Germany’s finance minister and the architect of the deals Greece signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not discussing the programme – this was accepted by the previous [Greek] government and we can’t possibly allow an election to change anything.

“So at that point I said ‘Well perhaps we should simply not hold elections anymore for indebted countries’, and there was no answer. The only interpretation I can give [of their view] is, ‘Yes, that would be a good idea, but it would be difficult. So you either sign on the dotted line or you are out.’”

...“It’s not that it didn’t go down well – there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.”

...Varoufakis was reluctant to name individuals, but added that the governments that might have been expected to be the most sympathetic towards Greece were actually their “most energetic enemies”. He said that the “greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”. “Were we to succeed in negotiating a better deal, that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.

...The second phase was they’d ask us what we intended to do on VAT. They would then reject our proposal but wouldn’t come up with a proposal of their own. And then, before we would get a chance to agree on VAT, they would shift to another issue, like privatisation. They would ask what we want to do about privatisation: we put something forward, they would reject it. Then they’d move onto another topic, like pensions, from there to product markets, from there to labour relations. … It was like a cat chasing its own tail.”

His conclusion was succinct. “We were set up.”

And he was adamant about who is responsible. I asked whether German attitudes control the outlook of the Eurogroup. Varoufakis went further. “Oh completely and utterly. Not attitudes – the finance minister of Germany. It is all like a very well-tuned orchestra and he is the director.

Tsipras folds and betrays his own people's referendum.

...Days before Varoufakis’s resignation on 6 July, when Tsipras called the referendum on the Eurogroup’s belated and effectively unchanged offer, the Eurogroup issued a communiqué without Greek consent. This was against Eurozone convention. The move was quietly criticised by some in the press before being overshadowed by the build-up to the referendum, but Varoufakis considered it pivotal.

WhenJeroen Dijsselbloem, the European Council President, tried to issue the communiqué without him, Varoufakis consulted Eurogroup clerks – could Dijsselbloem exclude a member state? The meeting was briefly halted. After a handful of calls, a lawyer turned to him and said, “Well, the Eurogroup does not exist in law, there is no treaty which has convened this group.”

“So,” Varoufakis said, “What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential. No citizen ever knows what is said within . . . These are decisions of almost life and death, and no member has to answer to anybody.”

How Varoufakis was driven out of office.

He said he spent the past month warning the Greek cabinet that the ECB would close Greece’s banks to force a deal. When they did, he was prepared to do three things: issue euro-denominated IOUs; apply a “haircut” to the bonds Greek issued to the ECB in 2012, reducing Greece’s debt; and seize control of the Bank of Greece from the ECB.

None of the moves would constitute a Grexit but they would have threatened it. Varoufakis was confident that Greece could not be expelled by the Eurogroup; there is no legal provision for such a move. But only by making Grexit possible could Greece win a better deal. And Varoufakis thought the referendum offered Syriza the mandate they needed to strike with such bold moves – or at least to announce them.

He hinted at this plan on the eve of the referendum, and reports later suggested this was what cost him his job. He offered a clearer explanation.

As the crowds were celebrating on Sunday night in Syntagma Square, Syriza’s six-strong inner cabinet held a critical vote. By four votes to two, Varoufakis failed to win support for his plan, and couldn’t convince Tsipras. He had wanted to enact his “triptych” of measures earlier in the week, when the ECB first forced Greek banks to shut. Sunday night was his final attempt. When he lost his departure was inevitable.

“That very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan]. Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.”

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