In de­fense of Varoufakis

Financial Mirror (Cyprus) - - FRONT PAGE -

From blam­ing him for the re­newed col­lapse of the Greek econ­omy, to ac­cus­ing him of il­le­gally plot­ting Greece’s exit from the eu­ro­zone, it has be­come fash­ion­able to dis­par­age Yanis Varoufakis, the coun­try’s for­mer fi­nance min­is­ter. While I have never met or spo­ken to him, I be­lieve that he is get­ting a bad rap (and in­creas­ingly so). In the process, at­ten­tion is be­ing di­verted away from the is­sues that are cen­tral to Greece’s abil­ity to re­cover and pros­per – whether it stays in the eu­ro­zone or de­cides to leave.

That is why it is im­por­tant to take note of the ideas that Varoufakis con­tin­ues to es­pouse. Greeks and oth­ers may fault him for pur­su­ing his agenda with too lit­tle po­litesse while in of­fice. But the essence of that agenda was – and re­mains – largely cor­rect.

Fol­low­ing an im­pres­sive elec­tion vic­tory by his Syriza party in Jan­uary, Greece’s prime min­is­ter, Alexis Tsipras, ap­pointed Varoufakis to lead the del­i­cate ne­go­ti­a­tions with the coun­try’s cred­i­tors. His man­date was to re­cast the re­la­tion­ship in two im­por­tant ways: ren­der its terms more amenable to eco­nomic growth and job cre­ation; and re­store bal­ance and dig­nity to the treat­ment of Greece by its Euro­pean part­ners and the In­ter­na­tional Mon­e­tary Fund.

These ob­jec­tives re­flected Greece’s frus­trat­ing and dis­ap­point­ing ex­pe­ri­ence un­der two pre­vi­ous bailout pack­ages ad­min­is­tered by “the in­sti­tu­tions” (the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank, and the IMF). In pur­su­ing them, Varoufakis felt em­pow­ered by the scale of Syriza’s elec­toral win and com­pelled by eco­nomic logic to press three is­sues that many econ­o­mists be­lieve must be ad­dressed if sus­tained growth is to be re­stored: less and more in­tel­li­gent aus­ter­ity; struc­tural re­forms that bet­ter meet so­cial ob­jec­tives; and debt re­duc­tion.

These is­sues re­main as rel­e­vant to­day, with Varoufakis out of gov­ern­ment, as they were when he was tire­lessly ad­vo­cat­ing for them dur­ing vis­its to Euro­pean cap­i­tals and in tense late-night ne­go­ti­a­tions in Brus­sels. In­deed, many observers view the agree­ment on a third bailout pro­gramme that Greece reached with its cred­i­tors – barely a week af­ter Varoufakis re­signed – as sim­ply more of the same. At best, the deal will bring a respite – one that is likely to prove both short and shal­low.

In part, the crit­i­cism of Varoufakis re­flects less the sub­stance of his pro­pos­als than the man­ner in which he ap­proached his in­ter­locu­tors. Es­chew­ing the tra­di­tional dual­ity of frank pri­vate dis­cus­sions and re­strained public com­men­tary, he ag­gres­sively ad­vo­cated his case openly and bluntly, and did so in an in­creas­ingly per­sonal man­ner.

Whether deemed naive or bel­liger­ent, this ap­proach un­de­ni­ably up­set and an­gered Euro­pean politi­cians. Rather than mod­i­fy­ing a pol­icy frame­work that had failed for five years to de­liver on its stated ob­jec­tives, they dug in their heels, even­tu­ally re­sort­ing to the eco­nomic equiv­a­lent of gun­boat diplo­macy. And they ev­i­dently also made it clear to Varoufakis’s boss, Tsipras, that the fu­ture of ne­go­ti­a­tions de­pended on him cast­ing aside his un­con­ven­tional min­is­ter – which he did, first by as­sign­ing some­one else to lead the ne­go­ti­a­tions and then by ap­point­ing a new fi­nance min­is­ter al­to­gether.

Now that he is out of of­fice, Varoufakis is be­ing blamed for much more than fail­ing to adapt his ap­proach to po­lit­i­cal re­al­ity. Some hold him re­spon­si­ble for the re­newed col­lapse of the Greek econ­omy, the un­prece­dented shut­ter­ing of the bank­ing sys­tem, and the i mpo­si­tion of sti­fling cap­i­tal con­trols. Oth­ers are call­ing for crim­i­nal in­ves­ti­ga­tions, char­ac­ter­is­ing the work he led on a Plan B (whereby Greece would in­tro­duce a new pay­ments sys­tem ei­ther in par­al­lel or in­stead of the euro), as tan­ta­mount to trea­son.

But, love him or hate him (and, it seems, very few peo­ple who have en­coun­tered him feel in­dif­fer­ent), Varoufakis was never the ar­biter of Greece’s fate. Yes, he should have adopted a more con­cil­ia­tory style and shown greater ap­pre­ci­a­tion for the norms of Euro­pean ne­go­ti­a­tions; and, yes, he over­es­ti­mated Greece’s bar­gain­ing power, wrongly as­sum­ing that press­ing the threat of a Grexit would com­pel his Euro­pean part­ners to re­con­sider their long-en­trenched po­si­tions. But, rel­a­tive to the macro sit­u­a­tion, these are mi­nor is­sues.

Varoufakis had no con­trol over the eco­nomic mess that Syriza in­her­ited when it came to power, in­clud­ing an un­em­ploy­ment rate hov­er­ing around 25% and youth job­less­ness that had been run­ning at more than 50% for a con­sid­er­able pe­riod. He could not in­flu­ence in any mean­ing­ful man­ner the na­tional nar­ra­tives that had sunk deep roots in other Euro­pean coun­tries and thus un­der­mined those coun­tries’ abil­ity to adapt. He could not counter the view among some of the re­gion’s politi­cians that suc­cess for Syriza would em­bolden and strengthen other non­tra­di­tional par­ties around Europe.

It also would have been ir­re­spon­si­ble for Varoufakis not to work be­hind closed doors on a Plan B. Af­ter all, Greece’s eu­ro­zone des­tiny largely was – and re­mains – in the hands of oth­ers (par­tic­u­larly Ger­many, the ECB, and the IMF). And it is yet to be es­tab­lished whether Varoufakis broke any laws in the way he and his col­leagues worked on their con­tin­gency plan.

When push came to shove, Varoufakis faced the dif­fi­cult choice of go­ing along with more of the same, de­spite know­ing that it would fail, or try­ing to pivot to a new ap­proach. He bravely opted for the lat­ter. While his brash style un­der­mined out­comes, it would be a real tragedy to lose sight of his ar­gu­ments (which have been made by many oth­ers as well).

If Greece is to have any re­al­is­tic chance of long-term eco­nomic re­cov­ery and meet­ing its cit­i­zens’ le­git­i­mate as­pi­ra­tions, pol­i­cy­mak­ers must re­cast the coun­try’s aus­ter­ity pro­gramme, cou­ple pro-growth re­forms with greater so­cial jus­tice, and se­cure ad­di­tional debt re­lief. And if Greece is to re­main in the eu­ro­zone (still a big if, even af­ter the latest agree­ment), it must not only earn its peers’ re­spect; it must be treated with greater re­spect by them as well.

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