Varoufakis Apologia: “The Adults in the Room”

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FILE - Greece's former Finance Minister Yanis Varoufakis, presents his new party MeRA25 or European Realist Disobedience Front, during a press conference in Athens, Monday, March 26, 2018. (AP Photo/Petros Giannakouris)

Yanis Varoufakis, the short-lived but blindingly bright shooting star, the first finance minister of Alexis Tsipras, brought more drama to the Greek political scene than any of the long line of political hacks that preceded and followed him since the equally dramatic(but more destructive) Andreas Papandreou.

Adults in the Room,Varoufakis’ first-person history of the2015 Greek debt drama, that nail-biting sequence of eventsthat began with Varoufakis as finance minister leading the Tsipras government into a riveting confrontation with the “troika” – the alliance of the EU, the European Central Bank (ECB) and the IMF – interrupted by a referendum which saw the Greek people overwhelmingly reject the troika’s terms andculminated in Tsipras’ humiliating surrender to the troika despite his referendum victory.

The objective facts leading up to the 2015 SYRIZA victory need a brief recap.A combination of cheap ECB interest rates, corrupt collusion between Greek politicians, European finance and State-sponsored bribes by exporters led to the Greek state assuming crushing debt levels. In 2010, then-Prime Minister George Papandreou informed his Eurozone partners that the Greek government would default on its next debt payments threatening to destabilize the Eurozone. The EU leadership demand Greece repay the loans under draconian conditions. Papandreou, sensing that Greece still had leverage, announced he must hold a referendum before agreeing to these terms. In the most notorious act of infamy in 21st century Greece, Evangelos Venizelos, sensing the opportunity to take over the PASOK party stabbed Papandreou in the back and undermined the proposed referendum.That enabled the Eurozone leadership to put Greece into the equivalent of Chapter 11 bankruptcy (without using the term), appoint trustees (the “troika”) who took control of the Greek State’s finances and bailed out their own banks by loaning even more money to Greece.

Papandreou and his successors accepted this arrangement, euphemistically named the Memorandum of Understanding (MOU), and agreed to impose a crushing tax and austerity regime that put Greece into a Depression deeper than that of the United States following 1929.By 2015, the Greek people realized that they were well and truly screwed with no way out under the current arrangements. Seeing defeat in the polls the troika and then Prime Minister Samaras even claimed, falsely, that Greece was about to get of out bankruptcy.The electorate knew better, soundly smashed the traditional parties and elected an upstart Populist Alexis Tsipras leading a party known as the Federation of the Radical Left (SYRIZA).

Varoufakis wrote “Adults in the Room”as a first-person account. He recordsalmost every meeting in quotations so detailed that the reader might well ask if Varoufakishas a memory that would shame an elephant.Varoufakis describes himself as a principled believer in the European project and a supporter of the EU as well as a deeply patriotic Greek. While stating the obvious that Greece should never have sought Eurozone membership nor should the Europeans have agreed, he argues that Greece, once in, has no choice but to find a way to stay in while finding a path to economic growth.His team (largely Americans) drafted a series of proposals that he still believes would have accomplished both.He built an alternative economic model (superior to the troika’s model),including a complicated series of debt swaps to restructure the Greek banking system and a parallel payments system that would carry the Greek economy through what would be a painful but brief transition period.Varoufakis leaves us with the impression that only the blind or the ill intentioned could reject them.His belief in his own genius and his moralizing permeate every page.

Unfortunately, Varoufakis lays the blame for his failure on rigid adversaries and treacherous allies.European politicians could not admit to their own parliaments that they lied when they soldthe MOUas a no cost way to get“profligate Greece” to pay its bills knowing Greece had assumed a debt load it could never repay.IMF Managing Director Christine Lagarde said she agreed with Varoufakis; even the most optimistic scenario would lead to a Greek default.Unfortunately, she too betrayed Varoufakis and lined up with the troika.Varoufakis denies the United States supported Greece in the crisis; he quotes Treasury Secretary Jack Lew telling him to do what the troika wants.He accuses former Prime Minister Samaras of cutting a deal with the troika to sabotage the Tsipras Government even before it took office. Finally, Varoufakis blames his colleagues inside the Tsipras government for undermining his campaign to bring the troika to agree to his plan.He callsCentral Bank Governor Yannis Stournaras a stooge for the troika.Varoufakis, however, excuses Tsipras as well-meaning but weak rather than perfidious.He argues Tsipras believed German Chancellor Angela Merkelwould support a solution good for Greece. When Merkel proved otherwise, Tsipras – in Varoufakis’ telling – lost his nerve and caved.Oddly, Varoufakis seems to have a soft spot for Wolfgang Schauble, Germany’s ferocious finance minister, Greece’s bete noire.Varoufakis quotesSchauble as recommending Greece take an orderly “time-out” from the Eurozone using a process quite similar to Varoufakis’ fallback plan should Greece be expelled.Varoufakis excuses Schauble on the grounds that he could not bring his plan before the German Parliament.Only Emmanuel Macron, then France’s finance minister and now President, enjoys praise as the only European politician who openly supported Varoufakis to the bitter end.

Varoufakis joins the long tradition of leftist economists, beginning with Karl Marx, who make uncannily accurate analyses of the shortcomings of the liberal capitalist system but flub the solutions.It is a pity that we will never know if this particular Varoufakis plan might have worked as the troika refused to even look at it, let alone consider it as a solution to the Greek impasse.

Anyone interested in how the Greek economic crisis of 2015 played out must read “Adults in the Room.” It provides a first hand account of how domestic German politics drove policy rather than rational economic considerations.

Varoufakis’ self-pity, blaming everyone else and using first names in every quotation made continuing to read a real challenge. If Varoufakis is so smart, one must ask why, he did not resign when he realized everyone was against him, including his pal Tsipras.Nevertheless, the book rings true. No reputable economist across the entire political spectrum believes Greece can possibly do what the EU demands and regain economic independence.The condition that Greece sustain a 3.5% annual primary surplus for 20 years is, frankly, absurd.Varoufakis’ account of conversations also rings true. Most importantly, no one quoted in the book has stepped forward to deny whatever Varoufakis said they said. In fact, Larry Summers whose late night barroom conversation opens the first chapter told a New York Times reporter that the quotations were “slightly embellished.” That sounds like the working equivalent of the truth.