In the endlessly sad saga of Greece’s negotiations with the eurozone, there is something abnormally pathetic about the spectacle of the forced resignation of Greek finance minister Yanis Varoufakis.
Politicians are meant to resign the day after they are defeated. Just ask Ed Miliband, Nick Clegg and Nigel Farage (ok, don’t ask Nigel Farage.)
Varoufakis himself had promised to step down if the Greek public voted to accept a bailout package that he found so unacceptable that he said he cut his arm off rather than sign it.
Instead, he is resigning a day after Greek voters resoundingly backed his position that the offered bailout was essentially a fraud, or, in EU parlance, “extend-and-pretend.”
Varoufakis announced his sudden departure on his blog yanisvaroufakis.eu. You have to wonder whether he will be changing his internet domain now to yanisvaroufakis.com, which remains for sale.
Varoufakis explained: “Soon after the announcement of the referendum results, I was made aware of a certain preference by some eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings.”
Prime Minister Alexis Tsipras, who enlisted Varoufakis although he was not a Syriza member, decided to offer him as a token sacrifice.
This is truly a monumental embarrassment for other finance ministers.
Stuck in a failed policy that has seen Greece’s GDP plummet 31 per cent since 2008, and 27 per cent since the first bailout in 2010, Varoufakis’s former eurozone counterparts do not want to be confronted with their own failure.
They cannot face the combative and clever academic economic who makes a thoroughgoing critique of the eurozone’s own structural flaws (forget Greece’s for a moment)—and argues his own country went bankrupt in 2010.
A glimpse of the discomfort of this eurozone group came in Varoufakis’s last meeting with his peers.
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According to a reconstruction by the New York Times, Varoufakis challenged IMF director-general Christine Lagarde across the table:
“I have a question for Christine,” he said. “Can the IMF formally state in this meeting that this proposal we are being asked to sign will make the Greek debt sustainable?”
Ms Lagarde, whose institution has repeatedly made absurd projections about Greece’s growth and debt sustainability, acknowledged that Varoufakis had a point and that the question of debt needed to be addressed.
Before she could expand, perhaps going on to explain that the creditors had to agree to a debt write-off, however, she was interrupted by the chairman, Jeroen Dijsselbloem, who heads the working group of finance ministers. Dijsselbloem, aware that debt relief is a German taboo, told Varoufakis curtly that the package on the table was a take-it-or-leave-it offer.
The coda came last week when the IMF published a report arguing that Greece required debt relief— a document the eurozone reportedly tried to suppress.
Varoufakis is the victim of a eurozone system that does not work and which he pledged to change.
The fundamental issue is the old European problem of German power—the very problem the European Union was designed to solve.
As Varoufakis explains, Germany needs to recycle its vast surpluses—just as the United States did after the Second World War. Rather than mounting a Marshall Plan as the United States did, Germany is trying to hoard its money for itself.
The German banks who recycled their deposits before the financial crisis by making unwise loans to Greece have been held blameless in German eyes.
Instead of bailing out their own banks, as the British or US taxpayers did, the German taxpayer instead sent money to Greece to be laundered back to pay back German banks’ bad loans.
It’s a Ponzi scheme requiring never-ending bailouts. That is the Ponzi scheme that Varoufakis sought to stop.
Venturing into the lions’ den, Varoufakis made an excellent and thought-provoking speech to the Hans-Bockler-Stiftung in Berlin last month citing the historic “Speech of Hope” by US Secretary of State James F Byrnes in Stuttgart on 6th September, 1946.
In 1946, Byrnes insisted that America would not punish Germany with deindustrialization but would rather help Germany to grow again and prosper.
Varoufakis called for Chancellor Angela Merkel to make a similar “Speech of Hope” for Greece.
Indeed, he offered her speechwriting help from his own sometime adviser James K Galbraith, who was in the room—the son of economist John Kenneth Galbraith, who wrote the original “Speech of Hope.”
Now that Greece appears to be heading for Grexit, it is incumbent on EU members like Britain who had the good sense to avoid the flawed euro currency to come to Greece’s aid—rather than leaving the task to Russia and China.
Varoufakis will go down in economic history as the man who told the eurozone leaders that they have no clothes.
In his resignation blog, he said: "I shall wear the creditors' loathing with pride."
That loathing is all the eurozone finance ministers have left to wear themselves.
