Yanis Varoufakis: Greece is even more bankrupt than it was at peak of crisis

By Paul Ray

The year is 2015, and Europe is once again in a moment of crisis. Greece, still fatally stricken by the financial crisis of 2008, is about to default on its debt repayments from its second bailout loan, worth €100 billion. If Greece declares bankruptcy, and so loses its capacity to meet its debt repayments, then European banks (mostly German) face black holes in their books, potentially leading to severe economic crisis in other debt-hit nations like Spain, Portugal and Ireland. For the stability of the European economic order to continue, it seems that Greece needs a third bailout loan.

Then, on the 25th January, left-wing populist party Syriza win the Greek general election, and Yanis Varoufakis becomes the country’s finance minister. A British educated economist and an academic lecturer by trade, Varoufakis has one mission as finance minister: to force the political and financial world to admit that Greece is bankrupt. No third bailout loan, with its indefinite postponement of Greece’s bankruptcy, and its punitive attached conditions of harsh austerity. Instead, Varoufakis’s mission was to totally renegotiate Greece’s debt settlement with the EU; restructure the debt, reform the failing economy, and lift the socially and economically depressing condition of austerity from Greek life. He fails. On the 12th July, Greece’s Prime Minister signs a third bailout package worth a further €86 billion, contrary to a referendum in which Greece voted ‘No’ to a third bailout by a margin of 61%. Varoufakis resigns from the government.

That was six years ago. In our interview, I ask Varoufakis how Greece has managed to stay afloat since he left government.

“Well, let me give you some numbers. In 2015, when the whole world was referring to Greece, quite rightly, as bankrupt, our debt was 300. Forget the zeroes,” he explains, calmly and methodically. “And our income was 175 – that’s when I left the ministry. Today, public debt is nearer 400. And income is 168. So we are more bankrupt than we were in 2015. The reason why you don’t hear of this in your newspapers, media, and so on – this is completely out of the news – is because the European Union has decided it doesn’t want to deal with the Greek crisis anymore. So they are pretending it’s not there. And the only way to pretend that the bankruptcy is not there is by continuing to give out loans.

“In 2015 when I disagreed with the Prime Minister back then and resigned, [Greece] took a credit card of €85 billion. When that ran out, they shifted some of their debt to beyond 2032. Now what they’re doing is they have the European Central Bank printing money and lending it to the Greek state, effectively. So it’s lending, lending, lending. That would have been fine, if it wasn’t, however, for the conditions; the strings that came attached with this lending. And those strings were continuing with harsh austerity. Now you have evictions, 600,000 homes that are about to be auctioned off with people losing them, and losing their shops and so on.”

“We are losing all of our young.”

yanis varoufakis

On austerity, “it’s a political decision,” Varoufakis tells me. “You have to understand that a state goes bankrupt when the powers that be decide that it is bankrupt. If they decide that it’s not bankrupt, it’s not bankrupt. So, theoretically, the European Central Bank could keep printing money to refinance the Greek debt. I don’t think they will, ad infinitum, but they could. Now the question is, what happens to the people of Greece? Because the price of continuing to extend the bankruptcy into the future – pretending to have solved it – then the price you have to pay for that is desertification. We are losing all of our young people. They are emigrating. There is nothing to do here. Either they choose to stay here as peasants, you know, working for peanuts in the tourist industry, in shops, earning next to nothing, never being able to imagine a proper life. Either they accept this ignominy, or they accept the other ignominy of migrating.”

Yanis’ new book, Another Now, is a strange hybrid of vividly atmospheric fiction and an economics lecture, in which we follow three protagonists through to a post-capitalist 2025, with a utopian economic and political settlement in place. I ask Varoufakis what prompted him to write a novel, after years of patiently explaining economic concepts to general readers in factual tomes.

“The main reason is that so far, all the books that I’ve written concern the present, and concern my analysis of what’s going on. This book has the purpose of answering a question that I always avoided throughout my life. An important question. And because it was so important, and because I didn’t really have an answer, I was avoiding it. And the question is, ‘OK mate, you’re a leftie, you don’t like capitalism – what’s the alternative?’ The problem with this question is that the moment I come up with an idea, I immediately come up with its opposite. I immediately start having arguments with myself. So I thought […] let the characters fight it out.”

At one point in the interview, Varoufakis describes the world of his new book as a ’realistic utopia’. It’s essentially a form of market socialism, where capitalist markets remain, albeit in closely regulated form. But one market conspicuous in its absence from Varoufakis’s new world is the labour market, people freely selling their time doing labour for bosses in exchange for an hourly or monthly wage.

“I believe that as long as there is scarcity, you can’t do away with markets,” Varoufakis explains. “[But] there are two markets that have to go before we can even begin to speak of socialism. One is the labour market and one is the market for money, in particular financial markets and the commercial banks. In my book there is a full sketch. Some people say it’s too comprehensive, because it takes away from the novel to have all this detail. But I wanted to provide as much detail as possible on how you can have a functioning market system without labour markets.

“Now, why do we need the market at all, the market for goods and services? Because if you don’t have the markets, how do you make decisions as to what corporations produce, about prices, and about distribution, who gets what? There are two alternatives that I can think of. One is the Soviet model of central planning. You have a Gosplan (a ministry of planning) that decides how many washing machines will need to be produced, how many cars and so on. We know that that failed. This system kills innovation, because it can only plan for things that we know are produced. So in that system no one can produce an iPhone from scratch, because it doesn’t exist already in the system for the ministry of planning to tell somebody to create it.

“The alternative to Gosplan, and the market system, is for everything to happen through negotiation. My colleague Michael Albert believes that consumers and producers should form assemblies. In these assemblies there should be negotiations, and producers put forward ideas of what consumers may want to buy, and consumers can vote for them. To me this is too unwieldy. I am a socialist, I’ve been a socialist all my life, [but] I have a great appreciation for what Oscar Wilde once said, that socialism will not happen because socialist meetings last too long into the evening.

“In the end, as long as it’s not the labour market or the market for cash, the market has a certain liberating effect. You don’t need the approval of the collective. This collectivism is highly oppressive, [where] everyone has to agree before you do anything. So markets can be quite liberating, as long as it’s not the labour market, because it’s through labour markets that capital imposes its iron will on the many.”

Realistic utopia, or the pipe dream of an academic who couldn’t fulfill his grand economic project when he was actually in power in Greece? Perhaps only history will be able to answer that.

Image: Olaf Kosinsky