A Finance Minister Fit for a Greek Tragedy? - NYTimes.com
Yanis Varoufakis knows when he will go. “I’m not going to humiliate myself, and I’m not going to become compromised in terms of principles and in terms of logic,” he told me in early May. The Greek finance minister had just returned to Athens from a hopscotch tour of European capitals, during which he warned his fellow European leaders that they faced a Continental crisis: If they didn’t lend money to his ailing country soon, Greece might end up forced to leave the eurozone. And yet Greece wouldn’t accept many of the conditions they were demanding in return. He sounded angry. “I’ll be damned if I will accept another package of economic policies that perpetuate this same crisis. This is not what I was elected for.” He would resign, he said, rather than push the Greek people deeper into economic despair: “It’s not good for Europe, and it’s not good for Greece.”
Varoufakis has been Greece’s finance minister for only four months, but the story of how he has thrown Europe into turmoil is one many years in the making. After Greece joined the European Union’s monetary union in 2001, the tiny country of 10 million was flooded with money from elsewhere on the Continent. Over the course of the next decade, Greek leaders, whose sclerotic and corrupt economy had long been rife with patronage and tax evasion, borrowed billions from imprudent European banks and then lied to E.U. officials about its mounting debts. When the financial crisis finally rolled into Greece in 2009 and 2010, the country was an estimated $430 billion in debt, a staggering figure that imperiled the economic health of its near and distant neighbors — indeed, all of Europe. The European Commission, International Monetary Fund and the European Central Bank (often referred to as the troika) agreed to bail out the sinking economy by loaning it $146 billion. In return, as Athenians rioted in the streets in protest, the government promised the troika it would reduce state spending by slashing pensions and wages, eliminating jobs and raising taxes, an approach to debt reduction known as “austerity.”
That bailout, along with another, even larger rescue in 2012, temporarily buoyed Greece, but the spending cuts have produced what many Greeks consider to be a humanitarian crisis. Twenty-five percent of the country’s population is unemployed; Greece’s gross domestic product has shrunk by a quarter; suicides and homelessness have increased; hospitals, woefully underfunded, scrounge for medicines. Just this month, Varoufakis warned that the country could run out of money in weeks.
In successive elections after the crisis, both dominant political parties — Pasok and New Democracy ruled Greece for the last 40 years — failed to transform the Greek economy or protect its people. In January, more than a third of the electorate voted into power the Coalition of the Radical Left, a collection of older leftist parties now known as Syriza, which pledged to end austerity. Its ascendance amounted to a kind of democratic revolution. Its victory, however, threatened an ominous evolution for the eurozone: The rise of a “radical” party in the region has frightened conservative and centrist European leaders facing anger at home amid declining living standards. And while most of Syriza’s officials, including its leader, Prime Minister Alexis Tsipras, want to stay in the eurozone, as much as a third of Syriza’s membership would be willing to abandon the euro to avoid more austerity. It’s an outcome more likely than ever before, and its consequences are frightening and unknowable.
The European Union has been a project in the making since the end of World War II, but its monetary union, the eurozone, is only 16 years old. There is no agreement on what might happen if a country were to leave it. A result could be catastrophe, especially for Greece itself, which would have to return to its former currency, a drachma vastly reduced in value. Banks could close, savings evaporate, businesses collapse, medicine and petroleum and all sorts of other goods become impossible to import. The uncertainty alone — could Greek companies or the state pay its bills? — would scare off foreign investment. Globally, meanwhile, the markets fluctuate every time bad news comes out of Greece.
Whether the eurozone as a whole is now prepared for these sorts of disruptions, as some experts believe, Greece’s official creditors, some of which are European governments, would still have to absorb losses. And the symbolic and moral failure of a union and monetary zone designed to prevent ethnic conflict and ensure prosperity for all European citizens would be incalculable. If the “Grexit” comes to pass, could Spain be the next country to leave? Could Italy? Without the Parthenon, without La Sagrada Familia, without the Colosseum, what is a European “union”?
These concerns clouded Syriza’s triumph, and in February the party faced the disheartening task of somehow wrenching a new agreement from Europe. During the campaign, Syriza promised its voters a range of seeming impossibilities that ran directly counter to the political realities inside the European Union. Austerity would end; the next installment toward paying off the second bailout would not happen; above all, dignity would be restored. At the same time, Syriza was now vowing to remain in the euro. As someone joked to me, Syriza essentially hoped that 1 plus 2 could equal 4. To negotiate an agreement that might accomplish this seemingly impossible outcome, Tsipras decided to send a pugnacious economist named Yanis Varoufakis.
It was a startling choice. Varoufakis is neither a politician nor a banker by training. He has been one of the most visible and vociferous critics of the Greek government, the European establishment and the Greek-European bailout. Imagine that President Obama had, instead of picking Timothy Geithner to be his Treasury secretary in the midst of the financial crisis, appointed a progressive academic economist like Paul Krugman or Joseph Stiglitz, only edgier and funnier, someone who had spoken out scathingly against bank bailouts, freely expressing himself however he wanted on television and in public debates because he wasn’t running for office. His popularity was undeniable, though. When Syriza did put Varoufakis on the ballot for Parliament in January, despite the fact that he was living in Austin, Tex., at the time, he won more votes than any other candidate.
Four months into his political tenure, Varoufakis is at the center of a contest that could determine the entire Continent’s future. No deal between Greece and the domineering center of European authority has been reached. Varoufakis finds himself struggling to hold on to his principles, what he calls the “red lines” that prevent him, in his mind, from becoming like every other Greek politician before him. Those ideals risk bringing more hardship to Greece, but Varoufakis has staked his academic integrity on a particular economic and moral critique of the crisis. To what, to whom, does he presently owe his ultimate responsibility?
“For the people who are now 15, 16, 17 years old, to have a chance by the time they are 20 — this is what matters,” he told me this month. “There’s no doubt that this economy now is far worse off in the last two months as a result of our hard bargaining.” He described that change as a trade-off, an investment in a better future. “And an investment always involves a short-term cost,” he said.
I asked him about that short-term cost. Is he worried about the Greek economy today?
“Terrified,” he said. “Terrified and aghast.”
Economic crises in modern countries are not always easy to see; the suffering doesn’t reveal itself everywhere. Athens is a cafe civilization. Its streets are lined with tables that in springtime, when the sun is pale yellow and soft, are full of people. The vitality of the scene might cause a visitor to wonder: what financial crisis? Where is the emergency? Shops are still open, crowds flow from the Metro exits, automobile traffic clogs the streets. The Acropolis still stands.
Only someone who lives in Greece can look at that busy restaurant and tell you that a souvlaki and soda costs only $5; that the college graduate sits outside for hours because he is unemployed and has no future; that the elderly man sitting with him lost his pension and has been nursing that same beer all day. A few minutes from the tourist center of the city, the streets are desolate, the stores boarded up; farther out, much of Athens is grim and poor. According to one Greek political theorist, the recession in Greece has reached a level “unseen in a Western country since the 1930s.” Anthony Kefalas, a former adviser to the Hellenic Federation of Enterprises, a business lobby, told me that if something isn’t done soon, “an entire generation in Greece will never be employed.” Hospitals and universities have been ravaged; the economics Ph.D. program that Varoufakis ran at the University of Athens, for example, now barely keeps going.
The finance ministry itself was deserted when I visited Varoufakis in February. Few people seemed to be working there, except for a guard sitting sleepily outside a bank of elevators and a woman smiling behind a desk in the hall. Wires hung from cracked panels in the ceiling; a parched fern wilted in the corner. Varoufakis did not have a staff yet. When he first moved into the ministry, there was no computer in his office, and the Internet didn’t work. He had a press person of sorts — who told me to text “Yanis” directly for appointments.
After a while, Yanis found me in the waiting room. “I’m just going to come out here and get you myself,” he said. Polite and full of energy, Varoufakis took me inside to his office, whose windows directly face the Parliament building across Syntagma Square, the nucleus of the city. The view, especially with the angelic Athenian light, was better than the space, which was bereft of personal effects and ached with the drabness of ’70s-era bureaucracy. Someone later told me that the only change to the office during the last five years was that a hole in the window, caused, legend has it, by a bullet fired during a 2010 demonstration in the square, had been fixed. A flat-screen TV mounted on the wall blared a Greek talk show.
“Why is this on?” he said, punching at the remote-control buttons. “I hate TV. And I don’t know how to work this. See, I don’t know how to work my own television.” Varoufakis is almost always sardonic; when he seems to be poking fun at himself for not knowing how to work the television, it’s clear that it’s the television’s fault.
His office had been set up for a news crew, and wires and gadgets crisscrossed the floor — he was doing a lot of television. During his recent tour through European capitals, and lastly in Brussels, where he faced off against his European negotiating partners, Varoufakis stunned Europeans and Greeks with his reflexive defiance. Greece, he said, would no longer simply acquiesce to the austerity doctrine of the European Commission, the European Central Bank and the I.M.F. In fact, Varoufakis, who believes Greece should have been treated as a bankruptcy case, initially wanted the institutions to write off a portion of its debt, which amounted to some $262 billion. After many rounds of confrontation, Greece and its creditors agreed to extend the controversial second bailout, which came in 2012, and Greece was allowed to propose its own list of economic reforms.
On his Continental tour, Varoufakis also became a celebrity. The Europeans eyed Varoufakis as if his species had never swum in their lagoon. Epithets included “used-car salesman,” “hothead” and “nightclub bouncer,” and some wondered why he always had one hand in his pocket. They dwelled on his black leather jacket, his popped collar, the colors of his shirts, his shaved head. He was apparently a sex symbol, too. He rode a motorcycle. He worked out; he had charisma and cheekbones. He had a way of tilting his face down so that his eyes looked up from under his brow unnervingly: One image that circulated online depicted lasers shooting out of his eyes. His personal style was blunt; he disregarded the bloodless etiquette of European politicians. When the German finance minister, Wolfgang Schäuble, said at a news conference after their first meeting, “We have agreed to disagree,” Varoufakis replied, “We didn’t even agree to disagree, from where I’m standing,” and it was thrillingly clear that the Greek finance minister had never been a politician before. Some German comedians even made a video that depicted Varoufakis as a man of animalistic power, some sort of rock star who licks his motorcycle seat in one scene. Another scene includes footage of Varoufakis himself apparently giving the finger to Germany.
At home, “V Is for Varoufakis” posters hung in the windows of cafes. Greeks showered him with love, twittered over his looks, and wrote adoring satires of his glamorous life and wide-ranging talents. Varoufakis’s oldest friends were bewildered by the international fuss, but everyone I’ve spoken to who knew him before this ministerial turn says Varoufakis’s behavior on the European stage is typical: He’s outspoken, passionate and confident about his ideas. That, apparently, was the problem, because Varoufakis did not go to Europe merely to negotiate Greece’s future. He had bigger ideas. He wanted to show the Europeans how to save Europe itself.
Varoufakis’s wife, Danae Stratou, invited me over one evening to their apartment near the Acropolis. It was located in a turn-of-the-century building that belonged to Stratou’s mother — the family once owned the largest textile company in Greece — and Varoufakis and Stratou lived on the first floor. (They have since moved.) It was not large and had a small balcony off the back. A bookshelf by the Israeli industrial designer Ron Arad hung on one wall, and Stratou’s artworks were on display throughout. One piece, a large photograph of hooded crimson scarecrows, arms outstretched and leaning in a lush Kashmir field, reminded me of the prisoner photos from Abu Ghraib. Around the time I visited, the apartment achieved a measure of fame when it appeared in Paris Match magazine, whose photographs showed Varoufakis and Stratou smiling and eating fish. The scene came across as rather glitzy for a leftist politician, and Varoufakis told me he regretted the pictures. “Look, I know it sounds stupid, but I didn’t know what Paris Match was,” he said. “I don’t read these magazines.”
Stratou, who is beautiful and has wide, ice blue eyes, is a large-scale land artist; her first major work, “Desert Breath,” took nine months to construct and still exists in the Egyptian desert. After she and Varoufakis started dating in 2005, he began taking part in her art projects, including one that took them to borders around the world — between Israel and Palestine, Ethiopia and Eritrea, United States and Mexico — where dividing walls keep people apart. It sounded as if the couple had a fruitful collaborative relationship, and Stratou said Varoufakis’s only major concern about becoming the finance minister of Greece was the disruption it would bring to their life.
“He did it because he felt he had to morally be there,” Stratou said. “He was offered the chance to help his country. He feels extremely responsible to 10 million Greeks. And he has lost a lot of sleep over that. What I can see is that he is someone walking on a minefield. Every moment that passes, he doesn’t know what he’s going to step on.”
Varoufakis says he took the job because, after years of articulating a solution to the crisis, he said he felt he didn’t have a choice. “In the 1980s, I was incensed by apartheid. Some people could forget about it; I couldn’t forget about it. It’s not because I am morally superior, I just couldn’t forget about it. Similarly, in the case of the 2008 crisis, it was the idiocy of it: This was a crisis that was unnecessary.”
Varoufakis traces his political consciousness to his childhood in “the junta era” — the years when Greece was ruled by dictatorship. “It was very hard to avoid being political,” he said. “It was all around you.” His father, he said, was raised as “a liberal enlightenment person, not a left winger,” but when he immigrated to Greece from Cairo in the late 1940s, the royalist-communist civil war was underway. One day, the police roughed him up but said they would release him if he signed a denunciation of communism. “He said, ‘Look I am not a Buddhist, but I would never sign a denunciation of Buddhism,’ ” Varoufakis said. “He read Rousseau at 13 years old, and he knew about civil liberties.” He ended up in a concentration camp with communists — and joined the Communist Party, which made finding work nearly impossible. Eventually, he got a low-paying job as a personal assistant to the owner of a steel company, and today, at age 90, he is its chairman. Varoufakis’s mother, a biochemist, made “a pittance,” he said, because she was a woman. She became involved in the feminist movement in the 1970s. Varoufakis was also a political activist from a young age. When he began his career as an academic at the University of Essex, he said, his slogan became “subvert the dominant paradigm,” which some of his students later put on a T-shirt.
Varoufakis left England in 1988 to teach at the University of Sydney, where he began a series of conversations about the global economy with the economist Joseph Halevi, the two of them among academics in their field who contested the notion then popular that the world had entered a new phase of “perpetual growth,” what the former Federal Reserve chairman Ben Bernanke called the “great moderation.” After the crash, Varoufakis decided to put those ideas into a book for a popular audience titled, “The Global Minotaur,” which presented the world, and Europe, as perilously yoked to the fluctuations of the American economy. When the crisis finally reached Greece, Varoufakis began working with the British economist Stuart Holland and, later, the American economist James Galbraith, on a pamphlet titled, “A Modest Proposal,” which identified four major crises in Europe — in banking, public debt, underinvestment and social welfare — and proposed solutions to each. “Europe is fragmenting,” they wrote. “As this happens, human costs mount, and disintegration becomes an increasing threat. . . . The fallout from a eurozone breakup would destroy the European Union, except perhaps in name. And Europe’s fragmentation poses a global danger.”
He told me that he still felt that way. The crisis that began in 2007 was just as bad as the Great Depression that started in 1929, and it was far from over. “We need a New Deal for the globe,” he said, “at least for Europe.” But when he sought to make his case in interviews and speeches across Europe these past months as finance minister, while also mounting a moral argument for easing the suffering of Greece as well as other southern European countries, his European counterparts were exasperated. They were frightened, too, by the prospect of Varoufakis serving as inspiration for leftist movements elsewhere — especially in Spain, where Podemos, a leftist party led by activists who also oppose austerity policies, has made significant inroads. At the February meetings, the European financial leaders pushed back by insisting on austerity. Aristides Hatzis, a professor of philosophy in Athens, says that Varoufakis found himself “where no one was interested in life in the eurozone in the long term — they were only interested in specific details about the way Greece was going to pay its debt.” Because Varoufakis is clever, Hatzis says, he adjusted to this reality and changed course. He was also forced to make many concessions.
The American economist Joseph Stiglitz, a Nobel Prize winner, describes Varoufakis’s situation as “absolutely impossible.” “There is an obsession among policy-making economists in Germany about fiscal balance,” he says, “compared to unemployment, inequality, economic growth, financial stability.” When Greece received its first bailout in 2010, the Europeans insisted on severe austerity while predicting that Greece’s gross domestic product would shrink by only 4 percent. Over five years it shrank 25 percent. (Stiglitz says that he tells his students that if their economic models and forecasts were that bad, he would give them an F.) By 2011, according to Stiglitz, the European leaders admitted they needed a new strategy. “They never delivered,” Stiglitz told me. “In a way, Europe has reneged on their promises over and over again, and Yanis and this new government have to pick up the pieces.”
When I met Varoufakis in late March, his popularity remained buoyant, at least on the street, despite the increasingly caustic criticism of him at home and abroad. It was a gray Sunday morning in Athens, and only a few men sat in cafes drinking coffee and smoking. “Keep going, Yanis,” said a taxi driver as we walked to a cafe near the Acropolis. “Good job,” another said. Varoufakis smiled and thanked them. Before turning inside, a man stopped him and shook his hand. I asked if it was always like this. He said, “Yes, all the time.”
That weekend, the Greeks and Europeans still hadn’t settled on the reforms. No money had been released. Two teams of negotiators, in Athens and Brussels, were desperately trying to work out the agreement. Syriza was scouring even university bursaries for cash. Weeks before, the party entered into an ugly nationalist squabble with Germany: Syriza politicians began demanding reparations for damages done during Nazi Germany’s occupation of Greece in World War II, prompting the accusation that they were trying to deflect attention from Greece’s own economic failures.
In a situation like this, a government could pursue right-wing reforms like privatization or left-wing reforms like going after wealthy tax evaders. Syriza had done neither. I asked Varoufakis why.
“When?” he said. Greece’s creditors had given the party no time to maneuver. “I have done nothing else for two months than to negotiate for the right to negotiate — to have this discussion. I still haven’t won that right. Which means everything we do has to go through this negotiating process.” He thinks the Europeans’ complaints are about something else. “They do not believe a little colonial outpost in the eurozone has a right to have an opinion about its own affairs and the eurozone.”
It made some sense, however, that a new party in power for a mere two months might have been unprepared to figure out what was broken and how it could be fixed. He told me, for example, that it was impossible to know how much money the government could collect from tax evaders, and he didn’t want to lie. Yet the Greeks are frequently portrayed as “stalling.” Varoufakis says he wanted to limit the number of reforms to three or four that could immediately be put into effect, but the Europeans require a highly technical list of reforms that is now about 26 pages long.
“Our critics will say we have been talking too much, but it isn’t our choice,” he said. “This is what the institutions want. This is what they’re doing as we speak.”
From the European point of view, Greece has no right at all to argue about reforms, so utterly did previous governments, after torpedoing their own economy, fail to implement them over the past five years. But Varoufakis and Syriza regard their election as a sort of “Day Zero” for Greece. “We are the guys who spent all our lives in Syntagma Square outside my office protesting what the people inside my office were doing,” Varoufakis said. “We were being bombarded with gas, because we didn’t see how we could repay a loan under the circumstances.” He compared himself to Margaret Thatcher, elected in 1979 in opposition to the welfare state. “How intelligent is it to blame Margaret Thatcher for the postwar corporatism that came before her?” he asked. “Not much. So what we have here is a serious case of deeply rooted racism that all Greeks are the same, that whether or not they protested the bailout, they are still responsible for it.”
At that moment, a tourist interrupted him. “Excuse me, can I take a photo with you?”
“No, not right now, thank you,” he replied, and turned back to me. “Hannah Arendt said that if one German died in Auschwitz resisting Hitler, you can’t say the German nation was responsible for Nazism. I believe in that. But that applies to the Greek people as well.”
His cellphone, which had been ringing constantly throughout our talk, went off again; this time it was Prime Minister Tsipras, presumably calling from Brussels. After finishing the call, he needed to go. I asked how the weekend’s negotiations were going so far.
“I don’t know,” he said, his voice inflecting as if he, too, were curious. “It’s a political decision. It has nothing to do with these discussions. The question is: Have they decided to throw us out of the eurozone? I am not going to pay the I.M.F. and not pay pensions in the next few weeks. So I said to them: ‘Decide. Do you want this to be a proper bargaining round, or do you want this to be a post-mortem?’ ”
I suggested that maybe this is why he’s accused of brinkmanship.
“It’s not brinkmanship. It’s the truth. They want me to fold. That’s brinkmanship on their part. I am not going to fold on pensions.”
Syriza’s opponents in Greece wonder if Tsipras and Varoufakis have already failed. They were naïve, the critics contend, to believe that they could extract huge concessions from the Europeans, and they will end up with the same bailout terms as before and an economy in even worse shape. In that case, Greece could be subjected to a fifth year of austerity. If Greece seeks a third bailout in June, as even Varoufakis assumes it will, it’s hard to imagine Europe, basking in triumph, would relent on any of its conditions.
Varoufakis says that he has done what the Europeans have asked of him. He is proud, even, of the compromises Syriza has made, which include privatizations of some state assets, like the port of Piraeus, and a delay in raising the minimum wage. But he refuses to budge on maintaining pensions — slashing them has already brought considerable hardship to elderly Greeks — or on restoring collective bargaining rights, which would give workers more leverage in negotiating salaries. His greatest fear is that the Europeans may insist on what is in his eyes the worst measure of all: the maintenance of a 4.5 percent surplus, a stringent European stipulation from 2012 that preserves large state savings and cripples expenditures. The policy is the embodiment of austerity. For Varoufakis the economist and academic, this is very likely the red line that would be the hardest to cross, intellectually and professionally.
For Syriza, this is a question of democracy, Greek self-determination and the architecture of the European Union, in which member states don’t necessarily control their own fates. But as many critics have pointed out, the eurozone is not a place for rebelliousness or big ideas; it is a place of rules. And in that forum, Varoufakis has done poorly, says Daniel Gros, the director of the Center for European Policy Studies, a research firm based in Brussels. “He is unable to provide them with the kind of detailed proposals they are looking for,” Gros says, referring to the Europeans he believes were more sympathetic to Greece than Syriza claims. “They were fed up with the old status quo. They thought: O.K., maybe there is someone here who is tough talking but will deliver. And he hasn’t. The attitude is: You get money if we see something concrete.”
Syriza officials to the left of Varoufakis believe his mission was quixotic from the start. There is a sense that he and Tsipras were both too idealistic and too confident in their ability to persuade the Europeans to abandon an ideological policy they have promoted for years. “They really thought that they could get something substantial,” says Stathis Kouvelakis, a member of Syriza’s Left Platform, which represents a third of the party and believes, among other things, that leaving the euro is the only option for Greece. “There is a miscalculation from the outset. You have the iron cage of neoliberal policies that has to be defended at any cost, and Greece was the test case of that: Do what you are told to do or you will be punished. This will serve as a lesson to Podemos or any force in Europe that would dare contest its neoliberal austerity politics.”
In April, after newspapers reported that Varoufakis had been “sidelined” from the negotiations after finance ministers angrily insulted him at a meeting in Riga — reportedly calling him a gambler, an amateur and a time-waster — Varoufakis tweeted: “FDR, 1936: ‘They are unanimous in their hate for me; and I welcome their hatred.’ A quotation close to my heart (& reality) these days.”
According to Varoufakis, the tweet — he has more than 400,000 Twitter followers — was directed not at his fellow finance ministers, but at journalists. “The media went into a frenzy of obfuscations and lies, which I am sure they are not entirely responsible for,” he said. “It seems as if there were leaks from within that were disconnected from the reality of what happened. All these reports that I was abused, that I was called names, that I was called a time-waster and all that: Let me say that I deny this with every fiber of my body.” (He says he taped the meeting but cannot release the tape because of confidentiality rules.)
Nonetheless, he said, he and the prime minister decided that they should reshuffle the teams to adjust to the current climate and the narrative that dominated the media, even though he denies that he was “sidelined.” He represented Greece as usual at the next round of negotiations. “This is a narrative that feeds on itself,” he said. “It’s completely disconnected from reality, but it’s a parallel reality, a Goebbels-like propaganda style that has a wonderful capacity to change the atmosphere.”
He described himself as simply the “lightning rod.” He knew how difficult the job would be. “I take it all in stride. I would have been down in the dumps and upset, maybe even panicking, but I was expecting it. So it’s O.K.” Strangers on the streets of Athens, he says, still call out messages of support. “What they are starved of is a government that they can be proud of,” he said. “We are not particularly concerned about retaining our positions. So that destabilizes the other side. They are used to politicians who are really keen to maintain their positions. And we’re not that keen. We don’t care. We want to do the right thing, and if we can’t do the right thing, we’ll go.”