A Finance Minister Fit for a Greek Tragedy?
The defiant stand by Yanis Varoufakis in the high-stakes economic negotiations with the E.U. threatens to tear Europe apart.
By SUZY HANSENMAY 20, 2015 | The NewYork Times
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.”
A statue of the goddess Athena in Athens. Greece is struggling to avert bankruptcy.
Explaining the Greek Debt Crisis APRIL 8, 2015
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.
Varoufakis has remained popular at home amid criticism from Northern European countries. Credit Luca Locatelli for The New York Times
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.”