On Spain, Greece, Italy and our plans for a European movement to democratise the EU – Interview: L’Espresso
Posted on December 23, 2015 by yanisv
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The English text of the answers I sent to L’Espresso follows. The interview covers the Spanish elections, the latest from Greece’s never ending depression and, more importantly, a foreshadowing of the pan-European movement (not party!) that will be launched in February – with a simple, but radical, agenda of democratising the EU.

 -First, let I ask you to comment on the outcome of the Spanish election.

Our Syriza government’s opposition to a failed Troika program was crushed last summer, and Prime Minister Tsipras forced to accept a new loan that everyone knows is catastrophic, for one reason: To teach the Spanish people a lesson and thus deter them from voting for Podemos. In this context, Podemos did very, very well in the election. As I commented immediately after hearing the results, it was a small but important step in the right direction. A small step that may turn into the large faultline necessary to shatter the Eurozone’s crisis-denial and the Troika’s contempt for democracy.

– Is the success of Podemos due to mistrust of the people towards the party system? Or are we facing the success of populism?

Podemos is not a populist party. Populism manifests itself in promising all things to all people. No, Podemos began as a protest party and is developing into a party that has a go at a New Politics, where spin and power-grabbing give their place to a discourse of openness.

-Will Podemos turn into Syriza? Will it betray the promises made to the voters?

I hope not but we must see if Podemos gets such a chance. I say this because to get to that moment of truth, Podemos must form government first – something that it cannot do given the electoral result. The great question now is: Would Podemos go into a coalition by making fundamental concessions to Eurogroup loyalists, like PSOE?

 -Could you summarize what the new government Tsipras did in these three months in office? For example, what are the worst laws enacted and which you believe will make the Greek economy even weaker?

The main ill-effect stems from the very announcement, last July, of the contents of the new ‘agreement’: The incredible level of austerity announced for the next five years, the associated tax increases (VAT in particular), the absence of any credible commitment to serious debt relief, and the plain reality that the banks will remain incapable of lending to profitable businesses (given that their non-performing loans will not be managed efficiently by a public bad bank) – all these taken together mean one thing: no serious investor will invest serious money into an economy condemned to diminish as a result of these failures.

Now, in terms of particular pieces of legislation already passed (or about to be introduced) that will add to the recessionary forces already at work, these are: the VAT increases, the demand that business pre-pay (during December 2015) 100% of their estimated 2016 profits, the increase in pension fund contributions, and the foreshadowed reductions in pensions.

 -A few days ago our premier Renzi has accused Germany of not being the only country to feed the EU economy and indeed of taking advantage of the Greek crisis to do business, for example, the purchase of 14 local airports. In your opinion are just words or do you think rather than southern European countries are ready to form an array with Renzi head to counter the policy of austerity dear to Germany and to the countries of Northern Europe?

I hope I am wrong but it seems to me that, if PM Renzi were serious in his opposition to Berlin’s policies, he would have refrained from exerting inhuman pressure on PM Tsipras to surrender in July to all these demands that, now, belatedly, Mr Renzi is finding objectionable. It is in the heat of the battle that one’s courage and true intentions are revealed.

– Are you aware of the failure of some Italian banks, saving them from the government and the problems had by bondholders who have lost everything? If yes, what do you think?

Of course I am aware of the sorry state of several of Italy’s banks. On the issue of the bondholders who lost everything, there are two things to say.

First, the bank managers who instructed their staff to mislead their customers into buying the unsecured private bonds of the banks (thinking that they were buying ‘safe’ products from their own bank) should be prosecuted immediately using Italy’s legislation meant to protect customers from false description of goods and services.

Secondly, this sorry episode reveals that, despite the propaganda from Brussels and Frankfurt, we do not really have a banking union. German or Dutch private bank bondholders would not have been haircut if a German or a Dutch bank were in trouble – because the German and Dutch governments (that are flush with cash) would have bailed them out fully. So, when the probability of losing one’s bank deposits, or one’s investment in a bank’s bonds, depends on whether one leaves in Italy (where the state is fiscally stressed) or in Northern Europe (where the state has the financial leeway to bail the banks out), it is evident that there is no proper banking union in the Eurozone. The lack of a proper banking union matters because a single currency without a single banking jurisdiction produces capital flight from countries like Italy to countries like Germany, thus ensuring that the crisis never ends.

– Greece is not yet saved. What are the biggest obstacles that the country will have to face?

Greece was pushed deeper into the black hole of insolvency by the latest loan agreement. The only obstacle to its recovery is the Troika and the Eurogroup, who insist that the Greek debt is sustainable (when it is not), who refuse to create a bad bank to deal with non-performing loans, and who keep insisting that lowering incomes further (through tax hikes and pension/wage reductions) will bring recovery in a country snowed under debt (that goes up rather than down) and which needs higher incomes to be repaid.

– What is your prediction for your country and for the European Union?

Without a doubt, if we continue along the lines of present policies, that have failed so spectacularly, the centrifugal forces will get so strong that the Eurozone first, and then the EU, will fragment. This time Greece may not be the epicentre of the earthquake, as its Great Depression gets worse and its people are subdued by hopelessness. No one can tell where the rupture will take place. Maybe in Greece, maybe in Italy, maybe somewhere else. Like in the case of the Soviet Union, where it was impossible to predict how its end would come (even though it was clear that it could not last), we know that the present course is catastrophic for the EU even if ignorant of what will trigger it.

– Every day brings new refugees, according to you they are a resource for Europe or a problem?

They are neither. They are fellow human beings in need of our solidarity. If we can prove our humanity by seeing them as an end-in-themselves, maybe we Europeans have what it takes to create the circumstance necessary for them to flourish in our midst and to contribute to a future shared prosperity.

 -How should the EU act to integrate these people?  Will the sharing  system ( quota)  work ?

We should reverse the ‘competition’ between our countries. At present we are competing on which country will accept the fewest. We should change this and begin competing on which will be seen to be more open, more willing to take them in, more generous. Countries should be shamed for wanting to take the fewest. The idea of imposed quotas is repugnant to me, and should be ditched.

– The refusal of the Eastern European countries to accept a fixed number of refugees is a symbol of European disunity and a clear sign of a collapse that will happen sooner or later?

Yes. Eastern European countries have their own past and reasons for reacting the way they do. The problem however is that the mind set put on display by their ruling classes undermines basic European values of solidarity and humanism. If Europe loses its humanist values, and fails to embrace refugees for reasons that boil down to racism and to a ‘not in my backyard’ mentality, Europe will turn into an iron cage for discontented peoples.

– If Britain should leave the EU what will happen?

Nothing much at first. But, just as in the case of a Grexit, once the process of integration begins to unravel, a European Union already in the clasps of the centrifugal forces created by its deepening democratic and economic crisis will face a serious existentialist crisis. As for Britain, it will not be better off either, even if for a few months millions of Brits will have enjoyed upsetting Brussels’ bureaucrats.

– Now let’s talk about you: What are your plans?  Will you come back into the political arena?

The plan is simple: To launch, in early February, a pan-European movement with a single, radical objective: To democratise the EU! To form a movement that seeks to harness the energy of pro-European radical critics of Brussels and Frankfurt in order to prevent the disintegration of the EU. In short, to show that there is a third alternative to the calamitous ‘choice’ between: (a) those who want to return to the cocoon of the nation-state, and (b) those who accept the authoritarian, ineffective policies of the deeply anti-democratic EU institutions.


Yanis Varoufakis

Professor of Economic Theory at the University of Athens. Finance Minister of Greece