Varoufakis: Europe’s North South Divide Has Returned
Yanis Varoufakis, the former academic turned political firebrand, is the perennial outsider. Too effective for his own good, his was forced out by his own Syriza prime minister Alexis Tsipras at the behest of the troika (a term deemed too insensitive or too ironic, depending on who you asked).
As leader of the MeRA25 party he has effectively consigned himself to the political sidelines, but when he speaks out it is always worth listening. As one of the few politicians in Europe who is capable of integrating the lessons of the past, however painful they may be, he is uniquely placed to offer insight into the current pandemic and the eurozone’s response.
In an interview with German newspaper Berliner-Zeitung, Varoufakis again plays the Miranda of today’s Europe as the continent reverts to its old playbook of bailout funds and overbearing fiscal interventions.
Referring to Europe’s leaders, Varoufakis says they “resemble the Bourbons: they have forgotten nothing and they have learned nothing.” For the uninitiated (and I must count myself among them here), the quote is often attributed to Talleyrand, although the original source is unknown. Restoring a dynasty with so much baggage and so many vendettas was unwise. Todays Europe seems equally doomed to repeat the mistakes of the past.
“Europe’s leaders resemble the Bourbons: they have forgotten nothing and they have learned nothing.”
The challenge this time around is in creating a working consensus while the scars of the recent past are still fresh. Ireland’s leftfield victory to secure the Eurogroup presidency in the face of public opposition from Germany and France might be seen as a coup for the periphery. Surprisingly, Varoufakis sees it as a win for the forces of austerity.
“My first thought was that it spelled the end of any possibility of harmonising corporate tax rates across the Eurozone, an issue on which I am on Ms Merkel’s side. The second thought was that the Irish finance minister’s victory was a victory for forces pushing for greater, not less, austerity across the European Union. It was not a good moment for Europe.”
As expected, he reserves his most intense criticism for the latest iteration of the bailout fund. Once again, a Eurobond solution is proposed, and once again it is quashed by the major EU powers.
“While it is true that the Recovery Fund involves a degree of common debt, it is explicitly (and legally) designed as a one-off debt with specific details on how and when it will be repaid. Thus, we have wasted a fantastic opportunity to create the equivalent of US Treasury Bills, which is what makes the dollar powerful and the United States far better placed to absorb shocks.”
Eurobonds are not impervious to criticism, and are likely not within the spirit of the EU treaties. Article 125 of the Treaty on the Functioning of the European Union, which prohibits member nations from taking on the financial commitments of other countries, would likely need to be revisited. Unfortunately, most would prefer such changes to be made in a forum of calm, considered debates, not rushed through during a global pandemic. Who can really blame them?
With Eurobonds a non-starter, Varoufakis would prefer a more flexible approach to how pandemic funds will be allocated within the eurozone.
“I am appalled that the Commission specified in advance, based on backward looking data, which country will receive how many billions. It was an awful thing to do because it set one country, one people, against another. What we needed was a sum that would be diverted to regions in Europe most in need of support. There are poor parts of Germany that will be harder hit than richer parts of Spain. The total sum available should be distributed ex post on the basis of the needs of particular European regions and sectors, not by means of the usual sordid bargain in Brussels that divides a pie between governments.”
Yet the eurozone is a rules-based institution. It may be anal-retentive at times, but this is the nature of the beast. The alternative is to leave everything up to political negotiation. That is hardly feasible given the significant power differential between the north and south.
This leaves us in an entirely unsatisfactory conundrum. Those who will suffer most as a consequence of the pandemic are the working class of all countries. However, the structure of any recovery fund will, in Varoufakis’s view, exacerbate north south tensions.
“It will entrench the false view in Northern Europe that it was all about hand-outs to the Southerners while, at once, entrenching the false view in Europe’s South that the whole of the North benefits from pushing the South into greater impoverishment.”
This was and remains the great risk for Europe. Memories are long in European politics, but how willing are we to learn from the recent past?
Be sure to check out the full English version of the interview here.