Yesterday former Greek Finance Minister Yanis Varoufakis, whose new book Adults in the Room has just been published, spoke in Dublin as part of the International Literature Festival. Varoufakis is a Professor of economics specialising in game theory. The session, which covered topics from power to austerity to the politics of the Eurozone, took the form of a Q&A with Sean Whelan, RTÉ’s Economics Correspondent, followed by some questions from the audience.
Adults in the Room outlines Varoufakis’ experience of negotiating on behalf of Greece with the IMF and the Eurozone during 2015. Yesterday’s talk gave some fascinating insights into how decisions are made at this level, and the power dynamics between EU countries.
Varoufakis’ proposal to the IMF was a “great debt restructuring” for Greece. He found that the major players agreed with his idea but would argue, as Christine Lagarde did, that “it can’t work”. Lagarde told him that so much political capital had been invested in the process of austerity that the IMF’s credibility depended on going through with it. He noted that “I was being lambasted as a left-wing crazy madman” but, as Wikileaks tapes showed, senior figures in the IMF agreed with his analysis.
Varoufakis had much to say about the individuals he negotiated with in Europe. He noted that he had little direct interaction with Angela Merkel, as negotiation is on a PM to PM and Finance Minister to Finance Minister basis, but he observed animosity between her and Wolfgang Schäuble, the German Minister of Finance. Varoufakis related that Schäuble once said to him: “your PM, he speaks to our PM all the time…what does he think he’s going to get from her? If anything is going to happen it’s througb me”.
He was also illuminating on the subject of the relationship between France and Germany, pointing out that “when Merkel enters the room, the French president – whoever it is – shuts up”. He explained that this is because, within the EU, France is a deficit country and Germany is a surplus country, so if the EU breaks up, there will be “a tsunami of capital fleeing France for Germany”. So “Mrs Merkel has a ‘get out of the Eurozone free’ card in her handbag”.
The new French president Emmanuel Macron made a positive impression on Varoufakis; he suggested that Macron was the only minister who understood the Eurozone, and noted that he intervened when the Troika attempted to shut down the Greek banks. He further commented that “Macron has the correct idea of the fiscal and economic architecture of the Eurozone” but that his policies may be “too little too late”.
Varoufakis was less enamoured of Irish Minister for Finance Michael Noonan. Asked what he thought of him he replied “not much…I found him insignificant…whenever he spoke he mumbled, and he missed every opportunity to promote the interests of Ireland”.
Hearing him speak it is not surprising that Varoufakis lasted only seven months in politics. He came across not as a politician but as an academic frustrated with the political structures that prevented people from acting on his science-based evidence. He suggested that politics at the EU level was “like 19th Century power… but instead of guns and armies they use fiscal and monetary policies”.
Varoufakis’ own suggestion for EU policy makers is increased capital investment in “green energy, infrastructure, research and development”. He advocated a “common investment program”, with debt reconstruction using ECB bonds. More specifically, what should small countries like Ireland do when negotiating with the EU: “go to Berlin with a well-thought out proposal…and a Plan B when they say no”.