Axis of Logic
Finding Clarity in the 21st Century Mediaplex

Greece
What was Varoufakis trying to do and did he do it?
By Elias Kulukundis, HuffPo
Huffington Post
Sunday, Aug 2, 2015

The Syriza government who won the Greek elections of January 2015 came into office with the ambitious aim of reforming the eurozone. Far from behaving humbly and feeling ashamed of Greece's enormous debt, Syriza actually burst on the scene as a self-righteous reformer.

The standard-bearer of the government's message was Yanis Varoufakis, a Greek professor of economics formerly of the University of Texas, who with no previous experience in government became Syriza's Finance Minister.

Dress was the new government's first innovation. Prime Minister Tsipras made his debut on the world stage not wearing a tie, and Varoufakis's style was even more iconoclastic. He wore an open bright blue or purple shirt outside his trousers under a leather jacket. And what was even more indecorous, he began to call for restructuring Greece's debt, although he knew the very mention of the idea would be anathema to Germany.

The German Finance Minister Schaeuble's reaction was predictable. Besides, he had set himself against the new government even before it took office. Within days of Syriza's election, he confided publicly that he felt "sorry for the Greeks who have elected such an irresponsible government." The minister showed no awareness that Germany's refusal to grant any concession to the previous Greek government had paved the way for Syriza's resounding election victory. But Schaeuble was correct to interpret Syriza's election victory as a direct challenge to the German doctrine of austerity.

The previous Greek government would have tried to communicate with the eurozone in the language of mathematics, thus restricting itself to a field where the doctrine of austerity was strong, and resistance from the Greek side would be weak if not futile. Instead, with Varoufakis as its spokesman, Syriza changed the terms of the debate and set its own agenda. It made the point that the Greek debt was unsustainable and any new agreement with the eurozone would have to include provisions for some debt relief. By the end of the first round of negotiations, it was clear that in devising its strategy, Syriza had hit on a way to put the eurozone on the defensive, and Varoufakis may have been the best choice to lead the Greek negotiating team, at least at the beginning.

But after such an auspicious start, why did Syriza have trouble capitalizing on its initial success?

For one thing the Germans were even more intransigent than anyone could have expected; and on its side Syriza overplayed its hand. Syriza could have toned down its iconoclasm and begun to negotiate more politely while attempting to make allies of other eurozone nations. Changing the tone of the negotiations would have confused the opposition even further and kept them off balance. But Syriza kept up its strident tone. Tsipras and Varoufakis made a rapid tour of European capitals, but their confrontational approach won them no friends. Syriza hoped for the support of Spain, Portugal, Ireland and Italy, other countries in the eurozone also suffering poverty and high unemployment, but no support from any of these countries was forthcoming. The governments of these nations did not want to support a party that opposed Germany for fear that if Syriza's stand was seen to be successful, their own constituents would seek to drive them from power as Syriza had deposed the previous Greek coalition in the election of January 25, 2015.

But there was a more important dynamic at work which Syriza ignored at its peril. That has its origin in the dynamics of the pack. In any club there is usually one powerful member who attracts other members to form a cabal so that together they rule the club between them. In the club of the eurozone, the top-dog is Germany and the Netherlands, Finland, Austria, and a newcomer Slovakia are the supporting vassals. As anyone familiar with pack behavior knows, members of the pack will inevitably shun a newcomer who is critical of the leader for fear of losing their standing in the pack and becoming outsiders like the newcomer. To confirm that pack behavior is what is working here, one has only to look at the videotapes of the Netherlands' Finance Minister Jeroen Dijsselbloem leaning over German Finance Minister Schaeuble's wheelchair as the two allies confer. Dijsselbloem looks like a poodle -- a large, well-coiffed, curly dog -- in contrast with his smaller, dour and far deadlier German counterpart.

Syriza perceived correctly that in this club, it could never be a member of good standing. Greece started as the bad-boy of Europe (because it owed so much money,) and under Syriza's leadership, it became a rebel-reformer and a very bad boy indeed.

Greece's lack of status was an impediment to negotiations, but given Germany's immediately hostile stance, there may have been no other option available to Syriza than to behave like an outsider. Tsipras adopted the tactics of his Finance Minister, and gave the drama an unexpected twist by walking out of the eurozone talks at the end of June and calling a referendum. The eurozone leaders were used to controlling the timing of negotiations themselves, always taking the decision down to the wire. But Tsipras stole a march on them, by breaking the talks off altogether and calling a referendum ostensibly to give the Greek people the last word.

From its conception the referendum was doomed to have zero substance. The "NO" question was "Do you approve the proposal of the eurozone of June 25?" -- a question which seemed clear enough until you remembered that the eurozone's June proposal had already been withdrawn. The "YES" vote was totally obscure, much of it written in English, which many Greek voters could not read. Some "YES" supporters say the overwhelming victory for the "NO" side stiffened resistance in the eurozone, so that the end result was an agreement less favorable to Greece than the proposal which the referendum had rejected.

That cannot be determined, and anyway it is beside the point. Tsipras was not thinking of the end result when he called the referendum, but to rally the support of Syriza's own voters. The referendum was like the gesture that the young British tennis star Heather Watson recently employed to give herself courage in her remarkable near victory over Serena Williams at Wimbledon. Every so often the twenty-three year old would raise both arms in a gesture that invited her supporters to stand up, and whenever she did that, which was not often, most of the predominantly British audience at Centre Court would jump to its feet. Tsipras's referendum served largely the same purpose -- to give the Greek people a necessary chance to express their opposition to austerity, and 61 percent of Greek voters were happy to stand up, even if it meant bringing on more opposition from the eurozone and achieving a less favorable agreement in the end. Having had their moment to give a resounding "NO," the Greek people were then more prepared to let their government say "YES."

And in the process, Tsipras could not be accused of capitulation. He had opposed the eurozone defiantly -- by a gesture. Greeks may not be good at consistent politics, but they are masters of political theater. And the drama that ensued was the epitome of Greek political theater, which in addition to its dramatic value, brought some tangible results. Not only did it draw negotiations out farther than even the eurozone euphemizers were used to doing, but it made something happen in the eurozone that Syriza could have been wishing for from the start: Germany's leadership of the eurozone was challenged.

An irreverent outsider may be admitted to a pack only if someone with enough stature to stand on an equal footing with the pack leader offers support for the newcomer's position. Earlier in the spring, Varoufakis had hoped to elicit such support from British Prime Minister David Cameron, who although not a representative of a eurozone country was able to stand on an equal footing with the German Chancellor Merkel. But in the end, a likelier and closer rival to Germany emerged from the eurozone itself, someone who dared to stand in opposition to the German chancellor and champion the cause of Greece. This man was the reluctant hero President Hollande of France. French officials even helped the Tsipras government draft its counter-proposal to the eurozone, and France became the first eurozone country to speak in favor of the Greek platform.

Hollande may have been prodded to act by U.S. President Obama, who in turn had become afraid that Russia's influence in Greece would give it the opportunity to meddle on the continent of Europe. Or his action may have been the result of French fears that if Germany succeeds in driving Greece out of the eurozone, other economically weak countries will also be pushed out, and France will be left with a collection of feeble southern allies as the sole opposition to the German-led cabal from the north.

Such a turn of events shows how far the conflict in the eurozone has progressed from a simple disagreement over the sustainability of Greek debt. By now it has become a public confrontation between two member states -- Germany and France -- each with opposing views on which direction the eurozone should take. If the previous ruling coalition had remained in power in Athens, no one in Europe would be discussing this question. The fact that people are doing so now is a testimony to Tsipras's and Varoufakis's success in directing the agenda. Even the International Monetary Fund has broken ranks with its fellow creditors to declare that Greece's debt is unsustainable, just as Syriza said. Here we must remember that the first person to raise that question publicly was an eccentric and outspoken economist named Yanis Varoufakis.

Last month, it was rumored that Tsipras had asked for Varoufakis's resignation as a concession to those in the eurozone who found him a disruptive influence. After the referendum, Varoufakis tendered his resignation, referring to the fact that some people in the eurozone would be made more comfortable by his absence.

Varoufakis was able to appear conciliatory and helpful to his boss, but he may also have had another less altruistic motive in doing so. By resigning when he did, Varoufakis has avoided any stigma that may attach to what in the future may be seen as Syriza's capitulation to the eurozone. As though to confirm this strategy, Varoufakis did not even show up in Parliament for the vote to approve the government's negotiating platform (he has been opposed to eurozone bailouts for Greece since the first one in 2010.)

If he had been present, he would have had to abstain or vote against his own government, and that might have been a reason to stay away. In any case, the work he was best at and which he was appointed to do, as a publicist and gadfly -- that work was done. As much as anyone in Syriza, Varoufakis was responsible for drawing attention to the bankruptcy of austerity and ultimately for cracking Germany's fa├žade of monolithic dominance over the eurozone. Having completed these two tasks, (Hercules himself performed only five more,) the mercurial professor could go home to his weekend house on the island of Aegina and let Syriza grapple with the contradictions that Tsipras's series of gestures had left behind.

These are not Varoufakis's responsibility and he will not be blamed for them. By his own light, his role in the negotiations was successful -- he created publicity for Greece's plight and for himself, and he will not have to pay the price for it, no matter what anguish the Greek people have suffered in the last five months, or what the delayed agreement will finally cost them.

As we've seen since, Yanis Varoufakis has much more to say on the subject of Greece and the eurozone and other questions of economic polity. [See here and here, for example.]


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