The German taxpayers should be happy to have SYRIZA in Greece, says economist Yanis Varoufakis in an interview. Greece is not unwilling to reform.
ZEIT ONLINE: Mr. Varoufakis, the Greeks say they want to keep the euro but vote for SYRIZA and its leader Alexis Tsipras, whose plan could lead to an exit from the monetary union. How does that work?
Yanis Varoufakis: SYRIZA also wants Greece to remain in the eurozone. But, at the same time, it wants to renegotiate the austerity program, because it doesn’t work. Just about everyone who knows anything about economics knows that by now.
Two weeks ago, the Greek government had to borrow $4.2 billion from the European Financial Stability Facility (EFSF) rescue fund at an interest rate of about 4 percent. The government then handed back the equal sum to the European Central Bank to redeem maturing Greek government bonds. So, Greece borrows money from one EU body only to give it back to another EU body almost immediately. At the same time, austerity imposed on the country is driving it into bankruptcy. How is Greece supposed to ever pay back its debt?
SYRIZA wants to stop debt service.
Greece will eventually reach a point where, under the existing conditions, it can no longer remain a member of the eurozone. SYRIZA says: We can’t go further if we want to keep the euro. We can’t take your money on the terms that make it impossible for us to repay you. The party is acting responsibly when it clearly says that to Europe. I would have thought that the German taxpayers would appreciate that.
Even if Tsipras became prime minister, he would have to continue the austerity measures, because the Greek government is spending more than it takes in. Isn’t he deceiving his voters?
Of course, there’s no way around poverty and hardship. The Greeks know that, too. But to put it bluntly: hardship is one thing; an austerity policy based on the theory that the public debt can be reduced by lowering public spending and raising taxes at the same time is quite another thing. Greece, Portugal, and Spain have also shown that this course just doesn’t work.
Many accuse the Greeks of doing too little. Are the reforms really just going slowly?
It is absurd to accuse the Greeks of being lazy or unwilling. Europe has completely failed to understand what is happening in Greece. The country isn’t just in a simple recession. Even well-run enterprises are going bankrupt because the circulation of money has collapsed.
Credit is the lifeblood of the economy, but in Greece there is no credit, nor is there any trust. A friend of mine has owned a profitable business for decades. Its order book is full, and 95 percent of its products are exported. Nevertheless, the company is close to collapse because it can’t get raw materials and intermediate goods any more. If a functioning company in Germany lost access to credit, it would go down, too.
What is a solution that improves the situation in Greece and is politically acceptable to both Greece and the other eurozone countries?
We must change the fundamental structure of the eurozone. The European banks must be regulated centrally and recapitalized by the EFSF or the European Stability Mechanism (ESM). Then the national debts must be partially collectivized. A common currency area with separate national debts does not work. With separate national debts, we are virtually inviting speculators to bet against one country or another. We also need an investment policy. The European Investment Bank would be the right organization for it.
Yanis Varoufakis is an economist at the University of Athens. His latest book is The Global Minotaur. Read his blog at yanisvaroufakis.eu. The original interview “‘Syriza handelt verantwortungsvoll'” was published by ZEIT ONLINE on 6 June 2012. Translation by Yoshie Furuhashi (@yoshiefuruhashi | yoshie.furuhashi [at] gmail.com). Cf. “I recommend that (even those who have Greek amongst their languages) you do not read their [Syriza’s] manifesto. It is not worth the paper it is written on. While replete with good intentions, it is [s]hort on detail, full of promises that cannot, and will not[,] be fulfilled (the greatest one is that austerity will be cancelled), a hotchpotch of policies that are neither here nor there. Just ignore it. . . . No, the reason it is safe to take a gamble on Syriza is threefold. . .” (Yanis Varoufakis, “Why Europe Should Fear Fine Gael-like ‘Reasonableness’ Much, Much More Than It Fears Syriza,” 3 June 2012). For an alternative view, see, e.g., Gorka Larrabeiti, “Euro Exit? Interview with Economist Alberto Montero Soler” (MRZine, 8 June 2012).