Greece had no choice but to fold when the EU united against it—a precedent the UK's negotiators would do well to noteby Chris Bickerton / June 20, 2017 / Leave a comment
Adults in the Room: My Battle with Europe’s Deep Establishment by Yanis Varoufakis (Bodley Head, £20)
Berlin Rules: Europe and the German Way by Paul Lever (IB Tauris, £17.99)
On 24th April 2015, the Greek finance minister, Yanis Varoufakis, attended a meeting of his Eurozone counterparts in the Latvian capital, Riga. Believing the gathering to be largely ceremonial, a sop to the Latvian government which held the rotating presidency of the European Union at the time, Varoufakis was expecting a short session on uncontroversial matters. Instead, the EU’s big hitters—in particular the Eurogroup’s Dutch president Jeroen Dijsselbloem and the German finance minister Wolfgang Schäuble—ambushed him. They threatened him with “plan B,” the vague term used to refer to Greece’s exit from the euro.
Journalists covering the meeting reported that Varoufakis, a radical, leather-jacketed game-theory specialist turned politician, had lost his temper. They claimed that other finance ministers had called him all manner of names, from “gambler” and “amateur” to “time-waster.” There was even talk of a scuffle, something unheard of at these usually soporifically dull meetings. As if to confirm that there was no smoke without fire, Varoufakis had declined the invitation to attend the Eurogroup dinner, preferring to enjoy beer and sausages with his Greek entourage. Stories of his growing isolation from the rest of the Eurozone tribe spread across the media.
A month later, in a long interview with the New York Times, Varoufakis dropped a bomb. All the allegations about name-calling in Riga were false, he said. The meeting had remained perfectly civil—and he could prove this because he had recorded it on his mobile phone. Though he said he could not release the transcript because of confidentiality, his message to the media—and those who had confected the story—was clear: tell the truth, or I will prove you wrong.
With that kind of material in his back pocket, and with a fondness for provocation and controversy, it was only a matter of time before Varoufakis—who was removed from his post in July 2015, after just six months—spilled the beans. The result is Adults in the Room—a whistle-blowing memoir that doubles as a penetrating analysis of the eurozone crisis, one caused in Varoufakis’s view by the stubbornness and ideological dogmatism of what he calls Europe’s “deep establishment.” As Britain prepares to enter exit negotiations with the EU, many will turn to this book for insights. Varoufakis thinks he can help—he wrote an open letter to Theresa May in the Evening Standard in which he urged her to “listen and learn from our Greek tragedy.”
“Varoufakis spills the beans—exposing the dogmatism of what he calls Europe’s ‘deep establishment'”
Adults in the Room has a fly-on-the-wall quality that makes it a captivating read. Those who come out worst are Europe’s social democrats, the French and the Germans in particular. In one meeting, Sigmar Gabriel, the Vice-Chancellor of Germany and until recently the leader of the Social Democrat Party (SPD) tells Varoufakis about his recent yachting holiday in Greece. Gabriel had repeatedly offered to pay his mooring fees, only to be told that there was no rush and that he could pay “whatever he wanted,” a sign in his view of the excessive “informality” that characterises Greek economic life. Varoufakis generously folds Gabriel’s remark into a wider conversation about tax evasion, but the reader cannot help thinking that the German’s main interest in Greece is as a picturesque location for his sailing trips.
The hypocrisy of centre-left politicians, who express sympathy with Varoufakis in private but then toe the austerity line in public, is dispiriting. France’s former finance minister, Michel Sapin, is one more culprit. The behind-the-scenes camaraderie towards Varoufakis, in Sapin’s case, comes from his interest in the ancient coins of Aegina, a Greek island near Athens. This fascination with Greek history contrasts with his unforgiving public pronouncements on the fate of contemporary Greece.
The book, whatever its merits, is far too long. Chunky quotations of articles, written by Varoufakis when he was finance minister, fill its many pages. For someone who is churning out a book a year, this copy-and-paste approach is understandable, but it does not make for very good reading. Many of the anecdotes, however entertaining, are already well known. The story behind the hunting coat, which Varoufakis wore for his visit to George Osborne and the British press compared to something a Russian mafioso might wear, has already been recounted in a profile of Varoufakis in the New Yorker over two years ago.
So what do we really learn from Adults in the Room? A lot about the Eurogroup, which is one of the most powerful institutions in the EU and also one of the most shadowy. Varoufakis helps us to grasp how this institution is supposed to tick. The Eurogroup is where finance ministers from eurozone member states decide euro-relevant policies. The European Central Bank (ECB) is in charge of monetary policy and the Eurogroup provides political oversight and accountability—after all, it is made up of ministers from democratically elected governments.
The truth, though, is more complicated. The Eurogroup Working Group, a preparatory committee, does much of the Eurogroup’s grunt work. This group is staffed by economists drawn from eurozone member states. Thomas Wieser, its current chair, has a limited public profile that is entirely out of keeping with his power. Wieser also chairs the Economic and Finance Committee, the body charged with preparing the meetings of all of the EU’s finance ministers. According to Varoufakis, Wieser is far more powerful than either the president of the European Commission, Jean-Claude Juncker, or Pierre Moscovici, commissioner for economic and financial affairs. Indeed, Varoufakis writes that at times Wieser seemed to “run the whole show,” a worry given how few people know that he exists.
We also learn a great deal about the inner dynamics of Eurogroup meetings. There are 19 members of the eurozone and finance ministers from these countries sit on the two longest sides of a huge rectangular table. At each end are the key players: on the one side, the president of the Eurogroup and his deputy, the chair of the Euro Working Group, and representatives of the International Monetary Fund (IMF). At the other end are the president of the ECB, Mario Draghi, and another member of the ECB’s executive board, along with two European commissioners.
Eurogroup meetings proceed as follows. The chair, Jeroen Dijsselbloem, raises an agenda item, and asks representatives from “the institutions,” which in the context of the debt crisis meant the Troika—the Commission, the IMF and the ECB, in that order—to give their view. Only then do finance ministers of member states speak up. Having received no real briefing on the matters being discussed, Varoufakis concludes that “the purpose of the Eurogroup is for the ministers to approve and legitimise decisions that have already been taken by the three institutions.”
All of this makes the Eurogroup sound like governing body meetings in Oxbridge colleges, where fellows spend much of their time rubber-stamping decisions made by the master and the bursar. Or, indeed like any committee where what really matters is decided behind the scenes in advance. Decisions that are meant to be taken by consensus are actually the result of what sociologists call “apparent consensus”—the absence of obvious opposition, rather than any positive endorsement. The story is familiar to many of us who attend such meetings. The chair asks if everyone agrees. There is a sullen silence, and then the chair says, “wonderful, so we are all agreed on this, let’s move on.” No one really believes there is agreement but nor is anyone willing to disrupt the ritual for fear of provoking a real discussion.
Understood in this way, it is easy to see why Varoufakis became such a hate figure. His boss, the Greek Prime Minister Alexis Tsipras, was told that negotiations would only continue if there was a change in finance minister. Varoufakis certainly lectured his peers and berated them for believing in a Greek recovery that did not exist, even on paper. But his real sin is challenging the “apparent consensus,” and bringing into the Eurogroup a debate about the eurozone and its policies.
Why did the finance ministers of countries like Spain and Slovakia round on him? Not because they wanted Greece to suffer as they had. Their grudge was far more personal. By tearing up the consensus, Varoufakis exposed them as cowards. He revealed how little they had challenged Germany’s interpretation of the euro crisis. The more Varoufakis argued, the more they could see how low they had sunk. For that reason alone, he had to go.
Perhaps in an effort to salvage relationships with Europe’s political heavyweights, Varoufakis goes out of his way to say that all the main protagonists meant well. The nastiness dished out to Greece was done with the best of intentions. This view bears little correspondence with the general belief in Greece and many other crisis-hit southern European countries, which is that Germany was to blame. Germany rules Europe and Germany is implacably opposed to transforming the EU into a “transfer union,” where the continent’s haves distribute to its have-nots. Only this kind of union could save Greece, goes the argument, and so German intransigence is to blame for Greek misery.
A book that challenges the temptation to blame Germany is Berlin Rules by Paul Lever, the British ambassador to Germany from 1997 to 2003. A career diplomat, Lever is one of the UK’s best informed Europeanists. He spent his entire career at the Foreign Office and all his postings were to European destinations: Helsinki in the late 1960s, Vienna in the early 1990s and finally Germany.
Lever’s book is an excellent introduction to German politics and society, with chapters on the economy, the federal political system and foreign policy. At times, it reads like its subject is actually the EU rather than Germany proper; but that is testimony to its accuracy. German politics is so embroiled in European affairs that the borders between what is German and what is EU-related can be difficult to trace. The EU is, for Germany, its main political terrain and Germans like to think of themselves as living in a “European Germany.”
At the heart of Lever’s book is a puzzle. Germany dominates Europe in countless ways, from its ability to set the rules for the eurozone to its shaping of pan-European policies on refugees and on foreign policy. We are living in what Lever calls Germany’s “golden age of power.” But Lever also recognises that German leadership of Europe contains within it no particular project or vision, and no desire for domination. Lever quotes favourably the phrase of Willie Paterson, a well-known specialist on German politics, that Germany is a “reluctant hegemon.” Lever observes that, “Germany certainly exercises power in Europe and provides the impetus for all the EU’s decisions,” but “there is no goal which these decisions are intended to serve, no light at the end of any tunnel, no crock of gold at the end of any rainbow. It is… power without purpose.”
“No one really believes there is agreement but nor is anyone willing to disrupt the ritual for fear of a real discussion”
For those of us who wish to understand the EU, and the eurozone crisis that engulfed the continent and brought Greece to the edge of a humanitarian disaster, these are astonishing words. The blame game around the eurozone crisis has focused on profligate Greeks and the austerity dogma of Chancellor Angela Merkel and Schäuble. It turns out that a different explanation is required.
The categorical rejection by Germany of any significant debt relief for Greece has its origins in German public opinion, where there is virtually no support for more generous alternative policies involving redistribution from creditors to debtors. This is not a product of neo-liberal ideology but reflects, as Lever explains, Germany’s own social make-up and the reality that many Germans are feeling decidedly pinched.
The German export miracle has relied on wage suppression and labour market reforms. This has brought insecurity to many Germans, and has created a class that identifies itself as victims of the “Hartz IV” unemployment benefit reforms which came into effect in 2005. Though collectively wealthy, individual experiences of the economic miracle in the country are extremely variable. In its negotiations with Greece, the German finance minister was immovable because his political mandate was clear: Grexit was preferable to creating a transfer union by stealth.
On the Greek side, the terrible pathos of the events of 2015 has its origins in the incompatibility of the Tsipras government’s policy positions. It wanted to negotiate a new deal with its creditors, but without ever considering default as a serious option. Time and again, in Adults in the Room, we see Varoufakis as a political loner, making bizarre “covenants” with Tsipras and his entourage that had no meaning outside the rarefied atmosphere of Maximos, the prime minister’s residence in Athens. A faction of their Syriza party—Left Platform—was serious about Grexit, but the more moderate Tsipras outmanoeuvred it. Varoufakis’s greatest failing was not his narcissism or his vanity—hardly unusual in a politician. It was his utter lack of interest in Greek politics and naïve faith in all things European. The only place where he could have built up a coalition around his own negotiating position—which was to renegotiate terms with creditors but accept that Grexit was better than a third bailout—was in Greece. He had no interest in doing this, preferring instead his celebrity status as a renegade and iconoclast.
“The euro transforms Germany’s economic hegemony into a depoliticised set of rules and policies”
Putting the two books together, the lesson for the eurozone is clear if sombre. The euro is “There is no alternative” writ large. Any element of political choice, understood as a real debate about the ends pursued in the name of creating a just society, has gone. The eurozone is an uncontestable policy space. In moments of crisis, as in 2015, the criterion for decision-making is that of the euro’s survival, which is the only thing that matters. In normal times, decisions are made with reference to the rulebook. Germany’s attachment to the euro partly reflects the economic benefits the currency has conferred upon it; these, after all, have been some time in coming and required painful adjustments domestically. The euro also transforms Germany’s economic hegemony into a depoliticised set of rules and policies, where power is exercised on its behalf by “the institutions” rather than by any national government, so Berlin does not need to “rule” in any direct way. The euro-regime dilutes national political responsibility for macro-economic policy choices, which is why Varoufakis found negotiating with the Eurogroup so frustrating.
Should these books find their way into the inner circle of the UK’s Brexit negotiators? The answer is yes. Lever’s book tells us that Germany is happy with the status quo and will do a great deal to preserve it. This bodes badly for a British government seeking a bespoke agreement with the EU, as does the German government’s lack of vision and wider purpose. For a continent facing so many other challenges, the Article 50 negotiations might have been an opportunity for a debate about the meaning of European cooperation in the 21st century. There is clearly no appetite for this kind of debate, which is regrettable as it suggests there is no longer any difference between a vision of Europe and the EU as it is currently configured.
Varoufakis’s book also tells us that when negotiating with the EU, one has to be serious about leaving the room if the deal on offer is a bad one. The Greek government never was, which is why its negotiations with the Troika failed so spectacularly. Theresa May said that “no deal for Britain is better than a bad deal.” There is little evidence that she meant it or even realised its full implications. Whoever eventually leads the UK into the Brexit endgame should beware. It is very likely that the EU will call their bluff.