Europe

Greece debt crisis: How did Yanis Varoufakis do?

Yanis Varoufakis Image copyright Reuters

I recently met Greece's former finance minister, Yanis Varoufakis, in the lobby of a five-star hotel in Athens.

Our meeting came at the end of a tumultuous week in Greek politics. It was just hours after last week's reshuffle in which Greek Prime Minister Alexis Tsipras had sacked rebellious ministers. Since then, Greece's credit rating has improved along with its liquidity status, curbing expectation of a "Grexit".

Two days earlier, anti-austerity protests had turned violent in the wake of the Greek parliament approving the latest bailout deal. At the same time Mr Varoufakis was leading an attack against his own government's plans inside the chamber.

So now, at the culmination of months of failed negotiations, ugly street scenes and a very unpopular deal for the Greek people, I asked him if he was sorry not to have resolved things sooner.

Without taking a breath, he reminded me of the recent referendum, which fell 61.5% in his favour, to prove he acted with the will of the people.

His voice then changed to that of a leader facing down his adversary at the dispatch box, rising an octave to deliver what seemed to be his killer blow.

His answer has since stuck in my head:

"Your question, sir," he said, "is the equivalent of putting to the British people in 1940 that Winston Churchill's speech, with which he raised the sentiment of the British people against the invaders, was responsible for the suffering of the Londoners after the Blitz or during the Blitz. The shortages, the rations, and so on and so forth. There's no doubt that freedom and rationality sometimes needs to be defended by means of a great deal of suffering. But to turn to the victims and blame them for what the villains have done is the height of audacity."

Image copyright PA
Image caption Was Churchill to blame for Londoners' suffering during the Blitz? asks Varoufakis

'Unachievable' promises

Amid the bravado was perhaps an acknowledgement that he thought suffering was a price worth paying. But for what ends?

To help answer this, I turned to two economists.

Athens-born economist Vicky Pryce thinks Mr Varoufakis let negotiations with the eurozone leaders go on for too long.

"The fact remains that the Greeks got nothing in return from six months of negotiations. Tsipras and Varoufakis should have realised the promises they made to people were unachievable," she said.

She said that last year the economy had been showing signs of recovery, banks had easily raised equity and the government was able to borrow three- and five-year bonds.

Image copyright Reuters
Image caption The Greek parliament has passed a second set of reforms but PM Tsipras has stressed that he is not happy with the measures imposed

But delays caused by the current government's protracted negotiations put paid to that. As a result, she said, some firms closed down and businesses disappeared.

Vassilis Pesmazoglou, assistant professor of economics at the University of Peloponnese, agreed that the stalled negotiations had a negative, or in his words, "recessionary" impact.

"The referendum decision, especially given its timing and its predictable capital controls consequence, gave a further downward push to the economy: instead of a 2.8% growth, Greece is now expected to have a -3% [or even higher] recession in 2015 and a milder one in 2016," he said.

Achieving results

If Mr Varoufakis had been relying on the threat of a Grexit to force the creditors' hand, it wasn't going to work.

Mr Pesmazoglou said it gradually became apparent over the past few weeks that neither the markets nor the eurozone had a great difficulty with Greece leaving the euro and that it was actually the preferable option for several German politicians.

Yet the shaven-headed, leather-jacket-wearing Mr Varoufakis, who has been dubbed the rock star of politics in the media, has used his belligerent style to achieve results.

Vicky Pryce said that debt negotiation is now widely accepted as necessary for Greece's long-term recovery with the alternative of no action taken by creditors to reduce debt seen as "unsustainable".

"That will encourage a re-think for what happens with the rest of the eurozone - look to Portugal and Spain. The last few months has brought this out and Varoufakis was instrumental to that," according to Ms Pryce.

"Varoufakis has exposed the problems of Greece, the eurozone, the undemocratic way decisions have been made about other countries and the divisions between the creditors, leading to the rise again of France as an important decision maker when it looked like Germany was running the show," she added.


Varoufakis soundbites

Image copyright AP
  • Greek bailout is like "fiscal waterboarding"
  • The euro is like Hotel California in the Eagles song - a place where "you can check out any time you like but you can never leave"
  • Varoufakis is "the George Clooney of the government", said Nikitas Kaklamanis, a centre-right New Democracy politician
  • "So let us default! Now! With a smile and optimism!" - Varoufakis in April 2010
  • "Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders - the Greek taxpayer"

Profile: Yanis Varoufakis, Greek bailout foe

Yanis Varoufakis: In his own words

Rhetoric ramped up as negotiations struggle


Narcissist?

In his latest performance, since we met, Yanis Varoufakis actually voted with the government on Wednesday night, in favour of a crucial set of reforms that needed to pass to allow bailout talks to finally begin.

For some Greeks, the motorcycle-loving Marxist economist has become difficult to predict.

Image copyright EPA
Image caption Yanis Varoufakis: The rock star of politics?

One Athens-based mother, who regularly watches the politician on the news, told me his approach appeared inconsistent at times, heavily criticising the deal but then offering his support where necessary. She also said she believed he was a narcissist at times.

Reflecting on my brief encounter with Mr Varoufakis, I was struck by how resolutely he maintained his unyielding stance. Once that might have been seen as strength. Now, with his ideas put to the test, and Greece still in turmoil, I wonder if it seems more like weakness.

Yet according to Mr Varoufakis, historians would look back on this period when Europe went against its history and, in his words "crossed its own soul".

Certainly it seems likely they will be interested in the impact of this man on the way in which eurozone business of the future is conducted.

More on this story