EuroFinance report: Yanis Varoufakis on the EU’s ‘destructive mind-set’

Yanis Varoufakis served as Greece’s finance minister for little more than half a year, from January 2015 when the leftist Syriza party came to power to July that year when he was resigned following the failure of negotiations with Greece’s creditors. Despite this, he drew a capacity audience as keynote speaker on the third and final day of the EuroFinance international treasury and cash management conference in Vienna.

Syriza’s election success was based very much on its pledge to renegotiate the terms of Greece’s bailout loans and significantly ease the austerity regime that plunged the country into a steep recession. However, Varoufakis told his audience that Brussels had refused “realistic negotiations” on easing the harsh conditions that were applied in return for Greece’s financial rescue.

Officials from both the European Commission (EC) and the European Central Bank (ECB) had instead exhibited “a degree of contempt” for his country, symptomatic of a “destructive mind-set” prevailing in Brussels. This had most recently been evidenced by EU council president Donald Tusk’s warning to the UK that it only options were a ‘hard Brexit’ or no Brexit at all following the British electorate voting to withdraw from the EU.

Although Varoufakis revealed that he actually supported the ‘Remain’ camp in the recent EU referendum, in his presentation he was unsparing in his criticisms of the EU and its institutions. The ECB is “the least independent central bank in history”, despite any protestations to the contrary, Mario Draghi.

The policy of quantitative easing (QE) that the bank embarked on 18 months ago only got underway as the US Federal Reserve was bringing its own QE programme to a close – a “failure of synchronicity” that has proved highly damaging for the global economy. The ECB’s bond repurchasing policy effectively contravenes its charter, but has been pushed through thanks to the EU’s favourite policy of fudge and has done more to damage German savings and pensions than alleviate debt in other stricken Eurozone countries such as Spain and Portugal.

Itexit after Brexit?

Nor is Varoufakis a supporter of the euro – “a terrible currency that is asphyxiating my country” – although he added that he is not opposed to the concept of a single currency. Asked whether other EU member countries could follow the UK in heading for the exit, he cited Italy as a possible contender as the country is “the most telling case of the euro’s failure”. Even though Italy runs a current account surplus and its government budget is in surplus, its economy – and banking sector – is very evidently in trouble as a result of being caught up in the eurozone and the eurosceptic Five Star movement leads in the opinion polls.

However “those of us who dislike the eurozone nonetheless have a moral duty to try to fix it,” the former finance minister declared. As for the UK, he suggests that following the referendum result the country needs “seven years of stability” that would enable it to decide just what form it wishes Brexit to take.

This would best be achieved by UK prime minister Theresa May triggering Article 50 immediately, rather than delaying further. The UK should then negotiate an interim trade deal through a five-year temporary membership of the European Economic Area (EEA), in the same way that Norway has done – a recommendation also made recently by The Economist magazine, which is part of the same group as EuroFinance .

“The next UK government can then debate what future relationship it wants with Europe,” concluded Varoufakis, who was also asked which candidate he supported in the US presidential election. “I’ve been highly critical of Hillary Clinton in the past – indeed. I consider her dangerous,” he replied. “Nevertheless, I would recommend holding your nose and voting for her.”

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