by “A gripping tale of an outspoken intellectual’s sudden immersion in high-stakes politics,… an attempt to divine why smart, seemingly decent politicians and bureaucrats would continue pushing a pointlessly cruel approach long after its pointlessness had become clear.” “Varoufakis wasn’t always trying to make waves. And he seems to have approached his chief task with great seriousness.” Why the Greek Bailout Went So Wrong by Justin Fox, New York Times, 17th November 2017 (Click here for the NYT site) Short of leaving the euro, a move with no precedent or procedure and a high risk of cascading chaos, this was not an option for Greece. So in May 2010, the European Commission, European Central Bank and
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“A gripping tale of an outspoken intellectual’s sudden immersion in high-stakes politics,… an attempt to divine why smart, seemingly decent politicians and bureaucrats would continue pushing a pointlessly cruel approach long after its pointlessness had become clear.”
“Varoufakis wasn’t always trying to make waves. And he seems to have approached his chief task with great seriousness.”
Why the Greek Bailout Went So Wrong
Short of leaving the euro, a move with no precedent or procedure and a high risk of cascading chaos, this was not an option for Greece. So in May 2010, the European Commission, European Central Bank and International Monetary Fund stepped in with what was characterized as a 110 billion euro ($146 billion at the time) bailout.
It wasn’t so much a bailout of Greece, though, as of its lenders, notably the struggling big banks of France and Germany. Greece still owed an impossible amount of money, only now its main creditors were the “troika” of E.C., E.C.B. and I.M.F., which went on to impose harsh austerity measures. That austerity accelerated Greece’s economic decline, making repayment of its debts even less likely. More bailouts that weren’t exactly bailouts followed.
“Fiscal waterboarding” is the name that the University of Athens economist Yanis Varoufakis gave to this process, after the torture method that simulates near-drowning again and again. And just as intelligence experts generally don’t think waterboarding is an effective way to extract information, it is hard to find an outside economic or financial expert who thinks the troika’s Greece policy has been effective or sensible.
So why has it continued? This is the most important question Varoufakis sets out to answer in this account of the six months he spent as Greece’s finance minister in 2015. “Adults in the Room” is several things: a gripping tale of an outspoken intellectual’s sudden immersion in high-stakes politics, an at times overwrought riposte to the many people in and outside Greece who derided his efforts and a solid work of explanatory economics. Most of all, though, it is an attempt to divine why smart, seemingly decent politicians and bureaucrats would continue pushing a pointlessly cruel approach long after its pointlessness had become clear. The book’s subtitle (“My Battle With the European and American Deep Establishment”) might lead a reader to expect all manner of sinister machinations. But while there are a few internal Greek political plots that can be fairly described as conspiracies, at the international level it’s mainly what Varoufakis calls “an authentic drama … reminiscent of a play by Aeschylus or Shakespeare in which powerful schemers end up caught in a trap of their own making.”
At the outset of the narrative, the former United States Treasury secretary Lawrence Summers asks Varoufakis in a dimly lit hotel bar in Washington, D.C., whether he is an “insider” or “outsider,” warning that outsiders (those who “prioritize their freedom to speak their version of the truth”) tend to have a hard time getting anything accomplished in government.
Varoufakis was and is obviously an outsider. He had made his name with colorful critiques of Greek and European economic policies. Even as he allied himself with Alexis Sipras and his leftist Syriza Party to run for office in January 2015, he didn’t actually join the party. And once in office he continued to behave in ways that finance ministers aren’t supposed to, tooling around Athens on his Yamaha XJR motorcycle and famously showing up for a meeting on Downing Street in a too-tight, too-bright blue shirt and a leather overcoat described by one British fashion writer as a “drug dealer’s coat.”
That bold fashion statement, Varoufakis recounts, was unintentional — the result of leaving his suitcase in a cab in Athens two days before. Arriving in Paris on a Saturday evening after most stores had closed, he had to make do with a couple of shirts from Zara and a coat borrowed from the Greek ambassador to France.
So Varoufakis wasn’t always trying to make waves. And he seems to have approached his chief task with great seriousness. He got Summers on his side, with the Harvard economist frequently emailing and calling with advice and information. Playing an even bigger role was Jeffrey Sachs of Columbia, who helped Varoufakis craft his debt restructuring proposals and accompanied him to meetings with European and I.M.F. officials. James Galbraith of the University of Texas, who had brought Varoufakis to Austin as a visiting professor, holed up at the finance ministry in Athens to develop contingency plans for a Greek exit from the euro. Other members of Varoufakis’s kitchen cabinet included the former chancellor of the Exchequer Norman Lamont (a Tory), the former Deutsche Bank chief economist Thomas Mayer and even, on occasion, the French economy minister (now president) Emmanuel Macron. This was no amateur hour. That the effort nonetheless ended in failure seems to have been only partly about that insider-outsider thing. A bigger obstacle was political deadlock in the country that now calls almost all the shots in Europe.
Varoufakis had hoped to engineer an orderly bankruptcy for Greece within the euro, with the country’s debts significantly reduced and austerity scaled back. Failing that, though, he was willing to pull Greece out of the euro and go the sovereign-debt-crisis route.
The German finance minister Wolfgang Schäuble, the dominant figure in European financial affairs, openly favored the latter course. His harsh but not entirely unreasonable view was that it had been a mistake to let Greece into the eurozone, and that the only way forward was for Greece to leave. Chancellor Angela Merkel, on the other hand, was unwilling to contemplate a “Grexit” that might lead to an unraveling of the common currency. But she was also unwilling or unable to force Schäuble to offer a better deal to Greece. The result, as Varoufakis writes: “Stalemate!” Reinforcing the stalemate was what Varoufakis calls the “eurozone runaround,” the repeated protestations from officials at the E.C., E.C.B. and I.M.F. that, while they sympathized with Greece’s plight and agreed with many of Varoufakis’s recommendations, they alone couldn’t change the troika’s course. Jack Lew, then the United States Treasury secretary, similarly offered sympathetic words but made clear that he had no interest in crossing the Germans. The end finally came in July 2015, when — right after 61 percent of Greek voters decided to reject the latest “bailout” from the troika — a fearful Sipras chose nonetheless to submit. Varoufakis resigned after that.
Varoufakis does a magnificent job of evoking the absurdities and frustrations of his tenure. This is what it’s like to go from meeting to interminable meeting for six months, trying and failing to negotiate your country’s way out of a terrible impasse.
At least, this is what Varoufakis says it was like. I did wonder on occasion how much I could trust his play-by-play. I’m reviewing this book, not fact-checking it, but I couldn’t resist asking Summers for his assessment of the opening scene in the hotel bar. “Somewhat embellished,” was the verdict. Leaving aside whether Varoufakis’s recollections might be more accurate than those of a man who has met with so many embattled finance ministers over the past quarter century that he has probably lost count, I’m good with that. A truth somewhat embellished is still pretty much the truth.