Yanis Varoufakis
Canary in the Coal Mine

In 1998 Yanis Varoufakis was a university lecturer writing obscure texts for mathematicians from the comfort of his office. Then the 2008 financial crisis happened and he was thrust on to the global stage.

From 2009 to 2012 there wasn’t a time when you would open a newspaper and not expect to see an image of Yanis donning a leather jacket on his motorbike, the ‘wild liberal’ trying to salvage what he could of the Greek economy.  His voice was, and continues to be, a battle cry for those who see the need for deep systemic change.
He never meant to become the face of the financial tsunami that engulfed the world, but unfortunately his homeland became ‘the canary in the coal mine’ as he calls it – the country that fell first and hard. On its knees and totally bankrupt, the troika (ECB, IMF & EC) delivered an illogical hammer blow that left no way out for Greece.
Now that same merciless culling is making its way across Europe and worldwide. This malformed idea of capitalism has infected the world. However, in response to this alarming trend Yanis remains as pragmatic as ever, founding what he calls a real alternative, DIEM25.
In this sometimes unnerving interview we delve into the erratic history of capitalism, why another economic crisis is on the way and why his book Adults in the Room is so controversial it has already sparked death threats.

You were plucked from obscurity and there was a time when there wasn’t a single day where you weren’t in the news, so you became the poster child for this crisis in a lot of ways. You have now emerged from this as a vocal critic of the establishment.

Yes, before 2008, I enjoyed obscurity – but back in 2003/2004, I was trying to raise the alarm about what was going on in global capitalism. So when the crisis happened in 2008, I was immediately made aware of the fact that Europe was about to crumble, the reason being that it was the most brittle economic block within global capitalism; it was large, substantial, systemic and yet brittle. I could see that the Chinese and the Americans would find a way of rebalancing themselves, of hanging on for dear life, but Europe simply did not have the shock absorbers, did not have the institutions necessary to handle the shock waves of the ‘great financial crisis’.

"Europe simply did not have the shock absorbers."

Yanis Varoufakis on the EU financial crisis

I came out in late 2009/2010 with an article in the leading newspaper saying that the Greek state is well and truly bankrupt, and there is nothing we can do about it so we are better off embracing it, and that if we try to extend it by taking out new loans, we will be sacrificing a whole generation. This is how I became notorious in Greece. The whole establishment treated me as a national traitor; it’s like a cancer specialist being accused for a tumour.

The whole establishment, the oligarchy, was gung-ho to pretend that we were not bankrupt and that, whatever the problem, some loans would sort it out. Eventually the Greek government and Tsipras said to me that I’d been criticising the establishment for so long, and putting forward proposals as to what should happen, I’d better accept the role of Finance Minister, which I reluctantly did.

Every time they talked about my leather jacket, my motorcycle or my wife, I knew that this was an attempt of the system’s media not to discuss the real issue.

Former Greek finance minister Yanis Varoufakis arriving on a motorbike for a cabinet meeting in Athens.

So what were they trying to do with you at this point? Were they trying to smear you?

Yes it was something like that. The thing to understand is that most journalists are lazy; they just reproduce the stories that other media report.

I know the names, address and telephone numbers of people actually within the Brussels establishment, and I know exactly when these texts full of complete nonsense were sent, the purpose of which was to make sure that the public would not discuss the real issues.

Throughout this incredibly turbulent process, from 2008 to now, was there ever an awakening point where you felt like there was no going back? That you had done everything you could with your ‘cold logic’ so all you could do was capitulate?

No there was no awakening moment. My position was given from the very beginning. My position was we were bankrupt, so we don’t take new loans. Whether you are an individual, a company or a country, you do not take on new loans if you are bankrupt because there is no way you will escape the bankruptcy by doing this. If you can’t repay your mortgage, it doesn’t help to get a credit card. What you need to do is go to your bankers, restructure your debt and reduce it effectively, then you need to restructure your operation so that you are more efficient and can increase your income, and only then do you consider new loans to invest and grow.

My view was always very simple, and it is how I advised the government since 2010, what I told my friend and colleague Alexis Tsipras who then became prime minister. ‘Look, we are bankrupt and we have known this since 2010. You continued to force feed us with predatory loans so that your banks can be repaid. Now your banks have been repaid but you have shifted their debts on to your taxpayers and our taxpayers and this cannot continue.  If you don’t want to do sensible debt restructuring, sensible reforms and you insist on this idea that will shoot us down, then go on and shoot us down, try your hardest. Do we look scared?’

Yanis Varoufakis in the thick of Greek crisis talks with IMF director Christine Lagarde and current Greek prime minister Alexis Tsipras

 If you don’t want to do sensible debt restructuring, sensible reforms and you insist on this idea that will shoot us down, then go on and shoot us down, try your hardest. Do we look scared?

 Something is unravelling at the moment, and maybe the Greek crisis was the ‘canary in the coalmine’. It’s not populist demagoguery, that is just a symptom, so what do you think is really going on?

I think right now we are experiencing a postmodern version of the 1930s. If you think about it, capitalism is a very interesting beast; it goes through phases and spasms. The 1920s was a pivotal period in the history of capitalism because you had a combination of two new institutions that never existed before. One is the networked company, like Google or Apple, but back then it was Bell Company and other large corporations with multiple sites and a network. By the standards of the 19th Century, these were huge corporations. They used technology in order to create monopoly power and to create big horizontally and vertically incorporated companies. The second institution, the mega bank, was needed to finance these corporations, because they needed such huge amounts of capital, no small bank could provide that. So the first stage of financial organisations was the creation of the mega bank.

In order to make this network grow and be sustainable, it had to be globalised. So globalisation, in today’s terms, began in the 1920s, and for it to work, you had to have a fixed exchange rate that was stable between countries. When that whole thing started happening, there was huge exuberance – the roaring 20s, incredible optimism…this time things are different. Now everyone can be rich, everybody wants to have shares on the Stock Exchange. There was huge growth in the 1920s and therefore you had this explosion of the arts and the first appearance of pop music, it goes hand in hand. Then the bubble bursts with the Wall Street crash. We go through a period of civility again because of the new leaders in power who try to tame financial capital. The golden era of capitalism, between the 1950s and the 1970s, the Bretton Woods era, was predicated on the exact opposite of that; keeping things sensible. Bankers were not allowed to do crazy things anymore.

And then of course that phase collapsed and we have another roaring 20s in the 1980s and so on. So when you ask me what is happening today, it is very similar to what was happening in the 1930s, with some important differences. 2008 was our 1929.

The Great Moderation of Ben Bernanke and ‘No return to boom and bust’ from Gordon Brown, all of this was mythology, exactly like it was in the 1920s, where humanity was completely taking over by the myths that capitalism can be exponential and everyone can be rich and famous.

Yanis Varoufakis explains parallels between boom and bust period in the 1920s


So in 2008 you had the collapse of Wall Street, and very soon after that you had the fragmentation of the monetary system, especially with the Euro in Europe. Very soon after that austerity was used as a way of shifting the losses of the banks onto the shoulders of the weakest taxpayers, which is what happened in Greece this time, and also what happened in the 1930s; remember the Nazis came up because of austerity, not because of inflation. It’s a great myth that inflation was the cause of the Nazis – in 1930, Heinrich Brüning, the finance minister, imposed an austerity measure on German workers. That was when Hitler shot up in the polls.

Your book outlines a shocking dysfunctionality, not just at the Greek level, but at the global elite level. The phrase ‘adults in the room’ sums up this dilemma quite well.

When the elite talk about adults, they mean rulers, better than ‘the people’ out there. There is a deep contempt for the ‘demos’, the people; the powers that be constantly think that the ‘demos’ are the democracy. They use democracy as a fig leaf for oligarchy. Now when I look at the way they talked about the people, the voting masses, this contempt was very clear. In their mind, democracy is something to be avoided at all costs, by invoking its name, so democracy is a very good propaganda concept, the purpose of which is to deny its absence in practice.

So to give you an example, 25th June 2015, it was end game – the rug has already been pulled from under my feet by my own prime minister and it is clear that we are about to collapse. I’m in the Eurogroup and it’s clear that the deep establishment are not interested in a deal that is mutually advantageous.

They presented me with an ultimatum. The ultimatum was technical, it had three chapters: one was fiscal policy, the other was funding (or more loans) and the last one was to do with the terms and conditions of these loans. I looked at it, and I did not criticise it at all on the basis of its ethicality, I took it apart for its financial unsustainability. It was like your bank giving you a loan that cannot be repaid, so I said, ‘Hang on a minute, this isn’t even in your interest because you won’t get your money back’. In any case, they wouldn’t hear it and they insisted on it. So what I said was, ‘I do not have a mandate from the people of Greece to clash with Europe, I was not elected for that. I cannot take responsibility either of the money that I know I can’t repay, or of clashing with you. So what we, the Greek government, are going to do, we will put it to the Greek people so that they can decide to accept this or not.

They were livid at this idea, ‘How dare you put this to the people? The people are not sophisticated enough to understand what is right for them.’ Ministers were incensed that I was saying the people should be the final arbiters of such a matter.

Banker on Wall Street experiences massive trading losses in 2008 crash


So let’s flip that on its head and let the people decide on Britain leaving Europe in a referendum. A lot of the rhetoric that came about after that from liberals was that people don’t know what is best for them.

Then who the hell knows? If the people don’t then who does, the Queen? David Cameron? The bankers? I was under the impression that we had sorted this out, that yes, the people don’t know, nobody knows and we are all just swimming in a sea of uncertainty. But how do we decide collectively? Do we have a dictatorship where there is an oligarchy making decisions on behalf of everybody else? In which case let’s just stop having elections.

All this proves to me is that there is no logic in any political platform.

I don’t think we should make the mistake of confusing our rationality as a species with the logic of the establishment. The whole point of history is that there is this constant clash between the interests of those who control, and those of the great masses. This is what has been driving history, Marx put it in terms of class struggle and he was right – history is the history of class struggle and its dynamic.

The fact that, yes, we are very imperfect animals, but that is not an excuse for the elite, who are perfectly capable of messing up and diminishing our prospects well below our capacity and potential as a species.

They use democracy as a fig leaf for oligarchy. Now when I look at the way they talked about the people, the voting masses, this contempt was very clear. In their mind, democracy is something to be avoided at all costs, by invoking its name, so democracy is a very good propaganda concept, the purpose of which is to deny its absence in practice.

"They use democracy as a fig leaf for oligarchy."

On the elite powers that supress democracy

 So what allows this oscillation of power, that those few who have their hands on the levers pulling on our strings like puppets?

It’s not that deep – we allow it. But we don’t vote. When we go home to watch Survivor or Big Brother rather than engaging with the decision-making process that determines and destroys our lives, then we allow it.

The way Bank of England boss Mark Carney puts this current dilemma is, ‘Are we building a bridge between crises or a pier to nowhere?’ What do you think when you hear that?

It’s neither. The problem is that we are going to have a new crisis before the previous one has been sorted out. We are moving on to a new problem before the legacy of the previous one has been dealt with, the previous one being 2008.

Capitalism is not healthy. We created huge bubbles again and we gave rise to another cycle of crisis.

When does that new crisis arrive do you think?

I have a Masters in Statistics and the only thing I remember from it is to never predict what will happen and when it will happen.

Let’s say it is 1982 and you and I are in Moscow. Let’s say we are both economists and we work out that the Soviet economy is unsustainable. Would it be possible to predict how long it will take before it collapses? No way. Will we be able to predict that it collapses because of Afghanistan, or Chernobyl or whatever? These things are impossible to predict. You know what is going to happen but you cannot know when it will happen or the mechanism by which it will come about.

Are you almost proud, in a sadistic way, that Greece was the first one to light the fire and make the world aware?

I’m not proud of that, because the human cost of being the canary in the coalmine is huge. There are hundreds of thousands of people in Greece that are suffering big time at the moment, so I can’t be proud of that or welcome it.

You did mention that aspects of Greece were reckless and irresponsible long before the Crash happened in some ways.

Well I was always opposing and protesting against Greek governments since I was a child. I’m the last person that needs to be lectured on the inefficiencies of my country.

Then why was Greece even allowed to enter the Eurozone?

The answer to that is very simple; it was to get Italy in. And the reason why is because Germany was always disadvantaged by the devaluation of the lira. Every time Volkswagen built a new car and they wanted to sell it in Italy, the bank of Italy would devalue the lira so that the Volkswagen would be more expensive and Fiat would beat Volkswagen, even in Germany because the price of Fiats would fall there as well. So Germany wanted a common currency with Italy, but the problem was that Italy did not meet the criteria for the Eurozone – they had twice the debt that they should have, they had more inflation.

Now Greece had more or less the same data as Italy, and what the functionaries of the Greek government did at the time was to effectively threaten the Germans by saying, ‘Look, if you don’t let us in, we’re gonna spill the beans that you let Italy in when they had the same numbers as us.’

So they let Greece in, and then they blamed it on the Greek statistics. As if the Greeks are clever enough to confuse the Germans on our macroeconomic statistics, they knew everything.

And now we find ourselves in this almost predictable mess. Do you find that there is an incredible hypocrisy in the way the banks in America were bailed out when you look at how Greece was handled?

Well I think the way that the Greek bankers were dealt with takes the cake. I tell stories in the book about how they did it and it was even worse than the Wall Street bankers. Look, let’s face it, the worst aspect of the last twenty years or so is the way in which social democracy in Europe was corrupted by financialisation. People like Tony Blair and Gerhard Schröder in Germany, my former friend George Papandreou – I mean I don’t want to criticise them on a moral basis – but they simply took the path of least resistance. Social democrats of yesteryear, like Harold Wilson in Britain and Willy Brandt in Germany, they saw their role as the go between of capital and labour. They would gather around the table representatives of industry and try to come to an agreement. So it was a redistribution of wealth and income from capital to labour, from capital to the State, for the NHS etc., and that was the role of social democrats; to play referee and create the social contract.

"I think the way that the Greek bankers were dealt with takes the cake... it was even worse than the Wall Street bankers."

Yanis Varoufakis on the bizarre treatment of bankers

But then from the 1970s onwards, especially with Thatcher here, but also there was an international trend, industry started declining and banking started rising. So industrial profits started to fall, and social democrats, especially after they became prime ministers, didn’t really want to antagonise the rich. If there was another way of funding the working class and the welfare state, they would prefer that; they liked going round the various gentlemen’s clubs and the halls of power to be patted on the back by the almighty. And they found a way – it was a Faustian bargain with bankers.

This bargain was catastrophic, because the bankers then created chains and pyramids of private money, watched things burn down and then Tony Blair and the social democrats did not have either the analytical capacity or the moral authority to pick up the phone and say to the bankers, ‘Ok, you’re out now. You messed up, I’m taking you to the cleaners.’ So that is how social democracy died.

In answer to all this you started a movement called DiEM25, and I understand the basis of it. But what I can’t get a hold of is what you propose as an alternative to this entrenched modern politics, to pull the tent poles out and create something completely new?

We do not believe in Year Zero. You know, we’re not Pol Pot, we don’t believe that we have to start from scratch.

You have a lot of very well known faces in DiEM 25, like Elif Shafak and Brian Eno. But unfortunately, because the Right has smeared the Left so much, now when you mention DiEM or these other liberal people like Jeremy Corbyn or Bernie Sanders, the knee-jerk reaction is, ‘I don’t want to live in a hippy commune.’

True, but last week I addressed an audience of 600 German bankers, and these are the types of audience that I really enjoy tackling. Preaching to the converted is fun but it’s not useful, these are the people that you need to preach to. Not that you will necessarily bring them on side but you will change the terms of the conversation, and this is what I consider to be my challenge.

The answer to your question is the same I think, to make the establishment feel awkward, to show them that there is a better way.

You don’t break them by telling them that a better world is possible if we all love each other and forget about profit, and actually I don’t want to say that because I’m nauseated by this narrative. But you can show them that they are messing up on the basis of their own criteria, and that there is a better way of going about it. You don’t need to accuse them of being unjust, but you can show them that they are being inefficient, and they hate that.

Do you think that the EU is going to survive?

No. I think that it will continue to exist but it will become increasingly irrelevant as the centrifugal forces tear apart the essence of the Union.

Theresa May is facing all of this as we speak. We saw her discussing the other night at Downing Street with Juncker, who didn’t come here to cut a deal. He came here to make sure there will be no deal. Just like it was with us, there will be no deal because they are not in the business of cutting deals with those that oppose them, even if it means massive costs for both sides.

So I think that the EU is moving in a direction similar to how the Soviet Union collapsed in 1990, becoming a shell of itself. But remember, if the economic foundation collapses then the whole thing collapses.

So do you believe that this book is going to cause shockwaves?

I don’t really care if it does or not, I said what I needed to say, people don’t know that I recorded conversations and meetings. I’m sure I’ll receive legal threats and I’ve already received death threats.

Well if you have already then you must be hitting on a nerve.


Adults in the Room: My Battle with Europe’s Deep Establishment is out now through Penguin.