Nothing has ever been subtle with Yanis Varoufakis, the leather-jacketed, motorbike-riding economist who was finance minister of Greece for six of the most tumultuous months in that country’s history. Plain-spoken (to say the least) and a self-professed radical, he is, at 58, not nearly done waging war on Europe’s major power players.
This week, he gets his chance to prove whether his ideas have traction among regular Europeans. The European Union’s 500 million citizens go to the polls over the next four days, beginning on Thursday, to elect 751 delegates to the EU Parliament in Brussels, and Varoufakis’s political party is one of the more colorful contenders. Varoufakis’s new group, DiEM25 (short for “Democracy in Europe Movement 2025”), is almost unique among the hundreds of parties across the E.U.’s 28 members in that it’s an international party–running in a total of 11 countries.
The group is likely to gain only a tiny fraction of votes. But that is not the point. To hear Varoufakis describe it, in his typical blunt, mile-a-minute delivery, his new party aims to prove that Europe’s deep problems of stagnation, inequality and high unemployment, can be solved only with Europe-wide solutions, including by stopping Europe’s major corporations from sitting on mountains of cash, and by having central banks boost investment with higher interest rates.
“Europe created in 2008 a postmodern version of the 1930s,” Varoufakis told me during a break in his blizzard of stops around Greece, during the final days of the EU election campaign. “The kneejerk reaction of the establishment was to shift all the financial pain, all the losses from the financial sector, on to the weakest tax payers, beginning with Greece.”
Rewind to the depths of the Greek financial crisis, in 2015: Varoufakis, as the Finance Minister in the far-left Syriza government of Prime Minister Alexis Tsipras, was trying to rescue his country from total economic collapse. Banks were close to running out of cash. Bonds were rated junk.The country barely was able to pay its civil servants and pensioners from month to month.
That July, the so-called troika of creditors, the European Central Bank, the IMF and the European Commission, demanded that Greece drastically cut public spending, prompting countless thousands of Greeks to pour into the streets in protest, and reject the deal—at Varoufakis’s urging—in a referendum. Tsipras, with his country on its knees, signed a troika deal anyway, prompting Varoufakis to quit in fury. “I will wear the creditors’ loathing with pride,” he told Greeks. In the end, the troika’s bailouts for Greece totaled a whopping €289 billion ($322 billion).
Varoufakis has since told his side of this Greek tragedy in a bestselling book, “Adults in the Room,” which has been translated into multiple languages. Greece’s GDP shrank by nearly a quarter over a decade, although it exited the bailout program last summer, and is slowly recovering from the dark years.
Varoufakis, however, has hardly mellowed since his tumultuous days in office, as was clear when talking to Fortune. Here is an edited version of our interview:
How should the EU overhaul its economy?
The financial crisis revealed the flimsiness of the European Union, and the fact that we have a common market without a fiscal union. We don’t have a political union, a federation.
Forget Greece for a moment. Greece is in a state of almost permanent, deep insolvency and bankruptcy. But look at Germany. That is far more revealing. Germany is swimming in liquidity. You have the greatest surplus in the history of capitalism: 8.4% of a very large GDP. You have a federal government in surplus, that is being paid by investors who borrow from them in negative interest rates.
You have corporations with hundreds of billions of euros. Corporations should not be saving. They should be borrowing to invest. When they are saving, you know that something is wrong.
So how do you force corporations to stop sitting on their mountain of cash?
They want to invest. But they are caught up in a vortex of fear. Half the population of Germany now has a lower standard of living than they did 15 years ago. Companies think, if we invest money and produce gadgets and services, and then people don’t buy them, we’ll lose our money.
So instead of investing they buy property and push up property prices in Berlin, making inequality worse. And they buy back their own shares. Volkswagen is using its money to buy back its shares, not to invest in electric cars, unlike the Chinese, who are overtaking us. They are still producing the same awful diesel cars, and buying back their own shares because that pushes the share prices up, and the bonuses of executives are linked to the share price.
We have the highest level of savings in the history of Europe, and the lowest level of investment in relation to liquidity in the history of Europe.
So, hence the growing wealth inequality that many see as the root cause for Europe’s populism?
Of course. Negative interest rates destroy the pensions of the middle class. Low levels of investment destroys good jobs. The middle class see that their children will have precarious jobs, they will drive Uber cars, instead of having good quality jobs. They cannot see how they will start a family, how they will invest.
That is the greatest gift to the fascists. I don’t call them populists. I call them fascists, just so we know what we’re talking about.
You’re talking about [French far-right politician] Marine Le Pen, [Italian Interior Minister] Matteo Salvini, et cetera?
Of course. And [German nationalists] Alternative fur Deutschland, [Austrian Chancellor Sebastian] Kurz, [Hungary’s Prime Minister] Viktor Orban, and so on.
So what can you offer Europeans?
It is our view that this is a systemic European crisis with different manifestations around Europe. We need a systematic European answer to this. We need to have one political party. We are the first one. We are trying to run in 11 countries with one program. This has never happened before. All the other parties are competing in the European elections as if they are a dress rehearsal for the national level. So they are ignoring the systemic problems. We are the only ones not ignoring them.
We are saying, we would like a federal Europe. We would like things to be different. But things are not different. And if we go now to voters and say, “Let’s create a federal Europe,” they will say, “Yeah right, I’ll be dead before that happens.” So they will stay at home and not vote.
So we do something much more pragmatic. We say: Here’s what we can do under the existing rules and treaties and use the institutions we already have.
Such as?
Take the European Investment Bank [the E.U.’s lending arm] which is a splendid institution based in Luxembourg. It’s five times the size of the World Bank. This is not some little institution.
We are saying the European Investment Bank should issue €500 billion worth of bonds every year for five years, and sell it to these people who have all this money that is doing nothing or doing damage in the financial sector. With the European Central Bank making one announcement, and that is: If need be, we will buy those bonds on the secondary market to prop up their value. By making this announcement they will not need to. Those who have all this money would love to buy those investment bonds because they are a safe asset.
So suddenly we would have the capacity as Europe to invest in the green transition that is necessary, to electrify transport of cars and railways – which are still not electrified in Eastern and Southern Europe—and of course a green Common Agricultural Policy. We can start tomorrow morning.
We have a policy for how to fight poverty across Europe, with a similar program to the American food stamp program, only much more upgraded, using plastic and debit cards, which the European central banks should issue and fund, with the profits of the ECB, which were €91 Billion last year.
Clearly you aren’t about to win the E.U. elections, by your own admission. But do you think you’re opening the path to a new way of doing things?
Absolutely. We have to learn our lesson from the fascists. Marine Le Pen did not need to become French president [she lost the 2017 French elections to Emmanuel Macron] to influence the policies of the French government. The previous French government under President François Hollande introduced a policy giving it the right to remove French citizenship of people with Arab descent. [The law threatened to strip convicted terrorists of their citizenship.] That would never have happened had it not been for the fascists in parliament doing reasonably well.
Let’s get back to the Greek debt crisis. You’ve said in the past that China wanted to lend Greece money but that this was blocked by Europe.
I have written down exactly as it happened in my book “Adults in the Room” which is in every language in the world. The gist is that when we were elected, the party was against the privatization of Piraeus port and the sale to Cosco. [China’s Ocean Shipping Company, also known as Cosco, now owns Athens port, as part of the Belt & Road Initiative.] I was the one who said, hang on a second guys. Let’s think about this. I met the Chinese ambassador and the representatives of Cosco.
I said, Why do you just want the port? You should want more. Let’s get into joint ventures, start producing mobile phones and new technology in Greece. We’d like you to consider building a super-fast railway between Greece and Germany because we really need that.
Instead the troika forced the Greek government after I resigned to sell the railways to the Italians for €43 million which is ridiculous. Let me put it this way: If we had ripped up all the rails and sold them for scrap we would have got more money.
So you blame Europe?
I never blame Europe. I’m a European. I blame [German Chancellor] Angela Merkel, [former Eurogroup President] Jeroen Dijsselbloem… Those people who did so much harm to Europe all those years, including my former Syriza colleagues in the Greek government. This alliance of oligarchs, Eurocrats, Greek government ministers, have really done a great deal of damage to Europe. And even to China, because China is not benefiting from this state of disrepair in which Europe and Greece find themselves.
And yet China is trying to invest more, and is being blocked here and there, also in Greece.
This anti-Chinese wave in Europe is pathetic. The Chinese are minding their own business. They are looking after their self-interest. They are patient investors. That is a good thing. They don’t come in to make a quick buck and leave. If they are making inroads into Eastern Europe, parts of the Eurozone like Slovenia, Slovakia, Italy, Greece, it is because Europe does not have any investment. That is why we’re proposing an investment bond.
There is a vacuum. Money does not like a vacuum. So the Chinese are bringing their money. It is the fault of the official European decision-makers who are making one mistake after another, keeping investment at the slowest level in history, and leaving the Chinese to come in as the only investors.
It seems that in AI and 5G, Europe is so far behind.
That is why we need €500 billion investment every year for five years. And we have a plan to do this without one euro in new taxes.
Interview by May 23rd, 2019. Click here for the FORTUNE site.
