‘Adults in the Room’ lays bare a European failure. It is not the Greek crisis.
A critical review of Yanis Varoufakis’ bestselling account of the Greek debt crisis.
1. On the Rhetorical Mode
In 2017, former Greek finance minister Yanis Varoufakis published Adults in the Room, his bestselling memoir of the economic crisis that ravaged his country in the 2010s. The book is subtitled My battle with Europe’s deep establishment, which refers to the author’s negotiations with the European Union’s institutions on the handling of Greece’s enormous, unsustainable public debt.
That ‘negotiations’ are equated to a ‘battle’ already on the front page is an early warning that Varoufakis isn’t going to mince words in his memoir. Indeed, one of the primary targets of his battle is economic austerity, which he scathingly defines as ‘a morality play pressed into the service of legitimizing cynical wealth transfers from the haves to the have-nots,’ resulting only in ‘misfortune on a continental scale’.
I will return to Varoufakis’ interesting choice of vocabulary, but since austerity is such an important topic in this book, we must first address one logical question which is raised by the author’s philippic: if these policies were so evidently and unconditionally terrible, then why did successive Greek governments as well as the European Union insist on pursuing them for the better part of a decade?
Varoufakis clearly understands the urgency of this question. The entire first part of the book is dedicated to answering it in depth, and he comes up with four separate reasons why austerity policies were pursued in Greece. They are as follows.
The first was the effect of what he calls ‘super black boxes’. These are overarching global systems which ‘evolve organically and are guided by a supra-intentional drive that no individual can control, not even the president of the United States, the CEO of Barclays or those manning the pivotal nodes in the IMF or national governments’. The momentum from these super black boxes led to ‘the organized folly that the European Union has descended into’, but by a process out of anybody’s control. Varoufakis is quite clear: ‘there are no “goodies” or “baddies” in this book. Instead, it is populated by people doing their best, as they understand it, under conditions not of their choosing’.
The second reason was an underhand political operation finalised towards saving those French and German banks that owned billions in Greek bonds and which would have failed had the country declared bankruptcy. Austerity was the price to be paid by Greece in exchange for the massive bailout loans which allowed the country to stay afloat long enough for said banks to sell their bonds. (This is the only hard economic argument on this list, and we will have more to say about it when examining the book’s economics.)
The third reason why austerity policies were imposed was so that an authoritarian European establishment could crush the Greeks, and thereby set an example that would intimidate other EU countries into submission: ‘If [the troika’s officials] were not careful, dangerous ideas might infect the minds of other Europeans — Spaniards, Italians, possibly the French — such as the idea that it was possible […] to regain one’s sovereignty and to restore a nation’s dignity’. These policies did not fail by accident or inefficiency, but were intended to pulverize the Hellenic economy so as to keep everyone else in line: ‘The creditors knew that more austerity […] would shrink Greek incomes, ultimately increasing their own long-term costs, but they did not mind. […] Just as the Prague Spring had been crushed by Soviet tanks, in Athens hope would be crushed by the banks.’
The fourth and final reason was for the European establishment to save face in the aftermath of the first bailout loan, which failed to resolve the crisis. Since the institutions had already committed themselves to austerity policies, by the time it became evident that these policies were not working ‘there was […] too much political capital at stake to admit their error’. Indeed, here was ‘the sole reason that the IMF and the EU were asphyxiating us: because they did not have what it took to confess the error of their ways’. In other words, the creditors consciously chose a set of policies destined to fail because if they had gone ahead and saved Greece, that would have been tantamount to admitting that they didn’t know how to save Greece.
It may not have escaped the reader of this review that these four reasons are, if not in contradiction with each other, at least tricky to reconcile. The first implies that European institutions had no control over the unfolding events, while the second and third suggest events were part of a precise, deliberate plan. One tells us that said institutions were moved by cold economic interest (saving the banks), another that the ‘creditors did not want their money back. What mattered to them was their authority.’
The sense of estrangement that results from trying to put together these conflicting positions is the only true constant of Adults in the Room, which is nowhere near as revealing about the economics of the European Union as it is about the state of its political discourse. Like a Joycean novel, it seems to explore every form that our contemporary political language can take, skirting from one rhetorical mode to another in a way that makes it nearly impossible to say what Varoufakis’ true beliefs are.
For example, compare the following passage…
When a large-scale crisis hits, it is tempting to attribute it to a conspiracy between the powerful. Images spring to mind of smoke-filled rooms with cunning men (and the occasional woman) plotting how to profit at the expense of the common good and the weak. These images are, however, delusions. If our sharply diminished circumstances can be blamed on a conspiracy, then it is one whose members do not even know that they are part of it. That which feels to many like a conspiracy of the powerful is simply the emergent property of any network of super black boxes.
…with this one from later in the book:
In the bonfire of its illusions that followed the financial crash of 2008 and the subsequent euro crisis, Europe’s deep establishment lost all sense of self-restraint. I witnessed first-hand what can only be described as a naked class war that targeted the weak and scandalously favoured the ruling class.
The first extract makes an exceptionally subtle argument, in which moral lines are blurred and the heuristics of history cannot be reduced to the intentionality of those in power. It is as though the author were calmly inviting us not to let our angry gut overrule our rational minds. The second extract is almost exactly the opposite, painting an elementary moral picture in which the familiar ‘establishment’ and ‘ruling class’ are the baddies, and the implied exhortation is to go straight for the pitchforks, philosophical questions be damned!
This constant back-and-forth between the language of a sober moderate and that of a raging demagogue makes of Adults in the Room the most schizophrenic political memoir I have ever read. Take Europe, for example. Varoufakis repeatedly declares himself an ‘ardent Europeanist’, yet at the same time conducts all of his arguments in the language of a ferocious eurosceptic. The EU institutions are referred to alternately as ‘an empire of foes’ and ‘vicious foes’. The European Central Bank is led by ‘clever bullies’, and its then president Mario Draghi is their ‘tragic despot’. The ‘ruthless Eurogroup’ is ‘a shadowy crucible’, while the European Commission has by now suffered a ‘complete subjugation […] to forces lacking legal standing or democratic legitimacy’. The euro is described in a conversation with a British Tory as ‘a currency that neither of us liked’ and ‘whose design and creation I had opposed’. Europe’s establishment is ‘bereft of ideas as to how to sustain our societies yet unable to relinquish its grip on them’, and under its thumb ‘all [the smaller European countries] had been beaten into submission’ while the Greek parliament is ‘reduced to rubber-stamping its own servitude’. I challenge anyone to read Varoufakis’ attacks on former Greek PM Antonis Samaras and find a single important difference — in either style or content — with the way Brexit architect Nigel Farage blasted the same politician at the European Parliament six years ago.
In fact, the parallels between Varoufakis’ language and those of notorious populists like Marine Le Pen, Matteo Salvini or Viktor Orbán are remarkably easy to trace. One stylistic trait they all share is their fondness for connoting the European Union and its leaders to totalitarianism and brutal violence. Comparisons to British imperialism abound in Adults in the Room, chapters sport titles like ‘Democracy at gunpoint’, we are told that the EU institutions spread ‘lies and distortions that would make Joseph Goebbels proud’ while their leaders are ‘in blood / Stepped in so far’ (a quote from Macbeth), the author’s colleagues make him think of ‘the ending of George Orwell’s 1984’, the meetings of the Eurogroup are ‘the front line of a war’, the Greek government signed its ‘own version of the Treaty of Versailles’ which is also ‘a coup against democracy’ and is compared to ‘Dunkirk in June 1940’, and so on.
Some of this is evidently bluster, but it’s not always easy to tell. I had a genuine hard time, for instance, making sense of Varoufakis’ repeated attacks on ‘Brussels’s propaganda machine’. The expression propaganda machine would normally be used to describe a powerful media apparatus under direct control of a regime, or, in a more elastic sense, to describe information channels owned by a shady political figure, like Italy’s Silvio Berlusconi. But in Adults in the Room, ‘Brussels’s propaganda machine’ seems to refer to the ordinary political practice of leaking information to the press to sway public opinion in one’s favour. The publications allegedly forming this ‘machine’ are some of the world’s most reputable international newspapers — Bloomberg, the Financial Times, the Wall Street Journal, Reuters — some of which aren’t even based in Europe.
Varoufakis calls the work of these media outlets ‘Operation Truth Reversal’, which at this historical conjuncture I can’t help but find ironic. The EU is the prime scapegoat for every tabloid publication and opportunistic politician in the continent, and blatant fake news about its institutions are trumpeted in multiple countries on a weekly if not daily basis. Yet even as a barrage of misinformation has been eroding trust in the Union for years, there has never been so much as a squeak by an EU ambassador, never mind a media counter-offensive. Where is ‘Brussels’s propaganda machine’ when Brussels actually needs it?
2. On the Economic Arguments
Varoufakis’ eclectic use of language allows him to appeal to a very broad readership, yet also makes it difficult to pin down his political views. Similar difficulties arise when attempting to evaluate his economic arguments, which of course are the meat of the book.
A chapter called Wasteland is case in point. Here, Varoufakis tries to give his readers a sense of the magnitude of the Greek crisis by comparing his country’s economic indicators to those of the United Kingdom following the crisis of 1981. Thus, the drop in national income by 1.26% that befell the UK in 1980–81 is placed side by side with Greece’s drop by 7.5% in 2009–10. Other figures are provided and discussed, but the point of the comparison is clear: where the Greek numbers are about seven times worse than those in the UK, that tells us the Greek crisis was about seven times worse too.
The contrast is certainly striking, but it is also spurious. The UK has an economy that is more than ten times larger than that of Greece, meaning comparisons do not scale. If I said that both the Greek and the UK economies grew by 10% in a year, we would be talking about radically different performances, because the $20 billion that Greece would need to raise are much easier to find in the global economy than the roughly $280 billion required by the UK. (The UK economy was of course a lot smaller in 1980, but its share of global wealth was much higher, meaning the point remains).
As importantly, Greece in 2008 was at the zenith of a financial boom caused by the same currency that would later be its downfall. The following graph shows the size of Greece’s GDP from the 1960s to the present day.
One thing that Varoufakis doesn’t mention, when rattling out how many percentage points of national income Greece lost each year, is that this decline must be seen in the context of a process of readjustment. The Hellenic economy shrank by almost a third of its size from 2008 to 2015, which looks like an inconceivable collapse with scant historical precedent, until you realise that it had also more than doubled from 2002 to 2008.
The comparison with the UK is therefore more misleading than revealing — a stable economy going into recession and a financial bubble bursting (in this case, a credit bubble) are simply not the same thing.
But what is truly puzzling about Varoufakis’ comparison is less its accuracy than the fact that it simply isn’t necessary. Greece was indeed in the throes of a catastrophic economic crisis after 2008, the human cost of which was substantial and tangible. Even when explaining it to the layman, there are dozens of ways of illustrating this fact. Why choose a comparison that Varoufakis — a trained economist — must know is inadequate?
Many of the economic propositions in Adults in the Room are much like the above — they seem like questionable (and infallibly dramatic) points put in service of some fairly unobjectionable arguments. On occasion, however, the argument itself seems dishonest, and then the language employed becomes not just misleading, but positively manipulative.
This is true for one of the core propositions of the book, that the true purpose of the bailout loans to Greece was to save French and German banks. This argument is so central to Adults in the Room, and simultaneously so mystifying, that it is necessary to unpack it completely.
The account Varoufakis gives us in the book, simplified, is as follows: before the crisis, French and German banks irresponsibly loaned their money to the Greek state. When the Greek state was unable to repay it, the European Central Bank took money from the pockets of European taxpayers and gave it to Greece (in the form of bailout loans), who then gave it to the banks (in the form of loan repayments) and therefore kept them from failing.
Four objections to this account may naturally be raised. In order –
a.) In the form in which it is articulated, the argument simply isn’t true. When Varoufakis trots out the numbers proving that the exposure of Franco-German banks to Greek debt were reduced to near zero between 2010 and 2012, he expertly makes it look like this happened because Greece paid off its bonds: ‘the official loans from European taxpayers came in before being funnelled to France and Germany’s banks’. In reality, it was the European Central Bank that purchased directly from Franco-German credit institutions the bulk of the government bonds which constituted Greek debt, thus saving them from potential bankruptcy. This was a separate financial operation than the bailout loans (even if, naturally, both were part of a common greater strategy), and there was nothing covert about it. Indeed we find an account of it in Varoufakis’ own book, albeit buried in footnote 15 of a later chapter called Raging against the dying of the light.
b.) Varoufakis singles out banks in France and Germany, yet conveniently glosses over the fact that Greek bonds had been acquired by banks in other European countries as well. The entire eurozone, and probably beyond, was exposed to systemic financial failure had Greece been unable to service its debts. Varoufakis’ argument that the ECB’s purpose was saving the banks rather than the Greek nation would best be formulated as saving the banks and Greece (which is what central banks do), but the important distinction is that it was everyone’s banks — not just those of the French and the Germans.
c.) In blaming the debt crisis on French and German banks, Varoufakis furnishes said banks with agency over how much money the Greek state had been willing to borrow and on what terms (his expression for this is ‘predatory lending’). But national governments borrow money by issuing bonds — and it is the governments, not the banks, that decide how many bonds they will issue and what interest rates they will offer on them. Market forces will dictate the success of the sale, clearly, but nobody except for the issuer has any say on how this sale is decided or conducted. It was not the banks that decided to introduce the single currency which led to the Greek credit bubble, and it was not the banks that told the Greek government to take advantage of that bubble and accumulate mountains of unsustainable debt. Varoufakis declares that Europeans ‘were actually paying for the mistakes of French and German bankers’, but what was the mistake exactly? Trusting Greece?
d.) Varoufakis makes a big deal out of the fact that ‘taxpayer money’ was used to save the ‘idiotic banks’. He thus seemingly implies that, in the circumstances of the debt crisis, there would have been an alternative course of action that kept the common taxpayer free from harm — for example letting the banks fail, or letting the French and German governments bail them out instead of the ECB. But allowing a bank to fail means that all of the ordinary people who deposited money there will see their savings go up in smoke — for the French bank BNP Paribas alone, that means 30 million people ruined, not to mention an extra 200,000 losing their jobs. If the banks are bailed out by their national governments instead of the ECB, on the other hand, that still means that taxpayer money is being used — although in this scenario, non-Greek taxpayers would be picking up the tab for the Greek government’s debt, which Varoufakis perhaps finds more acceptable. In any case, every time that the author accuses the ECB of jeopardising common people’s money, the automatic question becomes — as opposed to what?
In spite of its many flaws, Varoufakis’ argument has gained remarkable currency in eurosceptic circles. It’s possible to find populist politicians rehearsing it in debates against competent economists, who then predictably tear it apart. I suspect the reason this idea is popular is precisely the reason why Varoufakis brings it up in the first place — it appeals to angry people on both sides of the barricades. Right-wing nationalists will be satisfied to see the blame laid within Franco-German borders, while left-wing anti-capitalists will concur that the villains of this story are the banks.
In brief, Varoufakis’ argument that the purpose of the bailout loans was to save the French and German banks is quintessentially populist, because it is designed to gather consensus as widely as possible not by reason and evidence, but by giving everyone the villains they are looking for.
I would go as far as to say that this holds true not just for this particular point of contention, but for the majority of what is written in Adults in the Room.
3. On the German Conundrum
Varoufakis’ approach when discussing the EU is to consistently declare himself a Europeanist while consistently expressing himself like a eurosceptic. One may be tempted to describe his attitude towards Germany as similarly ambivalent.
On the one hand, donning his moderate, rational hat, Varoufakis writes clearly that there was ‘no place in our newfound dignity for nationalist or anti-German bigotry’. On the other hand, the language the author employs whenever he mentions that country, denigrating its ministers of state and mockingly dropping terms in their language, is borderline racist: ‘you can trust me to propose a debt restructuring that combines substance with finesse, […] and, importantly, can be sold to fidgety Bundestag politicians by Angela Merkel as her own wunderbar idea.’
While Varoufakis’ positions towards Europe remain indefinite, however, the picture that emerges of the German state is straightforward. Adults in the Room fully endorses the eurosceptic shibboleth that the European Union is no more than a puppet state wielded by Germany to rule the rest of Europe. Indeed, almost any time that the author writes about the EU doing or deciding something, he is careful to discuss them as the EU and Berlin, as though they were acting as a single entity. Representing this entity — and calling all the shots for it — are Chancellor Angela Merkel and former German finance minister Wolfgang Schäuble.
As well as being ‘a man ostensibly more powerful than almost anyone in Europe’, Schäuble ‘ruled supreme’ in the Eurogroup, the cabinet assigned to negotiating the position of the EU on the Greek crisis. The president of the Eurogroup at the time was actually former Dutch finance minister Jeroen Dijsselbloem, but Adults in the Room suggests his title was merely nominal. Schäuble is repeatedly dubbed Dijsselbloem’s ‘master’, and the Dutchman himself is painted as thoroughly subjugated to the German (‘He looked like a primary school pupil being reprimanded by a severe teacher’). The other finance ministers in the Eurogroup, meanwhile, are Schäuble’s ‘cheerleaders’ or ‘cheerleading team’.
Because the only person higher in the pecking order than Schäuble is Merkel herself, when the two are not on the same page we find ourselves catapulted from the Eurogroup back to the late Soviet Union:
Fearful of Wolfgang, they would not speak in favour of the draft communiqué, but they dared not speak against it either when it had the backing of Angela Merkel. Caught between two masters, they lowered their heads and kept their thoughts to themselves.
As for Chancellor Merkel, the book credits her with virtually limitless power, including the right to unilaterally decide the composition of the European Commission (as extensively described in the chapter Promising liaisons: 1. The commissioner). Her authority on Dijsselbloem is direct, absolute, and — given how Varoufakis likes to portray Germans — predictably militaristic: ‘Merkel […] got cross and instructed him […] to find an accommodation — forthwith!’ The prime ministers and presidents of smaller countries can be removed from their positions according to her will (‘George Papandreou […] was elected PM in 2009 and jettisoned by Chancellor Merkel’), while the heads of larger countries simply follow her commands: ‘Merkel […] ordered [French President] Hollande to keep Macron out of the negotiations’. When recalcitrant leaders emerge, like Greece’s Alexis Tsipras, she uses ‘psychological manipulation’ to get them to act against their will: ‘Alexis had succumbed to the chancellor’s spell’.
In what is certainly the most all-round baffling moment in the book, Merkel appears to have authority even over China. In the chapter Whittling our Spring, Varoufakis claims to have struck a deal with the Chinese regime: he would give ownership of key Greek infrastructure like the ports and the railways to one of China’s government-owned conglomerates (how this fits in with his ‘extraordinary struggles for recovering sovereignty’ I am not sure) in exchange for them buying €1.5 billion in Greek bonds. When the Chinese fail to honour their side of the deal, Varoufakis seems genuinely perplexed: how could a regime so famously honest, transparent and generous choose to backstab him like this? A little digging, however, and we have our denouement — the Chinese received a ‘blunt message’ from Berlin.
Yes, that’s all. The Chinese superpower abruptly decided to give up on their economic interests and their expansionist policies because of a ‘blunt message’ from Berlin. This is, presumably, a much more credible explanation than that the Chinese simply decided to bide their time and gobble up the port of Piraeus without paying €1.5 billion in commission fees, as they eventually did less than a year after Varoufakis resigned, in January 2016.
This episode aside, what is conspicuously missing from Varoufakis’ account of this German super state is the same thing usually missing in analogous eurosceptic diatribes — an explanation of how exactly this covert power works. For example, how does Germany bypass the authority of the European Parliament and the European Council when deciding who to appoint as Commissioners? Do they just control both institutions from behind the scenes, but if so — again — how is that done? By what process does Angela Merkel remove the presidents of smaller countries from power, and why would someone like French President Hollande obey her orders? Why do all of the finance ministers in the Eurogroup behave as Schäuble’s servants? Varoufakis says it is because they feared having austerity measures imposed on them too, but the Netherlands had no deficit problems, yet Dijsselbloem comes across as little more than a Byzantine slave.
There is one exemplary moment in the chapter The commissioner’s humiliation, in which Varoufakis speaks with the EU Commissioner of Economy at the time, the Frenchman Pierre Moscovici. The commissioner is beaming: he has a plan that accommodates all of Varoufakis’ requests, and said plan has the backing of Jean-Claude Juncker, Christine Lagarde and Mario Draghi, who at the time were respectively the President of the European Commission, the Chair of the International Monetary Fund, and the President of the European Central Bank. Moments later, when this plan is presented to and turned down by Dijsselbloem, Moscovici simply lowers his gaze and mumbles: ‘Whatever the Eurogroup president says.’
This could be extremely relevant testimony, but as it stands it simply makes no sense. Why would a plan supported by every major leader in the European Union along with the IMF just go nowhere in a cabinet that they set up themselves? Why does Moscovici, in spite of this crushing level of backing, just bow submissively instead of calling on his authority? If there were invisible political machinations at work, what were they? If Schäuble could just single-handedly overrule all of these leaders from his office in the Bundestag, then for the nth time, how?
What makes this account especially frustrating is that the issues Varoufakis raises are all of the greatest importance. There is reason to worry that larger countries may have disproportionate influence within the EU, and there are important political challenges related to the question of sovereignty for indebted smaller countries. But Adults in the Room is no closer to being an answer than a brick thrown at a window could be qualified as a greeting.
Ultimately, what is most frustrating about Adults in the Room is less what it says than the thought of what its alternatives are for the European reader. Some time ago I got my hands on Hans-Werner Sinn’s The Euro Trap, which also accounts for the Greek debt crisis, and I found it to be the exact opposite of Adults in the Room: rigorously well-researched, exhaustive and persuasive, but also highly cumbersome and difficult to follow for one not fluent in modern economic science.
The trouble with the discourse of and about the European Union is precisely that it is stuck in the binary represented by these two books. Only two forms are presently available to discuss our internal affairs — that of angry demagoguery, and that of heady academic dissertations. We Europeans, it appears, can only speak the language of idiots, or that of geniuses.
With systemic crises coming down the pipeline which will make the Greek meltdown feel like a broken fingernail, this is cause for the gravest concern. This continent of polyglots needs to find a way for people to talk to each other about important issues, one that is both clear and intelligent, and comprehensible to more minds than only the uneducated and the super-educated. A failure to do so would come at a price that no economic science can quantify.