Thursday

30th Jun 2022

Schaeuble and Varoufakis: worlds apart

An audience at an influential think tank in Washington got a snapshot of eurozone politics when the two protagonists in the Greek bailout impasse presented them with two thoroughly opposing world views - one after another.

First up was German finance minister Wolfgang Schaeuble. He gave listeners at the Brookings Institute a long introduction on how increased debt was not the answer to advanced economies' quest for growth.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Europe is not in the grip of austerity he said, but is "trying to keep a tap on debt", and has three priorities - that government spending should not be higher than GDP; to undertake structural reforms; and to boost investment.

"Debt relief and permanent transfer" would not solve anything, he said in a clear nod to Greece. Another nod came in the form of: "We will not help a country if it refuses to help itself".

He spoke of the moral hazard of making sure that European solidarity does not weaken a country's motivation to "take responsibility".

He was dismissive of questions whether Germany, with its large current account surplus, should do more to help the eurozone as a whole.

As the session went, on he increasingly lived up to his reputation for being blunt. Entering at times into the thoroughly undiplomatic.

He noted that in his long experience - he is 72 years old - countries never took an uncomfortable decision unless they had to. So France - which for years has been grappling with undertaking reforms - would be "happy" to have something like the troika (the trio of international creditors) to force it to take difficult decisions.

Meanwhile, if Greece could find someone to lend them €200 billion in Washington, Beijing, or Moscow, then "OK" - they should take it.

He refused to countenance a debt haircut for Greece, noting that it has low interest rates for debt repayment, saying "the problem [for Greece] is regaining competitiveness."

Why, he asked, does the country still have a minimum wage that is higher than some members of the eurozone? And why is the ratio of those in public administration higher than in every euro state?

He showed some flexibility by noting that the creditors only have to say Athens has "broadly" done what it is asked to do, "Not 100 percent. We never ask for 100 percent".

On Greece exiting the euro - something seen as increasingly likely the longer the impasse with creditors continues - Schaeuble said "No", he doesn't think the eurozone is strong enough to take the loss, but he added that this "is only a decision for the Greeks".

"Solidarity in Europe is our duty, but solidarity is not a one way street," said Schaueble.

Long winter of discontent

For Varoufakis, speaking half an hour later to largely the same audience, "historical record will show that there was no solidarity" between countries of the eurozone.

The reform programme - the strings attached to the bailout - that Schaeuble had said was delivering results under the previous conservative Greek government - had, for Varoufakis, a "sorry track record".

Varoufakis referred to "Greece's great depression - our seven-year old, long winter of discontent".

He said his country had been the "champion of fiscal consolidation", with its economy having contracted by 11 percent since the start of the crisis.

His also said his country is an "experimental lab" for badly thought out strategies and that negotiations should have started "afresh" rather than continuing where they had left off with the old government.

The Greek government wants time to be "heard" without the pressure of payment deadlines.

For Varoufakis it is all about principles. The Greek finance minister could easily and quickly have signed up to the reforms being demanded by creditors but that would have been the "wrong" thing to do.

"I would enthusiastically accept any terms offered to us if they made sense."

"We will compromise. We will compromise. We will compromise. But we will not be compromised," he said.

Amid the big statements there was something to grasp. On privatisation - urged by creditors - Varoufakis said a "firesale" would not help the country.

Greek negotiators want minimum investment, labour and environment levels attached to any sales.

More generally, they want debt repayment linked to economic growth; more investment by the European Investment Bank.

According to Varoufakis, European integration is being negatively affected by "centrifugal forces" and the bad feeling inspired by the crisis.

Schaueble, for his part, noted that if "integration was at stake, you would see huge majorities" come out in favour of the EU.

For the Washington audience it hardly looked like a deal between Greece and the rest of the eurozone is in the offing.

Greece risks default in mid-May, S&P warns

Greece will be forced to default on its debts if a deal with its EU creditors is not reached by mid-May, a leading credit rating agency has said.

Feature

The second coming of Varoufakis

Greece’s former minister of finance re-emerges with a plan to democratise Europe. His proposals get a lukewarm reception.

Eurogroup closes Schaeuble era

Eurozone finance ministers bade farewell to their longest-serving and most influential colleague, while preparing to also replace its chairman at the end of the year.

Greece raids public sector coffers to pay pensions

The Greek government is forcing the transfer of public sector money to the central bank so it can pay pensions and salaries as the impasse with its international creditors continues.

MEPs boycott awards over controversial sponsorship

Two MEPs have withdrawn their nominations from the MEPs Awards over the Swiss pharmaceutical company Novartis's participation as a sponsor — currently involved in an alleged bribery scandal in Greece.

Opinion

The euro — who's next?

Bulgaria's target date for joining the eurozone, 1 January 2024, seems elusive. The collapse of Kiril Petkov's government, likely fresh elections, with populists trying to score cheap points against the 'diktat of the eurocrats', might well delay accession.

News in Brief

  1. EU announces trade deal with New Zealand
  2. Russia threatens Norway over goods transit
  3. Russia urges Nato not to build bases in Sweden, Finland
  4. New president for European Committee of the Regions
  5. Gas flows from Spain to Morocco, after Western Sahara row
  6. BioNTech, Pfizer test 'universal' coronavirus vaccine
  7. UK sanctions second-richest Russian businessman
  8. Hungary permits emergency supervision of energy firms

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  2. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  3. Council of the EUEU: new rules on corporate sustainability reporting
  4. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  5. Reuters InstituteDigital News Report 2022
  6. EFBWW – EFBH – FETBBHow price increases affect construction workers

Latest News

  1. MEPs boycott awards over controversial sponsorship
  2. If Russia collapses — which states will break away?
  3. EU Parliament interpreters stage strike
  4. EU's post-Covid billions flowing into black hole
  5. Nato expands and reinforces on Russian flank
  6. EU Commission says it cannot find messages with Pfizer CEO
  7. EU ministers sign off on climate laws amid German infighting
  8. EU presidency still looking for asylum relocation pledges

Join EUobserver

Support quality EU news

Join us