Yanis Varoufakis discusses Europe's long-term economic and political decline with Glenn Diesen
Glenn Diesen interviews Yanis Varoufakis, former Greek finance minister and founder of DiEM25, on the structural failures driving Europe's decline.
Summary
Glenn Diesen interviews Yanis Varoufakis, former Greek finance minister and founder of the Democracy in Europe Movement (DiEM25), about the trajectory of the European project. Varoufakis argues that Europe's current crisis did not begin with the Ukraine war or Trump's tariffs, but with the 2008 financial collapse, which triggered an undemocratic transfer of banking losses onto ordinary taxpayers while sidelining even the European Commission in favor of an unelected bureaucratic cabal. He contends that Germany's de-industrialization is a direct consequence of this austerity regime, and that the push to rearm — producing Leopard tanks on former Volkswagen production lines — is a desperate industrial stopgap that requires the Ukraine war to continue in order to be justified. Varoufakis describes Europe as entering a period comparable to China's "century of humiliation," lacking a plan for war, a plan for peace, or a coherent industrial or geopolitical strategy. He closes by insisting that this outcome is not inevitable, but that it requires overthrowing the current political leadership.
Key Takeaways
FULL TRANSCRIPT
Europe's structural decline and the 2008 turning point
Glenn Diesen: We are joined today by Yanis Varoufakis, a professor, former finance minister of Greece, and also the founder of DiEM25 — that is the Democracy in Europe Movement. Thank you very much for coming back on.
Yanis Varoufakis: Always a pleasure, Glenn. Always a pleasure.
Glenn Diesen: We're both Europeans, and I think we both share some concern about the future of the continent. My list of grievances tends to be somewhat long. I often look towards the re-division of Europe in the 1990s with NATO expansion. I look at the management of the 2008 global financial crisis, the failure to develop technological sovereignty, the excessive dependence on the US. But I would say over the last few years something else has begun to go terribly wrong. We're seeing economic stagnation if not decline, much more authoritarian EU, warmongering, and I think eventually disintegration. But I've been told I'm often too pessimistic, so I was wondering — what is your view? What do you see happening to Europe as well as the European project?
Yanis Varoufakis: I'm very much afraid that we are in the same boat. It's not just pessimism. Pessimism is a question of expectations. I think it's a question of hard-nosed, particularly rational assessment of where we are — and where we are is on a trajectory leading Europe to a very long period of decline and stagnation: decline financially, ecologically, morally. So in a sense, we are more or less on the same boat.
But why has this been happening? When the French and German banks went belly up immediately after Wall Street's collapse in 2008, we had a coup d'état effectively in Europe. When I was involved — I was finance minister in the Eurogroup and the European Council — it was clear that during that emergency, a true emergency in which the whole of the banking system of at least the Eurozone had gone under, the powers that be were frantically trying to refloat it and bail it out. Not in the way that happened in the Scandinavian countries in 1992. Back then, as you know better than anyone, the banking system of the Scandinavian countries — Sweden in particular, but also Denmark — went bankrupt, and what happened was the state stepped in and bailed them out. But they didn't bail out the bankers in 1992. They were nationalized and then eventually re-privatized.
What happened in Europe was that all the losses of the criminal bankers of Frankfurt and Paris — but also of Rome and others — were shifted onto the shoulders of the weakest European taxpayers, as part of a coup, because parliaments were not involved, the people didn't know, no one was consulted, it happened overnight. This was socialism for the bankers and austerity — harsh austerity — for everyone else.
And to effect that transfer, I witnessed this up close and personally. Essentially the European Commission — even the European Commission, which nobody can accuse of being a democratic body; it's a bureaucracy — even the European Commission was sidelined. When I was traveling to Brussels to negotiate — we didn't even negotiate; we negotiated for the right to negotiate — the basic parameters of Greece's political economy, I can tell you that the European Commission, presided over by Mr. Juncker at the time, with Pierre Moscovici as the economics commissioner — the former finance minister of France — they were irrelevant. They were actually quite sympathetic to our case. They don't admit it now, but back then I can assure you they were telling me that I was right. But they were totally sidelined.
There was a bureaucracy, a cabal essentially, that had been appointed primarily by Berlin. I'll be very specific. There is the Eurogroup, which is the finance ministers' body, and underneath it, at least hierarchically, was the so-called Euro Working Group. The head of the Euro Working Group was somebody appointed — God knows how — named Thomas Wieser, an Austrian national. He had more power than Juncker, than Moscovici, than the real European Commission. He was there as a person who was equidistant between the German Chancellor and the German Finance Minister, because these two — Merkel and Schäuble — were at odds with one another. So Wieser was the only man who was close to both of them, and he was running Europe at the time.
Moscovici would have ideas about how to resolve the debt disaster that was Greece — ideas very close to mine — and at some point he and I thought we would walk into the Eurogroup and put forward a joint proposal that would have been quite good both for Greece and for Europe. It turns out that five minutes before the meeting, I witnessed the utter humiliation of the European Commissioner for the economy and finance — Moscovici — by these underlings, by people like Wieser and Dijsselbloem. The complete humiliation. The man was almost in tears.
So that's something Europeans are not familiar with: when the proverbial feces hit the fan, even the European Commission was sidestepped in favor of some people that nobody had heard of, who were actually running the show. And the way they ran it was intended to achieve one objective and one objective alone — to make sure that the taxpayers, especially the weaker, working-class taxpayers of Germany, Holland, Greece, Slovenia, Slovakia, and so on, took onto their shoulders the largest percentage of the burden of the banking sector. And that was all done in the name of European solidarity, European values, and democracy. There was no democracy. It was just utterly dictatorial and corrupt.
That was back in 2010, 2011, 2012, 2013, 2014, 2015. So it's a mistake to think that everything was going swimmingly and we were a democracy up until a couple of years ago and then something happened and democracy fell by the wayside. No — this has been part and parcel of the European project all along.
Effectively, my point about the European Union now is that the chickens have come home to roost. Once you cynically transfer these gigantic losses of the bankers onto the shoulders of the weakest taxpayers and impose harsh austerity upon the majority while practicing socialism for the bankers and the financiers — then two things happen. The first is that aggregate demand falls massively. While aggregate demand falls, industrialists are not investing, because why would they invest in high-quality, value-added goods when the many can only scrape a few euros together? At the same time, you have the European Central Bank printing trillions that they pass on to industrialists who will not invest even those trillions, but will take them — because they are given for free at almost zero interest rates — and use them to buy back their own shares. So asset prices go up, all other prices go down including wages and pensions, and you end up with stagnation.
This is the reason why even Germany is de-industrializing as we speak. And when you have Germany de-industrializing in a Eurozone which is predicated upon — indeed founded on — the German business model, the whole thing starts fragmenting and collapsing. You end up with a political class that is absolutely incapable of articulating a position consistent with the viability of this Eurozone.
Germany's reversal — from model democracy to warmonger
Glenn Diesen: You mentioned Germany, which was the locomotive driving Europe forward. Beyond its economic power, it was also held up as a country that had learned from its history, transcended history — "never again" — embracing democracy. But now we also see that at the heart of the EU, Germany itself has reversed in many ways. It is de-industrializing, becoming more authoritarian. I think you've been banned from speaking there, even over Zoom if I'm not mistaken. And it has also become much more warmongering. We saw this from what happened in Gaza — the genocide — they had no opposition to the attack on Iran. Merz made the point that Israel is doing the dirty work. And of course no one seems to want to put an end to the war with Russia; indeed they seem very much intent on escalating. How do you explain this huge switch in Germany? Does it also have the same common source going back to 2008?
Yanis Varoufakis: I remember a conversation — one of my first conversations with Wolfgang Schäuble, the then — and now late — Wolfgang Schäuble, who was the finance minister of Germany at the time. He was talking to me as if the problem was Greece, and that we simply had to take the tough medicine and receive the tough love from Northern Europe. I was trying to explain to him that what you're doing is not just detrimental to the Greek people — it's detrimental to the German people, because I know you're imposing austerity on us in Greece in order to bring austerity to Germany. And he agreed. He said, "Yes, absolutely, because we can't compete with the Indians, with the Bangladeshis, with the Chinese. We have too generous a social system. Our wages are too high." So he agreed that he was imposing austerity on the Greeks in order to bring it back to Germany.
I said, "Look, this is going to be a self-inflicted wound for your own country, because with this austerity you're going to have less and less investment, and you are going to end up with discontent, and the only people who are going to benefit from that discontent are the far-right neo-Nazis." And this is exactly what is happening.
Why is Germany de-industrializing? Why can't Volkswagen produce cars that are competitive vis-à-vis BYD or even Tesla in the United States? The answer is because they haven't really invested in the last 15 years. And why have they not invested? It's not that they didn't have money. They had plenty of money — their own money, their surpluses, and the money that the European Central Bank printed and gave to them. The reason why they didn't invest was because the level of demand for high-value-added cars was very low in Europe. And why was it very low? Because of austerity for the many and socialism for the bankers.
The result now is that Volkswagen cannot compete. They're shutting down factories, and in a desperate attempt to reduce the rate of de-industrialization — given that they can't sell cars — they are passing whole production lines to Rheinmetall, the German arms manufacturer, to build Leopard tanks on those production lines. Now these Leopard tanks, as you know, are completely useless. Even the Ukrainians do not want them because they are death traps. But this is what Rheinmetall can produce. It uses a lot of metal and a lot of labor. So they are desperately trying to slow down the process of de-industrialization by producing these Leopard tanks.
The only way they can justify producing these Leopard tanks — and pass it through the Bundestag and convince even members of their own party, the Christian Democrats, that it's a good idea — is to say, "Well, we have a war happening in Ukraine and so we need to rearm." Now, firstly, any expert on warfare and geostrategic dynamics will tell you that the Leopard tanks Rheinmetall is producing are useless in the field of battle. They're not even producing the drones which are necessary. But that's what Rheinmetall can produce.
Far more importantly, the point of doing this is to find a stopgap for the de-industrialization process. Therefore, the continuation of the war in Ukraine is functional. Let's say that tomorrow morning Zelensky and Putin kissed and made up — just assume that hypothetically — then why would they produce more Leopard tanks and sell them to the German army, the Greek army, and so on? They would lose the excuse for doing it. And given that they have no industrial policy, they have no plan for arresting the rate of de-industrialization, the war in Ukraine and the perpetuation of the war in Ukraine is some sort of solution.
What holds the EU together now?
Glenn Diesen: What is it that holds these 27 EU member states together today? Because the EU as a geoeconomic project — I can see great potential. With collective bargaining power, the EU could essentially represent Europe next to the US, Russia, China, India, as one of the great powers. But it seems like the EU has shifted now from a geoeconomic to a geopolitical project. And the geopolitical project — its unity, as you suggested — is dependent more on balancing Russia in a military sense. But this means that the economic benefit of the EU is gone. We cut ourselves off from the Russian market, especially energy. We send our money and weapons to Ukraine. And whatever remains of money has to be wasted on horrible trade deals with the United States, because as long as the war goes on, we have excessive security dependence on the US, which it knows how to convert into loyalty — for example, when von der Leyen had to show up at Trump's golf course and sign that awful trade deal, because that's what you have to do.
But given that the EU doesn't even want to pick up the phone and talk to the Russians and try to find a diplomatic off-ramp, some way of reforming the European security architecture — what is it that brings us together now? Because all I'm seeing is the EU celebrating fake victories, all conflicts framed as good versus evil so we won't dissent too much, any dissent labeled as populism, people simply voting incorrectly and having to do it over again. There's more narrative management than open debate. How do you see this? What is it that's going to hold the EU together in the years to come, now that the EU is officially a geopolitical project?
Yanis Varoufakis: There are different levels. Most Europeans like the idea of a common European space. Students love the Erasmus program where you can spend six months in a different country, a different institution. They like freedom of movement, and that's totally understandable. I happen to like that too.
But we Europeans live under a myth — the myth that the European Union was a European creation for the purposes of ending war and uniting Europeans. Now that aspiration is absolutely real, but this is not how the European Union was created. The European Union was created as a cartel of big business, and it was done under the supervision of the United States. The New Dealers after the 1940s, and even the Republican administration of the 1950s, were responsible for actually designing the European communities of coal and steel as a cartel. It was utterly intertwined with NATO. It was a project for making sure that the United States maintains control of Europe — a colonial project, to a very large extent — to which the ruling classes of Europe were very happy to participate. Their dependence on the United States was the be-all and end-all of the European Union. The lack of European sovereignty vis-à-vis the United States, the total subservience to the United States and to NATO, was embedded and ingrained into the DNA of the European Union.
If you look at the first two decades of the European Union — the 1950s and the 1960s — that coincided with the Bretton Woods system, a system where effectively the dollar was our common currency. We were part of the dollar zone. We had fixed exchange rates, and everything was managed by Washington DC. The German industrial miracle emerged because the United States provided the macroeconomic framework within which the German industrial machine became one of the pillars of the American dollar. Similarly with Japan on the other side of the world in East Asia.
Then you have the Nixon shock in 1971, when the United States ceased to be a surplus country and therefore decided that in order to restore the competitiveness of the American industrial sector vis-à-vis Germany and Japan, they would devalue the dollar, destroy the fixed exchange rate regime. That transformation from the Bretton Woods system to financialization and neoliberalism reversed the manner in which surpluses and deficits were recycled between the United States and Europe. But nevertheless, the United States was still providing the macroeconomic stability within which German industry, Dutch industry, and to some extent French and Italian industry could function. So Europe was always absolutely dependent on the kindness of the United States to create the circumstances for the European ruling classes to reproduce themselves.
And then 2008 comes in. With the collapse of Wall Street, a process begins by which essentially you had — I call it "Urexit" — by which I mean the throwing out of the dollar zone of Europe. It took them a long time to realize it, but with Wall Street's collapse, the decoupling of Europe from the United States begins — something that the European elites, the European ruling classes, were simply not ready for. And they are still in denial of it.
Now, Donald Trump is being portrayed by centrists all over Europe as the man who destroyed the special relationship between the European Union and the United States. This is not true. Donald Trump is just ruder than previous presidents were. I remember very well, under Obama, having a conversation with Jack Lew, who was his finance minister — the US Treasury Secretary — and he admitted that he and I agreed on a very damning interpretation of the European position. I remember him saying that Europe is exporting deflation to the United States because of the great trade surplus that the European Union has vis-à-vis the United States. That was the Obama administration saying it — very politely, of course, in a very quiet voice — but it's more or less what Trump has been saying, except that Trump has been shouting it from the rooftops and clamping down on it with his tariffs.
The European elites, especially the German ones, are in denial. They refuse to acknowledge the fact that the macroeconomic environment that between 1945 and 2008 was being managed on their behalf by the United States — as long as they played the role the United States wanted for them — is gone. And because they were always absolutely dependent, psychologically as well as financially and institutionally through NATO, on the United States, they just cannot even envision a situation where the European Union develops its own geoeconomic or geostrategic position.
The Ukraine war, NATO expansion, and European cynicism
Yanis Varoufakis: If you look at Ukraine, for instance, Angela Merkel was never in favor of demonizing Russia and pushing NATO all the way into Ukraine. When the Obama administration, under Secretary of State Nuland, were doing that — concocting various administrations in Ukraine, all the machinations that led to Maidan and an effective coup against Yanukovych — the Germans were not in favor of that. Indeed, Nuland herself has been quoted by WikiLeaks saying, "F*** the Europeans." But very gradually the Europeans got on board the idea that Russia is the new Hitler, the new enemy, and we need to define Europe's sovereignty — or bid for sovereignty — in juxtaposition to Russia. And therefore, to justify whatever needs to be done in order to create a move towards more authoritarianism within Europe as a necessary reaction to the Russian bear, the Russian threat.
In the end, that has become functional to Rheinmetall, to their attempt to slow down de-industrialization. It is now the resolve of the European Commission, the resolve of the European Union Council. But there's also a degree of utter cynicism here. I'll give you an example very close to my heart and my home. The Greek government — the government of Prime Minister Mitsotakis — is completely on board the NATO position, the dominant position in the European Union, that Ukraine has to win the war and has to join NATO. If you ask him how Ukraine is going to win the war, he's got no answer, but he doesn't even care to give one, because he doesn't care about any of that. He doesn't care about what's happening in Ukraine. He doesn't care about the future of Europe.
All he cares about is to maintain his own power base in Greece. Now, you and I and our audience have been witnessing for years the way that Orbán was presented in the corridors of power in Brussels, Frankfurt, Paris, and Berlin. I have no love lost with Orbán — politically I am completely opposed to his ethno-nationalism, his quasi-fascism, and all that. But there is this observation I want to make. Orbán was lambasted by Brussels for corruption, for circumscribing freedom of the press, for misappropriation of European Union funding — all those things. Right now, my prime minister here in Greece has done exactly the same, and actually worse. The degree of corruption of this government is worse. He was caught red-handed eavesdropping on conversations of his own cabinet members, opposition leaders, even members of the armed forces. He was caught. This is not an allegation — he admitted it in parliament. And nothing happened. No one from within Brussels, whether NATO or the European Union, criticized him the way they criticized Orbán. Why? Because he said, "Look, I'm all in favor of Ukraine joining NATO, and we should all back Ukraine until it takes Moscow" — or whatever ridiculous statements are coming from Europe regarding this tragic war.
What I'm trying to get at is this: there are interests like Rheinmetall — very hard-nosed financial interests — that want the war in Ukraine to continue forever, in order to keep getting money to build tanks that nobody wants, not even the Ukrainians, on production lines that Volkswagen doesn't need anymore because it can't compete by selling cars. Then you have the people who have an ideological inertia and momentum — when you tell a whole population for many years that Russia needs to be defeated, at some point this becomes a self-reproducing ideological position. And then you have the cynicism of people like the Greek prime minister, who don't give a damn about either Zelensky or Putin or anything. They just want to maintain their hold on power in their own little jurisdiction. But it's not just Greece — it's Milan in Italy, it's everywhere. They just want to control their own little world. And if that means going along with the narrative from Brussels that Ukraine must win — even though they are not helping Ukraine win in any particularly tangible way — they'll go along with that. So it's complicity, a self-perpetuating ideological framework, and the cynicism of: we will just replicate and reproduce all the rubbish that comes from Brussels as long as they let us plunder our own people.
Glenn Diesen: So if you fall in line, you're protected, and if you oppose Brussels, you'll be held accountable.
Rationality, multipolarity, and Europe's failure to adapt
Yanis Varoufakis: Well, it seems as if the issue of rationality is something that should be addressed. You mentioned President Obama, who was the first to advocate for the pivot to Asia — which seemed implicitly like a recognition that a multipolar world was coming. If the US can't be everywhere, it has to prioritize. Trump, in his own rude way, has focused hard on this — the US has to focus on the western hemisphere, its own backyard, and East Asia where its rival is. But it seems as if what they want to do is adjust to multipolar realities, reduce their footprint in Europe and the Middle East.
For the Europeans, the logical thing — if they want to become more autonomous — would be to at some point find a way of working with Russia again, to end this division of Europe both for their own economy and security, and also to reach out more to other great powers: China, India. Still maintain good relations with the United States, but not put all their eggs in one basket, especially when that country doesn't really want to be in Europe that much anymore. But the assumption here is that all states are rational, that they act according to the international distribution of power. You were the finance minister, you engaged with the European elites. What is your impression? When I saw Orbán trying to push for diplomacy — meeting Zelensky, meeting Putin — he was punished. The EU seems to define energy security as cutting off a key supplier instead of getting as many suppliers as possible. Do you get that impression when you speak with people in the EU, or are there other objectives at play?
Yanis Varoufakis: No, I don't think there are objectives. I think they are completely clueless. And they are clueless because when your industrial base, your economic model, your business model is failing, and you don't have the levers necessary to pull it back together — because this is what we did in Europe: we created federal money, we federated our money without a federal treasury. And then we had 20 national treasuries without a central bank to have their back. These national treasuries have to look after banking systems, industrial systems, and electricity networks without having a central bank to backstop them. This is a disastrous design.
During the good times, at the beginning in 2001 and 2002 when it was first created, it was all plain sailing. It's a bit like a beautiful river boat that you tried to use to cross the Atlantic. When the weather is nice it looks splendid, but the moment the first storm comes it starts leaking water and starts sinking. And then you panic. I think this is the state of Europe. They didn't think it through. They didn't have a plan for what would happen if Wall Street collapsed as it did in 2008. Who is going to bail out the banks? Under what conditions? Is there going to be a banking union? They were resisting it. They're still resisting it. We have a banking union without a common deposit insurance. It is pathetic. Can you imagine a banking union without a common deposit system?
It's like taking the shock absorbers out of your car and then driving it into a pothole. It's going to be a catastrophe. And then of course you will panic because you will be left with a wreck of a car. This is the situation we find ourselves in.
From an economic point of view, this was completely and utterly predictable. Nicholas Kaldor, the famous Cambridge economist who died a long time ago, in 1970 wrote an article in the New Statesman. Back then it was clear that the Bretton Woods system was not going to last forever — the fixed exchange rates would go, and therefore Europe was going to be in trouble. The European Union had to have a fixed exchange rate regime because it was a cartel of big business, and cartels need a common currency or at least fixed exchange rates — otherwise, if currencies start going up and down, that destabilizes the cartel, which is all about agreeing to quotas and prices. So in order to prevent these fluctuations of prices that destabilize the cartel that was the European common market, they needed fixed exchange rates.
Nicholas Kaldor foresaw that the Europeans would try to fix the exchange rates, that that would fail, and therefore they would create a monetary union, a common currency like the euro. And he wrote in the New Statesman that if you make the mistake of thinking you're going to create a monetary union as a stepping stone towards a political union, that's a big mistake. It's not going to work, because the monetary union is going to create such a toxic crisis that it will then be politically impossible to create a political union. And this is exactly what happened.
Even take Emmanuel Macron — Macron wants a political union. At least he told me once that he wanted it and was desperate for it. And there are some people in Germany as well who want a political union. But try going to the people of France or the people of Germany and talking to them about political union, because when you effectively tell them you need more Europe, every time they hear "more Europe" it's like Iraqis hearing Westerners promise them more democracy — they hide under the table. Because for Iraqis, when Westerners promise more democracy, the bombs start falling out of the sky. Similarly, Europeans, when you tell them you want more Europe today, they say, "Okay, more austerity — that's what you're telling us." Less degrees of freedom, less democracy — because this is what happened as a result of having created the monetary union first and then suffering the repercussions.
So I don't think they have a plan on Ukraine. I talk to people who genuinely think that Putin is the new Hitler — genuinely think that, and they're really scared. I say to them, "Okay, look, I'm not going to try to dissuade you. I personally don't like Putin much. But if you think that Putin is the new Hitler, why aren't we sending troops to defeat him, to push him into the bunker and force him to commit suicide, or drag him to Nuremberg? If you think he's the new Hitler, you're not sending troops in there. You're not sending any serious money." They borrowed 90 billion — it took them a year and a half to get that agreement amongst themselves, and that 90 billion has already been spent. What are they going to do next year? Borrow another 90 billion? They don't want to. It is not as if they're saying, "We have the new Hitler in the form of Vladimir Putin, and we're going to take 500 billion, 600 billion and give it to the Ukrainians." They have no plan for Ukraine winning the war. But they have no plan for peace either.
I have been struggling politically now for years — four years — to put forward a peace and security agenda for Europe, Ukraine, and Russia. And every time I put this forward, I'm demonized. I'm painted as Putin's handmaiden, Putin's servant, Putin's client. So anybody who dares talk about a peace and security agenda with Russia that would resolve the war in Ukraine peacefully is immediately thrown out of the room, demonized, taken to the cleaners — like people like me, and I suspect you as well. No plan for war, no plan for peace. Now, why would the Chinese or the Indians or the Mexicans take Europe seriously? The Chinese, the Indians, the Bangladeshis, the Africans — they all want an end to the war in Ukraine, the same way they want an end to the war in Iran, because it is impacting their livelihoods negatively. But they see that Europe doesn't have a war plan and doesn't have a peace plan. So why should they care about Europe?
The EU's structural design flaw and the half-built house
Glenn Diesen: That's one of the things that confuses me about Europe as well — the suspending of diplomacy essentially. But I feel like everything in Europe now is normative arguments. They keep referring to how they wish the world was instead of taking actual steps in terms of how it is.
I just want to address what you said about the EU being a cartel of big businesses, because what you're describing has been referred to as the EU as a half-built house. Usually you want to have a political union, then you can have a fiscal union, and then you establish a monetary union — along the lines of what the United States did. But the EU went the other way: first a monetary union, which would eventually produce some conflict or problems building up, which forces a fiscal union, which would then force a political union. But all of this would assume that the EU would be born in crisis almost. And here's the problem — you can't really sell "more Europe," as they call it, when it's not performing. So given that we now have these problems which have been built up, the war in Ukraine, the war in the Middle East, the United States losing interest in Europe, the banking crisis — what is the future now for Europe? Is Europe done, or do you see any way out, any recovery?
Yanis Varoufakis: Unfortunately, I don't see a way out. That's why I was prognosticating earlier that we are entering a very long period of stagnation, a very long period of decline. I think the historian of the future — especially the economic historian of the future — is going to identify the 2008 crisis as the beginning of a half century or even a century of European decline. I hope I'm wrong. I really truly hope I'm wrong, but I don't see how it can be averted.
I didn't go straight into that kind of pessimistic, negative mindset immediately after 2008, 2009, 2010. I struggled, I fought my corner, by tabling proposal after proposal of how that could be averted. There were many ways of doing it. James Galbraith and I and other economists — along with Stuart Holland, a British politician and economist, a great economist — were putting forward since 2008 and 2009 the so-called Modest Proposal for the resolution of the Euro crisis. It was a very simple idea: that we should simulate a federation, given that we didn't have one, by using the European Investment Bank as a major pillar of growth, investment, research and development, and so on, by means of bonds that the EIB — the European Investment Bank — would issue, to be supported by the European Central Bank. That would have given us an opportunity to arrest the decline, the fragmentation, the bailouts, in order to create a space for having the conversation about the political and fiscal union which was necessary.
When I was finance minister, I put forward the same proposal along the same lines at the Eurogroup meetings. The people from the European Investment Bank, including the German head Werner Hoyer, were very enthusiastic about that. But the German government said no. And the people around the European Commission — people like Thomas Wieser and so on, this bureaucratic, shadowy government of Europe — were absolutely determined to kill these ideas and to impose austerity instead.
Austerity is a bit like a huge dose of cortisone in a cancer patient. It seems to work — the patient recovers a little bit, becomes more alive — but the cancer continues to do its evil work under the skin. And this is exactly what happened. They're celebrating the end of the Euro crisis, but the Euro crisis never went away. In my country, for instance, even though the financial numbers are fantastic if you're a financier — you're laughing all the way to the bank, you buy non-performing loans for 5% of their value, sell them for 50%, you've made ten times what you put in, you buy Greek bonds and the European Central Bank is supporting them — all of that has happened at the expense of 80% of the population sinking into greater misery now than ever. Negative net investment. This is what they're doing — they're doing everything they can, they will change everything to make sure that nothing changes in a Europe that needs change. And that brings about what you and I have been discussing: this constant decline.
We are falling behind in everything. We are not producing green energy. Solar panels, which used to be a great German invention, are not produced anymore because the Chinese are producing them so much better and so much cheaper — and it's not dumping; they have quite high profit rates. They have simply developed technologies that Europeans have not invested in. We can't produce electric cars, so we produce Leopard tanks instead. We have no investment whatsoever in what I call cloud capital, in algorithmic capital, in AI. All the technologies of the future have bypassed us.
Von der Leyen, Trump's golf course, and the 700-billion-euro promise
Yanis Varoufakis: And simultaneously you have political dwarfs ruling the roost. You have von der Leyen, who has been given free rein, and she's doing things that are absolutely detrimental to the interests of Europe. Let me remind you that when Donald Trump was elected, she flew soon after to Scotland and met him — met Donald Trump, the President of the United States — at a golf course owned by Donald Trump, and signed a ridiculous trade deal with the United States where Europe gave everything and took nothing. And not only that, but she made a solemn promise to Donald Trump. And if you promise Donald Trump anything, you better deliver, because if you don't, he gets really peeved, and he can be very nasty when he gets peeved.
She promised him 700 billion euros of investments into the United States. Now, the President of the European Commission does not have that money to give. She doesn't have the budget. She cannot send a check for 700 billion to the United States to be invested there. She doesn't have the funds to do it. So she was making a promise that she could not keep, hoping that German industry — fearing tariffs — would shift production lines, like Mercedes-Benz production lines, Siemens production lines, Krupp production lines, to the United States. This is the head of the European Commission doing that.
So when I say that we've entered a period — just like the Chinese went through 100 years of humiliation and decline — I think that's where Europe is. We are at the beginning of that century of humiliation.
Is there a way out?
Glenn Diesen: Well, it was only economic stagnation before, but all of this economic collapse and political failure is happening at a very critical time in human history — with this new industrial revolution, the emergence for the first time of a truly global multipolar world. It's not a great time to fall behind in this way. I think we've already gone over time. Do you have any final thoughts before we wrap up?
Yanis Varoufakis: Look, I don't want to leave people with a very bitter aftertaste in their mouth. The fact that the way things are today are pointing towards a hundred years of humiliation doesn't mean that it has to be that way. The beauty about human societies is that they are very much unlike the weather. The weather doesn't give a damn what we think about it. But when it comes to social outcomes, to historical outcomes, we are the determinants of them. So if we change our mind and we act collectively and rationally, then we can prevent that century of humiliation. That's why I'm still in active politics. That's why, even though I'm not optimistic — because only fools can be optimistic under the circumstances — I don't lose hope. And I hope that others don't lose hope, and we come together, and maybe by means of some kind of collectively created miracle we can prevent that.
Glenn Diesen: With the current political leadership, I remain pessimistic — but I do agree, and we shouldn't—
Yanis Varoufakis: That's why we need to overthrow them.
Glenn Diesen: Yes. So I was going to ask as well if we live in pre-revolutionary times, but that might be answering my question already. Thank you very much for taking the time.
Yanis Varoufakis: Thank you.