The EU; The weak suffer what they must

And the Weak Suffer What They Must? Europe, Austerity and the Threat to Global Stability, Yanis Varoufakis, The Bodley Head, 2016, £16.99.

Ten years ago, if Turks took the ferry to that Aegean island where burning Sappho wept and sung, they were greeted by patronizing customs officers who had been instructed to say ‘welcome to Europe’. Now, if they go there, here is a vague smell of excrement from the overcrowded refugee camps, and if they go on to Athens, they find boarded-up shops, Afghan rent-boys in the public parks, and a general air of hopeless despondency. Greeks now head for jobs in Turkey, where their enormous clevernesss and adaptability makes them many friends. The Turks are not very good at irony, but their customs officers might say, as these Greeks come in, ‘welcome to Asia’. For Europe – or rather southern Euro-Europe – has turned into a place of the skulls. The Euro has been a calamity. The author of this book, Yanis Varoufakis, should know, as he was Greece’s finance minister in 2015, wrestling with mountains of debt, bad banks, and European technocrats, especially Germans, who understood nothing. He lost his job after a few months because he annoyed the Brussels technocracy so much – lecturing them with power-point economics (he is a professor). When he started, Dr Schäuble, the German finance minister, would not shake his hand. But Varoufakis has triumphed, for he has a gift for public relations which these grey souls utterly lack, and he writes with venom about them. The word ‘inane’ comes up is these pages often enough. His title comes from an ingenious reference. In Keynes’s papers he discovered a copy – in the original – of Thucydides’ Peloponnesian War, in which the Athenian generals’s response to the Melians’ plea for leniency were dismissed. Keynes, then desperately trying to get the Americans to go easy on the debt-ridden British, had underlined it. It reads, ‘the strong do what they can and the weak suffer what they must’. The weak in this case are old age pensioners who cannot get their pills because the Euro rules otherwise. A good title for this devastating book.

It is really two books: a history of the Euro, interleaved with memoirs that give it bite. In the days when the European Union was a success story, the various stages in its construction were scrupulously studied in university courses. In the days when Turkey was a plausible candidate, I tried conscientiously to teach graduate students about it, but how do you make the Werner Report on Monetary Union (1970) come alive for a class? Eyes glazed, and I therefore vastly admired the energy and clarity of Varoufakis’s account. He can cut through a jungle of bureaucratese and get to the heart. He puts the effort at monetary union in the context of Bretton Woods, the Americans’ arrangement, with fixed exchange rates, to establish financial stability after 1945. It broke down in 1970, because the USA ceased to have a trading surplus, and also started running up a huge debt; the dollar had to be devalued, as happened to the Pound Sterling, a vital part of the system, three years earlier (I still have six handsome Mappin and Webb silver tankards which I bought for £180 as a hedge at that time). But what would happen to trade, if exchange rates were awry? Efforts at co-ordinating European currencies went on, with ‘the Snake’, the Exchange Rate Mechanism, the European Monetary System. They all failed to work, mainly because the French spent and the Germans saved. In the 1980s, when everyone wanted to invest in America, the Dollar rose, and the Europeans decided to set up their Euro as rival. Oddly enough the original idea and even the name had been suggested by an official of the Marshall Plan, who saw separate currencies as a nuisance, an interference in trade (Varoufakis’s bibliography should have had room for the works of Alan Milward on this subject). In 2002, to fanfares, the Euro entered the game. As an old Marxist, Varoufakis well understands the hard-faced interests behind all of this, and has done a wonderful job in explaining a subject that is desperately intractable. He is a chivalrous man, and he speaks favourably of Margaret Thatcher, who saw through the whole thing in the later 1980’s, and lost office for her recognition of the truth. As he says, there had not been an anti-Thatcher demonstration that he did not join. If only the snowflake generation Left had that kind of chivalry. He is also respectful of Norman Lamont, whose Brexit speeches have indeed been impressive.

The Euro’s first years went well, and tidal waves of money went from surplus Germany, where interest rates were low, to southern Europe, where they were high, and the fact that southern Europe used the indestructible Euro meant that such investments would be safe from the devaluations of the past. In Greece, there was whoopee. In 2008, when the Lehman Brothers crash came, the European banks were found to be just as exposed to toxic loans as the American ones, and governments could not pay their own debts, Greece in the lead. At this point, Varoufakis loses his temper, and rants, with a splendid philippic against Angela Merkel in particular. How could she tell the Greeks to pay their debts, and balance their budgets, while offering no proper relief? European ‘bail-outs’ only really saved French and German banks. This was inane, on a par with the inanities of the early 1930’s, when the French clung to the Gold Standard and ran themselves into the ground. No wonder he used elementary power-point to explain to the Brussels technocrats what all this was about. They, by all accounts, just regarded him as a fantasist and worked to have him removed. But he is a much bigger man than they are, and writes much better prose. I have just the same a grumble or two. Like others of his stamp – Joseph Stiglitz of the World Bank a case in point – he is a nostalgist for the 1960’s and would love to be regulating away. But the 1970’s did not come from nowhere, and were an exceedingly difficult time, with the combination of stagnation and inflation, when Moscow could quite plausibly suppose that the Atlantic world was disintegrating. Reagan and Thatcher did put a stop to that. And should not a Greek at least admit that the Greeks had some responsiblity for this mess? The German press produced story after story as to how they abused the system, with early retirement and lavish pensions. Why should German savers pick up the bill? Of course Varoufakis must be right, that a multi-national currency will not work unless there is a central fund to direct funds to countries with chronic deficits, and he must also be right to savage the people who thought up the Euro without that kind of safety net. And we can also be very grateful to him for giving us a very, very strong argument for Brexit.

[pullquote]

Enjoyed this book review? Help keep us solvent by tweeting it or sending it to you Facebook. Subscriptions (paper magazine or online) from as little as £10 a year)

[/pullquote]