What It’s About

Shortly after Syriza’s victory in January 2015, Yanis Varoufakis is traveling around Europe for his first official meetings with various and economics ministers. Here’s an interesting conversation with one of them:

Pier Carlo Padoan, Italy’s finance minister and formerly the OECD’s chief economist, is in many ways a typical European social democrat: sympathetic to the Left but not prepared to rock the boat… Our discussion was friendly and efficient. I explained my proposals, and he signalled that he understood what I was getting at, expressing not an iota of criticism but no support. To his credit, he explained why: when he had been appointed finance minister a few months earlier, Wolfgang Schäuble had made a point of having a go at him at every available opportunity…

I enquired how he had managed to curb Schäuble’s hostility. Pier Carlo said that he had asked Schäuble to tell him the one thing he could do to win his confidence. That turned out to be “labour market reform” – code for weakening workers’ rights, allowing companies to fire them more easily with little or no compensation and to hire people on lower pay with fewer protections. Once Pier Carlo had passed appropriate legislation through Italy’s parliament, at significant political cost to the Renzi government, the German finance minister went easy on him. “Why don’t you try something similar?” he suggested.

“I’ll think about it,” is Varoufakis’ diplomatic reply.

A couple days later, he has a meeting with the German finance minister himself, perhaps the most important single figure in the Euroepan establishment. Schauble brushes off Varoufakis’ suggestions for strengthening the Greek tax authorities, insisting instead on

his theory that the “overgenerous” European social model was no longer sustainable and had to be ditched. Comparing the costs to Europe of maintaining welfare states with the situation in places like India and China, where no social safety net exists at all, he argued that Europe was losing competitiveness and would stagnate unless social benefits were curtailed en masse. It was as if he was telling me that a start had to be made somewhere and that that somewhere might as well be Greece.

I’m supposed to be writing a review of Adults in the Room.That right there is the story, I think. Debates over fiscal arrangements were a pretext, the real agenda has always been restoring the rule of market over society, over labor in particular. And Greece was just a convenient place to start, or to make an example of. Despite the constant framing of Eruope’s divisions in national terms, I think it’s clear that for German conservatives like Schauble, the real target has always been their own working class.

6 thoughts on “What It’s About”

  1. While I 100% agree with your interpretation, I also want to say that italian “center left” (here represented by Padoan) is not all that leftish either.
    So the way they frame the situation is: “hey, we would reaaally like to strenghten the welfare state, we think it would be ethically just, but obviously the welfare state would be unefficient economically, so we can have only small of it, and maybe in the future when the crisis is gone, in the week of the seven fridays”.

    So in practice the difference between a Padoan and a Schauble isn’t as big as it seems, because they start from the same model of reality, the only difference in Padoan being less an ass personally than Schauble.

    So in the case of Greece, why did the Greek government get so few support in the EU, even though in a standard keynesian view their requests were totally correct? In part it depends on German politicians forcing an anti-worker policy in the EU, but I think the extent Germany forced those choices on other EU countries is exaggerated, as I think EU politicians in most countries, including center-leftish ones like the Italians of the times, in reality mostly shared the same way of thinking.

    1. Sorry, I didn’t really spell out my thought — point of post was jsut to get some evocative quotes out there.

      I agree — and I imagine V. would as well – that there is no important substantive difference in substance between Padoan and Schauble, just in style/presentation. And I agree with your last statement. The logic here — as to a significant extent with the IMF and similar agencies historically — is that an external force allows domestic political elites to present the policies they actually want as being forced on them.

  2. I’ve never understood why Yanis Varoufakis was so determined to stay in the Euro rather than regaining monetary sovereignty for Greece. That looked to me to be a true solution to the issue.

  3. I wish I could find it now, but I swear it was reported that Obama and Peter Orszag together agreed that American wages inevitably needed to converge with Chinese wages.

    1. I don’t recall that. But yeah, in general, there’s this constant back and forth where we’re told one day that trade is win-win, everyone gets richer, there’s no reason to be against it except xenophobia; and then the next day that it’s impossible that “unskilled” workers can have high wages in this new integrated world, that international competition sadly just forces us to give up on the welfare state.

      This article by Mssimo Pivetti (can’t find non-paywalled version) nicely lays out how this two-step worked in Europe.

  4. I regularly fantasize about writing a history of post-crisis Europe with Schauble in a starring role as the villain. (The main thing that stops me is that my reading knowledge of German is mediocre.) I guess we will survive, but he came this close to completely derailing the European project.

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