Germany's practical weight in the European Union

Yanis Varoufakis catches a surprising passage at the very end of this Financial Times article, Yannis Stournaras urges ‘troika’ to ease demands on Greece by Peter Spiegel and Kerin Hope 01/09/2014:

Some Greek officials, including deputy prime minister Evangelos Venizelos, have warned the government could fall without a significant change in the terms of its bailout repayments.

But Mr Stournaras [Greek Finance Minister] appeared to distance himself from such brinkmanship, emphasising other ways to reduce Greece’s debt, including its increasing budget surplus and improving its privatisation programme.

Indeed, Mr Stournaras said he bucked pressure from Christine Lagarde, IMF managing director, and Poul Thomsen, the IMF’s Greece mission chief, to ask other eurozone leaders – including German finance minister Wolfgang Schäuble – to accept “haircut” losses on their bailout loans.

“Poul and Lagarde said I had to [stand] by their side,” he recalled. “I said: ‘OK, but if I come by your side, it is what would really help Greece, but it’s something which is totally out of the question.’ Schäuble told me: ‘Yannis, forget it.’ So it cannot be done, so what can I do?” [my emphasis]

Varoufakis in Greek Finance Minister Confesses: “I turned down the IMF’s offer of an alliance in favour of a debt restructure” 01/10/2014 calls this "a stupendous story." Varoufakis writes:

Never perhaps in the history of the European Union has a better example seen the light of day of the complete and utter subjugation of proud nations to the tyranny of the leading surplus nation [Germany]. Never before have we had such a vivid confirmation that the European Union is no longer an association of sovereign nations and that a rational debate is ruled right out. ...

Yannis Stournaras happens to be a valued colleague and a good friend of mine (see the open letter I sent him upon his appointment as finance minister). It is with great personal sadness that I write these lines. Greece needs a finance minister that will re-negotiate forcefully the terms and conditions of a misanthropic, irrational, unworkable ‘bailout’ package (especially now that a Mk3 version is on the boil). Given the way he, by his own admission, squandered this remarkable opportunity to increase Greece’s bargaining power, he lacks the credibility amongst Greece’s polity to lead these negotiations. He should thus resign. Effective immediately.

A very sad and very telling report.

Tags: austerity economics, eu, euro, european union, france, françois hollande, greece