Brexiters are Crazy to take Lessons from Varoufakis

Published by, 26.20.2017



David Davis is the latest hardliner to praise Yanis Varoufakis, telling MPs yesterday to read his recent book. Doesn’t he know that the former Greek finance minister’s antics nearly destroyed the country?

Sadly, the UK’s current position towards the EU has come to resemble Greece’s strategy of 2015. At that time the newly elected Greek government was seeking a total renegotiation of the bailout deal of 2012. The Greek plan has been described in detail in Varoufakis’ book Adults In the Room: My Battle with Europe’s Deep Establishment. It reveals two striking analogies between Greek Prime Minister Alexis Tsipras and Theresa May.

First, a mistaken perception of the underlying balance of power. Tsipras entered the negotiations thinking he held a winning hand. He believed “Grexit” would be very damaging to the rest of the eurozone. He also thought that if Athens threatened to create a parallel electronic currency and default on loans held by the European Central Bank (ECB), the EU would cave in.

These calculations were entirely misguided. Neither Tsipras nor Varoufakis understood the eurozone’s legal architecture. A parallel currency would have violated the EU treaties, which provide that monetary policy is an “exclusive competence” of the EU for eurozone members. The new currency would thus have brought legal chaos, without affecting the eurozone in the least.

Meanwhile, defaulting on the bonds held by the ECB would not have had the domino effect Varoufakis expected. The other countries were well protected from contagion because the ECB had a contingency bond-buying plan that the European Court of Justice declared legal, contrary to the former Greek finance minister’s wishful thinking. 

Similarly, May triggered Article 50 negotiations appearing to believe that a “no deal” Brexit would be so damaging to the EU’s exports that it would bend over backwards to do a deal. That’s why she kept saying “no deal is better than a bad deal”.

Like Tsipras, she miscalculated. As confirmed at last week’s EU summit, the other countries are fairly relaxed about “no deal”. It would not be ideal, but they can live with it. So the EU is still refusing to open negotiations on a future trade deal until the position of EU citizens, the UK’s financial obligations and the Irish border are resolved.

The second striking similarity between Tsipras and May concerns their expectations of what they could achieve. The Greek prime minister entered the talks believing his interlocutors were “illegitimate” and “undemocratic” bureaucrats. He also thought that they would offer him a novel deal, unlike anything that had been done before.

Tsipras was again mistaken. His interlocutors were not undemocratic bureaucrats but elected politicians from other countries, looking out for their own voters’ interests. Nor did they have the power to make up the rules as they went along. Varoufakis and Tsipras appear to have been surprised that the EU is a community based on the rule of law.

May is going through the same process of discovery. Her talks are not with “overpaid bureaucrats”, as the Brexit media likes to describe them. She is negotiating with other countries’ elected representatives, who are accountable to their own parliaments or, as in the case of Jean-Claude Juncker, are accountable to the European Parliament.  

Brexiters, just like Greek populists, have been so blinded by ideology that they did not care to understand how the EU works. And just as in Greece, their encounter with reality may be happening too late. Having wasted six months, the UK government is now calling for urgency, flexibility and creativity to get a unique “bespoke” deal. Fat chance of that.

Although the radical left Varoufakis is a strange bedfellow for right-wing Tories, there is one lesson Britain could usefully take from Greece. At the height of his showdown with the eurozone, Tsipras called a referendum to back his decision to say “no” to the bailout terms offered by the other countries. The people backed him resoundingly.

Just a few days later, realising the havoc a total default would cause, Tsipras did a flip flop – or what the Greeks call a “kolotoumba” – and sued for peace with the eurozone. Given the chaos as May struggles with the impossible task of finding a good Brexit, might the UK do its own kolotoumba?

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Edited by Hugo Dixon