If one asks European officials, the consensus is harsh: Varoufakis was a self-aggrandizing time waster who helped ruin the Greek economy before Tsipras got rid of him. The hard-edged intellectuals of Popular Unity agree that Varoufakis was as much a part of the problem as he was a part of the solution. They also agree that it was a mistake for Syriza to have haggled with the eurozone creditors. Their preferred option was for Syriza to have broken with the creditors from the beginning.2 A “rupture,” an exit from the eurozone, in January or February 2015 might have sustained the momentum of Syriza’s election victory. [...]
To understand Varoufakis’s motivations, we have to understand how he defines what was at stake in the battle between Greece and its creditors. For many on the left, the struggle was between the “forces of capital” and democracy. That made a good rallying cry. But it is far from the situation that Syriza actually confronted in 2015. Due to the 2012 debt write-down, when Syriza took power three years later only 15 percent of Greece’s debts were owed to banks, insurance funds, or hedge funds. Eighty-five percent were debts to official agencies and other European governments. The struggle was not with the capital markets but with official creditors and the other national governments assembled in the Eurogroup. [...]
By buying sovereign and private bonds, the ECB propped up their prices, pushed interest rates down, and flushed hundreds of billions in euro liquidity into the financial system. The primary aim was to stimulate the eurozone economy, but quantitative easing also had political ramifications. As long as the ECB kept buying their bonds, Spain, Italy, and Portugal were immune to contagion from the uncertainty surrounding Greece. Quantitative easing thus deprived Syriza of one of its chief bargaining weapons. Ironically, it was the ECB’s action—made in defiance of the conservatives in the Eurogroup—that freed those conservatives to lay siege to the left-wing government in Athens. They could force Greece to the brink of a disorderly Grexit without fear of destabilizing the rest of the eurozone and fight Greece’s political contagion without having to worry about the financial kind.
At the height of the crisis—between 2010 and 2012—there was indeed a spectacular confusion in the eurozone that might have been resolved by means of a grand bargain. But even then, the idea that the solution could have come from Greece was fanciful. In 2012, it took the combined weight of France, Italy, Spain, the European Central Bank, the European Commission, and the Obama administration to convince Germany to accept the ECB’s commitment to do “whatever it takes” to save the eurozone. What emerged in the aftermath of that crisis was neither a muddle—as Varoufakis suggests—nor a conspiracy. Europe’s political economy came to be dominated by the “reform” project first launched by Germany’s main political parties in the early 2000s, which centered on labor market liberalization and fiscal consolidation.
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