The Guardian view on the euro: Yanis Varoufakis begins to haggle
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Version 0 of 1. Rocking up to No 11 on Monday in a black leather jacket, a bold blue shirt and no tie at all, Yanis Varoufakis looked like a visitor from another planet, beside a buttoned-up George Osborne. Indeed, Greece’s new finance minister hails from another intellectual universe from the man with the “long-term plan” for austerity. But as Europe anxiously eyes developments in Athens, it can be reassured that Mr Varoufakis was, while still buried away in university departments, doing some long-term planning of his own. He has penned books on “game theory”, the science of bargaining – useful training for the gruelling months of negotiations with Berlin, Frankfurt and Brussels which lie ahead. But during Syriza’s electric first few days – in which privatisations were halted, rhetoric ramped up and dubious coalition partners embraced – mastery of abstract models was never going to reassure a continent which fears for its currency’s future. What should reassure Mr Varoufakis’s counterparts in other capitals, as well as the markets, is that he has spent the last few years to trying to chart a practical path out of the debt trap, publishing several versions of what he calls A Modest Proposal. To German or Finnish taxpayers, already outraged at the large cheques written to the Greeks, no proposal to ease the debt burden will sound modest. But after what had looked like becoming an irresolvable clash of red lines – with Syriza insisting that the only solution was a debt write-off, and Germany ruling that out – every European who wishes to see the single currency come through 2015 in one piece should be grateful that Mr Varoufakis has done so much homework. In an interview with the FT, we saw the fruits of that – and got our first glimpse of the territory on which a compromise might be found. Shrewdly, Mr Varoufakis acknowledged that suggestions of creditor “haircuts” jar in some countries – a first flicker from Syriza of the need to respect domestic political pressures on other states. At the same time, however, he pleaded with them to understand that, in much the same way, terms like “troika” are “jarring for the Greeks”. More concretely, he proposed not simply to reduce debt, but instead to repackage it into a new form of bonds, where repayments were linked to cash GDP. This could, in the jargon, align the incentives of creditors and debtors, giving the former a stake in a Greek recovery which they have thus far shown no interest in bringing about. It would avoid Europe’s north having to hoist the white flag, and say “forgive and forget”. And by linking to money, rather than real, national income, the bond proposal guards against a deflationary context, which could otherwise make the debt trap ever deeper. Put all this together with a progressive package of reforms – to start collecting unpaid tax, and to take on the web of vested interests which have ensnared the Greek state for so long – and you ought to have the makings of a deal. It would still be a difficult deal for many others to swallow, but Europe should be thankful that Greece is no longer simply grandstanding, but engaging creatively with the pressing need to haggle. |