An excoriation of Europe’s elites from a Greek prophet

Non-fiction; And the Weak Suffer ; What They Must?; By Yanis Varoufakis ; Bodley Head, €23

The Bundesbank is the villain. The game played is international one-upmanship to cope with the vast imbalances of money, goods, and people that modern trading nations generate. At the rotten heart of this game is nothing more than the exigencies of power and national self-interest.

The euro, a currency designed to pull Europe’s disparate nations together, has instead left them increasingly divided into ‘creditor’ and ‘debtor’ categories, with the weak in each nation suffering more than is necessary as a result.

Since 1964, Europe’s solution to the problem of coping with these vast trade and financial imbalances has been a vast bureaucracy in bed with massive oligopolies. The polemicist making this argument here is Yanis Varoufakis, former finance minister of Greece and the bête noir of European bureaucrats.

Varoufakis’s latest book takes its title from Thucydides’s account of the Peloponnesian War which raged from 431 to 404 BC. Thucydides, himself an Athenian general, speaks of how the victorious Athenian generals denied the defeated Melians any dignity, explaining that rights are only pertinent between equals in power, because “the strong actually do what they can and the weak suffer what they must”.

Rights, and the natural justice that flows from them, are for the victors. The parallels between the victorious creditor nations of Europe and the defeated peripheral nations like Ireland, Greece, Cyprus, and Portugal don’t need to be spelled out.

And The Weak Suffer What They Must? takes us through the development of post-war international institutions like the IMF and Europe’s Coal and Steel Federation as well as the creation of the euro itself, sponsored by French bureaucrats in need of a way to bend Germany to its will in the 1960s, but not taken up seriously by France and Germany until the late 1970s.

It turns out that it’s all about competitiveness. Germany required a way to make its exports more competitive, and a weakened currency is the best way to achieve a state where your stuff is cheaper than their stuff. The result is the largest current account surplus in the world in Germany, and current account deficits across much of the rest of Europe. The imbalances between nations, which independent monetary policies and exchange rates can help fix, are only exacerbated by a common currency.

A deficit country, like France, operating within a monetary union with a surplus country, like Germany, can’t avoid capital flight by scared savers and investors the moment the monetary union is hit by some crisis or other, making the crisis worse in the deficit country, and helping the surplus country. All of a sudden, the deficit country is in deep trouble, and the only way out is to restore competitiveness by cutting wages, that is, imposing austerity.

That a single currency is about the politics of Europe is not in dispute in 2016. When Margaret Thatcher said it in one of her last appearances as British prime minister, it was. Thatcher grasped the euro’s design flaws quickly.

The economist Dani Rodrik calls this the globalisation trilemma. You can have two of the following: a sovereign nation, and/or integrated international markets for capital and labour, and/or effective mass national politics. You can’t have all three.

Take Ireland. This country has surrendered much of its sovereignty and the effectiveness of its national politics in favour of increasing the degree of international integration it experiences. This has been a policy choice since the 1950s. The results of this choice are why sovereign bond yields on peripheral economies like Spain, Portugal and Ireland barely fluctuated after their inconclusive elections.

It’s because the domestic politics don’t matter. The political scientist Peter Mair, in his book Ruling The Void, made exactly the same point as Rodrik. Politicians seeking real influence will not court the polity any more; they will retreat to supranational institutions and remodel themselves as a homogeneous professional class, withdrawing into state institutions that offer stability relative to depending on the whims of fickle voters.

And this is where Europe’s democratic deficit – which the philosopher Jürgen Habermas has been worried about now for decades – comes from: a supercedence of social democracy by the spirit of Mitteleuropa and Paneuropa, two post-war pipe dreams which just happened to come true.

Throughout his narrative, which is engaging, witty, and well-written, Varoufakis is at pains for us to understand that the fell hand of Germany’s “hard money”-loving central bank, the Bundesbank, is behind many of the more malign aspects of the flawed design of the euro.

One example: “Monetary union was to be given a go as long as any notion of symmetry between France and Germany was replaced by an ironclad commitment to the Bundesbank’s unfettered domination of European economic policy.”

Now, I’ve actually been to the Bundesbank. To judge by Varoufakis’s many descriptions, these guys bestride the world like stentorian gods, moving mountains with their Machiavellian minds. The lads I saw, padding around in their socks and scratching themselves, just didn’t really give me that vibe.

In my opinion, the causal story behind the narrative puts too much focus on this one aspect of the story, but of course it helps Varoufakis’s argument that the Bundesbank, the chief architect of his woes as Greek Finance Minister, has been messing with everyone’s politics since the 1950s, including deposing one of its own governments!

Varoufakis is also at pains to show how things have changed: following Germany’s post-war humiliation, its debt was forgiven by the US and then by (almost) everyone else, including Greece. Now, 70 years later, with the shoe firmly on the other foot and placed on the neck of the Greek people, such debt forgiveness is impossible. As one German junior minister said to Varoufakis: when am I getting my money back? US Treasury Secretary Tim Geithner was shocked when he heard his European counterparts say “We’re going to teach the Greeks a lesson . . . [w]e’re going to crush them.”

If he over-eggs the malevolence of the Bundesbank, Varoufakis gets the mechanisms of the crisis just right, and he also understands the moral dimension of the European crisis. Those who found themselves in power did not see it as their duty to help the weak, who they caricatured as profligate.

It was just not part of their web of belief. When it came down to it, like the Athenian generals 2,500 years ago, Europe’s elites decided that the weak could suffer what they must. Varoufakis tried his best to stop them, but he failed. His book goes some way to explaining why. For me, he is a flawed Cassandra, the prophet and daughter of the King of Troy, who warned her people but who was cursed never to be believed.