What on earth is Yanis Varoufakis, Greece’s new finance minister playing at? We were told he was a class act, and he certainly seemed to articulate quite brilliantly the problem at the heart of Europe’s experiment in monetary union.
But right now, it is impossible to know what he and his fellow Syriza leaders are trying to achieve. First they promise to repudiate Greece’s debts, then they say they will honour them. They pledge to reverse austerity, and now they plan to go “cold turkey”, which presumably means reducing the Greek financial diet from one of thinnest gruel to nothing at all.
They say they won’t have any dealings with the hated Troika, comprising the EU, International Monetary Fund (IMF) and European Central Bank (ECB), but instead intend to negotiate bilaterally with the individual nations which have lent Greece money in a series of bailouts.
Good luck with that one. There is more chance of the IMF and the ECB cancelling their debts - and there is virtually no chance of that - than individual nations, who would then have to explain to their own taxpayers why at a time of austerity they have lent so much money to Greece only then to cancel the obligation.
And then Mr Varoufakis flies in for talks with George Osborne in London, who has no bilateral loans out to Greece (the UK participates in Greek bailouts only indirectly through the IMF and the EU) before picking up the phone to Wolfgang Schäuble in Berlin, who has a great deal of money out on loan to Greece.
Now admittedly, Mr Varoufakis will get a more sympathetic hearing in London, where large parts of the media seem to regard his arrival on these shores as something akin to the second coming, than Berlin, but it doesn’t help his case with Greece’s main creditors. What’s more, his anti-austerity agenda is scarcely likely to resonate with the hair-shirted men of Downing Street.
Mr Varoufakis is said to be an expert on game theory. I guess it is in the nature of playing a good game that you must keep your opponents guessing to the last. Mr Varoufakis has no option but to play hardball. Brinkmanship was always going to be the substantive part of his negotiating strategy. But what's going on at the moment is just chaotic nonsense. It's impossible to know what Mr Varoufakis wants. Far from making progress, what Syriza is actually doing right now is leading Greece over the cliff. How does the Greek government propose to pay its bills once the money runs out? If the ECB doesn’t do it first, the Bundesbank will surely move shortly to block the Target 2 transfers currently necessary to fund capital flight from the Greek banking system.
The reality is that Syriza is not just playing a dangerous game, it is playing no game at all likely to produce anything other than abject disaster. I had high hopes of Mr Varoufakis, but am fast losing my faith. Capital controls and limits on cash withdrawals from Greek banks can be only weeks, if not days away.