My recent participation in an international conference put me on separate occasions in the privileged position of listening to the opinions of two high profile political leaders as well as with the oppportunity to ask questions. Jack Lew was President Obama`s Chief of Staff between 2012-2013 before he became the US Secretary of the Treasury from 2013 to 2017. Yanis Varoufakis, as a member of the ruling left-leaning party, Syriza, was appointed Greece`s Finance Minister from January to July 2015. In this capacity he led the negotiations with the Eurogroup and IMF with a view to restructuring Greece`s foreign debt, and as such witnessed quite a few tense discussions first and foremost with German leaders. Aware of their political orientation, one cannot ignore what these insiders of international politics have to say.
During his speech, Mr. Lew insisted on emphasizing the deep divide within both the American public opinion, and the political scene. Despite that, he sees a silver lining for the bipartisan relationship. This should be helped along by the outcome of US midterm elections in fall when all 435 seats in the House of Representatives and 35 of the 100 seat in the Senate will be contested. Mr. Lew strongly believes that the House of Representatives at least is going to be won by democrats which will most likely have each party hold the majority of one chamber. Throughout the US history, he noted, similar circumstances encouraged bipartisan talks and agreements which should on this occasion also help bridge existing gaps.
As expected, Mr. Lew defended President Obama`s decisions, including those not to intervene in Syria. He claimed that, given that at no time had there been better options as to the outcome of a US intervention, he could not have possibly supported a decision in that respect. In that regard, he admitted that the red line mentioned by President Obama referring to the use of chemical weapons was not inspired as it created unrealistic expectations. At the same time, as regards the alternative of providing stronger military support in the region, he reminded the situations where it was found that American weapons came to be used against their intended purpose.
As expected, he criticized President Trump`s approach, in particular him damaging international political ties that took America so long to build. In that regard, Mr. Lew stated that four years in the office was not long enough to cause irreparable damage. Two terms, however, might prove a long enough period to seriously hurt internal and external relations.
As he characterized the current US presidency as impulsive, I asked him to what extent he considered that the American political establishment was able to contain this impulsiveness. Mr. Lew observed that both the judicial system and the American press were handling the situation successfully. The democrat party sees his power constrained by being a minority party in both chambers, whereas the Republicans have mixed feelings.
As for Mr. Varoufakis`s remarks, he mainly referred to the EU and the future of the eurozone. He remarked on the democracy deficit within the EU, and criticized the fact that Brussels bureaucrats with no democratic legitimacy had the power to make important decisions for the Union. According to him, the solution would be European elections with no national orientation, that is in which candidates may run and ask for votes across the entire EU and not just their own country.
He believes that Brexit was an unfortunate choice with definite adverse implications for the UK. Moreover, he is convinced that the EU will make UK`s exit as painful as possible so as to deter any other similar initiatives.
He noticed that the eurozone is dysfunctional. The danger of a possible breakup lies in Italy being thrown into an economic crisis, a country that is impossible to bail out by applying the plan for Greece. Indeed, Mr. Varoufakis noted that Greece would never be able to pay back its foreign debt and that a postponement of debt cancellation would only prolong the country`s agony and prevent its economy from recovering.
The problem of the eurozone lies in the fact that its economies are so diverse, with some operating on budget surpluses while others create deficits. To do away with the resulting tensions, Mr. Varoufakis considers that it is high time for surplus and deficit economies to merge up as long as their debt is below the debt threshold set out by the Maastricht Treaty, with the public debt being managed jointly. Countries with deficits exceeding the Maastricht limit should fund the exceeding portion of the debt as public sovereign debt.
He did notice, however, a complete lack of appetite for radical eurozone reforms on Germany`s part. To this end, he gave as example the list of reform proposals that President Macron recently presented to Chancellor Merkel which failed to rally any support. Having said that, although Mr. Varoufakis believes that Ms. Merkel belongs to the “camp” of European politicians afraid of change, he does not see a better German alternative to the incumbent chancellor. All Ms. Merkel needs is a nudge out of her inaction.
Which was why he advised Mr. Macron to take a tougher negotiating stand. He gave the example of the “empty chair crisis” created by General De Gaulle when he was the French president. Faced in 1965 with the threat that France lost its veto right on the Common Agricultural Policy, key to subsidizing French farmers, the general decided to boycott the European Economic Community meetings until his right to veto was recognized. The comparison made by Mr. Varoufakis suggests that Mr. Macron should urge Ms. Merkel to accept his reform proposals for the eurozone or else he will take measures to return to the franc thus causing the eurozone to collapse.
To my question on whether it would be appropriate for the eurozone to split into two, a “weak Euro” area and a “strong Euro” one, he answered that it was already too late for that discussion and that the debate should have happened in 1991. Such a move now would cause deflation in the strong Euro zone and stagflation in the weak Euro zone (AN. It is a position which I do not share).
Mister Varoufakis also mentioned that he saw as the main risk facing the EU, its breaking up into islands which would mean political and economic irrelevance.
These were Messrs. Lew and Varoufakis` main remarks with which we may disagree, but which we definitely cannot ignore.
Have a nice weekend!
