Greece 'not going gently into the night,' says new finance minister

Yanis Varoufakis, an economist with a fondness for Dylan Thomas and loud shirts, promises to take a hard line against what he calls Europe's 'fiscal waterboarding' of Greece.

He quotes Dylan Thomas, wears garish shirts, and has had a globe-trotting career as an economist.

Now Yanis Varoufakis has been made the point man in Greece’s looming battle with Brussels and Berlin over its crushing level of debt and the detested austerity policies imposed by its international creditors.

Mr. Varoufakis was appointed Greece’s finance minister on Tuesday by Alexis Tsipras, the former communist who a day earlier was sworn in as the country’s youngest prime minister after his radical leftist Syriza party won a resounding victory in the national election.

Now, as Greece’s key negotiator, Varoufakis will face a very delicate balancing act. On the one hand, he must push for debt reduction in order to keep the promises Syriza made to voters. On the other hand, Greece desperately needs Europe’s money and cannot afford to deeply antagonize its creditors. And the EU, and in particular Germany, which bankrolled much of the bailout, says the repayment of the debt is non-negotiable.

A Greek depression

Since the austerity policies were imposed, Greece has undergone an economic calamity on a par with the Great Depression of the 1930s in the United States. The economy has contracted by a quarter; adult unemployment runs about 25 percent, while youth unemployment is double that.

The new government has vowed to roll back five years of austerity and force a renegotiation of a 240 billion-euro loan ($270 billion) to Greece by the European Union, European Central Bank, and International Monetary Fund in order to save the country from bankruptcy.

It says that its first priorities are to raise the minimum wage by 30 percent and to restore electricity to 300,000 households that had their power supplies cut because they could no longer pay their bills.

It has also promised a 12 billion-euro spending spree that will include increasing pensions, which have been repeatedly cut in the last few years, and reinstating public service workers who lost their jobs as the country moved in 2013 to trim a bloated bureaucracy.

'Fiscal waterboarding'

Varoufakis, who left a post at the University of Texas to take the position in Greek government, hailed Syriza’s election win on Sunday as a new dawn.

Paraphrasing the Welsh poet Dylan Thomas, he wrote on his blog: “Greek democracy today chose to stop going gently into the night. Greek democracy resolved to rage against the dying of the light. The people of Greece ... used the ballot box to put an end to a self-reinforcing crisis that produces indignity in Greece and feeds Europe’s darkest forces.”

Varoufakis roundly condemned Europe's austerity policies, calling it a huge mistake to “unload the largest loan in human history on the weakest of shoulders.” Speaking to the BBC, he said: "An eight- or nine-year-old can understand this will not end well. What we have had since ... is a kind of fiscal waterboarding policy that has turned Greece into a debt colony."

He said 90 percent of the money received by Greece went back to the banks in debt repayments, in a vicious circle of debt that the country can never hope to escape. It was "a cynical transfer of banking losses onto the shoulders of the weakest taxpayers," he wrote on his popular blog this month.

Syriza says that Greece is being strangled by the debt, which is nearly 180 percent of its GDP – the second-highest in the world after Japan – and that unless some of it can be written off, the country will never be able to climb out of its grinding, six-year recession.

'A very difficult position'

But Varoufakis has a tough fight on his hands. After Syriza’s election win, German Chancellor Angela Merkel wasted no time in telling Greece that it must honor its debts and continue with structural reforms, the privatization of state assets, and the contraction of the public service sector.

"In our view it is important for the new government to take action to foster Greece's continued economic recovery," said Steffen Seibert, her spokesman. "That also means Greece sticking to its previous commitments."

The stage is set for a bruising showdown between the new Greek government and the bankers and bureaucrats of northern Europe, with the first big test coming at a meeting of European leaders on Feb. 12 in Riga, the Latvian capital.

"If Tsipras puts at risk Greece's position in the eurozone, it would be political suicide for Syriza and for him personally," says Vassilis Kostoulas, the economics editor of Naftemporiki, a business newspaper. “He’s in a very difficult position – he must find balance on all sides.”

But Costas Douzinas, a political commentator and a professor of law, says austerity has failed and Greece’s creditors will have no choice but to come to some sort of compromise. “The theory of austerity was a kind of black magic. It was the idea that if you bleed a person, like they did with leeches in the Middle Ages, then they will get better. But the patient is bleeding to death."