Varoufakis has achieved one thing – uniting resentment from poorer nations

Countries such as Latvia and member states in eastern Europe have been some of Greece’s most trenchant critics, after having to take part in the world’s biggest ever bailout

Yanis Varoufakis could not resist bragging. Shortly after Greece’s new leftist government struck a deal with creditors to extend the country’s bailout to the end of next month, the finance minister and glamour boy for the Syriza radicals waxed triumphalist about how he had outfoxed the eurozone.

“We no longer have this unified group against Greece,” he declared in a lengthy radio interview. “We now have a side that has broken down into many different sides, some of which are very open to our proposals. This by itself is a great success.”

So far, the extension of the bailout from 20 February to the end of June has remained the only breakthrough achieved by the brinkmanship of Alexis Tsipras’ government in talks with eurozone creditors.

The condition was that Tsipras comes up with a reform programme that could satisfy lenders. With the clock ticking and the odds shortening on a Greek default, they are still waiting for the Tsipras programme.

Varoufakis’ boast might have gone down well at home, but it was 180° wrong.

Rather than splitting the eurozone, he has managed to unite the other 18 single-currency countries against himself and against Greece more firmly than ever before. As an object lesson in how to make enemies and lose friends, it was quite a feat.

“He annoyed a lot of people, burned a lot of trust,” said one senior EU diplomat.

Two months on and following last week’s disastrous meeting of eurogroup finance ministers in Riga, Varoufakis was defenestrated. Ministers and officials were shockingly open in venting their exasperation and their contempt for the Greek finance minister, who stayed away from the group dinner.

Tsipras quickly read the runes, reshuffled his negotiating team, and shunted Varoufakis aside.

FDR, 1936: "They are unanimous in their hate for me; and I welcome their hatred." A quotation close to my heart (& reality) these days

— Yanis Varoufakis (@yanisvaroufakis) April 26, 2015

Only months ago, it seemed everyone loved Varoufakis. By last weekend he was tweeting how everyone hated him, and bitterly complaining about his “political deconstruction”.

It is fitting that the site of Varoufakis’ grief was Latvia, given that one of the undercurrents in the five-year Greek drama has been how the smaller and poorer countries of the eurozone, notably Latvia and the other two Baltic states, have bitten their lips while nursing intense resentment about having to take part in the world’s biggest ever bailout.

Lithuania’s finance minister, Rimantas Sadzius, was among the harshest of Varoufakis’ critics in Riga, participants in the meeting said. The Slovak and Slovene ministers were not far behind. Latvia chaired the meeting and had to be on best behaviour, but it has already been one of the most trenchant critics of Greece for years. Its views are shared next door in Estonia, too.

The chorus of criticism from the eastern periphery of the eurozone meant that the usual suspects – Wolfgang Schäuble of Germany and eurogroup chairman Jeroen Dijsselbloem of the Netherlands – were spared the need to issue their usual dire warnings to the Greeks.

“The EU is not just Germany and Greece,” said a former long-serving prime minister of an eastern European member state. “The [Tsipras] government didn’t have any understanding of how the EU functions. There are other countries, too.”

In a European Union of 28 member states, there are 12 countries poorer than Greece, according to World Bank per capita gross national income (GNI) figures for 2013. In the single currency bloc embracing 19 countries, six of them remain poorer than Greece even after the wrenching austerity and the collapse in living standards during the bailout years.

Tsipras had started out with elements of wary support in Italy and France and in the European commission, especially from France’s commissioner Pierre Moscovici and the EC chief, Jean-Claude Juncker. That has dissipated.

Two euro countries poorer than Greece – Portugal, which has been through its own bailout, and Malta – might have been expected to be sympathetic, but were also alienated. Malta described the Riga meeting as a “complete communications breakdown.”

But it is in the post-communist east that Greece’s problems are viewed most unforgivingly, regarded as an exercise in national narcissism.

Four of the six poorer eurozone countries are newer member states from the east, all of which went through the extremely painful economic reconstruction of the 1990s following the collapse of the Soviet Union. Additionally in 2008-9 the three Baltic states suffered their own financial meltdowns driven by the credit booms and reckless lending of the Scandinavian banks that dominate the region. Latvian GDP shrunk by 16%. State spending and social services were slashed. Up to a tenth of the population emigrated.

Prime Minister Valdis Dombrovskis led Latvia out of the mess and into the euro, all the time complaining that Greece was getting it wrong. He is now vice-president of the European commission in charge of the euro.

These countries have come out the other side – Lithuania joined the euro this year, Latvia the year before. Understandably they have little sympathy for the Greeks, especially since five years later the crisis remains unresolved.

European commission vice-president Valdis Dombrovskis (left) speaks to European commissioner for rconomic and financial affairs Pierre Moscovici in Riga.
European commission vice-president Valdis Dombrovskis (left) speaks to European commissioner for rconomic and financial affairs Pierre Moscovici in Riga. Photograph: INTS KALNINS/REUTERS

“We’ve discussed it so many times and no one says Greece has to leave,” said the ex-prime minister, who attended countless EU summit deliberations on the Greek crisis. “But people feel humiliated and in many countries people don’t care about Greece any more. It’s hard for me if I’m prime minister to explain why we poor should help the rich Greeks. The Greeks can do their reforms if they want to, but not with our money.”

Vykintas Pugaciauskas, who helped run Lithuania’s EU presidency in 2013 before returning to Vilnius to work in national television, said he had been surprised that when the crash hit his country in 2008 there were no strikes or public unrest.

The reason, he said, is that Lithuania and the other Baltic states were willing to take the hit and “to suffer for a bigger cause”.

That meant joining the euro and entrenching themselves deeper in the EU. “Now we’re in the euro and we need to pay up for countries like Greece,” he said.

“There is a general resentment here all the time about this. This has got nothing to do with Tsipras or Syriza. It’s not a political party thing. It’s just that people say we shouldn’t be soft on Greece.”


Ian Traynor Brussels

The GuardianTramp

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