Brexit: Yanis Varoufakis on May's mistakes and the best road ahead
The former Greek finance minister takes a taxi with the FT to give his view on how Prime Minister Theresa May should have negotiated with Brussels and how he would navigate the next steps
Produced and edited by Joe Sinclair; filmed by Petros Gioumpasis
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It is the end game for her, an end game that was predetermined at the very beginning, the moment she painted red lines on the floor that were impossible to not violate, and, moreover, accepted Michel Barnier's two-phase negotiation which was, in a sence, a declaration of war by the European Union establishment. They said to her, there will be two phases. In the first phase, you can give us everything we want. And then in the second phase, we will discuss what you want.
If I were to say this to you, you should be offended. You should consider this not only an insult, but naked aggression. She could have said, no, it won't be a two-phase negotiation, it would be a simultaneous negotiation. Negotiation is the art of giving and taking. If I give you everything at once, why will you give me anything?
So I would like for Britain to step out nominally from the EU, to respect the first referendum, but to stay within the single market and the customs union. In other words, there are minimal costs attached to this soft, soft Brexit, for an indefinite period. Which is not the same as the same forever. For Britain to have the debate it wants, and then in the end of that debate, whenever it happens, without the ticking clock, unlike now, to have a referendum. Do you want to now get out of the single market and the customs union, or do you want to get back into the EU? And ideally, I would want us to have to see a second referendum where people in this country decide to rejoin an EU and hopefully, a reformed and transformed EU.
Well, you see, there is something really delicious about an outcome that leaves everybody slightly dissatisfied, but no one particularly incensed. The fact that a Norway plus outcome would not be the first choice, the first preference, of anything other than a small minority is correct, but irrelevant, to the extent that it minimises the maximum discontent. What Britain today needs is an opportunity to create some common ground, to create an environment where you can have a debate about those matters that are central to the future of this country. Like, for instance, the business model of this country. What do you do about the current account deficit? What do you do with the fact that you have, increasingly, a business model relying on low skills, low wages, low regulation, and low productivity?
I'm sorry they have had no debate. They've had a shouting match across the aisles. There will be the Remainers. There will be the Leavers, with the strongest preferences, who are both minorities, shouting at each other, as if it is a football match. That is not the debate. To make the debate count, it should be a debate about everything. About austerity, about what we want to do about investment. How are we going to change the business model? What we want to do about England? Because Brexit is an English phenomenon.
It's not a Scottish phenomenon. It's not a Northern Irish phenomenon, even. I mean you have the DUP now holding the whole country to ransom. And they represent 30 per cent of the Northern Irish, who voted to remain. So there is something wrong with the political system that skews the conversation so much in parliament, compared to what's happening on the ground.
Always know that in Brussels, they will want to crush you. Why? Because it is in their interest as a cartel to band together in order to demonstrate to each other that their rules hold. So you've got to have a strategy which, in game theory, we call it a dominant strategy. That is a strategy that you will follow independently of what the other side will do.
When you are going to a country like Greece in 2015, and you raise VAT to 24 per cent, and you have the corporate tax go up from 26 to 29 per cent , and on top of that, you force small businesses to prepay next year's estimated corporate tax this year, what are you going to do? What are you going to end up with? A diminution of the tax take, from which you're going to give your money back. But they were far more interested in humiliating a government that opposed them than in their own money. So yes, they're perfectly capable of going against their interests.
Worst aspect of it... had nothing to do with interactions with the representatives of the troyka. The worst aspect of it is the backstabbing within your own cabinet, within your own war room, back home in Athens. I think Theresa May would probably agree with that. Except that Theresa May is responsible for her own fate, because of the way that she morphed, of her own volition, from one day to the other, the day after the referendum, from a soft, sensible Remainer into a hard Brexiteer.
Hope... we have a moral responsibility not to lose it. In this country, you have a lot more reasons to be hopeful than we do in Greece, because you are not a banana republic. You have your own currency. You have the Bank of England. You have serious problems. And the major problem we have is democracy.
Your democracy is broken, but you can fix it. You have a long democratic tradition. Britain has the remarkable capacities to reinvigorate itself. It's proven this in the past. And you are not a vassal state.
The problem with Theresa May's deal is that it is a kind of deal that only a country defeated at war would sign. And this is why I don't think... it never stood a chance of being accepted. But you need the people's debate on the business model and the constitutional system in this country. And you need it to be interwoven with the discussion amongst yourselves regarding the future arrangements between the UK and the EU.