Yanis Varoufakis, former finance minister, Greece HARDtalk

Now on BBC News, it's time for Hardtalk.

Welcome to HARDtalk.

I'm Stephen Sackur.

Frustration and anger are the common currency

of today's European politics.

On the right, there's a resurgent nationalism, fuelled

by fears of immigration, and, on the left, well, on the left, the

enemy is austerity and an economic system seen as serving the elite.

My guest today is one of the most powerful voices

in Europe's radical left, Yanis Varoufakis, the motorbike

riding, former Greek Finance Minister who confronted the powers

that be during the darkest days of Greece's debt crisis and lost...

Or did he?

Yanis Varoufakis, welcome to HARDtalk.

Yanis Varoufakis, welcome to HARDtalk.

It's great to be here.

When you reflect on your own life and Greece's turbulent

life over the last, say, 15 months or so, do you reflect with a deep

sense of disappointment, failure?

Oh, no.

Nothing could be further from the truth.

Life is a constant battle and waging it is where

the satisfaction comes out of.

In the end, we are all dead - it does not mean we do not wake up

in the morning full of zest.

Well, that's a very interesting way of putting it.

Life is a constant battle but nobody wants to spend life losing battles

and you fought and you lost?

Not necessarily.

Losing the good battle, waging the fight that has to be

fought, if you feel that it is a good cause, is a source

of great satisfaction and pride.

Even when you look at Greece today, you a country that is still tied to

the so-called Troika bailout package, desperately trying to

negotiate the latest instalment of the third bailout, you see former

comrades like Alexis Tsipras, the prime minister,

now managing a process which you have described in the past

as little more than terrorism inflicted upon your country?

Well, there is no doubt we have an extremely sad affair

in the case of Greece.

Greece went bankrupt in 2010 and since then the powers that be,

including in Athens but everywhere in Europe...

Including your former comrades, the party that you served for -

what was it?

- 6-7 months...

Including every government that has served since 2010, the IMF...

they have all been, in the end serving a gross denial

by extending the crisis into the future, pretending they have solved

it through, you know, just adding unsustainable debt on unpayable debt

and this sounds like a historical incident of some interest but,

in reality - that is why it is extremely disappointing - because we

are talking about real people, here, we are talking about kids that faint

at school from malnutrition, we are talking about a lost generation.

But I suppose what interests me most is that it was supposed to

be different after 2015.

You know, you talk about the crisis going back to 2010, and you're quite

right to do so, the crisis has been deep and long, but something

happened in 2015 - the Greek people voted for a radical left alternative

- the Syriza party.

You, having said that you would "never, never, never" - and that'sa

direct quote - "serve in politics," answered the call from Alexis

Tsipras, and joined the Syriza-led government in an effort to

fundamentally change the deal in Greece and Greece's deal with

the European Union.

Precisely.

We stood on a platform of speaking through to power -

and power of course is the Troika lenders, of creditors of Greece.

Our pact was based - the pact of those who served in the

first government that was elected in January, 2015 - was very simple.

We are going to go to Brussels, and we're going to go to Washington,

and we're going to go to Frankfurt and say to them, the program that

you have been implementing in Greece has been a spectacular failure, the

greatest macro-economic disaster in the history of the IMF,

for instance - a third of our income dissipated, unemployment

jumped up by 20% - imagine that, one in two families do not have

a waged person in their midst.

And we are going to say to them, we need to reboot.

We're no longer going to sign on the dotted line of loan

agreements without having secured that these new loan agreement is

going to be sustainable.

And we were, I thought, absolutely united in that and we were not going

to back away, but in the end, a wedge was pushed between us.

We were divided by the end, and once you get divided, you fall.

Yeah, you fell.

I mean, I look back at some of the things you said

at the time you took the job.

Having said you wouldn't do politics, you said, well,

I can't resist this call, it's too important, my country's at stake.

You said that we are going to do things differently -

"we are going to destroy the country's oligarch who viciously

sucks the energy and the economic power from everybody else."

Your message was we are going to be truly radical to change Greece

for ever.

Why?

(CROSSTALK).

Not necessarily...

I am not accusing left or right, at the moment,

I'm just saying you refused...

The crisis was so deep that left, right, commonsense could prevail.

We needed to do three things - first, we needed to restructure

and negotiate an unsustainable debt because,

if you are bankrupt, that's it.

There is no life beyond that.

It's like being in the shadow of Mephistopheles all the time.

Secondly, we would have to have credible fiscal targets so that we

would never fall back into deficit position but, at the same time not

have huge surplus targets that are unbelievable and therefore deeply

further your credibility stock.

And thirdly, attack the oligarchy, attack corruption,

reform Greece deeply.

These were the three things we needed to do.

But there is arrogance, a hubris there, because the assumption you're

making is it was within your power and remit to decide how

to prioritise and what to do?

But, of course, Greece was essentially bust.

It was totally reliant on the money coming from outsiders and

therefore outsiders had - clearly had - the right to decide how Greece

should get itself out of this mess?

Well, I think you are overstating it.

Since when does debt mean that you have lost formally

and fully your national sovereignty and foreigners will decide

everything about your country...?

Well, I am not saying everything.

Think about any arrangement which involves a loan and a debt -

there is a choice to be made on both sides.

You only loan the money if you are sure and have promises...

Ah-ha.

About how that money is going to be used.

So why did they land this money to a bankrupt state?

2010 where the largest loan in absolute terms

in human history given to the most bankrupt European state,

you know, it takes an irresponsible lender and an irresponsible borrower

to forge this kind of pact.

(CROSSTALK).

Indeed but the power and the cards lie...

But to answer your question...

Going forward the real power lies with the lender

not with the borrower because the borrower is going to go bust...

Not exactly.

If you owe 320 billion euros, you have some power.

Yeah?

If you owe ?3,000 to the bank then you have no power.

But if you owe 300 billion, and you are part of

an interconnected financial system, you are not completely devoid

of power but that is not the issue.

Let's set aside for the moment the question of bargaining power.

When I went to Europe group and to meet Dr Schauble...

I want to talk a lot about that...

I am referring to what you just said.

What I took with me, in my suitcase, was a willingness to sit

down with them, not to dictate to them what should happen in Greece

but sit down with them and work out a manageable fiscal

and reform consolidation programme.

The trouble was, they were not interested.

This is the very first time in history that creditors did not

want their money back.

Hang on a minute.

You talk about going to the euro group,

and sitting there with Schauble and all the others - you took a style

with you, a style that was designed to antagonise, send a message...

What, I do not wear a tie?

Of course, you wore your leather jacket, we all know that...

No, I did not wear my leather jacket (CROSSTALK).

I can assure you.

It was not about what you wore, whether you had atie on, whether you

came on your motorbike - it wasn't about any of that - it was about

the inflammatory language, accusing them of fiscal waterboarding...

There was no inflammatory language.

You called them terrorists!

No, no, no.

Get your chronology right.

I used...

Firstly I never caught anyone a terrorist.

What I said was, in the first week of July, after our banks were closed

down by our central bank, why?

Was there a problem with the banks?

No.

The central bank of Europe - the ECB - had proclaimed our banks to be

solvent and why did they close them?

In order to force us, the elected government,

to accept massive pension cuts, massive austerity cuts.

Yeah?

Now, what is the spread of fear in order

to attain political objectives?

It is terrorism.

And so, by that stage...

Fiscal waterboarding as well, that is torture.

These are people you say, "I approach with an open mind, trying

collectively to find a way out of this crisis that would help the

Greek economy and the Greek people."

You say that and then I refer back to every

attitude you took into the room.

You made a point of being the antipolitics politician but the

way you did it just does not work.

Stephen, Stephen, when a new government is elected to

confront creditors and to say to them that in your

interest, too, and in the interest of our long-suffering nation

in a great depression, we have to sit down and find common ground.

At that moment, you have to set aside all this brimstone

and noise and get down to work.

The fact that for five years, all previous governments were being

fiscally waterboarded is indisputable.

Think of what has been happening since today.

It is happening as we speak.

You can continue to use that language if you like but I then

reflect upon Christine Lagarde, at the height of the crisis, in June,

2015, coming out of a meeting with you and saying, with just total

frustration, "it would be nice if we had some adults in the room."

Stephen, she had not come out of a meeting with me when she said that.

Who do you think she was talking about?

Well, I'm not going to divulge this.

It is not for me, you have to ask her.

But, look, when I first met Christine Lagarde -

since you're refering to Christine - we had conversation

one-hour long conversation and we actually agreed on all the basic

failures of the previous programme.

Indeed, with Paul Thompson, who is the European chief

of the International Monetary Fund, a very close associate of Christine

Lagarde, we had agreed that the previous programmes had failed

because there was no serious debt restruction involved,

that the way of managing previous Greek governments by the Troika was

effectively the strategy of fiscal waterboarding, which is what?

You bring the subject to the point of no return

and then you let the subject have a gulp of air - or liquidity, in the

case of Greece - and then you repeat and you repeat and you repeat.

This has been the pattern since May, 2010, and the result is the loss of

one third of income and an ability to repay our debts to our creditors.

The point is, and we come back to the opening of

this conversation about senses pf failure - the point is that you, in

the end, were thrown overboard by your former colleague, and the guy

who hired you, Alexis Tsipras.

No, this is not what happened...

This is not what happened.

It is what happened.

No, it's not.

Essentially, he said I'm going to let you go because the euro group

cannot work with you anymore.

That's not what happened.

Do you want me to tell you what happened?

You tell me what happened.

From the end of April onwards, Alexis Tsipras and I started

diverging in our views of what the right strategy should be.

He was making compromises which, as far as I was concerned, were lethal,

in the sense that they were...

he was accepting for instant fiscal targets impossible to achieve.

My view was, the moment you start doing that, you lose credibility and

then at some point you're going to have to surrender and capitulate.

That happened.

Let me tell you...

(CROSSTALK) when that happened, when he said to me on

the referendum, when we called upon the Greek people to back us, not to

capitulate, that night we met and he said it is time to surrender and

at that point I said, not for me.

We parted amicably, having disagreed on whether the right course

of action at that moment was to continue the confrontation with the

Troika creditors that were imposing upon us strings and measures that

made it absolutely impossible for Greece, firstly,

to recover and, secondly, to pay its debts, or to capitulate.

When he decided as a Prime Minister's want is, to capitulate,

it was time for me to resign.

I was not thrown overboard.

I was made aware of the absence and it was supposed to be

potentially helpful.

So the Tsipras did not want you and he knew that, and...

It is not one voice.

We can talk about individuals.

You became toxic.

I did not become toxic and I was a major inconvenience.

Because I was the first Finance Minister.

And this gets personal.

Before you get there...

Let me tell you why I was so despised.

Either we capitulate and accept the programme

of the previous governments that had failed so spectacularly or

the banks would be closed.

I made it abundantly clear that I shall never submit to such

blackmail.

Tsipras understood that.

It was very important to him that I should be sidelined.

As the Finance Minister of the Bank of State I would not sign

on another loan knowing that we would not be able to repay it.

This is what a sensible, rational, moderate Finance Minister should do.

If you are running a business, the BBC or a company, you should

never accept a loan if your existing loans and not sustainable.

You were a radical.

When radicalism hits it, reality trumps radicalism.

That was the message that came out in the summer of 2015 and it is

the message that comes out today in many different parts of Europe.

There are powerful voices like yours that propounded a very radical

leftist view of European economics.

That is not the basis of it.

Explain to me why?

I ask you all to go to my website or any Google search engine and look

at my proposals as Minister of Finance on the 11th of May 2015.

What were our proposals to the Troika of lenders?

They were the most moderate proposals we have.

You are not in power any more.

Greece is desperately trying to maintain the third bailout deal.

You, in all respect...

Ran a county that did not fail.

We needed to have a radical minister.

This is the depth of the European crisis.

You need to have a radical left wing minister to propose common sense.

Commonsense is in very short supply in Europe.

Is Greece better off as a result of my defeat and my removal?

No.

We are deeper into the mire than we were a year ago.

If my proposals had been accepted instead of the Troika,

would we be better off?

Definitely.

It is indisputable.

Look at the proposals and ask top-notch economists

around the world, which are better or more sensible?

Which would have given the Greek Nationals a chance to recover?

After my removal, why did it happen?

I don't want to get stuck on the past because there are

important things to talk about.

You are leaving an impression that a radical minister left

and moderation prevailed.

And moderate minister, released a radical minister

proposing moderate policies was removed, and idiocy prevailed.

Let me give you one example because your audience has to hear this.

One of the things I would not sign into

law was increasing the corporate tax in a country that was broken

and the imposition of prepaying next year's tax a year in advance for

small businesses that were broken.

You are not reconciled to your defeat, are you?

Well...

You are not reconciled and you now run a movement that you

say has the capacity to completely reshape Europe in a democratic way.

Your argument is that the European Union

as they are currently constituted is currently undemocratic

and it is killing Europe.

I just wonder how you believe you're going to persuade the European

public as a whole of this argument?

Firstly, the movement is not me.

But since you are focusing on my past, and my record, it is

important that we set it straight.

In my six months in the finance ministry I put

forward certain proposal.

I consider them to be the only chance, even today,

of Greece's recovery and of healing within the eurozone.

I may be wrong or I may be right.

When did that happen exactly?

Well...

You just slipped in a major way.

When I was the most severe supporter of this

process, with 62% of the votes.

And the next day the Prime Minister said we're going to back

the deal anyway.

Do not say it was the Greek people who rejected the proposals.

They are not even in first place any more.

In that case, I need to get your ideas on the future of Europe

because such a big debate, not least in Europe, and there is an argument

about whether Europe can be changed from within or actually Europe is go

to have to collapse before anything else can be rebuilt

and something better.

What is your view?

There is no doubt that what we have created is a monster.

We have created a European Union which is deeply contemptuous

of the democratic process.

This is the reason why I had to resign and not to pursue what I

consider to be modern policy.

But you wanted to stay in the eurozone and you now advise Britain

to stay in the European Union.

But you call it a monster.

It seems entirely contrary.

Well I got in a country with a monstrous regime and we either

had to get out of it or to abandon it or to see it be dismembered.

I wanted to be democratised after our dictatorship in the 1960s.

The same thing applies to the European Union.

If we had not created the European Union and the eurozone,

we should not have had consent to the creation.

Is that OK?

As they currently exist...

But now that they exist, dismembering it, fragmenting it,

is going to take us where we want to be had we not created at.

It is going to throw us into a terrible abyss.

What is going to happen?

My prediction, and tell me if you agree with me or not, is that

there is going to be a huge fault line with Germany, Austria, the

Netherlands, Poland all forming a zone which will immediately go to a

big recession as its currency appreciates through the roof.

The rest of Europe, Latin Europe with Greece,

maybe Ireland, is going to go in a stagflation situation because their

currencies are going to depreciate.

This will create a vortex, and Britain as well

as other nations that are inappropriate for all of this vortex

are going to fall into it.

There is no way that we as Europeans are going to escape if this monster

of the European Union disintegrates under the weight of its hubris

and discontent for democracy.

It is our monster and we better civilise it.

We have to end there.

Thank you for being on HARDtalk.

It was a great pleasure.