By Ambrose Evans-Pritchard, Athens 06 July 2015
If lenders think Varoufakis's touted successor will be a pushover, they are set to be disappointed. He shares little of his predecessor's European idealism
Varoufakis' parting shot: "I shall wear the creditors’ loathing with pride" Photo: AFP/Getty
Yanis Varoufakis was sacrificed to placate the European creditor powers.
Germany let it be known that there could be no possible hope of an accord on bail-out conditions as long as this wild spirit remained finance minister of Greece.
In a moment of condign fury, Mr Varoufakis had accused EMU leaders of "terrorism", responsible for deliberately precipitating the collapse of the banks in one of its own member states. (This is objectively true, of course)
"I shall wear the creditors’ loathing with pride," he signed off in his parting shot, 'Minister no More'.
It is an odd end to the 'OXI' landslide in the referendum, a 61pc stunner that seemed at first sight to be a vindication of Syriza's defiant stand over the last six months.
He had looked like the hero of the hour threading through ecstatic crowds in Syntagma Square in the final rally. Fate plays its tricks.
“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Euro group participants, and assorted ‘partners,’ for my … ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.”
His sacking is a paradox. He is the most passionate pro-European in the upper reaches of the Syriza movement, perhaps too much so since he thought it his mission to rescue the whole of southern Europe from 'fiscal waterboarding' and smash the 1930s contractionary regime of Wolfgang Schauble's monetary union for benefit of mankind.
"I wish we had the drachma, and we'd never entered monetary union. But once you are in, you don’t get out without a catastrophe,”
But then he was starting to harbour 'dangerous' thoughts. When I asked him before the vote whether he was prepared to contemplate seizing direct control of the Greek banking system, a restoration of sovereign monetary instruments, Grexit, and a return to the drachma -- if the ECB maintains its liquidity blockade, forcing the country to its knees - he thought for a while and finally answered yes.
"I am sick of these bigots," he said.
His fear was that Greece did not have the technical competence to carry out an orderly exit from EMU, and truth be told, Syriza has already raided every possible source of funds within the reach of the Greek state - bar a secret stash still at the central bank, controlled by Syriza's political foes - and therefore has no emergency reserves to prevent the crisis spinning out of control in the first traumatic weeks.
He was putting out feelers for technical experts in London, targeting veterans of Britain's ERM exit in 1992, though he was under no illusions that Grexit could ever be anything other than gruesome.
"I wish we had the drachma, and we'd never entered monetary union. But once you are in, you don’t get out without a catastrophe,” he said in May.
He was already looking ahead in our final interview, at his office on the 6th floor of the finance ministry. "Would the devaluation be big enough, that's the concern?" he asked, wearing his hat as a currency economist, almost as if he were talking about another country.
But separating his multiple characters as a Keynesian professor, Game Theory tactician, street fighter, rap star, and finance minister, was never easy. Deep down - despite his furious outbursts - he was never really willing to confront the European Central Bank head-on.
The hard-line wing of the Syriza movement has been pushing for a temporary take-over of the Bank of Greece under emergency powers in order to issue liquidity - accompanied by a lawsuit at the European Court of Justice to throw the whole EU ruling system off balance - but Mr Varoufakis recoiled, deeming it too incendiary even for him. At heart, he is an admirer of Mario Draghi.
It appears that Euclid Tsakalotos will take over as finance minister. Another brilliant economist - educated at St Paul's and Oxford, with a Celtic wife - he has earned a reputation as safe pair of hands since becoming chief negotiator in the debt talks.
He is a man who keeps his outward emotions in check. Mr Tsakalotos will not be calling anybody a terrorist.
But be careful what you wish for. If the creditors think that he will be a push-over - more willing to accept terms that fall short of genuine debt relief - they are likely to be disappointed. He is comes from the radical Marxist wing of Syriza, and shares little of Mr Varoufakis's European idealism.
For Mr Tsakalotos, EMU membership is a cost-benefit calculus.
Scratch a little and you start to discover a Eurosceptic who never wanted Greece to join the euro, indeed who already foresaw with remarkable prescience in this paper in 1998 that EMU would not bring about the convergence of the core and peripheral countries. He was miles ahead of the amateurs religiously touting the benefits of EMU.
For Mr Tsakalotos, EMU membership is a cost-benefit calculus. His own academic work has explored the issue of "first-mover advantage" after the rupture of currency pegs.
When we spoke at his office in the foreign ministry just before the referendum, he said that Grexit would be a very bad idea, but also gave me the strong impression that it is a matter of trade-offs. All depends on the exact terms that the Eurozone is willing to offer his country, or whether it instead keeps Greece in a permanent "Nietzschean" cycle of control, as he puts it.
He also maintained the line - genuinely in my judgement - that Grexit would set off a political chain reaction and is therefore just as much a threat to the EMU Project as it is to Greece itself.
"I do believe if Greece was to leave, the Eurozone would break up because it changes a monetary union into a hard-peg."
The crucial point is that EMU is an "irrevocable promise" that no country will ever devalue again. Once that is breached, financial markets will not lightly believe in the pledge again.
"People are wrong to say there's not much contagion now but that's not how it is going to work, maybe months later, in the following country in crisis. I fear that if it all breaks up we could then move to the kind of 1930s nationalist reactionary politics and the hegemony of the nasty Right," he said.
The difference is that Mr Varoufakis once loved 'Europe', and still cannot stop loving it. Mr Tsakalotos was never a believer in the first place.