Ireland no paradigm of successful austerity - Varoufakis

Ex-Greek finance chief says Irish economic model only a success as nobody else using it

Ireland is no "paradigm of successful austerity" and owes its success to a more lenient approach taken by its creditors and a corporation tax rate that undercuts European rivals, former Greek finance minister Yanis Varoufakis has said.

The man, who famously described Greece’s bailout conditions as a form of fiscal water-boarding, was in Ireland for this year’s Kilkenomics festival in Kilkenny.

Compared to the financial "implosion" in Greece, he said Ireland was a great success story. However, to elevate the Irish case onto "the pantheon of macroeconomic successes" stretches credulity, he said.

In its dealings with the troika, Mr Varoufakis said Ireland had adopted the strategy of a model prisoner “doing everything it was told” in the hope of one day being released. Greece had tried this approach for five years - prior to Syriza’s being elected, he said, but had ended up in a deflationary debt spiral.


Mr Varoufakis said Irish people had been “very badly” treated by the EU institutions but did not have to suffer “the mountains of austerity” imposed on Greece.

“We took the brunt and when the troika came here, it was a bit more nuanced in the way it imposed austerity on Ireland,” he said, noting the troika did not insist on a 40 per cent cut in the minimum wage.

“If the same policy parameters had been imposed on you, you would not be where you are today, you would be in far, far worse place.”

“Ireland is not a paradigm of successful austerity, it’s the opposite. It shows that austerity is not as bad if it’s not as much,” Mr Varoufakis, who resigned his post in July ahead of Greece’s third bailout, said.

In his view, Ireland had also fared better than Greece because of its low corporation tax.

"The Irish model works because nobody else is using it. If we all had it, then Ireland wouldn't be successful. It's a bit like Switzerland. Switzerland is successful because there aren't any other Switzerlands."

The combative 54-year-old said he was not disappointed by the lack of support from Ireland, which took a hardline stance on Greece in European negotiations, as he no expectations of “special support from the Irish finance minister”.

While admitting to finding himself isolated in Eurogroup meetings, Mr Varoufakis insisted most of the 18 finance ministers were against austerity.

From the relative obscurity of academia, Mr Varoufakis exploded onto the scene in January, being appointed Greek finance minister in the wake of Syriza’s landslide election victory.

The motorbike-riding Marxist and anti-austerity champion cut something of a dash at Eurogroup meetings.

However, confrontational style infuriated negotiators, who blamed him for months of deadlock in talks over his country’s financial future. In the end, his mission “to save European capitalism from itself” lasted only six months.

He resigned in July after it became clear prime minister Alexis Tspiras was going to ask for a third bailout, despite winning a referendum that rejected EU-imposed austerity.

On his relationship with Mr Tsipras, he said he hasn’t spoken to his former cabinet colleague for some time but insists has never had a “cross word” with the prime minister.

However, he said the Greek prime minister had made a fatal error in signing an agreement with creditors on a third bailout package worth €86 billion.

Asked if he had broken the mould of finance ministers, who are often seen as stuffy and boring, he said German finance minister Wolfgang Schäuble - his main adversary - was not stuffy and boring. “I found him fascinating and our conversations were excellent.”

Mr Varoufakis said the traditional European model was “kaput” with national governments stripped of power by elites in Brussels.

“Either Europe is going to disintegrate or we’re going to have to bind together across borders and create a political movement across Europe to deal with pan-European problems. This is a tall order but the alternative is a terrible dystopia.”

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times