Yanis Varoufakis says Brexit deal is the worst of all possible outcomes

The former Greek finance minister on why Brexit is bad for business and why developed countries could learn from Singapore.

The former Greek Minister for Finance, Yanis Varoufakis says Theresa May’s proposal for Brexit is ‘the worst of all possible outcomes’ and will create ‘interminable uncertainty’ for entrepreneurs of growing businesses in the UK and across Europe.

The left wing rockstar economist says the deal ‘effectively prolongs the last two years (of negotiations) well into 2021 and 2022… we’re going to be having exactly the same conversations then if this deal goes through.’

Varoufakis himself negotiated with the EU for six months in 2015 as finance minister for the Syriza party in Greece.

Small businesses at risk

Varoufakis also warns that many small businesses in the UK do not have the capacity and resources to make the large shifts that would cover them from the fallout of uncertainty and unexpected outcome of Brexit. ‘We have to live with this uncertainty and the problem with this is that it renders one more risk that is good for them,’ he says.

The comments were made in an exclusive interview to GrowthBusiness after Mr Varoufakis’ talk at the Xynteo Exchange in Norway 2018 on 28 November alongside James Gowen, chief sustainability officer at Verizon, Astronaut Christer Fuglesang and Alli Keskitalo, President of the Sami parliament of Norway (indigenous group).

According to the ONS, overall business investment in the UK has fallen by £22 billion in the last two and half years as larger businesses continue to reign in spend and reduce their risk by hiring more contractors instead of permanent staff. Also, a Boston consulting group report found that smaller businesses in the UK and Europe are the most likely to be badly affected by Brexit disruption.

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Look to Singapore’s strong template for start-ups

So, do governments in developed countries have enough concerted plans to encourage growing businesses and start-ups? He says that Western governments have done ‘good things’ with start-ups but maintained that larger developed countries had not shown anything like the dexterity in that regard when compared to smaller places like Singapore.

He praised Singapore as a city-state that provides good infrastructure for start-ups, like free building space, income supplement, strong network coverage, five years of tax moratorium and accounting services thrown in for free.

Europe needs to invest more in green technologies

In November 2018, 50 business leaders including executives from AXA and Unilever said the target to keep global warming under 2 degrees ‘is clearly not on track’ and that the companies would be investing in low-carbon initiatives and companies, and in innovations to reduce greenhouse gas emissions.

Varoufakis also threw his weight behind the idea for an energy union project in Europe which, he says, ‘needs investment funds of somewhere between four-five per cent of GDP to put into developing technology and creating new technology we have not invented yet.

‘It sounds like a lot of money but it isn’t,’ he says.

He says, ‘In the UK, EU and US there is around $3.5 trillion in the financial sector which is not being invested in a productive capacity – money is being used to buy back shares, splashing around buying junk bonds but not being invested in infrastructure – in fixed capital and green technologies. The money is there to invest in green technology, it is a question of how we do it. We need a combination of public and private finance to focus liquidity up.

He adds, ‘If you look at the issue of negative interest rates in Germany, which are damaging Mrs Merkel’s political fortunes, this could be easily solved by the European Investment Bank issuing bonds worth €500 billion with the European senate bank declaring that it is spending and buying the secondary market. Issuing bonds of that magnitude would soak up all that the liquidity and would then sell like hot cakes and that would fund a major new green deal for Europe.’

With Varoufakis recently announcing he is to run as an MEP in Germany in 2019, it’s clear that he will continue to share his progressive views with the world for some time to come.

Michael Somerville

Michael Somerville

Michael was senior reporter for GrowthBusiness.co.uk from 2018 to 2019.

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