Don’t get caught in US-China cold war. warns Yanis Varoufakis

Yanis Varoufakis warns Australia risks obliterating its national economy by getting caught up in the middle of an aggressive cold war between the US and China.

Economist Yanis Varoufakis. Picture: Getty Images

Australian academic turned international economic rock star Yanis Varoufakis warns Australia risks obliterating its national economy by getting caught up in the middle of an aggressive cold war between its greatest ally, the US, and greatest trade partner, China.

Mr Varoufakis has been closely monitoring China’s global political aspirations since being re-elected to parliament in Greece and, while he says the communist regime’s foreign investments have sounded warning bells in southeast Europe, he is even more concerned by the escalating tensions between the rising superpower and his former homeland.

“What I’ve noticed is a deep paranoia setting in in Australia over the last few years about China,” he says. “Australia went from utter complacency to China in the first few years of Chinese investment and the dependence of the Australian economy on China to something bordering on complete paranoia — and both extremes are equally dangerous from an geopolitical standpoint as well as an economic one.”

Mr Varoufakis is no stranger to economic disasters. After lecturing in economics at the University of Sydney for more than a decade, he was catapulted to international stardom after being ushered in as Greece’s new finance minister in 2015 and tasked with resolving its catastrophic debt crisis.

Labelled arrogant and aloof by some, and a hero by others, he was renowned for his determination to take on the global banking system and refusal to accede to the austerity measures demanded by the bankrupt country’s creditors — the so-called “troika” of the European Central Bank, European Commission and the International Monetary Fund.

Despite eventually winning the support of the Greek people in a hastily arranged “bailout referendum”, his stance against the troika ultimately failed, and he resigned after just five months in office when his prime minister acquiesced to their creditors’ terms.

The 60-year-old has since founded his own political party — the democratic socialist MeRA25 — and returned to parliament after winning nine seats during Greece’s legislative election two years ago. He says heading a small party has freed him to focus on the big issues — one of the most pressing being China’s insistence on playing a great role in international affairs and mammoth investment in key countries around the globe. He says the regime is beginning to flex its political muscles in his “neck of the woods”.

Given the vast financial resources at China’s disposal, he believes smaller nations like Australia and Greece need to be astute about how they guard against political and economic interference.

“We should not be complacent about China because every superpower, every economic power, has an imperialistic tendency or force driving it,” he says. “If I lived in China I would probably be imprisoned, I have no doubt about that: it’s an authoritarian communist state and I wouldn’t want to live in a one-party state.

“While Australia and Greece cannot compete with China on the volume of investment, the way we can compete is in cultural capital and soft power.”

He believes Australia also needs to focus on its own needs.