This is a really interesting question! I think the 20 year rule might forbid much discussion of Varoufakis' own motives and biases at play – needless to say, there are reasons why a semi-conspiratorial interpretation of events in which ‘Europe’ steps in to undermine a left-wing government might appeal to him.

That said, his claim here isn’t at all unfounded – there is no doubt that members of the European Community (led by Schmidt in particular, but this was far from only a German effort) exerted pressure on Portugal and then Spain during their transitions to democracy, as did the United States (with somewhat different reasons and goals). What is quite problematic is Varoufakis' interpretation in terms of both motive and causality – that is, was this intervention aimed at forestalling and undermining potential far left governments, and was this intervention decisive in ensuring that neither country became communist states? For the former, I think it ends up as a value judgement – it’s possible to frame and understand European intervention in Portugal and Spain as being much more benign (with the overarching goal of forestalling any regression into authoritarian government rather than a specific animosity towards the left). For the latter, I personally think that Varoufakis sells the Portuguese and Spanish people a bit short, and overemphasises the actual impact and decisiveness of other countries’ influence. There are plenty of other reasons, in other words, that communism did not take root in either country, and I think Varoufakis is a little eager to blame the failure of the far left on external factors rather than their own failings.

So, what sort of influence are we talking about? It’s necessary to broadly distinguish between the US and Europe here. The US – particular as Henry Kissinger was still in charge of foreign policy at this point – was quick to see developments in Cold War terms. The Portuguese Provisional Government was formed from all anti-Salazar parties, which included the communists, which was unacceptable to Kissinger (not least due to the situation in Italy, where as noted in your quotes there was a real chance that the Italian Communist Party might be included in government). In practice, this meant a withdrawal of economic and military support (at a time of economic crisis), and trying to isolate Portugal within NATO, arguing that they should no longer be given access to highly-classified documents (ie anything above ‘Confidential’) and excluded from NATO’s Nuclear Planning Group. What the US feared was another Chile – where the choice became between an unacceptably left-wing government and a reactionary military coup. The US was at one stage almost resigned to a communist takeover in Portugal, and was planning accordingly.

It’s worth noting that many European governments, including Germany and Britain, thought that US policy was misguided and counterproductive, giving up on a transition to democracy prematurely, and they actually opposed many of these measures (they argued that humiliating Portugal by restricting their NATO participation would serve little practical purpose and was only going to strengthen any anti-NATO sentiment). For these governments, the threat was less the presence of communists in government, but the possibility of a conservative counter-revolution and the return of autocratic government. They tended to disagree with Kissinger’s evaluation of Portuguese socialists (Kissinger dismissed Socialist leader Mario Soares as a ‘Kerensky’ – an ineffectual leader who would pave the way to revolution). Instead, Schmidt and other European leaders sought to strengthen and legitimise the moderate left. Their trump card was European integration – in Portugal, and later Spain, becoming economically integrated into Europe was seen as vital across much of the political spectrum. With Europe’s leaders willing to tie both countries’ membership of the EC to democratisation, they were able to provide a strong incentive to political elites to embrace democratic reform while also legitimising the platform of the moderate Socialists. In Portugal, this helped translate into a strong victory for the Socialist Party in April 1975 elections, while the Communist Party gained just 12% of the vote (the Spanish Communist Party did even worse in 1977, with just over 9%). This did not spell the end to US scepticism, particularly as the Portuguese military and communists still played a powerful role in both government and state institutions, and the US apparently pursued various covert options over the summer of 1975 (such as supporting conservative separatists in the Azores, where NATO had a military base). Eventually, the formation of a Portuguese coalition government with a minimal communist presence allowed for both Europe and US to embrace Portuguese democracy more wholeheartedly – not least financially, providing aid and loans that helped stabilise the economic crisis.

So, in the end, I personally think Varoufakis’ interpretation is at the very least a bit misleading. Roughly speaking, one might characterise European and US policy as taking carrot and stick approaches respectively. While the US sought to punish and even threaten Portugal, European leaders such as Schmidt offered enticements by making entry to the EC conditional on democratic reform, strengthening the moderate left in particular. It’s worth noting that this kind of carrot would never have worked if a broad spectrum of Iberian political elites – and electorates – had not thought that European integration was something worthwhile. This, I think, is not something Varoufakis would like to admit.

Sources

Mario del Pero, “‘Which Chile, Allende?’ Henry Kissinger and the Portuguese revolution”, Cold War History 11:4 (2011), pp. 625-57.

Pablo Calderón Martínez, “The EU and Democratic Leverage: Are There Still Lessons to be Learnt from the Spanish Transition to Democracy?”, Journal of Contemporary European Studies 23:4 (2015), pp. 530-47.