As Pappas, Alexis and I had previously discussed, dismantling Bailoutistan 2.0 required the handing over of the banks to their new owners, Europe’s taxpayers, and the uncoupling of their losses from the Greek state’s debt. A Syriza government should therefore negotiate with the troika for the banks’ shares and management to be transferred to European institutions, whose job would be to nurse them back to health on behalf of all Europeans. To do this Syriza needed to unite left-wingers, who believe in the socialization of banks, with libertarians, who loathe the idea of propping up bankrupt bankers with capital taken from powerless taxpayers.
3. SENSIBLE FISCAL POLICY AND DEBT RESTRUCTURING PROPOSALS
Shout from the rooftops that a Syriza government would be committed to a state that lives within its means in good times and bad. In technical terms that would mean a small primary budget surplus not exceeding 1.5 per cent of national income – not enough to repay the unrepayable public debt but sufficient to keep the state solvent while giving the private sector a chance to breathe again. As a prerequisite for this, Syriza would need to propose debt restructuring of sufficient scale that further debt repayments could be accommodated by a 1.5 per cent primary surplus. During the period of negotiation with the Eurogroup and its troika over this final point a Syriza government should be prepared to survive any shortage of cash by squeezing the highest salaries and most generous pensions as much as is necessary to make ends meet.
4. EMERGENCY PLAN TO COMBAT THE HUMANITARIAN CRISIS
In the meantime a Syriza government should immediately provide food, energy and shelter to the hundreds of thousands of families who are suffering most. Lambros and those about to fall through the cracks should be the government’s top priority. Existing identity documents could be replaced with a smart card equipped with debit payment capabilities at a low cost. These capabilities would be activated for families below the absolute poverty line, for use in supermarkets and for essentials such as electricity and housing.
5. MODEST PROPOSAL FOR RENDERING THE EUROZONE VIABLE
As a progressive Europeanist force, a Syriza government should negotiate not just on behalf of the Greeks but also go to Brussels with comprehensive proposals for Europe’s public debt, banks, investment policies and poverty-fighting capacities – proposals without which the eurozone is unsustainable. To this end, my recommendation to the Syriza economic team was that they adopt the Modest Proposal for Resolving the Euro Crisis that Stuart Holland, Jamie Galbraith and I had been working on for years.
In order to succeed in these aims, I told the meeting, your government must go to Brussels with a comprehensive proposal that is good not just for Greece but for every other European country too. You must give a clear signal that Athens will no longer be bullied into accepting further extend-and-pretend loans. You must make the people at the EU and the IMF realize that you have arrived on the scene with a commitment to staying in the eurozone and of compromising. But they must realize that, if need be, you are prepared to walk out of the negotiations, whatever their threats, for if you are not, there is no point in entering the negotiating room in the first place.
Alexis and Pappas looked satisfied. Euclid and Stathakis also indicated their broad agreement. It fell to Dragasakis to ask the pertinent question: ‘How can we convince the Eurogroup, the ECB and the troika that we are not bluffing?’ The question was supremely apt; the whole strategy relied on this one point.
My response was that Syriza’s preferences and priorities had to become common knowledge. It had to become commonly known that a Syriza government wanted above all else a viable agreement within the eurozone but that it preferred Grexit, a terrible outcome, to capitulation, the worst outcome. If this order of preferences was widely known, then the blame for Grexit, with all the costs and legal issues that it would entail, could only fall on the EU and the IMF. The choice would then be entirely theirs and known to be theirs.
Of course even if Syriza’s true preferences were known, the EU and IMF officials would no doubt test Alexis’s resolve to its utmost. It was possible too that the EU and IMF would ultimately prefer to throw Greece out of the euro than deal consensually with a Syriza government, or that in pushing Alexis to the brink they might effect Grexit by accident. A long constructive discussion followed in which we considered these possible scenarios, but the key point I made was this: whether or not they could convince the Eurogroup, the ECB and the troika that they were sincere in these preferences, there was no point in any of it if they weren’t. This is what they needed to work out among themselves, I told them:
Do you truly believe in your bones that ‘doing a Samaras’, capitulating to the troika like him, is worse than being thrown out of the euro? If you are not sure, let Samaras stay in Maximos. For what is the point of winning power to clash with the creditors only to fold the moment the troika calls and then take the blame for their inhumanity? Win power only if you are not intending to bluff because you are convinced that capitulation is even worse than a terrible Grexit. Only then will Greece get a chance to stay sustainably in the eurozone and to put Grexit behind it once and for all.
As he was showing me out, Pappas put his arm around my left shoulder and said, ‘That was brilliant. It will be our line from now on.’
Gathering qualms
It was the night of 11 June 2013, an hour before midnight, when the television screens froze. For two hours they broadcast nothing but a still of a journalist cut off in mid-sentence as he explained that the government had decided to close down the three state television channels, all the regional and national radio stations, and the satellite service that provided the Greek diaspora with Greek programming. It was the equivalent of all BBC television channels suddenly going dark at the same time as every BBC radio station went silent.
Unable to believe my eyes and ears, my mind raced back to the time of Greece’s fascist dictators, whose first move in their coup was to take control of the state television channels. They at least had bothered to broadcast a picture of the Greek flag, although accompanied by military music. In Bailoutistan the troika-subservient government just froze the picture for two hours. Then Greece’s TV screens turned black. That blackness was an apt metaphor for the new government’s authoritarian turn as the dismal failure of its success story became apparent.
Within minutes of the blackout, demonstrators invaded the ERT building – from which I had been banned in 2011 – beginning a months-long occupation that rekindled the spirit of Syntagma Square. The next morning Danae, Jamie Galbraith and I flew to Thessaloniki to offer our support to the local ERT staff. While there I gave a speech, followed by Jamie and Alexis, to a large packed hall. My return to ERT, as one of the thousands of demonstrators and a guest on the unofficial programmes that the staff broadcast over the Internet, could not have been more bittersweet.
Prompted by these events and following my meeting with Syriza’s economic team, something of a coherent agenda began to take shape over the course of that summer. In November 2013 Jamie and I organized a two-day conference at the University of Texas on the theme ‘Can the eurozone be saved?’ with Alexis, Pappas and Stathakis attending and giving well-received speeches. The idea was to introduce the three Syriza leaders to establishment figures from Europe and the United States, trade union leaders, academics and journalists.
It was also a good opportunity to test Alexis’s commitment to the logic behind the Five-Pronged Strategy. During the conference he and Pappas were present at a heated debate between me and Heiner Flassbeck, a left-wing German economist and former junior finance minister in the Schroeder administration, who argued that Greece’s liberation from debtors’ prison was impossible within the eurozone. He maintained that Grexit was the correct objective for a Syriza government, or at least the best threat to use against its creditors – the same position as that of the Left Platform, an official faction within Syriza that numbered among its supporters one-third of Syriza’s central committee.36 It was in Austin that I became convinced of Alexis’s rejection of this position and his belief that if anyone were to threaten Grexit, it must be the troika, not Syriza.
The winter passed with Samaras’s government struggling to sell its ‘success story’ and Greek society sinking further into the economic mire. April 2014 marked Samaras’s last hooray with Stournaras selling government bonds to investors who were reassured by the ECB’s tacit backing. In May 2014, however, Syriza topped the polls in the European parliamentary elections, confirming that no one was fooled. A month later Wolfgang Schäuble gave up on the Samaras government. Change was in the air.
That June, back in Greece once more for the summer, I met Alexis and his economics team to warn them about a new threat. In the fine print of an otherwise innocuous press release the ECB had just announced that in the near future it would stop accepting the IOUs issued by banks and backed by the governments of bailed-out countries as collateral for further loans. In other words, a vital component of the smoke-and-mirrors machinery used by Greece’s four largest banks to ensure their day-to-day liquidity would be removed. The date on which the new policy became effective set alarm bells ringing in my head: March 2015 – the month the president of Greece’s term expired, when new elections were likely to be held and when in all probability Syriza would form a government.
‘Do you see where I am going with this?’ I asked Alexis, Pappas, Dragasakis, Euclid and Stathakis, having passed on the ECB’s bombshell. The day after they won power, I warned them, Mario Draghi would call them with the news that, as previously announced, the ECB must deny Greece’s banks liquidity, effective immediately. The ECB was creating the conditions necessary to close down the banks without any warning or reason just as Syriza was taking over.
Dragasakis’s face sank. ‘And what happens then?’
The only way the banks could continue to function, I said, was at the discretion of the Central Bank of Greece, which could continue to lend to them through a scheme known as emergency liquidity assistance (ELA). The Central Bank of Greece is in effect a branch of the European Central Bank, so even then the cash would be coming from the ECB, albeit indirectly and at a higher rate of interest, and could ultimately be switched off.37 But there was a more immediate obstacle to contend with before all this happened.
‘Is it a coincidence that three days from today Prime Minister Samaras will transfer Stournaras from the finance ministry to the governorship of the central bank?’ I asked. ‘It’s obviously a stratagem in anticipation of your electoral victory.’
At that point Alexis grew angry. ‘The first thing I shall do as prime minister is demand Stournaras’s resignation. I will drag him from the central bank kicking and screaming if need be.’ Pappas offered a number of even more drastic solutions to this problem.
I pointed out that it hardly mattered who sat in the governor’s office; a Syriza government’s priority was to deter Draghi from closing down the banks in the first place. As per the first part of the Five-Pronged Strategy I had presented the previous year, they would need to make clear to Draghi that bank closures by the ECB would trigger a move from Athens that might well bring down the eurozone. The question was: were they committed enough to do so and to take on all those on Draghi’s side, not just Stournaras but local bankers such as our Aris and Zorba as well?
Alexis and Pappas responded with enthusiasm: they would not hesitate to do this. Euclid, reputedly the most militantly left wing in the team, agreed. Stathakis nodded. Dragasakis, on the other hand, replied in a manner that I would learn to expect: ‘Let’s proceed on the basis of the good scenario,’ he said, adding, ‘If forced, we will have to respond.’
A week later, in the majestic gardens of the Athens Byzantine and Christian Museum, Alexis and I appeared in front of another large audience to present the Greek translation of the Modest Proposal for Resolving the Euro Crisis. Alexis’s whole team was in the audience, with Dragasakis in the front row, an impressive show of support for the strategy.
A couple of days afterwards, Alexis, Pappas and I met again.
‘Do you realize,’ asked Pappas, ‘that no one else but you can oversee the implementation of the negotiating strategy you are proposing? Are you ready to do this?’
I replied that my commitment to the fight was a given, but that I didn’t believe in technocrats being parachuted into a political process. In truth I still had fundamental concerns. Negotiating on a country’s behalf requires a democratic mandate. The Modest Proposal represented my personal convictions, and I had no desire to legitimize the de-politicization of economic policy, that most political of realms. Besides, Dragasakis, Euclid and Stathakis had built Syriza up from scratch over decades. They commanded the respect of the party. By comparison, I could never be more than a proxy for them, and this would undermine my ability to run the negotiations with the authority required. Lastly, my qualms regarding the incongruity between Syriza’s internal priorities and a credible government agenda had not disappeared.
A week later, Wassily Kafouros, a dear friend from my undergraduate years in England, added to my misgivings. He asked me if I was the only person not to know that Dragasakis was extremely close to the bankers. I said I didn’t believe him. ‘Where is your evidence, Wassily?’ I demanded.
‘Evidence I do not have,’ he admitted, ‘but it is commonly known that he has made it his business, even back in his communist party days, to keep the bankers close.’
I assumed the accusation was false, and although doubts still slithered through my mind like restless serpents I decided I could not afford to worry about problems that lay beyond my capacity to solve. Those who had earned an electoral mandate had to unbend the evil bows. For now all I could do was point out the traps and suggest ways to avoid them.
4 Treading water
The Ship of Stone, the Stoneship for short, is what sailors call them: three large rocks protruding from the open sea in the mouth of the Saronic Gulf. Seen from an approaching boat a mile or so away they do indeed look like a ghost ship heading slowly towards Cape Sounion, home of Poseidon’s enchanting temple. Swimming in the unnervingly deep blue waters in the Stoneship’s shadow so close to shipping lanes has something of an edge to it.
In August 2014 Alexis and I were treading water fifty metres or so from the Stoneship, as far from prying ears as it was possible to be. Our conversation turned to trust. Did Alexis trust his team to lead the charge against the bankers such as Aris and Zorba? Did he trust them to negotiate with the troika without fear of – or a desire for – Grexit? Would they stand tall against a troika willing and ready to asphyxiate them via the banks while Greece’s oligarchs went berserk?
Alexis was skilfully evasive, striking a consistently optimistic tone. Restraining myself so as not to overwhelm him with my doubts, I nonetheless had to ask the question that had been burning in my mind from the moment Wassily planted it there.
