‘As you know,’ I said, ‘I have serious reservations about the Thessaloniki Programme. Indeed I have very little respect for it and, given that it has been presented as your pledge to the Greek people on economic matters, I cannot see how I can, in all honesty, assume the responsibility of implementing it as finance minister.’
Predictably, Pappas jumped in at this point to restate his insistence that the Thessaloniki Programme was not binding for me. ‘You are not even a member of Syriza,’ he pointed out.
‘But would I not be expected to join if I am to become your finance minister?’ I asked.
Alexis interjected with a studied response: ‘No, under no circumstances. I don’t want you to become a member of Syriza. You need to remain unburdened by our party’s tortuous collective decision-making.’
My head was ringing with alarm bells. Alexis’s point was reasonable but pregnant with immense risks. On the one hand, remaining semi-detached from Syriza, a party whose flimsy economic policies I had criticized for years, would afford me a precious degree of freedom and allow Alexis to blame those of my decisions that contradicted party policy on the fact that I was not bound to it. At the same time, this blame could snowball into condemnation of me at the drop of Alexis’s or Dragasakis’s hat, leaving me exposed to animosity from the party whose backing I would need so badly when struggling against the troika and the Greek oligarchy. Again, this was hardly a concern I could have shared with them.
The pressure to decide was mounting, but I needed to know for sure: were we truly in agreement over both aims and means? If not, my life would have remained blissfully uncomplicated.
‘Let’s see if we can agree on fundamentals before we discuss my role in a Syriza government,’ I said.
My intention was to try out on them an up-to-date, firm, clear-cut version of the Five-Pronged Strategy I had proposed to Alexis in 2012, before it was so ingloriously discarded.9
The covenant
First and foremost, I began, came meaningful debt restructuring.10 We had to agree that this was the be-all and end-all of a Syriza government. Getting Greece out of debtors’ prison was more important than preventing privatizations or any other objective on Syriza’s agenda. They agreed.
With debt restructuring, I continued, we could finally put an end to the austerity–deflation spiral and aim at a small government surplus – I specified a target of at most 1.5 per cent of national income. This would require sharp reductions in VAT and the corporate tax rate in order to re-energize the private sector.
‘Why should business pay less?’ Alexis protested.
I explained that I thought the private sector should pay more in total tax revenue, but the only way to achieve an overall increase in their contribution at a time of next to no sales and with bankrupt banks unable to provide credit even to profitable firms was to reduce the corporate tax rate. Dragasakis stepped in to say he agreed, apparently allaying Alexis and Pappas’s initial consternation.
When it came to privatizations, I continued, we would have to make compromises if we wanted an agreement with the EU and the IMF. Syriza’s blanket rejection of privatization would have to be replaced with a policy of considering them case by case. Fire sales of public holdings had to end, but there would be some assets, such as ports and railways, that we should make available conditional on a minimum level of investment, on the buyer’s commitment to granting workers proper contracts and the right to union representation, and on the state retaining a large, even if minority, shareholding, the dividends from which would be used to assist pension funds. Meanwhile, those assets that were to remain under public ownership should be handed over to a new public development bank, which would use them as collateral in the raising of funds to be invested in these same public assets so as to boost their value, create jobs and enhance future revenues. They agreed on this too.
Now came the delicate issue of Aris, Zorba and their fellow bankers. Remembering the awkward conversation with Alexis in the Stoneship’s shadow, I chose my words carefully in Dragasakis’s presence. I asked them to what extent they were prepared to take on bankers with Aris’s and Zorba’s background and force them to surrender control of their banks, which were essentially the property of the taxpayers. I reminded them of the curious alliance between our bankers and the European Central Bank, which was keeping their banks alive via government-backed IOUs. Either institution was capable of asphyxiating a Syriza government.
Pappas brimmed with revolutionary zeal, decreeing that all the bankers would be sent packing. More cautious but nonetheless positive, Alexis added that this was why it was important to have a senior person as deputy prime minister, meaning Dragasakis, to rein in the bankers.
But were they prepared, I asked, to adopt my proposal that these bankrupt banks be placed under the management and ownership of the EU? I knew this was an extraordinarily challenging proposal for a left-wing party that tended if anything towards nationalizing the banking sector. A perilous silence followed.
Alexis broke it by asking the inevitable question: ‘But why can’t we nationalize the banks? The state owns majority stakes in them anyway. Can’t we just pass a law that converts our non-voting to voting shares?’
I replied that unless we were prepared to turn the banks over to the European Union, we would not be able to unburden the Greek state of the liabilities incurred by their fake recapitalization. Bank nationalization would only make sense in the event of Grexit. ‘But we are committed to refusing to think of Grexit as an objective, correct?’
‘Correct,’ came Alexis’s immediate reply.
‘In which case, can we agree that our negotiating position on the banks should be that their shares, along with the liabilities for their recapitalization, should be transferred to the European Union, with new boards of directors no longer in the pocket of Greece’s bankers?’
Alexis and Pappas agreed, but I noticed that Dragasakis chose not to respond directly, remarking only that it was important to stay within the limits of legality – a point that ought to have been self-evident. His avoidance of the question reinforced my suspicions. So far though, all three seemed happy with the agenda. Nevertheless, I felt the need to recapitulate one more time what we had agreed our aims to be.
‘Debt restructuring comes first. Second, a primary surplus of no more than 1.5 per cent of national income and no new austerity measures. Third, wide-ranging reductions in sales and business tax rates. Fourth, strategic privatizations under conditions that preserve labour rights and boost investment. Fifth, the creation of a development bank that would use remaining public assets as collateral to generate a domestic investment drive, and whose dividends would be channelled into public pension funds. Sixth, a policy of transferring bank shares and management to the European Union while creating a public “bad bank” to deal with the banks’ non-performing loans, so as to prevent evictions and the mass expropriation of small business by vulture funds.’
Again they agreed, this time with greater conviction.
But I was not finished yet. Their agreement had to extend also to my proposed negotiating strategy, complete with its key deterrent, the threat to haircut our SMP bonds, and the parallel payments system with which to buy time in the event of an impasse that would bring on bank closures. I went through these points and they agreed once more.
Then came my final and most pressing point: ‘Key to having a shot at a decent agreement is that we share a common understanding that we are not going to bluff against the troika. Are we clear on that?’ I enquired anxiously.
Dragasakis asked what I meant. Was this a genuine question or tactical amnesia? Regardless, I was happy to make the key point once again, the same point I had been making since our very first meeting: ‘It is not a bluff to issue a statement of intent if you are intending to carry it out regardless of what the other side does.’
Alexis understood: ‘We heard. You’re saying that we will not sign even if threatened with Grexit. Correct?’
I confirmed that that was exactly my point: there was no point entering into a tough negotiation with the world’s most powerful credit institutions unless we were after a viable agreement within the euro, did nothing to jeopardize such an agreement, but were also clear in our minds that between surrender to a renewed sentence in debtors’ prison and Grexit we preferred the latter.
‘Are we clear on this?’ I repeated.
‘It goes without saying,’ was Alexis’s response, accompanied by another passionate confirmation from Pappas. Dragasakis remained conspicuously silent, offering only a friendly and tired smile. It was the closest we could have come to a covenant.
It was now my turn to decide.
Yes or no?
The moment of truth had arrived. In front of me there lay an offer I could refuse. The risks of accepting were clear and mountainous. While I liked Alexis and was willing to believe in him, the events of 2012 and, more recently, his casual disregard of our Stoneship agreement to involve me in the shaping of Syriza’s Thessaloniki Programme had given me more than sufficient cause for scepticism. And as Danae said after my subsequent return to Austin, I was exploitable because I was expendable: ‘If you bring back a decent deal, they will claim the credit. If not, you will get the blame.’
An outsider in relation both to Syriza and to the establishment, I was the ideal target to attract the slings and arrows of the troika, of the domestic establishment, of Syriza’s loyalists and party members, and to deflect them from Alexis and his caucus. I did not mind playing the role of target; it is what finance ministers do on behalf of their prime ministers and cabinets. It would be worth it, but only as long as our covenant was intact and everyone understood that this was a fight not worth entering unless we were prepared to take it to the wire. I was. Were they? It was a question I did not have enough evidence to answer.
At the same time I faced an ethical dilemma. Did I have the right to turn Alexis’s offer down? Here was the prime minister-in-waiting presenting me with an opportunity to put my money where my mouth was – to implement the negotiating strategy and the economic reform programme I had been advocating from the sidelines ever since Greece was confined in its peculiar prison. Socrates’ definition of a good life is one that you do not regret on your deathbed. How would I feel when, in my old age, I recounted the moment I turned my back on that opportunity?
If only I could talk it through with Danae, I thought. But with thousands of miles separating us, and after such a long seance at Alexis’s apartment, nothing less than a decision there and then would do. And so I reached it. But before accepting I had one last condition: that I first succeed in getting myself elected to parliament. I was not prepared to be another extra-parliamentary finance minister like Stournaras and his successor.11
‘But Yanis, you have never contested an election before,’ Alexis objected. ‘You don’t have the infrastructure in place, and the elections are coming up soon, with you living in Texas!’
Pappas intervened with a compromise: I could be on the list for one of the places in parliament allocated by the party leader.12 Alexis then suggested it might be appropriate if I were placed low down on the party list in an ‘honorary’ position, which would not bring a seat in parliament but which would signal the high esteem in which I was held by Syriza.
I was adamant. ‘That will not do. Either I get a direct mandate from the electorate, unmediated by the leadership, or I shall stay away.’ It was not a question of honour. ‘If I am to face up to Wolfgang Schäuble in the Eurogroup, a seasoned politician who has received his people’s backing for decades, I need to go in there with thousands of votes backing me too. Otherwise, I would lack the necessary legitimacy.’
