It began with a meeting involving officials from the Treasury and the ministry’s public debt management agency. I welcomed them into my office, mindful of the need to dispel any fear that I would turf them out or marginalize them in favour of Syriza loyalists. In a short opening speech I told them that their party political allegiance or past collaboration with the troika, however enthusiastic it might have been, was irrelevant as far as I was concerned.6 I emphasized my determination to be their greatest champion as long as they worked diligently and loyally; equally, I made clear that I would be their worst nightmare if they chose to serve other interests instead. Relief flooded the room, and a conversation began in a spirit of mutual respect and cooperation.
Spreadsheets were laid on the large table, graphs and diagrams were shared, lists of repayments and obligations were drawn up, timelines were presented (with the colour red dominating the charts from mid-February onwards). After every qualification had been made and uncertain assumptions stated, I asked the one and only question that mattered: ‘How long?’
It was 28 January 2015. What I was asking was how many days did we have before the state’s coffers would be so bare as to necessitate a choice between defaulting to our main creditor, the IMF, or failing to pay fortnightly pensions and civil servants’ salaries. My question was followed by a few seconds’ silence. When my eyes met those of a senior Treasury official, he put on a brave face and said, ‘Things are not too bad, Minister.’
‘Define “not too bad”,’ I said.
‘Anything between eleven days and five weeks,’ he replied, his eyes turning to his notes to avoid mine. ‘It depends on the rate of our tax revenue inflows and some operations we can perform to repo [sell temporarily] various reserves,’ he concluded.
So much for the Greek-covery and the substantial surplus the outgoing Samaras government had been celebrating in a bid to convince themselves that the Greek people had been wrong to dismiss them at the polls. Not that I had expected anything different, but it is one thing to know the numbers, it is quite another to have them recited to you in the electric chair.
Keep me out of jail!
A phone call to a friend and colleague who had been a minister in previous governments solved my secretarial problem. Summoned by their former boss, Fotini Bakadima and Anna Kalogeropoulou turned up to take the reins. Their experience was evident immediately: it was as if they had always worked there. In the months that followed they would prove their loyalty and dependability too.
The other key appointment for the team, a chief of staff, was taken care of before I had even had the chance to look for one myself. The deputy PM’s office dispatched a Syriza member and lawyer by training, George Koutsoukos, who had been working as a civil servant in the finance ministry, to fill this role. While I was suspicious of his connections to Dragasakis, George won me over – not least because he was a published novelist. No one who publishes novels while serving in Greece’s finance ministry deserves to be mistrusted, I thought.
Still, while I was determined to work well with my parachuted-in chief of staff – and in fact ended up working very well with him indeed – I felt the urgent need for a minder whose loyalties would not be shared with any of my new Syriza comrades, let alone the deputy PM. So I picked up the phone to summon Wassily, the dear friend who had warned me of Dragasakis more than a year before.
I had met Wassily in 1978 as a first-year undergraduate at Essex University. Our first encounter was on a basketball court. Playing for opposite sides, we clashed for the ball, exchanged words that are reproducible neither in print nor in polite society, and had to be restrained by fellow players. For months afterwards my feelings for Wassily were those of intense dislike – as were his for me, apparently. But after the long Winter of Discontent had come and gone, with Mrs Thatcher having moved to 10 Downing Street in April and the June exams approaching, the general gloom that descended upon us took the edge off our mutual loathing. One evening in the student union bar we agreed to collaborate on an economics assignment. By the early morning, with the assignment completed, the antipathy had metamorphosed into an intense friendship that grew over the years.7
‘What do you want from me?’ Wassily asked once we were in my office alone, visibly unimpressed by the surroundings or the fact that his friend was now minister of finance.
‘To keep me out of jail, Wassily,’ I replied. He understood. Ministers of finance are at the mercy of their minders. They sign dozens of documents, decrees, contracts and appointments daily. It is humanly impossible to examine closely everything they sign. All it takes is a hostile or absent-minded aide, and suddenly the minister faces the wrath of the public or a summons to court.
Wassily accepted without a second thought and, as soon as I had signed his secondment from the government’s Centre for Economic and Planning Research, got down to work. As the day’s meetings unfolded, Wassily roamed the corridors to work out who did what to whom, as Lenin might have said, and how they impeded or aided my work.
Swiss cheese
Famously Norman Lamont once quipped that John Major’s government, from which he had recently been removed, remained ‘in office but not in power’. As I would explain to him years later, his remark’s pertinence reached its apogee in the case of the Greek government in general and my ministry in particular. It was not just that, like any other government, we were at the whim of the markets’ violent reactions. It was far, far worse than that.
As described in ‘Bailoutistan 2.0’ in Chapter 2, the conditionalities of the second bailout loan, which had been implemented in stages between 2012 and 2014, included momentous attacks not just on social spending but on the very sovereignty of the Greek state, specifically on its control over essential departments within the Ministry of Finance. As well as creating the Hellenic Financial Stability Facility (HFSF), which after 2012 held the banks’ majority shareholdings on behalf of the state, and a privatization unit whose job was to conduct fire sales of Greece’s public assets, both of which answered not to the Greek people but to the troika, the jurisdiction of the tax office had also been co-opted by our creditors – specifically, to the Eurogroup Working Group, presided over by Thomas Wieser. By scooping out these three crucial chunks of the Ministry of Finance and placing them beyond the reach of Greece’s democratic process, they had effectively turned the ministry into something resembling a Swiss cheese.
Greece’s tax office provides one of the most fascinating examples of neocolonial rule in modern times. As Greece’s finance minister, the tax department was under my jurisdiction and nominal control, so if a tax evasion scandal broke I would be held responsible for it in parliament and in the eyes of the public. Yet I had zero authority over the activities of the department. I lacked the right to censure, fire or replace its head, and I was not even consulted on how the department was run – all this in a country world famous for tax evasion and for the tax immunity of its oligarchs. In addition, the statistical authority whose computations of the government’s budget and balance were used to determine whether the fiscal targets agreed with its creditors had been met or not also answered not to me but to the troika. In a nutshell, I was responsible for, but not equipped to administer, the nation’s taxes, banks, property and statistics.
During those first forty-eight hours in the ministry, with my thoughts trained on the impending visit of the Eurogroup president, I was deeply conscious of the fact that a large number of civil servants within my ministry understood that their careers depended a great deal more on serving Brussels than their minister or parliament’s will. In the ensuing months many of those civil servants would prove themselves to be diligent, honest and patriotic by working inordinately long hours with conspicuous selflessness and in defiance of exorbitant pressure from the troika. Nonetheless, reclaiming national sovereignty and democratic control on our parliament’s behalf over their ministries – and their allegiance – had to be as high a priority as restructuring the source of that bondage, our public debt. To that end, I made an appointment with the head of Greece’s intelligence service.8
Yannis Roubatis is a striking yet diminutive man. Softly but exceptionally well spoken, he impresses by weighing each of his words so carefully. Originally a journalist, in the 1980s he served as the official spokesperson of Andreas Papandreou’s socialist government before becoming a socialist member of the European parliament in the 1990s.9 On paper Roubatis seemed well qualified to head an intelligence service better known for US-sponsored subversion of Greek democrats and leftists than for defending Greece from foreign foes: as a young man he had written a doctoral thesis at Johns Hopkins University that exposed the infiltration of the Greek government by the CIA, and the government he served in the 1980s did a great deal to sever the link between foreign agencies and Greek spooks.
From the word go I felt comfortable with Roubatis, or at least as comfortable as one can feel with a spy chief. His analysis of the situation our new government was facing was in sync with mine. His declaration of loyalty to the government and stated resolve to be our non-intrusive helper were welcome. His advice on simple measures that could be taken to deter the dirty tricks that our opponents might employ during the negotiations was well taken. But most of all I appreciated his confirmation that the loyalty of whole departments within my ministry lay elsewhere and his making me privy to how cosy the relationship between the heads of these departments and troika officials had become.
After that first meeting I would bump into Roubatis regularly at Maximos in an office next to the prime minister’s where he often waited to meet Alexis before or after one of the regular meetings of our ‘war cabinet’ – which was how we referred, only partially in jest, to our core negotiating team.10 Roubatis would brief me on the latest intelligence and advise me on how to keep my communications with the prime minister secure. But as I would soon discover, the head of one’s intelligence service can imperceptibly turn from a useful friend into a lethal foe.
Ultimatum
On Friday, 30 January, three days after I had assumed the ministry, the president of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem, dropped in. He came with a large entourage that included Thomas Wieser, president of the Eurogroup Working Group and the true power broker within the eurozone. I waited for them by the sixth-floor lift. We met, shook hands warmly and proceeded to my office for some refreshments before moving to an adjacent conference room, the two teams facing each other across a large rectangular table.
On my side of the table I had my two alternate ministers plus Chouliarakis, chair of my Council of Economic Advisers, Stathakis, economy minister, whose office was one floor above mine, and Euclid. Among the heavyweight troika officials on Dijsselbloem and Wieser’s side was Declan Costello, an Irishman famous even in Ireland for his hardline policy towards indebted nations, now the European Commission’s mission chief for Greece, plus the Dutch ambassador to Greece. Dragasakis made a short welcoming speech then left the room immediately. I followed up with a welcoming speech of my own before Jeroen Dijsselbloem said a few words on behalf of the Eurogroup. Niceties were exchanged and good intentions were aired in what can only be described as a tense encounter. Then the moment of truth arrived when I invited Jeroen into my office for a tête-à-tête.
With the door closed behind us, I attempted to melt the ice by sharing the words of optimism with which I had closed my inaugural press conference a few days earlier. Let’s defy the prophets of confrontation, I proposed. Let’s prove wrong the media who imagine this to be some High Noon encounter. I assured him that our new government was only interested in compromises on a path leading to a mutually advantageous agreement. But to assist the birth of this new partnership, we would need to work out a better negotiation process, one that was not injurious to the Greeks’ sense of pride. The troika’s methods in Greece over the past five years had been counterproductive.
‘Yes,’ he agreed. ‘The troika has not left the best impression here.’
‘That’s a major understatement, Jeroen,’ I said with a smile. I urged him to see it from the perspective of the people on the ground. For years now groups of technocrats dispatched by the IMF, the European Commission and the European Central Bank had arrived at Athens airport, from which they had been driven at high speed under police escort in a convoy of Mercedes-Benzes to the various ministries, where they had proceeded to interrogate elected ministers and dictate to them policies that affected the lives of millions. Even if these policies had been wonderful, they would have been resented. ‘We must find another way to work together,’ I said, one that would allow our people to embrace whatever policies he and I agree upon. At the very least, Greece’s elected ministers should not be expected to conduct their business with anyone other than their elected equals; technocrats could prepare the ground, establish the facts and the figures, but should not conduct the ministerial negotiations.
I was happy to hear him say that, yes, he agreed that the process would have to be reconsidered, although in hindsight I suspect his accommodating attitude was less to do with an appreciation of what I had been saying and more to do with his evident eagerness to change the subject and return to the same question he had posed on the telephone a few days earlier: ‘What are your intentions for the Greek programme? Are you planning to complete it?’ he asked.
I repeated the answer I had given him over the phone: our new government, I replied, recognized that it had inherited certain commitments to the Eurogroup while at the same trusted that its partners would recognize in return that it had been elected only a few days before in order to renegotiate key elements of this programme. His response was abrupt and aggressive. ‘This will not work!’ he declared.
I reminded him that when I had given the same answer to the same question three days earlier, he had replied, ‘This is very good.’ Jeroen brushed my reminder aside. The Greek programme, he mused, was like a horse. It was either alive or it was dead. If it was alive, we had to climb on it and ride it to its destination. If it was dead, then it was dead. Not knowing what to make of his metaphor and unwilling to adopt it, I tried to reason with him.
There was a reason, I explained, why the previous government had fallen on its sword and called elections so early in its term. And there was a reason why Antonis Samaras had been sent to the opposition benches by the voters who had elected us instead. And the reason was simple: it was simply impossible to complete the second Greek programme, and the voters understood that. ‘If it could have been, Jeroen, you and the previous government would have completed it,’ I remarked.
For a moment he seemed lost for words, so I continued: the troika’s own numbers showed that even if the programme was completed and Greece received the few billions left in the second bailout kitty, we would still be €12 billion short. Where would I find a missing €12 billion? Think of the effect this unanswered question is having on private investors, I urged him: it reinforces their resolve not to lend to the Greek state again until a serious restructuring of our debt has been effected. And think of the broader picture too, I implored him: the government’s debt repayments in 2015 alone amounted to 45 per cent of all the taxes it hoped to collect; meanwhile, national income, measured in euros, continued to fall, and everyone was anticipating an increase in taxes to meet the repayments. No investor in their right mind invests in an economy where demand is shrinking and taxes are rising.
There were only three options available to us, I said. One was a third bailout to cover up the failure of the second, whose purpose was to cover up the failure of the first. Another was the new deal for Greece I was proposing: a new type of agreement between the EU, the IMF and Greece, based on debt restructuring, that diminished our reliance on new debt and replaced an ineffective reform agenda with one that the people of Greece could own. The third option was a mutually disadvantageous impasse.
You do not understand, Jeroen told me, his voice dripping with condescension. ‘The current programme must be completed or there is nothing else!’
It was an astonishing statement. The head of the eurozone’s finance ministers was refusing to engage with a simple funding issue. He was making it impossible for me not to ask, ‘But where will the missing €12 billion come from, Jeroen? Am I wrong that the second programme can only be completed if a third one is first negotiated? Can you see any way that would render its completion financially feasible without a new programme that can only be agreed to after exhaustive negotiations between all nineteen finance ministers [in the Eurogroup]? Is there any doubt that I will not be able to complete this programme even if I were willing to violate the mandate that the Greek voters gave me to renegotiate it?’
Jeroen refused to engage with my questions and the underlying facts. Apparently he had not come to Athens to discuss numbers or financing. One could only assume that he had come instead in the expectation that I would perform an instant U-turn – a quick victory allowing him to board his jet at Athens airport with my oath of allegiance to the programme, to the Eurogroup and to the creditors in his briefcase.
The fact that the president of the Eurogroup was so deluded as to think this was a possibility is a fascinating comment on the recent history of the European Union. It reveals how experience has taught functionaries operating on behalf of Europe’s deep establishment to expect newly elected government ministers, prime ministers, even the president of France, to buckle at the first whiff of an ultimatum backed by the ECB’s big guns.11 Since 2008, when the only thing keeping most eurozone member states’ commercial banks open was the Eurogroup’s goodwill – which Mario Draghi’s ECB needed in order to issue the official waiver that allowed him to accept the banks’ junk collateral in return for cash – several governments had succumbed to policies they detested: the Baltic states, Ireland, Cyprus, Spain, Portugal, all had been beaten into submission.12 In fact, Dijsselbloem had boasted that the way Cyprus had been treated in 2013, soon after he had taken over the Eurogroup presidency, was the ‘template’ for future crises. It was the threat of bank closures that had done it – this was the ace he carried in his sleeve on the day of his visit to me – and now he played it.
There was an alternative to committing to completing the programme, he told me. I was glad to hear it, I replied hopefully. Turning his eyes to meet mine, he said purposefully, ‘You and I hold a joint conference where we announce that the programme has crashed.’
I replied that the word ‘crash’ was not exactly soothing for markets and citizens. What do we replace it with? I enquired.
A shrug of his shoulders and a look of faux puzzlement was his response.
‘Are you threatening me with Grexit, Jeroen?’ I asked calmly.
‘No, I have not said this,’ he protested.
‘Can we please be frank here?’ I said. ‘There is too much at stake to pussyfoot around. You did say that if I insist on renegotiating the programme, the programme crashes. This means one thing and one thing only. And we both know what that is.’
It was of course that the ECB, either centrally or through the Central Bank of Greece, withdrew its waiver and refused to accept the collateral of Greek banks any more, forcing them to close. At that point our government would have no option but to issue its own liquidity. And if the impasse continued our nominally euro-denominated liquidity would, at some point, turn into a new currency. This was Grexit.
‘So, you are giving me an ultimatum,’ I continued. ‘You are in effect telling me: commit to a programme that cannot work or you crash out of the eurozone. Is there any other reading to what you just said?’
The president of the Eurogroup shrugged his shoulders again and grinned.
‘It is a sad day for Europe when the Eurogroup president presents a freshly elected finance minister with an impossible ultimatum,’ I said. ‘We were not elected to clash with the Eurogroup, and I am not interested in clashing with you. But nor were we elected to abdicate during our first week in office by espousing an impossible programme that we came in with a mandate to renegotiate.’
Our eyes met in mutual recognition of the impasse. The only thing left to do was to agree on what each of us would say during the press conference scheduled to follow our meeting, so as to conceal the deadlock and thus prevent it affecting the financial markets. He proposed a first draft; I made a couple of corrections; we agreed. I suggested that, after the speeches, it would be best to take no questions. He countered that we had better take a couple. Answering journalists’ pointed questions would give him the opportunity to jangle the markets’ nerves just a little – enough to accelerate by a notch or two the bank run that the troika had kick-started weeks before. Loath to be portrayed as muzzling the press, I agreed.
The press room was packed. Once the TV feeds had been established and the noise subsided, I began with predictable niceties consistent with my narrative of a new beginning in Greece’s relationship with its creditors and the Eurogroup. Every word had been agreed beforehand. He too respected our agreement and did not stray from the script as we laid a veneer of boring normality over the meeting. Then came the questions.
