Yes, there was. First, I asked that he state clearly that the Greek programme that the IMF had been policing since 2010 had failed dismally as a result of the ridiculous levels of austerity the IMF had helped impose. Second, I asked that he point out that the resulting great depression had bred the monsters of the Nazi Golden Dawn and that if our democratic pro-European government were to be squashed by its creditors, it was highly likely that democracy itself would be strangled in its birthplace, just as it had been during the Second World War. Bernie promised he would make both these points, and added that he would make another, one that the International Monetary Fund would take seriously: if the IMF continued its abysmal behaviour towards Greece, he would press in the US Senate to reduce its funding.
Since 2012 Jamie Galbraith and I had worked hard to win American progressives over to the cause of dismantling Bailoutistan. When I called Alexis to relate Bernie’s offer of help, Alexis provided further evidence that those efforts had not been wasted. President Obama had called him with the customary congratulations but also with a suggestion that a meeting be organized soon between Jack Lew, the US Treasury Secretary, and myself. I asked Alexis to convey my readiness to meet Lew at his earliest convenience. Soon after, Obama made an extraordinarily helpful public statement: ‘You cannot keep on squeezing countries that are in the midst of depression,’ he told CNN’s Fareed Zakaria, adding, ‘At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits.’
An hour or so later, my mobile phone rang again with yet another US number. It was Jeff Sachs, a Columbia University economics professor and head of the Earth Institute. He was calling to offer his services in our ‘worthy struggle’, as he put it, to convince the creditors to proceed with large-scale meaningful debt relief and a sustainable fiscal policy. Jeff was one of those American economists who aged well, turning increasingly progressive with experience. Always close to the IMF in spirit but also in practice, he had participated in IMF ‘rescue’ programmes in the 1990s, most of which had gone badly wrong (for example Yeltsin’s Russia) with some exceptions like Poland. Like the economist Joe Stiglitz, who became a staunch critic of the Washington Consensus after witnessing the horrors perpetrated by the IMF and its programmes during the 1998 South East Asian crisis, Jeff had been shaped by the experience of seeing from the inside the bad behaviour of international creditors and the IMF towards bankrupted states such as Argentina. Both men had been transformed as economists and public intellectuals by these hands-on experiences and were to prove remarkably generous and dedicated supporters of our cause.
My last American phone conversation of the day was with Jamie Galbraith. I told him about the auspicious messages from Bernie, Jeff and Obama before discussing his arrival in Athens, where I wanted him to begin urgent work on our Plan X – the contingency plan that Alexis had first asked me to prepare at the end of our long late-night meeting at his flat in November 2014 and which was to be deployed only if Grexit was forced upon us. Given that the ECB had a plan for Grexit, devised by among others Thomas Wieser and Jörg Asmussen,5 as did every major European bank, we had a duty to develop our own. Indeed, I was under express orders from the prime minister to ready one. The reason I picked Jamie to lead the team was that the plan needed to be developed in total secrecy, since public knowledge of its existence would undoubtedly accelerate the bank run in anticipation of the devaluation of the currency that would inevitably result from its redenomination, which would in turn provide the ECB with the perfect excuse to close our banks, thereby forcing Grexit upon us: Plan X would become self-fulfilling. If I had asked a civil servant from within the finance ministry to head the team, a fatal leak would have been inevitable. In fact, finding anyone within Greece with Jamie’s expertise and capacity for discretion would have been impossible. In the event, he worked for several months on Plan X literally next to me – in a room within my ministerial inner sanctum.
A couple of hours later, the letter that Bernie Sanders had sent to Christine Lagarde arrived in my in-box. It was an absolute gem. The following extract captures its marvellous essence.
This week, the Greek people elected a new government and invested that government with a mandate to reverse the failed austerity policies of the last six years. Austerity has not only impoverished the Greek people, leading to an unemployment rate of upwards of 25 per cent, it has created a political vacuum so dangerous that the neo-Nazi party Golden Dawn has gained seats in parliament … The people of Spain, Italy, and Portugal are watching, and if this situation is not addressed with sufficient consideration for the broad swath of workers and citizens involved, the results of continued austerity could lead to more severe political consequences and a worldwide financial crisis. Fortunately, this is not inevitable.
The International Monetary Fund, as a multi-lateral institution and one member of the troika … has an important role to play in this episode. As ranking member of the Budget Committee, I am concerned about the IMF using United States government resources to impose austerity on a people that cannot take any more of it and risking severe financial contagion in doing so … There is substantial debate over whether the American government should increase the amount of US resources available to the IMF for lending to foreign countries, including questions over how to score the cost of such commitments. Without wading into this debate, I would like to understand how our commitments are being used in this case, and whether those commitments are being used to induce financial contagion and right-wing political extremism through excessive austerity or to aid in helping Greece achieve a manageable debt load and a sustainable economy.
By the time I had finished admiring the letter, it was 3 a.m. Time to put friendly Americans out of my mind and convert my mental list of domestic priorities into the following day’s concrete agenda: meet officials to be briefed on the state’s official funding situation; appoint secretarial staff and a press officer; convene meetings with the tax office to implement our strategy to tackle tax evasion; establish close partnerships with my deputies in charge of tax policy and budget management; liberate the ministry’s macroeconomists and statisticians from the imperatives of the troika and set them to the task not of obfuscating reality but of getting its measure as accurately as possible. Lastly, there was the sensitive task of putting together a small team to begin work on the parallel payments system.
Over the next forty-eight hours the sixth-floor office that until so recently had attracted our people’s wrath, would become my home. With Danae having flown back to Austin the day before to close down our apartment and ship everything back to Greece, at least I had no reason to leave the office. The fading red couch would be ideal for the three hours’ sleep available before the ministry woke up every morning. Adrenalin would do the rest. A few hours later a bright sun rose above Parliament House bathing the office in a luminous yellow. The new day dawned hopefully.
Define ‘not too bad’
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.
