Soon after landing in Berlin I was scheduled to have a secret dinner with Jörg Asmussen and Jeromin Zettelmeyer. Asmussen was the junior minister for labour affairs, but a key figure in the German political system with close contacts at the ECB, where he had been a member of the Executive Board until a year before, and a power broker within the Social Democrats (SPD), the federal government’s junior coalition partners. Zettelmeyer worked directly for Sigmar Gabriel, the vice chancellor of the federal government, economy minister and SPD leader. The purpose of the dinner was ostensibly to build bridges between the Syriza government and the section of the German government controlled by the Social Democrats. They presented themselves as our allies and supporters within the Berlin administration, offering me advice and protection from the ‘big bad wolf’, as one of them jokingly referred to Wolfgang Schäuble.
The agreement was that I would go to the restaurant alone, incognito and by cab, and that I would not tell anyone we were meeting. The implication was that it would backfire on all of us if word leaked. ‘Let’s keep this just among ourselves,’ Jeromin had said to me on the phone. Of course the fact that he called my mobile meant that it was already quasi-public knowledge – as Yannis Roubatis, our government’s head spook, had explained to me. Just as I was ready to leave my hotel room, I received an email from Jeromin telling me that they had changed the restaurant booking because the original choice was ‘too public’, confirming once more the importance of discretion. Partly because of this emphasis on secrecy, and partly because I was exhausted and looking forward to disconnecting for a couple of hours, I left my mobile phone in my room.
I found a taxi in a cold dark street nearby and gave the driver the address of the out-of-the-way pizzeria where we were now meeting. On arrival, as per my instructions, I walked upstairs to the first floor, which had been reserved just for us. Over pizza and red wine a friendly discussion developed.
Jörg and Jeromin spoke to me like friends, comrades even. It was becoming a pattern among social democrats, I thought, recalling my encounter with Michel Sapin. The objective, as they put it, was to create a common Syriza–SPD agenda sophisticated and sensible enough to make it hard for Angela Merkel and Wolfgang Schäuble – their Christian Democrat colleagues in government but political opponents in general – to oppose. It sounded good to me. Too good, to be honest. Then again, if a decent agreement could be hammered out with Jörg's and Jeromin’s help, fine. If not, what did I have to lose?
As our discussion drifted from one topic to another, the basic plan I was proposing seemed to satisfy them. The question that preoccupied them was what objections the Christian Democrats would make and how these could be addressed. The more we talked the more I felt as if I was having dinner with a pair of consultants working for my government. Until, that is, Jörg’s phone rang. He answered it, put the phone to his ear, then looked at me seriously and, without speaking a single word into the phone, said, ‘It’s for you. Mario wants to speak to you.’
So much for the secrecy of our meeting. These people don’t even try to keep up the pretence, I thought to myself. I got up, took Jörg’s phone and walked out into the dark corridor above the pizzeria’s kitchen, immersed in pleasant smells and noises.
‘Hello, Mario, what can I do for you?’
‘I wanted to let you know, Yanis,’ Draghi said in a steady voice, ‘before you learn it from the media, that as I foreshadowed this morning, the Governing Council voted to withdraw your banks’ waiver. But this does not mean much since your banks will continue to be supported by your central bank via emergency liquidity assistance.’
‘I appreciate you going through all sorts of interesting channels to find me and inform me in person, Mario,’ I said. ‘Since you are giving me the opportunity to respond in person on the telephone, allow me to say that this decision – the withdrawal of the waiver a day after I single-handedly lifted the banks’ shares and reversed the bank run, a week after our election, indeed a week before my first Eurogroup meeting, and three whole weeks before the expiry of the programme extension – can only be interpreted as a hostile, deeply political move by the ECB against my government.’
Draghi made a faint attempt to deny that there was anything political about this move but I would have none of it. It was a decision, I told him, that would be interpreted in Athens as an unwarranted, over-hasty and aggressive move concerted with the Eurogroup president’s ultimatum.
When I returned to the table I found Jörg and Jeromin in a different mood. I put on a brave face, pretending that nothing much had happened, but of course they knew better. Gone was the atmosphere of comradeship, of sharing in a joint project to rejig the Greek programme against Schäuble and Merkel’s designs. So I stopped pretending and let them have my assessment of the ECB’s decision. Asmussen replied as if he was still on the ECB’s Executive Board, whispering unconvincing excuses. All the heroic talk of a Syriza–SPD collaboration had evaporated with a single phone call that exposed the whole dinner for what it was: a clumsy set-up.
They were not bad people either
I returned to my hotel at around midnight, switched on my phone and called Alexis to tell him Draghi had pulled the waiver.
‘Be uncompromising but see if Gabriel can be of any help,’ he advised me sounding unperturbed.
‘Judging by his two messengers last night, Alexi, I am not hopeful,’ I said. We needed to signal persistently our determination to activate our deterrent the moment they pulled the ELA on our banks, I told him.
‘Get some sleep now. You have to be fresh for Schäuble,’ Alexis replied light-heartedly.
First I had to write a press release to soften the blow of the waiver withdrawal. The happy task of the finance minister, I ruminated: packaging a shock as a non-event.
Meanwhile, upon hearing the news, the ever-vigilant and helpful Glenn Kim sent me an email with his analysis of its immediate financial effects. It confirmed that even before the stock exchange opened or depositors had a chance to make fresh withdrawals, the banks would take a major hit.11 My task was to pen a statement that on the one hand hinted at my intense disapproval of the ECB’s aggression while at the same time it steadied nerves, minimized the inevitable sharp turn in market sentiment and preserved some of the gains I had made in London.
Anticipating that when I went to see Schäuble the following day I would be accosted outside the federal finance ministry by journalists demanding a reaction to the ECB move, I prepared the following statement.
The ECB is basically trying to abide by its own rules, motivating both us and our partners to reach a political and technical agreement quickly, while keeping the Greek banks liquid. I trust that Greek depositors understand that day-to-day stability is guaranteed and that we are negotiating new terms that will bring recovery and a permanent solution. To us, the timing of the ECB decision was particularly surprising as it risks creating an unnecessary sense of urgency, given that we had until 28 February before the current Greek programme expires. I trust that the hasty decision was due to the timing of the ECB Governing Council’s regular ‘non monetary policy’ meeting yesterday. From their point of view, it was probably the right timing.
It was all I could do. Of course, in the event the stock exchange fell, the banks’ shares dropped and the deposit outflows resumed. Some of the previous day’s gains were preserved but it was only a matter of a day or two before the withdrawal wiped those out as well. The only silver lining was that none of this would matter in the medium term. The real issue was whether Berlin could be persuaded to compromise, or would an all-out confrontation be necessary, as I had been expecting since 2012.
On the way to the federal finance ministry I noticed two emails had arrived on my phone. One was from Jamie Galbraith informing me that Bernie Sanders was about to write to Janet Yellen, the US Federal Reserve chair, to ask her to indicate to the ECB that its behaviour had been appalling and ultimately globally destabilizing. The second email was from Glenn. This was a brief on Wolfgang Schäuble, for whose office Glenn had consulted in his previous life. Typically for a financier’s brief, it came in bullet points:
He is a lawyer through and through.
His command of economics is quite weak. I can recall on more than one occasion him mixing up yields and prices and making references to financials without understanding what they mean.
Absolutely hates the markets. Thinks that markets should be controlled by technocrats.
He practically relishes being the bad cop.
But:
He is also an ardent Europeanist.
He believes in the destiny of a German-like Europe (though unable to grasp the contradiction in such a term).
He is someone that can be debated with.
Hostility was in evidence even before I met the great man. I was met on the ground floor of the Federal Ministry of Finance by a junior minister. Before getting into the lift, he asked me playfully, but with enough of a hint of aggression to establish that he was not actually joking, ‘When am I getting my money back?’ I was tempted to reply, ‘When you persuade Deutsche Bank to return it to you.’ I said nothing, smiling widely, my mind on the main game.
The lift door opened onto a long cold corridor at the end of which Wolfgang Schäuble was waiting in his wheelchair. This was a man whose speeches and articles I had been reading and following for two and a half decades. I fully understood that to him I was a damned nuisance, but the smile on my face and the hand I extended towards him were meant with genuine respect and in the secret hope that we might establish a decent, civilized modus vivendi. Strangely, that wish was granted in the end, despite the awfulness of what happened next: refusing my offer of a handshake, Germany’s federal minister of finance performed a swift U-turn in his wheelchair and propelled himself at impressive speed towards his office, commanding me to follow with a wave of his hand – which of course I did, Euclid rushing behind me to keep up.
Once inside his office, my host relaxed, his expression turning kinder. We sat around the customary conference table, he with two junior ministers at his side opposite Euclid, our Berlin ambassador and myself. As always, I was invited to make an opening statement. I gave a variant of the same speech I had given in my meetings with Sapin, Osborne, Padoan and Draghi. The difference was an emphasis on two points that I knew resonated powerfully in Berlin. First, I was not asking for a debt write-down, and I made clear that the overall utility of my debt-swap proposals would benefit Germany as well as Greece. Second, I stressed the importance I placed on catching tax cheats and effecting reforms that would encourage entrepreneurship, creativity and probity across Greek society.
Schäuble’s opening line was friendly enough, insisting that we address each other by first name. But immediately thereafter he proceeded to make clear that he had no interest in anything I had just said. Instead, unable to resist the opportunity to suggest German probity and Greek delinquency, he offered to send five hundred German tax officials to Greece to help catch the evaders. I told him that I very much appreciated his generosity but expressed concern that, finding themselves unable to read Greek tax returns or the associated documentation and therefore incapable of auditing our taxpayers, his officials might become disheartened. I had a better idea: why didn’t he appoint the general secretary of my ministry’s tax office?
My suggestion startled him visibly. So I continued. Thanks to the troika, I explained, I was responsible for the tax office but had no control over it; the person in charge of it was neither appointed by nor answerable to me or my parliament, even though I was accountable for her actions. My proposal was as follows: he would choose a German tax administrator of unimpeachable credentials and spotless reputation to be appointed immediately and to be fully accountable to the both of us, and if she or he required additional support from his ministry, that was fine by me. ‘I know you don’t like dealing with me or with my government,’ I told him. ‘But, be that as it may, you can rest assured that in me you have a genuine ally in the fight against tax evasion.’ Finally, I informed him of the plan I had put in place to create an algorithmic method of identifying tax evaders between 2000 and 2014.
It was not what Dr Schäuble had expected. But two things showed his determination to avoid any serious engagement with this proposal either. First, he proceeded to change the subject, away from this potentially fruitful discussion, before we had a chance to strike an impressive deal on fighting tax evasion in Greece, never to return to it. Second was the topic he chose to turn to instead: his theory that the ‘overgenerous’ European social model was no longer sustainable and had to be ditched. Comparing the costs to Europe of maintaining welfare states with the situation in places like India and China, where no social safety net exists at all, he argued that Europe was losing competitiveness and would stagnate unless social benefits were curtailed en masse. It was as if he was telling me that a start had to be made somewhere and that that somewhere might as well be Greece.
My rejoinder was that the obvious solution was the globalization of welfare benefits and living wages, rather than the globalization of insecure working poverty. In response, he reminisced at length about a secret mission he had undertaken in the 1970s and 1980s, to liaise with the East German authorities on behalf of his Christian Democrat party. ‘The DDR people were not bad,’ he told me. ‘They had good intentions for a social welfare system that was not economically possible.’ The insinuation was perfectly clear.
‘Are you comparing me with a well-meaning DDR minister trying to sustain an unsustainable political and economic system?’ I asked. ‘Let me reassure you, Wolfgang, that despite what your friends in Greece may have told you, I am a committed democrat, a determined pluralist and an unwavering Europeanist. And so are my Syriza party colleagues. We have as much in common with the DDR’s ways and means as the CDU has with Pinochet’s regime: nothing whatsoever!12 As for our proposals regarding pensions and welfare benefits, they are part and parcel of a broader fiscal policy yielding small but positive budget primary surpluses. Fiscal and economic sustainability is our number-one priority. Greeks have had enough of living on deficits.’
In response he backpedalled, protesting that he had not intended to make such a comparison at all.
Go to the institutions!
With this unfortunate misunderstanding behind us, I channelled the conversation back to debt restructuring and my debt-swap proposals. Schäuble did not even glance at my non-paper. He passed it to his junior minister with an air of scorn saying that it was a matter for the ‘institutions’ – the very word I had used at my joint press conference with Jeroen Dijsselbloem in Athens, suggesting that even the German finance minister now felt uncomfortable with the term ‘troika’. This would be Berlin’s standard tactic throughout. Whenever we put a proposal to Chancellor Merkel or Minister Schäuble – on debt, privatizations, pensions, tax evasion and so on – they would simply refer us to the ‘institutions’. The implication was that there would be no negotiation between Berlin and Athens; it was simply not their job.13
At this point Euclid made an excellent intervention. On the German side, no one other than Wolfgang had spoken. In elegantly structured sentences Euclid pointed out the irresponsibility of leaving matters of great political importance to technocrats with a proven record of mishandling the Greek fiscal, debt and social crisis, revealing the absurdity of Schäuble’s response. It was wonderful to have Euclid on my side, upping the ante and allowing me to make a placatory suggestion. If I were to go to the ‘institutions’ with my proposals, to have any chance of hammering out a workable deal it would be in everyone’s interest to allow for a period of ‘peace and quiet’, of financial stability. Wolfgang nodded as if in agreement.
This was in contrast to the Eurogroup president’s attitude. I described how he had threatened me with bank closures, in my office, a mere three days after I had moved into it. ‘Not exactly a convivial move,’ I said dryly.
Wolfgang reacted angrily. ‘He had no reason to go to Greece. He had no mandate.’
Not a man to fake emotion, Schäuble convinced me that Dijsselbloem must have acted alone. If he had done so in the hope of an easy win on his master’s behalf, it was fair to say that he had failed: his master was evidently not pleased.
Stunned by the reproach, aghast at the praise
At the customary press conference afterwards Wolfgang adopted his stern public persona, telling the gathered media that we had had a cordial meeting during which he had ‘explained’ that Greece had ‘obligations’ that must be respected regardless of which party was in government.
‘We agreed to disagree,’ Schäuble said, dispelling any notion that our discussion had reached any common ground.
‘We did not even agree on that,’ I interjected.
I wanted to make clear that my host had been unwilling to debate anything, but also that things had changed: Greece now had a minister of finance who would not be pushed around just because the Greek state was insolvent. Having established this, I made a statement aimed at healing the rift that was developing between ordinary Germans and Greeks. ‘Some are tempted to imagine that the solution lies in the separation of our peoples,’ I said.
