From the outset Pierre approached me as a friend, a comrade even. He told me he understood my arguments entirely. At some point he confessed that in his youth he had been a Marxist. Though no longer a radical, he wanted me to understand that there was enough of a left-winger left in him to appreciate my government’s position. No wonder Berlin did not trust him. When I described my recent encounter with Jeroen Dijsselbloem, he winced with distaste at his behaviour and advised me to pay no attention to his threats.
Taking heart at Pierre’s warmth, I tested my agenda on him: it was essential that a different type of agreement should govern Greece’s relationship with the EU, but to get a chance to hammer out what that should be we needed time and fiscal space; we needed, in other words, a six-month bridge between the previous programme and a new contract between the EU and Greece. I used the word ‘contract’ in the spirit of Jean-Jacques Rousseau, I explained: a mutually beneficial relationship between equals. This new long-term contract must include proper debt restructuring, a realistic fiscal policy and a reform agenda that targeted the oligarchy. Lastly, we needed to replace the troika’s current attitude to Greece with a process that respected Greek sensibilities and the rule of law, both European and domestic.
When Pierre responded, I could hardly believe my ears: he offered nothing less than a paean to the agenda I had just outlined. The troika’s methods had been very bad for the EU’s image, he admitted. ‘It has to end’ were his specific words. To my joy and amazement, he also agreed with my point about separating the European Commission, the ECB and the IMF from the troika that they had assembled – precisely what had caused Dijsselbloem’s outrage two days previously. ‘Technocrats must talk with technocrats and ministers with ministers,’ he acknowledged. I added that it was absurd that the officials charged with representing Greece’s central bank were acting as bailiffs and imposing fire sales upon the government they were meant to serve. Pierre agreed wholeheartedly. It was unacceptable, he reiterated, adding that he thought it important not only for Greece but also for Europe that the troika be replaced with direct political negotiations over economic matters in Brussels between me and him.
There was hardly anything left for me to say. He had done my job for me. So we shook hands warmly and agreed to remain in touch in order to plan for the first Eurogroup meeting, scheduled for 11 February, when this new chapter in our relationship would commence.
‘I hope that this is indeed a new beginning, Pierre,’ I said as I walked him upstairs to the lobby.
‘It is, it is,’ he replied smiling warmly.
Euclid, who had been present throughout, seemed amused. ‘Let’s see what goodies our friend from the IMF has in store for us,’ he said.
Promising liaisons: 2. The troika man
Poul Thomsen, my next guest in the hotel’s dungeon, is probably the most despised foreigner in Greece. The tall Dane’s surname is synonymous with the troika and Bailoutistan. In 2010, when the troika was being assembled, he was appointed by the IMF to head its Greek mission.
Unlike the ECB or the European Commission, the IMF had decades of mission experience. In the 1970s its technocrats had made a name for themselves by visiting failing states in Africa and Latin America to impose austerity, privatizations, school and hospital closures, liberalization of food and fuel prices and the like in exchange for IMF loans. When the troika was put together by Berlin to do the same on Europe’s periphery, beginning with Greece, IMF technocrats were deployed to lead the way. Unlike previous IMF mission chiefs though, Thomsen was being entrusted with the fortunes of a First World country.1
As a reward for his unmitigated failure in Greece, Thomsen was promoted to head the IMF’s entire European department. Negotiating with Thomsen therefore presented a special difficulty: he had a vested interest in resisting any acknowledgement that the Greek programme had failed. It was a little like negotiating the dismantling of Bernie Madoff’s Ponzi scheme with Bernie Madoff.
To my intense surprise, Poul Thomsen needed no persuasion. Having listened to my analysis of Greece’s predicament and my agenda, he offered a response that makes me smile even to this day: ‘Look, we know that we cannot expect a left-wing government to do things that even your right-wing predecessors wouldn’t do. I understand that you need to bring back collective bargaining and cannot expect you to consent to privatizing everything.2 But the one thing that we would expect of you, in accordance with your own pronouncements, is that you go after the oligarchs, targeting tax evasion in particular.’
Was I dreaming? I told him he had my cast-iron guarantee that we would not leave any stone unturned in pursuit of them. We would also sell to the private sector assets whose privatization would benefit our social economy, as long as the new owners committed themselves to high levels of direct investment and proper protection for workers and the environment. But, I added, for any reform agenda to work, we would need a get-out-of-debtors’-prison card. At that point I took from my folder the one-page non-paper outlining my debt swaps proposals and gave it to him. Thomsen looked at it, smiled and dumbfounded me once more.
‘This is fine. But it is not enough. We need an immediate annulment of part of your debt. No swaps, no delays. Just take €53 billion and erase it.’
That’s it, I concluded: I am dreaming! He was talking about eliminating at a stroke the entire debt that Greece still owed the EU member states from the first bailout of 2010. Had some member of Syriza’s Left Platform infiltrated Thomsen’s mind? Was he possessed by some radical spirit?
Suddenly I found myself on the defensive. I could not have agreed more, I told him, but how could Berlin be persuaded to agree to such a proposal? And what about all the other EU governments? Was it politically feasible for them to get this through their parliaments?
Thomsen’s reply turned on a technical point: the monies given to Athens under the first bailout agreement were exceptional in that they were all bilateral loans from other eurozone capitals; by contrast, the second bailout loans came from Europe’s bailout fund, the EFSF, which had also lent money to Ireland, Portugal, Spain and Cyprus. If we restructured Greece’s debt to the EFSF, then Dublin, Lisbon, Madrid and Nicosia would seek similar relief, whereas Greece’s first bailout could be annulled without giving the other bailed-out countries any grounds for protest.
As desirable as his proposal was, I told him, I still did not see how Berlin would agree to it, nor how he would avoid the accusation that he was advocating the annulment of debt owed to Europe but not to the IMF.
‘I’m just telling you what the IMF position is,’ he said, shrugging his shoulders.
Not wishing to spoil a wonderful first meeting, I turned the conversation to the subject of Greece’s primary surplus targets and stressed the importance of their being sensible, at around 1.5 per cent of national income.
‘I agree,’ Thomsen replied laconically.
My Sunday in Paris could not have begun better. Would my next guest spoil it?
Promising liaisons: 3. France’s ECB man
Third on the list was Benoît Cœuré, widely regarded as France’s man on the ECB Executive Board, a description that he detests but which he can hardly escape given that, prior to moving to Frankfurt, he had spent his entire career in the French Treasury. A mild and agreeable man, Cœuré seemed to me to have a good grasp of the challenge the ECB faced given the eurozone’s terrible economic and financial architecture.
I was pleased at the urgency of the first question he raised: was I really intending to restructure unilaterally the Greek government (SMP) bonds that the ECB owned? It was a matter of great concern in Frankfurt, he told me.
I was happy to settle this matter right away. From my point of view, these bonds were both a blessing and a curse, I explained. They were a curse because their purchase had done absolutely nothing to help Greece in 2010, and had the ECB not bought them that part of Greece’s debt would have been written down by around 90 per cent in 2012. ‘Having to borrow now from EU taxpayers to pay the ECB for bonds that it should not have purchased in the first place is ridiculous to say the least,’ I said. At the same time, they were a blessing because they gave the ECB and Greece common cause – and leverage – against Dijsselbloem and the Eurogroup. If the ECB threatened to close down our banks at Dijsselbloem’s behest, we would reply with a counter-threat to write down the SMP bonds unilaterally; neither the ECB nor Greece wanted this. My simple proposal was: let’s not threaten one another. If Benoît told Jeroen that the ECB would not be part of a coup against the Athens government, then we, the Athens government, would not even consider any unilateral moves in relation to these bonds. ‘Can we agree on this?’ I asked.
He smiled. Of course there should be no threats, he agreed.
We moved on to the debt swaps I was proposing. I gave him my non-paper and briefly talked through it. He thanked me for it, though it was evident he had studied my proposals already. He thought they were sound, but the main concern of the ECB Executive Board was that they should not be seen to violate their own rulebook. I claimed that swapping SMP bonds for a new perpetual bond or equivalent debt instrument was perfectly consistent with the ECB charter. He thought about it for a moment and, while he remained concerned, came to the conclusion that, ‘Yes, this might work.’
Last we discussed the burning issue of liquidity. Our government would need a few months of breathing space in which to conduct negotiations, which meant some way of meeting the repayments to the IMF that were imminent without having to scrape the bottom of the barrel of the Greek public sector, endangering pensions and civil service salaries. I reminded Benoît of what the ECB had done in the summer of 2012 to help the then freshly elected Samaras government during a similar period of negotiations: it had raised their credit card limit (in Treasury bills) from €15 billion to €18.3 billion in order to enable them to make the repayment then due to the ECB.3
Benoît remembered. And he agreed that something of the sort would have to be done.
‘Except that, instead of doing this you have been tightening the noose around our necks even before we were elected,’ I said to him.
Benoît pretended not to understand. So I reminded him of Stournaras’s remarkable statement on 15 December 2014, which had begun the bank run. ‘This was an act of war against the next government, a uniquely offensive dereliction of duty in the annals of central banking,’ I said.
Benoît lowered his head and told me that he too thought that Stournaras’s statement had been ‘inappropriate’ and ‘inexplicable’.
‘And I do not think that Stournaras acted without the OK from Frankfurt, Benoît. No one believes this in Athens,’ I added.
Benoît said nothing.
Filling the silence, I continued: if the ECB didn’t do what was necessary to end a bank run of its own making, if it didn’t extend to us the helping hand we needed in order to conduct our negotiations, many would see it as political intervention by the ECB – one set of standards for the Samaras government, another for ours. Benoît smiled again, this time more widely, as if in acknowledgement of Frankfurt’s curious position: officially apolitical but in reality playing a key role in European politics.
Who are you and what have you done with my Michel?
After my last informal meeting of that long morning – what turned out to be a pointless conversation with one of President Hollande’s aides who apparently lacked the authority to say anything of substance – it was time to switch from unofficial to official mode. The Greek embassy’s German car arrived outside the hotel to take us to meetings with France’s finance and economy ministers. The three of us, Euclid, the ambassador and myself, rode quietly to Bercy, the large complex where both ministries are housed on the banks of the River Seine.
At the entrance I was met by an effusive Michel Sapin. A jovial man in his early sixties, Sapin was the only finance minister in the Eurogroup who did not speak English. But he made up for it with a warm character. Typically Latin in his hand gestures and body language, he made me feel genuinely welcome as we walked to his office.
Once we were sat down with our aides and translator, I was asked to make an opening statement, which I used to outline the main items on our economic agenda, my debt-restructuring ideas, including the non-paper, which Sapin seemed keen to see, prefaced with an expression of allegiance to Europeanism and my contention that the Greek crisis, and its perpetuation, was wounding Europe unnecessarily. I explained that I was proposing a new relationship between Greece and the EU based on Jean-Jacques Rousseau’s concept of a contract between equals.
