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.
Thankfully, today I did not just visit the finance minister of Europe’s powerhouse economy. Above all else, I visited a European statesman for whom European unity is a lifelong project and whose work and efforts to unify Europe I have been following with great interest since the 1980s. Today, my message to Minister Schäuble was that in this government he has a potential partner in the search for European solutions to a variety of problems afflicting not only Greece but the union more broadly.
Turning to my host, I said,
From our government you can expect a frenzy of reasonableness. You can expect proposals that are aimed not at the interest of the average Greek but at the interest of the average European – the average German, Slovak, Finn, Spaniard, Italian. You can expect from us an unwavering commitment to telling it as it is, without tactical stratagems or subterfuge. These are our commitments. What we request is perhaps the most precious of commodities: time. A short space of time during which our government can present to our partners, to the IMF, to the ECB, to the European Commission, comprehensive proposals and a road map for the very short term, for the medium term, and for the long term.
On the challenges facing the EU more generally, I suggested that we respect established treaties and processes without crushing the delicate bud of democracy. When I visited Paris, I said, I had told the French minister of finance that it had felt like a homecoming, that I was returning to one of Greece’s spiritual homes. In Berlin I expressed the same feeling and described how for almost two centuries the land of Goethe, Beethoven, Hegel and Kant had been a source of inspiration to Greeks across the political spectrum. But there was something more that bound Greece and Germany together, I continued.
As finance minister in a government facing emergency circumstances caused by a savage debt-deflationary crisis, I feel that the German nation is the one that can understand us better than anyone else. No one understands better than the people of this land how a severely depressed economy combined with ritual national humiliation and unending hopelessness can hatch the serpent’s egg within one’s society. When I return to Athens tonight, I shall find myself in a parliament in which the third-largest party is a Nazi one. When our prime minister laid a wreath at an iconic memorial site in Athens immediately after his swearing-in, that was an act of defiance against the resurgence of Nazism.14 Germany can be proud of the way Nazism has been eradicated here. But it is one of history’s cruel ironies that Nazism is rearing its ugly head in Greece, a country which put up such a fine struggle against it in the 1940s. We need the people of Germany to help us in the struggle against misanthropy. We need our friends in this country to remain steadfast in Europe’s postwar project; that is, never again to allow a 1930s-like depression to divide proud European nations. We shall do our duty in this regard. And I am convinced that so will our European partners.
The next day the German press lambasted me for having dared to mention the Nazis in front of the German finance minister in Göring’s old Air Ministry building. Meanwhile Greek nationalists were praising me for having called Schäuble a Nazi. I was not sure whether I should be more appalled by the praise or by the reproach.
Siemens
After our statements Wolfgang and I took questions. One of them concerned Siemens, the German conglomerate, and a man called Michael Christoforakos who used to head their operations in Greece. Some years earlier a scandal had occurred when an investigation initiated in the United States suggested that Christoforakos had been bribing Greek politicians to secure government contracts on behalf of Siemens. Soon after the Greek authorities began investigating the matter, Christoforakos absconded to Germany, where he was arrested. But the German courts were preventing his extradition to Athens.
‘Did you, Minister,’ asked a journalist, ‘impress upon your German colleague the German state’s obligation to help the Greek government snuff out corruption by extraditing Mr Christoforakos to Greece?’
I tried to provide a balanced and reasonable answer: ‘I am sure that the German authorities will understand the importance of assisting our troubled state in its struggle against corruption in Greece. I trust that my colleagues in Germany understand the importance of not being seen to have double standards anywhere in Europe.’
