A little later an anxious Emmanuel Macron texted me too. ‘We had a good result,’ I informed him. ‘Now we need to get down to work. Thanks for the help.’

Emmanuel replied with a comradely ‘Let’s keep fighting.’

On my way out of the room, I walked over to Mario Draghi to have the chat that he wanted to avoid. I reminded him of what he had told me in his office sixteen days earlier as well as over the phone later that night, when he had pulled with suspicious haste the Greek banks’ waiver, cutting them off from ECB liquidity: that once there was an agreement at the Eurogroup level, the ECB would no longer have a reason to deny Greek banks the waiver. Mario nodded and promised, now the Eurogroup had extended Greece’s loan agreement, that the ECB Executive Board would discuss the matter soon. I pressed him for a date when Greek banks would be reconnected to ECB liquidity. As he was walking away he said it would be ‘soon’ but probably not before the following Wednesday, when the top echelons of the ECB were scheduled to meet. For now it was as much as I could do.

I headed for the press room, relieved that this time the waiting journalists would be able to report white smoke signalling an agreement. But I was also pleased that Alexis still had his eye on the ball: in his last text before the press conference he reminded me to emphasize in front of the cameras that the phrase ‘appropriate surpluses’ in the communiqué translated into no more than 1.5 per cent of national income and the ‘end of 3.5 per cent’.

Two months later, as I was making my way back from Alexis’s office to the finance ministry, I would reread that text, my spirit almost broken.

A moment to savour, darkly

It took three Eurogroup meetings for Greece and Europe to turn a page. In the end, as I told the gathered press, we showed that negotiation means compromise but also a readiness to say no to proposals, suggestions and offers that we do not have the moral right, the political right, the mandate to say yes to. We combined logic and ideology, respect for the rules and respect for democracy. We countered the view that a heavily indebted country cannot have elections that change anything. We stood firm under immense pressure. Our struggle was not a nationalist, populist attempt to improve our people’s lot at the expense of other Europeans. From day one we said that we were not in the business of short-changing our partners but of recalibrating our policies with the interests of the whole of Europe in mind. We refused to see our negotiation as a zero-sum game where our gain would be someone else’s loss.

Having thanked Jeroen for steering that evening’s Eurogroup towards an interim agreement, I hailed it as an opportunity to get down to work. Over the weekend, I informed the press, my team and I would be working round the clock to prepare our government’s list of reforms to be submitted in three days’ time. ‘It will be hard work,’ I admitted, ‘but we shall do it gladly now that we have moved on to a new relationship of equals,’ for this was our opportunity to prove that partnership, not coercion, was the route to success.

The weekend ahead was going to be very long indeed. Yes, we had won the right to replace the most toxic part of the MoU with our own radically different reforms. But that right did not translate automatically into a reality. It was merely the first step towards a new deal for Greece. The agreed process involved three further steps. Once we had submitted our list of reforms via email – by late afternoon on Monday, 23 February, less than seventy-two hours later – the institutions would have until Tuesday morning to study the proposal in time for a Eurogroup teleconference on Tuesday afternoon. There, Draghi, Lagarde and Moscovici, representing the three creditor institutions, would pronounce on whether my list was ‘sufficiently comprehensive’ to be used as the benchmark by which my government would be assessed. The third step, the assessment, would be in mid-April, which if successful would lead to a release of funds with which to repay the IMF. Only then, with these three steps completed, could we enter the Promised Land of negotiations, to be concluded by the end of June (when the interim agreement expired), over the new contract for recovery and growth that we were demanding – our Holy Grail.

I am often asked whether I thought there was ever a serious probability of successfully navigating those treacherous waters to a new deal for Greece within the eurozone. I answer that the actual probability was neither computable nor important. We had to give our creditors the chance to come to the table with humane, logical ideas, and the opportunity to listen to ours. It was always going to be a long shot, but our mandate from the people of Greece was to do our utmost to secure a sustainable future within the eurozone.

To this day I receive ferocious criticism for having concluded the 20 February Eurogroup agreement. Greece’s parliamentary opposition, tainted by their signatures on the two previous bailout programmes, were keen to claim that I had signed up to their MoU but, being the fool that I am, without receiving any of the money. Of course, they overlooked the fact that it had taken three Eurogroup meetings to remove any mention of the MoU or programme from the communiqué. Curiously, Syriza’s Left Platform argued the same, ascribing the blame for our eventual surrender to the 20 February agreement rather than to any of the war cabinet’s subsequent failures. There are also critics who argue that constructive ambiguity always favours the stronger party in a negotiation, neglecting to mention that Schäuble fought tooth and nail to block the agreement. And there are comrades, including Euclid, who criticized me after the fact for failing to insert into the communiqué a phrase that committed the ECB to ending our liquidity squeeze, forgetting that the ECB’s sacred independence meant no such phrase could ever be included in a Eurogroup communiqué.

Nonetheless, what the hail of criticism for the 20 February agreement that followed our eventual defeat in July 2015 did confirm was my and Danae’s prognosis after I had accepted the offer of the finance ministry in Alexis’s apartment: no matter what its true causes might be, our government’s failure would have a single parent – me.

What is interesting though is the absurd but widespread notion that our eventual defeat was hard-wired into that Eurogroup agreement. The interim agreement of 20 February was a necessary but insufficient first step towards escaping Bailoutistan. To make it sufficient and set us on the road to liberation, it had to be accompanied by an unwavering willingness on the part of the war cabinet to enact our pre-agreed battle plan during the window of opportunity it provided. We needed constantly to be prepared to activate our deterrent the moment we were threatened with bank closures and capital controls. And to be prepared we had to believe that the worst possible outcome for Greece would be to sign up to an extension of Bailoutistan in order to keep the banks open. This use of the 20 February agreement would have definitely delivered us from Bailoutistan. One way or another, sustainability and dignity would have returned to Greece, either by means of a negotiated new deal within the eurozone or through a painful rupture that would at least restore Greece’s capacity to make its way in the world.

On the flight from Brussels to Athens those Greeks who happened to be on the plane were ecstatic, even though most supported the opposition parties. We had stood up to the troika and were returning home with an honourable interim agreement that Germany’s finance minister had tried his best to scupper. What was not to celebrate? But despite the fatigue and my eyelids growing heavy, one question haunted me: would the war cabinet do what was necessary to keep the troika in line? And would we activate our deterrent if the creditors tried any dirty tricks?

Back in Athens I received an email from Norman Lamont. ‘I was amused that The Economist criticized you for saying Greece was bankrupt,’ he wrote. Norman’s amusement stemmed from the fact that, by saying this, I was implying that the ECB’s executives had been breaking their own rules for years, for the European Central Bank’s own statutes prohibited it from loaning money to bankrupt states. Clearly, the story originated with allies of the ECB who, unlike Norman, were not amused and were briefing against me. More worryingly, the fact that these leaks were coming from Frankfurt after the 20 February agreement suggested that the ECB was not about to loosen the noose. It confirmed in my mind that, unless we were truly prepared to default to the IMF, haircut the ECB’s SMP bonds and prepare our parallel payments system, the creditors would not honour the spirit of the interim agreement.

In the same email Norman gave me his perspective on the events of the past few days:

You seem to be facing a lot of headwinds (like Ulysses?) but nonetheless making some hard-earned progress against the tide. I guess the big prize is what you get after four months even if you have to yield a bit on the short term ‘structural reforms’ (a phrase everyone uses but no one knows what it means). Anyway for what it is worth I think you are ahead of the unlikeable Schäuble on points.

That Wolfgang was furious about this widespread impression, I had no doubt. That he would hit back, I knew. What I had no inkling of was that the knife would be wielded first from within my ministry and, a little later, from within our own war cabinet and in the same office in Maximos where Alexis had moved me to tears on the day of our swearing-in.

10 Unmasked

On my way from the airport to parliament, where a relieved cabinet was already discussing the Eurogroup agreement, my mobile phone brought acclaim and damnation in equal measure. Jeff Sachs emailed praise for achieving ‘a 120-day period to think and brainstorm together … an historic breakthrough, breaking all of the rules of top-down management in the eurozone. All kudos!’ But two left-wing heroes of my childhood whose views I cared about deeply – Manolis Glezos, hero of the anti-Nazi resistance and a member of the European parliament in February 2015, and the legendary composer Mikis Theodorakis – denounced the agreement.1 They were all correct. It was an historic breakthrough but it would bring defeat and humiliation if we were not careful.

Later that Saturday, 21 February, I arrived back at the ministry to work on the list of reforms that we would propose as a substitute for the MoU. The padded door to my office shut behind me with a thud and I dived in. My mission was to excise the toxic commitments of the MoU – the ‘miscellany of ugliness’, as some of my team liked to refer to them – which amounted to some 30 per cent of the overall document and which pushed for greater austerity and an intensified class war against the weakest, and replace them with new policy intentions. These needed to be phrased in such a way that the troika would not object to them, but had to open the door to the genuinely therapeutic measures we had been arguing for, which it would most certainly oppose. In theory I had forty-eight hours to complete the document. In reality, with so much else pressing upon me, I had a lot fewer.

Once it was submitted on Monday evening, Mario Draghi, Christine Lagarde and Pierre Moscovici would have the following morning in which to review it before the Eurogroup teleconference scheduled for Tuesday afternoon. There would be no quibbling; three of them would simply pass judgment on the list of measures in turn, giving it either a green light or a red flag, with ministers having no say.

A red flag at the teleconference would be ruinous. The hard-won results of our efforts over the previous weeks would evaporate, the banks would shut down and we would look like spurned petitioners. It was essential to know whether this was going to happen in advance, well before Monday night. If an impasse was inevitable, then I would refuse to submit any reform list and instead hail the instincts of old warriors like Glezos and Theodorakis at a press conference where the failure of the negotiations would be announced and explained. At the same time, I was equally desperate to avoid a stalemate because of some minor difference that could have been smoothed over. To keep a line of communication open with the creditors, I had left my deputy and representative in the Eurogroup Working Group George Chouliarakis behind in Brussels. His brief was to elicit from key Brussels functionaries where the creditors would draw their red lines, test the creditors’ sensitivity to our own and ultimately warn me prior to Monday night if a deadlock was on the cards.

All that Saturday night I was holed up alone in my office, sweating over the escape plan that my incarcerated nation would present to its jailors. I began with its fourth and final section, which I entitled ‘Humanitarian Crisis’. I chose this title as a litmus test. Jeroen Dijsselbloem had dismissed the phrase as ‘too political’ for inclusion in the communiqué at my first Eurogroup. If Tuesday’s teleconference rejected my list because of this section, I would know what to do: announce the end of negotiations at Eurogroup level, press the Off button on my teleconference device and call Alexis to deploy our deterrent. Throughout the document the challenge was to strike the right balance between ambiguity and specificity. But while I would remain intentionally ambiguous in many areas, the last entry in this final section was very clear. It expressed the ambition to commit the Greek government, and a kicking and screaming Eurogroup, to providing poor families with a stigma-free prepaid debit card to pay for food, shelter, medicine and electricity.

With the final section completed, I began to unpick those MoU entries that damaged basic rights. I wrote in a ban on evictions from a family’s main home; a reassessment of the criteria for privatizations to include minimum investment levels, environmental standards, labour rights and a concern for local communities; the establishment of an investment bank to exploit public assets and share the profits with the suffering pension funds; the suspension of previously agreed reductions of pensions; an affirmation of our commitment to reinstate the right to trade union representation; a guarantee that minimum civil service wages would not be cut further; and so on. In exchange I let a large number of the MoU’s ‘prior actions’ stand. Some were ugly, some bad, a few good. But that’s what the spirit of compromise dictated. In the closing discussion of the 20 February Eurogroup Dijsselbloem had specified that my list should be ‘wide but shallow’, taking up no more than three pages. In the end I sent them five.

Working with the enemy

On Sunday George Chouliarakis returned from Brussels with news. He had been holding talks with the European Commission’s key troika representative, Declan Costello, who apparently was positive and keen for us to pass Tuesday’s test. I asked if he had shown Costello my draft. He had, and the response had been good, but Costello wanted us to reframe the list in the troika’s preferred lingo and template. ‘They are happy with the content but are keen to retain their own format. Let me go to my office, freshen up, and reformat our list in their language,’ Chouliarakis suggested. It sounded good. Accepting their stale format but losing some of their terrible content was well within my red line.

When George returned, he brought with him a disappointing document. Its language was clearly that of the troika’s MoU, but the insertions that were supposed to reflect my earlier draft were also either absent or unacceptably watered down. So I pulled out a chair and invited George to sit next to me while I edited his text. It was an uneasy collaboration. We tried hard to work together, with some success, but it was clear that we were on different wavelengths – analytically, politically, culturally. For George the document was an end in itself. For me it was a stepping stone to what came after the reform list was agreed: front-loaded debt restructuring. Without debt restructuring my reform list, indeed any reform agenda, would be rendered irrelevant by the process of extracting debt repayments. This would keep Greece trapped within a debt-deflation spiral – a state in which any society is impervious to reform and will eventually fail. At the analytical level our differences were also beginning to mount. The more we discussed fiscal policy the more I was struck by George’s tolerance of the troika’s ridiculous economic models, which I thought engendered a disconcertingly relaxed attitude to its usurious fiscal targets.

A finance minister should have complete confidence in the chair of their Council of Economic Advisers, who manages the team of economic analysts that do the minister’s number-crunching and who represents the minister at crucial forums. I did not have that confidence, but that was not George’s fault. It was mine for not having made it my top priority to find someone of my own for that key position and to insist on their appointment against the deputy prime minister’s will. Still, there was a job to do and we had to do it. Over many hours, sitting next to each other, we did our best.

Using my laptop I reshaped Chouliarakis’s Word document until we were both happy with it. Just after 9 p.m. we sent it to Costello for his response. The reply arrived a little more than three hours later. Happily, the litmus test had not been failed. To my surprise, Costello raised no objections to the ‘Humanitarian Crisis’ section. Indeed, he did not even mention it, choosing instead to confront me on ‘two other areas where the text would cause major problems’: evictions and privatizations.

Any moratorium on evicting families from their primary residence jarred terribly with the troika. It had promised bankers the freedom to repossess and auction off all residences, large and small, primary or secondary. It demanded the liquidation of businesses and households in arrears, compensating them with a few hundred euros each month with which to pick themselves up off the scrapheap on which Lambros and so many others were already languishing. Even though Costello could not have known of (or given a damn about) my oath to Lambros, he was smart enough to realize that I would not countenance accepting these measures. So he proposed some ‘language’, as he put it: how about saying that the government was committed to ‘avoiding’ evictions without mentioning a moratorium ‘at this stage’? Chouliarakis thought it a reasonable concession in the grander scheme of things. I agreed.

On privatizations Costello pushed me on two fronts. First, he demanded that no privatization effected by the previous government was to be reversed and that privatizations be allowed to continue if the tender process had already commenced. On this I agreed to respect ongoing tenders while inserting a clause that left it to the courts to decide whether a privatization should be reversed, safe in the knowledge that Greece’s judges were keen to have their constitutional powers restored to them so that, for the first time since 2010, they could keep a check on the looting of the country and undo the scandalous fire sales.2 Second, the troika was dead against my proposal for a new public development bank that would use public assets as collateral to generate investment and share any profit with the haemorrhaging pension funds. Costello’s diplomatic solution was to suggest I leave it out of my list altogether ‘as it would take several months to develop the idea and is not something which needs to be discussed or settled in the immediate future’. It was another concession that I agreed to, making a mental note to place it at the top of my priorities from April onwards.

After a few hours’ sleep on my office red couch, I embarked on a marathon of meetings to secure the consent of the prime minister, war cabinet colleagues and key ministers. Everyone had a strong view about one item or another on my list, while the strongest opposition came from colleagues belonging or close to the Left Platform. From their perspective, our negotiations with the creditors were fundamentally ill advised, and the couching of my list in troika-speak bordered on the treacherous. This reflected their view that Grexit ought to be our goal – a line that was not only strategically wrong, to my mind, but also at odds with the mandate we had been given by the electorate. Despite these and other objections, by the afternoon of Monday 23 February we had achieved a consensus.

Around the same time I received three separate emails from troika officials ‘recommending’ that I reintroduce parts of the MoU that I had excised. Each of them wrote, unlike Costello, in a private capacity, as ‘friends’ who wanted to avert a ‘dead end’. I replied matter-of-factly to each that I was not prepared to resuscitate toxic measures that not even Costello had demanded. If they felt strongly enough, I suggested, they could advise their leaders (Lagarde, Moscovici and Draghi) to reject my reform list during the following day’s teleconference.

They relented, informally agreeing to the list I had dispatched on Monday afternoon. But not without an injurious delay. Their reluctant green lights did not arrive until just after midnight. Was this a tactical delay? If not it was certainly serendipitous for their side. For, unwilling as I was to formally submit my list until I had had word that it would not be rejected, I had been forced to wait. Midnight had come. Nothing. Then, at ten minutes past, all three had responded with miraculous synchronicity. By thirteen minutes past midnight, my list had been sent to Costello and his counterparts in the ECB and the IMF.

One might imagine that a delay of thirteen minutes is neither here nor there. Not so when the dogs of the propaganda war are out to get you. On Tuesday morning the world’s media used those thirteen minutes to portray me as incompetent, tardy, disorganized. VAROUFAKIS MISSES DEADLINE FOR SUBMITTING REFORM LIST was the typical headline. It was a charge I could not challenge without revealing that I had been negotiating secretly with Greece’s creditors before formally submitting the list. Still, as charges against me went during that period, it was trifling. That Tuesday morning the Brussels propaganda machine was hard at work, and another charge, incomparably greater in its capacity to wound, was on its way.

Soon after leaking that I had been late in submitting my proposals, they went on to leak the list itself – hours before a meeting of the Greek cabinet convened to approve it formally. The majority of my fellow ministers had not yet seen the list and were understandably peeved that they should have first had sight of it while scanning the news on their tablets on the way to Parliament House. But what turned their legitimate annoyance into an immense political and personal blow were the headlines under which it appeared: COSTELLO’S LIST was a typical example from the Greek media sympathetic to the troika. VAROUFAKIS: THE TROIKA’S LATEST STOOGE was a left-wing site’s interpretation. One of the ministers filing into the meeting gave me a look that combined pity and disappointment and told me that he had not imagined I would be taking orders from Costello.

Dazed by the preposterous accusation that Costello had authored my list, my initial reaction was to dismiss it as yet another fabrication, except that on this occasion the media had a hook on which to hang their charge. Apparently, one smart journalist (who later became a friend) discovered that by clicking on the ‘Properties’ tab of the leaked document, one could see its ‘Author’ – which the software defined as the registered user of the computer on which the document had first been created. Hearing this I grabbed my laptop, opened the document containing my reform list, clicked on ‘File’ and then on ‘Properties’ to see that next to ‘Author’ it read ‘Costello Declan (ECFIN)’ and just below, under ‘Company’, two words that completed my humiliation: ‘European Commission’.

With the cabinet meeting about to commence, it took an immense effort to stifle my fury and concentrate on gaining the ministers’ consent. But immediately after I had secured it, after a two-hour debate, I returned to the ministry and summoned Chouliarakis. Yes, he admitted, the document that he had presented to me in my office, which I had then proceeded to edit radically, had been created by Declan Costello in Brussels, not by him. ‘And you did not see fit to tell me this? To inform your minister that your document, which I was clearly unhappy with, was composed by our chief enemy?’ I asked. No answer. ‘Let’s say that it escaped you at first, or that you were embarrassed to admit it,’ I continued. ‘When you saw me labouring over it to amend its contents radically, struggling with a Word document created by the troika’s sternest functionary, did it not occur to you then to warn me? Not even as I was about to email it to the troika?’

In a manner wholly typical of Chouliarakis, he shrugged off my questions with infuriating nonchalance and a face which hid thoughts no one could have deciphered.3 Under normal conditions he would have been sacked there and then, but normality was a luxury that I never experienced during my time in office. The landline was already ringing. The Eurogroup teleconference was beginning. I took my place next to the receiver, clutching my notes, with Chouliarakis next to me. A greater battle demanded my full attention.

Schäuble’s revenge

When negotiating from a weak position, a crackling telephone line only makes things worse. In face-to-face meetings one can at least use one’s voice, eye contact and physical presence to gain greater control of the room. The teleconference format, by contrast, makes an already challenging meeting harder still. On this occasion, to level out the grossly uneven playing field I had succeeded in securing a commitment from Jeroen Dijsselbloem that the teleconference would only allow the leaders of the three institutions (European Commission, ECB and IMF) to deliver a binary verdict: was my list ‘sufficiently comprehensive to act as the basis for a successful conclusion of the final review’ of Greece’s second bailout agreement or was it not? That was the only question on the table that day. Indeed, at the end of the previous Eurogroup meeting on 20 February Jeroen had told everyone, much to Wolfgang Schäuble’s particular disappointment, that there would be no debate during our teleconference on 24 February. Its limited remit was to allow the institutions to emit either white smoke or black. Nothing else.

With prior agreement to my list having been secured, albeit unofficially, it would have been exceedingly surprising if white smoke did not appear. But if it did not, I had enough ammunition to expose the troika’s duplicity at a press conference and win the blame game. My main fear was that Wolfgang would somehow overturn the ban on a debate, initiate one over the sputtering phone line and somehow get the MoU back on the table. All my mental energy went into imagining how he would try to do this and how I would stop him. My best defence lay with Jeroen’s prior and explicit commitment, but did I trust the Dutchman?

As it turned out, Wolfgang did not have to gatecrash the teleconference with a debate, nor did Jeroen have to go back on his promise to prevent one. The set-up was cleverer than I had imagined. It became apparent as soon as the institutions’ leaders opened their mouths. The first to speak was Dobrovskis, the Latvian vice chair of the European Commission: ‘In the view of the Commission this list is sufficiently comprehensive to act as the basis for a successful conclusion of the final review…’ White smoke as expected, I thought with a sigh of relief. But then Dobrovskis continued: ‘Let me stress, however, that … this list does not substitute the MoU, which constitutes the official legal basis for the programme.’

Confounded at first, I quickly recognized what was going on: Wolfgang Schäuble had risen from his humiliation three days before and was once more in full control. Over the weekend, while I had been struggling to produce a replacement for the MoU, the German finance minister had been successfully turning the tide back in his favour – so successfully that he did not have to interrupt, force a debate or even speak at all in order to resuscitate the MoU.4 By stating clearly that my list did not ‘substitute the MoU’ Dobrovskis had done Schäuble’s work for him. For if the list did not replace the MoU, then there was no point in the list at all. We were back at the impasse of the first Eurogroup.

Was Dobrovskis acting alone? Pierre Moscovici, Mario Draghi and Christine Lagarde spoke up to confirm that he was not.

‘We understand, consistent with the Eurogroup decision of last Friday,’ said Mario, ‘that the list does not call into question the current arrangements and thus existing commitments in the context of the MoU, which are the basis of the review.’

‘Consistent with the Eurogroup decision of last Friday’? A better example of Orwellian double-speak would be hard to imagine – spoken shamelessly by the president of the European Central Bank in the full knowledge that restoring the MoU’s primacy was in precise and direct violation of both the spirit and the letter of the 20 February agreement.

Mario Draghi’s gigantic fib was hastily repeated by Christine Lagarde: ‘I can literally endorse and adopt all the points made by Mario,’ she began. ‘… [T]he discussion about completion of the review … cannot be confined to the list presented by the Greek government, and I think that Mario’s mention of the MoU is particularly relevant … Finally it would be extremely helpful if Yanis could explain to us the government’s liquidity condition so that the review can begin.’ So there I had it. A carefully planned ambush that began with an outrageous U-turn and ended with a thinly veiled threat.