‘Do you know what he’s thinking as he’s exiting the Chancellery?’ my friend asked.
‘I have no idea.’
‘What the hell am I going to do now with Varoufakis? That’s what he’s thinking.’
13 The right stuff, foiled
‘When has a revolution ever delivered anything other than disaster?’
A fellow lecturer at the University of East Anglia, where I was teaching in the mid-1980s, once put this question to me. For him, an Englishman influenced by the thinking of Edmund Burke, it was a rhetorical question rich with truth and wisdom. For a Greek it was nonsense. Our very country would not exist had it not been for the revolution of 1821 – an insurrection against the Ottoman empire that stood a tiny chance of success and was opposed at the time as reckless by a large part of the Greek elite.
Every year, on 25 March, every village, town and city in the country puts on a parade to celebrate that reckless utopian act of faith which, almost by accident, yielded modern Greece. I have to admit I have always found these parades a little too kitsch and militaristic, but in 2015 the spirit of the 1821 insurgency seemed to acquire new meaning for the majority of Greeks. This time the spring was brimming with something more than wildflowers and swallows; pride and dignity were blossoming again throughout the land, as well as among the Greek diaspora in the Americas and Australia. So when Alexis asked me to represent the government at one of the parades, I said yes and requested that it be the parade in Chania, the Cretan city where the largest parade on the island was scheduled for that year.
Apart from some ancestors on each of my parents’ sides, I have little linking me to the island, and yet Crete is special to me. Danae is convinced that I have a Cretan character, whatever that means, and my Australian-born daughter, who has been to Crete only once, tells her mates in Sydney that she is Cretan. Whatever the background, I was excited that Danae and I would attend the Greek Revolution Day parade in Chania. When the day came, we walked around the centre of Chania with a large group of local officials, making our way slowly to a marquee, where I then stood next to the archbishop of Crete, the mayor and the chief of police to watch the procession of local schoolchildren, police units, firefighters, ambulance staff, platoons of men and women dressed in revolution-era gear and, touchingly, five veterans from the Battle of Crete in wheelchairs pushed by their grandchildren.1 As the parade passed, the participants turned towards me to salute their government’s representative. It made me feel at once proud and ridiculous, but I confess I enjoyed every moment of it, despite the anarchist in me constantly taking the mickey. Afterwards, we laid a wreath at the war memorial and made our way slowly through a dense crowd towards the taverna where lunch had been laid out.
As we walked, men and women anxiously squeezed my hand, hugged me, spoke words of encouragement, all conveying one message: ‘Don’t give in! Do not dare surrender! No U-turn!’ At one point I noticed a journalist filming us. When a middle-aged lady repeated the slogan ‘Rupture now!’ I stopped, took her hand and, with an eye to the reporter, said, ‘I’m sure you understand that this is something that we must be united behind. It’s not just for us to do. We must hang together.’
‘We’re with you!’ she insisted.
‘Yes, but you must be with us on the day after the rupture too!’
The footage was the main news item on all television stations that night, as I had hoped. Genuine negotiations with our creditors had still not begun, and the moment of either rupture or surrender was approaching. Millions were urging us towards the former. Alexis had already put the question in the war cabinet: ‘Would those calling for rupture today be with us afterwards? Or will they then curse us for having brought the rupture about?’ It was an important question and one that I wanted to address publicly.
After we arrived back in Athens that night, Alexis and I had a long telephone conversation. ‘Did you really tell a granny that she had better be with us after a rupture?’ he asked.
‘Yes, Alexi, I did. We must prepare our people. It is inexcusable to behave as if there is nothing to worry about. We must gradually let them into the true picture if we want them by our sides in the event of a clash.’
Alexis agreed but cautioned that alarming people would worsen the bank run. It was a valid point, but I sensed that Alexis was gradually retreating towards delay at all costs.
Changing the subject, I relayed to Alexis a phone conversation I had just had with Larry Summers, who had called with information and solid advice: the IMF was planning to demand a wicked turn of the austerity screw. They would claim we were facing a huge primary budget deficit of between -2 per cent and -5 per cent of national income. It was an absurd projection, given that we were running a primary surplus at the time; indeed, even after the events of the summer of 2015, the financial year closed without a primary deficit.
Alexis was upset and expressed some animosity towards Summers. I explained that Larry was not condoning the IMF position; he was telling us that whatever else we conceded we must not accept more austerity. Obama, Lew, the IMF, every banker in Wall Street and the City all understood that it was a cruel, unusual and stupid punishment. ‘Larry’s message is simple,’ I said. ‘We should not yield on the one thing that the world’s most powerful people agree with us on.’
Alexis accepted the point and seemed more relaxed. To defuse the tension we exchanged a joke or two before hanging up.
It was late, well after 2 a.m. Danae and I sat on the sofa for a moment’s peace and togetherness before turning in. She asked me how I felt. As I began to answer, she got out her phone and started videoing. ‘These are historic moments,’ she explained. It was something that Danae would go on to do quite a few times thereafter. The experience of watching those videos has been painful enough to deter me from returning to them more than once. That night my spontaneous response was: ‘I feel alone, Danae. I sit in my ministerial office, supposedly the head of fourteen thousand civil servants. But in reality I am on my own, confronting a large, fully weaponized army without even a small shield for protection … hell, without even a proper press office to let the world know of the solid policy work that my tiny team is doing; let alone protect me from lies and distortions that would make Joseph Goebbels proud.’
That feeling – and evidence that it was justified – would only get stronger.
From gloom to the sublime to the absurd
By the end of March all the Greek state’s spare liquidity had been spent on our IMF repayments. According to the second bailout loan agreement, these repayments, amounting to around €1.5 billion, were meant to have been covered by means of disbursements from Europe’s bailout fund and the IMF, but these had of course been withheld as part of the strategy to force us to capitulate. The €1.9 billion the ECB owed us had also been withheld and the €1.5 billion that Beijing had offered us had been blocked. It was a miracle that my ministry managed to find that €1.5 billion for the IMF while also meeting our obligations to civil servants and pensioners. It proved that, despite the deep crisis, the Greek state was living well within its means and that all the talk of my demanding loans from other European countries to pay for extravagant pensions and salaries was nonsense.
Nonetheless, we had come to the end of the road. We had given the creditors a whole month to test their willingness to meet us halfway, to come to the table in good faith and discuss a proper plan for ending the Greek crisis. They had failed that test purposely. The Brussels Group was stalled as the troika dismissed every one of our proposals while putting forward no ideas of their own. Not once had we received even a single page from them containing any practical solution or policy. And yet the mainstream media even in Greece were reporting that the Greek government was failing to submit costed plans to match the ‘meticulously prepared’ proposals of the institutions. The mammoth gap between their reports and reality convinced me that we were sleepwalking to our doom. Urgent action was necessary. It was time either to surrender or to fight. It was time to fold or to default.
As a first step we needed to announce that we did not intend to continue repaying the IMF, and later the ECB, as long as the Eurogroup and the institutions refused to talk business. On 3 April an informal inner cabinet meeting was convened at the prime minister’s office. I arrived at Maximos early in order to confront Alexis and convince him that a decision was overdue: he must either announce an imminent default to the IMF or call Merkel with a request for the terms of our surrender. ‘You have no other option, Alexi,’ I insisted. ‘Prolonging the present stasis only helps Wolfgang and his satellites, who are edging us out of the eurozone through a process of attrition.’
Alexis was unenthusiastic. Evidently downhearted he gave me his usual line: we would default but not yet. ‘We must not lose the blame game … Let me talk to Angela again … The time is not right.’
I retorted that we had already lost the blame game. ‘Read the press, Alexi,’ I said. ‘Every day that passes is reported as another day when we have failed to put forward proposals that add up.’ We had waited long enough, demonstrated our readiness to compromise and given the other side a chance to compromise too. On 20 February we had alienated many of our own people in order to do so. And what had been the response? They had reneged on the agreement within days. ‘That was a month ago, Alexi. Since then they have been upping the ante while Angela has, despite her kind words and promises to you, failed to intervene. If not now, when are we going to default?’
The ensuing conversation lasted a while. Tenaciously, though with little enthusiasm, he followed his usual practice of agreeing with everything I said but drawing the opposite conclusion. He spoke slowly and lethargically, looking ever more downhearted. Eventually we ran out of time: the ministers were gathering in the conference room opposite his office. I left his office to join them, giving Alexis the opportunity to freshen up a little before chairing a meeting whose purpose was not just to brief key ministers but also to raise their spirits.
Shortly after I had taken my seat at the table, Alexis entered looking a little better. As usual, he kicked off the meeting with a briefing on the state of play, but with no good news to report nor any announcements of valiant initiatives, he soon flagged. Confined to a grim assessment of a process that was evidently going nowhere, the more he talked the greater the gloom in the room. By the time he had concluded, there was a leaden atmosphere of resignation. Every minister who contributed to the ensuing discussion spoke in a distinct tone of melancholy. Once everyone who wanted to had spoken, Alexis took the floor again to wrap up the meeting. He began much as he had ended his introductory speech – slow, subdued, almost depressed – recounting how difficult the situation was and the dangers involved, but gradually he picked up a little in speed and buoyancy.
Before you all came in, I was talking with Varoufakis in my office. He was trying to convince me that it is time to default to the IMF. He was telling me that they are showing no signs of wanting to compromise so that a difficult but decent agreement, one that is economically viable and politically manageable for us, can be reached. I explained to him that this is not the right time to default. That we will lose the blame game when there are still three months left in the extension we secured on 20 February. That defaulting to the IMF will trigger the cross-defaults thus giving Draghi the right to close down our banks.2
Here we go, I thought. He is having it out with me in cabinet without my having said a word!
Except that I was badly mistaken. After a short but theatrical pause he continued, his voice suddenly growing in confidence – and not just his voice; his whole body began gradually to resonate with energy. To my astonishment I heard him say, ‘But you know what, comrades? I think he is right. Enough is enough. We have been playing by their rules. We accepted their process. We bent over backwards to show them that we are willing to compromise. And all they did was to delay us and then blame us for the delay. Greece is still a sovereign country and we, the cabinet, have the duty to say, “Enough!”’ Then, rising from his chair and with his voice growing louder, he pointed at me and bellowed, ‘Not only are we going to default but you are going to get on a plane, go to Washington and tell the lady in person that we shall default on the IMF!’
The room erupted with cheers. Colleagues looked to one another for confirmation of what they had heard, fully recognizing its historic nature. The gloom and darkness vanished as if a curtain had been ripped back on a sunny day. Like everyone else but perhaps more, much more, I allowed myself a moment of elation. At that moment it felt like the nearest thing to a sublime Eucharist a bunch of atheists can experience.
As I headed out of Maximos, Alexis and I hugged silently. Euclid walked out with me, looking just as chuffed. As we were going in the same direction, I gave him a lift on my motorcycle. The photo of two Greek ministers on a Yamaha XJR went around the world. That night Euclid sent me a text message: ‘My daughters are jealous. They also want a ride on your bike.’ It was a rare happy day.
That night I worked for hours with Spyros Sagias, preparing the legal argument that I would present to Christine Lagarde. Spyros was scribbling in Greek in a legal notebook; I was typing into my laptop, the two of us managing little by little to produce Greek- and English-language versions of our official letter to the IMF managing director. Its gist was that, in the Greek government’s opinion, the IMF could not expect us to pay up while, first, the troika had suspended disbursements to Greece even of its own money and, second, the ECB was reducing our liquidity.3
Meanwhile, my secretary was trying to get hold of Christine Lagarde’s office. It took some time because it was Good Friday.4 Alexis wanted me to leave immediately for Washington, DC, which meant arriving there on Easter Sunday. Once we had got through to Christine’s office and explained that there were special circumstances that demanded a meeting, we were told that she would cut short her Easter break and meet me at her office in the late afternoon of Easter Sunday.
On the long flight to Washington via Munich I was accompanied by Takis Roumeliotis, a former representative of Greece at the IMF who had distinguished himself as an early critic of the IMF’s Greek programme.5 In my bags I carried the official letter that would accompany my verbal announcement that my ministry would not be making the next payment to the IMF of €462.5 million, due on 9 April 2015, while in my mind I was planning the best way to use our impending default as a way of extricating Greece from its doom loop. The long flight at least offered me a few hours of isolation in which to rewrite the document that was, with the help of Jeff Sachs and others, to become my ministry’s constructive substitute for the MoU. First default, then return immediately with a moderate, sensible plan for Greece – that was the only way of shaking up the creditors and ending the vicious circle.
Upon arriving at Ronald Reagan Washington National Airport I discovered that my US visa was no longer valid, despite having another year to run, since I had resigned from the University of Texas to contest the parliamentary election in Greece. Of course, the fact that I was a minister of state expected by the head of the IMF within two hours and had appointments the next day at the US Treasury and the White House meant nothing to the US immigration officers. Like any other foreigner I had to go through the process of making an official application online, which I proceeded to do at the immigration checkpoint. Even though it was an inconvenience, there was something pleasing about the egalitarianism of US immigration.
The extra time it took to clear the border delayed the turning on of my mobile phone. In retrospect, this gave me another hour or so of mental peace, for when I did switch it on, I found a terse text message from Alexis: ‘Call me.’ Naturally, I did so immediately.
‘Look, Yani,’ he said, ‘we’ve decided that we’re not going to default, not yet.’
Flabbergasted, I asked, ‘Who’s “we”? Who decided that “we” won’t default?’
Alexis, sounding coy, said, ‘Me, Sagias, Dragasakis … we decided that it’s not the right move just before Easter.’
‘Thanks for telling me,’ I replied, fuming and dejected. Adopting as cool and dispassionate a tone as I could, I asked, ‘So what do I do now? Get on the same plane and return? What’s the point of seeing Lagarde now?’
‘No, you must hold the meeting. You must go ahead as we agreed. Go in there and tell the lady that we’ll default.’
It was the most absurd thing I have probably ever heard. I cannot be hearing this right, I told myself. I needed clarification. ‘What do you mean? Tell her that we’ll default even though you’ve decided that we won’t be defaulting?’
‘Yes,’ said Alexis. ‘Threaten her so that she gets anxious enough to call Draghi and push him to stop the liquidity squeeze. Then we’ll reciprocate by announcing that we’re not defaulting to the IMF.’
The adrenalin racing through me dissolved all traces of fatigue or jet lag. Keeping my indignation in check, I asked, ‘And what if Draghi doesn’t relax the liquidity squeeze upon hearing from Lagarde that I threatened to default on the IMF? What then, Alexi?’
‘They will give in, Yani, they will!’ came back his baselessly optimistic prediction.
‘And what if they don’t? Don’t you see that when David’s facing down Goliath with only a small catapult as a weapon, it’s silly to put the catapult in jeopardy? Our catapult is the threat of default. You should only take it out if you intend to use it. For if you threaten to use it and then blink when the enemy calls your bluff, we’re finished. Then they’ll never fear your threats. We are too weak to bluff, Alexi. And, as your finance minister, I cannot let you waste our only weapon. I cannot tell Lagarde we’ll default after you have just made it clear to me you don’t intend to let me default.’
‘You will tell her we’ll default. Consider this an order from the prime minister.’
