‘So far so good,’ I texted back. ‘Wolfgang is failing to control the proceedings.’
At 8.39 I texted Euclid and Alexis to inform them of an extraordinary development: Wolfgang had left the room, clearly angry.
Alexis could not believe it. ‘Can we leak this?’ he asked.
But a few minutes later Wolfgang returned. I stood up and walked over to him to say that, while I understood his opposition, an interim agreement based on the communiqué on the table would be excellent for both our countries and could become the foundation of an end to this otherwise endless drama. He conveyed his appreciation of my gesture but seemed too annoyed to indulge me.
At 8.56 Alexis asked me for an update.
The Schäuble camp was not giving up, even though it had been reduced to just the Iberian contingent and mainly to Luis de Guindos. But Jeroen was managing to contain them. ‘The Dutchman is handling it well,’ I replied.
At 9.14 Alexis asked me if there was a chance that the German–Spanish alliance could scuttle the communiqué.
‘They are trying their best,’ I responded. A few minutes later I informed him that Lagarde had taken to the floor in support of the communiqué. ‘She is salvaging it,’ I texted. Alexis seemed pleased but, like Euclid, was preoccupied with the ECB. Would Draghi stop the asphyxiation? I replied that we should get this agreement in the bag first. Then I would put it to Draghi that he had a duty to end the hostilities, beginning with the return of the waiver. One step at a time.
At 9.28 Alexis texted again: was there a chance of failure? Had the communiqué been altered since Jeroen first read it out?
Nine minutes later I texted him back, ‘We won this one. But let’s not celebrate. The last thing we need is to upset Wolfgang further.’
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.
