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.
‘Yanis must now answer a couple of points raised in the context of the necessity of agreeing all measures with the institutions,’ came Jeroen’s twopenn’orth. ‘That’s the basis on which we work.’
As I pressed the button that activated my microphone, my mind was racing. What should my reaction to this shocking violation of our agreement be? How do I pick up the gauntlet? To buy myself some thinking time, I began by addressing all the relatively minor points mentioned by Dobrovskis, Moscovici, Draghi and Lagarde. With every word, the agony grew.
Accepting the ridiculous proposition that the 20 February agreement did not commit us to replacing the Memorandum of Understanding with our reform list would have been tantamount to accepting the reinstatement of the MoU in full. It would annul everything we had fought for. It would have been to accept everything Wolfgang Schäuble had demanded in our very first Eurogroup meeting and everything that Jeroen Dijsselbloem had tried to push down my throat at our first encounter. Above all, it would have constituted an unforgivable betrayal of our people: those who had trusted us recently, as well as old warriors like Glezos and Theodorakis, who had already rushed to denounce me for the capitulation now staring me in the face.
While talking about privatizations and fiscal targets, two options were competing in my mind. One was to end the teleconference respectfully, stating that the Greek government was withdrawing from negotiations at the Eurogroup level because the institutions’ leaders had rendered them irrelevant with their attempt to reintroduce the full-strength MoU. The second option was to remain in the process but to contest the institutions’ interpretation of the 20 February Eurogroup agreement and to state for the record that the Greek government well and truly rejected the MoU’s reinstatement in accordance with that agreement’s spirit and letter.
The moment of truth was approaching. It was a choice I had to make on the spot, with only Chouliarakis looking on. It was the hardest decision I have ever had to make.
Mea maxima culpa
It was clear in my mind that withdrawing from the process would trigger the closure of our banks the following morning, Wednesday, 25 February 2015, one month exactly after our election victory. With only four days left before Greece’s loan agreement expired, the ECB would undoubtedly have pulled the plug on them. Immediately after ending the teleconference, therefore, I would have to rush to Maximos with the dismal news and with a firm recommendation to activate our deterrence plan immediately. This would mean announcing the date when the SMP bonds would be haircut, the establishment of electronic IOUs via the tax office’s website and an amendment of the law governing the Bank of Greece. It was a tough call. But I should have made it.
Instead, disastrously, I opted for the softer alternative. When the critical moment arrived during my speech, this is what I said:
I heard from all three institutions that [our] list is not a replacement for the MoU and that this list will simply be grafted upon the MoU … Now, as you know, we spent three Eurogroup meetings discussing the imperative of combining the programme with our government’s imperatives. And I was – this government was – under the impression that we are making a fresh start … We shall insist … that the review be completed on the understanding that this government’s list of reforms is the starting point.
Looking back, this was appallingly timid. While I correctly stated that the 20 February agreement had suspended the MoU and replaced it with my reform list as the basis for the review, I should have made the continuation of the process conditional on a reaffirmation of this principle. Of course, had I insisted on such an affirmation I would most probably not have got it. And then I would have had to withdraw from the teleconference, thus triggering the rupture. But my thinking at the time – the reason why I refrained from doing so – rested on three conjectures.
First, the reaffirmation of the MoU was purely verbal. It had taken place in the context of a Eurogroup teleconference that was not about to issue a communiqué and whose remit was only to approve my list. The only agreement on paper remained that of the 20 February Eurogroup, which privileged my reform list, making no mention of the MoU, while also creating space for a negotiated end to austerity and also to debt restructuring.5 By not withdrawing from the teleconference I was not actually endorsing the return of the MoU in any shape or form.
Second, our government was only twenty-seven days old. Setting up the parallel payments system necessary to deal with the closure of the banks and preparing for the hardship shuttered banks would bring simply required more time.
Third, any decision by me to end the process during that teleconference would have been taken without either the prime minister or the cabinet’s consideration. My statement as finance minister that we rejected the institutions’ attempt to reinstate the MoU sufficed for the time being. The government, united and steeled by the creditors’ connivance, would, and should, take collective responsibility for the decision over the precise timing of our withdrawal from the negotiations.
The first two conjectures were valid. The third was not. Had it been, the decision I made during that teleconference would since have been vindicated. If our side had stood firm, as I assumed it would, and calmly chosen the right moment to retaliate, I would not be writing these lines overwhelmed by regret. Alas, we did not stand united against the troika’s attempt on 24 February to reimpose the MoU. We were divided and ultimately we were ruled.
Did I have sufficient information at the time to predict this? I did not have a great deal, but with hindsight I think I had enough. The cosiness between Chouliarakis and Costello revealed by that Word document should have alerted me to the divisions among us. Blinded by my unwillingness to contemplate any alternative, I was unable to imagine that my deputy’s actions were due to anything other than a failure of judgement. It suited me to ascribe that incident to his lethargy and introversion. However, there was something else motivating me – something more than a justifiable reluctance to be paranoid. Something like fear.
At the press conference on the night of 20 February I had celebrated the agreement as a major turning point. I was not wrong. Wolfgang Schäuble had been defeated, if only temporarily, in a straight fight in his own backyard. As Luis de Guindos and Jeff Sachs had noted, it was a game-changing success. Our government and people latched on to it as a godsend. We had won 120 days of something like normality and the right to negotiate a substantially new reform agenda, new fiscal targets and debt restructuring. It was a moment to savour. Had I come out of the teleconference on 24 February with the news that all bets were off, that the dream of an honourable compromise had evaporated and that the banks were closing down forthwith, the disappointment would have been unbearable. Psychologically I failed to rise to the challenge of accepting that burden.
The problem with errors is that, like crimes, they beget new ones. My failure to pull the plug on the 24 February Eurogroup teleconference was to be compounded with an even greater one a few days later.
Snookered
My first concern was to brief Alexis on the troika’s reversal and the decision I had made. We met in the prime minister’s office in parliament, where I put him in the picture. The creditors had duped us, I told him. They were trying to put the MoU back on the table and it would take a concerted effort to keep it off. ‘Unless we remain ready to activate our deterrent and to default on the IMF and the ECB, they will drag us back into their process, defang us, exhaust us and, by the end of June, hang us out to dry,’ I told him plainly.
Alexis listened carefully before telling me that I should not worry. If they wanted to go down that road, they would soon be made to think again. It was precisely what I wanted to hear. And so I continued with my efforts to keep the process on track.
