A fascinating debate on what had to be done to take our default to the IMF off the table was reaching its natural conclusion. I had to exploit that unique opportunity to present the crux of the problem to the only interlocutor that I could communicate with properly.
VAROUFAKIS: Let’s get serious here. You folks – Mario, Angela and you – have to give us a road map. I am leaving Wolfgang out because we know where his map would take us. We cannot just drift into the unknown on the basis of hearsay that something may happen one day to render Greece viable. We need to have an adult conversation with clear markers on dates so that on 13 April or thereabouts the liquidity tap is turned back on. I cannot go back to Athens to say to my cabinet that we agreed that something magical might happen at some point before we reach the cliff’s edge. I cannot energize my colleagues without someone picking up the phone and giving us some assurances that we have a process that comes with [the] liquidity provisions necessary to salvage the negotiation process.
LAGARDE: But there is a clear link between the two.
VAROUFAKIS: Yes, but we need more than that. We need an indication that the process will be timely.
Poul stepped in to put me back in the dock, unwittingly I hope, unless he had eavesdropped on my last conversation with Alexis. ‘Not paying on the ninth is not the solution,’ he said, ‘if that is what you will tell your colleagues in Europe.’
‘I never said that,’ I protested.
Christine intervened in my favour. ‘He did not say that,’ she confirmed.
‘What I did say,’ I clarified, ‘was that if we do not get any liquidity provisioning then we will be forced to default independently of our will.’
Returning to my request for an ‘adult conversation’, Christine counter-proposed: ‘But it must be a grown-up conversation without drama, without journalists chasing me, no game[s], no improvisation – we are very boring people. It has to be very technical, boring. We have not been able to have that conversation. It is just beginning now. We are prepared to do it day, night, on the weekend, no matter where. We would prefer to do everything in Athens. But from an optics point of view [from the perspective of public perception in Greece] we can have some of it in Brussels. What you are proposing, a little less shallow than your list of reforms [meaning if they were fleshed out further], is actually to meet the objectives of the initial proposal.’
We were on the right path. To broaden that path as far as possible, I suggested that we start our new collaboration with a small step: both in Athens and at the Brussels Group, from now on we should divide our discussions thematically, so that a deadlock over one issue did not prevent progress elsewhere. Christine very much liked the idea, and Poul seemed happy too. It was progress. We had established the basis for a common understanding of the questions if not the answers.
For the first time we were faced with the opportunity of having a serious discussion about what reforms each of us thought were pressing. I invited Christine to have a first stab.
‘Can I? Can I?’ she asked excitedly. ‘I know that this is anecdotal, and you might find this trivial—’
‘Not the pharmacists, please!’ I interrupted. ‘Is this what you were going to say?’
‘Why not?’ she replied. ‘I find it just amazing that in the Wall Street Journal you defended the pharmacists. I thought, Not Yanis! I found it amazing that you support their monopoly of baby foods and cosmetics – which I know causes problems, from when I was finance minister. And I had my fights.’
I knew of the IMF’s obsession with Greek pharmacies. These invariably small family-owned businesses were protected by a law that permitted only pharmacy school graduates to own one and prohibited the sale of non-prescription drugs by supermarkets. But that, of all possible subjects that needed tackling, the managing director of the IMF, faced with a European country on the brink of default, wanted to discuss this one? I had to pinch myself. I explained that the pharmacies’ monopoly over the sale of baby foods and cosmetics had already ended, and that what I opposed was not the end of their monopoly over certain other commodities but the proletarianization of thousands of owner-pharmacists via the takeover of the pharmacy sector by one or two multinational chains.
Giving me the benefit of the doubt on this matter, Christine then took me to task for our tax arrears instalments measure – part of my Humanitarian Crisis Bill aimed at bringing the 40 per cent of Greek citizens back into the tax system by allowing them to pay even very small instalments each month – which she ‘found shocking’:11
LAGARDE: I cannot believe that you would introduce this rescheduling of tax payments without discriminating between those who cannot pay and those who organize themselves so as not to pay.
VAROUFAKIS: Let me explain the practices of rich defaulters. When charged they take the tax office to court and get a court hearing for 2022. In the meantime we cannot touch them. So what we are doing is giving them the opportunity to start repaying little by little while organizing out-of-court settlement procedures. At that point we can force things to a head and confiscate available funds of strategic defaulters.
LAGARDE: That’s fine.
VAROUFAKIS: But to be told that what we did is a unilateral move and [be] ordered to take it back, when we have 3.6 million people owing less than €3000 to the state that they can’t pay – who are dying to become part of the formal economy again by starting to pay small sums little by little—
LAGARDE: But you could have checked their capacity—
VAROUFAKIS: Our tax authorities do not have the resources to check three to four million people in a short time. So, what we plan to do is to let them get into the instalment plan – start repaying – and then go after the strategic defaulters.
It was now my turn to tell Christine which reforms I thought truly mattered. These were not even on her radar screen, and, as I would go on to explain, the fact that she did not know of them was intimately linked to the liquidity crunch our government was facing. It all related to Greece’s corrupt bankers. ‘I’m sure you’re not privy to this but the word “reform” becomes a dirty one the moment the troika pats on the back our corrupt bankers while targeting the pharmacists and the pensioners. Even worse, when the ECB collaborates with the same bankers to deny liquidity from the government that the people just elected, in order to force us to accept cuts in the lowest of pensions, the whole population turns against the ECB, you, everyone in authority.’
Christine seemed fascinated. I proceeded to tell her of the trick pulled by the Greek bankers (recall Aris, Zorba and their ilk) which kept them in control of the banks that they had bankrupted, all with the active support of the Eurogroup Working Group, which dominated the HFSF, whose funds kept the banks going and the bankers unaccountable. As I talked, Poul looked like a man about to have a stroke. But there was more. The bankers, I explained, then used the liquidity provided by the ECB and the capital channelled to them by the creditors, which of course burdened the weakest taxpayers, to fund media outlets and spread propaganda in favour of those politicians who were in the bankers’ pockets: the triangle of sin.
‘When the ECB gets into bed with corrupt and corrupting bankers, who are actively sabotaging democracy, we consider this enemy action,’ I said. ‘I am not telling you that Mario knows this. But someone in Frankfurt must know it if I do. Your people in Athens are smart enough to have picked it up, even though I do not doubt that they keep it from you. When our people see the same figures, aided and abetted by the troika, retain control of bankrupt banks and bankrupt media with new debt burdening the little people against whose interests the banks and the media labour, you cannot expect them to take you seriously. Or take us seriously if we do as you tell us.
‘We cannot go on like this, Christine. This is very hard for us. We want to talk about reforms. But in this state of warfare, and with Wolfgang Schäuble telling me, “I am not going to talk to you,” I am sounding an alarm bell that this is not the Europe that we signed up to. We are mightily pro-European. We want to keep Greece in the euro. I think it would be excellent for official Europe to demonstrate that Europe can do business not only with the establishment political parties it is affiliated to but with pro-European political parties who have a different – weird for you – view of the world. And to show the Greek people that they can be part of this process. Alas, all the people of Greece now see is your functionaries in bed with our oligarchy’s triangle of sin: bankrupt banks, toxic television channels, corrupt procurement…’
Christine looked concerned and I believe she genuinely was.
LAGARDE: But why don’t you go after them, if you have evidence that they—
VAROUFAKIS: They have all the cards. The press are their agents. The judiciary is ineffectual and in some cases corrupt. Of course we will go after them even if it means falling. But that is why we need breathing space … The TV stations are lambasting us for throwing the country onto the rocks by resisting the troika while at the same time criticizing me for coming here to negotiate pension cuts with you. We will prevail because we are doing very well with the people and because we have managed to create a disconnect between the majority of Greeks and the TV channels, which is a remarkable achievement – they are not influenced by them any more. For how long I do not know. What we need is a little peace and quiet. What we are asking for is ninety days—
LAGARDE: You can create that—
VAROUFAKIS: I hope so.
LAGARDE: To demonstrate that you have the will to do it, we will go out of our way. Working with you.
Poul then made a point of saying that Christine and he spoke with one voice, something that I had just witnessed was untrue. ‘Anything you hear from me, or from our mission in Athens,’ he claimed, ‘be assured that everyone at the IMF speaks as one.’
Incapable of resisting, I said, ‘Yes, I know. You are like the Catholic Church!’
Christine took the joke with good humour, insisting the IMF was the better institution.
By now night had fallen. As we were wrapping up, Christine was keen to know that I would not now be heading to the press to announce an imminent default. And I was eager to get her to commit to doing something to ease the waterboarding. We had understood each other but we were obliged to finish with a last rendition of our tussle, one that was performed with the greatest courtesy.
LAGARDE: A default would be terrible for Greece.
VAROUFAKIS: Of course, but it would be terrible for the IMF and for Europe too.
Lagarde: Yes, yes.
VAROUFAKIS: Defaulting to you, to the IMF, would trigger the cross-defaults, and then Mario would refuse to lift ELA with the result that the banks would run out.
LAGARDE: Then capital controls—
VAROUFAKIS: We would not accept that, Christine. This is a political decision. It is a nightmare of course. We do not sleep at night. But we cannot accept capital controls in a monetary union. And we are preparing as we should.
LAGARDE: That would be terrible for Greece. Think about inflation.
VAROUFAKIS: Why? Do you think that having capital controls imposed and turning into a kind of protectorate without any access to liquidity would be better?
We had said all there was to say, but as we got up to leave Christine asked me to stay back for a word in private. She was ‘flabbergasted’ she said by what I had told her about the triangle of sin and in particular about our bankers. ‘I’m a lawyer, and I would love to understand … I know it is hot sensitive but I would love to understand what is happening.’ I shared with her my plan for cleansing the banks, by which Takis, my companion that day, would be appointed chair of the HFSF and new CEOs would be brought in to the key banks.12 She nodded, if not in agreement then at least to show she had a clear understanding of what I was up to and what I was proposing. In a low voice, she then said, ‘I will speak to Mario. I cannot guarantee the outcome.’ It was the best I could get, given the position I had arrived in.
As if to offer me some solace, Christine’s parting gift was a promise to do some ‘digging’ into the background and activities of Greek individuals who might jeopardize my work and to get back to me about them. Even though she never did get back, which I never expected her to, it was the thought that counted.
‘Thanks once more for sacrificing your Easter Sunday,’ were my last words as I made my way out.
14 The cruellest month
The next day I flew back to Greece knowing that I would be returning to Washington a week later to try to win President Obama’s people over to our side.1 A week earlier I would have been over the moon with excitement at the prospect. Alas, as my trust in my comrades had withered, any such excitement had died with it.
