Alexis, Sagias and I responded to his protestations like a well-rehearsed trio. There was a huge difference, we argued, between signing a new loan agreement, which naturally requires parliamentary approval as it commits the nation to new liabilities and new obligations, and signing a letter that requests an extension of an existing loan agreement, which involves no new loans or obligations. Our point was perfectly valid, but he seemed paralysed by the notion of providing a legal opinion in support of something that had no precedent.
He remained in that state for some time, during which Alexis and I strove to shift him from it with a mixture of logic and firmness. In the end, our pressure bore fruit. The harried head of the government’s legal service went back to his office, authored a legal opinion that the finance minister had the authority to sign this particular letter and sent it to my office by official courier. As soon as I had received the opinion, I signed the formal letter of request and, with revulsion in my stomach, had it sent to the creditors. It was a thing of darkness. And I had acknowledged it as mine.
Would Alexis honour our covenant in return? Was he happy to give the negotiations a chance but equally prepared to activate our deterrent if they went nowhere? In the early hours of Friday, 27 February I was confident, though not certain, that he was. The following day, crippling doubt set in.
Unmasked
Replacing Chouliarakis had become imperative. A country’s Eurogroup Working Group representative and Eurogroup deputy must be the tip of its finance minister’s spear. With a finance ministry resembling Swiss cheese, I desperately needed the chair of my ministry’s Council of Economic Advisers to be someone in whom I had total faith, both as an economist and as a human being. I had neither. I considered Chouliarakis’s analytical skills to be woolly, his academic credentials paltry, and his reliance on the troika’s inane econometrics worrisome. As for his character, he was the opposite of a team player: opaque, almost always late for meetings and often remarkably difficult to locate. He rarely answered his phone when I called him, and even his secretary rarely knew exactly where he was. From what Euclid and Alexis told me, he rarely answered their calls either. The question ‘Where is Chouliarakis?’ became a running joke among the three of us. If asked, I would shrug my shoulders and say, ‘How should I know? I am only his boss.’ The joke had now worn thin, to say the least.
Nevertheless, far from savouring the prospect, I was reluctant to fire him. The last thing we needed was to give the hostile media any sign of internal strife. But the Costello document and the Wieser email had exposed the government to ridicule and the nation to a premature rupture with its creditors. If nothing else, it was now impossible to keep him on as my link with that astute and menacing duo.
Later that morning, after we had all had a few hours’ sleep, I was back at Maximos to brief Alexis on my plan to replace Chouliarakis. The idea was to promote him from chair of the Council of Economic Advisers to general secretary for fiscal policy, a position of higher rank in the ministry but one in which he could do relatively little damage and which was currently unfilled. In his place I was proposing to appoint my colleague at the University of Athens Nicholas Theocarakis, whose appointment as general secretary for fiscal policy had been delayed for bureaucratic reasons. As a top Cambridge-trained economist, politically close to Syriza even before Syriza was formed, and a friend I could trust with my life, he was the ideal replacement.
Alexis was not happy. I had to remind him of the damage Chouliarakis had inflicted because of his failure to do his job. Alexis did not dispute my reasons but to my puzzlement remained unsupportive of my plan. It was only when I told him that Sagias and Stathakis were also of the opinion that Chouliarakis had to go that he relented. ‘If that’s what you want to do, go ahead,’ he said looking unhappy and deflated.
On my way back to the ministry I sought excuses for Alexis’s reluctance. I supposed that he was being careful not to upset Dragasakis as he had such a lot invested in his alliance with the deputy prime minister. Still, what I could not understand was Alexis’s failure to appreciate the solution I had proposed, which involved promoting Chouliarakis, thereby sparing both him and Dragasakis any embarrassment.
With this question lingering in my mind, I called Theocarakis. ‘Nicholas, I have an offer for you that you cannot refuse. I need you to accept the position of chair of the Council of Economic Advisers,’ I told him. Nicholas was torn. On the one hand, as a great friend and a loyal Syriza supporter, he felt he should accept. On the other hand, by leaving the University of Athens in 2012 for the United States I had already burdened him with the task of keeping the Department of Political Economy together, along with the progressive doctoral programme in economics that we had both worked very hard to set up since 2001. If he accepted my offer, he was concerned that everything he had been working for at the university would collapse. However, when I explained the critical juncture the country faced and the personnel problems I had been dealing with, he agreed.
It was time to summon Chouliarakis. Once he arrived in my office, I cut to the chase. I explained that the two recent incidents had made it impossible for me to have anything like the degree of trust in him that was essential for someone in his role. And it was not just those two incidents, I added. Even if they could be excused as temporary lapses, there was his lack of punctuality, his general unavailability and his continued use of the troika’s demonstrably faulty macroeconomic models. And so I came to my proposal that he be promoted to general secretary for fiscal policy, with Nicholas Theocarakis replacing him as chair of the Council of Economic Advisers.
I knew that Chouliarakis would not like it. It was understandable; no one likes to be told that they are not trusted, that their economic models are faulty and that they are about to be moved up in order to be moved out of the way. But not in my worst nightmare had I expected the reply he gave me.
‘It is your decision, Yanis. Just know that if you decide to take the Council of Economic Advisers away from me, I shall not accept the general secretariat for fiscal policy, nor any other position in the government. I shall instead go to the Bank of Greece, where Stournaras has a position ready for me.’
The mask was off. The cynicism was extraordinary. He had just told me, quite brazenly, that he was ready to work directly for the troika rather than sever his privileged links with the troika’s functionaries in my ministry. Not only this, he had openly admitted that he was already in cahoots with the troika’s primary ally, the governor of the Greek Central Bank, who had begun the bank run in the run-up to our election as part of their bid to keep us from office. I was aghast. To avoid an ugly exchange, I told him that I would consider his reply and that he could go. I left instantly for Maximos to warn Alexis that we had a fifth columnist in our midst.
For months before we had won the general election, Alexis and his team had considered Governor Stournaras an obstacle to a Syriza government. Rightly so. Former Prime Minister Samaras had shifted Stournaras from the finance ministry to the governorship of the central bank precisely in order to undermine a possible Syriza administration. Alexis had repeatedly told me and others that removing Stournaras was his top priority. Ironically, I had advised moderation and tempered his animosity towards Stournaras, pointing out that the government could not remove the governor of the Bank of Greece without a major clash with the ECB’s executive council. For as long as the ECB negotiated with us in good faith, I argued, we needed to show respect for its Greek branch – although if they closed down our banks and tried to overthrow our democratically elected government, then obviously all bets were off. But in trying to contain Alexis’s fury towards Stournaras, I had created the impression among the Syriza leadership that I was soft on the troika’s favourite son in Athens.
I was convinced that Alexis would blow his top when I told him that the chair of our Council of Economic Advisers was threatening to defect to Stournaras. He did no such thing. Instead, he looked at me with the same depressed expression he had worn hours earlier when I had announced my decision to fire Chouliarakis. With apparent sympathy towards the apostate and with a disconcerting dullness in his eyes, he said, ‘I understand the lad – he has had this arrangement with Stournaras for a while now.’
It was as if the director of MI5 had revealed to Britain’s prime minister that their top agent had threatened to work for Russia’s FSB if he were shifted from his post, only to have the prime minister reply, ‘I understand the lad – he has had this arrangement with the FSB for a while now.’
If my response to the troika’s attempt to reinstate the MoU during the Eurogroup teleconference of 24 February had been regrettably tepid, my performance in the face of Alexis’s astonishing insouciance bordered on the pathetic. Admittedly my glimpse into Alexis’s inner world had been brief, but the ghastliness it revealed, however fleetingly, should have provoked me into an eruption. Anything less than rage at Chouliarakis for having dared to threaten us with defection should have alerted me to the troika’s presence in that office, to the fact that its tentacles were not just confined to my ministry. To my shame, I looked the other way, allowing wishful thinking to airbrush what I had seen. A pattern was thus established. Again and again during the weeks and months that followed, instead of recognizing his evident duplicity, I would find excuses for Alexis’s backtracking from our covenant. I would blame it on fear, depression and inexperience, relying eventually on sheer faith that the moment would come when he would bounce back, shake off the tentacles, reactivate his belief in our cause and honour the magnificent words with which he inspired me that first day at Maximos.
What could I have done differently? Hindsight blurs history and tortures the mind with sterile hypotheticals. I am certain of one thing, though: had I had that glimpse into the abyss before I entered the Eurogroup teleconference of 24 February, I would have most definitely pulled the plug on the troika there and then. The only reason I had not done so was my conviction that Alexis could be counted on to trigger the rupture at a later, commonly agreed, stage if need be. That conviction evaporated when he apologized for Chouliarakis’s outrageous threat to work for the enemy.
My only enduring excuse for turning a blind eye to hard, unwelcome facts, for giving Alexis the benefit of the doubt, was what was happening on the streets of Athens, in the towns and villages of Greece. A whole nation had reclaimed its dignity on the basis that the two of us would hold our heads high in Brussels, Frankfurt and Berlin on their behalf. An overwhelming reluctance to undermine that dignity stopped me from doing what I now know was necessary to defend it. I should have confronted Alexis’s backtracking – in public if necessary. Instead I carried on believing that we were as one, while the troika, having inserted the edge of its steely wedge between us, began the slow, tortuous process of pushing it right through.
11 Whittling our spring
Spring arrived early in Greece in 2015. Thanks to a wet winter, a mutiny of wild flowers was already in evidence during the first sunny days of March. It provided a marvellous backdrop to the people’s rebellion against their creditors. The extension of our loan agreement had been granted, giving us until 30 June to forge a new contract. The grumblings of some Syriza MPs notwithstanding, the mood across the land was ebullient.1
For the troika’s officials, sitting in their fluorescent-lit offices in Brussels, Frankfurt and Washington, it was a nightmare. Unable to fly to Greece and be driven through Athens in convoys of Mercedes-Benzes and BMWs, they had no way of demonstrating their authority and regaining psychological control over the Greek people. If they were not careful, dangerous ideas might infect the minds of other Europeans – Spaniards, Italians, possibly the French – such as the idea that it was possible, even within this Europe, to regain one’s sovereignty and to restore a nation’s dignity. For the troika, getting its money back would have been nice but, in the grander scheme of things, was of secondary importance. The creditors knew that more austerity and the rejection of my debt swaps would shrink Greek incomes, ultimately increasing their own long-term costs, but they did not mind. As the Slovak finance minister, Schäuble’s keenest cheerleader in the Eurogroup, put it a few months later, ‘We had to be tough on Greece because of their Greek Spring.’2 Just as the Prague Spring had been smashed by Soviet tanks, in Athens hope would be crushed by the banks. The strategy for doing so was as follows.
First, by refusing to agree a road map to any specific destination – let alone our desired one – or any credible milestones along it, they cultivated and maintained a deep and corrosive uncertainty in Greece as to its future. Any financial planning, whether in the home, a small business or across a large corporation, short term or long term, was made impossible. Such ‘permanent temporariness’ is a tried and tested strategy for keeping an occupied land subdued.3
Second, they deployed what I have described elsewhere as fiscal waterboarding.4 Like waterboarding a prisoner, the victim (in this case a eurozone government) is brought to the edge of asphyxiation. But just before an actual default, which would trigger the ECB’s closure of the country’s banks, the creditors provide just enough liquidity to keep the suffocating government alive. During this brief respite the government passes whatever austerity or privatization measures the creditors demand. In our case, fiscal waterboarding began with a carefully orchestrated bank run before we were even elected and was ramped up with the removal of our waiver on 4 February 2015.
With a minefield of debt repayments ahead of us, and in the midst of profound uncertainty that made Greeks reluctant to pay their taxes, the troika hoped that by early June at the latest we would be gasping for air and ready to capitulate. The only danger was that Alexis might honour our covenant: default on the creditors, inaugurate a parallel payments system and throw the ball into Mrs Merkel’s court. To avert this, they deployed a third strategy, one that had allowed the British empire to rule the world for so long with so few military resources: divide and rule.
Since 2010 our creditors had succeeded in using Greece’s ruling elite – the triangle of sin, as I called them – to carry out their occupation. As well as separating the elite from the population at large, institutions had also been made accountable directly or indirectly to the troika. As we have seen, the tax office, the bank bailout authority and the statistical office had all been removed from parliamentary scrutiny. Alongside this, a network of think tanks, media and marketing outfits had dispensed trickle-down legitimacy and propagated acquiescence. But our government’s election had broken the triangle and wounded its machinery. The troika now had to divide our government in order to reassert its rule.
So much for the strategy. How was it to be implemented?
Picking opponents
Since my first Eurogroup, Jeroen Dijsselbloem had conducted an intensive campaign to bypass me altogether. He would phone Alexis directly, even visit him in his hotel room in Brussels. By hinting at a softer stance if Alexis agreed to spare him from having to deal with me, Dijsselbloem succeeded in weakening my position in the Eurogroup, and by extension Greece’s too.
Perhaps more significantly, the troika was brilliant at choosing its opponent at the so-called technical level as well, which is to say in the Eurogroup Working Group. On 27 February, dazed by Alexis’s reaction to Chouliarakis’s threat to join the enemy camp and recalling that Wolfgang Schäuble’s deputy in the Eurogroup Working Group was not the chair of his Council of Economic Advisers but an official within the Ministry of Finance, the idea came to me to keep Chouliarakis at the Council of Economic Advisers, thus avoiding a public firing that would have rocked an already shaky boat, but to replace him as my Eurogroup deputy and as Greek representative in the Eurogroup Working Group with Nicholas Theocarakis by appointing Nicholas to the formally senior position of general secretary for fiscal policy within the finance ministry.
It was a terrible, terrible idea. The first time the Eurogroup Working Group met after Nicholas’s appointment was on 17 March in the form of a teleconference. Thomas Wieser, who was presiding, lost no time in stating his preference: ‘It is a pity that George Chouliarakis cannot join today and instead Nicholas Theocarakis is on the line.’ From then on, Wieser, Dijsselbloem and the rest of the troika campaigned unashamedly for Chouliarakis’s reinstatement. It took them two months, but by the end of April they had their man back.
I understood perfectly why the troika wished to get me and Nicholas out of the way. In contrast to Chouliarakis, Nicholas understood the econometric models the troika used for its fiscal predictions better than Wieser and the others did, knew what their weak points were, and was determined to oppose the Eurogroup Working Group’s lazy assumptions before they ended up as ‘facts’ at the Eurogroup. As for me, they knew I would never sign a third bailout agreement, and since it is only the finance minister who can sign a loan agreement on behalf of a eurozone member state, my removal was fundamental. Besides, it is plainly a huge advantage to be able to pick one’s opponent. What litigant or general or business leader would decline the opportunity to do so? What I had not seen coming was Alexis’s readiness to acquiesce. Divide and rule produced a farce featuring a troika appointee negotiating with the troika on behalf of a government elected to oppose it.
The eurozone runaround
Henry Kissinger famously quipped that when he wanted to consult Europe he did not know who to call. Our predicament was even worse. As we have seen, any attempt to enter into a meaningful discussion with Wolfgang Schäuble was blocked by his insistence that I ‘go to the institutions’ instead. Once there, I soon discovered that the institutions were also divided, and in more ways than one. Famously, the IMF was dead keen on debt restructuring while the ECB was dead against it. But the European Commission was even worse: in private talks Commissioner Moscovici would agree readily and enthusiastically with my arguments about a consistent fiscal policy and on issues like labour relations. But then the commission’s representative in the Eurogroup Working Group, Declan Costello, would reject all these ideas out of hand.
The uninitiated may be excused for thinking that this eurozone runaround was the result of incompetence on the part of the creditors. While there is an element of truth in this, it would be the wrong conclusion. The runaround is a systemic means of control over governments of countries whose banking and/or public sectors are financially stressed. Indeed, to politicians like Wolfgang Schäuble it is a welcome feature of the eurozone. A finance minister who wants to table, say, debt-restructuring proposals is simply denied the name of any person to speak to or a telephone number to call so that she or he simply does not know who to talk to. As for apparatchiks like Wieser and Costello, the runaround is essential to their personal power.
The Swedish national anthem routine
On the assumption that good ideas encourage fruitful dialogue and can break an impasse, my team and I worked very hard to put forward proposals based on serious econometric work and sound economic analysis. Once these had been tested on some of the highest authorities in their fields, from Wall Street and the City to top-notch academics, I would take them to Greece’s creditors. Then I would sit back and observe a landscape of blank stares. It was as if I had not spoken, as if there was no document in front of them. It was evident from their body language that they denied the very existence of the pieces of paper I had placed before them. Their responses, when they came, took no account of anything I had said. I might as well have been singing the Swedish national anthem. It would have made no difference.
Possibly because of my academic background, this was the Brussels experience I least expected and found most frustrating. In academia one gets used to having one’s thesis torn apart, sometimes with little decorum; what one never experiences is dead silence, a refusal to engage, a pretence that no thesis has been put forward at all. At a party when you find yourself stuck with a self-centred bore who says what they want to say irrespective of your contribution to the conversation, you can take your glass and disappear to some distant corner of the room. But when your country’s recovery depends on the ongoing conversation, when there is no other corner of the room to retreat to, irritation can turn into despair – or fury if you grasp what is really going on: a tactic whose purpose is to nullify anything that is inimical to the troika’s power.
