Alexis gave me a long warm comradely look and, after a pause, said, ‘Yani, listen. You and I are like a woollen jumper. If we let them get hold of a thread and start pulling it, eventually the jumper will be undone. This is their strategy. They are aiming at your undoing to undo me. They want to get you to get at me. We are not going to let them, right? We are going to stand together. I do not want to hear again about this nonsense. Stay strong. We have a war to win.’
Once more it took only a few words from Alexis to make me forget and forgive. Combined with my deep desire to believe what he said and the genuine opportunity we had to extract our country from its vicious cycle, they revived my hopes and steeled my nerves.
A few minutes later that sense of purpose received another boost when Nikos Pappas walked in. He smiled widely upon seeing me and congratulated me for having stood up to the troika in Riga, briefly reviving the spirit of our earlier meetings in Psyrri. Pappas had some news: apparently, Jeroen Dijsselbloem had just emailed Alexis’s office to demand that I be replaced.
‘See?’ Alexis said, looking at me. ‘They’re at it! Trying to divide us.’ Turning to Pappas, he said, ‘Niko, tell him to go jump off a cliff.’
But Pappas responded aggressively: ‘It is all your fault, Alexi,’ he said, adding a number of adjectives that I would rather not repeat. ‘By talking to him directly, instead of referring him to Yanis, you gave Jeroen the impression that he can have direct access to the prime minister and bypass the finance minister that stands up to him. You have no one to blame but yourself,’ he concluded at the top of his voice.
Alexis acknowledged his ‘mistake’ and said, ‘I shall email him tonight, making it clear that anything he wants to say to us he must say via Varoufakis.’
That night I went home feeling hopeful again. ‘The jumper seems intact,’ I told Danae cryptically before explaining myself.
The following day, after a meeting of the war cabinet, I asked Alexis whether he had sent the email to Jeroen. ‘No, I decided not to, Yani,’ he said. ‘Why antagonize him needlessly? Let him find out the hard way that he will have to deal with you.’ Alarmed at this decision, I nevertheless failed to recognize the bitter truth: the jumper was already unravelling.
The cruellest April day
‘April is the cruellest month,’ wrote T.S. Eliot in the opening of The Waste Land. In the April of 2015, Monday 27 was its cruellest day. Our war cabinet lasted six hours and fifteen minutes. It began with Alexis announcing his decision to give the troika something as an expression of goodwill. That ‘something’ was the head of my deputy, Nicholas Theocarakis, the man who, on the orders of our prime minister, had put the phone down on Thomas Wieser and the Eurogroup Working Group.
Alexis sounded almost reasonable when he explained his decision. ‘I talked to Dijsselbloem twice. He demanded Varoufakis’s head. He also wanted Chouliarakis to represent us at the Eurogroup Working Group. I can’t let him choose for us, but at the same time we cannot say no to everything. So I decided to burn Theocarakis and restore Chouliarakis.’
Spyros Sagias, the cabinet secretary, was first to respond. He spoke of a ‘faulty negotiation’, that we had been pursuing the ‘wrong process’, of the need to wrap up a deal quickly. It was a drawn-out speech delivered with low intensity, in which I was not mentioned by name but which laid the blame clearly at my door. George Stathakis, the economy minister and a long-standing academic colleague of mine, went further: ‘The duo Varoufakis–Theocarakis, I love them both as brothers, but they cannot bring home an agreement. Chouliarakis can.’
If by ‘agreement’ he meant capitulation to Wieser and Dijsselbloem’s demands, then Stathakis was perfectly correct. Chouliarakis was the right man to sign a surrender document. I intervened to say so. My brief statement was greeted with an awkward silence.
Then Euclid took the floor. Surely he would oppose the developing coup? He didn’t. Instead, without mentioning either Chouliarakis or me, he pronounced Theocarakis a fine scholar, thinker and comrade but not someone with the organizational skills necessary for such complex negotiations. By implication, he was endorsing Chouliarakis’s return.
I never felt the slightest animosity towards Stathakis. His views had been clear from the beginning: we should accept whatever the troika presented us with. It was those of my comrades who had pledged never to surrender who disappointed me bitterly. Euclid’s position saddened me immensely. He knew who Chouliarakis was and what he had done. He had talked to me about him in language more scathing than I would ever have used. Why was Euclid now tearing strips off our friend Theocarakis in support of Alexis’s horrendous proposition? Why did he not at least stay silent like Pappas, who had swallowed his bravado of two days before, or even Dragasakis, who was no doubt happy at the decision but felt no need to say a single word? The answer arrived minutes later when Alexis announced that Euclid would coordinate the negotiations of the Brussels Group with the technical process in Athens and my struggles at the Eurogroup.
During the remainder of that long, long meeting I kept uncharacteristically silent while the rest plotted a course of complete alignment with the MoU process, in stark contrast to the plan that I had brought back from Washington. The reason for my silence was that in my head I was scripting a new resignation letter. The end of the road had arrived. There was no place for me in a cabinet that had wittingly or unwittingly surrendered.
Like blood to a shark
Later that day I visited Alexis at his parliamentary office with my resignation letter in my pocket. I had not spoken to a single person about it, not even to Danae. I wanted to give Alexis one more chance to reconsider, and I would not be satisfied this time with rousing words that masked the unpleasant truth. Thankfully, there were none.
When I arrived, Alexis welcomed me in but asked me to wait for a minute while he went to the bathroom. As I was sitting down on the couch to await his return, I caught sight of a few A4 pages on the adjacent coffee table. I picked them up. When Alexis emerged, my expression no doubt conveyed my indignation at what I had read.
With the pages in my hand, I asked, ‘Am I right in presuming that you didn’t run these concessions by me because you knew I would veto them?’
‘Yes,’ he confessed with a guilty smile.
‘Do you understand what these numbers are, Alexi? Do you realize what you have done by conceding them? Don’t you get it that you have just accepted huge new austerity?’
The main number I had in mind – which had snagged my attention like a rusty nail – was 3.5. The pages were a letter signed by the Greek prime minister and addressed to the troika, committing to a budget with a primary surplus target of 3.5 per cent of national income. Unbelievably, the same number appeared next to the years 2018, 2019 … all the way to 2028. With the exceptions of Singapore and oil-rich Norway, no country in the world has ever posted a 3.5 per cent budget primary surplus for ten years in succession. The chance that a depressed economy lacking functional banks and with negative investment could do so was the nearest to the theatre of the absurd that economic policy can produce.
‘How did this happen, Alexi?’ I demanded.
‘Chouliarakis thinks that we need to make this concession to get an agreement,’ was his answer. Evidently, this was what Stathakis had meant when he said that Chouliarakis was the only one who could bring home a quick agreement: complete capitulation.
I took a deep breath to compose myself. ‘I bet Chouliarakis was also the one who convinced you to send these concessions to Wieser and Dijsselbloem without asking me.’
‘No,’ replied Alexis, ‘that was my idea. Admit it, Yani. You would have objected, for good reasons I am sure. But Yani, when negotiating you must give something to get something back.’
‘And what is it that you got back? What did Chouliarakis tell you to expect from the troika in exchange for another lost decade of punishing austerity for a people that elected us to put an end to the worst and longest austerity drive in capitalist history?’
‘They’ll now have to give us something on debt relief,’ he replied.
For a moment I was lost for words. The folly in his argument was choking me. Then for the first time I spoke to him condescendingly.
‘Are you serious? Have you gone completely off your rocker? Why would they ever concede on debt restructuring if you offer them 3.5 per cent primary surpluses for ever? Your argument is like trying to fend off a shark by pouring blood into the sea. Think about it: in declaring your readiness to extract from the body of what’s left of the Greek economy 3.5 per cent of national income every year in the form of a surplus you’re implicitly declaring that you can pay the creditors 3.5 per cent of national income every year for ten years! How difficult is it to see that, in saying this, you are declaring that we don’t really need debt relief? That we would like it but that we don’t really need it?’
‘Chouliarakis believes that we can achieve the 3.5 per cent surplus target if we start growing again.’
This was the inane argument of the regime we had fought so hard to replace.
‘If this is so, Alexi, why did we strive to win government? For the glory? Did we not argue strongly against the Samaras government that our economy will never recover unless we end austerity, which means tearing up ridiculous surplus targets and replacing them with one of at most 1.5 per cent?’
Alexis looked troubled and tried to mollify me. ‘Nothing is final, Yani. Until there’s a comprehensive agreement no concession I have made is cast in stone – I can always take it back.’
‘What?’ I exploded. ‘Do you really think that you can take back the massive austerity you just gave them? You gave the shark a taste of your blood, its jaws grabbed your arm, and now you think you can pull it back because there is no deal until there is a final deal? Are you confusing us with the powerful side in this negotiation?’
By that stage my blood was boiling. In fact I was so enraged during most of this exchange that I almost forgot I had visited him to offer my resignation. When I did remember, towards the end, I decided not to make a hasty move in anger. I needed to leave, calm down and think things over before making a final decision.
When I returned to my office, I called my friend Wassily and told him what had happened. He breathed in deeply and emitted a sound expressing deep discontent before telling me to forget about resigning. ‘Remember the one hundred and forty thousand people who voted for you. They don’t want you to resign. They want to see you stay in the mix and give those bastards hell.’
Back at home, without knowing what Wassily had said to me, Danae made the same point. ‘Think of the one hundred and forty thousand people who put their trust in you,’ she said. I then spent a heart-wrenching hour on the phone explaining to Nicholas Theocarakis that the prime minister had ‘burned’ him in favour of Chouliarakis.
I faced a merciless dilemma. The Financial Times, as Nicholas informed me, was already reporting that I had been replaced as chief negotiator by Euclid even though in reality the negotiations were clearly being handled by George Chouliarakis. The war cabinet, meanwhile, had been turned, with a large majority now favouring wholesale capitulation and seeing me as the main impediment. Dignity demanded that I resign. But that night, once I had calmed down and thought things through, I realized that it was not just duty that obliged me to stay on.
Beneath Alexis’s political, economic and moral error in surrendering to austerity lay another, larger error: his belief that the troika would give him a speedy agreement and a third bailout in return. Undoubtedly, Merkel and Wieser had encouraged Alexis and Chouliarakis to believe this. But setting aside the fact that we had no mandate from our voters for such an agreement, there were two reasons why not even this was on the cards. First, the creditors would surely want to make an example of Alexis – who had spent years in opposition, and some months in government, lambasting them – as a deterrent to any other politician in Spain, Italy, Portugal or indeed France who might be tempted to confront them. For this they would need not just his capitulation but his very public humiliation too. Second, the troika had been denying for years that either a third bailout loan or significant debt relief were necessary. The only way they could explain a third bailout loan now was by claiming, as Poul Thomsen had done during the Riga Eurogroup, that the Greek debt had in fact been sustainable until Syriza won government, and to prove their charge it would be necessary to close down Greece’s banks, cause massive new losses and bankruptcies and then blame the costs on Alexis’s government.
Just before dawn I arrived at the conclusion that the more concessions Alexis made, the more they would ask for, that there would be no agreement until after the banks had been shut down and that then he would be forced into an agreement so degrading that the Eurogroup could hold it up to the cameras and say to all Europeans, ‘This is what you get if you cross us!’ This realization invited the question of how Alexis would react. He was only forty-two years old, I thought to myself. Surely he could not contemplate hiding for decades after acquiescing in such disgrace? When he finally saw what the troika and Angela Merkel were demanding – his ignominy and the crushing of our people – there must be a strong chance that he would refuse. And as long as there was a significant chance of that I had a duty to be there, ready to assist by putting forward our Plan for Greece and activating the payments system that would allow us to continue to function until Merkel made her mind up: side with Wolfgang Schäuble in kick-starting the eurozone’s disintegration beginning with Grexit, or accept our plan as the basis for an agreement.
So I decided to stay on. I would dedicate myself to keeping our deterrent alive for the moment Alexis might need it and to finishing our Plan for Greece together with Jeff Sachs and Nicholas Theocarakis – whom I also dissuaded that night from resigning – and aided by supporters including Norman Lamont, Larry Summers, Thomas Mayer as well as my immediate team. It was a hard, thankless path. I had known all along that the troika saw me as its primary obstacle, but now I knew that our own war cabinet felt the same. The single thread of hope that kept me going was that Alexis would, at the moment of his impending humiliation, come to me and finally say, ‘Let’s do it!’
Tapped
Friends chastise me for my forbearance. They think I was naive to maintain faith, despite all the evidence, that Alexis might bounce back. Hopefully, the following two episodes will help convey something of the pressure we laboured under and the scale of what we faced.
When I arrived home from Maximos that evening, Danae bombarded me with questions, videoing my replies with her phone. As she was doing so, my mobile rang. It was Jeff Sachs. Reluctant to convey my desperation over an unsecured line, I chose to share with him the only good news of the day: almost a month too late we were at last ready to default to the IMF. While Sagias, Dragasakis and Chouliarakis had objected, Alexis, Pappas and Euclid had sided with me on this. The coffers were bare. If the IMF wanted its money, it was time for the rest of the troika to release some liquidity. ‘The die has been cast,’ I told Jeff. ‘I think Alexis means it this time. The next payment to the IMF will not be made.’
Jeff was ecstatic. ‘It was about time,’ he remarked before offering advice on how to handle the fallout of a default.
Half an hour later my phone rang again. It was Jeff, laughing uncontrollably. ‘You will not believe this, Yanis,’ he said. ‘Five minutes after we hung up, I received a call from the [US] National Security Council. They asked me if I thought you meant what you’d said! I told them that you did mean it and that, if they want to avert a default to the IMF, they’d better knock some sense into the Europeans.’
I had fully expected my phone to be tapped, but two things made Jeff’s news remarkable. First, the eavesdroppers not only had the capacity to recognize that what I had said was of real significance but they must also have had an open line to the NSC. Second, they had no compunction whatsoever about revealing they were tapping my phone!
It was around three in the morning, but I called Alexis to inform him. Despite the collapse of our united front, despite our shattered bond, such moments reminded me that we were, ultimately, fighting a common enemy.
