As we were making our way to lunch, I spotted a canteen where some employees were taking a break and broke away from my hosts to speak to them. They shook my hand and smiled a lot, but when I asked them about working for Cosco they were coy. ‘It’s good,’ was about as much as they were willing to say. The expressions on their faces were hard to read. Looking over my shoulder, I saw Captain Fong and his Greek white-collar entourage watching us. I made a mental note to insist on full union rights for all workers as a pre-requisite for any deal before saying my goodbyes.
From there my hosts whisked me up to the company restaurant, where a rare view awaited us: the ancient harbour immediately below, the island of Salamis in the background, and between them the straits where the famous naval battle between the Persians and Athenians took place in 480 BC. Now a third ancient people were making their mark in history here.
‘Which do you want first, Minister, the good news or the bad?’
After lunch, which featured an odd but pleasant blend of Greek and Chinese recipes and a quick interview for a Chinese TV crew, we arranged a follow-up meeting with Cosco’s Greek representative and Sagias in order to negotiate the terms of the deal. A few days later, on the evening of 2 March, we convened at my ministry. The meeting was short and efficient.
I repeated my commitment to speed up the privatization of the port of Piraeus, to be followed by even bigger and bolder joint ventures, and spelled out the same conditions that I had already explained to the Chinese ambassador: Cosco’s shareholding in Piraeus would be reduced from 67 to 51 per cent, with the difference (16 per cent of the equity) to be retained by the Greek state with a view to passing it on to the suffering pension funds of naval, shipyard and municipal workers; Cosco would commit to an investment of up to €300 million within eighteen months; all Cosco employees at Piraeus would be unionized, collective agreements on wages and conditions would apply and there would be no workers hired via subcontractors; and coastal shipping would be handled by the municipality of Piraeus, with the active participation of the local authorities of the islands served by the port, ensuring that communities in the area shared in the benefits.
Lastly, as a token of its desire to help Greece get back on its feet again, I required a commitment from the Chinese government to purchase immediately €1.5 billion of the T-bills that Mario Draghi’s ECB had prohibited the Greek banks from buying. And once the impasse with our creditors had been brought, one way or another, to an end, I said, ‘Athens would be tremendously grateful to the people of China if Beijing helped Greece launch its first new bond issue with a purchase of at least €10 billion.’
Cosco’s representative seemed confident that my terms would be given a sympathetic hearing in Beijing, and further communications with the Chinese ambassador confirmed that my new friends were happy with the deal and that a positive response would be forthcoming from the land of the dragon, now that its teeth were in. Indeed, a tangible sign of good faith followed less than forty-eight hours later, on the morning of 4 March, when the head of my ministry’s public debt management department called me with the news that China’s treasury had, indirectly and secretly, bought €100 million worth of our T-bills – news that brought me to the brink of satisfaction.
But not quite there. Lest we forget, two days later I would have to find €301.8 million to hand over to the IMF. A week after that, on 13 March, I would have to do the same with another wad of €339.6 million. Three short days after that, on 16 March, I would have to come up with a whopping €565.9 million to wire to the IMF. Then, on 20 March, €339.6 million more would have to be extracted from our depleted coffers to be sent the same way. During March alone, then, we would haemorrhage to the IMF more than €1.5 billion. In that context, the €1.5 billion T-bill purchase promised by Beijing would have given me three weeks in which to catch my breath before the fiscal waterboarding recommenced on 13 April, when a further €452.7 million would have to be paid to the IMF. After that, between 12 May and 19 June, another six instalments were due to the IMF totalling €2.52 billion. But the hottest months were yet to come: in July we would have to pay almost €4 billion to the creditors with another €3.2 billion to follow in August.7
In other words China’s liquidity injection of €1.5 billion would not have nearly sufficed. Indeed, however willing Beijing might have been, no injection of loans, however large, could have saved us from insolvency. As I had been saying for years, they could only have extended it. Nevertheless, €1.5 billion would have bought us at least two months to ascertain whether a new contract with our creditors was possible, while making it impossible for Mario Draghi to maintain his argument that no one other than the Greek banks cared to purchase our T-bills. At the same time, it would also have demonstrated our capacity to attract foreign investment, to be flexible and to turn a colonial fire sale into a mutually beneficial agreement with one of the world’s superpowers.
Sagias and I briefed Alexis and began preparations. The intention was to restart the formal bidding process for the port of Piraeus under the new conditions that the Chinese had accepted, while behind the scenes the two governments agreed the Chinese loans to the Greek state. Soon the plan was finalized and ready for implementation. First, Beijing would inject the remaining €1.4 billion of the promised €1.5 billion into our T-bills. Almost simultaneously Deputy Prime Minister Dragasakis would make a formal trip to Beijing to strengthen relations between the two governments and informally seal the agreement. Lastly, Alexis would follow up with a full state visit in April or May to make public and sign the comprehensive agreement between Athens and Beijing.
It was a splendid opportunity for both countries. A lifeline for Greece and a giant leap forward for China’s new Silk Road into the heart of Europe. Dragasakis left for Beijing on 25 March, accompanied by our foreign minister. Counting on the €1.4 billion that would pour into my ministry by the end of the month, I scraped the bottom of the barrel to find the €1.5 billion we were obliged to pay the IMF during March. The idea was to use that month to give the creditors one last chance to reach out to us with serious intent for a viable agreement. China now had a stake in our success, and our ability to attract Chinese investment would be a significant weapon in the negotiations. The cash itself would then buy us a further month in which to table our own fully fledged plan for Greece’s recovery.
On 31 March, the day Beijing had promised the breakthrough purchase of €1.4 billion in T-bills, I was at my office waiting for the phone to ring. The auction was meant to end at around 11.00 a.m. At 10.30, unable to contain myself, I called the ministry’s public debt manager. ‘No news yet,’ I was told, ‘but don’t worry. The Chinese make a habit of entering auctions at the very last moment.’ So I waited.
At 11.02 my phone rang. I jumped to answer it. ‘There’s good news and there’s bad news, Minister. Which do you want first?’ asked the public debt manager.
‘Begin with the good news,’ I said.
‘Well, the Chinese have entered the auction, but the bad news is that they only bought another €100 million.’
Before we had hung up, I was dialling the Chinese ambassador on my mobile. Once I had told him what had happened, he said, ‘I cannot believe this. Can I come to your office right away?’
‘Of course,’ I replied.
Half an hour later, a frazzled Chinese ambassador was sitting on my red sofa. In what I believe to have been genuine anguish, he pleaded with me to believe that he had had no inkling that something like this would happen, that he was hugely embarrassed and that he would do all he could to get to the bottom of the shortfall. From within my office he tried to place calls to the Chinese ministry of finance but could not get through. So he went back to his office promising to get back to me as soon as he heard.
A few hours later he called, sounding far more relaxed. ‘Minister, I can assure you it was a technical hitch. Beijing is very sorry about it. In two days’ time, when you have another T-Bill auction, the purchase will go through.’
I felt a mixture of relief and incredulity. On the one hand it made no sense for Beijing to lie via its ambassador, who appeared genuinely keen to cement our deal. On the other, the idea that China’s technocrats had simply made a mistake was equally unbelievable. Time would tell.
Two days later I was in my office awaiting the same call from our public debt manager. At 11.05 the phone rang. ‘There’s good news and there’s bad news, Minister. Which do you want first?’ Not again, I thought.
‘Please don’t tell me that they entered the market with another €100 million,’ I implored him.
‘Precisely what they did,’ came his reply.
This time I did not bother to call the ambassador; I went straight to Maximos. There I told Alexis what had happened and suggested strongly that he contacted the Chinese prime minister.
The next day Alexis relayed the news from Beijing. Someone had apparently called Beijing from Berlin with a blunt message: stay out of any deals with the Greeks until we are finished with them.
When I spoke to the Chinese ambassador again, I tried to convey to him how our people felt when foreign powers, pretending to be our partners, steamrollered their hopes for recovery and dignity.
‘I understand, I understand,’ he replied. And I believed him.
So ended a dreadful episode in the long saga of the creditors who had no interest in getting their money back – with the scuttling of a marvellous agreement between two ancient countries.8
The tides of March
At the beginning of March it felt as if the tide had suddenly gone out, leaving the hopes I had carried back to Athens after the 20 February Eurogroup agreement exposed, bedraggled, stranded. The creditors’ promises to allow us to co-author our own country’s reform agenda and to negotiate a life-saving debt restructuring had been withdrawn even before February was over. But unlike February, whose cold breeze had braced my resolve, March’s warmer touch made me freeze.
The difference was the narrow crack that had opened up across the bond linking me to Alexis – narrow but now impossible to ignore. However successfully I managed to put it out of sight, I could not put it entirely out of mind. With every concession we made that month and with each delay in Alexis’s reactions to the troika’s aggression, I sank deeper into doubt. Would he be prepared to activate our deterrent when the troika chose to put him to the test? By the end of March, and certainly by the beginning of April, the impartial spectator within was telling me that our opponents had succeeded in intimidating him. It took a little while longer for the rest of me to catch up.
There were two aspects to our talks with the creditors: the negotiation over our reform agenda, which was meant to be concluded by mid-April, and the negotiation over debt restructuring and ending austerity. To keep hope’s flame alive, it was essential that these two strands not be separated: only with debt restructuring would a reform agenda make any sense. But despite the differences between them, the creditors were impressively united towards us and invested tremendous effort into prising the strands apart: only once we had accepted their reform priorities would they contemplate discussing debt restructuring. It was an increasingly lonely struggle. Alexis, Pappas, Dragasakis and even my friend Euclid seemed increasingly ready to accept a deal that included only vague promises on debt as long as some of Syriza’s sacred cows – the reintroduction of collective bargaining agreements and the preservation of pensions, for example – were left alive. They were drifting into the mentality of the famous Brussels fudge.
The contrast between the troika’s rigid will and my side’s shrinking ambitions enhanced my sense of dread and loneliness. War cabinet meetings were turning into exercises in weighing up the utility of different forms of surrender based on Syriza survivability come the next election. At such moments I felt contemptuous of intra-party politics and glad that I kept out of them. Pappas would go on and on about preserving the administrative ban on large-scale dismissals that the IMF was keen to abolish. Alexis focused more on the pensions that Berlin had in their sights. Others banged on about privatization. I could not bear it. I too cared deeply about all these issues, but what was the point if we did not first and foremost end the doom loop? What was the point of preserving an administrative ban on mass dismissals if austerity were to be reinforced thus causing companies of all sizes to fail? What was the point of focusing on pensions when the state on which our pension systems depended was insolvent?
Every attempt I made to return our deliberations to what really mattered – debt restructuring, the end of austerity, investment and bad banks – was treated as a distraction from the main agenda. Were we still committed, I would ask, to start defaulting on the IMF and later the ECB by the end of March or at the latest the beginning of April if the troika refused to discuss debt restructuring seriously? Were we still determined to retaliate to their threats of capital controls and bank holidays with haircuts of the ECB’s SMP bonds and the activation of our parallel payments system? In response they would humour me, ever less convincingly, with repetition of oaths of allegiance to our strategy.
Back at the ministry I would attempt to pick up my spirits and plough ahead. The fact that any agreement would require my signature, and mine alone, made me feel simultaneously pivotal and expendable. But until I was expended, I thought, I had some power to keep debt relief at the top of the list, to unify the two negotiations, to continue to hold Alexis to our covenant, to strive for international alliances, to push for the completion of our algorithmic cornering of major tax cheats, to develop our parallel payments system and, last but not least, to promote a bill to address the humanitarian crisis. It was the least I could do for Lambros and the millions of others who, to use an old Peloponnese expression favoured by my grandmother, had made us the object of ‘all their devotions and [should we disappoint them] all their curses’.
The next Eurogroup meeting in Brussels, where we would take stock of the negotiations, was on 9 March. It was wholly in the troika’s interests that there should be no progress to report, a shortcoming which they would blame on our recalcitrance, and when the IMF’s Poul Thomsen called me on 1 March to announce that the troika was ready to fly to Athens, I knew they were going in for the kill.
Welcoming the troika’s officials into our ministries would have triggered precisely the wrong kind of negotiation, in which technocrats from the European Commission, the ECB and the IMF would demand concessions from our ministers on the minutiae of the troika programme. If we were to respond by agreeing to talk about such matters only as long as we also talked about debt swaps and austerity too, they would simply refuse, telling us that negotiating our debt was above their pay grade, which of course it was. The only way to avoid being cornered in this way was to insist that there be no negotiations in Athens between the troika’s middle managers and our elected ministers. In other words, our refusal was not just symbolic, it was critically strategic. Nonetheless, troika officials began reporting to the press that our refusal to welcome them to Athens was ‘ideological’, whereas they simply wanted to get the necessary work done.
On 3 March I briefed my team on the importance of keeping the two negotiations unified and insisting on a comprehensive agreement. I remember warning them that the troika would respond with threats of capital controls and informing the most trusted among them of the deterrent that a tiny team was working on: the parallel payments system and the SMP bond haircuts. Meanwhile, Jeff Sachs was hard at work in Washington meeting David Lipton, number two at the IMF, and Poul Thomsen in a desperate attempt to bridge our differences.
The media battle continued. A day or two later, Mario Draghi publicly described me and Alexis as ‘loquacious’. Jamie Galbraith responded in typical style: ‘Normally a central banker would deliver such a message in private, and the fact that he chose to do otherwise was evidence of loquacity.’ When asked by Italian daily La Repubblica to comment on the accusation that I spoke to my Eurogroup colleagues with greater ‘candour’ than one would expect of a finance minister, Jamie replied, ‘While it might be true that Varoufakis has departed from the customary standard of candour among finance ministers, since I support raising those standards anyway, it is not evident to me that there is a problem.’
On 5 March, in an attempt to upset troika strategy, I sent a letter to the Eurogroup president, Jeroen Dijsselbloem, demanding the commencement of negotiations, including a proposal to implement immediately seven of the reforms the institutions had approved in our teleconference of 24 February. Their response was to rubbish the seven proposed reforms accompanying my letter to Jeroen, targeting for greatest ridicule the idea that German Vice Chancellor Sigmar Gabriel had been so keen on in our meeting in February: clamping down on tax evasion by employing people from all walks of life to record transactions as they happened.9 Ever since, our plans for the algorithmic capture of large-scale tax evasion had been entirely ignored, dismissed with derisive references to ‘wired tourists’.
