Words eluded me. In refusing the opportunity to adopt this document and proclaim it our government’s anti-MoU, he was wasting the chance to table a plan for Greece’s recovery devised by the Greek government for the Greek people with the able assistance of some of the world’s brightest and most experienced policymakers. Denied the prime minister’s stamp of approval, the Policy Framework was from then on nothing more than a Ministry of Finance green paper, handing the creditors a licence to ignore it altogether.
Alexis’s one act of resistance remained his threat to default to the IMF (while signalling behind the scenes to Merkel his readiness to roll over). The next IMF payment, totalling €765 million, was due on Tuesday, 12 May, the day after the Eurogroup meeting. But on Sunday, 10 May, just before another war cabinet gathering, Yannis Stournaras, governor of the Greek central bank, called to relate that €650 million had miraculously been discovered idling around in some forgotten account that happened to be stuffed with funds that we were allowed to use to repay the IMF. There was no way we could justify defaulting over the remaining €115 million. ‘Bastards! They have resorted to paying themselves to stop our default,’ was how Alexis put it.
‘The fact that they’re paying themselves rather than announcing a default by Greece should give you strength and courage, Alexi,’ I told him. ‘It shows the kind of power you have.’
My attempt to revive his spirits went unnoticed, and over the next few hours, as the war cabinet discussed new ways to succumb to the old programme, I remained quiet. Only towards the end of the meeting did I ask, ‘Tomorrow I have to fly to Brussels to attend another Eurogroup. What are my instructions?’ The answer I received was to fend off Wolfgang and his troops in the hope that Merkel would come to our rescue.
Wolfgang’s move
Keeping my friends close but my enemies even closer, I arranged to visit Wolfgang, along with Theocarakis and Chouliarakis, at the German delegation’s Brussels office an hour before the Eurogroup began.4 He received us with his two deputies by his side. Setting aside the usual preliminaries, he got straight to the point. ‘Look,’ he said, ‘it’s a mistake to believe anything the commission tell you. What can they offer you? They talk and talk and talk but it is all just talk. Pay no attention to them.’
On past experience he was right. What I had not expected, and what I now discovered, was that his advice to ignore the European Commission applied equally to his own chancellor. ‘I know that your prime minister talks to her all the time,’ he said. Growing visibly agitated, he asked, ‘Why is he talking to her all the time? What for? What does he expect from her? There is nothing she can give him!’ Perhaps realizing that he had exceeded the limits of propriety, he took a step back: ‘I was very pleased to have heard your prime minister mention the possibility of a referendum because that would be fantastic! But you must be very careful. You must make it very clear – very, very clear – to the Greek people what their choice is. Opinion polls say that they want the euro. You must tell them that if they want the euro they must have the MoU. If they don’t want the MoU then that’s fine, move on. Just move on.’
I retorted that membership of the eurozone could hardly be made conditional on consenting to failed policies that made one’s country unsustainable within that same eurozone.
He dismissed my argument immediately: ‘The MoU, the MoU as it is, with no changes. Or the drachma. You have to take the MoU if you want the euro. If you don’t want the euro, that’s another matter. The people of Greece must decide that question. That’s why I was happy to hear your prime minister speak of a referendum. You should set up this referendum. And, you know, if it takes six months for the Greek people to have plenty of time in order to make up their minds, that’s fine. We will fund you completely for six months.’
So there I had it. All the talk about the ECB merely following its rules in denying us liquidity was claptrap. If they wanted to, for political purposes they would fund Greece’s debt obligations ‘completely’. And not just for the two or three weeks that we had been requesting but for six whole months – which would amount to €11 billion!
‘But Wolfgang,’ I replied, still reeling at his words, ‘as responsible leaders and Europeans, we should do all we can to prevent Grexit and to offer our peoples a clear vision of a decent life within the eurozone. Pushing them to make a choice between a catastrophic fiscal policy within the eurozone and a catastrophic exit from the eurozone is not the mark of an enlightened political leadership. Don’t you see that the problem with the MoU is that it offers no hope whatsoever for a decent future?’
Of course he could see it, he admitted. ‘The MoU is bad for your people. It will not allow you to recover. It is not good for growth. That’s why you need the referendum. To make this clear.’
Shocked at the ease with which he appeared willing to endorse the disintegration of the eurozone, I said, ‘Leaving aside Greece for a moment, do you really think that you can control the demonic forces that a Grexit would unleash? This is pure folly. No one can control them. It would be an error of historic proportions.’
‘Don’t call it a Grexit then,’ Wolfgang said. ‘You don’t have to think of it as Grexit. Think of it as a time out. The way I understand it, you get out for a while, you rebound very quickly, so you gain your competitiveness again through the devaluation. And then a year later or so, when you have recovered a large part of your lost competitiveness, you can come back in.’
I hardly knew where to begin. ‘Wolfgang, I cannot condone Greece’s exit from a currency that admittedly we should never have entered. Since it takes up to a year to create a new currency before devaluing it, it is equivalent to announcing a currency devaluation a year in advance. The short-to-medium-term costs would be immense. While I fear these costs less than the costs of staying ad infinitum in the euro under a destructive MoU, I insist that putting us in the MoU-or-drachma dilemma is not consistent with the interests of Europe. Even if you don’t care about Greece, Grexit – or a Greek time out, or however you want to spin it – will end the euro’s aura of inevitability. This will hit Italy and Spain badly and immediately, before the secondary effects reach Paris. And there is nothing that Mario Draghi can do to ameliorate this damage even if he prints pyramids of euros. The monetary union will be unstitched everywhere by forces that you will not be able to control.’
Wolfgang disagreed, but expressed his disagreement via a curious overlap in our opinions. ‘In the Eurogroup you are probably the one who understands that the eurozone is unsustainable,’ he said. ‘The eurozone is constructed wrongly. We should have a political union, there is no doubt about it.’
‘I always knew you to be a dedicated federalist,’ I interrupted. ‘I recall your disagreement with your colleagues back in the early 1990s. I am sure Mrs Merkel could not see as well as you did the importance of a federal political structure to go along with the monetary union.’
He seemed pleased for a moment. ‘And the French too,’ he added. ‘They opposed me.’
‘I know,’ I said. ‘They wanted to use your Deutschmark but without sharing sovereignty!’
Wolfgang agreed heartily. ‘Yes, this is so. And I won’t accept it. So, you see,’ he continued, ‘the only way I can keep this thing together, the only way I can hold this thing together, is by greater discipline. Anyone who wants the euro must accept discipline. And it will be a much stronger eurozone if it is disciplined by Grexit.’
From the corner of my eye I could see Chouliarakis going pale. Theocarakis, on the other hand, looked impressed but unsurprised by the sight of the German finance minister firing on all cylinders. Taking my chance, I said, ‘You will not be able to control the chaotic process that a Grexit would trigger. Forget about a temporary time out. Once one is out, one is out, and the rest will begin to fall out too. You are planning for a dynamic that you will not be able to control.’
‘I don’t agree with you,’ he replied, shaking his head and looking at the floor. ‘We can safeguard the euro much better after you leave, with huge help from us, and then you can come back in.’
It was evidently pointless to challenge his faith in his ability to control a vicious force of nature, and when the German finance minister offers your battered country ‘huge help’, you have a duty, as its finance minister, to ask for clarification. So I asked him, ‘OK, when you say “with huge help”, what do you mean by “huge”? By the way, Wolfgang, have you briefed the chancellor on this?’
Looking at me intensely and with a meaningful smile he said, ‘If I answer this question and you leak this, I’m going to kill you with my own hands!’
‘Wolfgang,’ I said, ‘have I ever leaked anything we have talked about in our meetings? You have, but, as you know, I have not!’
He laughed and said, ‘Yes, you are right, you are right. She knows and I will convince her that it’s a good idea.’
As I had suspected, the chancellor knew of Wolfgang’s plan but had not approved it. At that point it hit me: he and I had something important in common. We disagreed on everything, Grexit included, but there was one thing we shared: a leader who was muddling through.
‘From what you are telling me,’ I probed, ‘this is a conversation that you do not have a mandate to have with me.’
‘Yes, you need a mandate from your prime minister for us to have this conversation and I need a mandate from the chancellor.’
‘OK,’ I said. ‘I’ll call you later.’ We exchanged telephone numbers and agreed to talk again later.
Meanwhile, we had the Eurogroup meeting to attend. From within the Eurogroup I texted Alexis with Wolfgang’s news. The following rapid exchange ensued.
VAROUFAKIS: [16.21] Wolfgang pirouetted amazingly today during our meeting.
TSIPRAS: [16.22] Meaning?
VAROUFAKIS: [16.25] He is sending you a message about a time out …
TSIPRAS: [16.26] Is he proposing exit or adopting a parallel currency?
VAROUFAKIS: [16.27] The former by means of the latter; in the full knowledge that the MoU is throttling us.
TSIPRAS: [16.30] In that case tell him that, if he means it, let’s discuss how it could happen under the best terms. Funding, consensus and mutual assistance without default.
VAROUFAKIS: [16.35] He is offering huge help for the transition.
At that point Jeroen called on me to respond to the usual charges against the Greek government: causing delays, being unwilling to offer credible proposals and so on. After delivering my by then standard rejoinder and an urgent plea for a balanced communiqué, I resumed my exchange with Alexis.
TSIPRAS: [17.50] I am curious to find out what on earth he has in mind. Tell him also about that other proposal to see how he sees it.5
VAROUFAKIS: [17.51] OK. Do I have your green light to talk with him in strict confidentiality about all these matters?
TSIPRAS: [17.53] Yes, but make sure that you do not give him the impression that you agree. And be careful that he does not leak it.
VAROUFAKIS: [17.53] OK. Our line is: 1. That I am simply speaking with him to explore his proposal without any commitment to it. 2. If he leaks it we shall deny it.
As the Eurogroup moved on from discussion of Greece to other topics, Wolfgang beckoned me over to his side of the enormous conference table. I walked over and knelt down next to him.
SCHÄUBLE: I have been thinking about what we were saying.
VAROUFAKIS: Me too. And I am glad to report that I have my mandate from my prime minister to discuss your idea, without any agreement or commitment to it.
SCHÄUBLE: Listen, it is not enough for us to have the mandate to talk. It is important that they talk about it first.
I could see his point: it would be very easy for both of us to land in hot water, accused of going rogue on such a crucial matter.
VAROUFAKIS: I see. How should we then go about it? In any case, did you get your mandate from the chancellor since we spoke?
SCHÄUBLE: I shall talk with her tomorrow morning. But it’s not enough for her to agree. She and Tsipras must have this discussion first. Why doesn’t your prime minister, in one of their many talks, mention it?
