‘I know all this, Mario,’ I said, ‘but it is our money nevertheless.’ Whatever arcane rules the Eurogroup had concocted – without the approval of the European parliament or any legitimate body of the EU – I was merely trying to find a practical way to avoid defaulting on the IMF in the next two weeks, I told him. ‘The situation is simple: we owe one part of the troika, the IMF, a sum that we do not have. At the same time another part of the troika, the ECB, owes us a similar sum. Logic dictates that we cancel out these two sums.’ I was not even asking the creditors to trust me with our money, simply to take the money the troika conceded it owed us and use it to pay itself. ‘Have the money transferred, if need be, from the ECB to national central banks, to member-state governments and then directly to the IMF. This is a practical, logical, fair solution.’
‘This is not up to me,’ Draghi said. ‘It is up to the Eurogroup.’
Jeff tried valiantly one more time. ‘Mario,’ he said, ‘I have been listening to this discussion and I must tell you that I am concerned. Yanis has been trying to propose a practical solution to a simple-to-solve problem. You rejected that solution, which is fair enough if there are technical problems, but I have not heard from you any alternative solutions.’
Mario shrugged his shoulders. ‘It is not for the central bank to offer such solutions. This is a matter for the politicians.’
‘Just wait and see what the politicians do when I raise the subject with them,’ I said to Jeff as we were leaving. ‘They will refer me to back to the ECB, possibly to Poul Thomsen.’ Jeff shook his head in disbelief.
I met Nicholas Theocarakis, who had replaced Chouliarakis as my Eurogoup deputy, at the entrance to the meeting. This would be his baptism of fire. But as we walked into the room who should I see at the chair next to mine but George Chouliarakis!
Nicholas and I greeted him, and the three of us sat down as the other ministers and their deputies filed in. Chouliarakis knew that each minister was allowed only a single deputy at the Eurogroup – leaving aside the exception made for our government’s first Eurogroup, when Dragasakis was allowed to sit in – and to this day I cannot imagine what he was thinking. When I leaned over to ask politely that he wait for us with Jeff Sachs in the Greek delegation’s office, he refused, explaining that he had neglected to inform Wieser formally that Nicholas had replaced him. ‘Don’t worry about that,’ I told him. ‘I will deal with Wieser.’
Meanwhile, Jeroen had declared the meeting open. Sitting next to him, Wieser had spotted the scene that Chouliarakis was making. Never one to miss an opportunity to criticize us, he walked over to tell us that one of my two associates had to leave. Huffing and puffing, Chouliarakis finally got up and left. Later I found out that, instead of waiting in our office, he simply went to the airport and boarded a flight back to Athens.
The Eurogroup of 9 March was a wholly predictable affair. One after the other, like arsonists watching a blaze that they had started and commenting on its progress, the troika’s leaders blamed us for stalling the negotiations. When my turn came, I explained as moderately as I could the two causes of the stasis: the troika’s refusal to enter into genuinely comprehensive negotiations that included my debt-swap proposals and the relaxation of austerity that these would enable, and their demand, the IMF’s in particular, that their so-called missions return to Athens for direct ‘consultations’ with our ministers. I reminded my fellow finance ministers that I had written to Dijsselbloem demanding the commencement of negotiations and concluded with a plea to end the stonewalling and the asphyxiation of our government using the practical proposals that I had already presented to Mario Draghi and Benoît Cœuré.
Once more Draghi repeated his insistence that the ECB was operating strictly within its rules while avoiding decisions that would politicize its work. I decided to expose this lie gently but firmly.
The present circumstances are similar to [those of] the summer of 2012, in the sense that there is a new Greek government, the programme is suspended, there are negotiations about negotiations, and the Greek state has pressing repayments coming up. But the ECB today is refusing to behave towards our government in a manner comparable to how it behaved in 2012 towards the previous government. Mario’s claim that the ECB is above politics is not supported by the facts. Indeed, the only reasonable explanation of its behaviour today is that the ECB is biased against a government that its governing council members dislike for purely political reasons.
As I outlined the facts and figures that made this contention irrefutable, I could see in the corner of my eye that Mario Draghi was looking uncomfortable. Wolfgang Schäuble, on the other hand, looked anything but. Unwilling to let the ECB president off the hook, I continued:
Before the 20 February agreement, the ECB president had told me that, once we strike an interim agreement with the Eurogroup, the waiver would be returned and liquidity restored to the Greek banks. This promise remains unfulfilled. And it is not the only one. When requesting the restoration of our T-bill limit, Mario had told me in no uncertain terms that it would happen once there was evidence of demand for our T-bills from customers other than the Greek banks. Well, I have it on good authority that five days ago a Chinese investor purchased €100 million of our T-bills. Alas, there has been no relaxation of the asphyxiating constraint. I am tiring you with these details for one reason only: because our hard work to get to the 20 February agreement is being undermined in ways that you may not be privy to and for which our government is not responsible.
Instead of engaging with my very serious accusation that the ECB was acting politically, Jeroen hastily attempted to end the discussion. He proposed that we issue a quick statement saying that the negotiations would begin in two days with the institutions coming to Athens. I immediately replied that I welcomed the commencement of negotiations but proposed they take place in Brussels instead. Jeroen retorted that the negotiators might need data that could only be found in our ministries. I said that we were happy to welcome technical personnel from the institutions to Athens in order to collect data to be brought to the two sides’ negotiators in Brussels. At that point, in a rare helpful intervention, Pierre Moscovici suggested that he and I work this out over the next couple of days. We had successfully avoided falling into the trap of accepting the troika’s return.
Judging by the exchange of text messages that followed the meeting, Alexis was happy. ‘We are spinning it as a success: political negotiations to commence in Brussels along the lines of the 20 February agreement in order to end the impasse.’ He also had a warning for me. Apparently Michael Noonan, the Irish finance minister, was reported to have said that I was about to be replaced. ‘We have denied this,’ Alexis texted me. In a separate message he added, ‘I think that the Irishman is trying to facilitate the creditors’ plan to undermine you because you are a tough negotiator.’
Separately, Alexis texted me to say that Jeroen had contacted him directly to push for the troika to come to Athens two days later on 11 March: ‘He told us that you agreed to that. Pappas replied that he did not believe that Varoufakis would ever have agreed.’
I responded, ‘He threatened that it will all be over if the troika does not return. I told him his threats will not work.’
Alexis fumed at Jeroen’s cheap tactics: ‘Jeroen threatened me with a cessation of the negotiations as he was “getting tired”. Pappas told him to take a deep breath because we were only at the beginning of an historic process. Yani, end this today before it takes us under.’
I knew what he meant: ensure that the negotiations took place in Brussels; prevent at all costs the return of the troika to Athens. ‘Not to worry, Alexi. I shall nip this in the bud,’ I reassured him. To do so I needed to talk to Moscovici urgently. But first I had two appointments to keep.
Jeff’s shock
After the obligatory post-Eurogroup press conference, at which Jeroen lamented a ‘wasted two weeks’, clearly implying that we were the ones responsible for the delay, I collected Jeff from our delegation office and headed down the corridor to the office of the Federal Republic of Germany.
To a Europeanist like me there is something beautiful about that corridor, off which every European country has an office. Admittedly it is on a nondescript floor in an ugly building, but the fact of its existence should be something to be seriously proud of. As it was, I headed for Wolfgang’s office with Jeff and Nicholas Theocarakis, dreading what might occur but with a plan.
Thinking back to what transpired I am reminded of Mike Tyson’s fantastic line at the height of his tumultuous boxing career: ‘Everyone has a plan until they get punched in the mouth.’ My plan had been inspired by a tip I received from Pier Carlo Padoan, the Italian finance minister, when I had met him in Rome a little more than a month earlier. Pier Carlo had managed to break the ice with the German finance minister by offering to push through Italy’s parliament a reform bill Wolfgang was proposing. Its successful passage won him Wolfgang’s trust. ‘Offer him something similar,’ had been Pier Carlo’s advice.
Wolfgang began the meeting in top form. ‘Your prime minister and your cabinet have managed to make us lose all confidence in your government,’ was his opening line.
‘But, Wolfgang,’ I said genuinely bemused, ‘we never had your confidence. We are, for goodness’ sake, a government of Greece’s radical Left party! How could you have confidence in us?’ Wolfgang smiled at my frankness. ‘But,’ I hastened to add, ‘believe me when I tell you that I want to earn your confidence and your trust.’ I continued: ‘The question is how? I will not lie to you, Wolfgang, like others before me with promises that I can neither fulfil nor intend to. That would accomplish the opposite. The only way I know to win your trust is by making a promise that is difficult to fulfil but which, firstly, I want to fulfil and, secondly, you want me to fulfil. So, here is my suggestion: why don’t you tell me what are the three or four major reforms that you think we should implement in Greece? If we can agree on three or four major reform bills, that we both agree would be therapeutic for Greece and increase your chances of getting your money back, then all I ask you is for four weeks without the present liquidity squeeze. During those four weeks I shall endeavour to pass these bills through our parliament and begin implementing them. If I am successful, you will then have cause to begin to trust me. If not, proceed with your plan to throttle us.’
I had not briefed Jeff about my plan, but it seemed to go down well with him and he appeared eager to hear Wolfgang’s response. I suspect Wolfgang’s reply came as something of a surprise to him. ‘I am not going to negotiate with you. As I have told you last time, you must go to the institutions!’
‘But Wolfgang,’ I replied, ‘time is running out. In a week or two we will have to default to the IMF with untold consequences for all. You tell me to go to the institutions. But the institutions simply lack the mandate to do what it takes to avert a crash or to negotiate with us a viable agreement for Greece within the eurozone. I am telling you all this because there are forces at work trying to derail the process.’
Wolfgang’s face went from apathy to engagement. Even though I had learned from past meetings that such changes in Wolfgang’s expression were pregnant with disappointment, on that occasion I could never have predicted his extraordinary response. ‘I don’t think that any government can keep Greece in the eurozone,’ he declared.
‘Is this the chancellor’s view too?’ I asked.
‘She has other ideas,’ he replied dismissively.
If I had any remaining doubts that getting their money back was towards the bottom of our creditors’ priorities, Wolfgang had just put paid to them. It appeared that Germany’s finance minister had resigned himself to the idea that his country would not be getting any money back at all. For if a country like Greece were to leave the euro, its new currency would devalue substantially, and so an already unsustainable euro debt would become even more unpayable.
With that bombshell Wolfgang had killed our conversation. Anything I might say to him about finding a way for Greece to repay a sizeable portion of its debts was redundant in the face of his conviction that Greece could not survive in the euro, irrespective of how the country was run. But any discussion about Grexit was impossible too as Mrs Merkel had ‘other ideas’. Stalemate!
As we left for our next meeting, Jeff was practically pulling his hair out. ‘I cannot believe what my ears just heard,’ he said, his face contorted. ‘Does Wolfgang not realize that he is jeopardizing everything that we have been building for sixty years?’1 He continued to voice his exasperation as we made our way back to the Greek office: ‘Even if we assume that they don’t care about people in need, are these guys not aware that, for a relatively small amount of money, they are running the risk of pissing off many very rich and powerful people?’ His question was left hanging as we went in.
Klaus Regling, whom Wolfgang Schäuble had appointed head of the eurozone’s bailout fund (initially the EFSF, later the ESM), was waiting for us. A functionary with next to no discretionary power, he lacked the authority to make any difference to our situation. Still he had asked to see me and, out of courtesy, I had agreed. I hoped to use the opportunity to put to him several ideas regarding the debt swaps I was proposing which fell within the remit of his fund. From the outset, however, he proved even more unwilling to discuss solutions than anyone else I had spoken to that long, long day. The only thing he seemed keen to say was that I owed him €142.6 billion.
As there was very little to reply to that, except perhaps to recite the title of Dario Fo’s play Can’t Pay Won’t Pay, I presented him instead with a moral dilemma: ‘Given that, as it seems, in a week or two we shall run out of money with which both to repay the IMF and to pay salaries and pensions, what do you advise me to do, Klaus? The choice is between defaulting on the old and the frail or defaulting to the IMF. Which is of course an unnecessary dilemma given that our central bank owes us a similar amount.’
For Klaus it was a no-brainer. ‘You must never, ever default to the IMF. Suspend all pension payments instead. This is what you must do,’ he said with striking conviction.
I chose not to point out that, even if we let every old age pensioner die of hunger, it would still be impossible to repay the IMF and the ECB over the next few months, but said, ‘It is a sad day when the head of Europe’s stability mechanism is advising me to do something that will violently destabilize our society and economy.’
At the end of a busy but arid day punctuated only by Wolfgang Schäuble’s statement that Grexit was inevitable, Jeff rewarded me with what I took to be a massive compliment: ‘Having sat in your meetings with Thomsen, Draghi, Schäuble and Regling, I must tell you that I have never seen anything like this in my decades of experience with meetings between debtor governments and creditors such as the IMF, the US government, the World Bank … In every meeting you were positive, bristling with ideas regarding practical solutions. And they kept knocking your ideas down, even though they were good ideas, without proposing a single one of their own. Unbelievable!’
Caging the troika
Alexis’s directive had been crystal clear: the troika could not be allowed to return to Athens as if nothing had changed. So was Jeroen’s threat that if the troika’s return to Athens were impeded, he would end the process.
