Smiling, I dismissed his threats. ‘What matters now,’ I said, ‘is that the negotiations begin in a fashion maximizing the chances of an agreement. Try to be a little more positive about this. In any case, did we not agree that the precise location and process would be the subject of talks between Moscovici and me?’
‘Fine,’ he conceded sullenly, ‘but I want this settled within twenty-four hours.’
Pierre Moscovici and I met that same morning in Brussels. He was entirely sympathetic to our rejection of the troika’s return. In fact, he repeated his view that the troika process had been a humiliation not only for Greece but also for the European Commission, whose role the troika’s behaviour undermined. And in less than a quarter of an hour we had agreed on a sensible process: the political negotiations over debt restructuring, fiscal policy and reform agenda would take place in Brussels. Ministers would talk to ministers and to Pierre (who as a commissioner is equivalent in rank to a minister), while our deputies deliberated in adjacent rooms. Meanwhile, the institutions would be free to dispatch ‘technicians’ to Athens for the purposes of on-the-spot data mining and fact finding. They would talk only to Greek ‘technicians’ about the facts and the data they sought and would refrain entirely from debating or negotiating political decisions. Instead, the facts and data they gathered would be passed back to those engaged in the political negotiations in Brussels. Pierre proposed the new process be called the Brussels Group – the Bee Gees, as Nicholas Theocarakis jokingly named it.
Once Pierre and I had agreed on the Bee Gees, we discussed how to prevent ill-intentioned members of the troika from undermining our agreement. Pierre thought it crucial that we keep the plan secret until Mario Draghi and Christine Lagarde were on board. He feared that if certain people got wind of it, they would find ways to kill it off before it even got going. (While he mentioned no names, I am sure his list of potential spoilers included Thomas Wieser, Declan Costello and of course Poul Thomsen.) So he asked me to maintain radio silence while he tried to convince Mario and Christine. I promised that I would tell only Alexis, and he promised to get back to me within twenty-four hours – before Jeroen’s latest deadline expired.
A tense day followed, in which Pierre and I exchanged messages and drafted a joint communiqué describing the new process, but we succeeded well within the deadline. The Bee Gees were ready to roll. I called Nicholas Theocarakis and asked him to assemble our troops to arrive in Brussels the next morning, ready for battle. I also called Spyros Sagias, who was to orchestrate the reception of the troika’s technicians in Athens.
Sagias feared rightly that, once in Athens, the troika’s storm troopers would attempt to revert to their usual ways, while Alexis was adamant that they should not be allowed the unconstrained access to our ministries they were accustomed to. So the government booked a whole floor at the Athens Hilton and reserved a conference area in its basement to house the troika’s technical HQ. At the troika’s request, ministry officials and technicians from our side would visit them at the Hilton, bearing the files, laptops and hard drives necessary to satisfy their entirely disingenuous hunger for data and facts – data and facts that they knew even before we did as they controlled our ministries’ departments more than we did.
The first skirmish occurred less than twelve hours after our visitors settled in, when Christine Lagarde signalled to my office that her IMF team in Athens was dismayed at being incarcerated in the Hilton and feared for its safety. Allegedly, the Greek government had not provided any security personnel. I telephoned Roubatis, our chief spook, to get the lowdown, and then immediately called Christine. She repeated the story she had been told – that her people in Athens were distressed at their vulnerability. I told her that around three hundred plain-clothes police and secret service officers were guarding the Hilton, as Roubatis had just informed me. Never before, I said, had so much security been provided for the IMF’s mission to Athens. Christine was taken aback and expressed a preference for uniformed police. ‘Why?’ I asked. I did not get an answer. Could the reason have been that the troika wanted to be visible? Without their motorcades escorted by police with sirens blaring, how would the Greek people know that they had arrived? Perhaps it was only to be expected that they needed to be seen to be in Athens and in control.
From day one the troika teams in Athens strove to violate the separation between the political and the technical that Pierre and I had agreed. Questions submitted to our ministries included: ‘How do you intend to deal with the pension funds’ chronic deficits in view of Greece’s demographics?’ While this was a perfectly good question, it pertained to political choices and not to the establishment of facts or the measurement of our situation. Meanwhile, their actual requests for data were so extensive and voluminous that it would have taken an army of civil servants weeks to fulfil them.
In the Brussels Group, meanwhile, the political negotiations were going nowhere thanks to a potent cocktail of the eurozone runaround, the Penelope ruse and the Swedish national anthem routine. To be fair, our side also contributed to the fiasco that these negotiations were turning into. Nicholas Theocarakis had the onerous task of managing an already disparate team that was fundamentally split in two: between my team of professionals, including Elena Panariti, Lazard personnel and Glenn Kim, and Chouliarakis and his younger Syriza cohort. Chouliarakis and company refused to coordinate with my team, arriving late for meetings, going for lunches and dinners at critical moments and generally behaving with the arrogance of those who believed they had the prime minister’s ear. ‘At times I felt like a childminder,’ was how Nicholas expressed his frustration to me.
By contrast, although they had nothing of substance to propose and their only concern was how to avoid any discussion of debt restructuring, the troika were on time, in tune and on target. Nicholas reported to me that when Glenn Kim entered the room, Declan Costello protested again: ‘We cannot have someone in the room who works on debt write-downs.’ Naturally Nicholas asserted our right to have whoever we chose in our team, but Costello’s tactic was telling: warm and fuzzy with Chouliarakis and his gang, cold and brazen with Glenn, Nicholas and Elena – classic divide and rule.
Our side’s failings were apparent in Athens too. The troika’s requests for non-existent facts and reams of data they already possessed may have been ridiculous, but it is also true that our ministries were less than competent in responding. Some, especially those under the control of the Left Platform, refused point-blank to cooperate on the grounds that the whole exercise was a charade. That was a fair point, but for better or worse our government’s policy was to cooperate fully within the framework of my agreement with Pierre Moscovici and within the spirit of the 20 February Eurogroup agreement, which committed us to doing our utmost to establish common ground with the creditors. For as long as Alexis and the war cabinet were committed to negotiating in good faith, the fact that the creditors were violating their side of the bargain did not justify non-cooperation. Theocarakis, Sagias and I spent hours negotiating with some of our colleagues, sometimes pleading with them to reply to requests for data competently and on time. Often we failed to convince them to do so. Sometimes we had to get the data from alternative sources outside the ministry in question or call on the cooperative functionaries of one ministry to get answers that another ministry ought to have provided.
Despite our own side’s failings, there is not a shadow of a doubt that they were not responsible for the impasse. Even if our Brussels Group team and the ministries at home had acted in exemplary fashion, the outcome would have been exactly the same. In the spring of 2015 Greece’s creditors were in no mood to negotiate; they were resolved to re-establish their authority over a territory of their empire that had rebelled and to ensure that none of their other possessions got a similar idea. While commentaries in the Wall Street Journal and the Financial Times made out that Brussels and Athens were the scenes of a major disagreement over fiscal targets, tax rates and administrative reforms, in reality what was happening was the equivalent of the nineteenth-century gunboat diplomacy used by the British Empire.
Alexis, Sagias and Pappas seemed to understand this. Although, little by little and to my great distress, they were abandoning our objective of restructuring the debt and ending austerity, at this stage they were still prepared to take decisive action in order to prevent the troika’s reoccupation of our ministries. Sagias worked tirelessly to keep their technical team confined to the Hilton, while Pappas was threatening to expel them altogether. And on 15 March, when a ridiculous list of questions related to pensions arrived from the troika’s technical team, Alexis exclaimed, ‘Enough is enough!’
He was right. The questions had nothing to do with data or facts; they were purely political. Indeed, they were questions that not even Wolfgang Schäuble could have answered had he been asked them. Germany’s mature and well-funded state has not worked out how to render its pension system sustainable in the long run, given its country’s difficult demographics. How could the Greek government be expected to answer such questions given its newness, the state’s insolvency and a situation in which one in two families had no one in paid work and survived on a single pension? By putting such questions to the civil servants of our overwhelmed social security department, the troika’s technical representatives were inciting them to an act of bad faith: either they would refuse to answer, in which case they could be accused of failing to cooperate, or they would be forced to go well beyond their remit.
With a Eurogroup Working Group teleconference approaching on 17 March, at which we were to ‘take stock’ of the negotiations, Alexis ordered me to instruct Nicholas to make it clear that the troika’s Athens team had crossed a red line. To make sure there would be no misunderstanding, I sat down in Alexis’s office to write Nicholas’s statement so that Alexis could read it first and approve it, which he did the moment he laid eyes on it.
The proceedings of what turned out to be an historic teleconference began in the usual fashion with the troika’s representatives presenting their position. Declan Costello spoke first, then Benoît Cœuré, finally Poul Thomsen. All three read from the same predictable script.
There will be no agreement in April unless the Greek side accelerates … we need a comprehensive approach … there is an urgency to step up the intensity of the work … the Greeks must understand the need not only to respect previous commitments but also the European provisions … it would be a pity if they violated the process of consultations to which they are committed … we are worried about Athens’s temptation towards unilateral action … the humanitarian deal and new instalment law is a matter of concern to us … the process is highly unsatisfactory … they treat the mission as a nuisance …
Once they had finished, and Thomas Wieser as chair had expressed his regret that Greece was not being represented by George Chouliarakis, it was Nicholas’s turn to read the script that Alexis had instructed me to write and which he had approved. In an initially unsteady voice, owing to the gravity of what he was about to do, Nicholas said the following:
I am sorry to report that the behaviour of the institutions’ technical teams in Athens, in the opinion of my government and the prime minister, has violated the agreement that the technical team in Athens would only collect facts and data. My prime minister has now elevated the negotiations at the highest political level. The solution now must be reached not at the technical level but at the political level, which is much above the Euro Working Group level. In this sense I do not think that this teleconference serves a useful purpose and I am clearly and unequivocally not authorized to say any more here.
For a few seconds there was silence. Weiser then tried to carry on as if Nicholas had not spoken. Others joined him in a bizarre effort to pretend that discussion of the negotiations with Greece could proceed. Instructed to do so by Alexis and myself, Nicholas reached for our teleconference device and pressed the Off button. We looked at each other. And smiled. It was a proud moment but one we knew we would pay for dearly. Within hours, leaks to the media from the usual sources were portraying Nicholas, one of the most congenial, cultivated, nuanced, moderate and brilliantly educated Europeans I know, as a brute, an imbecile and a spoiler.
That same day Declan Costello sent an email to Nicholas, to be passed on to me, warning us not to table our Humanitarian Crisis Bill in parliament. He ‘strongly urged us’ to consult with him, Thomas Wieser, Poul Thomsen et al. before proceeding. ‘Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with your commitments,’ he wrote. It was a perfect gift – my cue to push the bill immediately through parliament while making Costello’s email public, thus exposing the troika’s opposition to our plan to extend urgent help to those Greek families suffering the most. The outcry in Greece and beyond was deafening. Costello must have kicked himself. But the troika learned their lesson well: from then on they never emailed or put in writing anything that revealed their intent or character – at least, not until one day in late June when they were ready for the kill.
The next morning the troika’s technical team headed for the airport. For the first time in weeks I felt that there might still be a chance to unite our side behind a comprehensive plan to end the crisis written for the Greek people by their own government. But to succeed it would require a collective willingness to do to Mario Draghi, Angela Merkel and Christine Lagarde what Nicholas had done in his inaugural Eurogroup Working Group teleconference: press the Off button.
Merkel’s spell
During his years in opposition Alexis had been publicly disparaging about the German chancellor. His sarcastic quips about ‘Frau’ or ‘Madame’ Merkel had been plastered all over the press, while Syriza had been promising that the moment they won office they would unilaterally tear up the MoU, write off the debt and perform other amazing feats inconsistent with their stated intention of negotiating a new deal for Greece within the eurozone and the EU. Alexis in particular had laboured under the illusion that forces beyond Europe, from Russia and China to the United States and Iran, would come to our assistance, while Europe’s periphery would somehow help contain Berlin in general and Mrs Merkel in particular.
This was in direct contrast to my oft-stated opinion that of all Greece’s potential allies in Europe or beyond, Mrs Merkel was our best hope. Naturally, this view startled those, including Alexis, who expected me to look instead towards countries such as France, Italy or Spain, for whom Merkel represented the common enemy. But I was convinced that no government of a deficit eurozone country would dare oppose Berlin, even if they wanted to in their heart of hearts. Instead, the key to our success lay in Angela Merkel’s determination to keep the eurozone together, as a result of her small-‘c’ conservatism and her aversion to structural breaks.2
From 2010 to 2014 I had made it my business to convince Greek politicians that the only way to force Chancellor Merkel to step in to deliver debt relief and a reasonable agreement for Greece would be to present her with a simple choice: evict us from the eurozone at your own political cost or deliver us from the workhouse. I was and remain convinced that, unlike Wolfgang Schäuble, who would have jumped at the opportunity to chuck us out of the eurozone, Angela Merkel would shy away from this course, however reluctantly. And from the day I assumed the finance ministry I had kept my eye on the German leader, ensuring that nothing we did would prevent her, if she chose, from presenting our debt-swap proposals and revised reform agenda to the Bundestag as her own solution to the Greek crisis. Allowing her to portray these proposals as her own was a necessary condition for a decent agreement. But it was nowhere near sufficient. To motivate her to adopt our proposals at all we had to remain determined to stand our ground in the face of Wolfgang and his sidekicks’ threats of Grexit. Only then would the chancellor step in.
And there lay the difference between Alexis and me. He had a very negative view of Merkel, seeing her as an enemy who would never yield unless Washington or Moscow or some other power forced her to. But I saw in her a pragmatic politician who would, once all other alternatives had been exhausted, do the right thing. Unlike many Greeks, I neither demonized Merkel but nor did I expect her to act on our behalf without due motivation. Thus, when she intervened helpfully before the 20 February Eurogroup, my expectations were confirmed: the chancellor would step in at the last moment and as a last resort if she feared that we would not budge. Equally, when a couple of weeks later she promised another positive intervention which Wieser’s visit to our flat put paid to, my expectations were also fulfilled: the chancellor would never yield until she had to.
But Alexis saw Merkel’s behaviour differently. When she intervened before 20 February, his negative expectations resulted in euphoric surprise. Then, with his expectations raised, Merkel was at liberty to dash them at will, causing Alexis to sink into the depths of misery. She used this capacity to toy with Alexis, lifting his spirits, depressing them and raising them again as it suited her. I did my best to weaken her influence over my prime minister with my own analysis of her behaviour, arguing that the only way to secure a decent agreement was to ensure she was constantly aware that we were not afraid to press the Off button. But it was not working. By April I sensed that Alexis had succumbed to the chancellor’s spell.
The reader would be wrong to think that Alexis was easy prey for Mrs Merkel. He was not. It took the legacy of the Cold War to push our young prime minister towards her, and it took her astounding work ethic to subdue him fully once he was there.
The cataclysmic civil war of the 1940s had left Greeks bitterly divided and in awe of two hegemons: Russia and America. Rightists looked to the United States as their bulwark against the red bear, while leftists hoped the USSR would support them were they ever to win government. Of course by the time Syriza came to power, the USSR no longer existed, yet a section of Syriza continued to see Moscow as a potential friend in our struggle against the neoliberal troika. Quite a few even nursed fantasies of petrodollars sent by Vladimir Putin to support our cause.
While relatively unsusceptible to this delusion, Alexis seemed nevertheless convinced that some help would come from Russia. When he told me this I did my best to discourage him. ‘Russia is not China,’ I remember telling him. Even if Putin was prepared to provide money in exchange for some pipeline or state-owned company, I told Alexis we should turn it down for three reasons. First, Putin was an unsafe friend, and Russian business notoriously incapable of and disinclined towards proper long-term investment – unlike for instance the Chinese. Second, Russia was at sea financially, and any promise of substantial help would prove hollow. Third, Putin and his regime had an appalling human rights record: did we, whose only real backers were the progressives of Europe, want to be associated with such a state?
At the same time, our problematic coalition partners from the far Right had the opposite idea: that we throw ourselves at the feet of the United States so as to extricate ourselves from Merkel’s grip. On one occasion, during a break from a cabinet meeting, Defence Minister Kammenos walked over to say that I should not allow the Germans to worry me. ‘I can get you billions from the other side of the Atlantic and a swap deal with the Fed that will make it painless to get out of the euro,’ he said.3 I smiled and tried hard not to give him a piece of my mind. He continued, suggesting that I meet a friend of his, a Greek-American on Wall Street who had it all worked out. Alexis was listening and said that I should look into it. As the finance minister of a financially stressed country I had an obligation to leave no stone unturned, so although I was convinced it was a sham, I did my duty and met the said gentleman at my office and even asked Jamie Galbraith to visit his associates in New York. As I had guessed, the proposed dollar lifeline was a phantom.4 By the time I had confirmed and reported to Alexis that the Fed swap and the American cavalry were a delusion, Putin had apparently also told him not to expect any money or indeed any help at all from Russia. ‘You must strike a deal with the Germans,’ he said.5
With no hope of support from either Cold War superpower, Alexis had little option but to turn to Merkel, which left him vulnerable to her psychological manipulation and remarkable diligence.
In the wake of the fruitless fiasco that was the Eurogroup of 9 March, Alexis spoke to Angela Merkel on the phone to ask for a second intervention. In response the chancellor requested that he have his people carefully annotate the MoU with their precise points of disagreement and what they proposed instead. Naturally, Alexis agreed and called me immediately afterwards with a request that I prepare the document. That night I stayed at the office alone, once more doing battle with the MoU’s fifteen paragraphs. Underneath each paragraph I wrote a colour-coded commentary: in green I explained which aspects of the paragraph we agreed with and why; in red I listed our objections and explained them; finally, in blue, I presented alternative policies with which to replace what we objected to. By the following morning, the original four-page document had grown to twenty-seven pages.
On 20 March, three days after the Eurogroup Working Group teleconference at which Theocarakis had pressed the Off button, Alexis was due in Brussels for an EU summit. Angela Merkel had suggested that after the formal dinner the two of them get together so that he could present the document and they could discuss it. In the event the formal dinner dragged on longer than expected, almost to midnight, and Alexis thought that the chance for their tête-à-tête had disappeared. Not so. The indefatigable Angela took him to an adjacent seminar room and proceed to spend hours with him, going over every sentence, every word, every nuance in the document. When at last they had finished, she congratulated him on the text he had brought – twice, in fact, as Alexis told me with a self-satisfied glow. Her congratulations, her diligence and her mastery of the Greek programme in incredible detail made quite an impression on Alexis.6
Merkel’s influence over him had been growing steadily, and when the chancellor finally delivered her coup de grâce, it targeted the solidarity between Alexis and me. In essence, her proposal was this: given the deep dislike that most Greeks harboured for Wolfgang Schäuble, she suggested that they sideline their finance ministers – let Varoufakis ‘cancel out’ Schäuble, and Schäuble ‘cancel out’ Varoufakis, to use her words – while she and Alexis worked behind the scenes to reach a reasonable agreement. To do this, Angela Merkel suggested they establish a third level of negotiations, separate from the Brussels Group and the Eurogroup and free of me and Schäuble, at which Alexis was promised concessions impossible at the Eurogroup.
Alexis loved the idea. A secret meeting was thus arranged to take place in Frankfurt between their envoys, who would be known thereafter as the Frankfurt Group. Merkel chose Martin Selmayr, a German functionary in the European Commission, to represent her, while Alexis selected Nikos Pappas. They were joined by Benoît Cœuré, representing Mario Draghi, and the ubiquitous Poul Thomsen, representing Christine Lagarde. The Frankfurt Group was a microcosm of the Eurogroup except for three casualties: Wolfgang, myself and Pierre Moscovici, who was replaced as Juncker’s representative by another Frenchman, Luc Tholoniat, who also worked for the commission.
The Frankfurt Group proved largely irrelevant, but it had its one major, intended effect: Alexis became convinced (or so he said) that I was making an enormous contribution to the cause by ‘cancelling out’ Wolfgang, but in reality Angela Merkel had succeeded in sidelining me. It was a brilliant ploy which succeeded in spreading discord in our ranks and offering Alexis hope that she fully intended to dash. Within a month of the formation of the Frankfurt Group, bundling me and Schäuble together had had a sinister side-effect: in the collective consciousness of the war cabinet Wolfgang and I were now in the same mental box – two combatants that neutralized one another. But by the middle of May, what had begun as a compliment – that in sacrificing myself I had succeeded in taking out Schäuble – had metamorphosed into a charge against me: that I was in cahoots with Wolfgang Schäuble, plotting with him behind the back of the chancellor and my prime minister to introduce capital controls and bring Greece out of the euro.
Such an insinuation could never have been believed without generous assistance from within our War Cabinet. Imagine my horror when I discovered that not only was assistance being given but that it was based on, possibly initiated by, false reports from Greece’s intelligence services.
To this day people still ask me, ‘When was Alexis turned?’ It is a question that I refuse to engage with since I know I shall never be able to answer it to my satisfaction. Nevertheless I listen to the answers others give with some interest. Of those, one fascinated me. In early 2016 Danae and I were having dinner with another couple, a film director and his wife. As our partners were debating the question, the film director and I kept silent, until suddenly he volunteered a laconic answer: 23 March 2015. Startled by his accuracy and certainty, I asked why that particular date. Being the visual artist that he is, he pulled out a tablet to show me two photographs by way of explanation: one was of Alexis entering the Chancellery on his first formal visit to Berlin, a couple of days after his late-night meeting with Merkel in Brussels.7 In it he looked downtrodden. The second was of him leaving an hour or so later accompanied by Chancellor Merkel, with a military guard of honour paying its respects. He looked jubilant.
