Afterwards, talking to Elena Panaritis in Danae’s presence, I described the unpleasantness and the havoc that followed this angry exchange: ‘Once again I was inches from resigning today. But I am not going to do them the favour. Alexis tried to defend me but did so clumsily.’
‘They have enchanted him,’ said Elena.
‘No, it’s not that,’ I said. ‘He has surrendered internally. He is tired and has lost his spirit. But he is our last hope. I shall stay until that hope disappears totally.’
16 Adults in the room
Hope continued to dissipate over the next month as the newsreel of our decline went into fast-forward.
On 1 June George Soros tries to contact Alexis via my channels. For years I have been falsely portrayed by the pro-troika establishment and the anti-Semitic Right as Soros’s stooge in Greece, so his message to the prime minister comes as a perverse vindication. ‘Fire Varoufakis! Europe cannot afford to have two open wounds at once – Greece and the Ukraine [where fierce fighting was taking place]. Athens must capitulate to Germany now so that Europe can dedicate itself to resolving Ukraine. For this Varoufakis must be removed.’ Months later, a further, bitter vindication arrives when the EU and the IMF announce that the same debt swaps and nominal income indexed bonds that I had been proposing for Greece would be used to restructure Ukraine’s public debt.
On 2 June Euclid texts me from Brussels: ‘We are being defeated on all fronts!’
On 3 June the troika announces that, for the first time ever, they will present us with their proposals. Fearful that we will leak them, they summon Chouliarakis to a seminar room at a godforsaken hour to present their demands by PowerPoint, with George taking notes. Having read his notes, I send Alexis my interpretation: ‘This proposal was written by the IMF with the intention of forcing you to reject it. Their strategy is clear: demand so much austerity and loss of sovereignty that either Berlin will yield on debt relief or Greece will break.’
On 4 June I ask Euclid, ‘Did we present our plan to the troika? Or did we let them beat us about the head with their SLA?’ Euclid texts back: ‘No prizes for guessing!’
On 5 June our attempts to default on the IMF fail again. This time, instead of discovering a hidden stash of money, the IMF defers our payment to the end of the month, to be bundled up with later tranches, something which Christine Lagarde told me in her Washington office two months earlier was impossible.1
On 6 June I inform Alexis of curious meetings taking place between a member of our war cabinet and a functionary within my ministry who has been undermining my algorithmic method for identifying tax evaders. That same day Pappas explains to journalists via text that I have to be removed because I am the ‘anchor’ that has been holding us back from an agreement with the troika.
Between 7 and 9 June I am in Berlin, where I have the meeting with Wolfgang Schäuble at which he stuns me with his helplessness. I also meet Green and SPD parliamentarians and deliver my speech at Berlin cathedral. In it, I recount US Secretary of State James F. Byrnes’s 1946 Speech of Hope, which triggered Germany’s rehabilitation and reindustrialisation, and invite Angela Merkel to deliver her own Speech of Hope for Greece.
In response, between 10 and 15 June, Gesine Schwan, twice the SPD’s candidate for the German federal presidency, impressed by my speech in Berlin and by the Plan for Greece that I shared with her, tries to convince Germany’s vice chancellor, Sigmar Gabriel, to do business with me. His office responds positively to the latest version of my plan, signalling that it is a good basis for an agreement. A promising dialogue evolves until 15 June, when Gabriel tells the German tabloid Bild, ‘The game theorists of the Greek government are in the process of gambling away the future of their country … Europe and Germany will not let themselves be blackmailed. And we will not let the exaggerated electoral pledges of a partly communist government be paid for by German workers and their families.’ Gesine is appalled. She emails me to say she feels ashamed for Gabriel. That same afternoon I travel to Herakleion, the capital of Crete, where I address thousands of people in the main square.
On 16 June a meeting of Syriza MPs takes place in the old Senate Room at Parliament House. All seats in the auditorium are taken by the time I arrive, but instead of accepting an invitation to take a ministerial seat next to the podium I choose to sit on a step in the stalls next to a friend and former academic colleague I have not seen for a while.
On 17 June the newspapers print an image of me sitting on the step under the headline FLOORED! and accuse me of a lack of respect for parliament. Upon seeing a photo of me on the front page of the Financial Times, Norman Lamont emails me: ‘Dear Yanis, I see you remain bloodied but unbowed. You looked tired but absolutely determined … And rightly so, let’s hope for some light and reasonableness soon.’ That same day I contact Ángel Gurría, secretary general of the OECD, seeking more help with my version of the reform agenda. Ángel replies that the OECD and his team are at my disposal.
The next day, 18 June, the Eurogroup meets. It is the troika’s final onslaught.
Adults behaving badly
Christine Lagarde arrived at the Eurogroup meeting of 18 June fuming. At the meeting of our parliamentary party on 16 June, where I had sat on the floor, Alexis had claimed that the IMF bore ‘criminal responsibility’ for the situation in Greece. ‘Hi, the criminal-in-chief is here,’ said Christine sarcastically by way of greeting. My expression seemed to calm her down. ‘I am not holding you responsible,’ she said graciously.
The free-for-all against us was led by Mario Draghi. His was less a speech and more a recital of the numbers of euros that Greek depositors had withdrawn from their accounts during the past week: ‘Monday, 358 million. Tuesday, 563 million. Wednesday, 856 million. Thursday, 1,080 million.’
Luis de Guindos later asked, ‘Will the banks open tomorrow?’
The answer from Benoît Cœuré, Draghi’s deputy, was, ‘Yes, they will open tomorrow. But Monday?’
Nothing speeds up a bank run more effectively than a central banker reciting its progress while his deputy signals their intention not to intervene except perhaps by closing the banks in three days’ time.
Months later, a whistle-blower from within the ECB let it be known that on 18 June, the very same day as the Eurogroup meeting, Mario Draghi commissioned an independent legal opinion from an outside law firm. The question he asked was whether the closure of Greece’s banks was legal or not. The ECB has a large, competent and expensive legal department of its own. That Mario should choose to bypass it and go to a private firm suggests a certain queasiness about what he was about to do – shut Greece’s banks.2
Meanwhile, Wolfgang’s Eurogroup cheerleaders were taking pot shots not at Greece this time but at the troika – for being too lenient on us. Slovenia’s finance minister chastised Lagarde and Moscovici for having watered down the original MoU, a criticism Christine and Pierre no doubt welcomed as evidence of their even-handedness towards us. Meanwhile Wolfgang reprised one of his favourite routines, demanding that no one send him any amendments to the MoU in writing because he would then be obliged to take them to the Bundestag.
When my turn came, in addition to my usual review of the burning issues – reforms, debt swaps, the need for credible targets, a management plan for investment and non-performing loans, the reasons why the institutions’ PowerPoint proposals made no financial, economic or political sense – I put forward one new proposal. Instead of quarrelling about the details of tax rates on the basis of unsafe models, I said, how about ‘a deeper, more comprehensive, permanent reform? An automated hard deficit brake that is legislated and monitored by the independent fiscal council that we and the institutions have already agreed upon … Consider this to be a firm proposal that our government will implement immediately after an agreement.’3
If they had any interest in reaching an agreement with us, they ought to have jumped at my proposal. Michel Sapin made some encouraging noises. ‘The institutions must take Yanis’s proposal seriously. Yanis is right on this. He was right on investment too … Experts cannot resolve everything. The Eurogroup is a political forum. It should make its political contribution – even if the matter is elevated to a higher political level.’ But from everyone else, I received the Swedish national anthem treatment.
When, later in the meeting, I expressed my astonishment that such a momentous proposal had been ignored, Jeroen killed the discussion with majestic authority: ‘[A]ny new proposals brought today must be looked at by the institutions. It is not for the Eurogroup to assess them.’ In due course, my debt brake proposal was dropped by Chouliarakis and Sagias so as to appease Wieser and the Eurogroup Working Group.
At the post-Eurogroup press conference a Greek journalist asked Christine Lagarde whether she was happy that the rest of the Eurogroup had quashed the IMF’s support for Greek debt relief. Christine pointedly ignored the question’s substance and chose to vent her anger instead: ‘For the moment we are short of a dialogue; the key emergency is to restore the dialogue with adults in the room.’
She was of course right. We needed adults in the Eurogroup, adults in Berlin and adults in Maximos. The problem was that there was a scarcity of adults in all three. However, the media reported Lagarde’s words as an attack on me, providing an addition to the long list of epithets they had used to describe me thus far – ‘adolescent’. The next time I saw Christine, I said, ‘The press report that your we-need-adults-in-the-room comment referred to me.’
‘Nonsense,’ she replied amicably.
The next day, 19 June, I received a message from Gesine Schwan: ‘I was moved by your speech at the Eurogroup.’ By that stage I had learned my lesson: to get round the media’s distortions and fend off future misreporting of my Eurogroup contributions, I was now posting my speeches on my website verbatim. ‘Gabriel and the SPD must be mad not to see the merit in what you proposed,’ she said. In my diary I wrote, ‘If only Alexis had been moved too.’ On Gabriel and the SPD, recalling my not-so-secret dinner with Jörg Asmussen and Jeromin Zettelmeyer in early February in Berlin, I scribbled, ‘They are not mad. They simply seem to share Mrs Merkel’s strategy not to touch the issue of debt restructuring.’
That night, back in Athens, Danae and I took a break to have dinner with a friend and his wife. Olga said something that hit a nerve: ‘You seem to have lost this battle. From what you are telling me, Alexis wants to surrender. Encourage him to do so with some dignity. Tell the people that this battle has been lost.’
On 20 June, as Sagias and Chouliarakis continued their comical attempts to write the final SLA on the troika’s behalf, I met Alexis in Maximos and offered him a piece of advice that was very different to anything I had ventured before. I told him that it was now clear to me that his mind was made up – that he wanted to surrender – and that while I disagreed with his decision with every sinew, as he knew, he was prime minister and must be the one to decide. ‘However, whatever you decide, don’t for goodness’ sake mislead our people. Do not get them out onto the street, fire them up, only to deceive them afterwards. I hear you occasionally speak of a referendum. Don’t do it unless you want to revive our original battle plan. If you want to surrender, surrender. But do it this way…’ I handed him a single page with a draft of a short speech, an address to the nation to be read out on television
Fellow Greeks. We have fought valiantly against an ironclad troika of creditors. We gave it our all. Alas, it is hard to argue with creditors who do not want their money back. We faced down the world’s strongest institutions, the local oligarchy, powers much greater than ours. We have received no help from anyone. Some, like President Obama, had kind words for us. Others, like China, looked sympathetically towards us. But no one came forward to offer any tangible assistance against those who are determined to crush us. We are not giving up. Today I am signalling to you that we choose to live to fight another day. Tomorrow morning I shall accede to the troika’s demands. But only because this war has many battles ahead. As of tomorrow, and after I yield to the troika’s terms, my ministers and I will embark upon a pan-European tour to inform the peoples of Europe about what happened, to energize them and to invite them into a common struggle to end the rot and to reclaim Europe’s democratic principles and traditions.
After reading it Alexis said in his now familiar dejected manner, ‘I cannot admit to our people that I’m going to surrender.’ His meaning was clear: he had indeed decided to surrender; he just could not bring himself to tell the people.
A special eurozone summit had been scheduled for Monday, 22 June in Brussels. At our cabinet meeting the day before I told my colleagues that we faced an historic choice between two clear options. One was to surrender, and I told them about the speech I had suggested Alexis make to the nation. The other option was to fight on. But if we did so, I warned them,
As of Tuesday the ECB will attempt to close the banks and put in place capital controls. It only makes sense to go down that road if we mean to respond to their threat with ones of our own: that we shall respond to the ECB’s aggressive move by deferring unilaterally the redemption of the €27 billion of the ECB’s SMP-era Greek government bonds to some distant future date; and that we shall activate the parallel payments system that I first introduced to you last February. If we are not prepared to respond this way, we should surrender tomorrow.
Before the eurozone summit, a Eurogroup meeting was held in preparation. In my speech I reviewed and defended the concessions Alexis had made without mentioning my strong disagreement with them and added a concrete proposal that would help reduce the new loans that would be required from the Eurogroup in the event that they were accepted.4 Looking back, I am amazed at my loyalty to a cause I considered both lost and wrong. But I suppose I remained loyal not only because I had a duty to do so but because I knew that the troika was not interested in Alexis’s concessions. They were determined to shut down the banks to make an example of him – at which point there was a slight chance, I thought, that he might shake off his acquiescence and bounce back.
The otherwise pointless Eurogroup meeting featured two interesting exchanges. At one point Wolfgang Schäuble attacked Pierre Moscovici for daring to make positive comments about Alexis’s concessions before he had been given the green light to do so by the IMF or, indeed, by Berlin. When Pierre attempted to deny this, suggesting that the IMF had been tardy in giving its consent, Wolfgang blew his top. ‘There have been positive comments by the commission … We are not idiots! You can play any game to blame the IMF. Without the full involvement of the IMF there is no way…’
Browbeaten, Pierre begged for mercy. ‘It was never, never, never in the mind of the commission to blame the IMF,’ he pleaded. ‘Maybe we reacted faster but we work together.’
The second exchange was between Schäuble and Mario Draghi. Wolfgang demanded to know how much longer the ECB would provide emergency liquidity assistance to Greece’s banks. Visibly angered, Mario responded, ‘I understand that there is an interest in how long we provide ELA. I appreciate the interest in knowing how long we shall continue providing ELA. But you will want to appreciate that our independence is even more important. So, like I am asking you questions about fiscal policy, and I have to restrain myself from doing so, I would expect the same restraint from yourself.’ For the rest of the meeting Wolfgang and Mario were clearly angry with one another.
Afterwards, Alexis and I met Donald Tusk, the Polish president of the EU Council. His message was stark: there should be no mention of debt relief in any meeting from then on. As we were leaving, I said to Alexis, ‘Your duty is to mention nothing else, unless you want to fold – in which case do it quickly to end the agony.’ His expression made it clear that he wanted to.
According to Euclid, who accompanied him to the eurozone summit that night, Alexis did everything in his power to surrender, but, as I had feared, Merkel would not allow him to. His concessions were dismissed as insufficient and he was told to return to the troika, conclude a further agreement with them and then pass that through another Eurogroup in two days’ time.
On 23 June Sagias and Chouliarakis continued their pitiable redrafting of the troika’s SLA, convinced that greater concessions would secure them a deal with the troika the following morning, which would be formally agreed in the Eurogroup meeting that afternoon. It was as if Faust were preparing to sell his soul to Mephistopheles, not realizing that Mephistopheles had no interest in buying. In the event there was no deal. All that these concessions bought Alexis was a proposal from the troika for a three-month extension of Greece’s loan agreement, after which the creditors would come back for more – much more.
At the ensuing Eurogroup the gathered finance ministers were justifiably annoyed that they had been convened to no purpose. Jeroen Dijsselbloem undershot his own low standards by refusing to distribute the revised SLA that Alexis had tabled, distributing only the troika’s proposed SLA instead. Taking advantage of everyone’s fatigue, I suggested that the Eurogroup as a whole deserved a break from Greece, and that the proposed extension be increased by a further six months at least, until March 2016, so as to spare those involved these incessant meetings. Almost everyone seemed sympathetic to the proposal, which was a rare experience for me, but ultimately no one dared to support it. Two hours later we adjourned until the following day in the hope, which I did not harbour, that Alexis’s team and the troika would reach an agreement overnight.
Back at the hotel, Alexis, Sagias, Dragasakis, Euclid, Pappas, Chouliarakis with some of his team and I gathered in a meeting room. I had nothing to say. They all knew where I stood. Those who had been confident that significant concessions would lead to some kind of agreement were deflated. Instead, the Eurogroup had ended with an agreement that we would all meet up at 6 a.m. to resume work on our concessions. Leadership was needed. It was time for Alexis to show his strength, but he went to ground, announcing that he was tired and would be dining with Kammenos, our right-wing minister of defence.
As he left the room, Euclid and Dragasakis erupted into a huge row for reasons I did not catch, which ended with Euclid storming out. Dragasakis and Sagias then disappeared, leaving me behind with Chouliarakis and two of his aides. Perhaps it was sheer inertia that impelled them to continue work on the SLA. Whatever the reason, they were busily writing in yet more concessions. I took a look at what they were doing. ‘There’s no way that our MPs will vote for the elimination of the tiny “solidarity” benefit to pensioners on less than €200 a month,’ I told them.
‘There are MPs from other parties that will,’ one of them replied.
There I had it: we were already counting on enlisting pro-troika opposition MPs. Operation Split Syriza was under way.
