Just as I was telling him that it would be unreasonable to expect us to cooperate in blackmailing ourselves by asking for capital controls and that they were fundamentally at odds with the principles of monetary union, Michel Sapin, the French finance minister, approached to ask me if I had news from the Brussels Group and our negotiations with the institutions. A brief chat ensued, after which Michel resumed his seat on the other side of the hall next to Wolfgang Schäuble. Benoît and I had resumed our whispered conversation when suddenly I heard shouting. Benoît looked concerned.
‘What happened?’ I asked him. Concentrating as I had been on my discussion with Benoît, I had failed to notice the drama unfolding behind me.
‘Michel shouted at Wolfgang,’ he replied.
‘Why?’ I had been aware only of raised voices, whereas Benoît, who was facing me, had seen everything and might also have actually heard what was said.
‘Because Wolfgang said that he wants the troika in Paris,’ said Benoît with a bitter grin.
It all made perfect sense. The troika that had been born and raised in Athens was now Paris-bound because its ultimate mission was to control the French national budget. The harsh and failed policies imposed upon Greece had nothing to do with our country. The threat to close down Greece’s banks that Benoît had been relaying to me at the very moment Michel yelled at Wolfgang had nothing to do with our banks. They were Wolfgang’s signal to Paris: if France wanted the euro, it must forfeit sovereignty over its budget deficits. There was a logic to all this – a twisted logic perhaps, a logic of the type that would end up damaging the European Union irreversibly, but a logic nevertheless. One thing remained puzzling, though: the manner in which Michel and Benoît were colluding in the French government’s subjugation by playing their part in ours.
On my way back to Athens I bumped into another Frenchman, Pierre Moscovici, at Washington airport. With half an hour to spare before boarding our respective planes, we struck up a conversation. ‘Germany is a problem, and not only for you,’ he suggested. But he added that an agreement between us and our creditors was possible ‘despite Schäuble’. I retorted that the news I was taking home with me from the IMF and the US administration was that an agreement could only be sealed with the joint consent of Washington, the ECB and the European Commission. He agreed. I mentioned my exchange with Benoît and the threat of bank closures during the negotiations.
‘Such loose talk can easily be interpreted in Athens as an existential threat,’ I told Pierre.
‘Don’t worry,’ Commissioner Moscovici replied. ‘Benoît is prone to angst and, as a central banker, feels the need to have contingency plans over everything. I shall speak to him on your behalf.’
We agreed to meet the following week. Unconvinced by his reassurances, I bade him farewell.
Back in Athens, Benoît called me to complete the conversation interrupted by Michel’s spat with Wolfgang. Possibly because Pierre had called him in the meantime, Benoît was far more reassuring. I then took him to task on the veiled threat of bank closures, reminding him that the banks would be closed not by natural causes or because of some accident but as a result of a purely political decision by his ECB.
CŒURÉ: Don’t say that. The banks may close because they have run out of eligible collateral.
VAROUFAKIS: This is impossible. In my capacity as finance minister, every other week I guarantee worthless IOUs issued by the banks to the tune of tens of billions of euros which they then post for collateral with the Bank of Greece. The only way they will run out of eligible collateral is if you guys at the ECB ban the Bank of Greece from accepting my guarantees. And this is 100 per cent a political decision, since we all know that the Greek government never had the capacity to honour these guarantees.
CŒURÉ: You are right. But as a central banker I must be ready for such a decision by two-thirds of the governing council.8
VAROUFAKIS: I understand this. Just know that, if this happens, our government will not stay passive and simply await the Cyprus-style ‘solution’ that some are planning for us. We shall not budge. Instead we shall, even if you close down our banks, create our own euro-denominated liquidity based on electronic tax-backed IOUs. Of course if you push us down that road, with defaults on the IMF and the ECB, you will be pushing us, against our will, to the point of no return.
CŒURÉ: Thank you for telling me all this. It is good that I know it. Now let me make my own commitment to you: if I sense that events are moving in that direction, against our will, I promise to let you know in advance so that you can call for an extraordinary EU Council summit to demand a political decision at the highest level.
VAROUFAKIS: I am happy to hear this, Benoît. These matters are above our pay grade.
And so they were. The decision would rest with Alexis.
Ambushed in Riga
Two days. That’s all the time I had in Athens in which to convince Alexis to adopt the strategy that my Washington trip had produced – the Plan for Greece along the lines of the Polish strategy which David Lipton had suggested and the missive to Merkel proposed by Lee Buchheit – before flying to Riga, Latvia, for a Eurogroup meeting on 24 April that would surely be the beginning of the endgame. I put my proposal in writing, taking care to ensure that no copy could escape online and that the only copy Alexis received was the printout that I handed him myself.
My meeting with Alexis went exactly as I had feared. ‘They will consider it a casus belli,’ he said with his familiar expression of melancholy in response to the idea that we put forward our own Plan for Greece. As for Buchheit’s idea, Alexis barely gave it a second thought. Having skimmed my written proposal for a few seconds, he set it aside and said, ‘Merkel promised me that she will step in. Let’s not cross her now.’
‘She will give you nothing,’ I replied, ‘unless we present our own credible agenda and back it up without our own pre-emptive strike.’
‘Now is not the time. You go to Riga tomorrow and yield on nothing. Don’t be intimidated. Just hold the fort there. I shall be talking to Merkel again tomorrow night to get to an agreement at our level.’
It was clear that Merkel’s spell had taken hold. All I could do was hope that somehow Alexis would convince her to do something she neither wanted nor had a compelling reason to do.
The Eurogroup of 24 April had been convened primarily as part of the celebrations for Latvia’s presidency of the EU. In theory it would be relatively informal, and the whole meeting had been scheduled to last no more than two hours. The day Nicholas Theocarakis and I flew to Riga, Alexis contacted us with words of encouragement: ‘It will be an easy Eurogroup, as it is largely ceremonial and nothing much will be said about Greece. Whatever you do be cool and do not yield an inch to them.’ Alexis’s capacity to lift my spirits with a few well chosen words was undiminished. Despite the qualms weighing me down, his heartening message would serve me well in the hell of Riga.
Fotini, my secretary, alerted me to the first sign that something was amiss the moment we arrived in the Latvian capital: my team was booked into a hotel a fair distance away from where I was staying, making it hard for us to meet for essential consultations. Unwilling to succumb to conspiracy theories, I decided to interpret it as a logistical cock-up.
On that first night, after a gala dinner of no consequence, I returned to my hotel. Unable to relax, I summoned Nicholas from his distant hotel to brainstorm the next morning’s Eurogroup. With half an hour to kill before Nicholas arrived, I went downstairs to wait for him in the lobby. There I saw them.
All the troika players were at the bar: Poul Thomsen, Benoît Cœuré, Thomas Wieser, Jeroen Dijsselbloem, Pierre Moscovici and some others I cannot recall. I decided to say a collegiate hello. They were tongue-tied and manifestly uncomfortable. To break the ice, I asked playfully, ‘So, what have we here? Have I caught you in the act?’ My light-hearted remark was not reciprocated; instead I was told that they were having a meeting but I would be welcome to join them a little later. I smiled, wished them a good night and left.
Next morning, Nicholas and I were walking towards the room where the Eurogroup was to be held. Behind me I heard Pierre Moscovici greet me convivially. So we walked together and chatted. ‘I am proud we did this,’ he said, referring to the Brussels Group. ‘It is only right that these negotiations take place in Brussels with ministers talking only to ministers and technocrats talking with technocrats.’ Some of the lost honour of the Commission had been recovered, I told him as we arrived.
The room was eerily half-empty. Where was everybody? Apart from Pierre, Nicholas and me, only Jeroen Dijsselbloem, Thomas Wieser and four or five other delegations were present. Wolfgang Schäuble, Mario Draghi, Poul Thomsen, Michel Sapin and other key ministers were missing. As the meeting began, Nicholas and I looked at each other, convinced that something distinctly unpleasant was brewing nearby. The first item on the agenda was a procedural issue that required no debate. Once that had been dealt with, Jeroen said, ‘OK, colleagues, let us now move on to the second item on the agenda, Greece.’ Suddenly the doors opened, and Wolfgang, Mario, Poul, Michel and the other missing ministers flooded in.
First blood was drawn by Jeroen. In his introductory statement he demanded the troika’s return to Athens in order to end the ‘inefficiency’ of the Brussels Group. I looked at Pierre. Would he defend the process he had so recently been praising? It was as if the Eurogroup’s president had planned to humiliate the commissioner once more by making him eat his words, just as he had before the second Eurogroup meeting in February.9 And eat them he did. ‘Technical discussions and political ones,’ Pierre conceded in the last sentence of his statement, ‘must be combined and held at the same place, together.’ In case anyone was in any doubt, Poul Thomsen hastened to clarify that the place he was referring to was Athens.
Poul then performed a volte-face of his own to rival Pierre’s. The same man who had confessed to me on 1 February during our first encounter in Paris that Greece’s debt was unsustainable and that tens of billions of euros of debt relief should have been granted well before 2015 now sang a radically different tune. Until the Syriza government was elected, Poul argued, Greece’s debt had been sustainable; it was only after we had come to power that it had become unsustainable; neither debt relief nor extra money would now be necessary were it not for our government.10
The ground for the next blow was prepared by Mario Draghi, who presented his view that, unlike previous bank runs, the current one in Greece was not infecting the rest of the eurozone. In other words, Grexit would hurt the Greeks but not the other countries who shared its currency. This was the cue for Schäuble’s cheerleading brigade of finance ministers to go on the offensive with the threat of Grexit. In response to Thomsen’s absurd report that our backtracking and delays had pushed us once more into the red, the Slovak minister exclaimed, ‘Unbelievable!’ and went on to make a speech that ended, ‘We are ready to help Greece. But if Greece does not need help, maybe the time has come to talk consequences.’ Soon after, Wolfgang Schäuble lent his support to the Slovak’s tough talk: ‘We have moved fast in the wrong direction … [Laughing. More exclamations of ‘Unbelievable! Unbelievable!’] … I cannot imagine how we shall have a solution.’ The task of speaking the unmentionable words fell to the Slovenian minister: ‘There is no way Slovenians can be persuaded, who are most exposed to Greece, that they put additional effort to help Greece get out of the situation. So, I think we should talk about Plan B … I know that we did not want to talk about Plan B. We wanted, including Slovenia, to resolve this. But now I don’t see this.’
I began my response by coolly and moderately addressing every point that had been raised and putting to bed every inaccuracy before coming to the crux: ‘Plan B should not [even] be mentioned. It is highly and immoderately anti-European even to bring about this discussion. My dear colleague from Slovenia should know that it is not in the interest of his citizens that we even discuss this at the moment. I reject such a discussion. Our government intends to do whatever it takes to remain sustainably within the eurozone.’
From that point on, every time I opened my mouth to speak it was to present constructive proposals for reaching an agreement quickly. Each time I did so, Jeroen reacted with aggression, demanding that I consent to the troika’s return to Athens, agree not to legislate without the troika’s consent and acquiesce to the troika’s all-or-nothing approach, which meant ditching my proposal for an interim agreement based on three or four reform bills and a viable fiscal plan. Faithful to Alexis’s directive not to ‘yield an inch’, I stood my ground.
Character assassination
The troika’s assault in Riga was accompanied by a well-prepared propaganda drive. During the tense Eurogroup meeting the media had reported falsely that my fellow ministers had reproached me personally. According to a Bloomberg report, ‘Euro-area finance chiefs said Varoufakis’s handling of the talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, a person familiar with the conversations said, asking not to be named because the discussions were private.’11 At the press conference that followed, Jeroen was asked explicitly whether I had been called these names. Instead of simply saying no, the Eurogroup president gave the fake news credence by not denying it and instead, smiling meaningfully, replied, ‘It was a very critical discussion and it showed a great sense of urgency around the room.’
That night, after my own press conference was over and my official business for the day was done, I was told that finance ministers were invited to an informal dinner in the nearby countryside, a forty-five-minute coach ride away. Exhausted and wishing to prepare my speech for the following morning’s Ecofin meeting, I decided to give it a miss. Instead, I arranged to have dinner with Nicholas, Fotini and another member of my team in downtown Riga so that we could take stock of the day’s events and plan ahead. Walking by myself across town through the cold to meet them promised to revive me sufficiently for the long night’s work that awaited me on my return.
How invigorating it was! I walked for about half an hour, taking in the old buildings bathed in the orange rays of the street lights which pierced the freezing haze, breathing in the crisp air, feeling human again. Dinner with my colleagues at a German-themed beer-and-sausage restaurant was just as restorative as I had hoped it would be and reminded me what it was like to have a normal life. The next morning Reuters carried the following report.
As the buses carrying European finance ministers left for a gala dinner in the Latvian capital on Friday night, one of the party hung back at the hotel and then wandered off alone into the dusk. Greece’s Yanis Varoufakis had other dinner plans, he said, after a bruising first day of meetings in Riga that underlined his isolation as he tries to avert national bankruptcy. While other ministers were feted by their entourages with food and warm clothing during the meeting in Riga, Varoufakis was seen alone at almost every turn, eschewing aides or any security detail. ‘He is completely isolated,’ a senior eurozone official told Reuters on condition of anonymity. ‘He didn’t even come to the dinner to represent his country.’12
