35. The ECB’s desperate need to keep up the pretence that Greece was redeeming the Greek government bonds that the ECB owned was the deeper cause of the remarkable trickery described earlier under ‘Success story’.
36. Syriza was built as a loose alliance of socialists, ecologists, social democrats and communists. The Left Platform was one of its larger factions with historical links to the old pro-Soviet communist party, prior to its split in 1991. The Left Platform was traditionally, as the communists remain to this day, in favour of Greece pulling out of the eurozone. Once the euro crisis erupted and the Greek economy went into sharp recession, Left Platform Syriza members began campaigning strongly for Grexit.
37. The European System of Central Banks, built around the ECB, is a strange confederacy of the national central banks that make up the eurozone. While the national central banks have no right to issue currency or the ability to set interest rates, they retain some important functions. The most significant is that of providing the banks domiciled in their country with emergency liquidity assistance (ELA). The idea is this: under normal circumstances, the banks of a country such as Greece or Italy tap directly into the Frankfurt-based ECB for cash. They post collateral with the ECB (government bonds, mortgages and other paper assets that they own) and receive cash in return, but if the collateral is considered to be of poor quality, the ECB can refuse it. If matters were allowed to rest there, these banks would have to close down immediately, as they would not be able to give out cash to their depositors, triggering a run. This is when ELA kicks in. Effectively, the ECB tells the bank, ‘No cash for you from us in Frankfurt but do try your friendly national central bank; it may accept your poor collateral.’ So the distressed banker takes his poor collateral to his national central bank, which is essentially a branch of the ECB, and pleads for cash in return. The national central bank is unlikely to turn the banker down because otherwise a domestic banking crisis would erupt. There are two reasons why bankers do not like to be diverted from the ECB to their national central bank: it is bad for their reputation (revealing that the ECB has deemed their collateral to be poor) and it is bad for their bottom line (as ELA cash costs the banks more than ECB cash in terms of the interest rate charged). Finally, and importantly, the right and capacity of a national central bank to provide ELA cash to bankers can be curtailed by the ECB. All it takes is for two-thirds of the ECB Governing Council (thirteen of the nineteen governors of the eurozone’s central banks) to vote in favour of shutting down a member state’s national central bank’s ELA. Then the banks of the said member state run out of cash within hours and its whole banking system collapses.
Chapter 4: Treading water
1. ‘Blood, sweat and tears’, 15 September 2014, protagon.gr.
2. For a concise version of the Modest Proposal for Resolving the Euro Crisis, co-authored by myself, Stuart Holland and Jamie Galbraith, see Appendix in Varoufakis, 2016. To this day I remain convinced that had those proposals been implemented they would have prevented the European Union’s slide into ignominy and deconstruction, including Brexit.
3. Elections in Greece are always held on a Sunday.
4. 2015 was a minefield of repayments for any incoming government, with the IMF and the ECB alone demanding from the Greek government a sum equal to almost half of its tax revenues. Looking at the repayment schedule was enough to give the incoming finance minister a migraine.
6 March
€301.8 million – IMF
13 March
€339.6 million – IMF
16 March
€565.9 million – IMF
20 March
€339.6 million – IMF
13 April
€452.7 million – IMF
12 May
€969.1 million – IMF
5 June
€301.8 million – IMF
12 June
€339.5 million – IMF
16 June
€565.9 million – IMF
19 June
€339.5 million – IMF
13 July
€452.7 million – IMF
July
€3,490 million – ECB
August
€3,170 million – ECB
6 August
€189.5 million – IMF
4 September
€301.8 million – IMF
14 September
€339.5 million – IMF
16 September
€565.9 million – IMF
21 September
€339.5 million – IMF
13 October
€452.7 million – IMF
6 November
€166.5 million – IMF
7 December
