In early May I informed the IMF that Elena would be taking on the role of Greece’s representative to the IMF. I did so with Alexis’s permission and with the full support of Takis Roumeliotis, our former IMF representative, as well as that of our economy minister, George Stathakis. Her appointment was approved a few days later. In mid-May, however, Alexis asked me to dump her because ‘the party cannot tolerate someone who had signed an MoU’. Truth be told, Elena had a conspicuously neoliberal background, attended gatherings of neoliberal politicians and economists and addressed the media in the manner of a former member of parliament, which she was, rather than in the more deferential style expected of a minister’s adviser – that Greek was not her first language may not have helped either. But the only thing that mattered to me was that she represented me and our government brilliantly at international forums and was absolutely committed to the task of getting Greece off the hook. She was by far the best person for the job.
In response to Alexis, I explained that it was precisely because of the intellectual and moral courage with which she had turned against the logic of the MoU that I trusted her, certainly more than I trusted unschooled Syriza militants who did not know what they were up against. Alexis smiled at my reasoning but repeated that we had a problem. I put my foot down. This appointment was for the finance minister to make. Full stop. However, in order to help him fend off pressure from the party ranks, I proposed we go through an open recruitment process, with Dragasakis, Stathakis, Euclid and myself on the deciding committee, to assess Elena’s suitability in the context of other candidates. Alexis agreed. Once again Elena was judged the right candidate and appointed.16 A fresh letter to the IMF reconfirming her appointment was dispatched.
Four days later a newspaper reported that Sagias could not stomach her appointment, calling Elena an ‘MoU choice’. The fact that he was at that very moment striving to drag Alexis down a path that led back to the MoU was ironic to say the least. But by 1 June, under immense new pressure from Alexis, Elena had resigned.
It would be a mistake to think that such episodes were unimportant. The troika had made it clear that a deal would be possible only if we were to postpone debt relief and increase tax rates, so the Plan for Greece had to be shot down because debt relief was at its heart, and the taxation models my team and I had been working on had to vanish. Elena’s removal was a great help to Sagias and Chouliarakis’s campaign, supported by Pappas and Dragasakis, to steer the Syriza government away from seeking debt relief.
During a war cabinet meeting, Pappas – who had approached me in 2012 because of my dedication to debt restructuring and had insisted that I become finance minister in 2015 – accused me contemptuously of being ‘fixated’ on Greece’s debt.
‘You bet I am,’ I replied. ‘When in a prison camp one has a duty to be fixated on escaping.’
Sagias rushed to Pappas’s aid, making the incredible argument that the debt was not a problem as long as the troika funded its repayment. Watching Alexis fail to respond to this disavowal of literally everything we had been saying since 2010 was mortifying. Submitting to the troika’s MoU process and remaking our government into a softer version of the Samaras administration was now their goal. I remember hanging around with Euclid at Maximos as we waited for the war cabinet to begin while in an adjacent room Sagias and Chouliarakis, with Dragasakis hovering to lend them support, wrote and rewrote the troika’s so-called Staff Level Agreement (SLA). This was effectively a new MoU, identical to the old except but for a few fig leaves and a great deal less fiscal sustainability. The awfulness of it all was excruciating.
One day I told Alexis that he would not be able to sell Sagias’s SLA to himself, let alone to our parliamentary party. Disarmingly, he agreed and looked even more depressed. Meanwhile, Jeff Sachs was sending me urgent warnings: ‘They demand an SLA first, promising talks about debt relief and the like later. But they lie! Once you give them the SLA they will deny they ever promised you anything. Don’t fall for it!’ How could I tell Jeff that I no longer had Alexis’s ear? That he seemed compelled to go inexorably down that path?
By the end of May, Alexis seemed too depressed to control war cabinet meetings. They were now dominated by Sagias, who with the consent of Dragasakis and Pappas was intent on our adoption of the language and content of the troika’s SLA. We were conceding everything – fiscal targets that required austerity, the creditors’ tax models and rate hikes, privatizations without limit – and getting nothing in return. Whenever I pointed out that we were making commitments that were impossible to meet, I met with responses that were more or less a reprise of the Samaras government’s arguments: that future commitments were immaterial as long as we got new loans in the meantime; that debt was not an issue because, sooner or later, it would be restructured.
In a desperate attempt to refocus Alexis’s attention, with Glenn Kim’s help I compiled yet another, even milder and more moderate version of our debt swap proposals and suggested that Alexis present it at his forthcoming informal tripartite meeting with the German chancellor and President Hollande, arguing that any agreement based on Sagias’s SLA would be political poison in Greece if it didn’t include at least some kind of debt restructuring. Alexis did as I suggested and called me up later with the ‘good news’. The meeting had gone quite well, he told me. ‘Angela said she was prepared to have our debt proposals studied and asked me to send someone to discuss them with Wieser.’
But Euclid’s separate report from Brussels told a different story: ‘The tripartite went badly so we will give them more!’
‘Alexi,’ I said, ‘she referred you to our gravedigger, Thomas Wieser, who clearly has no mandate to discuss debt relief with us, and you are telling me this is good news?’
Nevertheless, I was happy to send Glenn Kim to Brussels to meet Wieser, just in case. Glenn was as brilliant as ever in demonstrating to Wieser how simple and effective the debt swaps we were proposing would be and that they would come at minimal political cost to the chancellor. Wieser was forced to concede that our proposals had merit, but the fact that there was no credible threat from our side any more meant that Glenn’s success led to nothing.
At a meeting of the war cabinet on 30 May, when Sagias and Chouliarakis suggested to Alexis that another meeting with Wieser should be arranged, I interjected, weighing my words carefully, ‘I don’t mind us talking to Wieser again, if you wish, but know that nothing will come of it. Our only chance of regaining control of our fate is if our prime minister, at most by Wednesday or Thursday, tables for public scrutiny and debate our own anti-MoU – our final proposal both for ending the current programme and for a new contract with the EU. Instead of speaking on the basis of their SLA, to discuss on the basis of our Plan for Greece. I have been saying this for two months now and I have been working on a text fit for that purpose…’
Sagias, who was sitting next to me, was repeating sarcastically, ‘A rupture proposal, a rupture proposal, a rupture proposal … That’s what you are doing. Proposing a falling-out.’
I had reached the limits of my patience. I banged my hand on the table and said, ‘Look here! You will not interrupt me again. Nor will you put words in my mouth to distort my meaning. The troika and its media are doing a perfect job of that. But not in here. If you disagree, you will wait until your turn comes to put forward your views.’
‘Now you’ve scared me!’ Sagias said with aggressive condescension.
‘Spyro, careful now. You are descending into the realm of political hooliganism.’
Sagias shouted at me, ‘I have forty years of struggling in this country unlike some who saw their chance to return from abroad to make a career here.’
‘I am glad the masks are off so that we can all see clearly who has been undermining the finance minister from within,’ I replied.
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.’
