involve some €27 billion of cash collateral (out of a total €41 billion of pre-waiver withdrawal ECB exposure) which will come at a cost of 1.55 per cent. The most affected would be Eurobank (roughly a 6–7 per cent hit to 2015 net interest income) and Alpha (6 per cent hit), while Piraeus (4 per cent) and National Bank of Greece (2 per cent) would be the least affected. Note, however, that banks have increased exposure to ECB after deposits outflows by I guess about €20 to €21 billion … hence the real impact could much higher than that. At this stage, only EFSF bonds will be still eligible for ECB funding.
12. The economic mantra of General Augusto Pinochet’s fascist regime in Chile and that of Schäuble’s wing of the CDU had many similarities.
13. Of course, when we did go to the institutions with our proposals, the institutions would also refuse to engage with them, demanding reams and reams of data instead. The purpose of this interminable data gathering was to avoid any response, positive or negative, to our proposals. Meanwhile the press would broadcast that I was arriving in Berlin, Brussels and Frankfurt with no proposals.
14. Alexis’s wreath-laying had been interpreted in Germany as a hostile gesture. By mentioning it during a speech in which I was praising the Germans for their successful purge of Nazism, I was trying to build a bridge. My point was that Greeks and Germans shared a common experience of Nazism and therefore a common aim: combating its economic underpinning, which was a permanently deflationary economy.
15. Willy Brandt was the SPD’s leader 1964–87 and West Germany’s chancellor 1969–74. During the latter period he had played an important role in marginalizing Greece’s right-wing dictators while at the same time giving sanctuary to fleeing Greek democrats.
Chapter 8: The frenzy before the storm
1. The title of his memoir about that work suggests those words stayed with him. See James K. Galbraith, Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe, 2016, Yale.
2. Without this small army of aides I would have been at the mercy of the ministry’s Council of Economic Advisers led by George Chouliarakis, who had already demonstrated himself and his team to be utterly unwilling and possibly incapable of doing anything beyond regurgitating the troika’s models and projections. With the clock ticking I thought it best to defer a confrontation until after an interim agreement had been reached at the Eurogroup.
3.https://www.nytimes.com/2015/02/17/opinion/yanis-varoufakis-no-time-for-games-in-europe.html?_r=0
4. Oscar Wilde, The Soul of Man Under Socialism, 1891.
5. I was paraphrasing John Maynard Keynes, who wrote of the Versailles Treaty: ‘[the German government’s] insincere acceptance … of impossible conditions which it was not intended to carry out – an acceptance which made Germany as guilty to accept what she could not fulfil as the Allies to impose what they were not entitled to exact’. See John Maynard Keynes, Dr Melchior: A Defeated Enemy, 1920 and Chapter 8 of Varoufakis, 2016.
6. Such evidence included the rehiring of the cleaners who had been dismissed from the Finance Ministry illegally (according to the Greek courts) as well as a few hundred state school janitors, and a pledge not to reduce pensions beyond the twelve separate cuts that had already reduced them by a stupendous 40 per cent.
7. Even though Dombrovskis was senior to Moscovici, he rarely took the lead. I suspect this was because his presentation skills left much to be desired. In any case, his real job was to watch over Pierre, rather than lead anything, let alone a discussion.
8. Recall that, well before our election, the Eurogroup had agreed that the ECB’s profits on the Greek government bonds purchased as part of the SMP programme should be returned at regular intervals to Athens, but as Wieser’s non-paper, sent to us via email by Thomas Asmussen, had made clear, the troika now intended to withhold that money. See Chapter 5, ‘First contact’.
9. Just before I entered the room, Glenn Kim had sent me a warning. According to his sources, Chancellor Merkel, unwilling to get involved herself, was inclined to let the European Commission find a solution to the new Greek drama, but the Spanish government was kicking and screaming. The reason was that they faced elections in which Syriza’s equivalent, Podemos, was threatening to do well. Glenn recommended that I keep an eye out for any sabotage Luis de Guindos attempted.
10. The Austrian and Belgian governments were internally divided in that they were headed by social democrats while their finance ministers came from the equivalent of Wolfgang Schäuble’s Christian Democrats.
11. Some member states’ constitutions or parliamentary rules require any EU decision with a potential impact on the state’s finances to be passed through their parliaments. This includes Germany, Austria and Finland. But in most member states, such as Italy or France, there is no need for a parliamentary vote.
Chapter 9: A moment to savour, darkly
1. See Chapter 6 in Varoufakis, 2016.
2. In my introduction I repeated my argument that reforming the troika’s programme was essential if we were to persuade the people of Greece to accept it, and that the manner in which the troika had conducted itself in Athens until then had been counterproductive in that regard. ‘Our commitment to working with each one of the three institutions is unwavering … We consider today’s meeting here in Brussels to be a new beginning that will serve the interests both of Greece and the EU … We have reviewed the MoU in detail and want to discuss it with you.’ I was frank about our government’s inexperience, and contrasted our team’s meagre resources with theirs. But our inexperience was a normal feature of the democratic process, I assured them, was to be expected whenever an electorate voted in a new government, and granting an incoming government a honeymoon period in which to develop its ideas into policy was an essential part of that process. That being the case I suggested that the meeting consider our team’s overarching policy framework rather than get bogged down in minutiae. After all, the Eurogroup was waiting for an agreement in principle based on the identification of common ground between the MoU and our government’s plans. I also mentioned my team of untouchables and our serious attempt to apprehend hundreds of thousands of tax cheats. If the troika was interested in reforms of substance and a large-scale infusion of cash into our state’s coffers, I told them I expected them to support this particular effort enthusiastically.
3. Over the course of the first day the leaks got worse. At one point Jamie reported to me that our team was upset at the press’s suggestion that they were incapable of putting forward proposals for ‘extending the programme’ that the troika could accept. Immediately I wrote back,
We must turn their own narrative against them, simply by saying: thank you for pointing this out. You are right. We are unable to present any policies leading to successful completion of the current programme for the simple reason that this programme cannot be salvaged. This is why we insisted in the Eurogroup on major amendments. Indeed, our teams are meeting today and tomorrow on a mission not to complete the current programme but to build a bridge to new, viable arrangements. Without amendments on the logic of its financial, debt and reforms agenda, and tranquillity over the time required to reach them, there can be no programme.
4. For example, in my summary of our discussions with the troika I had written, ‘On structural reforms, good progress was made to identify a large number of areas where the Greek authorities can support the ongoing reform agenda … Time is needed over the coming weeks for the new government to make a more detailed assessment of ongoing reforms. The Greek government is fully committed to continue efforts made in these areas.’ Euclid told me to delete ‘large’ in the first sentence and recommended that I replace the last sentence with: ‘The Greek government is committed to continue a reform agenda which takes the best elements of the current programme and its own reform agenda.’ Elsewhere I had written, ‘The Greek authorities are committed to continued primary surpluses over the next decade to ensure sound public finances.’ He advised me to replace ‘decade’ with ‘near future’, adding, ‘After all we are seeking a debt conference which should make such a promise redundant.’ How things would change a few months later when Euclid replaced me.
5. This is also true of paper money if restrictions are in place on its removal from the country.
6. A frequent criticism of my planned parallel payments system was that it would be euro-denominated only in theory, but in reality a euro within the parallel payment system would be worth less than a ‘proper’ paper euro. This is true, but if the ECB introduced capital controls, then the country would in effect have a dual currency already, so the argument is somewhat academic.
7. At the core of this informal and rather loose war cabinet, which had been convening in the prime minister’s office at Maximos to discuss strategy in the previous weeks, were Alexis, Pappas, Tzanakopoulos, Dragasakis, Sagias and Euclid.
8. In an admirable display of restraint, the press made very little of the story of how Jeroen Dijsselbloem’s office had retracted a claim it originally made, that he had been awarded a Masters degree by an Irish university. I often wondered how the same journalists would have treated me if my credentials had been subject to similar controversy.
9. Juncker’s draft proposed the adoption of a code of civil procedure, changes to the income tax code and the tax procedures code, legislation to broaden the definition of tax fraud and evasion and reform of the gas market. It also asked us whether there were other reforms that could be adopted swiftly – a most collaborative and thus welcome approach.
10. The European Commission is the closest the EU has to a government, and a commissioner has a status equivalent to a minister of state, whereas the Eurogroup, as previously mentioned, has no legal standing in any of the EU treaties. In that sense, Dijsselbloem was, officially and legally, no more than the Dutch finance minister, outranked in law by Moscovici.
11. In our Modest Proposal the EIB is hailed as a possible pillar for economic development, to sit alongside the pillar of financial stability that the ECB was meant to be. See Appendix in Varoufakis, 2016.
12. Dimitris Tzanakopoulos was a young lawyer and Syriza activist who was elevated to government spokesperson and given a ministry without portfolio a few months after my resignation.
13. Only George Stathakis, my academic colleague and economy minister, was prepared openly to dispute the strength of this commitment – and he did so from the very first day we were in government. I remember him telling me in private that when the crunch came ‘we would accept whatever they gave us’. At the time I was outraged, as was Alexis, who for this reason kept Stathakis at arm’s length, which explains why Stathakis was not a regular attendee at the war cabinet during our first months in government. As it turned out, George was the only Syriza insider who was consistently honest with me, and to his further credit, he tried to warn me that the others’ militancy was ‘impermanent’.
14. The €10.9 billion in question was left over from the second bailout’s recapitalization of Greece’s banks, worth €50 billion in total – see Chapter 2, ‘Bailoutistan 2.0’ and Chapter 5, ‘Greek-covery’. This left-over capital was insufficient to restore the Greek banks to health, in view of the huge non-performing loans on their books, and the troika was reluctant to let the Greek government pour more good money after bad before some solution had been found for the non-performing loans. The IMF and the ECB wanted this to take the form of foreclosures and auctions of repossessed homes and offices. Politically that would have been exceptionally toxic, so the €10.9 billion simply sat gathering dust on the books of the HFSF, the EFSF’s Greek branch, in the form of EFSF bonds. The ECB wanted to repatriate these EFSF bonds from the HFSF to the EFSF. Why? For effect, to demonstrate that they were getting tough on us. But in reality it made no difference since, even when these EFSF bonds were in the bosom of the HFSF, the Greek government had no authority to use them without the authorization of the Eurogroup Working Group and thus of the ECB. Remarkably, the opposition in our parliament portrayed this inconsequential transfer as ‘Varoufakis’s loss of €11 billion from under his nose’.
Chapter 10: Unmasked
1. Manolis Glezos called the 20 February agreement an exercise in ‘rebranding meat as fish’ – in Orthodox Christianity consumption of meat is prohibited during Lent, but fish is sometimes deemed acceptable – and apologized to the people of Greece for having supported our government and thus participated in their deception. Mikis Theodorakis described me and Alexis as insects lured by a ruthless spider into its web.
2. It is remarkable that a minister of state had to negotiate for the right to introduce a clause into an agreement with international creditors stating that the courts of the land should be allowed to carry out the duties vested in them by the constitution. From my discussions with judges from Greece’s Council of State it was clear that, since the first bailout, they had been leaned upon to make rulings that went against their actual legal opinions – the ultimate humiliation for decent men and women who had dedicated their lives to the rule of law.
3. George Chouliarakis is the only person to have succeeded in my presence in making Euclid Tsakalotos so furious as to swear.
4. The reader may suspect that Wolfgang Schäuble’s opposition to the communiqué of the 20 February Eurogroup was mere pretence, designed to lure me into the belief that I had got my way in order to trap me at the meeting of 23 February. I do not believe so. During the Eurogroup of 20 February Wolfgang was visibly agitated. He is neither as duplicitous nor as good an actor as would be required for such an elaborate ploy.
5. The relevant passage stated, ‘The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.’ The phrase ‘appropriate primary fiscal surpluses’ signalled that the previous targets had been set aside and were open to negotiation with our government, recognizing our right to negotiate the end of austerity, while the phrase ‘guarantee debt sustainability’ opened the door to a genuine negotiation on debt restructuring.
Chapter 11: Whittling our spring
1. Syriza members of parliament were split between those who were relieved at the extension of the loan agreement and those, mainly from the Left Platform, who were livid that it had been extended instead of rescinded. Interestingly, almost none objected to the lack of prior parliamentary approval per se, concentrating instead on whether the extension should have been secured at all. (Had they known how between 20 and 25 February our position had been jeopardized by my representative in the Eurogroup Working Group, I am sure they would have reacted differently.) At a specially convened tumultuous parliamentary party meeting I spent a good hour on the podium explaining why the extension had been necessary, taking personal responsibility for the whole affair while Alexis, Pappas and Dragasakis looked on.
2. See Paul Mason, 2016, ‘The Inside Story of Syriza’s Struggle to Save Greece: Exclusive interviews with the party’s top players shed light on the eurozone showdown’, The Nation http://www.thenation.com/article/the-inside-story-of-syrizas-struggle-to-save-greece/
3. See Alastair Crooke, 2011, ‘Permanent temporariness’, London Review of Books, Vol. 33, no. 5, pp. 24–5.
4. See Chapter 6 of Varoufakis, 2016.
5. For more on T-bills see Chapter 5, Note 17.
6. With the remaining 33 per cent dispersed across multiple investors who would gradually sell their share to Cosco.
