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.
Euclid would not answer his phone or open his door. An hour later he texted me with apologies and a message that he could no longer stand ‘their frivolity’ and had needed to vent his frustration. Just after midnight, he texted me again: ‘And needless to say the frivolity does not hold for us two.’
In my reply I said, ‘I think that the best service we can offer Alexis now is to abstain. To stay in our hotel. Maybe he will realize that he needs to rethink his modus operandi.’
Obviously embarrassed, Euclid replied that they were all currently at the European Commission, being pressurized by the troika. ‘I assumed you were in another car,’ he texted. I told him that the finance minister had not been invited. Euclid said, ‘I will insist they bring you in,’ to which I replied, ‘No need, Euclid. Not coming. It is clear that I am decorative. Can’t legitimize that or them any more.’
Early next morning Euclid called me to say that the late-night talks had been another disaster but that we were about to meet them again. ‘It’s important that you come. Our side is very weak.’ That night I had written what was, I think, a sixth draft of my resignation letter. I was planning to represent Greece at that day’s Eurogroup meeting and then resign at the end of the press conference, citing my government’s abandonment of debt restructuring, which to me was the A and the Z of our mandate, as the reason for stepping down. But for as long as I remained finance minister, I thought I might as well attend the pre-Eurogroup meeting as Euclid had suggested.
When we arrived at the commission, I was not invited to join Alexis, Dragasakis, Pappas and Chouliarakis in the meeting with Lagarde, Draghi, Juncker, Wieser and Dijsselbloem, but a few minutes later Alexis emerged to fetch me. As we were walking to the conference room, he told me, ‘Euclid insisted you should come. I agreed even though Dijsselbloem will be annoyed to see you.’ It appeared that Jeroen had been the one to veto my presence.
I was horrified by the dynamic in the room. The latest SLA the troika was proposing seemed designed to ensure that Alexis would be lynched on arrival back in Athens were he to accept it. It demanded, for example, that VAT on hotels should jump from 4 to 23 per cent; in the Turkish resorts on the coast opposite the holiday islands of Lesbos, Kos and Rhodes it was 7 per cent. Chouliarakis spoke little. When he did, he sounded uncannily like Wieser. Dragasakis was silent. Pappas, on the other hand, was spouting adolescent inanities. It was left to Alexis to address the troika like a supplicant.
Christine and Mario, meanwhile, were being allowed to get away with statements that held little water while Jeroen steered the meeting skilfully to another impasse. I made two interventions that exposed the incoherence of the troika’s funding formula, but while Christine and Mario took some notice, it had become apparent to everyone that my role was indeed decorative. A few months later Alexis told a journalist in reference to this particular meeting, ‘Yanis was good and said useful things but it was clear that he had no credibility in the room.’
Rekindled
Now that the Greek finance minister had been vanquished, my colleagues at the Eurogroup meeting of 25 June ought to have felt invincible, but it did not pan out that way. That afternoon I entered the meeting convinced it was my last, with my revised resignation letter ready in my pocket. Maybe the sense of relief it imparted, or maybe because I had nothing left to lose (Janice Joplin and Nikos Kazantzakis’s definition of freedom), I gave what turned out to be quite an effective performance, driving a wedge between the troika institutions.5
The proceedings began with Jeroen informing us that no agreement had been reached. He then distributed the troika’s final offer in the form of three documents: a full Staff Level Agreement (SLA) comprising the harshest austerity imaginable, full-on fire-sale privatizations and further losses of national sovereignty over key areas of public policy and property; a funding proposal that would take us only to November 2015, meaning that a fresh round of Eurogroup meetings would soon be required to extend it further; and a debt sustainability analysis. Remarkably, the IMF was refusing to endorse this last document. Moreover, for the first time ever Mario Draghi refrained from saying a word about funding. I sensed there was discord between and possibly within the institutions. And no wonder: the latter two documents were clearly built on sand and ready to be toppled by the slightest of touches.
