This is what happens when those with unwarranted power lose legitimacy and self-confidence: they turn ugly. No longer interested in winning the intellectual or ideological argument, the establishment resorted instead to character assassination and punitive measures that it knew would result in less prosperity and less freedom. It employed brute force to impose policies that not even Ronald Reagan and Margaret Thatcher would have endorsed. And once it had throttled the rebellion against itself, it imposed performative incantations such as our MoU upon the defeated and went about shutting off any space where debate or critical inquiry might take place. In short, it became a highly illiberal establishment.
During my discussions with the creditors I often warned them that crushing us was not in their interests. If our democratic, Europeanist, progressive challenge was strangled, the deepening crisis would produce a xenophobic, illiberal, anti-Europeanist nationalist international. This is exactly what transpired after the crushing of the Greek Spring. How did the so-called liberal establishment respond to the nationalist, bigoted backlash that its dark and dangerous illiberalism brought about? A little like the parricide who throws himself on the court’s mercy, demanding lenience because he is now an orphan.
Unwelcome vindication
Before the crisis, as an academic writing obscure scholarly articles and loving every minute of it, I was keen to avoid two kinds of people: followers and enemies. After my stint in government I now have plenty of both but not enough people willing to hear me out critically before either agreeing or disagreeing. This I regret. But I do not regret the decision to enter government to oppose continental-scale irrationality. But, ‘Isn’t it idiotic to put your job on the line to eradicate idiocy?’ an American journalist once asked me. ‘Not if you don’t care for the job except as a lever against idiocy,’ I replied.
Accusations such as ‘You gambled with your country and lost’ hold no water. It was my basic tenet that, as the finance minister of a bankrupt country, I had no right to gamble with its future. And I didn’t. It is not a gamble to adopt a stance that is optimal irrespective of how your opponent chooses to respond. To resist the third bailout was the right thing to do whether the creditors agreed to a sustainable set of policies or opted to evict us from the eurozone. While we had a strong preference for the former, the latter was better than capitulation. Denunciations for having resisted the creditors for too long cut no ice either, given that even Wolfgang Schäuble told me he would have refused to sign the third bailout agreement were he in my shoes.
One night in March 2016 I spent a few hours in Ecuador’s London embassy with Julian Assange listening to a recording of a telephone conversation between the IMF’s Poul Thomsen and his Greek mission chief. With bitter satisfaction I heard Poul confirm everything I had been saying about the unsustainability of the third bailout agreement. I also heard him insist passionately that the correct fiscal targets were the ones I had been proposing – and which he was, interestingly, rejecting in the Eurogroup.4 Vindication in defeat may be hollow, but at least it steels one’s nerves in the face of the ensuing witch-hunt, whose purpose has been to shield from blame those who abandoned our plan midway and to absolve the illiberal establishment of responsibility for forcing such a plan on us in the first place.
No country is an island
No man is an Island, entire of itself; every man is a piece of the Continent, a part of the main; if a clod be washed away by the sea, Europe is the less …
John Donne, Devotions upon Emergent Occasions, ‘Meditation XVII’
In the summer of 2015, with our people defeated yet unbowed, I was under pressure to start a new political party to keep the Greek Spring alive. The idea failed to light a fire in me. Then, one day in August, Danae and I found ourselves at a political meeting out in rural France. I was to speak. To my considerable surprise, a large crowd had gathered. I suspected they were there less to show solidarity with me or to my defeated country than for another reason, and I tested my suspicion by telling them this.
I am here because our Athens Spring was crushed, just like the Prague Spring before it. But I am not here today to drum up support for Greece’s crushed democracy. I am here to lend the Greek people’s support and solidarity to France’s democracy. For this is what is at stake. French democracy. Spanish democracy. British democracy. Italian democracy. Democracy throughout Europe. Greece was, and unfortunately remains, a laboratory where the destructive powers of extend-and-pretend loans plus self-defeating austerity were tried and tested. Greece is a battleground on which a war against European democracy, against French democracy, is tried and tested. Greece was never the issue for the troika and its minions. You are! This is why I am here. I am here because what happened to us is beginning to happen to you.
Judging from the roar of approval this received, I knew I had hit a nerve. They had gathered because they could sense that what had been done to Greece was coming their way. They were fully alive to Wolfgang Schäuble’s desire to see the troika in Paris. In that field in France I saw what had to be done. Similar experiences at meetings in German town halls reinforced my conviction: we needed to band together regardless of nationality and transcend the divide between debtor and creditor countries. The only practical way to oppose both the deep establishment and the nationalist international it had spawned was to form a pan-European, democratic, humanist movement whose purpose is to succeed where the generation of 1929 failed: to reach out across borders and political divisions to stem the descent into a post-modern 1930s.
A few months later, on 9 February 2016, that movement was born. We chose Berlin’s famous Volksbühne theatre to inaugurate DiEM25, the Democracy in Europe Movement. The energy that had failed to rise within me at the thought of starting a new party in Greece overflowed in response to the hunger across Europe for the spirit of the Greek Spring. One day, soon I hope, that transplanted spirit may be strong enough to return home to fire up our inordinately brave and virtuous people again. When that day comes, the Greeks may be able to address the rest of Europe by paraphrasing poet George Seferis: ‘We who had nothing taught you tranquillity.’5
Over the winter and spring of 2016 I puzzled many friends in the UK with my campaign against Brexit. ‘How can you tell us to stay in the EU after the way Greece has been treated?’ they would protest. ‘We want our country back!’ was their wholly legitimate demand. ‘So do we,’ I would respond. But to take back our countries, I would explain, we need to reclaim common decency and restore common sense across Europe. Just as no one country can tackle climate change by itself, the task we face cannot be achieved by solitary nations. ‘Would the weak in Britain suffer less after Brexit?’ I would ask. ‘Would the weak in Europe be better off?’ Or would reinforced borders and Europe’s disintegration favour the deep establishment and the political monsters its failures have spawned?
Some were convinced, others remained sceptical. The idea of Europe has been wounded so deeply, and mainly by the events of 2015, that good people are turning away from it. Even some who sympathize with DiEM25’s pan-Europeanism dismiss it as utopian. But allow me, dear reader, to share a strongly held belief as my parting shot: our movement may be utopian, but its policy of constructive disobedience within the EU, of being both in and against this illiberal and anti-democratic Europe, is the only practical alternative to the dystopia unfolding as Europe disintegrates. That was my stance as Greece’s finance minister. It remains my stance today.
Of course I may be wrong. Even so, I believe it is a cause worth pursuing. The danger is not that we shall aim too high and miss; the real danger is that we train our eyes on the floor and end up there. Minutes after the inauguration of DiEM25 in Berlin, filled with adrenalin and hope, my colleagues and I came across an older German activist who looked unimpressed. ‘This movement is doomed,’ he told us gloomily.
‘So what the hell are you doing here?’ my slightly peeved colleague asked him.
‘I want to be around the people who will have to pick up the pieces when the whole edifice comes tumbling down,’ he replied.
That’s a good enough reason to keep alive, across Europe, the small flame lit by the people of Greece during the spring of 2015.
Acknowledgements
To thank all those who deserve gratitude for a book of this nature would require even more pages than this hefty volume already contains. Trusting that they know the extent of my gratitude, I shall confine myself to thanking just two persons: Will Hammond, my editor, whose perseverance, skills and tolerance I have exploited shamelessly, and Christine Lagarde, to whom I owe the book’s title.
APPENDICES Appendix 1: False dawns in deflationary times
There is a data series that supports the establishment’s view that 2014 did see a rise in Greece’s national income. It is derived from so-called real national income, or real GDP (gross domestic product) data – except that during periods of deflation (negative inflation) the economic term ‘real’ means precisely its opposite. This fascinating statistical mirage, in which a depression looks desirable, works as follows.
Asked whether you are better off today compared to a year ago, you would answer in the affirmative if your money income (its dollar, pound, euro or yen value) had risen during the last twelve months. But you might accompany your response with the reasonable proviso that the cost of living had gone up too. To account for the gap between your money income and its capacity to buy you things, economists focus on your money income’s purchasing power – also known as real income – which is money income adjusted for average prices.
So too with the measurement of a nation’s aggregate income. Economists begin by totalling everyone’s money incomes to derive nominal gross domestic product – or, for simplicity, the nation’s total money income (N). Then they adjust this number N for changes in average prices (P) by dividing N by P. The resulting ratio (R) is used as the measure of the nation’s real income (R = N/P).
During inflationary times the utility of the real national income number is that it stops us from getting overexcited when we hear that money income has risen substantially. For example, at a time when prices are rising by, say, 8 per cent, a 9 per cent increase in money incomes translated into a mere 1 per cent growth in real income. So, clearly, in inflationary times the real national income number is the one to look at before rejoicing that the economy is growing. Only when R rises strongly do we have good cause to believe that economic activity is rising.
However, in periods of deflation (when prices are falling) R can be very, very misleading. Consider the fictitious example in the table below depicting a deflationary economy.
From Year 1 to Year 2 the nation’s money income (N) shrank by 2 per cent (from 100 to 98) while the index of average prices fell by 1 per cent (from 100 to 99). In the following year (Year 3), the recession deepened, with a further 2.04 per cent drop in money national income (from 98 to 96) and an even larger fall in prices as deflation hit 6.06 per cent. This is what an economy sliding from recession towards something reminiscent of depression looks like: falling incomes but an even faster decline in prices.
But look at the last row: real national income seems to have bounced back emphatically in Year 3, up from Year 2 by a healthy 4.28 per cent. How could that be? Well, this is a mirage caused by falling prices. Put simply, in deflationary economies where people and the state bear significant debts, only rises in money (as opposed to so-called real) income are a cause for celebration.
One may retort that the rising ‘real’ number is always good news even if money incomes are falling. For if prices are falling faster than money incomes, surely this means that we can afford to buy more for less? Is this not a good thing? It is in the absence of the usual spanner in the works: debt. For when people and governments are deep in debt, and as long as they pay positive interest on that debt, declining national income is a recipe for collective insolvency.
Lastly, and for the record, in 2014 Greek nominal national income was down by €2.8 billion or –1.569 per cent when inflation was –2.21 per cent. If you subtract –2.21 per cent from –1.569 you get a positive real growth number – a statistical mirage covering up for a depression (falling income, falling prices, rising debt-to-income ratios). By contrast, that was not the case in 2013, when nominal GDP fell –5.66 per cent and prices by –2.54 per cent: subtract –2.54 from –5.66 and the result is still a negative number.
Appendix 2: The IMF’s motivated error
The IMF’s miscalculation of the impact that the bailout programme would have on Greece’s economy surely qualifies as the worst but also the most lucrative in the history of economic forecasting. At the time of the first bailout the IMF predicted that in 2011 it would depress investment by 11.8 per cent. The actual drop in the investment level in 2011 was 19.4 per cent. For 2012 the IMF predicted a boost of 0.8 per cent, but it in fact fell again by 19.4 per cent. And for 2013 the IMF had predicted investment growth of 4.8 per cent, but it fell once more, this time by 13.2 per cent. Turning to price inflation, the IMF was predicting –0.5 per cent for 2011, 1 per cent for 2012, 0.7 per cent for 2013, 1 per cent for 2014 and 1.1 per cent for 2015. Actual price inflation was 1 per cent in 2011, –0.3 per cent in 2012, –2.1 per cent in 2013 and –2.6 per cent in 2014.
At the heart of the IMF’s calculations was a serious error. In order to pretend that by 2022 Greece’s debt would be curtailed, to end the country’s bankruptcy, the authors of the Greek programme had calculated:
• How much surplus the state should generate over the period 2015–22 so as to repay its creditors. Let’s call this S (surplus).
• How much national income, or GDP, had to grow by in order for that surplus to be possible, given the taxes. Let’s call this G (growth).
• The level of overall taxes the government should milk from the economy to pay its creditors and run the state. Let’s call this T (taxes).
Once they had these numbers, they announced them as targets. They made the Greek finance ministers and prime ministers sign affidavits (also called memoranda of understanding) which said things like, ‘The Greek authorities commit to striving for a growth rate of G that will allow for taxes T to be collected and leave at the end of each year a surplus equal to S. As S will suffice to meet Greece’s debt repayments to creditors, Greece’s debt is sustainable.’
