CONTENTS

CoverAbouttheBookAbouttheAuthorAlsobyYanisVaroufakisDedicationTitlePageANoteonQuotedSpeechPreface

PartOne:Wintersofourdiscontent1Introduction2Bailoutistan3Theybendtheirtonguesliketheirbows4Treadingwater5Ragingagainstthedyingofthelight

PartTwo:Invinciblespring6Itbegins…7AuspiciousFebruary8Thefrenzybeforethestorm9Amomenttosavour,darkly10Unmasked11Whittlingourspring12Merkel’sspell13Therightstuff,foiled14Thecruellestmonth

PartThree:Endgame15Countdowntoperdition16Adultsintheroom17LionsledbydonkeysEpilogue

NotesAcknowledgementsAppendicesIndexCopyright

AbouttheBook

What happens when you take on the establishment? In this blistering,personalaccount,world-famouseconomistYanisVaroufakisblows the lidon Europe’s hidden agenda and exposes what actually goes on in itscorridorsofpower.

Varoufakis sparked one of the most spectacular and controversial battles inrecentpoliticalhistorywhen,asfinanceministerofGreece,heattemptedtore-negotiatehis country’s relationshipwith theEU.Despite themass supportoftheGreekpeopleandthesimplelogicofhisarguments,hesucceededonlyinprovokingthefuryofEurope’spolitical,financialandmediaelite.Butthetruestoryofwhathappenedisalmostentirelyunknown–notleastbecausesomuchoftheEU’srealbusinesstakesplacebehindcloseddoors.

In this fearless account, Varoufakis reveals all: an extraordinary tale ofbrinkmanship, hypocrisy, collusion and betrayal that will shake the deepestablishmenttoitsfoundations.

As is now clear, the same policies that required the tragic and brutalsuppression of Greece’s democratic uprising have led directly toauthoritarianism,populistrevoltandinstabilitythroughouttheWesternworld.

Adults InTheRoom isanurgentwake-upcall to renewEuropeandemocracybeforeitistoolate.

AbouttheAuthor

Yanis Varoufakis is the former finance minister of Greece and now thefigurehead of an international grassroots movement, DiEM25, campaigningfortherevivalofdemocracyinEurope.HespeakstoaudiencesofthousandsworldwideandistheauthoroftheinternationalbestsellerAndtheWeakSufferWhatTheyMust?BorninAthensin1961,hewasformanyyearsaprofessorofeconomicsinBritain,AustraliaandtheUSAbeforeheenteredgovernment.HeiscurrentlyProfessorofEconomicsattheUniversityofAthens.

yanisvaroufakis.eu/@yanisvaroufakis

BYTHESAMEAUTHOR

TheGlobalMinotaur:America,EuropeandtheFutureoftheGlobalEconomy

AndTheWeakSufferWhatTheyMust?:Europe,AusterityandtheThreattoGlobalStability

Forallwhoeagerlyseekcompromisebutwouldratherbecrushedthanendupcompromised

ANoteonQuotedSpeech

Inabookofthisnature,inwhichsomuchdependsonwhosaidwhattowhom,Ihavemadeeveryefforttoensuretheaccuracyofquotedspeech.Tothisend,IhavebeenabletodrawonaudiorecordingsthatImadeonmyphone,aswellas on notes I made at the time, of many of the official meetings andconversationsthatappearinthisbook.Wheremyownrecordingsornotesareunavailable, Ihavereliedonmemoryand,wherepossible, thecorroborationofotherwitnesses.The reader shouldnote thatmanyof thediscussions reported in thisbook

took place in Greek. This includes all conversations that occurred with mystaff at the financeministry, in parliament, on the streets ofAthens,with theprimeminister,incabinet,andbetweenmypartnerDanaeandme.Necessarily,IhavetranslatedthoseconversationsintoEnglish.Theonlydiscussions I report that tookplace inneitherGreeknorEnglish

were those I hadwithMichel Sapin, the French financeminister. Indeed,MrSapinwas theonlymemberof theEurogroupnot toaddress themeetings inEnglish.Eitherwecommunicatedthroughtranslatorsor,quiteoften,hewouldaddressme inFrenchand Iwould reply inEnglish,ourgraspof theother ’slanguagebeinggoodenoughtocarryonthoseconversations.IneveryinstanceIhaveconfinedmyaccountstrictlytoexchangesthatarein

thepublic interestandhave therefore includedonly those thatshed importantlightoneventsthataffectedthelivesofmillions.

Preface

Mypreviousbook,And theWeakSufferWhatTheyMust?:Europe,Austerityand the Threat to Global Stability, offered an historical explanation of whyEuropeisnowintheprocess,decadesinthemaking,oflosingitsintegrityandforfeitingitssoul.JustasIwasfinishingitinJanuary2015Ibecamefinanceminister ofGreece and foundmyself thrust into the belly of the beast I hadbeen writing about. By accepting the position of finance minister of achronicallyindebtedEuropeancountryinthemidstofatumultuousclashwithits creditors – Europe’s most powerful governments and institutions – Iwitnessedfirsthandtheparticularcircumstancesandimmediatecausesofourcontinent’s descent into amorass fromwhich itmay not escape for a long,longwhile.This new book tells that story. It could be described as the story of an

academic who became a government minister for a while before turningwhistle-blower. Or as a kiss-and-tellmemoir featuring powerful personagessuchasAngelaMerkel,MarioDraghi,WolfgangSchäuble,ChristineLagarde,EmmanuelMacron,GeorgeOsborne andBarackObama.Or as the taleof asmall bankrupt country taking on theGoliaths of Europe in order to escapefromdebtors’prisonbeforesufferingacrushing if fairlyhonourabledefeat.But none of these descriptions convey my real motivation for writing thisbook.Shortly after the ruthless suppression of Greece’s rebellion in 2015, also

knownastheGreekSpringortheAthensSpring,theleft-wingpartyPodemoslost its momentum in Spain; no doubt many potential voters feared a fatesimilar to ours at the hands of a ferocious EU. Having observed the EU’scallous disregard for democracy inGreece,many supporters of the LabourPartyinBritainthenwentontovoteforBrexit.BrexitboostedDonaldTrump.Donald Trump’s triumph blew fresh wind into the sails of xenophobicnationaliststhroughoutEuropeandtheworld.VladimirPutinmustberubbinghis eyes in disbelief at the way the West has been undermining itself sofabulously.ThestoryinthisbookisnotonlysymbolicofwhatEurope,Britainandthe

United States are becoming; it also provides real insights into how andwhy

our polities and social economies have fractured. As the so-called liberalestablishmentprotestsatthefakenewsoftheinsurgentalt-right,it issalutaryto be reminded that in 2015 this same establishment launched a ferociouslyeffective campaign of truth-reversal and character assassination against thepro-European, democratically elected government of a small country inEurope.But as useful as I hope insights such as this may be, my motivation for

writingthisbookgoesdeeper.BeneaththespecificeventsthatIexperienced,Irecognisedauniversalstory–thestoryofwhathappenswhenhumanbeingsfind themselvesat themercyofcruelcircumstances thathavebeengeneratedbyan inhuman,mostlyunseennetworkofpowerrelations.This iswhy thereareno ‘goodies’ or ‘baddies’ in this book. Instead, it is populatedbypeopledoingtheirbest,astheyunderstandit,underconditionsnotoftheirchoosing.EachofthepersonsIencounteredandwriteaboutinthesepagesbelievedtheywereactingappropriately,but, taken together, theiractsproducedmisfortuneonacontinentalscale.Isthisnotthestuffofauthentictragedy?Isthisnotwhatmakes the tragedies of Sophocles and Shakespeare resonate with us today,hundredsofyearsaftertheeventstheyrelatebecameoldnews?At one point Christine Lagarde, managing director of the International

MonetaryFund,remarkedinastateofexasperationthat toresolvethedramaweneeded‘adultsintheroom’.Shewasright.Therewasadearthofadultsinmanyoftheroomswherethisdramaunfolded.Ascharacters,though,theyfellinto twocategories: thebanaland the fascinating.Thebanalwentabout theirbusinesstickingboxesonsheetsofinstructionshandeddowntothembytheirmasters. Inmany cases though, theirmasters – politicians such asWolfgangSchäuble and functionaries likeChristineLagarde andMarioDraghi –weredifferent. They had the ability to reflect on themselves and their role in thedrama, and this ability to enter into dialogues with themselves made themfascinatinglysusceptibletothetrapofself-fulfillingprophecy.Indeed,watchingGreece’screditorsatworkwaslikewatchingaversionof

Macbeth unfold in the land of Oedipus. Just as the father of Oedipus, KingLaius of Thebes, unwittingly brought about his own murder because hebelieved the prophecy that he would be killed by his son, so too did thesmartestandmostpowerfulplayersinthisdramabringabouttheirowndoombecausetheyfearedtheprophecythatforetoldit.Keenlyawareofhoweasilypower could slip through their fingers, Greece’s creditors were frequentlyoverpoweredbyinsecurity.FearingthatGreece’sundeclaredbankruptcymight

causethemtolosepoliticalcontroloverEurope,theyimposedpoliciesonthatcountrythatgraduallyunderminedtheirpoliticalcontrol,notjustoverGreecebutoverEurope.At some point, likeMacbeth, sensing their powermutate into insufferable

powerlessness, they felt compelled to do theirworst. Thereweremoments Icouldalmosthearthemsay

IaminbloodSteppedinsofarthat,shouldIwadenomore,Returningwereastediousasgoo’er.StrangethingsIhaveinhead,thatwilltohand;Whichmustbeactederetheymaybescann’d.

Macbeth,III.iv.

Anaccountbyanyoneoftheprotagonistsinacut-throatdramasuchasthiscannotescapebiasnorthedesireforvindication.So,inordertobeasfairandimpartialaspossible,Ihavetriedtoseetheiractionsandmyownthroughthelens of an authentic ancient Greek or Shakespearean tragedy in whichcharacters, neither good nor bad, are overtaken by the unintendedconsequencesoftheirconceptionofwhattheyoughttodo.IsuspectthatIhavecome closer to succeeding in this task in the case of those people whom Ifoundfascinatingandratherlesssointhecaseofthosewhosebanalitynumbedmysenses.ForthisIfindithardtoapologize,notleastbecausetopresentthemotherwisewouldbetodiminishthehistoricalaccuracyofthisaccount.

PARTONE

Wintersofourdiscontent

1

Introduction

The only colour piercing the dimness of the hotel barwas the amber liquidflickeringintheglassbeforehim.AsIapproached,heraisedhiseyestogreetmewith a nodbefore staringbackdown intohis tumbler ofwhiskey. I sankontotheplushsofa,exhausted.On cue, his familiar voice sounded imposingly morose. ‘Yanis,’ he said,

‘youmadeabigmistake.’InthedeepofaspringnightagentlenessdescendsonWashington,DCthatis

unimaginableduringtheday.Asthepoliticos,thelobbyistsandthehangers-onmelt away, the air empties of tension and the bars are abandoned to the fewwithno reason tobeupatdawnand to theeven fewerwhoseburdens trumpsleep.Thatnight, ason thepreviouseighty-onenights,or indeed theeighty-onenightsthatweretofollow,Iwasoneofthelatter.Ithadtakenmefifteenminutestowalk,shroudedindarkness,from70019th

StreetNW,theInternationalMonetaryFund’sbuilding,tothehotelbarwhereIwastomeethim.IhadneverimaginedthatashortsolitarystrollinnondescriptDCcouldbesorestorative.Theprospectofmeetingthegreatmanaddedtomysenseof relief:after fifteenhoursacross the table frompowerfulpeople toobanalor toofrightened tospeak theirminds, Iwasabout tomeeta figureofgreatinfluenceinWashingtonandbeyond,amannoonecanaccuseofeitherbanalityortimidity.Allthatchangedwithhisacerbicopeningstatement,mademorechillingby

thedimlightandshiftingshadows.Fakingsteeliness,Ireplied,‘Andwhatmistakewasthat,Larry?’‘Youwontheelection!’camehisanswer.Itwas16April2015,theverymiddleofmybrieftenureasfinanceminister

of Greece. Less than six months earlier I had been living the life of anacademic, teachingat theLyndonB. JohnsonSchoolofPublicAffairs at theUniversity ofTexas atAustinwhile on leave from theUniversity ofAthens.ButinJanuarymylifehadchangedutterlywhenIwaselectedamemberoftheGreek parliament. I had made only one campaign promise: that I would do

everythingIcouldtorescuemycountryfromthedebtbondageandcrushingausteritybeing imposedon itby itsEuropeanneighboursand theIMF.Itwasthatpromise thathadbroughtme to thiscityand–with theassistanceofmyclose team member Elena Paraniti, who had brokered the meeting andaccompaniedmethatnight–tothisbar.Smiling at his dry humour and to hide my trepidation, my immediate

thoughtwas,Is thishowhe intends tostiffenmyresolveagainstanempireoffoes?Itooksolacefromtherecollectionthattheseventy-firstsecretaryoftheUnitedStatesTreasuryandtwenty-seventhpresidentofHarvard isnotknownforhissoothingstyle.Determinedtodelaytheseriousbusinessaheadofusafewmomentsmore,I

signalledtothebartenderforawhiskeyofmyownandsaid,‘Beforeyoutellme aboutmy “mistake”, letme say,Larry, how important yourmessages ofsupportandadvicehavebeeninthepastweeks.Iamtrulygrateful.EspeciallyasforyearsIhavebeenreferringtoyouasthePrinceofDarkness.’Unperturbed, Larry Summers replied, ‘At least you called me a prince. I

havebeencalledworse.’For the next couple of hours the conversation turned serious. We talked

abouttechnicalissues:debtswaps,fiscalpolicy,marketreforms,‘bad’banks.OnthepoliticalfronthewarnedmethatIwaslosingthepropagandawarandthatthe‘Europeans’,ashecalledEurope’spowersthatbe,wereouttogetme.Hesuggested,andIagreed, thatanynewdeal formy long-sufferingcountryshould be one thatGermany’s chancellor could present to her voters as heridea,herpersonallegacy.Thingswereproceedingbetter than Ihadhoped,withbroadagreementon

everything that mattered. It was no mean feat to secure the support of theformidable Larry Summers in the struggle against the powerful institutions,governments and media conglomerates demanding my government’ssurrender and my head on a silver platter. Finally, after agreeing our nextsteps,andbeforethecombinedeffectsoffatigueandalcoholforcedustocallit a night, Summers looked at me intensely and asked a question so wellrehearsedthatIsuspectedhehadusedittotestothersbeforeme.1‘There are two kinds of politicians,’ he said: ‘insiders and outsiders. The

outsidersprioritizetheirfreedomtospeaktheirversionofthetruth.Thepriceof their freedom is that they are ignored by the insiders, who make theimportant decisions. The insiders, for their part, follow a sacrosanct rule:neverturnagainstotherinsidersandnevertalktooutsidersaboutwhatinsiders

sayordo.Theirreward?Accesstoinsideinformationandachance,thoughnoguarantee,ofinfluencingpowerfulpeopleandoutcomes.’WiththatSummersarrivedathisquestion.‘So,Yanis,’hesaid,‘whichofthetwoareyou?’Instincturgedmetorespondwithasingleword;insteadIusedquiteafew.‘BycharacterIamanaturaloutsider,’Ibegan,‘but,’Ihastenedtoadd,‘Iam

preparedtostranglemycharacterifitwouldhelpstrikeanewdealforGreecethatgetsourpeopleoutofdebtprison.Havenodoubtaboutthis,Larry:Ishallbehavelikeanaturalinsiderforaslongasittakestogetaviableagreementonthetable–forGreece,indeedforEurope.ButiftheinsidersIamdealingwithprove unwilling to release Greece from its eternal debt bondage, I will nothesitatetoturnwhistle-bloweronthem–toreturntotheoutside,whichismynaturalhabitatanyway.’‘Fairenough,’hesaidafterathoughtfulpause.Westooduptoleave.Theheavenshadopenedwhileweweretalking.AsI

sawhimtoataxi,thedownpoursoakedmyspringclothesinseconds.Withhistaxispeedingaway,Ihadtheopportunitytorealizeawilddreamofmine,onethathadkeptmegoingduringtheinterminablemeetingsofthepreviousdaysandweeks:towalkalone,unnoticed,intherain.Poweringthroughthewaterycurtaininpristinesolitude,Itookstockofthe

encounter.Summerswasanally,albeitareluctantone.Hehadnotimeformygovernment’s left-wingpolitics,butheunderstood thatourdefeatwasnot inAmerica’s interest.He knew that the eurozone’s economic policieswere notjust atrocious for Greece but terrible for Europe and, by extension, for theUnitedStates too.AndheknewthatGreecewasmerely the laboratorywherethese failed policies were being tested and developed before theirimplementation everywhere across Europe. This is why Summers offered ahelping hand. We spoke the same economic language, despite differentpoliticalideologies,andhadnodifficultyreachingaquickagreementonwhatouraimsandtacticsoughttobe.Nevertheless,myanswerhadclearlybotheredhim,evenifhedidnotshowit.Hewouldhavegotintohistaxiamuchhappierman, I felt, had I demonstrated some interest inbecoming an insider.As thisbook’spublicationconfirms,thatwasneverlikelytohappen.Back atmy hotel, getting dry andwith two hours to go before the alarm

clockwouldsummonmebacktothefrontline,Iponderedagreatanxiety:howwouldmycomradesbackhome, the inner circleofourgovernment, answerSummers’squestionintheirhearts?OnthatnightIwasdeterminedtobelievethattheywouldansweritasIhaddone.

LessthantwoweekslaterIbegantohavemyfirstrealdoubts.

Superblackboxes

YiorgosChatziswentmissingon29August2012.Hewas last sightedat thesocial securityoffice in the small northernGreek townofSiatista,wherehewas told that his monthly disability allowance of €280 had been suspended.Eyewitnesses reported thathedidnotutter awordof complaint. ‘He seemedstunned and remained speechless,’ a newspaper said. Soon after, he used hismobilephoneforthelasttimetocallhiswife.Noonewasathome,soheleftamessage:‘Ifeeluseless.Ihavenothingtoofferyouanymore.Lookafterthechildren.’ A few days later his body was found in a remote wooded area,suspended by the neck over a cliff, his mobile phone lying on the groundnearby.ThewaveofsuicidestriggeredbythegreatGreekdepressionhadcaughtthe

attention of the international press a few months earlier after DimitrisChristoulas,aseventy-seven-year-oldretiredpharmacist,shothimselfdeadbya tree in the middle of Athens’s Syntagma Square, leaving behind a heart-wrenching politicalmanifesto against austerity. Once upon a time the silent,dignifiedgriefofChristoulas’sandChatzis’s lovedoneswouldhaveshamedinto silence even the most hardened bailiff, except that in Bailoutistan, mysatiricaltermforpost-2010Greece,ourbailiffskeeptheirdistancefromtheirvictims, barricading themselves in five-star hotels, whizzing around inmotorcades and steadying their occasionally flagging nerves with baselessstatisticalprojectionsofeconomicrecovery.Duringthatsameyear,2012,threelongyearsbeforeLarrySummerswasto

lecturemeoninsidersandoutsiders,mypartnerDanaeStratoupresentedanartinstallationatadowntownAthensgallery.Shecalledit,It is time toopen theblack boxes! The work comprised one hundred black metal boxes laid outgeometricallyonthefloor.EachcontainedawordselectedbyDanaefromthethousandsthatAthenianshadcontributedthroughsocialmediainresponsetoherquestion,‘Inasingleword,whatareyoumostafraidof,orwhatistheonethingyouwanttopreserve?’Danae’sideawasthatunlike,say,theblackboxofadownedaircraft, these

boxeswould be opened before itwas too late. Theword thatAthenians hadchosen more than any other was not jobs, pensions or savings. What they

feared losing most was dignity. The island of Crete, whose inhabitants arerenownedfortheirpride,experiencedthehighestnumberofsuicidesoncethecrisishit.Whenadepressiondeepensandthegrapesofwrathgrow‘heavyforthevintage’,itisthelossofdignitythatbringsonthegreatestdespair.In thecatalogueentry Iwrote for theexhibition Idrewacomparisonwith

another kind of black box. In engineering terms, I wrote, a black box is adeviceorsystemwhoseinnerworkingsareopaquetousbutwhosecapacitytoturn inputs into outputsweunderstand and use fluently.Amobile phone, forinstance, reliably converts finger movements into a telephone call or thearrival of a taxi, but tomost of us, though not to electrical engineers,whatgoesonwithinasmartphoneisamystery.Asphilosophershavenoted,otherpeople’sminds are thequintessentialblackboxes:ultimatelywecanhavenoideaofpreciselywhatgoesoninsideanother ’shead.(Duringthe162daysthatthisbookchroniclesIoftencaughtmyselfwishingthatthepeoplearoundme,mycomrades-in-armsinparticular,werelesslikeblackboxesinthisregard.)ButthentherearewhatIcalled‘superblackboxes’,whosesizeandimport

is so great that even those who created and control them cannot fullyunderstand their inner workings: for example, financial derivatives whoseeffectsarenottrulyunderstoodevenbythefinancialengineerswhodesignedthem,globalbanksandmultinationalcorporationswhoseactivitiesareseldomgrasped by their CEOs, and of course governments and supranationalinstitutions like the International Monetary Fund, led by politicians andinfluentialbureaucratswhomaybeinofficebutarerarelyinpower.Theytooconvert inputs – money, debt, taxes, votes – into outputs – profit, morecomplicated forms of debt, reductions in welfare payments, health andeducation policies. The difference between these super black boxes and thehumble smartphone – or even other humans – is thatwhilemost of us havebarelyanycontrolovertheirinputs,theiroutputsshapeallourlives.This difference is encapsulated in a single word: power. Not the type of

powerassociatedwithelectricityor thecrushing forceof theocean’swaves,butanother,subtler,moresinisterpower:thepowerheldbythe‘insiders’thatLarry Summers referred to but which he feared I would not have thedispositiontoembrace,thepowerofhiddeninformation.During and aftermyministrydayspeople constantly askedme, ‘What did

theIMFwantfromGreece?Didthosewhoresisteddebtreliefdosobecauseofsome illicit hidden agenda? Were they working on behalf of corporations

interestedinplunderingGreece’sinfrastructure–itsairports,seasideresorts,telephonecompaniesandsoon?’Ifonlymatterswerethatstraightforward.Whena large-scale crisis hits, it is tempting to attribute it to a conspiracy

between the powerful. Images spring to mind of smoke-filled rooms withcunningmen(andtheoccasionalwoman)plottinghowtoprofitattheexpenseof thecommongoodand theweak.These imagesare,however,delusions. Ifoursharplydiminishedcircumstancescanbeblamedonaconspiracy,thenitisonewhosemembersdonotevenknowthattheyarepartofit.Thatwhichfeelstomanylikeaconspiracyofthepowerfulissimplytheemergentpropertyofanynetworkofsuperblackboxes.The keys to such power networks are exclusion and opacity. Recall the

‘Greedisgreat’ethosofWallStreetandtheCityofLondonintheyearsbeforethe2008implosion.Manydecentbankemployeeswereworriedsickbywhattheywereobservinganddoing.Butwhentheygottheirhandsonevidenceorinformation foreshadowing terrible developments, they faced Summers’sdilemma:leakittooutsidersandbecomeirrelevant;keepittothemselvesandbecome complicit; or embrace their power by exchanging it for otherinformationheldbysomeoneelseintheknow,resultinginanimpromptutwo-person alliance that turbocharges both individuals’ powerwithin the broadernetworkof insiders.As further sensitive information is exchanged, this two-personallianceforgeslinkswithothersuchalliances.Theresultisanetworkof power within other pre-existing networks, involving participants whoconspiredefactowithoutbeingconsciousconspirators.Whenever a politician in the know gives a journalist an exclusive in

exchangeforaparticularspinthatisinthepolitician’sinterest,thejournalistisappended, however unconsciously, to a network of insiders. Whenever ajournalistrefusestoslanttheirstoryinthepolitician’sfavour,theyrisklosingavaluablesourceandbeingexcludedfromthatnetwork.Thisishownetworksof power control the flow of information: through co-opting outsiders andexcluding those who refuse to play ball. They evolve organically and areguidedbyasupra-intentionaldrivethatnoindividualcancontrol,noteventhepresident of the United States, the CEO of Barclays or those manning thepivotalnodesintheIMFornationalgovernments.Once caught in this web of power it takes an heroic disposition to turn

whistle-blower, especially when one cannot hear oneself think amid thecacophonyofsomuchmoney-making.Andthosefewwhodobreakranksenduplikeshootingstars,quicklyforgottenbyadistractedworld.

Fascinatingly,many insiders, especially those only loosely attached to thenetwork, are oblivious to the web that they reinforce, courtesy of havingrelativelyfewcontactswithit.Similarly, thoseembeddedin theveryheartofthenetworkareusually too far inside tonotice that there isanoutsideatall.Rarearethoseastuteenoughtonoticetheblackboxwhentheyliveandworkinsideone.LarrySummersisonesuchrareinsider.Hisquestiontomewasinfact an invocation to reject the lure of the outside. Underpinning his beliefsystemwastheconvictionthattheworldcanonlybemadebetterfromwithintheblackbox.Butthiswaswhere,Ithought,hewasverywrong.

Theseusbeforethelabyrinth

Before 2008, while the super black boxes functioned stably, we lived in aworld that seemed balanced and self-healing.Thosewere the timeswhen theBritishchancellorGordonBrownwascelebratingtheendof‘boomandbust’and the soon-to-be-chairman of the Federal Reserve Ben Bernanke washeraldingtheGreatModeration.Ofcourseitwasallanillusiongeneratedbythe super black boxeswhose function no one understood, especially not theinsiders running them. And then, in 2008, they broke down spectacularly,generatingourgeneration’s1929,nottomentionlittleGreece’sfall.It ismyview that the2008 financial crisis,which is stillwithus almost a

decadelater,isduetotheterminalbreakdownoftheworld’ssuperblackboxes–ofthenetworksofpower,theconspiracieswithoutconspirators,thatfashionour lives. Summers’s blind faith that the remedies to this crisis will springfrom those same broken down networks, through the normal operations ofinsiders, struckme even at the time as touchingly naive. Perhaps that is notsurprising.Afterall,threeyearsearlierIhadwritteninDanae’scataloguethat‘opening these super black boxes has now become a prerequisite to thesurvivalofdecency,ofwholestrataofourfellowhumans,ofourplaneteven.Putsimply,wehaverunoutofexcuses.Itis,therefore,timetoopentheblackboxes!’Butinrealterms,whatwouldthisentail?

First,weneedtoacquireareadinesstorecognizethatwemayverywell,each one of us, already be a node in the network; an ignorant de factoconspirator.Secondly, and this is the genius ofWikileaks, ifwe canget

inside the network, like Theseus entering the labyrinth, and disrupt theinformation flow; if we can put the fear of uncontrollable informationleaking in the mind of as many of its members as possible, then theunaccountable, malfunctioning networks of power will collapse undertheir own weight and irrelevance. Thirdly, by resisting any tendency tosubstituteoldclosednetworkswithnewones.

By the time I entered thatWashingtonbar threeyears later Ihad temperedmy stance. My priority was not to leak information to outsiders but to dowhateverittooktogetGreeceoutofdebtors’prison.Ifthatmeantpretendingtobeaninsider,sobeit.Buttheinstantthepriceofadmissiontotheinsiders’circlebecameacceptanceofGreece’spermanentincarceration,Iwouldleave.LayingdownanAriadne’sthreadinsidetheinsiders’labyrinthandbeingreadytofollowittotheexitis,Ibelieve,aprerequisiteforthedignityonwhichtheGreekpeople’shappinessrelies.The day after my meeting with Larry Summers I met Jack Lew, the

incumbent US Treasury secretary. After our meeting at the Treasury, anofficial seeingme out startledmewith a friendly aside: ‘Minister, I feel theurge towarn you thatwithin aweek youwill face a character assassinationcampaignemanatingfromBrussels.’Larry’speptalkabouttheimportanceofstayinginsidetheproverbialtent,alongwithhiswarningthatwewerelosingthemediawar,suddenlycameintosharpfocus.Of course, itwasnogreat surprise. Insiders, I hadwritten in2012,would

reactaggressively toanyonewhodaredopenup theirsuperblackbox to theoutsiders’ gaze: ‘None of this will be easy. The networks will respondviolently,as theyarealreadydoing.Theywill turnmoreauthoritarian,moreclosed, more fragmented. They will become increasingly preoccupied withtheirown“security”andmonopolyof information, less trustingof commonpeople.’2Thefollowingchaptersrelatethenetworks’violentreactiontomystubborn

refusaltotradeGreece’semancipationforaprivilegedspotinsideoneoftheirblackboxes.

Signhere!

It all boiled down to one small doodle on a piece of paper –whether IwaspreparedtosignonthedottedlineofafreshbailoutloanagreementthatwouldpushGreecefurtherintoitslabyrinthinejailofdebt.Thereasonwhymysignaturematteredsomuchwasthat,curiously,itisnot

presidents or prime ministers of fallen countries that sign bailout loanagreementswiththeIMForwiththeEuropeanUnion.Thatpoisonedprivilegefalls to the hapless finance minister. It is why it was crucial to Greece’screditors that Ibebent to theirwill, that Ishouldbeco-optedor, failing that,crushed and replaced by a more pliant successor. Had I signed, anotheroutsiderwouldhave turned insider andpraisewouldhavebeenheapeduponme. The torrent of foul adjectives directed at me by the international press,arrivingrightoncueonlyalittlemorethanaweekafterthatWashingtonvisit,just as theUSofficialhadwarnedme itwould,wouldneverhavedescendedonto my head. I would have been ‘responsible’, a ‘trustworthy partner ’, a‘reformedmaverick’whohadputhisnation’sinterestsabovehis‘narcissism’.Judgingbyhisexpressionaswewalkedoutofthehotelandintothepouring

rain, Larry Summers seemed to understand. He understood that the‘Europeans’ were not interested in an honourable deal with me or with theGreek government. He understood that, in the end, I would be pressurisedinordinatelytosignasurrenderdocumentasthepriceofbecomingabonafideinsider.Heunderstood that Iwasnotwilling todo this.Andhebelieved thatthiswouldbeapity,formeatleast.Formypart Iunderstood thathewanted tohelpmesecureaviabledeal. I

understoodtoothathewoulddowhathecouldtohelpus,provideditdidnotviolatehisgoldenrule:insidersneverturnagainstotherinsidersandnevertalkto outsiders about what insiders do or say. What I was not sure about waswhetherhewouldeverunderstandwhytherewasnochanceinheaven–orhellforthatmatter–thatIwouldsignanon-viablenewbailoutloanagreement.Itwouldhave taken too long toexplainmyreasons,buteven if therehadbeentime I feared that our backgroundswere too different formy explanation tomakeanysensetohim.Myexplanation,hadIofferedit,wouldhavecomeintheformofastoryor

two.ThefirstwouldhaveprobablybeguninsideanAthenianpolicestationinthe

autumnof1946,whenGreecewasonthebrinkofacommunistinsurgencyandthe second phase of its catastrophic civil war. A twenty-year-old chemistrystudent at AthensUniversity namedYiorgos had been arrested by the secret

police,roughedupandleftinacoldcellforafewhoursuntilahigher-rankingofficertookhimtohisofficeostensiblytoapologize.Iamsorryfortheroughtreatment,hesaid.Youareagoodboyanddidnotdeservethis.Butyouknowthesearetreacheroustimesandmymenareonedge.Forgivethem.Justsignthisandoffyougo.Withmyapologies.ThepoliceofficerseemedsincereandYiorgoswasrelievedthathisearlier

ordeal at the hands of the thugs was at an end. But then, as he read thetypewrittenstatementtheofficerwasaskinghimtosign,acoldchillrandownhis spine. The page read, I hereby denounce, truly and in all sincerity,communism,thosewhopromoteit,andtheirvariousfellowtravellers.Tremblingwithfear,heputthependown,summonedallthegentlenessthat

hismother Anna had instilled in him over the years, and said, Sir, I am noBuddhistbutIwouldneversignastatedocumentdenouncingBuddhism.IamnotaMuslimbut Idonot think thestatehas the right toaskme todenounceIslam.Similarly, I amnot a communist but I see no reasonwhy I should beaskedtodenouncecommunism.Yiorgos’scivil libertyargumentstoodnochance.Signor lookforwardto

systematic torture and indefinite detention – the choice is yours! shouted theenraged officer. The officer ’s ire was based on perfectly reasonableexpectations.Yiorgoshadallthemakingsofagoodboy,anaturalinsider.Hehad been born in Cairo to a middle-class family within the large Greekcommunity, itself embedded in a cosmopolitan European enclave of French,ItalianandBritishexpats,andraisedalongsidesophisticatedArmenians,Jewsand Arabs. French was spoken at home, courtesy of his mother, Greek atschool,Englishatwork,ArabiconthestreetandItalianattheopera.At the age of twenty, determined to connect with his roots, Yiorgos had

givenupacushyjobinaCairobankandmovedtoGreecetostudychemistry.HehadarrivedinAthensinJanuary1945ontheshipCorinthiaonlyamonthaftertheconclusionofthefirstphaseofGreece’scivilwar,thefirstepisodeoftheColdWar.Afragiledétentewasintheair,andsoithadseemedreasonabletoYiorgoswhenstudentactivistsofboththeLeftandtheRighthadapproachedhim as a compromise candidate for president of his school’s students’association.Shortlyafterhiselection,however, theuniversityauthoritieshadincreased

tuitionfeesatatimewhenstudentswallowedinabsolutepoverty.Yiorgoshadpaidthedeanavisit,arguingasbestashecouldagainstthefeehike.Asheleft,secretpolicemenhadmanhandledhimdowntheschool’smarblestepsandinto

a waiting van. and he had ended up with a choice that makes Summers’sdilemmaseemlikeawalkinthepark.Given the young man’s bourgeois background, the police had every

expectation that Yiorgos would either sign gladly or break quickly oncetorturebegan.However,witheverybeatingYiorgosfeltlessabletosign,endthepainandgohome.Asaresult,heendedupinavarietyofcellsandprisoncampsthathecouldhaveescapedatanypointsimplybyputtinghissignatureon a single sheet of paper. Four years later, a shadow of his former self,Yiorgos emerged from prison into a grim society that neither knew of hispeculiarchoicenorreallycared.Meanwhile, during theperiodofYiorgos’s incarceration, a youngwoman

fouryearshisjuniorhadbecomethefirstfemalestudenttogainadmittancetotheUniversityofAthensChemistrySchool, despite their best efforts to keepherout.Eleni, for thatwashername,beganuniversityasa rebelliousproto-feministbutneverthelessfeltapowerfuldislikefortheLeft:duringtheyearsoftheNazioccupationshehadbeenabductedasaveryyounggirlbyleft-wingpartisans who mistook her for a relative of a Nazi collaborator. UponenrollingattheUniversityofAthens,afascistorganizationcalledXrecruitedheronthestrengthofheranti-communistfeelings.Herfirst–and,asitwouldturnout,herlast–missionforthemwastofollowafellowchemistrystudentwhohadjustbeenreleasedfromtheprisoncamps.This, in a nutshell, is the story of how I came about. For Yiorgos is my

father, and Eleni, who ended up a leading member of the 1970s feministmovement,wasmymother.Blessedwiththishistory,signingonthedottedlinein return for the mercy shown to insiders was never on the cards for me.WouldLarrySummershaveunderstood?Idon’tthinkso.

Notforme

Theotherstory isas follows. ImetLambros in theAthensapartment IsharewithDanaeaweekorsobeforetheJanuary2015electionthatbroughtmetooffice. Itwasamildwinter ’sday, thecampaignwas in full swing, and Ihadagreed to give an interview to Irene, a Spanish journalist. She came to theapartmentaccompaniedbyaphotographerandbyLambros,anAthens-basedGreek–Spanish translator. On that occasion Lambros’s services were

unnecessary as Irene and I talked in English. But he stayed, watching andlisteningintensely.After the interview, as Irene and the photographer were packing up their

gearandheadingfor thedoor,Lambrosapproachedme.Heshookmyhand,refusingtoletgowhileaddressingmewiththeconcentrationofamanwhoselifedependsongettinghismessageacross:‘Ihopeyoudidnotnoticeitfrommyappearance.Idomybesttocoveritup,butinfactIamahomelessperson.’Hethentoldmehisstoryasbrieflyashecould.Lambrosusedtohaveaflat,ajobteachingforeignlanguagesandafamily.

In2010,whentheGreekeconomytanked,helosthisjob,andwhentheywereevictedfromtheirflathelosthisfamily.Forthepastyearhehadlivedonthestreet.His only income came fromproviding translation services to visitingforeignjournalistsdrawntoAthensbyyetanotherdemonstrationinSyntagmaSquare which turned ugly and thus newsworthy. His greatest concern wasfinding a few euros to recharge his cheapmobile phone so that the foreignnewscrewscouldcontacthim.Feelingheneeded towrapuphis soliloquy,he rushed to theone thinghe

wantedfromme:

Iwanttoimploreyoutopromisemesomething.Iknowyouwillwintheelection.Italktopeopleonthestreetandthereisnodoubtthatyouwill.Please,whenyouwin,whenyouareinoffice,rememberthosepeople.Dosomething for them.Not forme! I am finished. Those of uswhom thecrisisfelled,wecannotcomeback.Itistoolateforus.But,please,pleasedosomethingfor thosewhoarestillon theverge.Whoareclingingbytheirfingernails.Whohavenotfallenyet.Doitforthem.Don’tletthemfall.Don’tturnyourbacktothem.Don’tsignwhattheygiveyoulikethepreviousonesdid.Swearthatyouwon’t.Doyouswear?

‘Iswear,’wasmytwo-wordanswertohim.AweeklaterIwastakingmyoathofofficeasthecountry’sfinanceminister.

Duringthemonthsthatfollowed,everytimemyresolveweakenedIhadonlytothinkbacktothatmoment.Lambroswillneverknowofhisinfluenceduringthebleakesthoursofthose162days.

2

Bailoutistan

By early 2010, some five years before I took office, the Greek state wasbankrupt.Afewmonthslater theEuropeanUnion, theInternationalMonetaryFund and the Greek government organized the world’s greatest bankruptcycover-up.Howdoyoucoverupabankruptcy?Bythrowinggoodmoneyafterbad.Andwho financed this cover-up?Common people, ‘outsiders’ from allovertheglobe.Therescuedeal,asthecover-upwaseuphemisticallyknown,wassignedand

sealed in earlyMay2010.TheEuropeanUnion and the IMFextended to thebroke Greek government around €110 billion, the largest loan in history.1Simultaneouslyagroupofenforcersknownasthetroika–socalledbecausetheyrepresentthreeinstitutions:theEuropeanCommission(EC),whichistheEU’s executivebody, theEuropeanCentralBank (ECB)and the InternationalMonetary Fund (IMF) – was dispatched to Athens to impose measuresguaranteedtoreduceGreece’snationalincomeandplacemostoftheburdenofthedebtupontheweakestGreeks.Abrighteight-year-oldwouldhaveknownthatthiscouldn’tendwell.Forcing new loans upon the bankrupt on condition that they shrink their

income is nothing short of cruel and unusual punishment.Greecewas neverbailedout.Withtheir‘rescue’loanandtheirtroikaofbailiffsenthusiasticallyslashingincomes,theEUandIMFeffectivelycondemnedGreecetoamodernversionoftheDickensiandebtors’prisonandthenthrewawaythekey.Debtors’ prisonswere ultimately abandoned because, despite their cruelty,

theyneitherdeterred theaccumulationofnewbaddebtsnorhelpedcreditorsget theirmoneyback.Forcapitalismtoadvanceinthenineteenthcentury, theabsurdnotionthatalldebtsaresacredhadtobeditchedandreplacedwiththenotion of limited liability. After all, if all debts are guaranteed, why shouldlenderslendresponsibly?Andwhyshouldsomedebtscarryahigherinterestratethanotherdebts,reflectingthehigherriskofgoingbad?Bankruptcyanddebt write-downs became for capitalism what hell had always been for

Christiandogma–unpleasant yet essential –but curiouslybankruptcy-denialwasrevivedinthetwenty-firstcenturytodealwiththeGreekstate’sinsolvency.Why?DidtheEUandtheIMFnotrealizewhattheyweredoing?They knew exactly what they were doing. Despite their meticulous

propaganda, in which they insisted that they were trying to save Greece, togranttheGreekpeopleasecondchance,tohelpreformGreece’schronicallycrooked state and so on, the world’s most powerful institutions andgovernmentswereundernoillusions.Theyappreciatedthatyoucouldsqueezebloodoutofastonemoreeasilythanmakeabankruptentityrepayitsloansbylendingitmoremoney,especiallyifyoushrinkitsincomeaspartofthedeal.Theycouldseethatthetroika,evenifitmanagedtoconfiscatethefallenstate’ssilverware,wouldfailtorecoupthemoneyusedtorefinanceGreece’spublicdebt.Theyknewthatthecelebrated‘rescue’or‘bailout’packagewasnothingmorethanaone-waytickettodebtors’prison.HowdoIknowthattheyknew?Becausetheytoldme.

Prisonersoftheirowndevice

Asfinanceministerfiveyearslater,Ihearditstraightfromthehorse’smouth.From top IMF officials, from Germany’s finance minister, from leadingfiguresintheECBandtheEuropeanCommission–theyalladmitted,eachintheirownway,thatitwastrue:theyhaddealtGreeceanimpossiblehand.Buthavingdoneso,theycouldseenowayback.Lessthanamonthaftermyelection,on11February2015, inoneof those

spirit-numbing, windowless, neon-lit meeting rooms that litter the EU’sBrussels buildings, I found myself sitting opposite Christine Lagarde, theIMF’s managing director, France’s ex-finance minister and a formerWashington-basedhigh-flyinglawyer.Shehadwaltzedintothebuildingearlierthat day in a glamorous leather jacket, making me look drab andconventionallyattired.Thisbeingour firstencounter,wechattedamicably inthecorridorbeforemovingintothemeetingroomfortheseriousdiscussion.Behindcloseddoors,withacoupleofaidesoneachside, theconversation

turnedseriousbutremainedjustasfriendly.SheaffordedmetheopportunitytopresentmybasicanalysisofthecausesandnatureoftheGreeksituationaswellasmyproposalsfordealingwithit,andnoddedinagreementformuchofthe time. We seemed to share a common language and were both keen to

establishagoodrapport.At themeeting’send,walking towards thedoor,wegotachanceforashort,relaxedbuttellingtête-à-tête.TakinghercuefromthepointsIhadmade,ChristinesecondedmyappealsfordebtreliefandlowertaxratesasprerequisitesforaGreekrecovery.Thensheaddressedmewithcalmandgentlehonesty:Youareofcourseright,Yanis.Thesetargetsthattheyinsistoncan’twork.But,youmustunderstand thatwehaveput toomuch into thisprogramme.Wecannotgobackon it.Your credibilitydependsonacceptingandworkingwithinthisprogramme.2So,thereIhadit.TheheadoftheIMFwastellingthefinanceministerofa

bankruptgovernmentthatthepoliciesimposeduponhiscountrycouldn’twork.Notthatitwouldbehardtomakethemwork.Notthattheprobabilityofthemworkingwas low.No, shewasacknowledging that, comehellorhighwater,theycouldn’twork.With everymeeting, especiallywith the troika’s smarter and less insecure

officials,theimpressiongrewonmethatthiswasnotasimpletaleofusversusthem,goodversusbad.Rather,anauthenticdramawasafootreminiscentofaplaybyAeschylusorShakespeareinwhichpowerfulschemersendupcaughtin a trap of their own making. In the real-life drama I was witnessing,Summers’ssacredruleofinsiderskickedinthemomenttheyrecognizedtheirpowerlessness.Thehatcheswerebatteneddown,officialdenialprevailed,andthe consequencesof the tragic impasse they’d createdwere left to unfoldonautopilot, imprisoning them yet further in a situation they detested forweakeningtheirholdoverevents.Becausethey–theheadsof theIMF,of theEU,of theGermanandFrench

governments – had invested inordinate political capital in a programme thatdeepened Greece’s bankruptcy, spread untold misery and led our young toemigrate in droves, there was no alternative: the people of Greece wouldsimply have to continue to suffer. As for me, the political upstart, mycredibility depended on accepting these policies,which insiders knewwouldfail,andhelpingtosellthemtotheoutsiderswhohadelectedmeontheprecisebasisthatIwouldbreakwiththosesamefailedpolicies.It’s hard to explain, but not once did I feel animosity towards Christine

Lagarde. I found her intelligent, cordial, respectful. My view of humanitywouldnotbe throwninto turmoilwere it tobeshownthatsheactuallyhadastrong preference for a humane Greek deal. But that is not relevant. As aleadinginsider,hertopprioritywasthepreservationoftheinsiders’politicalcapitalandtheminimizationofanychallengetotheircollectiveauthority.

Yetcredibility,likespending,comeswithtrade-offs.Everypurchasemeansan alternative opportunity lost. Boostingmy standingwith Christine and theother figures of power meant sacrificing my credibility with Lambros, thehomeless interpreter who had sworn me to the cause of those people who,unlikehim,hadnotyetbeendrownedinthetorrentofbankruptcyravagingourland.This trade-offnever cameclose tobecomingapersonaldilemma.Andthepowersthatberealizedthisearlyon,makingmyremovalfromthesceneessential.A littlemore than a year later, in the run-up to theUK referendumon 23

June 2016, I was travelling across Britain giving speeches in support of aradicalremainplatform–theargumentthattheUKoughttostaywithintheEUtoopposethisEU,tosaveitfromcollapseandtoreformit.Itwasatoughsell.ConvincingBritain’soutsiderstovoteremainwasprovinganuphillstruggle,especially in England’s north, because even my own supporters in Britain,women andmen closer in spirit and position to Lambros than to Christine,were telling me they felt compelled to deliver a drubbing to the globalestablishment. One evening I heard on the BBC that Christine Lagarde hadjoinedtheheadsoftheworld’sothertopfinancialinstitutions(theWorldBank,the OECD, the ECB, the Bank of England and so on) to warn Britain’soutsiders against the lure ofBrexit. I immediately textedDanae fromLeeds,whereIwasspeakingthatnight,‘Withsuchallies,whoneedsBrexiteers?’Brexit won because the insiders went beyond the pale. After decades of

treatingpeoplelikemeascredibleinproportiontoourreadinesstobetraytheoutsiderswhohadvotedforus,theystillconfusedoutsiderswithpeoplewhogaveadamnabouttheircounsel.UpanddownAmerica,inBritain,inFranceand inGermany – everywhere – the insiders are feeling their authority slipaway.Prisonersoftheirowndevice,slavestotheSummersdilemma,theyarecondemned,likeMacbeth,toadderroruponerroruntiltheyrealizethattheircrownnolongersymbolizesthepowertheyhavebutthepowerthathasslippedaway. In the fewmonths I spent dealingwith them, I caught glimpsesof thattragicrealization.

Itwasthe(FrenchandGerman)banks,stupid!

Friends and journalists often ask me to describe the worst aspect of mynegotiationswithGreece’screditors.Notbeingabletoshoutfromtherooftops

whatthehighandmightyweretellingmeinprivatewascertainlyfrustrating,butworsewasdealingwithcreditorswhodidnotreallywanttheirmoneyback.Negotiatingwiththem,tryingtoreasonwiththem,waslikenegotiatingapeacetreatywithgeneralshell-bentoncontinuingawar safe in theknowledge thatthey,theirsonsandtheirdaughtersareoutofharm’sway.Whatwas thenatureof thatwar?WhydidGreece’s creditorsbehaveas if

theydidnotwanttheirmoneyback?Whatledthemtodevisethetrapinwhichthey now found themselves? The riddle can be answered in seconds if onetakesalookatthestateofFrance’sandGermany’sbanksafter2008.Greece’s endemic underdevelopment, mismanagement and corruption

explain itspermanenteconomicweakness.But its recent insolvency isdue tothefundamentaldesignfaultsoftheEUanditsmonetaryunion,theeuro.TheEU began as a cartel of big business limiting competition between centralEuropeanheavyindustriesandsecuringexportmarketsfortheminperipheralcountriessuchasItalyand,later,Greece.ThedeficitsofcountrieslikeGreecewere the reflection of the surpluses of countries like Germany. While thedrachmadevalued,thesedeficitswerekeptincheck.Butwhenitwasreplacedby the euro, loans fromGerman and French banks propelledGreek deficitsintothestratosphere.TheCreditCrunchof2008thatfollowedWallStreet’scollapsebankrupted

Europe’s bankers who ceased all lending by 2009. Unable to roll over itsdebts,Greecefellintoitsinsolvencyholelaterthatyear.SuddenlythreeFrenchbanks faced losses fromperipheral debt at least twice the size of theFrencheconomy.NumbersprovidedbytheBankofInternationalSettlementsrevealatrulyscarypicture:foreverythirtyeurostheywereexposedto,theyhadaccesstoonlyone.Thismeantthatifonly3percentofthatexposurewentbad–thatis,if€106billionoftheloanstheyhadgiventotheperiphery’sgovernments,households and firms could not be repaid – then France’s top three bankswouldneedaFrenchgovernmentbailout.The same threeFrenchbanks’ loans to the Italian,SpanishandPortuguese

governments alone came to 34 per cent of France’s total economy – €627billiontobeexact.Forgoodmeasure,thesebankshadinpreviousyearsalsolentup to€102billion to theGreekstate. If theGreekgovernmentcouldnotmeetitsrepayments,moneymenaroundtheglobewouldgetspookedandstoplending to the Portuguese, possibly to the Italian and Spanish states aswell,fearingthattheywouldbethenexttogointoarrears.Unabletorefinancetheircombineddebtofnearly€1.76 trillionataffordable interest rates, the Italian,

Spanish andPortuguese governmentswould be hard pressed to service theirloans to France’s top three banks, leaving a black hole in their books.Overnight,France’smainbankswouldbefacingalossof19percentoftheir‘assets’whenamere3percentlosswouldmaketheminsolvent.To plug that gap the French government would need a cool €562 billion

overnight. But unlike the United States federal government, which can shiftsuchlossestoitscentralbank(theFed),Francehaddismantleditscentralbankin 2000when it joined the common currency andhad to rely instead on thekindnessofEurope’ssharedcentralbank,theEuropeanCentralBank.Alas,theECBwascreatedwithanexpressprohibition:noshiftingofGraeco-Latinbaddebts, private or public, onto the ECB’s books. Full stop. That had beenGermany’s condition for sharing its cherished Deutschmark with Europe’sriff-raff,renamingittheeuro.It’snothard to imagine thepanic envelopingPresidentSarkozyofFrance

and his financeminister, Christine Lagarde, as they realized that theymighthavetoconjureup€562billionfromthinair.Andit’snotdifficult topicturethe angst of one ofLagarde’s predecessors in France’s financeministry, thenotoriousDominicStrauss-Kahn,whowasthenmanagingdirectoroftheIMFand intent on using that position to launch his campaign for France’spresidency in two years’ time. France’s top officials knew that Greece’sbankruptcywouldforcetheFrenchstatetoborrowsixtimesitstotalannualtaxrevenuesjusttohanditovertothreeidioticbanks.Itwassimplyimpossible.Hadthemarketscaughtawhiffthatthiswasonthe

cards, interest rates on France’s own public debtwould have been propelledintothestratosphere,andinseconds€1.29trillionofFrenchgovernmentdebtwould have gone bad. In a countrywhich had given up its capacity to printbanknotes – the only remainingmeans of generatingmoney fromnothing–thatwouldmeandestitution,whichinturnwouldbringdownthewholeoftheEuropeanUnion,itscommoncurrency,everything.InGermany,meanwhile,thechancellor ’spredicamentwasnolesstaxing.In

2008,asbanksinWallStreetandtheCityofLondoncrumbled,AngelaMerkelwas still fostering her image as the tight-fisted, financially prudent IronChancellor. Pointing a moralizing finger at the Anglosphere’s profligatebankers, she made headlines in a speech she gave in Stuttgart when shesuggestedthatAmerica’sbankersshouldhaveconsultedaSwabianhousewife,whowould have taught them a thing or two aboutmanaging their finances.Imagine her horror when, shortly afterwards, she received a barrage of

anxious phone calls from her finance ministry, her central bank, her owneconomic advisers, all of them conveying an unfathomable message:Chancellor, our banks are bust too! To keep the ATMs going, we need aninjectionof€406billionofthoseSwabianhousewives’money–byyesterday!Itwas thedefinitionofpoliticalpoison.Howcould she appear in frontof

those samemembers of parliamentwhom she had for years lectured on thevirtues of penny-pinchingwhen it came to hospitals, schools, infrastructure,social security, the environment, to implore them to write such a colossalcheque tobankerswhountil secondsbeforehadbeenswimming in riversofcash?Necessitybeingthemotherofenforcedhumbleness,ChancellorMerkeltook a deep breath, entered the splendid Norman Foster-designed federalparliament inBerlinknownas theBundestag, conveyed toherdumbfoundedparliamentarians thebadnewsandleftwith therequestedcheque.At least it’sdone,shemusthavethought.Exceptthatitwasn’t.Afewmonthslateranotherbarrage of phone calls demanded a similar number of billions for the samebanks.WhydidDeutscheBank,FinanzbankandtheotherFrankfurt-basedtowersof

financialincompetenceneedmore?Becausethe€406billionchequetheyhadreceivedfromMrsMerkelin2009wasbarelyenoughtocovertheirtradesinUS-basedtoxicderivatives.ItwascertainlynotenoughtocoverwhattheyhadlenttothegovernmentsofItaly,Ireland,Portugal,SpainandGreece–atotalof €477 billion, of which a hefty €102 billion had been lent to Athens. IfGreecelost itscapacitytomeetitsrepayments,3Germanbanksfacedanotherloss thatwould require ofMrsMerkel another cheque for anything between€340 billion and €406 billion, but consummate politician that she is, thechancellorknewshewouldbecommittingpoliticalsuicidewereshetoreturntotheBundestagtorequestsuchanamount.Betweenthem,theleadersofFranceandGermanyhadastakeofaround€1

trillion in not allowing the Greek government to tell the truth; that is, toconfess to its bankruptcy. Yet they still had to find a way to bail out theirbankersasecondtimewithouttellingtheirparliamentsthatthiswaswhattheyweredoing.AsJean-ClaudeJuncker,thenprimeministerofLuxembourgandlater president of the European Commission, once said, ‘When it becomesserious,youhavetolie.’4Afterafewweekstheyfiguredouttheirfib:theywouldportraythesecond

bailout of their banks as an act of solidarity with the profligate and lazyGreeks, who while unworthy and intolerable were still members of the

European family andwould therefore have to be rescued.Conveniently, thisnecessitatedprovidingthemwithafurthergargantuanloanwithwhichtopayofftheirFrenchandGermancreditors,thefailingbanks.Therewas,however,a technical hitch that would have to be overcome first: the clause in theeurozone’s founding treaty that banned the financing of government debt bytheEU.Howcouldtheygetroundit?TheconundrumwassolvedbyatypicalBrussels fudge, that unappetizing dish that the Europeans, especially theBritish,havelearnedtoloathe.First, the new loanswould not be European but international, courtesy of

cuttingtheIMFintothedeal.TodothiswouldrequiretheIMFtobenditsmostsacred rule: never lend to a bankrupt government before its debt has had a‘haircut’–been restructured.But the IMF’s thenmanagingdirector,DominicStrauss-Kahn,desperatetosavethebanksofthenationheplannedtoleadtwoyearsdownthetrack,wasonhandtopersuadetheIMF’sinternalbureaucracytoturnablindeye.WiththeIMFonboard,Europeanscouldbetoldthatitwasthe international community, not just the EU, lending to the Greeks for thehigherpurposeofunderpinningtheglobalfinancialsystem.PerishthethoughtthatthiswasanEUbailoutforanEUmemberstate,letaloneforGermanandFrenchbanks!Second,thelargestportionoftheloans,tobesourcedinEurope,wouldnot

comefromtheEUperse;theywouldbepackagedasaseriesofbilateralloans– that is to say, from Germany to Greece, from Ireland to Greece, fromSloveniatoGreece,andsoon–witheachbilateralloanofasizereflectingthelender ’s relative economic strength, a curious application of Karl Marx’smaxim‘fromeachaccordingtohiscapacitytoeachaccordingtohisneed’.So,of every €1000 handed over to Athens to be passed on to the French andGerman banks, Germany would guarantee €270, France €200, with theremaining€530guaranteedbythesmallerandpoorercountries.5ThiswasthebeautyoftheGreekbailout,atleastforFranceandGermany:itdumpedmostoftheburdenofbailingouttheFrenchandGermanbanksontotaxpayersfromnations even poorer than Greece, such as Portugal and Slovakia. They,togetherwithunsuspectingtaxpayersfromtheIMF’sco-funderssuchasBraziland Indonesia, would be forced to wire money to the Paris and Frankfurtbanks.UnawareofthefactthattheywereactuallypayingforthemistakesofFrench

and German bankers, the Slovaks and the Finns, like the Germans and theFrench,believed theywerehaving toshoulderanothercountry’sdebts.Thus,

inthenameofsolidaritywiththeinsufferableGreeks,theFranco-Germanaxisplantedtheseedsofloathingbetweenproudpeoples.

FromOperationOffloadtobankruptocracy

As soon as the bailout loans gushed into the Greek finance ministry,‘OperationOffload’began: theprocessof immediately siphoning themoneyoff back to the French and German banks. By October 2011, the Germanbanks’exposuretoGreekpublicdebthadbeenreducedbyawhopping€27.8billionto€91.4billion.Fivemonthslater,byMarch2012,itwasdowntolessthan€795million.Meanwhile theFrenchbankswereoffloadingeven faster:bySeptember2011theyhadunburdenedthemselvesof€63.6billionofGreekgovernment bonds, before totally eliminating them from their books inDecember2012.Theoperationwasthuscompletedwithinlessthantwoyears.ThiswaswhattheGreekbailouthadbeenallabout.WereChristineLagarde,NicolasSarkozyandAngelaMerkelnaiveenough

toexpectthebankruptGreekstatetoreturnthismoneywithinterest?Ofcoursenot.Theysawitpreciselyasitwas:acynicaltransferoflossesfromthebooksof theFranco-Germanbanks to theshouldersofEurope’sweakest taxpayers.And therein lies the rub: theEUcreditors Inegotiatedwithdidnotprioritizegettingtheirmoneybackbecause,inreality,itwasn’ttheirmoney.6Socialists, Margaret Thatcher liked to say, are bound to make a mess of

finance because at some point they run out of other people’s money.7 HowwouldtheIronLadyhavefeltifshe’dknownthatherdictumwouldprovesofitting a description of her own self-proclaimed disciples, the neoliberalapparatchiksmanagingGreece’sbankruptcy?DidtheirGreekbailoutamountto anything other than the socialization of the French and German banks’losses,paidforwithotherpeople’smoney?InmybookTheGlobalMinotaur,whichIwaswritingin2010whileGreece

wasimploding,Iarguedthatfree-marketcapitalistideologyexpiredin2008,seventeenyearsaftercommunismkickedthebucket.Before2008free-marketenthusiastsportrayedcapitalismasaDarwinianjunglethatselectsforsuccessamong heroic entrepreneurs. But in the aftermath of the 2008 financialcollapse, the Darwinian natural selection process was stood on its head: themoreinsolventabankerwas,especiallyinEurope,thegreaterhischancesof

appropriating large chunks of income from everyone else: from the hard-working, the innovative, the poor and of course the politically powerless.BankruptocracyisthenameIgavetothisnovelregime.MostEuropeansliketothinkthatAmericanbankruptocracyisworsethanits

European cousin, thanks to the power of Wall Street and the infamousrevolvingdoorbetweentheUSbanksandtheUSgovernment.Theyarevery,very wrong. Europe’s banks were managed so atrociously in the yearspreceding 2008 that the inane bankers ofWall Street almost look good bycomparison. When the crisis hit, the banks of France, Germany, theNetherlands and the UK had exposure in excess of $30 trillion, more thantwice the United States national income, eight times the national income ofGermany, and almost three times the national incomes of Britain,Germany,France andHolland put together.8 A Greek bankruptcy in 2010 would haveimmediately necessitated a bank bailout by the German, French, Dutch andBritish governments amounting to approximately $10,000 per child,womanandmanlivinginthosefourcountries.Bycomparison,asimilarmarketturnagainstWallStreetwouldhave required a relatively tinybailout of nomorethan $258 perUS citizen. IfWall Street deserved thewrath of theAmericanpublic,Europe’sbanksdeserved38.8timesthatwrath.But that’s not all. Washington could park Wall Street’s bad assets on the

Federal Reserve’s books and leave them there until either they startedperforming again or were eventually forgotten, to be discovered by thearchaeologistsof the future.Put simply,Americansdidnotneed topayeventhat relativelymeasly$258perheadoutof their taxes.But inEurope,wherecountrieslikeFranceandGreecehadgivenuptheircentralbanksin2000andtheECBwasbannedfromabsorbingbaddebts,thecashneededtobailoutthebanks had to be taken from the citizenry. If you have ever wondered whyEurope’s establishment is so much keener on austerity than America’s orJapan’s,thisiswhy.ItisbecausetheECBisnotallowedtoburythebanks’sinsinitsownbooks,meaningEuropeangovernmentshavenochoicebuttofundbankbailoutsthroughbenefitscutsandtaxhikes.Was Greek’s unholy treatment a conspiracy? If so, it was one without

conscious conspirators, at least at the outset. Christine Lagarde and her ilkneversetouttofoundEurope’sbankruptocracy.WhentheFrenchbanksfacedcertaindeath,whatchoicedidshehaveasFrance’sfinanceminister,alongsideherEuropeancounterpartsandtheIMF,buttodowhateverittooktosavethem–evenifthisentailedlyingtonineteenEuropeanparliamentsatonceaboutthe

purposeoftheGreekloans?Buthavingliedonceandonsuchagrandscale,theyweresoonforcedtocompoundthedeceitinanattempttohideitbeneathfresh layers of subterfuge. Coming clean would have been professionalsuicide.Before theyknew it,bankruptocracyhadenveloped them too, justassurelyasithadenvelopedEurope’soutsiders.This iswhatChristinewas signalling tomewhen she confided that ‘they’

had invested toomuch in the failedGreekprogramme togobackon it.ShemightaswellhaveusedLadyMacbeth’smoregracefulwords: ‘What’sdonecannotbeundone.’

‘Nationaltraitor’–theoriginsofaquaintcharge

My career as ‘national traitor ’ has its roots in December 2006. In a publicdebate organized by a former prime minister ’s think tank I was asked tocomment on the 2007 Greek national budget. Looking at the figures,something compelled me to dismiss them as the pathetic window-dressingexercisethattheywere:

Today…wearethreatenedbythebubbleinAmericanrealestateandinthederivativesmarket…Ifthisbubblebursts,anditiscertainitwill,noreductionininterestratesisgoingtoenergizeinvestmentinthiscountrytotakeuptheslack,andsononeofthisbudget’sfigureswillhavealegtostandon…ThequestionisnotwhetherthiswillhappenbuthowquicklyitwillresultinournextGreatDepression.

Myfellowpanellists,whoincludedtwoformerfinanceministers,lookedatmethewayonelooksataninconvenientfool.9OverthenexttwoyearsIwouldencounterthatlooktimeandagain.EvenafterLehmanBrotherswentbellyup,WallStreetcrumpled,thecreditcrunchhitandagreatrecessionengulfedtheWest,Greece’s eliteswere living in abubbleof self-deludedbliss.Atdinnerparties, in academic seminars, at art galleries they would harp on aboutGreece’s invulnerability to the ‘Anglo disease’, secure in the conviction thatour banks were sufficiently conservative and the Greek economy fullyinsulatedfromthestorm.InpointingoutthatnothingcouldhavebeenfurtherfromthetruthIsoundedajarringdissonance,butitwouldonlygetworse.

Inreality,statesneverrepaytheirdebt.Theyrollitover,meaningtheydeferrepaymentendlessly,payingonlytheinterestontheloans.Aslongastheycankeepdoingthis,theyremainsolvent.10Ithelpstothinkofpublicdebtasaholeinthegroundnexttoamountainrepresentingthenation’stotalincome.Daybydaytheholegetssteadilydeeperasinterestaccruesonthedebt,evenifthestatedoesnotborrowmore.Butduringthegoodtimes,astheeconomygrows,theincomemountainissteadilygettingtaller.Aslongasthemountainrisesfasterthan thedebtholedeepens, theextra incomeadded to themountain’s summitcanbe shovelled into the adjacenthole, keeping its depth stable and the statesolvent. Insolvency beckons when the economy stops growing or starts tocontract:recessiontheneatsintoacountry’sincomemountain,doingnothingtoslowthepaceatwhichthedebtholecontinuestogrow.Atthispointalarmedmoneymenwill demandhigher interest rates on their loans as the price forcontinuing to refinance thestate,but increasedratesoperate likeoverzealousexcavators,diggingyetfasterandmakingthedebtholeevendeeper.Before the 2008 crisis Greece had, relative to the height of its income

mountain,thedeepestdebtholeintheEuropeanUnion.Butatleasttheincomemountain was rising faster than the hole was getting deeper, creating asemblanceofsustainability.11Allthatchangedmenacinglyinearly2009oncethe bottom fell out of the French and German banks as a result of havingstuffedtheirbootswithtoxicAmericanderivativesrenderedworthlessbyWallStreet’s cave-in. Greece’s double misfortune was that income growth in thecountry had hitherto been fuelled by further debt provided to corporations(often via theGreek state) by the same French andGerman banks thatwerelendingtothestate.12ThemomentthesebankspanickedandstoppedlendingtoGreece’s public and private sector simultaneously, the game would be up.Greece’sincomemountainwouldcollapseatthesametimeasthestate’sdebtholebecameanabyss.13ThiswaswhatItoldanyonewhowouldlisten.Intheautumnof2009anewGreekgovernmentwaselectedonthepromise

of higher spending as a means of helping the nation’s income mountainrecover,butthenewprimeministerandhisfinanceminister,fromthePASOKsocial democratic party, did not get it. The state was irretrievably bankruptevenbeforetheywereswornin.Theglobalcreditcrunch,whichhadnothingto do with Greece, was about to stop European banks lending to us. For acountrywith debt-driven growth – debt denominated inwhat is essentially aforeigncurrency,monetarypolicyovertheeurobeingwhollyoutofGreece’scontrol–surroundedbyEuropeaneconomiesindeeprecessionandunableto

devalue,Greece’s incomemountainwasbound todwindle at sucha rate thatthedebtholewouldconsumethenation.In January2010 ina radio interview Iwarned theprimeminister,whomI

knewpersonallyandwithwhomIwasonratherfriendlyterms,‘Whateveryoudo,donotseekstateloansfromourEuropeanpartnersinafutilebidtoavertourbankruptcy.’AtthetimetheGreekstatewasmakingasuperhumanefforttodopreciselythat.Withinsecondsgovernmentsourceswerechastisingmeasatraitor – a fool who failed to understand that such prognoses are self-confirming:retainingmarketconfidenceinthestate’sfinancialhealthwastheonlywaytokeeptheloanscoming,Convincedthatourbankruptcywasassuredwhatevercalmingnoisesweemitted, I ploughedon.The fact that I hadoncewrittenspeechesforPrimeMinisterPapandreoucaughttheeyeoftheBBCandother foreignnewsoutlets.HeadlinessuchasFORMERGREEK PMADVISER SAYSGREECE IS BANKRUPT titillated the media and cemented my reputation as theworstenemyoftheGreekestablishment.Upton Sinclair once said, ‘It is difficult to get a man to understand

somethingwhenhissalarydependsuponhisnotunderstandingit.’Inthiscase,the incomeandwealthof theGreekrulingclassdependedon theirnotbeingconvinced of Greece’s bankruptcy. If every man, woman and child in thisgenerationandthenexthadtotakeonunsustainableloansinordertokeeptheGreekoligarchs’relationshipwithforeignbankersandgovernmentssweet,sobe it.No argument appealing to the interest of the remaining 99per cent ofGreeks and their descendants could have swayed them. But the more theypluggedtheirearsagainstthedissonantfacts,thegreaterthedutyIfelttowarnourpeoplethattheloanstheestablishmentwereseekingontheirbehalfwould,inthenameofavoidingit,worsenthebankruptcyand,asaresult,consigntheGreeks to a debtors’ prison. Friends and colleagues warned me that mythinkingmightbe correctbut that itwasbadpolitics to speakofbankruptcy.Not being a natural-born politician, I would respond with a line by JohnKennethGalbraith:‘Therearetimesinpoliticswhenyoumustbeontherightsideandlose.’LittledidIknowhowpropheticthatwouldprove.And so I continuedmy solitary struggle to convince a nation to embrace

bankruptcyinordertoavoidtheworkhousethatwasbeingpreparedforitifitdidnot. InFebruary2010onnational televisionIsuggested that theproblemwith all extend-and-pretend loans is that, as in a gameofmusical chairs, themusichastostopatsomepoint.InthiscasethatwouldbethepointatwhichtheweakestEuropeans,whose taxes and benefitswould finance the loans, cried,

‘Enough!’Butbythenwewouldbemuchpoorer,muchmoreindebted,aswellashatedbyourfellowEuropeans.InApril2010,amonthbeforethebailout,Ipublished three articles in quick succession. In the first of them, on 9April,underthetitleAREWEBANKRUPT?Iarguedthatifthestatepretendeditwasnotbankrupt, through bailout extend-and-pretend loans, Greeks would face the‘most spectacular bankruptcy among families and businesses in our postwarhistory’.But if the state confessed its bankruptcy and entered into immediatenegotiationswithitscreditors,muchoftheburdenwouldbesharedwiththoseresponsible for thedebt: thebanks that indulged inpredatory lendingbefore2008.Theestablishment’sresponsewassimpleandtothepoint:ifourgovernment

were to demand debt restructuring, Europe would jettison us from theeurozone. My rejoinder was also simple and to the point: doing so woulddestroy France andGermany’s banking systems andwith them the eurozoneitself.Theywouldneverdoit.Buteveniftheydid,whatwasthepointofbeingin amonetary union that crushes its constituent economies?So, unlike thoseopponentsoftheeurowhosawthecrisisasanopportunitytopresstheircaseforGrexit,mypositionwasthattheonlywayofstayingsustainablywithintheeurozonewastodisobeyitsinstitutions’sdirectives.FewerthantendaysbeforethebailoutagreementwassignedIfiredanother

two shots across the government’s bows. On 26 April, in an article headedEUROPE’SLASTTANGOIlikenedourgovernment’seffortstosecureabailouttothose of successive Argentinian governments which strove to preserve,through largedollar loans from the IMF, thepeso’sone-to-one linkwith theUSdollarjustlongenoughfortherichandthecorporationstoliquidatetheirArgentinian properties, convert the proceeds into dollars and wire them toWall Street – before leaving the economy and currency to collapse and theaccumulated dollar debt to crush the hapless Argentinian masses. Two dayslater I went all out with an article whose title says it all: LOOKING ONBANKRUPTCY’SBRIGHTERSIDE.Fivedayslaterthebailoutloanwassigned.Theprimeminister,choosingan

idyllicislandasthebackdropforhisaddresstothenation,haileditasGreece’ssecondchance,proofofEuropeansolidarity,thefoundationofourrecovery,blahblahblah.Itwastobehisundoingandthenation’sone-waytickettotheworkhouse.

Championofausterity

In September 2015, after my ministry days were over, I made my firstappearanceon theBBC’sQuestionTime, recorded in frontof anaudience inCambridge.ItshostDavidDimblebyintroducedmeasEurope’santi-austeritychampion,anopeninvitationtoaladdishmemberoftheaudiencetoconfrontmewithhispro-austerityphilosophy:‘Economicsisreallysimple.I’vegottenpoundsinmypocket.IfIgooutandbuythreepintsofbeerinCambridge,I’mprobablyborrowingmoney.IfIcarryondoingthat,thenI’mgoingtorunoutofmoneyandI’mgoingtogobust.It’snotdifficult.’One of the greatmysteries of life, at least ofmy life, is how susceptible

good people are to this awful logic. In fact, personal finances are a terriblebasisforunderstandingpublicfinance,asIexplainedinresponse:‘Inyourlifeyouhaveawonderfulindependencebetweenyourexpensesandyourincome.Sowhenyou cut downon your expenses, your income is not cut.But if thecountry as awholegoes [on] amajor savings spree, then its total income isgoingtocomedown.’The reason for this is that at a national level total expenditure and total

income are precisely equal because whatever is earned has been spent bysomeoneelse.Soifeverypersonandbusiness in thecountryiscuttingback,theonethingthestatemustnotdoiscutbackaswell.Ifitdoesso,theabruptfallintotalexpendituremeansanequallyabruptfallinnationalincome,whichinturnleadstolowertaxesfortheTreasuryandtoausterity’sspectacularowngoal:anever-shrinkingnational incomethatmakes theexistingnationaldebtunpayable.Thisiswhyausterityisabsolutelythewrongsolution.Ifproofofthiswereeverneeded,Greecehasprovidedit.Our2010bailout

had two pillars: gigantic loans to fund the French and German banks, andswingeingausterity.ToputGreekausterity intoperspective: in the twoyearsthatfollowedGreece’s‘rescue’,Spain,anothereurozonecountrycaughtupinthe same mess, was treated to austerity which amounted to a 3.5 per centreductioningovernmentexpenditure.Duringthesametwo-yearperiod,2010to2012,Greeceexperiencedastupendous15percentreductioningovernmentspending. To what effect? Spain’s national income declined by 6.4 per centwhile Greece’s by fell by 16 per cent. In Britain, meanwhile, the newlyappointed chancellor George Osborne was championing mild austerity as ameans of achieving his dream: a balanced government budget by 2020.14

Osbornewas among the first financeministers Imet aftermy election. Themost startling aspect of that encounter – at least to those in the press whoexpecteda frostyoroutright acrimoniousmeeting–was thatwe foundverylittle todisagreeon. In thefirst fewminutesofourdiscussionIsuggested tohimthat‘Whilewemaydisagreeonthemeritsofausterity,youarenotreallydoingmuchofit,George,areyou?’15Heagreedsmilingly.Howcouldhenot?IfanAusterityOlympicshadbeen

staged, Greece would have swept the board while Osborne’s Britain wouldhavebeenanalso-ranatthebottomofthemedalstable.OsbornealsoseemedappreciativeofthehelphewasgettingfromtheBankofEngland,whichfromthe moment the City went through its 2008 credit convulsion had printedbillionstorefloatthebanksandkeeptheeconomy‘liquid’.OsbornereferredtothisBankofEnglandlargessecombinedwithgovernmentspendingcutbacksas‘expansionarycontraction’.‘Theyarebehindmeeverystepof theway,’he toldme,evidentlyrelieved

nottobeinmysituation,hostagetoaEuropeanCentralBankthatwasdoingpreciselytheopposite.‘Ienvyyou,George,’Ilamented.‘Unlikeyou,Ihaveacentralbankstabbing

meinthebackeverystepoftheway.Canyouimaginewhatitwouldbelike,here inBritain,’ I asked, ‘if instead of your “expansionary contraction” youwereforced,likeIam,intoa“contractionarycontraction”?’Henoddedwithasmile,signallingifnotsolidarityatleastsympathy.That a meeting between a Tory chancellor and a finance minister

representing the radical Left in Greece went swimmingly is not actually aspuzzling as the press would have everyone believe. Three years previously,with the euro crisis at full blast, a chartered accountants’ chamber based inAustralia decided to entertain the attendees at their annual conference inMelbournebystagingadebatebetweenaleft-andaright-wingerfromEurope.So they invited Lord (Norman) Lamont, former chancellor in JohnMajor ’sgovernment, andme todebate, convincedof the fireworks thatwould ensue.Unfortunately for them, they chose the wrong theme: the eurozone crisis.Havingtakenthestageinfrontofalargeaudienceanticipatingacockfight,wequicklydiscoveredthatweagreedonalmosteverything.The discussion was so amicable, in fact, that after we had left the stage

together,wemetDanae outside and the three of us proceeded to have lunchtogether at a riverside restaurant.Bathed in brilliant sunshine, the friendshipblossomed–with thehelpofsomedelightfulAussiewine,asNormankeeps

remindingme.Afterthatweremainedintouch,exchangingviewsinamannerthatconfirmedwehadmoreincommonthanevenwecouldhaveimagined.ItwasDecember 2014when I shockedNormanwith the news that Iwould betaking over Greece’s finance ministry within a month. Since that day, andthroughout my tumultuous months in office but also beyond, Norman hasproved a pillar of strength, a safe friend and a constant supporter. In fact,before I stepped into 11 Downing Street to meet George Osborne in 2015,Normanhadcalledhimonthetelephonetopavethewayforourmeetingwithafewwarmwordsaboutme.WhilemyfriendshipwithLordLamontseemedoddtomany,especially to

myleft-wingcomrades ingovernment, it fittedwellwithinabroaderpattern.Throughout the bleak years, from 2010 to this day, I have been continuallystunnedby the support that I, aproud leftie, have received fromavarietyofright-wingers–WallStreet andCityofLondonbankers, right-wingGermaneconomists,evenUSlibertarians.Togiveanexampleofhowweirdthingsgot,onasingledayinlate2011IaddressedthreeratherdifferentcrowdsinNewYork City – one at Occupy Wall Street, another at the New York FederalReserve and a third consistingof hedge fundmanagers andbank reps– andwhenItoldallthreeaudiencesthesamestoryaboutEurope’scrisis,Ireceivedfromeachofthesethreecampsofswornenemiesthesamewarmresponse.What authentic libertarians, Wall Street’s recovering bankers and Anglo-

Celticright-wingerslikedaboutmyotherwiseleft-wingpositionwaspreciselythatwhichtheGreekandEuropeanestablishmentloathed:aclearoppositiontounsustainable, extend-and-pretend loans that repackage bankruptcy as anilliquidityproblem.True-bluefreemarketeersareallergictotaxpayer-fundedbenevolence. They reject wholeheartedly my views on the desirability ofsubstantialpublicinvestmentinrecessionarytimesandoftax-mediatedincomedistribution at all times. But we agree that extending a bankruptcy into thefuture through taxpayer-funded loans is a horrific waste of resources and agateway to mass misery. Above all else, libertarians understand debt. As aresult,we saweye toeyeon themisanthropic fallacybehind theprogrammethatChristineLagardewaspushingme,fouryearslater,toembrace.The official explanation of how the establishment’s programme was

supposedtohelpGreecerecoverin2015mightbetermed‘OperationRestoreCompetitiveness’.Thebasic ideawas this:Greecehas theeuroand thereforecannotattractinvestmentfromoverseasbydevaluingitscurrency,whichistheusual strategy for regaining international competitiveness. Instead, it can

achievethesameresultthroughwhatisknownasinternaldevaluation,broughtaboutviamassiveausterity.How?Swingeinggovernmentexpenditurecutswillbeardownonpricesandwages.Greekoliveoil,hotel servicesonMykonosand Greek shipping fees will therefore become much cheaper for German,French andChinese customers.WithGreece’s competitiveness thus restored,exports and tourism will pick up, and with this miraculous transformationinvestorswillrushin,thusstabilizingtheeconomy.Intimegrowthreturnsandincomespickup.Jobdone.Itmighthavebeenaconvincingargumentifitwerenotfortheelephantin

theroom–anelephantthatlibertariansrecognize:nosaneinvestorisattractedto a country whose government, banks, companies and households are allinsolventatonce.Asprices,wagesandincomesdecline,thedebtthatunderliestheirinsolvencywillnotfall,itwillrise.Cuttingone’sincomeandaddingnewdebt can only hasten the process. This is of course what had happened inGreecefrom2010onwards.In2010, for every$100of incomeaGreekmade, the stateowed€146 to

foreignbanks.Ayearlater,every€100ofincomeearnedin2010hadshrunkto€91beforeshrinkingagainto€79by2012.Meanwhile,astheofficialloansfrom European taxpayers came in before being funnelled to France andGermany’sbanks,theequivalentgovernmentdebtrosefrom€146in2010to€156in2011.EvenifGodandalltheangelsweretoinvadethesoulofeveryGreektaxevader,turningusintoanationofparsimoniousPresbyterianScots,our incomeswere too lowandourdebts toohigh to reverse thebankruptcy.Investorsunderstoodthisandwouldn’ttouchaGreekinvestmentprojectwithabargepole. The corollary was a humanitarian crisis that ended up bringingpeoplelikemeintogovernment.Once I was there, with the international Left in permanent disarray, US

libertariansandUKfreemarketeerswereamongmymosteffectivesupporters.Interestingly, their ideological, quasi-Darwinian commitment to letting themarket’s losers perish was pushing them towards my side. Mindful of thedangersoftoomuchcredit,theirdictumthat‘Toeveryirresponsibleborrowertherecorrespondsanirresponsiblelender ’ledthemtotheconclusionthatbadloansshouldburdenirresponsiblelenders,nottaxpayers.Asforirresponsibleborrowers, they should also pay the price of their irresponsibility, mainlythroughbeingdeniedcredituntiltheyprovedtheirtrustworthinessagain.

Blacklisted

Throughout 2010 and 2011 almost every other day it seemed I appeared onradioandtelevisionimploringthegovernmenttoconfrontrealityandenterthephaseofgrimacceptancethatGreekpublicdebthadtoberestructured.Therewas nothing radical or particularly left wing in this proposition. Banksrestructurethedebtofstressedcorporationseveryday,notoutofphilanthropybutoutofenlightenedself-interest.Buttheproblemwasthat,nowthatwehadacceptedtheEU–IMFbailout,wewerenolongerdealingwithbanksbutwithpoliticianswho had lied to their parliaments to convince them to relieve thebanksofGreece’sdebtand take iton themselves.Adebt restructuringwouldrequire them to go back to their parliaments and confess their earlier sin,somethingtheywouldneverdovoluntarily, fearfulof therepercussions.TheonlyalternativewastocontinuethepretencebygivingtheGreekgovernmentanotherwadofmoneywithwhichtopretendtomeetitsdebtrepaymentstotheEUandtheIMF:asecondbailout.Iwasdeterminedtospoiltheirparty:toshoutfromanyrooftopIcouldscale

thatourworstoptionwouldbetoacceptmoreloans.Itriedvariousmetaphors:‘It’slikeacceptingacreditcard,’Ioncesaidontelevision,‘inordertorepaymortgageinstalmentsthatyoucannotmakebecauseofadropinyourwages.It’sacrimeagainstlogic.Justsayno.Ahomerepossessionisaterriblething,buteternaldebtbondageisevenworse.’Oneevening,on returning toour flatafteryetanother sessionatERT, the

GreekstateradioandTVnetwork,thelandlinerang.Ipickedthephoneuptohear a familiar voice. It belonged to Antonis Samaras, then leader of theconservativeNewDemocracy party, at the timeGreece’s official oppositionand the man I helped defeat four years later, in the January 2015 generalelection.‘Wehavenevermet,MrVaroufakis,’hesaid,‘buthavingjustwatchedyou

onERT I felt an urge to call. For I cannot remember the last time Iwas sotouchedbysomethingsoprofoundIheardsomeonesayontelevision.Thankyouforyourstance.’Hewas not the onlymember of theGreek establishment to approachme.

Indeed, my campaign had led to many secret discussions with socialistministers,oppositionconservativemembersofparliament,tradeunionbossesandthelikewhofeltIwasontosomething.OnceIoutlinedmybasicanalysis,

notoneofthemcontestedit.Thesocialistsspokelikepettyofficerswhoknowthattheshipisheadingfortherocksbutaretooscaredtoconfrontacaptainindeep denial. The conservatives, at least up until November 2011, were ahappierlot:withtheirleaderAntonisSamarasadoptingananti-austerity,anti-bailoutposition,theyfeltfreertoendorsemymusings.AfewdayslaterIwasatERT’sstudiospreparingforyetanotherappearance

onthemainnewsbulletin.Thenetwork’sCEOhadpreviouslyapproachedmewithanintriguingoffer:topresentashortprogrammealmostdailythatwouldfollow themain news, offeringmy commentary on the unfolding economicdrama. ‘The government will not like it but your views are important anddeserve an airing,’ he had said decisively. Flattered, but also pleased by thehead of state television’s commitment to pluralism despite the government’sfierceoppositiontomyviews,Ihadagreedtothinkaboutit.That night, ten minutes before show time, the CEO summonedme to his

office for a chat. Sitting opposite him was the station’s main anchor, ajournalist who for two decades had been the darling of the PASOKestablishment, well known for her dyed blonde hair, blue eyes, captivatingvoiceandflirtatiousness.TheCEOremindedmeofhisofferofaregularslotforme, towhich the anchor added her enthusiastic approval. Just beforeweheadedforthestudio,underhiswatchfuleyes,shecameupwithhercaveat:‘Iknow that this is your thing, but please do not mention debt restructuringtonight.Itmakesithardtokeepyouonair.Thegovernmentgoballisticwhentheyhearthesewords.’Ismiledandproceededtotheset.Oncesettledin,andaftershehadreadthe

headlines, she turned to me with her usual au fait manner to ask, ‘MrVaroufakis, the government is telling us that the programme is going tosucceed.Butwehearotherviewsalso.Whatsayyou?’ImmediatelyI replied,‘Withoutdebtrestructuring,noprogramme,not just

thisone, standsachance.’ I thought Idetectedanalmost imperceptible twitchunderherheavymake-up.Once the show was over, I headed straight for the car park, got on my

motorcycleand rodehome,certain that Iwouldneverbe invitedontoERT’sprogrammes again. Indeed, on the orders of the pressminister (whosemeretitle fills any liberal heartwithunease) Iwasunofficially blacklisted.16 Fouryearslater,exactlythesamesin–insistingondebtrestructuring–wouldleadEurope’stopdogstodemandmyremovalfromGreece’sfinanceministryandtheEurogroup.WhosaysEurope’sestablishmentisnotconsistent?

The2011ERTbanwasmy firstwhiffof the incompetentauthoritarianismthatcharacterized theEuropeanUnion’sapproach to theeurozonecrisis.Fortheirattitudetothecrisiswasessentiallyamoralisticone.Austerityisanawfuleconomic policy that, as explained previously, is guaranteed to fail in badtimes. But austerity is not really an economic policy at all. Austerity is amoralityplaypressedintotheserviceoflegitimizingcynicalwealthtransfersfrom the have-nots to the haves during times of crisis, inwhich debtors aresinners whomust bemade to pay for their misdeeds. Not satisfied with theGreeks’, theSpaniards’, theirownpeople’ssubmission to theirauthority, thetroikademandedalsothat theotherweaklingsofEurope, includingthemanyGermansstrugglingagainstpoverty,taketheguiltandtheblameforthecrisistoo.TheGermanfinanceministerDrWolfgangSchäubleoncetoldmethatmy

opposition toausterityplacedme inaminorityofEuropeans, citingopinionpollsthatshowedsupportforgovernmentexpenditurecuts.Irepliedthat,evenif that were true, amajority can bewrong about the cause of theirmalaise.During the Black Death of the fourteenth century, I reminded him, mostEuropeans believed the plague was caused by sinful living and could beexorcized by bloodletting and self-flagellation. And when bloodletting andself-flagellation did not work, this was taken as evidence that people’srepentancewasnotsincereenough,thatnotenoughbloodhadbeenlet,thattheflagellationwas insufficiently enthusiastic – exactly as now,when austerity’sabysmalfailureiscitedasproofthatithasbeenappliedtoohalf-heartedly.Ifhewasamused,Wolfgangdidnotshowit.Butthisisthepoint:strippedof

its moral weight, austerity emerges as what it is: a failed economic policyfounded on unethical moralizing. The reason the establishment found meinfuriating was that I had a degree of success in applying cold logic to theproblemandthusde-moralizingthedebateonGreekdebt,utilizingargumentsthattranscendedthedivisionsbetweenLeftandRightandresonatedpowerfullywithsegmentsofboth.This iswhy, if theyhadbeenable, theywouldhaveblacklistedmenot just

fromERTbutfromeverypublicforumonthecontinent.

Squareofhope

AtthesametimeasGreekstatetelevisionwasblacklistingmeforcontinuingtocampaignforadebtrestructuring,theIMFwasbeginningtoworktowards…adebtrestructuring.TheGermangovernmentwantednoneofthis,buttheIMF,increasinglyembarrassedatthemesstheEuropeanshaddraggeditinto,waspushinghard.ToappeasetheIMF,theGreekfinanceministerlukewarmlyconsulteddebt restructuringexperts inWashington,despitehisdeterminationto toe Berlin’s line.17 Meanwhile, Berlin and Paris were coming to theconclusionthatGreeceneededanewbailoutloan,ahaircutofsomeofitsdebtandanewgovernment.Theirthinkingwasuncomplicated:thefirstbailoutloanhadalmostallbeen

spentonshoringuptheFrenchandGermanbanks.TheGreekstatewouldsoonneedmoremoney–agreatdealmore–tocontinueitspretenceofsolvency.Butjustaswhenyouuseacreditcardtorepayamortgage,youroveralldebtonlyrises,sothesizeoftheheadlinesumtobeloanedtoAthensaspartofthesecondbailoutin2012wouldhavegiventhealreadyfumingparliamentariansthroughoutEuropeacollectivestrokeifitweren’taccompaniedbysomekindof haircut. President Sarkozy andChancellorMerkel resigned themselves totheideaofGreekdebtrestructuringonconditionthatitwouldburnonlythosecreditorswhowereincapableofharmingthemmuch.Bythesummerof2011,itwasdecided:thehaircutwouldmainlyhitGreekpensionfunds,Greeksemi-publicinstitutionsandGreeksaverswhohadboughtgovernmentbonds,whiletheloansprovidedbytheIMFandtheEuropeaninstitutionsin2010wouldofcourseremaininviolable.18ThatthiswouldspelltheendofthewretchedPapandreougovernment,which

hadpushedthefirstbailoutthroughparliament,wasconsideredanacceptableprice to pay. After all, PrimeMinister Papandreou, his financeminister, thewholeGreekestablishment,hadonlymanagedtogetparliamenttoapprovethefirstbailoutbyrepeatedlyassertingthatitwouldsaveGreece’sbacon,thatdebtrestructuringwas neither necessary nor desirable, and that anyonewho saidotherwise deserved to be tarred and feathered – or at least ostracized in theancient Athenian way. Less than two years later, how could that samegovernmentpush through thesameexhaustedandhumiliatedparliamentdebtrestructuringplusaloanevenlargerthanthefirst?Theyweredoomed.The impotence of the Papandreou government was evident not only in

Parliament House but even more so just outside it, on Syntagma Square.Syntagma means ‘constitution’, and the square’s name harks back to anuprising in 1843 against the Bavarian-born King Otto, in which the rebels

imposed upon their foreign overlord a written constitution. The square issandwichedbetweentheParliamentHouseononeside, formerlyKingOtto’spalace,and theugly1970sblock that is theMinistryofFinanceon theother.Fromcertain parts of the square one can catch glimpses of theAcropolis, areminder of bygone glories but also of the idea that thedemos – ‘people’ –oughttomatter.Since1843,whenKingOttowasforcedtobackdown,almosteverydemonstrationorrallyinAthenshasbegun,passedthroughorendedupatSyntagmaSquare,infrontofParliamentHouse.Indeed,itisthesitewhereI,along with millions of other Greeks of my generation, joined my firstdemonstration in the early 1970s, tasted the delights of CS gas and cut mypoliticalteeth.Duringthespringof2011,withthecountryalreadyinsavagerecession,the

spontaneousoccupationofSyntagmaSquarebegan,possibly inemulationofsimilar occupations of public spaces in Spain by the so-called indignados –‘indignants’–protestingagainstausterityanddemandingbacktheirdignity.Atfirst,oneortwothousandpeoplewouldgatherafternightfall.Butnightafternight thepeoplewouldreturn,andeverynight thousandsmoregathered thanthenightbefore.Thiswentonforthreewholemonths.Atitspeakonehundredthousandpeoplecongregatedinthesquare.Despitetheoccasionalbriefflare-upoflow-levelviolencecausedbyfascists,riotpoliceandhoodedanarchists,whatmadetheseralliesspecialweretheimpeccablystructureddebates.Noonecouldspeakformorethanthreeminutes;thespeakersweredrawnbylot;andevery few hours the theme under discussion changed. (I recall thinking tomyself how splendid itwould be to emulate such orderly discussions in ouruniversities.) It might not have been democracy at work, since no bindingdecisions were possible, but at least it was a huge agora vibrating withpossibility,insharpcontrasttowhatwentoninParliamentHousenearby,siteofournationalhumiliationandsubmissiontoagreatdepression.Danae and I would take the ten-minute walk from our flat to Syntagma

Square to breathe in the oxygen of hope. Twice I was asked to address thecrowd.Justbeforesteppingontothemakeshiftpodium,I rememberrecallingthat the last time I addressed a demonstration was somewhere inNottinghamshire, at a picket line during the 1984miners’ strike. At least atSyntagmatheweatherwaswarm,thecrowdmuchlargerandIwasnolongera‘meddlingforeigner ’,whichiswhataBritishpolicemanhadoncecalledme.Yettheexhilarationwasexactlythesame.AsIleftthepodium,visiblychuffed,Danaeleanedclosetomyeartoask,‘Areyousureyoudon’twanttorunfor

parliament?’IsaidIwas.Whatevermypersonalfeelings,Iexplained,thebestcontribution I could make to the cause would be to maintain the lines ofcommunicationIhadestablishedwithpoliticiansfromdifferentpartiesandtrytoworkacrosspartydivides.ButdeepinsideIwonderedhowmuchlongerthatwouldremainpossible.Themistsofdiscordwerethickening.InJune2011thefalteringGreekgovernmentwasbeingforcedbythetroika

to push through parliament one corrosive bill after another, including theeffectiveterminationoftradeunionrights.ThesewereeffectivelytheritesofPapandreou’s departure, a last humiliation before the rugwas finally pulledfrom under his feet by the second bailout. Sensing a crisis, the crowds atSyntagmaSquarewere getting denser andmeaner and soonwere occupyingthe square around the clock. Ominously, divisions began to open up. In theupper squarenationalistsand fascistsbegan tomake theiruglypresence felt,theirslogansreflectingtheirhatredofallpoliticians,indeedofparliamentarydemocracyitself–thevisiblemakingsofGoldenDawn’sascent.Inthelowersquare the much more numerous progressives would gather, striving toopposeboththeestablishmentandthecrudeanti-establishmentagitatorsoftheuppersquarebyhonouringthetraditionofwell-organizedpluralistdebates.Membersof parliament, especiallyof thegoverning socialist party,would

tellme on the phone or confess bitterly over a cup of coffee behind closeddoorsthattheycouldn’ttakeitanymore.Walkingpastthescreaming,enraged,humiliated masses to enter the chamber in order to vote for bills that theydetested was taking a heavy toll. They repeatedly told me they were on theverge of voting down their own government’s troika-dictated bills, but timeandagain,withonlyoneortwoexceptions,theywouldbebeatenbackintothegovernment’spen.Withinayear,thesocialistpartythatforthreedecadeshadcommandedaround40percentofthevotesawitssupportcollapsetoapitiful5percent.Oneday in late June five thousandpolice encircledSyntagmaSquare in a

well-orchestratedoperation toend itsoccupation.UsingquantitiesofCSgasnever seen before in a relatively confined urban space, alongwith stun andsmokegrenades,water cannonandgoodold-fashionedpoliceviolence, theyturned the square and surrounding areas into a wasteland. Hardened warcorrespondents ofmy acquaintance tell me they never imagined theywouldwitness such state violence in a city like Athens.Walls and pavements wereblackenedbythesmoke,andthewholecityreekedofchemicalsforweeks.On

thatdaythelastremnantsofthegovernment’slegitimacywerewellandtrulyexpunged.

Bailoutistan2.0

The technical details of howPrimeMinister Papandreouwas ousted are toosadtorecounthere.Sufficetosaythat,asinallgooddrama,thetroikabroughthim down by means of political machinations involving the courtiers thatsurrounded his shaky throne. It is typical of the troika’s cruel indifferencetowards those who serve it loyally that before they discarded GeorgePapandreou theysubjectedhim to theultimate ignominy: inOctober2011hewas obliged to travel one last time toBrussels to place his signature on thedraft of the second bailout and the very debt restructuring he had beendenouncing for so long on the troika’s behalf as ‘unnecessary andundesirable’.Setting up a successor government capable of shepherding the second

bailoutthroughtheGreekparliamentwasnotasimpleoperation.Papandreou’sdemiseandthewearinessof therulingsocialists’parliamentarianspointedtonewelections.Buttheballotboxisunpredictableandelectionsrequireatleastamonth,timethattheEU,theIMFandtheGreekelitedidnotfeeltheycouldspare. An interim coalition government would be formed instead, and onlyafter ithadpushed through thesecondbailoutwouldanelectionberisked inthespringof2012.Toformthatgrandcoalition,AntonisSamaras,theleaderoftheoppositionconservativeparty,wouldhavetobeco-optedintothelogicofthebailouts,whichhehadhithertoresisted.Ittookonemeeting–on23June2011inBerlinwithMrsMerkel–tobreak

MrSamaras’semotionalattachmenttomyfiercecondemnationofBailoutistanthathehadexpressedinourphoneconversationfollowingmyappearanceonERT.ThelureofaneventualmoveintoMaximos,theGreekprimeminister ’sofficialresidence,provedirresistible.HewouldnotbethelastleadertotradeaprincipledoppositiontoBailoutistanforthatoffice.Theplanwasasfollows:following Papandreou’s resignation, a ‘technocrat’ primeminister would beinstalled,withthecentreLeft(PASOK)andthecentreRight(NewDemocracy)providingministersforthegovernmentandthenecessaryvotesinparliament.Once they had seen the troika’s second bailout through the legislature, thisgovernment would call for fresh elections, which Mr Samaras’s New

DemocracywasboundtowingivenPASOK’simplosion–theresultofhavingborne the moral and political cost of the first bailout. As long as AntonisSamaras could find it within himself to jettison his anti-bailout narrative,endorse the second bailout and support the interim government from thewings, he need onlywait six to eightmonths for his turn as primeminister.Whichispreciselywhathappened.19To underline the depth of the cynicism involved, the gentleman chosen to

lead the coalition government was none other than the recently retired vicepresidentoftheEuropeanCentralBank.AformereconomicsprofessorinmydepartmentattheUniversityofAthens,LucasPapademoswouldbeobligedtoforget someunfortunateutterancesbeforemoving intoMaximos.Until threedays before his swearing-in, Papademoswas still parroting the troika’s linethatarestructuringofGreece’sdebtwas‘neithernecessarynordesirable’.ButoncehewasstandingonthethresholdofMaximos,surroundedbyjournalistskeentohavehisfirstofficialstatement,hepronouncedwithaperfectlystraightfacethathismaindutyasprimeministerwouldbetooverseetherestructuringofGreece’sdebt.And sowe come to thedelightfulmoment inour historywhen thepeople

who denounced as treacherous fools those of us who dared call for a debtrestructuringfoundthemselvestobetheverysamepeoplecalleduponbythetroika to implement it.By itself thatwouldhavebeenanamusing footnote ifthepointofthedebtrestructuringwereindeedtorenderGreecesolventagain.Butthatwasnevertheintention.To default on your creditors, to declare bankruptcy formally, is a terrible

thing,but ithasanupside:yourdebtshrinksandyouget thechance toworkhardagain,pullyourselfupbyyourbootstrapsandregainthetrustofpotentialinvestors. This is, for example, how GeneralMotors recovered after 2009,indeedhowGermanyreturnedtothelandofthelivinginthe1950sbymeansofsubstantialdebtrelief.Butno,Greecewasdestinedtomakehistory.Underthetermsofitssecondbailoutin2012thenewgovernmentwoulddeclarethelargest non-payment in world history while simultaneously remaining indebtors’prisoncourtesyofthelargestloaninworldhistory.Theworld-beating€100billiondebtdefaulthaircuthitGreece’spowerless

pensioners, its professional associations and small-time bondholders – whowouldbeforcedtokissgoodbyetothemoneythestateowedthem–whileaworld-record extend-and-pretend loan of €130 billion was pushed down thenation’s throat, almost none of which would go to the Greek state per se.

Instead, a large chunk of that money went to Greek bankers (toovercompensate them for money they had lost on the haircut governmentbonds), a second chunk went to Greece’s foreign private lenders (as anincitementtomakethemacceptthehaircut),andthethirdchunkwenttoservicetheEU’sandtheIMF’sloansfromthefirstbailoutagreement.20What made Bailoutistan 2.0 a regime more sinister than its previous

incarnationwerethreenewinstitutionsthat,bysideliningparliament,damageddemocraticsovereignty.Thesewereamechanismforbailingoutthebankers,anew form of governance for the state’s revenues and customs, and adepartment to organize, in the creditors’ interests, fire sales of the familysilver–inotherwords,privatizationGreek-programmestyle.Aquicklookattheseoffersavaluablebeginner ’sguidetoBailoutistan2.0.Possiblythevilestoftheseinstitutionswasthefirstofthem,themechanism

for bailing out the bankers.Whenmoney is injected into a private firm, theentity that provides it must receive shares in the firm in proportion to theinjectedvalueandanequivalentdegreeofcontrolover itsmanagement.Thesecondbailout stipulated that €41–50billionwas to begiven to thebankers,new public debt that burdened the taxpayers. But rather than securing somedegreeofpubliccontroloverthebankruptbanksinreturnforthismoney,aningeniousschemewasdevised tocircumvent thisaltogether.Anewfundwascreated, wholly owned by the Greek state, called the Hellenic FinancialStabilityFund(HFSF), intowhich€50billionof the total€130billionof thesecondbailoutwaschannelledwiththeexpressorderthatitbepassedontothebanks.Legally,thebankerswouldberequiredtopasssharestotheHFSFthatamounted to around 80 per cent of their banks’ equity in return, but twodevicesensured thatparliamentwouldstillhavenosay in theirmanagement.First,parliamentvotedtoagreethatthesharesheldbytheHFSFwouldcarryno voting rights. Second, the HFSF’s board of directors was to compriseforeign directors appointed directly by the troika and Greek nationals(including the CEO and the board’s chair) whose appointment required thetroika’s approval. Moreover, none of the directors could be fired by thegovernment or parliament without the troika’s say-so. By passing this bill,parliament’s last meaningful action with regard to banks kept alive by itscitizens’indebtednesswastogiveupitsoversightofthem.Turning to theGreek state’s revenues and customs department, parliament

againswallowedanabomination: thedepartmentheadwouldnowneed tobeendorsedby the troikaandcouldnotbe firedwithout the troika’sconsent. In

manycountriesthetaxoffice(HMRCinBritain,theIRSintheUnitedStates)isindependentoftheMinistryofFinanceorTreasurybutanswerabledirectlytothe legislature. In Bailoutistan 2.0 the tax and customs office would beanswerabletoneither.21To complete the triad of affronts, privatizations were assigned to an

independent authority led by yet another troika-endorsed chairperson,whosemotto might best be summarized as ‘Everything must go!’ Glossyprospectuses, featuring everything from the nation’s ports and railways topristinebeaches and small islands, invitedpotential buyers tomake anoffer.The family silver was for sale, and the proceeds were to be collected byGreece’sforeigncreditorsthroughlocalappointees.22Nothingcapturedbetterthe people’s frustration and resentment than the expressions on their faceswhileperusingthesebrochures.How were parliamentarians persuaded to vote for legislation that denied

them jurisdiction over three such crucial pillars of governance? They wereblackmailedwiththethreatofGreece’sexpulsionfromtheeurozone.Itwasavote thatno systemof jurisprudence shouldpermit, andonlyanagonizinglyweariedparliamentcouldhaveacquiesced.

WhodoIhavetobe?

‘Youhavenorighttodothis.Justvoteno!’A young woman shouted these words at a member of parliament as he

struggledpast theSyntagmaSquareoccupiers intoParliamentHouse tovoteforoneoftheBailoutistan2.0bills.‘WhoareyoutojudgewhatIshouldorshouldn’tvotefor?’hebarkedback

atherasheelbowedhiswayin,sweatrunningdownhisface.Herdevastatinganswercameeffortlessly:‘WhodoIhavetobe?’Bailoutistanisanuglyword,butitreflectsanobnoxiousreality:theturning

ofGreeceintoadebtors’prisononbehalfofNorthernEurope’sbanks.ThoseSyntagma Square nights framed the country’s further transition from prisoninto institutionalized debt colony, but they also marked Europe’s legitimacycrunchintheaftermathofitscreditcrunch.ThataEuropeancountryembeddedin the continent’s great common currency experiment would end up being

pushed around like a banana republic is a devastating indictment of a unionsupposedlyfoundedonthepromiseofsharedprosperityandmutualrespect.OfcourseEurope’sestablishmenthadwillednoneofthis.Before2008the

elitesinBerlin,Brussels,ParisandFrankfurthadbelievedtheirownrhetoric,as had those in the United States and the City of London: capitalism haddeliveredtheGreatModeration;boomandbustwasathingofthepast;bankshad found amagical way to produce ‘riskless risk’andwere self-regulatingmarvellously.Thoseinauthoritybelievedthathistoryhadended,andtheirjobwas one of micro-management, of nudging a magnificent self-guided, self-managingsysteminabroadlypredetermined,rationaldirection.But when Europe’s financial system hit the rocks put in its way byWall

Street’s self-destruction, Europe’s elites panicked. The sight of French andGermanbankssinkingwithoutatracemadethemreachintohistory’sdustbintoretrievethespiritofgunboatdiplomacyandtheinepteconomicsthatcamewithit.Greecejusthappenedtobetheplacewerethesewouldagainbeapplied,andBailoutistanwastheresult.When inordinate weight is loaded onto a flimsily constructed bridge, the

weakest beamwill break first.Greecewas that beam. The reason itwas hasnothing to dowith the EuropeanUnion and everything to dowith the sorryhistoryofthemodernGreekstateandtheoligarchythatruledoverit,butthecause of the disasterwas the bridge’s poor design.Even ifGreece had beenremovedfromthestructureandreplacedbyastrongerbeam,thebridgewouldhavestillcollapsed.Itistruethatin2010Greece’spublicandprivatesectorswereincompetent,

corrupt, bloated and indebted. That is why the euro crisis began there. WeGreeksmanaged to acquire an unsustainable debt even before our statewasformally created in 1827, and since then tax evasion has been somethingbetween anOlympic sport and a patriotic duty. Railing against this disgraceand theGreekoligarchy’sexcruciating ineptitude,whichoften translated intodespotism, we progressives learned our politics in the 1960s and 1970s,demonstrating on the streets and in particular in Syntagma Square. And yetnoneofthisexplainsthedepthofGreece’spost-2010crisisorthesubsequentestablishmentofBailoutistan,asaddebtors’colonyontheMediterranean.IfGreecehadstayedoutoftheeuroin2000,whatwouldhavehappened?In

the common currency’s first eight years our state and private sector wouldhaveborrowedatinyamountfromtheFrenchandGermanbanks,whowouldhave been coy about lending to a deficit country whose currency was on a

permanent slide. As a result, between 2000 and 2008 Greece would havegrownatthepaceofatortoisecomparedtothedebt-fuelledboomweactuallyexperienced.Andwhenthecreditcrunchhitin2008Greecewouldhavefaceda small, short, insignificant recession, like Romania’s or Bulgaria’s. Just ascorruptand inefficientasever,Greecewouldhaveploddedalongmuchas itdidinthe1950sand1960swithoutthehumanitariancrisisinwhichitisnowimmersed. Progressives, sick of our society’s ills, would have continued todemonstrateinSyntagmaSquare,unseenandunheardbytherestofhumanity,and theworld’s headlineswouldhavebeen freeof any reference to theNEWGREEK TRAGEDY, GREECE’S THREAT TO GLOBAL FINANCE and the like. And, ofcourse,thisbookwouldneverhavebeenwritten.To err is human, as they say, but to fail spectacularly and with stunning

humancost,itseemsweneededEurope’sgrandesteconomicdesign,theeuro.Greecewasthecanaryintheeurozone’scoalmine,whosedeathshouldhavebeenawarningof thedeadly financial fumes leaking through thecontinent’smonetarysystem.Instead, in2010small,fragile,wastefulGreecebecamethescapegoat for Europe and its banks. Not only were the Greeks made toshoulderimpossibleloansonbehalfoftheFrenchandGermanbanks,notonlyweretheymadetosubmittoalifeinapostmodernworkhousesothatforeignparliamentscouldbekeptinthedark,buttheywerealsoexpectedtointernalizethe blame.However, during those long glorious nights in SyntagmaSquare,Europe’sestablishmentlostcontroloftheblamegame.Theyoungwomanwhostoodtall,proclaimingherrighttoquestionauthoritywiththatglorious‘Whodo I have to be?’ symbolized the turning point. Yes, our society was shotthrough with a multitude of malignancies, but no, our cruel and unusualpunishmentwasnotjustified.Andwewouldnottakeitlyingdown.CatherinetheGreatoncesaidthatifyoucannotbeagoodexample,thenyou

will just have to be a horrible warning. Greece’s warning to the rest ofEurope’s laggards was indeed horrible: an iron cage forged by debt andausterity awaited those who fell foul of financial rules that the crisis madeimpossible toobey.But theyoungwomanatSyntagmaSquare,Lambros thehomeless interpreter,millionsofotherswilling tomakesacrificesbutnot tosee them thrown into thebottomlesspitofGreece’sdebtweredetermined toshow the rest of Europe that there were humane alternatives, that Europe’splightwhiledreadfulneednotbetragic,thatourfatewasstillinourhands.After the brutal eviction of the Syntagma Square occupiers, the Greek

summerheattookitstollandtheoccupiersneverreturned.Insteadtheyfiltered

outintoGreeksociety,wheretheyspreadtheword,bidingtheirtimeuntilthenextconflagration.ThenthespiritofSyntagmawouldbecomeanunstoppablepoliticalmovementwhichused theballotbox toestablishanewgovernmentwhose simple taskwas to dismantleBailoutistan and knock down the prisonwalls. But to get there four years of arduous groundwork would be neededfirst.

3

Theybendtheirtonguesliketheirbows

HecamehomeintheearlyhoursofSundaymorning.Exhausted,DanaeandIhad already turned in but had been listening for the front door ’s reassuringthudbeforegoingtosleep.Danae’sseventeen-year-oldsonhadrecentlyspreadhiswingsandwasobservingthecustomaryritesofanAthenianteenageronaSaturdayevening:goingoutwithfriendstodiscussthemeaningofeverythinguntil late in the night, usually at cafés at Psyrri, a neighbourhood a stone’sthrow from the ancientagora.Athens is the safest of cities, and Psyrri evenmoreso,butlikeanyparentwewelcomedthesoundofthefrontdoor.Onthatnight,momentsitseemedaftersleephadtakenme,thelandlinerang.

Conditionedtoassociatecallsaftermidnightwithfamilyillness,Ijumpedoutofbedandrushedtothelivingroomtopickup.Aneerilysuavemalevoiceasked,‘MrVaroufakis?’HazilyIsaid,‘Yes,whoisthis?’‘Weareveryglad to see that yourboyhas returned,’ continued thevoice.

‘Hehad a great time, it seemed to us, inPsyrri.He thenmadehiswaybackalongMetropolisStreet,takingadetouralongHadrian’sRoad,arrivinghomeviaByronStreet.’WithachillrunningdownmyspineIshoutedintothephone,‘Whothehell

areyou?Whatdoyouwant?’Hisanswerwasicycool.‘MrVaroufakis,youweremisguidedtoputcertain

banksinyoursightsandinyourarticles.Ifyouwantyourboytocontinuetoreturn home every day, everySaturday, youwill cease and desist. There arebettertopicsforyoutomeddlein.Pleasantdreams.’Mygreatestfearhadmaterialized.ItwasNovember2011andalreadythesecondbailoutwashavinganeffect.

Whereas the first bailout had been an exercise inmakingweaker Europeans(primarily Greece’s pensioners and low-income workers) pay for foreignbankers (primarily French and German), the second bailout was aimed atGreece’sownbankers:while thehaircutsheared themofup to€32.8billion,they would receive an injection of more than €41 billion as compensation,

borrowed byGreek taxpayers from the rest ofEurope’s taxpayers.Greece’sbankershadeverythingatstakeinseeingthismostpeculiartransferthrough.Their concern was twofold. First, with the Greek parliament so degraded

and its members so shattered, the bankers feared that the political processwouldstallbefore theygot theirmoney.Second, theEuropeanCentralBank,increasinglyembarrassedbyfinanciers’shenanigansandkeentobeseentobeclampingdownonthem,wasdemandingthatbeforetheyreceivedmorepublicmoney the banks raise some of their own. But how couldGreece’s bankersattractnewcapitalgiventhat,likethestate,theywerewellandtrulybankrupt?Nosaneinvestorwouldputmoneyinadefunctbank.

Twomenandabarrelofwhiskey

Tograsp the ingenuitywithwhich twoGreek bankers solved the problem ithelps to know a joke I was once told in a Dublin pub involving twoentrepreneurialdrunkards.Art andConn, goes the tale, decide that they have to do something to lift

themselves out of poverty, so they persuadeOlcán, a local publican, to lendthemabarrelofwhiskey.Theirplanistorollitdowntheroadtothenexttownwhereafeteistobeheld,wheretheywillsellitscontentsbythecup.Rollingthebarrelalongtheroad,theystopforarestunderagreatoak.Whiletheyaresittingunderthetree,Artfindsashillinginhispocket,rejoicesandasks,‘Hey,Conn,ifIgiveyouashillingcanIhaveacupofourwhiskey?’‘Aye,goon,’replieshe,pocketingtheshilling.Aminute later Conn realizes he now has a shilling to spend, turns to his

companionandasks,‘Art,whatdoyousay?IfIgiveyouashillingcanIalsohaveacup?’‘Aye,Conn,’Artagrees,takingbackhisshilling.Andsotheyproceed,theshillingchanginghands,untilhourslaterArtand

Conn are fast asleep under the oak tree with great grins on their faces, thebarrelempty.Ihaveno ideawhetherGreece’sbankershadeverheard this jokebut their

solutiontotheproblemofraisingcapitalfortheirbankswasuncannilysimilartoArtandConn’s,withthedifferencethattheywouldnotbetheonestosuffertheresultinghangover.Hereishowourtwobankers–let’scallthemArisandZorba–didit.

Aris’sfamilyfoundedoffshorecompanies,towhichZorbaagreedsecretlyto lendwithout collateralorguarantees themillions thatAris’sbankneeded.Why such generosity towards a competitor? Because Zorba and Aris weresittingunder the sameproverbialoak.Desperate to raisemoney forhisownbank, Zorba agreed to the loan on condition that Aris’s bank lent a similaramount toZorba’s family’soffshoreoutfits.Aris’sandZorba’s families thenusedthemoniesfromtheiroffshoreaccountstobuynewsharesintheirownbanks,thusfulfillingtheregulators’requirementthatnewcapitalberaisedandtherebyqualifying for the realmoney that the poor taxpayerwas borrowingfromthetroika.WhereArisandZorbawentonebetterthanArtandConn–whosehangover

was compounded by the thought of their debt to Olcán – was themeans bywhich they ended up owing nothing to anyone. Both sets of loans – fromZorba’sbanktotheArisfamilyoffshores,andfromAris’sbanktotheZorbafamilyoffshores–werewrittenoffsoonafterbeinggrantedandtransferredtothebanks’slonglistofnon-performingloans.1OfcourseArisandZorbawerenotbeingespeciallyinnovative.Theywere,

infact,standingontheshouldersofconmengranderthanthemselves,suchastheperpetratorsoftheSavingsandLoansscamintheUnitedStatesduringthe1980swhosetechniquestheyhadcopied.WhereArisandZorbaproveduniquein thehistoryofcapitalismwas in succeeding ingettingawaywith their conwiththeactivehelpofthreeofthemostrenownedglobalfinancialinstitutions:the InternationalMonetary Fund, the EuropeanUnion’sCommission and theEuropean Central Bank. These grand institutions committed the followingthreesins.First,theyforcedGreece’sruinedtaxpayerstoborrowmoneyfromotherEuropeancountriesthattheycouldneverrepayinordertopassitontoAris and Zorba in the form of ‘recapitalizations’. Second, they deprivedGreece’staxpayersofanycontroloverthebanksthattheynowlegallyowned(beingmajorityshareholders)andensuredthatArisandZorbawouldremaininchargeofthem.Last,theycondemnedGreektaxpayerstoabankingsystemthat, despite the public monies ploughed into it, remained fully bankrupt,courtesyofthenon-performingloansthebankershadgenerated.Throughout 2011 I had made it my personal crusade, in parallel with a

coupleofinvestigativereporters,toexposetheconnectionsbetweenGreece’sbailout loans, the international institutions that granted them,Greekbankers’remarkable ‘innovations’ and theGreek political system. Evidently, this was

thekindofmeddlingthatcouldprovokeinterestingtelephoneconversationsintheearlyhoursofthemorning.

Oftonguesandbows

When foreign journalists interview me, they usually try to get me toacknowledgeGreece’sendemiccorruptioninanattempttomakemeadmitthatI exaggerate the role of the EU, the IMF and the troika in engendering ourgreatdepression.Curiously,theyareneverinterestedindiscussingthecentralrolethatthemediahasplayedintheprocess.Duringmy timeas financeministeroneof themany interviews Igaveon

Greek television was marked by a fascinating confession. It was a longinterview that spanned almost every conceivable topic. During the firstsegment the interviewer came out all guns blazing, each question lacedwithpernicious allegations, giving me time to utter no more than four or fivewords before I was hit with the next. During the commercial break heapproachedmetowhisperintomyear,‘Minister,I’mverysorryaboutthisbutyou know our dire situation these days. Aris’s bank is our only source ofadvertising.’ I told him I understood.After that the interview proceeded at amorerelaxedpacethatallowedmeachancetobeheard.Itseemedthatenoughhadbeendone,onthatoccasionatleast,tosecurethestationitsdailybread.Infairness,thiswasonlytobeexpected.Greektelevisionstationshadbeen

intheredevenbefore2008.Indeed,noneofthemhadeverdeclaredaprofit.Nor had Greek newspapers or radio stations. Had they been stand-aloneenterprises, theywouldhavefiledforbankruptcylongago.Except theywerenot. During the years of unsustainable, debt-fuelled growth Greece’s mediaprovidedanimportantmeansofleverageforthedevelopersthatownedthem.Governmentministerscouldeitherawardtheirownerslucrativestatecontractsor expect to be torn to shreds on air or in print. This is one of the manyreasonswhyGreece endedupwithmotorways costing three timeswhat theywould inGermany, overpriced drugs in its hospitals, submarines that leanedliketheTowerofPisa,riversofcashstowedawayinoffshorebankaccountsandmediaoutletsthatalwayslostmoneybutnevershutdown.The silver lining of Greece’s bankruptcy in 2010was that the trough the

developersusedtofeedfromdriedup,whiletheirmouthpiecesweresuddenlylefttofendforthemselves,animpossibletaskgivendisappearingadvertising

revenueandabusinessmodelthatwasnevermeanttobeviable.Andyetonlyone network closed down during the crisis years, the rest continuing tofunctiondespitemultiplying losses.Howcould that be?Aris andoneor twootherbankersprovidetheanswer.Quitesimply,thebankersnowtookoverthefundingofthemediainorder

tomanipulatepublicopinionandthuscontrolthepoliticalgamethatkepttheminchargeoftheirbankruptbanks.But,unlikethedevelopers,thebankerswereclever enough to eschew ownership of the insolvent television stations andnewspapers.Instead,theykeptthemediaalivebypayingthemludicroussumsto advertise their services andmore importantly granted them large extend-and-pretend loans just like the loans theyweregrantingoneanotherand justliketheloanstheEUandtheIMFweregrantingtheGreekstate.The triangle of sin was complete: the insolvent media were kept in a

zombified condition by the zombie banks, which were maintained in theirundeadconditionbyabankruptgovernment,itselfpreservedinaconditionofpermanentbankruptcybytheEUandtheIMF’sbailoutloans.IsitanywonderthattheBailoutistanmediaextolledthebenefitsofthebailoutandportrayeditsbankersasvictimsofanunreliablestate,whiledemonizinganyonewhodaredrevealwhatwasreallygoingon?WhileIwasinthethickofthestruggle,BillBlack,anAmericancolleague

whohadplayeda leadingrole inexposingsimilarshenanigans in theUnitedStates, the savings and loans scandal of the 1980s and 1990s in particular,mademe laughone dayby sendingme an email that containedonly a shortquote, which I interpreted as a gesture of solidarity: ‘And they bend theirtonguesliketheirbow[s]forlies:buttheyarenotvaliantforthetruthupontheearth;fortheyproceedfromeviltoevil.’(Jeremiah9:3)

Theyoungprince

Psyrri,aneighbourhoodinAthenstakenoverbybustlingyoungstersatnight,isadifferentplacebyday.Tinyworkshopscontinuetostruggleforexistence,manufacturing nuts, bolts, buttons, tools and other stuff whose value isplummeting in theglobalizedeconomy.Theair is thickwithacacophonyofindustrious noises alongside the delectable smells of bakeries and the oddjasmineshrub,andpunctuatedbythemelancholysingingofRomamusicians,

who wander the narrow streets with their accordions, horns and violins,collectingtheoddcoinfromnostalgicpassers-by.I knowPsyrriwell, sincemy university office at the timewas only a few

hundredmetresup the road from theneighbourhoodwhileDanae’s studio islocatedatitsheart.Closeby,attheedgeofPsyrri,aretheshabbyofficesoftheAlliance of theRadical Left, universally known as Syriza. Sowhen in early2011NikosPappas,theclosestassociateofSyriza’syoungleader,calledmetoarrange ameeting and suggested that the threeof usmeet inPsyrri, itmadeperfectsense.Wemetatadiscreetboutiquehotel,oneofthoseinvestmentsintheareathat

nowepitomizethefalsedawnofthegentrificationcutshortin2010.Itwouldbecome our usual meeting place, its pastel-coloured walls witnessingexchangesthatbeganonthatdayatarelaxed,almostacademicpacebutturnedseriousandpurposefulbyearly2012.Nevertheless,during that firstmeetingandforsometimeafterwards,Ihadnoreasontobelievewewouldbemeetingagain.IhadfirstlaideyesonAlexisTsiprasonaposterplasteredalloverAthens

promoting his candidature for mayor in the local government elections of2008.Danae,along-timesupporterofthatparticularstrandofGreece’sLeft,wasenthusiasticaboutathirty-four-year-oldrunningforapostusuallyheldbydrearyolderpoliticiansusingitasaspringboardintoMaximos.2IntheeventAlexisdoubledSyriza’svoteincentralAthens,andbeforelongtheparty’soldguardhadorganizedaninternalputschwhichinstalledhimasleader,shovingasidethemanwhohadanointedAlexisashiseventualsuccessor.Inthegeneralelectionthefollowingyear,though,whenAlexisledthepartyforthefirsttime,theheadlinesweredominatedbythevictorioussurgeofGeorgePapandreou’sill-fatedsocialists,withSyriza3cominginfifth,collectingamiserable4.6percentofthevote,halfapercentlessthanin2007.WhenIwalkedintothehotel,heandPappaswerealreadyatatable,ordering

lunch.Alexis’svoicewaswarm,hissmileunaffected,hishandshakethatofapotential friend. Pappas had wilder eyes, a high-pitched voice. He jokedincessantly,whetherthematterwasfunnyortragic,andtriedtoexudeauthoritywhilebeingeverymantoeveryone.FromtheoutsetitwasevidentthatPappashadtheyoungprince’sear,guiding,restrainingandspurringhimon,andthisinitialimpressionsurvivedthroughouttheturbulenttimesthatfollowed:thesetwo youngmen, of similar age but different temperaments,were acting andthinkingasone.

‘I’ve been following your work for years, ever since I read yourFoundations,’ Pappas said, breaking the ice, referring to an economicstextbook I had published in 1998.4 Apparently he had been a postgraduateeconomicsstudent inScotlandwhenhecameacross thebook,andsince thenhehadreadtheModestProposalforResolvingtheEuroCrisis,whichIhadco-authoredwith StuartHolland, aBritishLabour formerMP and professor ofeconomicsatSussexUniversity.StuartandIhadbeenworkingontheModestProposalsince2005,motivatedbytheconvictionthattheeurowouldcauseanalmightycrisiswhichEuropemightnotsurvive.5Aftertheeurocrisiserupted,Stuart and I did our utmost to refine and promote the Modest Proposal,convincedthatitwasEurope’sbestchanceofavoidingitsdemise.‘TellAlexiswhatyouareadvancingintheModestProposal,’saidPappas.I explained its basic logic, and then the conversation turned to a general

assessmentofthepoliticaleconomyofBailoutistanandthestrategiesavailableto progressives intent on offering the country an escape from its prison ofdebt.Itsoonbecameclearthat,forpoliticalreasons,Alexiswasvacillatingovera

basic issue:whetherGreece should retain the euro.Even in2011Syrizawastorn by internal disagreements over whether the party should or shouldn’tmakeGrexit (departure from the eurozone, though not necessarily from theEU)itsofficialpolicy.Aswetalked,Alexis’sattitudetothequestionstruckmeas cavalier and immature. His focus was more on keeping control of thefeudingwingsofhisparty thanonclarifying inhisownmindwhat therightpolicywas.JudgingbythemeaningfullookscomingfromPappas,itwasclearthathethoughtsotooandwashopingIwouldhelpshifthisleaderawayfromcasualexperimentationwiththeideaofGrexit.In the hour or so that followed I didmy best to impress uponAlexis that

turning Grexit into an objective would be as large a mistake as failing toprepareforit.IalsocriticizedSyrizaformakingsillypromisessuchasthat,ifelected, thebailoutagreementwith theEUand the IMFwouldbeunilaterallytornup.‘Whycan’twetellthemthatiftheydonotacceptourunilateralrejectionof

theirprogramme,wewillexittheeuro?’Alexisasked.Iexplainedthattherewerethreepossibleoutcomesofaconfrontationwith

the troika. The best outcome would be a new deal for Greece – involvingserious debt restructuring, the end of self-defeating austerity and a series ofreformstargetingtheoligarchy–whichkeptusintheeuro.Theworstpossible

outcomewouldbetostayintheeurointhesameposition:indebtors’prisonandwithshrinkingincomes,prospectsandhopes.Grexitwouldbeinbetween:far,farworsethanaviabledealwithintheeurozonebutbetter,inthemediumand long term, thana continuationof thevicious circleofbailouts, austerityanddepressionforanotherfiveyearsormore.I toldhim therewasnowayBerlin,Frankfurt,Brusselsor the IMFwould

accepta take-it-or-leave-itoffer fromhim; theywould simply leave it.So toissue such an ultimatum would be to ensure the third outcome – expulsionfromtheeurozone–andtoremoveeventhepossibilityof thefirst.Toleavethedooropentothebestpossibleoutcome,heneededtoforceanegotiation.OntheonehandthismeantrejectingGrexitasathreat(letaloneanobjective)whileontheothersignallingtotheworldthathisworstfearwasnotenforcedGrexit but the continuation of the current situation. However, I was unsurewhetherhewasmuchinterestedinthenuancesofthisargument.‘ButYanis,manypeople,likePaulKrugman,saythatwewouldbebetteroff

outsidetheeuroanyway,’Alexisretorted.Iagreedthatwewouldbebetteroffifwehadneverenteredtheeurozonebut

hastened toadd that itwasone thing tohavestayedoutof theeuroandquiteanothertoleaveit.Exitingwouldnotgetustowherewewouldhavebeenhadwenotentered!To try to shakehimoutofhis lazy thinking, I outlinedwhat I expected to

happen immediately if Grexit were announced. Unlike Argentina, a countrythathadsevered itscurrency’s ties to thedollar,Greecedidnothave itsownnotes and coins in circulation.Grexitwould involvemore than severing theone-to-oneexchangeratebetweenthedrachmaandtheeuro.Theresultofsucha severance in Argentina had been a drastic devaluation in the nationalcurrency, leading to a major surge in exports. This in turn led to a majorreductioninthetradedeficit,andso,eventually,totherestorationofeconomichealth.Unlike theArgentinians,however,Greecewouldhave tocreateanewdrachmabeforethenseveringitfromtheeuro.6Butcreatingacurrencytakesmonths. In other words, Grexit would be like announcing a currencydevaluation months before it happens, a strategy that comes with direconsequences: an exodus of euros and an absence of a local currency tofacilitatedailytransactions.Wouldhebeprepared,IaskedAlexis,tostandinfrontofvotersduringan

electioncampaignandtellthemthatthiswaswhathewasproposing?ThatthisshouldbePlanA?Orwoulditnotbebettertotellvotersthis:weshalldemand

a renegotiation that yields a new deal for Greece rendering our socialeconomysustainablewithintheeurozone,butiftheEUandtheIMFrefusetonegotiatemeaningfully,thenweshallnotacceptanymoreextend-and-pretendloansfromEurope’staxpayers.Andiftheywanttoretaliatebypushingusoutoftheeuro,atimmensecosttoboththemselvesandus,thenletthemdotheirworst.Pappaswasnoddingenthusiastically,butAlexis seemedelsewhere.When I

pushedhimtoexplainhissilence,hisreplyconfirmedthathewaspreoccupiedwiththegoings-onwithinSyrizaratherthanengagingproperlywiththeissueathand.Iwasunimpressed.Asthemeetingdrewtoaclose,andattheriskofsoundingcondescending,Iofferedhimsomewell-meantbutunsolicitedadviceonaseparatematter,whichhemayhavefoundoffensive:‘Alexis,ifyouwanttobeprimeminister,youneedtolearnEnglish.Getatutor,itisimperative.’Back home Danae asked me how the meeting had gone. ‘He is a very

agreeablepersonbutIdonotthinkhehaswhatittakes,’Ireplied.ThosefirstmeetingswithAlexisandPappasprovedaturningpointinmore

ways than one. Over the previous two years I had become used to meetingworriedpoliticiansfromacrossthepoliticalspectrum–withtheexceptionofcommunist party cadres,who live in a permanent bubble of self-confirmingbelief.But as 2011drew to a close and the secondbailout approached, therewerefeweropportunitiesforgenuinedialoguewithanyonefromthepoliticalcentre, whether the shrinking PASOK socialists, many of whom simplyrecoiledintoaprivatepurgatory,ortheNewDemocracyconservatives,manyofwhom had once sharedmy forebodings butwho now co-opted PASOK’sstragglersintoanalliancedesignedtoseethesecondbailoutthroughandtheirpartyintopower.Quitesuddenlytheopportunitiesforcross-partydialoguehaddisappeared,likeafast-ebbingtide.InparliamentonlySyrizaremainedtofightagainsttheestablishmentofBailoutistan2.0.Thisiswhy,whenPappascalledbackafterthesecondbailoutwasfirstcanvassedtoproposeanothermeeting,Ididnotthinktwice:whatevermymisgivings,Iacceptedhisinvitation.At our secondmeeting and in themeetings that followed Iwas pleasantly

surprised:Alexisseemedtransformed.Gonewasthecomplacency,thefixationon Syriza’s internal affairs and the casual attitude towards Grexit. He hadclearly done his homework, even on theModestProposal.7 He also toldmeproudlythathehadengagedanEnglishlanguagetutorandwasmakinggoodprogress. (A few years later, when serving in his first government, I waslistening in to a teleconference involving Alexis, Chancellor Merkel of

GermanyandPresidentHollandeofFranceandrecalled thismoment:AlexishadthebestEnglishofthethree.)The best thing about our meetings was the emergent clarity and unity of

purpose.IinvestedmuchenergyinimpressinguponAlexisandPappasthatinany negotiationswith theEU and the IMFAlexis’s successwould depend asmuch as anything else on his ability to control Greece’s banks. Alexismeanwhile seemed fully to embracemy recommendationof a three-prongedpolicy of constructive disobedience, which comprised firstly saying no tofurther extend-and-pretend loans and the austerity they came with; secondlyputtingforwardmoderateproposalsfordebtrestructuring,lowertaxratesandreforms that attacked the triangle of sin; and finally always keeping inmindthat at some point, in a desperate bid to kill off demands for a debtrestructuringandtoavoidMrsMerkelhavingtotellherparliamentariansthetruth about what she had done in 2010, Berlin would threaten him withexpulsionfromtheeurozone.

Archimedeanpoint

AtfirstIdelayedtellingDanaeaboutthephonecallthreateningherson.BeforeworryinghermaybeunnecessarilyIwantedsomehowtoassesstherisk.Surelyitwasjustanemptythreatmeanttoscaremeintosilence?ButIrealizedIhadnorighttopassjudgmentalone.Asthesecondbailoutapproached,themedia,thebanksandthegovernmentwerepreparingfeverishlyforalaststand.Therewasnotellingwhattheywerecapableof.SoIpluckedupthecourageandtoldher.Danae looked at me disapprovingly and issued a laconic, matter-of-fact

ultimatum: ‘Either you enter politics to protect us, or we’re leaving thecountry.’WithouthesitationIreplied,‘Thenwe’releaving.’AfewdayslaterIwasduetotourtheUnitedStatestopromotemynewbook

ontheglobalcrisis.8WhileIwas there, twojobofferspresentedthemselves,allowingmefortuitously tofulfilmybargainwithDanae.Byearly2012ourmovetotheUnitedStateswasunderway.9On the day we boarded the plane Bloomberg screens beamed around the

worldoffinancetwonewsflashesfromtheeurozone.Thefirstread:‘Merkel

Open to Debt-Sharing Compromise asMonti SeesWay to Persuade Her ’.10Thesecondwasclosertohome:‘GreeksRunUniversityProfessorOutoftheCountry for Telling Economic Truths’. If only the first newsflash had beenright–itwasn’t–maybethesecondmighthavebeenwrong!ThusDanae and I landed in Seattle, where I worked for a fewmonths as

economistinresidenceattheValveCorporation11beforemovingontoAustin,wheremygreatfriendandcolleagueJamieGalbraithhadarrangedformetojointheUniversityofTexas’sLyndonB.JohnsonSchoolofPublicAffairs,atwhich I was to teach courses that included one entitled Europe’s FinancialCrisis.Despite his considerable powers of prescience, I doubt he knewquitewhathewasgettingembroiledinwhenhefoundmethepost:threeyearslaterJamiewouldendupjoiningmeattheGreekMinistryofFinancetoleadworkonavitaltop-secretproject.FormorethantwoyearsAustinprovidedanArchimedeanvantagepoint,the

idealplacefromwhichtoobservebutalsotoact.Whileitwasheart-wrenchingto watch from afar as the troika and its domestic minions formally turnedGreeceintoBailoutistan2.0,theviewfromAustinofferedclarity.ItalsoofferedanopportunitytobuildabridgebetweenWashingtonandmy

newSyrizafriends,notthemostnaturalofallies.ItseemedsafetoassumethatafutureSyrizagovernmentwouldprecipitateanalmightyclashwithGermany,the European Commission and the European Central Bank. The last thingAlexisandPappasneededwasahostileadministrationintheUnitedStates.So,from2012to2015,withJamieGalbraith’sassistanceandconnections,Iwoulddo all I could to explain to American opinion makers and the Obamaadministration that the United States had nothing to fear from a Syrizagovernment, whose priority would be first and foremost to liberate Greecefromitscrushingdebt.Austin is weird in the nicest possible way: paradise for live-music

aficionadosandanexcellentplacetoforgettherestoftheworld’stribulations.Butnoneofthatwasavailabletome.Duringtheday,whileGreecewasasleep,Iwouldpreparemylecturesandworkonmybookaboutthedeepercausesof‘Europe’sinanehandlingofitsinevitablecrisis’.12Atnight,takingadvantageofthetimedifference,IwouldappearoverSkypeonGreektelevision,followtheongoingdebatesandwritearticlestocontinuemycampaign.The Greek winter and spring of 2012weremarked by quiet anguish and

muffledindignation.SyntagmaSquaresawalmostnoneofthemassactionof2011.As the recession bit harder, the people privatized their pain, staying at

hometolicktheirwoundsandlookaftertheirneedy.Thetroika’stechnocraticcoalitiongovernmentledbytheformervicepresidentoftheEuropeanCentralBank and supported by PASOK and New Democracy, was completing theconstruction of Bailoutistan 2.0.13 The time was fast approaching when thatgovernment’sworkwouldbedoneandAntonisSamaras,theNewDemocracyleader, would trigger a general election that he hoped to win and movetriumphantly intoMaximos. In the event, the general electionwas called forMay2012.BeforetheMayelectionmyexchangeswithAlexisandPappaswerefewand

farbetween.WithPapandreou’sPASOKsocialistsstaringoblivionintheface,themainprotagonistswereSamaras’sNewDemocracyandTsipras’sSyriza,butneitherInortheyimaginedthatapartywhichhadwononly4.6percentofthe vote in the previous electionwould have a fighting chance at forming agovernment,howevergravetheshiftinthepoliticaltectonicplates.My preferencewas for Syriza to present voterswith a basic, progressive,

Europeanist, logically coherent, non-populist programmeas a foundationonwhich to build an image of a credible future government, one capable ofnegotiating the country’s escape plan with the EU and the IMF. Alexis andPappaswere inclined toadifferentpoliticalprogramme,one thatmaximizedshort-term electoral gains at the expense (inmy view) of long-term logicalcoherence. When I read the economic policy segment of Syriza’s 2012electoralmanifesto,myirritationwassuchthatIstoppedafterafewpages.ThenextdayIwasaskedtocommentonitbyaGreektelevisionreporter.IsaidIwas inclined to support Syriza but thatmy resolve to vote for the partywasconditionalonmycapacitytoresistreadingitseconomicprogramme.The May election produced a hung parliament. The political centre,

comprisingPASOKandNewDemocracy,partiesthattogetherhadpreviouslycommandedupto80percentofpopularsupport,weredesertedbymorethanhalf of their voters. It was the price the two establishment parties paid forhavingushered inBailoutistan.14 Tocall thisapoliticalearthquakewouldbean understatement.As often happenswhen debt deflation causes the politicalmiddle ground to implode, Nazism reared its ugly face, with Golden Dawnsecuring7percentofthevotetobecomethefourth-largestparty.Meanwhile,tiny Syriza quadrupled its previously puny vote to just 2 per cent short ofAntonis Samaras’sNewDemocracy. Itwas the first time since 1958 that theLeft would rise to the lofty heights of the official opposition. Alexis and

Pappas had cause to feel vindicated, ignoring the scorn I had poured overSyriza’seconomicprogramme.Butaparliamentinwhichthelargestpartycommandslessthan19percent

of the vote cannot produce a viable government. Its unavoidable dissolutionpaved theway fornewelectionsamonth later, in June2012. Itwas tobeaninteresting month. In the absence of either a government or a functioningparliament, theEUandtheIMFwereforcedtoconjureupsomebreathtakingnewillusionstomaintainthepretencethattheGreekstatewasmeetingitsdebtrepayments.Meanwhile, the only partieswith any electoralmomentumwereSyriza and NewDemocracy, with Syriza rising faster albeit from a slightlylowerbase.Ifthetrendsofthepreviousweeksweretocontinue,Alexishadashotatformingthenextgovernment.Thisrealizationshookuptheoligarchy,thetroika,Germany’spoliticalestablishmentandnotleastAlexisandPappas,whowereunderstandablypanickingatthepossibilitythatthecruelgodswereconspiringtograntthemtheirgreatestwish.

Alarmbell

I had returned toAthens to vote in theMay electionwhenPappas phoned toorganizeameeting.Tsipras,heandImetinthesamehotelinPsyrriinastateofconsiderableexcitement:theywerenolongeronthefringesofthepoliticalgame butwere now riding awave of popular support capable of producingreal changewithinweeks, not years.But itwas at thatmeeting that an alarmbellbegantoringloudlyinmyhead.‘Doyourealizethat, ifwewin,youwillbehandlingournegotiationswith

theEUandtheIMF?’askedPappaswithhistrademarksimper.My stomach lurched. Pappas’s eagerness to get me involved in the

negotiationswith theEU and the IMFwas at oddswith the fact that Syriza’seconomicpolicyportfoliobelongedtoYannisDragasakis–theparty’sshadowfinanceminister,aveteranpoliticianoftheLeftwhohadplayedacentralrolein Alexis’s elevation to the leadership and indeed in the creation of Syriza.WhileAlexisandPappasevidentlydidnotconsiderDragasakisthemantodobattlewiththeEUandtheIMF,hewasnonethelessresponsibleforscriptingtheparty’seconomicagendaandwasapartyheavywhosetoestheywouldavoidtreadingon.IinferredthatAlexisandPappas’sunderstandablereluctancetodo

sowaswhat lay behind their ill-thought-through enthusiasm for splitting therolesofchiefnegotiatorandfinanceminister.ItookamomentbeforereplyingtoPappas’squestion.Trainingmyeyeson

Alexis, I told them Iwas honoured by their offer but that I did not see howsplitting the roles could work. All negotiations would take place within theEurogroup,whereeachgovernment is representedby its financeminister: tohave any credibility and negotiating power, that minister must have the fullbackingnotonlyoftheirprimeministerbutalsoofthecabinet,parliamentandelectorate.Sending anunelected technocrat to negotiatewith its creditors thecountry’seconomicliberationwhilesomeoneelseranthedomesticeconomywouldbeadisasterinthemaking.Seeing thatAlexis agreedwithme, Pappas tried to salvage the discussion

with a request that I prepare a briefing document that outlined the optimalnegotiating stance of the government were Syriza to win on 14 June, threeshortweeks later.That night I sat down to complete the first ofmany,manyversionsofthatstrategypaper.AtitsheartIsetdowntwoproposalstobepresentedtotheEUandIMFfor

therestructuringofGreece’sdebt.First,thestate’sbankruptcy,thepublicdebt,should be uncoupled from the bankruptcy of the country’s banks and theirprivate losses.Thisway thebankrupt state couldnot beheld responsible forEuropeantaxpayers’moneyithadnotreceived.Moreimportantly, thebanks’revivalwouldnotbeheldbackbythestate’sindebtedness:afterall,howcouldthe Greek state back the banks when it too was bankrupt? Without suchuncoupling,theGreekstateandthebanksoperatinginGreecewouldcontinueto drag each other down like a pair of weak swimmers caught in stormywaters,huggingoneanotherastheysanktowardsthebottomofthesea.Howcouldthisbeachieved?ByturningEurope’s taxpayers into theownersof theGreekbankssothattheywerenolongerthedefactoliabilityoftheGreekstatebut were backed instead by the European people, and by having the EUinstitutionsrunthemontheirbehalf.15Thiswastheonlywayconfidenceinthebankscouldberestored.Second, any repayments of the Greek state’s debt to the EU and the IMF

arisingfromitstwobailoutsshouldbeconditionalonthecountry’srecoveryfirst reaching a certain momentum.16 This was the only way the nationaleconomycouldbegivenachancetorevive.Taken together, these two debt restructuring exerciseswould signal a new

era: the EU and the IMF would no longer operate like a pre-Christmas

EbenezerScrooge.Rather,theywouldbecomeGreece’spartnersinpromotingits economic recovery, without which their bailout loans would be haircutsavagelyanyway.Mybriefingpaper,writtenforAlexisandPappas’seyesonly,endedwitha

sectiononwhatreactiontoexpectfromthegoodfolkattheEU–IMFaswellasGreece’sdomesticoligarchy:venomoushostility.Although ideal forhelpingGreecetorecoverandthusrepayasmuchofitsotherwiseunpayabledebtsaspossible, the two proposals were politically toxic for our opponents bothwithinandoutsideGreece.Myadvicewasasfollows:

What should Athens do if Europe’s officials reject these two proposalsoutright,insistinginsteadonfreshextend-and-pretendloans?Unless a Syriza government is prepared to turn downany new loans

until the debt has been effectively restructured, there is no sense inwinning the election in the first place. Saying no to new loans will ofcoursecomeatacost.Thetroikawillthreatentoshutdownthebanks,andthestatewillhavetopaypublic-sectorwagesandpensionsoutofitstaxes.This means that your government must brace itself for a toughnegotiating period duringwhich the state lives strictlywithin itsmeans(reducing if need be the highest salaries and pensions until the primarydeficitiseliminated)andpapermoneytransactionsarereplacedbydebitcards,webbankingandsomeformofIOUsissuedbythestate.Itwon’tbepretty, but extraordinary struggles for recovering sovereignty call forextraordinarymeasures.Buthereisthegoodnews:ifyouarepreparedtoissue moderate, sensible demands and at the same time say no to theirextending-and-pretending (andmean it!), the EU and the IMFwillmostcertainly come to the table – it would cost them toomuch not to, bothfinanciallyandpolitically.

Iknewperfectlywell that from2010 the troika’s reaction to anyproposalinvolvingadebtrestructuringhadbeenferocious,forthiswouldhaverequiredChancellorMerkel to come clean on the ulterior motives behind the Greekbailout. The same reactionwould now occur domestically, inGreece. In themindsofGreece’sskittishbankersmycampaignfordebtrestructuringboileddowntotheirliquidation,ascontroloverthebankswouldbetransferredtoEUinstitutionsandtheirownershiptotheEuropeantaxpayers.Moreover,backingthe bankswas an entire political class used to receivingmassive loans from

theirbankermateswithoutcollateral,guaranteesorscrutiny.Icannotrecalltowhat extent Alexis grasped the implications of this strategy, but I do recalltelling him in detail what he should expect if he were to adopt myrecommendation:nothingshortofwar.Nowonderhewasreluctanttoembraceit.‘AreyouadvisingmetocallfortheGreekbankstobegiventoforeigners?

HowcanIsellthisideatoSyriza?’AlexisaskedmeatalatermeetingatpartyHQ.‘Yes,thisispreciselywhatyoumustdo,’Ianswered.Ifhewantedanegotiatedagreementwithintheeurozone,Iexplained,thenhe

hadtoacceptabasictruth:theGreekstatedidnothavethemoneytopropuptheGreekbanks.Ergo,theonlyalternativetoeitherGrexit,whereallbetswereoff, or continued debt bondage, the worst of all scenarios, was Europeanownership of the banks. In fact, I said, this was something that should behappening anyway: just as it is nonsense to speak of Californian or Texanbanking systemswithin thedollar zone, itwas ridiculous to imagine thatwecouldhaveseparate,nation-basedbankingsystemswithintheeurozone.Alexisgotit.Butthatdidnotmeanhelikedit.ParticularlyasSyriza’scentral

committeewasnaturallydrawntotheideaofnationalizingthebanks.WhiletheGreekmediawouldshriekALEXISTOGIVEOURBANKSTOFOREIGNERS!Syriza’sleftistswoulddenouncehimforabandoningtheir long-termcrusadetobringfinanceunder thecontrolof thestate.Seeinghishorrorat the thoughtof theinevitablebacklash, Iwarnedhim that liberatingGreecewouldmeanmakingpowerful enemies, not just thosewho had a political imperative to keep thecountry a debt colony, but those within Syriza who wanted him to build asocialist paradise within the eurozone. But this was impossible anyway. Theonly thing possible within the eurozone was to liberate Greece from itsdebtors’prison.Toachievethis,hisonlyhopewastoconvinceamajorityofGermans to see themselves as partners in our recovery rather than serialfunders of our blackhole.Theywere about to pour theirmoney intoGreekbanks,sohemustofferthemsharesinthosebanks.OnlythenwouldtheyfeeltheyhadastakeinGreece’srecovery.Withthatonestrokehewouldbreakthetriangleofsin.Alexis smiled. He told me he didn’t mind confronting the bankers, but

without any influence over the commercial banks operating in Greece, heargued, it would be impossible for a government to implement an industry

policy or a development and reconstruction plan. He just couldn’t see theSyrizacentralcommitteeswallowingit.Hehadapoint.Putittothemthisway,Isuggested.Astrueinternationalists,asprogressive

Europeanists, wewould be taking bankrupt banks away from corruptGreekprivateers and handing them over to Europe’s common people, to the sameEuropeancitizenryinjectingtheirmoneyintothosebanks.Atpresentthebankscannot provide the investment capital needed for Greece’s recovery andgrowth,soweonlystand togainbyhanding them,and their liabilities,over.Meanwhile, I suggested, we could set up from scratch a new publicdevelopment bank into which we would place Greece’s remaining publicassets. These could then be used as collateral to generate an influx of newinvestment funding fordevelopmentpurposes,possibly incollaborationwiththeEuropeanInvestmentBank.Alexislikedtheinternationalist,progressivesoundofthis,butdidhelikeit

enoughtotakeittoSyriza’scentralcommitteeandgetDragasakistoacceptit?Theyoungpartyleader ’sdilemmawasshotthroughwithmanyoftheillsthatultimatelyunderminedourbattleplaninthespringof2015.IcouldseeitinhisfaceonthatafternoonatSyriza’sHQ.Ontheonehand,hecouldseethatwhatIwasproposingwastheonlyescaperoutewithintheeurozone.ButatthesametimehecouldnotbringhimselftobreakwiththeinternalSyrizaestablishment.Personally,Iwasconvincedthatmyproposalswouldberejected,aperfect

excuse for keeping my distance from Syriza. As long as Alexis remainedhostagetoSyriza’sinternaldelusions,Iwasresoluteinmydecisiontoremainonthesidelines,offeringcriticaladviceifandwhenasked,andrelievednottobeinvolved.Threedayslater,on24May,thisreliefgrewwhenIreadAlexis’sspeech detailing Syriza’s economic policies. The chasm between what theywereproposingandwhatcouldactuallybeachievedwithintheeurozonewasimmense.WithinanhourIhaddispatchedalongscathingemailtobothAlexisandPappaswhichhighlightedthenumerouslogicalflawsinwhattheyhadjustpromised voters as well as my assessment of Dragasakis’s capacity to puttogetheraconvincingeconomicprogramme.17Alexis’sconfusedpublicpronouncements,theGreekoligarchy’santi-Syriza

hysteria,plusChancellorMerkel’snaked threatsagainstaSyriza-ledGreece,combinedtoproduceanelectionresultthatkeptAlexisinopposition.18Iwasatoncerelievedandsaddened:relievedthathewouldhaveanotherparliamentaryterm to get his act together, and saddened that Bailoutistan 2.0 would now

probablybecastinstonebyanewcoalitiongovernmentdancingtothetroika’stune.19

Afriendship’slastgasp

YannisStournarasandIbecameclosesoonafterImovedbacktoGreecefromAustralia. This was in 2000, when I left the University of Sydney for aprofessorship at the University of Athens, where Stournaras was already aneconomics professor.20 We made up an informal quartet of academiceconomists with Georgos Krimpas, a senior professor, and NicholasTheocarakis, an astounding scholar and dear friend. Krimpas had beenStournaras andTheocarakis’sprofessor andmentor,makingme thenewkidon the block. I succeeded Krimpas as director of political economy, thedisciplinetowhichallfourofusbelonged.Stournaras taught part time because of his government role under the

PASOKadministration thatbroughtGreece into theeurozone. Indeed,duringtheaccessionnegotiationsinthe1990s,whenBerlinwaskeentokeepGreeceout, Stournaras served as chair of the Council of Economic Advisers, animportantorganoftheMinistryofFinancewhichheusedtoconvinceBerlinandBrusselstoletGreeceintotheeuro.21OnceGreecewassecurelyinsidetheeuro, in 2000 the PASOK prime minister rewarded Stournaras with theCommercialBankofGreece,wherehebecamechairandCEO.22Itwasduringthislastphaseofhiscareerthatwefirstmet.Despitehisbusyschedule,Stournaraswasalwaysonhandtodohisshareof

teaching,andtodoithappilyanddevotedly.Whileoureconomicperspectivesdifferedconsiderably,asdidourpolitics,hiscommitmenttotheuniversityandthe good chemistry between us provided the foundation for a developingfriendship.WhenIsetupaninternationaldoctoralprogramme,Stournaraswasthere tosupport it,enjoying thehighercalibreofstudentsweattracted.Moreimprovements to the curricula followed, drawing indignation from corruptstudent politicians and vigorous animosity from colleagues whose pettyinterestswere threatened.23 But the quartet stood firm, aided by many othercolleagues.Soonweweresocializingoutsidework,evenspendingweekendstogether.

OnthenightoftheSeptember2009generalelection,whichbroughtGeorgePapandreou to government, Danae and I were at Stournaras’s north Athensapartment watching the count on television along with Yannis, his wife andanothercouple.Oftheeightpeopleintheroom,StournarasandIweretheonlyoneswhohadnotvotedforPASOKthatday–possiblybecause,likesausages,ifyouknowwhat’sinthem…24 AfewmonthslaterGreecewasbankruptandthefirstbailoutwasonitsway.During thatmomentous year forGreece, 2010, Stournarasmade a career

move that raised eyebrows, becoming director of an economics think tankoriginallysetupbyGreece’sNationalConfederationofIndustries,thelargestand most established bosses’ guild in the land, traditionally affiliated to theconservatives of New Democracy. Soon after taking the helm, Stournarasbegan endorsing standard free-market solutions that were at odds with thesocial democratic principles he had long espoused under PASOK. But hismovewas less an apostasy fromPASOK’s socialists, his former crowd, andmoreasignofwhatwastofollowoncethesecondbailoutdemandedagrandcoalitiongovernment.Stournaraswasapioneerof thecollapseof thecentreLeft and the centre Right into one, indivisible, pro-establishment, troika-friendly government – one that would take its ultimate shape after the June2012election.AmonthbeforetheMay2012electionIwaspassingthroughAthensonmy

waybacktotheUSAfromBerlin,whereIhadaddressedaconferenceontheeurocrisis.UponarrivinginAthens,IcalledStournaras.WemetthenextdayatacaféinthelobbyofahotelatthefootoftheAcropolis;wehugged,kissedand exchanged news of our daughters and partners. Turning to business, IbriefedhimonthediscussionsIhadjusthadinBerlinwithofficialsfromtheEuropeanCentralBankandtheGermangovernment,withfinancialjournalistsandthelike.IalsomentionedaconversationIhadhadwithfinancierGeorgeSoros. I told Stournaras that Soros agreedwithmy assessment of theGreeksituationaswellaswiththegistofmyeconomicpolicyproposalsforEuropeasawhole.StournarasandIthenproceededtodiscussthetroika’sGreekprogramme.It

wasclearthatGreece’sbankruptcyhadcreatedagulfbetweenus,turningpre-existing differences of opinion into a theoretical, empirical and politicalcrevasse.Stournarasinsistedthatthetroika’sprogrammewasviableprovideditwasimplementedvigorously.Iaskedhimtoexplain.Hedidsowithhisusualebullience.

‘It’ssimple,’hesaid.‘Itcanbedoneonthebasisofthethreefoursprinciple:4percentgrowthrate,4percentgovernmentbudgetprimarysurplus,and4percentinterestpaidoutonourbailoutloans.’25‘Sure,thatwouldnailit,’Ireplied.‘ExceptthatitisimpossiblefortheGreek

economytoachievea4percentgrowthrateanda4percentbudgetprimarysurplusatonce.’Iarguedthatifthegovernmentstateditintendedtoachievea4percentbudget surplus, thiswould translate in themindofany investor intoevenhighertaxratesandwasboundtodeterthem.Theconversationwasgoingnowhere.ButIstillbelievedourfriendship,one

ofthefewremainingbridgesbetweenopposingcamps,wasanassetthatcouldbeharnessedforthegreatergood.Justbeforeweparted,Isaidthatthetwoofus had a responsibility to remain friends.He seemed to be heading towardssomeloftygovernmentpositionwhereasmyideasweretakingmeintheotherdirection, towards the opposition. But above all else we should not allowourselves to be turned against one another at a human level. He nodded inagreement and we parted ways with a hug that, thinking back, was on thelukewarmside.Two months later, just before the June 2012 election, the University of

AthensEconomicsFacultywasconsideringmyapplication for leavewithoutpay,soIcouldreturntoAustinandcontinuetoteachthere.Sucharequestwasperfectlynormalandthefaculty’svotetoacceptitlittlemorethanaformality,but this application occasioned a tumultuous debate. The reason was thatStournarashadpresented thefacultywith thefollowingquestion:whyshouldtheUniversityofAthensgrantmeleavetoreturntotheUnitedStateswhenmypurposetherewastocollaboratewithGeorgeSorosintheshortingofGreekbonds?To short a government bondmeans tomake a bet that its valuewill fall,

effectivelyspeculating that thecountry’spublicdebtwillbecomeunattractiveto investors. If enough people spend enough money shorting a bond,confidence in the bond falls, it loses value and the short becomes self-fulfilling. Stournaras’s bizarre accusation was that I was speculating on theNewYorkmoneymarkets in cahoots with George Soros in order to profitfromadowngradeoftheGreekstate’screditworthiness.Allegations such as this – that I was a self-serving opportunist working

towardsbankruptingtheGreekstate–wereafavouriteofmyopponents.Anti-SemiticrightistconspiracytheoristshadattackedSorosasaJewforleadingacampaign to bring Orthodox Christian Greece down. From 2010 onwards,

when I started arguing that the Greek state was bankrupt and advocatedembracingourbankruptcy,thesecirclesinsinuated,andlaterproclaimed,thatIwas his stooge. The first time I heard the accusation, in 2011, Iwasmerelyamused. Now Stournaras had added a whole new twist to these ludicrouscharges, presumably based on my account of my discussion with GeorgeSorosinBerlin.ThesimplefactsarethatIhaveneverboughtorsold–letaloneshorted–a

bondorashareinmylife,andIhadneverbeforemetorcommunicatedwithSorosexceptatoursharedpaneleventinBerlininthespringof2012.Uponhearingofhisoutrageousallegation Ipickedup thephone, seething

withanger,andcalledStournarastoask,ascalmlyasIcould,whyhehadmadeit.Heapologizedimmediately,citing‘stress’andthe‘badinfluence’ofmediareportsthatIwasworkingforSoros.IsaidIacceptedhisapology,butinmyheart I knew Stournaras had crossed the Rubicon to a terrain incapable ofsupportinganybridgebetweenus.Afewdayslater,aftertheJune2012electionusheredinAntonisSamaras’s

coalition government, I heard on the news that Stournaras was to be thecountry’snexttechnocratic–unelected–ministeroffinance.Hestayedinthejob for two years, using his tenure to implement the loan conditions of thesecond bailout as faithfully as he could – so much so that the swingeingausterity introduced inwaveafterwaveofcutbacksand taxhikesacceleratedtherecession,terminallydestabilizingtheSamarasgovernment.Lessthantwoyears after its election victory, in the May 2014 European parliamentaryelection, Samaras’s New Democracy received fewer votes than Syriza andsubsequentlyfellwellbehindintheopinionpolls.AmonthlaterthetermofthegovernorofGreece’scentralbankexpired,andSamarasusedtheopportunitytoappointStournaras.Were theestablishmentparties to lose thenextgeneralelection,atleasttheywouldleavebehindsomeoneatthecentralbankwhowaswilling and able to undermine the incoming Syriza government. Which ispreciselywhatStournarasdid.The hotel café where we met in April 2012 had, as things turned out,

witnessedourfriendship’slastgasp.

Successstory

While Stournaras was taking over at the finance ministry during the hotsummer of 2012, the folks at the EU and IMF were trying to solve a littleconundrumoftheirown.Theloansforthesecondbailouthadbeendelayedbythe twin Greek elections and would not start arriving before the autumn.Unfortunately,Athenswasmeant to send just under €3.5 billion to theECB,one of its many unpayable debt repayments, on 20 August. How could thathappengiventhatthecofferswereempty?Whenthetroikahasawillitdiscoversaway.Hereisthewizardrytheyused

toconjureupthenecessaryillusion,narratedinslowmotionsothatthereadercanfullyappreciatethemagic.

TheECBgrantedGreece’sbankruptbankstherighttoissuenewIOUswithafacevalueof€5.2billion–worthlesspiecesofpaper,giventhatthebanks’cofferswereempty.As no sane personwould paymoney to buy these IOUs, the bankerstookthemtothefinanceminister,Stournaras,whostampedonthemthebankrupt state’s copper-bottomed guarantee – in reality a uselessgesturesincenobankruptentity(thestate)canmeaningfullyguaranteetheIOUsofanotherbankruptentity(thebanks).The bankers then took their worthless IOUs to the Central Bank ofGreece, which is of course a branch of the ECB, posting them ascollateralfornewloans.The Eurogroup gave the green light to the ECB to allow its Greekbranch to accept these IOUs as collateral and, in exchange, give thebanksrealcashequivalentto70percentoftheIOUs’facevalue(alittlemorethan€3.5billion).Meanwhile, the ECB and the Eurogroup gave Stournaras’s financeministrythegreenlighttoissuenewTreasurybillswithafacevalueof€3.5 billion – IOUs issued by the state, which of course no investorwouldtouchintheirrightmindgiventheemptinessofthestate’sowncoffers.The bankers then spent the €3.5 billion they had received from theCentral Bank of Greece – in fact from the ECB itself – when theypawnedtheirownworthlessIOUsinordertobuythestate’sworthlessIOUs.Lastly, theGreekgovernment took this€3.5billionandused it topayoff…theECB!

Such ingenuity propels Art and Conn’s logic to stunning new heights. Iteclipsesmanyof theshenanigans thatmadeWallStreetbankers theobjectofworldwide opprobrium. It adds a whole new dimension to Walter Scott’sfamous lines ‘Oh,what a tangledwebweweave: /When firstwepractise todeceive!’ Then again, without such tangled webs, how could the world bedeceived that Greece was solvent and on the mend, now that the rightgovernmenthadbeenvotedin?Butassoonasonesuchwebhadbeenwovenanotherbecamenecessary.Aroundthesametimeasthiswasgoingon,ChristineLagardewasbeingput

under pressure by non-European IMF member states – countries such asBrazil, India, Japan and Malaysia – to stop the charade and tell Berlin inparticularthatunlessGreece’sdebtwasrestructuredtheIMFwouldwalkawayfromthewholemess.Intheautumnof2012,asthesecondbailoutwasbeingfinalized,Lagardemadea remarkablemove revealingquitehow intense thispressure had become: she approached Stournaras suggesting that they walktogetherintotheEurogroupanddemandfromWolfgangSchäuble,Germany’sfinanceminister,adrastichaircutofGreece’sdebt.But insteadof jumpingat thisuniqueopportunity to forgeanalliancewith

theIMF,StournarasinformedSchäubleofLagarde’sproposaltobandtogetheragainsthimandasked theGermanfinanceminister ’spermission toaccept it.Naturally, Schäuble instructed Stournaras to ‘forget it’. Which Stournarasproceededtodo.26At that time Ihappened tobeattendingabankingconference in theUnited

States. There I bumped into one of the IMF’s bigwigs. ‘What was he[Stournaras]thinking?’heaskedangrily.‘Dotheseguyshaveabetterideaofhowtomakeendsmeet?Isthereaplan?Ijustdon’tgetit.’Theydidhaveaplan,Iinformedhim.Exceptthatitwasaplanforstayingin

governmentunderthepretencethatthecountrywasonthemend.Itscodenamewas(Iliketothink)GreekSuccessStory.The Greek Success Story plan had four sequential elements: the Merkel

Boost, the Speculative Bubble, the ECB Put, and the Pretend DebtRestructuring. The first of these, theMerkel Boost, was already in place. InSeptember 2012 Chancellor Merkel, egged on byMario Draghi, the ECB’spresident, and probably Beijing, stopped over in Athens on her way fromChina to Berlin.27 In the few hours of her stay she patted Prime MinisterSamaras on the back, signalling to the worldmedia that Grexit was off the

tableandthatGreece,havingchosentherightgovernment,wouldbeallowedtostayintheeurozone.This brief piece of theatrewas sufficient to create aminor rally inGreek

propertyvalues,whichhadgonethroughthefloorduringMayandJune2012whentheworldwasabuzzwithtalkofGrexit inthefaceofSyriza’sriseandthe hung parliament in Athens. As previously explained, if Greece werebundled out of the eurozone, all prices would be redenominated in newdrachmas,whoseexchangeratewouldinstantlyplummet,shavingconsiderablevaluefromshares,villasandyachts.Butmarketshaveatendencytooverreact.Whentheyfalltheyfallinordinately,andwhenagoodnewsstoryarrivestheyreboundunreasonably.TheMerkelBoostwasjustsuchanevent:amarketthathadalmostdiedsuddenlyralliedwithirrationalexuberance.The plan’s second element, sanctioned of course by the troika, was to

turbocharge this exuberance by creating a Speculative Bubble around theGreekbanks.Theideawassimple.AsfinanciersbegantolookatGreeceasanunderpriced investment opportunity thanks to the Merkel Boost, thegovernment would offer them a deal they could not refuse: buy shares inGreece’sbankruptbanksnow,andiftheirpricerisesinthefutureyouwillbeguaranteedmoresharesattheoriginallowprice,whileiftheyfallyourlosseswill be generously absorbed by the Greek taxpayer. What financier couldresist?The idea here was to create a flow of speculative money into Greece’s

dilapidated banking system and to present it as evidence of recovery, thusattracting other speculators in real estate, the natural ally of any financialbubble. Having demonstrated to Berlin and to the ECB that the new troika-drivengovernmentwas turning theailingshiparound,Athenswould thenhitthe ECB with its request: back our debt just as you are backing Ireland’s,Portugal’s, Spain’s and Italy’s.28 If Prime Minister Samaras and FinanceMinisterStournarascouldsecurethisbacking,therewouldbenothingtostopthem from selling newGreekdebt to private investors: even ifGreeceweresinkingfurtherintothequicksand,investors’bondswouldbeguaranteedbytheECB.Greekvoterscouldthenbetoldthattheircountrywasonceagaintrustedbyinternational investorsandergono longerbankrupt.Thiswas theirplan’sthirdelement,theECBPut.The fourth and last element of their plan was a wholly inadequate yet

symbolically important PretendDebt Restructuring. In a Eurogroupmeetingthat took place in November 2012, around the time Stournaras was giving

Lagardethecoldshoulder,SchäublerewardedStournaraswiththepromiseofapossible,albeitsuperficial,debtrestructuringbytheendofDecember2014.Theconditionwas thatAthenswould remain loyal to the troikaprogramme,completeitasagreedandbalanceitsbooks.29The hopewas that these four elements of theGreek Success Storywould

produceandmaintainafeelingofrecoverythatwouldreachitsclimaxbylate2014, just intimeforanewelectioninearly2015.30Butafterastrongstart,withthefinancialvariablesreflectingarobustMerkelBoostandapromisingSpeculative Bubble, the government’s plans got stuck in the mire of anunforgivingreality.ForwhilethevariablesthataffectthebottomlineofWallStreetspeculatorssuchastheinfamousJohnPaulson–whorushedinrightoncuetoprofitfromthebubblearoundGreekbankshares–wereflourishing,thevariables of daily life for normal Greeks were becoming even moreunbearable.The government began beating the drum for the Greek Success Story in

early2013.ThatyearGreeks’ total incomefellbyaheart-wrenchingmarginof more than 5.6 per cent, a figure that would have caused a revolution incountriessuchasBritain,Germanyor theUnitedStates. InGreece itwas thefifth successive year of precipitous falls. It wasn’t just the poor who wereunconvinced by the government’s story, though. In a bid to produce theprimarysurplus ithadpromisedSchäuble in return for itsdebt restructuringthefollowingyear,thegovernmentintroducedalandtaxthatlostitthesupportoftheupperechelonsofthemiddleclass,whomighthaveremainedassetrichbutwhomtherecessionhadrenderedincomepoorlikeeveryoneelse.Anewjokedidtheroundsinwhichparentsthreatenedtobequeathtotheiroffspringalltheirpropertyiftheydidn’tbehave.Thegovernmentpresumablythenrealizedthatitsstorywasfallingondeaf

ears because around this time influential conservatives in Prime MinisterSamaras’s inner circle considered approaching the Golden Dawn party tobolster its support, even seeking an electoral pactwith theNazis, albeit in arebrandedincarnation.In April 2014, with the opinion polls firmly against it and the European

parliamentelectionslooming,theSamarasgovernmentlaunchedtheECBPut.With the behind-the-scenes assistance of the ECB, which hinted at itswillingnesstobackthegovernment’snewbonds,thefinanceministryproudlycelebrated its return to the private debt market and the end of bankruptcy,borrowing a few billion from institutional investors who had agreed in

advance to participate in the charade. It fooled no one. Investors and voterscould see that incomeswere continuing to shrink anddebts to rise.Amonthlater, in theelections to theEuropeanparliament,Syriza topped thepoll.ForthefirsttimetheGreekLefthadwonanationwideelection,albeitaEuropeanpollbutpavingthewayfortherealthinginearly2015.In one of my meetings with Germany’s finance minister, after the Greek

SuccessStoryhadcollapsedinJanuary2015andSyrizawereingovernment,Iaskedhimoutofcuriosityandwithoutexpectingananswer,‘Wolfgang,whendidyoudecidetoceasesupporting[the]Samaras[government]?’‘InJune2014’washisunhesitatinganddisarminglyhonestresponse.Itmadesense.SamarashadlosttheEuropeanparliamentaryelectionofMay

2014despitetheboosthehadreceivedinAprilfromtheECB-mediatedbondsale. In Schäuble’s eyesSamaraswas a lame duck. Schäublemust have beensickandtiredofworryingthateverytimeabillwenttotheGreekparliamentSamaras’spaper-thinmajoritywouldevaporate.Moreover,afterhisdefeat intheEuropeanelections,Samaras lost someofhiszealandbegan todraghisfeet when it came to implementing the troika’s directives. Schäuble was nodoubtmightilydispleased.NowonderhegaveupontheSamarasgovernmentthatmonth.ItwasnoaccidentthatJune2014alsowitnessedStournaras’smovefromthe

MinistryofFinancetothenewlyvacatedgovernorshipoftheCentralBankofGreece.Hetoowasabandoningasinkingship.

Afive-prongedstrategy

Throughout2013,ensconcedinmyAustinsanctuary,IwasdoingallIcouldtohelpAlexisdevelopacrediblestrategywhilesteeringclearofSyriza’sinternalstruggles. The year began with an opportunity to help him win friends inWashington, DC, where he was due to address the prestigious BrookingsInstitution.Pappasaskedmetowritethespeech,whichIwasgladtodo,usingit to convey to American policymakers two now familiar but fundamentalpoints.First,thatSyrizawasapro-Europeanpartywhichwoulddoitsutmostto keepGreece in the eurozone, but that that did notmean accepting failed,self-defeating policies; to stay in the eurozone, indeed for the eurozone tosurvive,anewprogrammewasneededthatplaceddebtrestructuringfirstandforemost, followed by reforms that undermined the Greek oligarchy’s

strangleholdon theeconomy.31Second, theUnitedStateshadnothing to fearfrom a Syriza government’s economic or foreign policy, a point that Ireinforceda little later in aNewYorkTimesop-ed jointlywrittenwith JamieGalbraith.32 As previously mentioned, my thinking was that when we wereabout toopen a front againstBrussels,Frankfurt,Berlin andParis, a secondfront against Washington was pointless, but of course many in Greece,includinginSyriza,tooktheopportunitytoportraymeasanAmericanstooge.Two months later, in March 2013, news reached me from Cyprus that

stoppedmedead.ImmediatelyIsatdowntowritealongangstriddenemailtoPappas, for his and Alexis’s eyes. ‘I implore you to take seriously what ishappening in Cyprus,’ Iwrote. ‘Think of it as a dress rehearsal ofwhat thetroikawilldotoyouthedayafteryouwinpower.’AnewgovernmenthadjustbeenelectedinCyprus.Thefollowingdaythetroikacloseddowntheisland’sbanks,dictatingtermstothenewpresidentfortheirreopening.Incredulousbutunprepared,thenewpresidenthadsignedonthedottedline.‘Theyare trying this tacticout today inNicosia,’ Iexplained, ‘notbecause

Cyprusisthatimportantbutratherbecauseofitsrelativeunimportance,whichmakesittheperfectshootingrangetotesttheirnewbazookaonbeforeusingitagainstyou,againstourcomradesinSpain,Italy,etc.Theyaredoingthisforitsdemonstrationeffect,sothatyouknowthatthetroikaiswillingandabletoshut down a country’s banks to impose its will upon the government –especiallyanewlyelectedonethatdemandssomesovereigntyback.Watchandlearn!’The next day Alexis and I spoke on the phone, his voice conveying

considerabletrepidation.‘Isthereanythingwecandotodeterthem?’heasked.‘Yes, but you will need not only the right deterrence strategy but also a

tightlyknitteamtoworkonmakingitoperational,’Ireplied.‘Sendmeaproposal’werehislastwords.Ipromisedtodeliveritinperson.In Athens that May, in his spacious office in Parliament House, I met

Alexis’seconomicteamfor thefirst time.AswellasPappasandDragasakis,the shadow finance minister, it included two other Syriza members ofparliamentwhomIknewandlikedwell:EuclidTsakalotos,adearcolleagueattheUniversityofAthens,andGeorgeStathakis,aneconomicsprofessorfromtheUniversity of Crete. At thatmeeting I presented the proposalAlexis hadrequested,whichwasanenhancedversionofthestrategypaperIhadprovided

in June 2012: A Five-Pronged Strategy for a Sustainable Greece in aSustainableEurozone.The mood in the room was ebullient, which confirmed that my earlier

effortstodissuadeAlexisfromturningGrexitintoanobjective,orfromusingit as a threat, had not beenwasted.While I lost a greatmany friends on thebroader Left and within Syriza, who never forgave me for my role inexpunging Grexit from Syriza’s policy objectives, Alexis’s inner economicsanctumwas evidently keen to pursue a viable solutionwithin the eurozone.ThepurposeoftheFive-ProngedStrategywas topersuade themthat thiswasnot just desirable but actually possible, that a Cyprus-like coup could beavoided and to propose how it might be done. First came the deterrencestrategy.

1.KEEPINGTHEECBATBAYANDTHEBANKSOPEN

Fromlate2012onwards,MarioDraghi,theECB’swilypresident,managedtoholdthecreakingeurotogetherbypromisingtobuymountainsofdebtfromEurope’sfailingeconomies–Italy,Spain,Irelandandtherest–intheformofgovernment bonds.33 Despite securing Angela Merkel’s green light for hisplans, Draghi’s greatest foe was the German central bank, the Bundesbank,whosepresidentchallengedDraghi’srightandauthoritytobuypotentiallybadGraeco-Romandebts–indeed,doingsodirectlywasinviolationoftheECB’scharter and Draghi had had to come up with some ingenious methods tocircumvent it. The Bundesbank took Draghi to court over the matter.34 IfDraghi’spromisetobuysuchdebtwereconsequentlytovanishinthefaceofthis formidable legal challenge, then the only thing keeping the euro alivewouldbegone.TheBundesbank’sargumentagainstDraghiwasthathehadnolegalbasis foraccepting losses fromgovernmentbondpurchases.ThisgaveanyGreekgovernmentsignificantleveragebecausetensofbillionsofGreekgovernmentbondsremainedontheECB’sbooks:thesehadbeenpurchasedbythe ECB under its previous President as part of the Securities MarketProgramme(SMP)between2010and2011.MyadvicetoSyrizawasthatiftheECBthreatenedtocloseGreece’sbankstheirgovernment’sresponseshouldbeunilaterally to haircut the so-called SMP bonds – thus strengthening theBundesbank’slegalchallengetoDraghi’splantobuyFrench,Italian,Spanish,Irish andPortuguesebonds inorder to save theEurozone– and they should

makethisintentioncleartohim.ThiswouldmakeDraghiveryreluctanttodotoGreecewhathadbeendonetoCyprus.

2.DEFANGINGTHEBANKRUPTBANKERS

AsPappas,AlexisandIhadpreviouslydiscussed,dismantlingBailoutistan2.0required the handing over of the banks to their new owners, Europe’staxpayers, and the uncoupling of their losses from theGreek state’s debt.ASyriza government should therefore negotiatewith the troika for the banks’sharesandmanagement tobe transferred toEuropean institutions,whose jobwouldbetonursethembacktohealthonbehalfofallEuropeans.TodothisSyrizaneededtouniteleft-wingers,whobelieveinthesocializationofbanks,with libertarians,who loathe the idea of propping up bankrupt bankerswithcapitaltakenfrompowerlesstaxpayers.

3.SENSIBLEFISCALPOLICYANDDEBTRESTRUCTURINGPROPOSALS

Shout from the rooftops that a Syriza governmentwould be committed to astatethat liveswithinitsmeansingoodtimesandbad.Intechnical termsthatwould mean a small primary budget surplus not exceeding 1.5 per cent ofnational income – not enough to repay the unrepayable public debt butsufficient tokeepthestatesolventwhilegivingtheprivatesectorachancetobreathe again.As a prerequisite for this, Syrizawould need to propose debtrestructuring of sufficient scale that further debt repayments could beaccommodated by a 1.5 per cent primary surplus. During the period ofnegotiation with the Eurogroup and its troika over this final point a Syrizagovernmentshouldbepreparedtosurviveanyshortageofcashbysqueezingthe highest salaries andmost generous pensions asmuch as is necessary tomakeendsmeet.

4.EMERGENCYPLANTOCOMBATTHEHUMANITARIANCRISIS

In the meantime a Syriza government should immediately provide food,energyandsheltertothehundredsofthousandsoffamilieswhoaresuffering

most. Lambros and those about to fall through the cracks should be thegovernment’stoppriority.Existingidentitydocumentscouldbereplacedwitha smart card equipped with debit payment capabilities at a low cost. Thesecapabilitieswouldbeactivatedforfamiliesbelowtheabsolutepovertyline,foruseinsupermarketsandforessentialssuchaselectricityandhousing.

5.MODESTPROPOSALFORRENDERINGTHEEUROZONEVIABLE

AsaprogressiveEuropeanistforce,aSyrizagovernmentshouldnegotiatenotjust on behalf of the Greeks but also go to Brussels with comprehensiveproposals for Europe’s public debt, banks, investment policies and poverty-fightingcapacities–proposalswithoutwhichtheeurozoneisunsustainable.Tothisend,myrecommendationtotheSyrizaeconomicteamwasthattheyadopttheModestProposal forResolving theEuroCrisis thatStuartHolland, JamieGalbraithandIhadbeenworkingonforyears.Inordertosucceedintheseaims,Itoldthemeeting,yourgovernmentmust

gotoBrusselswithacomprehensiveproposalthatisgoodnotjustforGreecebut for every otherEuropean country too.Youmust give a clear signal thatAthens will no longer be bullied into accepting further extend-and-pretendloans.Youmustmakethepeopleat theEUandtheIMFrealizethatyouhavearrived on the scene with a commitment to staying in the eurozone and ofcompromising.Buttheymustrealizethat,ifneedbe,youarepreparedtowalkoutof thenegotiations,whatever their threats, for ifyouarenot, there isnopointinenteringthenegotiatingroominthefirstplace.AlexisandPappaslookedsatisfied.EuclidandStathakisalsoindicatedtheir

broadagreement.ItfelltoDragasakistoaskthepertinentquestion:‘HowcanweconvincetheEurogroup,theECBandthetroikathatwearenotbluffing?’Thequestionwassupremelyapt;thewholestrategyreliedonthisonepoint.My response was that Syriza’s preferences and priorities had to become

common knowledge. It had to become commonly known that a SyrizagovernmentwantedaboveallelseaviableagreementwithintheeurozonebutthatitpreferredGrexit,aterribleoutcome,tocapitulation,theworstoutcome.Ifthisorderofpreferenceswaswidelyknown,thentheblameforGrexit,withallthecostsandlegalissuesthatitwouldentail,couldonlyfallontheEUandtheIMF.Thechoicewouldthenbeentirelytheirsandknowntobetheirs.

Of course even if Syriza’s true preferenceswere known, theEU and IMFofficialswouldnodoubttestAlexis’sresolvetoitsutmost.Itwaspossibletoothat theEUandIMFwouldultimatelyprefer tothrowGreeceoutof theeurothandealconsensuallywithaSyrizagovernment,orthatinpushingAlexistothebrinktheymighteffectGrexitbyaccident.Alongconstructivediscussionfollowedinwhichweconsideredthesepossiblescenarios,butthekeypointImadewasthis:whetherornottheycouldconvincetheEurogroup,theECBandthetroikathattheyweresincereinthesepreferences,therewasnopointinanyofitiftheyweren’t.Thisiswhattheyneededtoworkoutamongthemselves,Itoldthem:

Doyoutrulybelieveinyourbonesthat‘doingaSamaras’,capitulatingtothetroikalikehim,isworsethanbeingthrownoutoftheeuro?Ifyouarenotsure, letSamarasstay inMaximos.Forwhat is thepointofwinningpowertoclashwiththecreditorsonlytofoldthemomentthetroikacallsandthentaketheblamefortheirinhumanity?Winpoweronlyifyouarenotintendingtobluffbecauseyouareconvincedthatcapitulationisevenworse thana terribleGrexit.Only thenwillGreeceget a chance to staysustainablyintheeurozoneandtoputGrexitbehinditonceandforall.

Ashewasshowingmeout,Pappasputhisarmaroundmyleftshoulderandsaid,‘Thatwasbrilliant.Itwillbeourlinefromnowon.’

Gatheringqualms

Itwasthenightof11June2013,anhourbeforemidnight,whenthetelevisionscreensfroze.Fortwohourstheybroadcastnothingbutastillofajournalistcut off in mid-sentence as he explained that the government had decided toclose down the three state television channels, all the regional and nationalradio stations, and the satellite service thatprovided theGreekdiasporawithGreek programming. It was the equivalent of all BBC television channelssuddenlygoingdarkatthesametimeaseveryBBCradiostationwentsilent.Unable to believe my eyes and ears, my mind raced back to the time of

Greece’sfascistdictators,whosefirstmoveintheircoupwastotakecontrolofthestatetelevisionchannels.TheyatleasthadbotheredtobroadcastapictureoftheGreekflag,althoughaccompaniedbymilitarymusic.InBailoutistanthe

troika-subservient government just froze the picture for two hours. ThenGreece’sTVscreensturnedblack.Thatblacknesswasanaptmetaphorforthenewgovernment’sauthoritarianturnasthedismalfailureofitssuccessstorybecameapparent.Withinminutesof theblackout,demonstrators invaded theERTbuilding–

fromwhichIhadbeenbannedin2011–beginningamonths-longoccupationthatrekindledthespiritofSyntagmaSquare.ThenextmorningDanae,JamieGalbraithandIflewtoThessalonikitoofferoursupporttothelocalERTstaff.WhilethereIgaveaspeech,followedbyJamieandAlexis,toalargepackedhall.MyreturntoERT,asoneofthethousandsofdemonstratorsandagueston theunofficalprogrammes that the staffbroadcastover the Internet, couldnothavebeenmorebittersweet.PromptedbytheseeventsandfollowingmymeetingwithSyriza’seconomic

team,somethingofacoherentagendabegantotakeshapeoverthecourseofthatsummer.InNovember2013JamieandIorganizedatwo-dayconferenceattheUniversityofTexasonthetheme‘Cantheeurozonebesaved?’withAlexis,Pappas and Stathakis attending and giving well-received speeches. The ideawastointroducethethreeSyrizaleaderstoestablishmentfiguresfromEuropeandtheUnitedStates,tradeunionleaders,academicsandjournalists.It was also a good opportunity to test Alexis’s commitment to the logic

behindtheFive-ProngedStrategy.During theconferenceheandPappaswerepresent at a heated debate between me and Heiner Flassbeck, a left-wingGerman economist and former junior finance minister in the Schroederadministration,whoarguedthatGreece’sliberationfromdebtors’prisonwasimpossible within the eurozone. He maintained that Grexit was the correctobjectiveforaSyrizagovernment,oratleastthebestthreattouseagainstitscreditors – the sameposition as that of theLeftPlatform, anofficial factionwithinSyrizathatnumberedamongitssupportersone-thirdofSyriza’scentralcommittee.36ItwasinAustinthatIbecameconvincedofAlexis’srejectionofthispositionandhisbeliefthatifanyoneweretothreatenGrexit,itmustbethetroika,notSyriza.ThewinterpassedwithSamaras’sgovernmentstrugglingtosellits‘success

story’andGreek society sinking further into theeconomicmire.April2014marked Samaras’s last hooraywith Stournaras selling government bonds toinvestors who were reassured by the ECB’s tacit backing. In May 2014,however, Syriza topped the polls in the European parliamentary elections,

confirmingthatnoonewasfooled.AmonthlaterWolfgangSchäublegaveupontheSamarasgovernment.Changewasintheair.ThatJune,backinGreeceoncemoreforthesummer,ImetAlexisandhis

economics team to warn them about a new threat. In the fine print of anotherwiseinnocuouspressreleasetheECBhadjustannouncedthatinthenearfuture it would stop accepting the IOUs issued by banks and backed by thegovernments of bailed-out countries as collateral for further loans. In otherwords, a vital component of the smoke-and-mirrors machinery used byGreece’s four largest banks to ensure their day-to-day liquidity would beremoved.Thedateonwhich thenewpolicybecameeffective set alarmbellsringing inmyhead:March2015– themonth thepresidentofGreece’s termexpired,whennewelectionswerelikelytobeheldandwheninallprobabilitySyrizawouldformagovernment.‘Do you see where I am going with this?’ I asked Alexis, Pappas,

Dragasakis,EuclidandStathakis,havingpassedontheECB’sbombshell.Thedayaftertheywonpower,Iwarnedthem,MarioDraghiwouldcallthemwiththe news that, as previously announced, the ECBmust deny Greece’s banksliquidity, effective immediately. The ECB was creating the conditionsnecessary to close down the banks without any warning or reason just asSyrizawastakingover.Dragasakis’sfacesank.‘Andwhathappensthen?’The only way the banks could continue to function, I said, was at the

discretionoftheCentralBankofGreece,whichcouldcontinuetolendtothemthroughaschemeknownasemergencyliquidityassistance(ELA).TheCentralBankofGreece is in effect a branchof theEuropeanCentralBank, so eventhenthecashwouldbecomingfromtheECB,albeitindirectlyandatahigherrateof interest,andcouldultimatelybeswitchedoff.37But therewasamoreimmediateobstacletocontendwithbeforeallthishappened.‘IsitacoincidencethatthreedaysfromtodayPrimeMinisterSamaraswill

transfer Stournaras from the finance ministry to the governorship of thecentral bank?’ I asked. ‘It’s obviously a stratagem in anticipation of yourelectoralvictory.’AtthatpointAlexisgrewangry.‘ThefirstthingIshalldoasprimeminister

is demand Stournaras’s resignation. I will drag him from the central bankkicking and screaming if need be.’ Pappas offered a number of even moredrasticsolutionstothisproblem.

I pointed out that it hardly mattered who sat in the governor ’s office; aSyrizagovernment’sprioritywastodeterDraghifromclosingdownthebanksin the first place. As per the first part of the Five-Pronged Strategy I hadpresentedthepreviousyear,theywouldneedtomakecleartoDraghithatbankclosuresbytheECBwouldtriggeramovefromAthensthatmightwellbringdown theeurozone.Thequestionwas:were theycommittedenough todosoandtotakeonallthoseonDraghi’sside,notjustStournarasbutlocalbankerssuchasourArisandZorbaaswell?AlexisandPappasrespondedwithenthusiasm:theywouldnothesitatetodo

this. Euclid, reputedly the most militantly left wing in the team, agreed.Stathakis nodded. Dragasakis, on the other hand, replied in a manner that Iwould learn to expect: ‘Let’s proceed on the basis of the good scenario,’ hesaid,adding,‘Ifforced,wewillhavetorespond.’Aweeklater,inthemajesticgardensoftheAthensByzantineandChristian

Museum,Alexisand Iappeared in frontofanother largeaudience topresentthe Greek translation of theModest Proposal for Resolving the Euro Crisis.Alexis’swholeteamwasintheaudience,withDragasakisinthefrontrow,animpressiveshowofsupportforthestrategy.Acoupleofdaysafterwards,Alexis,PappasandImetagain.‘Do you realize,’ asked Pappas, ‘that no one else but you can oversee the

implementationofthenegotiatingstrategyyouareproposing?Areyoureadytodothis?’I replied that my commitment to the fight was a given, but that I didn’t

believeintechnocratsbeingparachutedintoapoliticalprocess.IntruthIstillhad fundamental concerns. Negotiating on a country’s behalf requires ademocratic mandate. The Modest Proposal represented my personalconvictions,andIhadnodesiretolegitimizethede-politicizationofeconomicpolicy,thatmostpoliticalofrealms.Besides,Dragasakis,EuclidandStathakishadbuiltSyrizaupfromscratchoverdecades.Theycommandedtherespectoftheparty.Bycomparison, I couldneverbemore thanaproxy for them,andthis would undermine my ability to run the negotiations with the authorityrequired. Lastly, my qualms regarding the incongruity between Syriza’sinternalprioritiesandacrediblegovernmentagendahadnotdisappeared.Aweeklater,WassilyKafouros,adearfriendfrommyundergraduateyears

inEngland,addedtomymisgivings.HeaskedmeifIwastheonlypersonnotto know that Dragasakis was extremely close to the bankers. I said I didn’tbelievehim.‘Whereisyourevidence,Wassily?’Idemanded.

‘EvidenceIdonothave,’headmitted,‘butitiscommonlyknownthathehasmade it his business, even back in his communist party days, to keep thebankersclose.’I assumed the accusation was false, and although doubts still slithered

throughmymind like restlessserpents Idecided Icouldnotafford toworryaboutproblemsthatlaybeyondmycapacitytosolve.Thosewhohadearnedanelectoralmandate had to unbend the evil bows. For now all I could dowaspointoutthetrapsandsuggestwaystoavoidthem.

4

Treadingwater

The Ship of Stone, the Stoneship for short, is what sailors call them: threelarge rocks protruding from the open sea in themouth of the SaronicGulf.Seenfromanapproachingboatamileorsoawaytheydoindeedlooklikeaghost ship heading slowly towards Cape Sounion, home of Poseidon’senchanting temple. Swimming in the unnervingly deep blue waters in theStoneship’sshadowsoclosetoshippinglaneshassomethingofanedgetoit.InAugust2014AlexisandIweretreadingwaterfiftymetresorsofromthe

Stoneship,asfarfrompryingearsasitwaspossibletobe.Ourconversationturnedtotrust.DidAlexistrusthisteamtoleadthechargeagainstthebankerssuchasArisandZorba?Didhetrustthemtonegotiatewiththetroikawithoutfearof–oradesirefor–Grexit?Wouldtheystandtallagainstatroikawillingand ready to asphyxiate them via the banks while Greece’s oligarchs wentberserk?Alexis was skilfully evasive, striking a consistently optimistic tone.

Restrainingmyselfsoasnottooverwhelmhimwithmydoubts,Inonethelesshad to ask the question that had been burning inmymind from themomentWassilyplanteditthere.‘Alexi,’Isaid,tryingtosoundasnonchalantasIcould,‘IhearDragasakisis

too close to bankers. And, generally, that he may be going along with ourescapeplanswhileinrealityheisworkingtomaintainthestatusquo.’Hedidnotanswerrightaway.InsteadhelookedtowardsthePeloponnesein

thedistance,beforeturningbacktome.‘No,Idonotthinkso.HeisOK.’Ididnotknowwhattomakeofhisbrevity.Didheharbourdoubtstoobuton

balance trusted in his senior comrade’s probity or was he dismissing myquestion?TothisdayIdonotknowtheanswer.WhatIdoknowisthathekeptinsistingIhadnochoice:whenthemomentcame,Ihadtoplayaleadingroleinthenegotiations.Loath to list my reservations once more, I replied spontaneously, ‘OK,

Alexi,youcancountonmyhelp.Butononecondition.’‘Whichone?’heaskedwithasmile.

‘ThatIhaveamajorsayinSyriza’seconomicagendapriortotheelection.Wecannothavearepeatof2012.’AlexispromisedhewouldhavePappaskeepmeintheloopandconsultwith

mebeforetheyputanythingoutoneconomicpolicy.ItwastimetoswimbacktoAlexis’s partnerBetty andDanae,whowerewaiting on a small inflatabletenuouslyanchoredtotheseabed.

Blood,sweatandtears

Amonthlater,backinAustin,IheardonthenewsthatAlexishaddeliveredamajor speech in Thessaloniki outlining Syriza’s economic platform.Gobsmacked, I got hold of the text and read it. A wave of nausea andindignationpermeatedmygut.Straight away Iwent towork.Thearticle thatemerged less than half an hour later was used soon after its publication byPrimeMinister Samaras to lambast Syriza in parliament: ‘Even Varoufakis,youreconomicguru,saysthatyourpromisesarefake.’Andsotheywere.The Thessaloniki Programme, as Alexis’s speech was labelled, was well

meaning but incoherent and definitely inconsistent with the Five-ProngedStrategy,whichAlexisandPappashadsupposedlyendorsed.Itpromisedwagerises,subsidies,benefitsandinvestmentpaidforwithsourcesoffundingwhichwereeitherimaginaryorillegal.Therewerealsopromisesweshouldnothavewanted to fulfil. Above all, it was at odds with any reasonable negotiatingstrategythatkeptGreecewithintheeurozone,despiteadvocatingthatitshouldremainthere.Itwas infactsucharamshackleprogrammethatIdidnotevenbothertocriticizeitpointbypoint.InsteadIwrote:

How I would have loved a different speech from Alexis Tsipras, onebeginning with the question ‘Why vote for us?’ before proceeding toanswer itwith ‘Becausewearepromisingyouonly three things:blood,sweatandtears!’Blood,sweatand tears,whichWinstonChurchillpromised theBritish

peoplein1940ashewasassumingthehelmofgovernment,inreturnfortheirsupportandhelptowinthewar.Blood, sweat and tears, which will earn all Europeans, not just us

Greeks,therighttohopeforanendtothemutedbutruthlesswaragainstdignityandtruth.

Blood, sweat and tears, whichwe should be ready to shed to put thecountrybackontrack,somethingthattodayisimpossibleifwecontinueto behave likemodel prisoners hoping for early release from debtors’prison and to borrow more while cutting the incomes from which wemustmeetourrepayments.Indeed, if youwant to vote for us, youmust do so only because you

agreethattheblood,sweatandtearsthatwearepromisingyouareafairpricetopaytohearthetruthfromthelipsofgovernmentministersandtohaverepresentativesinEuropewhowillneitherbegnorbluffbutinsteadadopt a strategy no government has hitherto adopted, the strategy ofspeakingTruthtopower.Truthtoourpartners.TruthtothecitizensofEurope.Truthregardingthesorrystateofourbanks.Truthaboutour‘surpluses’.Truthaboutnon-existentinvestment.And finally, the most painful, Truth about the zero prospects for

recovery while the death embrace continues between a bankrupt state,bankruptbanks,bankruptfirmsandbankruptinstitutions.Lastly,beforeyouvoteforus,knowthatwedreadanelectoralvictory

more thanwe feardefeat, thatwearescaredstiffat the thoughtwemaywin.Butifyoudecidetovoteusintodelivertheblood,sweatandtearsweare promising in exchange for truth and dignity, if you overcome yourfear,thenwepromisetoovercomeourfeartogovernthiscountryandtosteerittoemancipationfromhopelessness.1

Onitspublication,friendsandfoesalikethoughtthismarkedtheendofmybriefaffairwithSyriza’sleadership.IthoughtsotoountilPappascalledafewdayslater,soundingchipperandasifnothinghadhappened.Iputittohimthatmyarticlechangedeverything.‘It changesnothing,’he retorted light-heartedly. ‘Youwill get to shape the

actual economic programme. The Thessaloniki Programme was a rallyingcallforourtroops.That’sall.’Exasperated,Igavehimapieceofmymind,stressingthatthesupportofour

troops was essential and lying to them was hardly the way to ensure it.

Unabashed, he assured me ominously, ‘There is party policy and there isgovernmentpolicy.Youwillauthorthelatterandleavetheformertous.’I asked who was behind the Thessaloniki Programme. Pappas said

Dragasakis had overseen it, assisted by Euclid. Dragasakis’s hand did notsurprisemebutEuclid’sinvolvementwasdisappointing.Iexpectedmorefrommyfriend.‘Whoeverwrotethatmonstrosity,’Isaid,‘it throwsaspannerintoanysensiblenegotiatingstrategy.’Iput thephonedownwithamouthsodryandbitter Ihad todrinkseveral

glassesofwater before talking thingsoverwithDanae.The leadershipweretelling each other one story while the party faithful were being served acompletely different one. It was a recipe for confusion, division and defeatagainstadversarieswhowereunited,mightyanddetermined.Thenarrativewegaveourpeopleandthetroikaofficials,theEUandIMFleadership,BerlinandWashington, indeed the international press and the markets, should be one,indivisible, credible, unbendingmessage.Uponhearingmyview thatPappasandAlexis’stacticswereboundtowreckanyfuturenegotiation,Danaereactedsharply:‘Youcannotbepartofthis.’Iagreed.The decision to keepmy distance brought instant relief, but my peace of

mind lasted only a couple of months. In late November 2014, as I waspreparingtoflytoFlorencetoaddressaconference,thecallcameonceagain.ItwasPappas.WhenhediscoveredIwasonmywaytoItalyheimploredmetomake a side trip toAthens before returning toAustin. ‘It is urgent that youcome,’hesaid.ReluctantlyIchangedmyticket.InFlorenceIaddressedagatheringofworriedItalianofficials,bankersand

academics, presenting a newer version of the Modest Proposal, a set ofpolicies thatcouldbe implementedinstantlywithinEurope’sexistingrules tostoptheeurocrisis inits trackseverywhere,not just inItalyorGreece.2Thenext morning I caught the train to Rome and from there the short flight toAthens,wonderingalongthewaywhatAlexisandPappashadinstoreforme.Thenewspapersat theairportwereabuzzwith rumoursofanearlyelection.HadmySyrizafriendsabsorbedthemessageinmyarticle?The taxi droppedmeoff at our empty flat. I dumpedmy suitcase andwas

pleasantly surprised at my motorcycle’s willingness to start despite threemonthsofidleness.AquarterofanhourlaterIwasparkingitunderAlexis’sapartment block,where Iwas greeted by two sentries at street level.The lift

tookme to the top floor,whereAlexis,Betty and their twodelightfulyoungboyslive.PappasandDragasakisweretheretoo.Itwasearlyintheevening.It wasn’t until the early hours of the following morning that I finally

emerged,drovebacktoourflattocollectmysuitcaseandcaughtataxitotheairportformyflighttoAustin.‘Whathappened?’askedDanaeonthephone.‘I’lltellyouwhenIseeyou,’Ireplied.Holdingmytongueonthephonefor

fearofeavesdroppershadbegun.

Afullandfrankexchange

The mood in Alexis and Betty’s apartment had been cheerful. Samaras’sgovernmenthadplummetedinthepolls,electionsnowlookedimminent,andtheywantedtodiscussstrategyintheeventofSyriza’snowprobablevictory.I was not in the mood to share their excitement. The Thessaloniki

ProgrammehadheightenedmyfearsthatAlexiswasabouttowastewhatmightwellbeourgeneration’slastchancetogetGreeceoutofitsprisonofdebt,soImade a point of emphasizing the hardships and risks ahead, reiterating thepointsIhadtriedtoimpressuponthematourmeetinginJune.Itwasallwellandgoodtoprayforthe‘goodscenario’thatDragasakislikedtoinvoke,butweurgentlyneededtoprepareforamoreprobable,andfarnastier,one.‘Let me tell you what I think you will face on day one of your

administration,’ I began once we had all settled down in the living room.‘ExpectabankruntobegintheMondayafteryourelection.’3Rumours that the ECB might close the banks would cause depositors to

withdraw their euros to store under their mattresses or wire abroad, Iexplained,justashadhappenedin2012andinCyprusthefollowingyear.EUand IMFofficialswouldbe innohurry tonegotiatewith a government theywanted toundermine.Theywouldsiton theirhands,bide their timeandwaitforAlexisandhis team tocome face to facewith the firstof the impossiblerepayments to the IMFand theECBdue fromMarch2015onwards.4 Aswehad discussed in June, a Syriza government therefore had to be prepared tosignalfromtheverybeginningthatiftheEUandIMFrefusedtonegotiateingoodfaithitwouldsimplynotmakethoserepayments.Ifthathappened,theEUand IMF would undoubtedly respond that the ECB was no longer able to

provide liquidity to the Greek banks, as their IOUs were backed by agovernment in default, a threat tantamount to switching off their emergencyliquidityassistance,thusshuttingthemdown.Themoodintheroomdarkened.‘Ihopenoneofthistranspires.Maybeitwon’t.Butitwouldbefoolishnotto

prepareforit,’Isaid.‘Iftheychoosethisbelligerentpath,theirpurposewillbetoworkoutwhatyouaremadeof,whetheryouarebluffingandwhatyourtrueprioritiesare.’‘WhatdoyouthinkMerkelwants?’saidAlexis.‘Icannotbelieveshethinks

it’sinherintereststostirupanothercrisis.’‘Berlinwill not dare upset themarkets by closingGreece’s banks down,’

interjectedPappas.‘GreeceisnotCyprus.Theycannotpushusaroundlikethatwithoutconsequences.’I begged to differ. In my viewMerkel and Schäuble had no intention of

goingtotheirparliamenttosupportdebtreliefforGreece,amovetantamounttoconfessing that thefirst twobailoutshadbeengivenunderfalsepretences.The only way Berlin could avoid such a confession was to arrange a thirdbailoutloan,keepingGreeceindebtors’prisonbutofficiallynotindefault.ButaseachbailoutrequiredthesacrificeofaGreekprimeminister(Papandreoufor the first, Samaras for the second) and a fresh government to push itthroughparliament,theywouldtryeithertowinAlexisovertotheirsideortocreatesuchchaosthathisgovernmentfell,allowingforitsreplacementwithacomplianttechnocraticadministration,justastheyhadhadin2012.Alexislookedgrim.‘ButwhataboutPappas’spoint?’hesaid.‘Aretheynot

scaredoftumultinthemarkets?’‘Theyare,’Iexplained,‘butjustwhenyoumightbemovingintoMaximos,

the ECB will be unleashing a torrent of money with which to stabilize theeurozone.’Sucha‘quantitativeeasing’programmeinvolvedthemasspurchaseofgovernmentbondsusingthedigitalprintingpressesoftheECB.Thiswouldpush down interest rates in key states such as Italy, Spain and France. Twoyearsintheplanning,itwasMarioDraghi’sstrategytobuytimefortheeuro.‘Itwould be idiotic to think of this as a coincidence,’ I said. ‘Merkelmay

wellfeelthatthemomentthemarketsarefloodedbyECBmoney,anECB-ledenforced Greek bank holiday will go reasonably smoothly for her andEurope’sfinanciers.’‘Howdoweupsettheirplanthen?’askedAlexis.

‘Toextract fromthemahalf-decentagreement,’ I said, ‘youmustgive theECBgoodcausetohesitatebeforeshuttingdownthebanks.’

Keydeterrent:theECB’sremainingGreekdebt

The strategy for deterring a bank shutdown thatwe had discussed in June –based on theFive-ProngedStrategy I had presented atmy firstmeetingwithAlexis’s economic team inMay 2013, itself based on the initial paper I hadpresented in June2012–hingedon the legalbattlebetweenMarioDraghiattheECBand theBundesbankunder JensWeidmann.Draghi hadpromised tobuy vast amounts of government bonds from Europe’s shaky economies inorder topropup theeurozone.TheBundesbankhad takenhim tocourtoverthis, claiming it violated the constitution of the ECB. In February 2014 theGermancourtshadreferredthemattertotheEuropeanCourtofJustice,whichruledinfavourofDraghi,buttheirjudgmentincludedcaveats–caveatsthatinmy analysis gave a future Syriza government considerable leverage. MyreadingofthemwasthatDraghi’spowertocontinuebuyinggovernmentdebtwas conditional on protecting theECB from anywrite-down of governmentdebt theECB already owned. This included the so-called SMP bonds:GreekgovernmentbondsithadacquiredfromprivateinvestorsaspartofwhatithadbrandedtheSecuritiesMarketProgramme.The sum that the Greek state still owed the ECB in the form of these

outstandingbondscameto$33billion.FromGreece’sperspectiveitwasalotofmoney,especiallygiventhatrepaymentsof$6.6billionwerecomingupinJuly and August 2015. But from the ECB’s perspective it was financiallyinsignificantwhencompared to theone trillioneurosandmore that theECBwasplanning to release.Nonetheless, those fewbillionsofGreekdebt to theECB were legally momentous: any haircut of that sum or delay in itsrepaymentwould openDraghi and theECB up to legal challenges from theBundesbankandtheGermanConstitutionalCourt,underminingthecredibilityof itsoveralldebt-purchasingprogrammeandcausinga riftwithChancellorMerkel, who would never take on both the Bundesbank and the GermanConstitutional Court at the same time. Facing their combinedmight, Draghiwas sure to find his freedom drastically curtailed, thus undermining themarkets’faithinhishithertomagicalpromisetodo‘whateverittakes’tosavetheeuro–theonlythingpreventingthecurrency’scollapse.

‘MarioDraghi isabout tounleashamajordebtpurchasingprogramme inMarch2015,withoutwhichtheeuroistoast,’Isaid.‘Thelastthingheneedsisanythingthatwillimpedethis.’5ASyrizagovernmenthadtherefore tosignaltoDraghithatitwantedamutuallyadvantageousdealwiththeEU,theECBandthe IMF andwaswilling to compromise to get this. But itmust also signal,discreetly but firmly, that if Draghi were to shut down Greece’s banks inresponse to a Syriza victory, itwould consider this a casus belli andwouldimmediatelylegislatetopostponeredemptionoftheGreekgovernmentbondsowned by the ECB by, say, two decades. I had no doubt that if a SyrizagovernmentsignalledearlyonitsintentiontoretaliatebyhaircuttingtheGreekSMPbondsheldbytheECBinthisway,itwoulddetertheECBfromclosingdownthebanks.‘Draghi is toowise a central banker to risk this simply in order to allow

Berlintosteamrolleryou,’ItoldAlexis.‘Ofcourse,ontheotherhand,ifyoufailtoconvincehimthatyouareseriousabouthaircuttingthoseSMPbonds,hewillhavenoreasontoantagonizeBerlinbyrefusingitsrequestthathecrushyouwithanenforcedbankholiday.’Asin2012,soagaininAlexis’sapartmentthatnight,Iwasatpainstostress

one simple thing: in this and in every aspect of the negotiation they faced,Syriza could not afford to bluff. Even if Draghi did shut down the banks,Alexis’s government had to be ready to keep the economy ticking over forseveralweeks. If he continued to stand his ground even then – signalling toBerlin and toFrankfurt that,while his government’s aimwas an honourableagreement, it nonetheless preferred a costly and unwanted Grexit to thenightmareofcapitulation todebtbondage– then the realnegotiationswouldbegin.Wasthisabattletheywerepreparedtoseethroughtotheend?PappasseemedoffendedthatIshouldask.Alexis,morerestrained,saidwith

anairofresignation,‘Wehavenoalternative.’Dragasakissaidnothing.Itwasimperativethenthattheyhadaplanforbuyingtime,Itoldthem;away

of getting through several weeks so that they would not have to choosebetweenGrexitandsurrender theverymoment theATMsclosed.ThiswouldalsogiveMerkelandDraghithechancetostepbackfromaterminalruptureonceitbecameclearthatSyrizameantbusiness.Todothis,theywouldneedapaymentssystemreadytokickinthemomentthebanksclosed.

Aparallelpaymentssystem

The scheme I outlined, alluded to in June 2012 and in the Five-ProngedStrategyofMay2013,wasbasedontheoreticalworkIhaddonepreviouslyonhow fiscally stressed eurozone governments could gain some room formanoeuvrethroughanovelutilizationoftheirtaxofficewebsites.Thegistofitwassimple.SupposethatthestateowesCompanyA€1millionbutisdelayingpayment

owing to the state’s liquidity squeeze. Suppose also that Company A owes€30,000toJill,oneof itsemployees,plusanother€500,000toCompanyB,whichsupplieditwithrawmaterials.Meanwhile,JillandCompanyBalsoowe,respectively,€10,000and€200,000intaxestothestate.Nowimaginethatthetaxofficecreatesareserveaccountforeachtaxpayer(pertaxfilenumber,tobeprecise),includingforCompaniesAandBandJill.Thestatecanthenjust‘deposit’€1millionintoCompanyA’sreserveaccountsimplybytypingit inandprovideeachtaxpayerwithaPINtobeusedtotransfer‘funds’fromonetaxpayer ’sreserveaccounttoanother.CompanyAcouldthentransfer€30,000toJill’sreserveaccountand€500,000toCompanyB’sreserveaccount,whichJill andCompanyB could thenuse to repay the €10,000 and€200,000 theyrespectivelyowethestateintaxarrears.Theimmediatecancellationofmanyarrearswouldhavebeenthuseffected.SuchasystemwouldbegreattohaveinPortugal,inItaly,indeedinFrance

even during the best of times, but it would be critical in Greece during theemergency of an ECB-enforced bank holiday, allowing all sorts oftransactions to continue, not just thosewith the state. For example, pensionscould be partly paid into a pensioner ’s tax office reserve account, and thepensioner could then transfer a part of that sum to, say, her landlord, whowouldalsohavetaxtopay.Eventhoughthesecreditscouldnotbewithdrawnfromthesystemascash,theschemewouldcontinuetoworkforaslongasthestate continued to accept the credits in lieu of tax. And it could workremarkablywellifitweredevelopedfurtherintwoways.Every Greek citizen already has an identity card. Imagine if this were

reissuedasasmartcardfeaturingamicrochipsimilartothoseinmoderndebitandcreditcards.TheIDcardsofpensioners,public-sectorworkers,peopleonbenefits, government suppliers – anyonewhohas financial dealingswith thestate–couldbelinkedtotheirtaxofficereserveaccountsandusedtopayfor

goodsandservicesatsupermarkets,petrolstationsandthelike.Inotherwords,evenifthebanksweretoclosedown,evenifthestatewasrenderedilliquid,thegovernmentcouldstillmeetitsobligationssimplybyassigningtaxcreditstopeople’s ID cards – as long as the total value credited did not run thegovernmentintoafiscaldeficit,ofcourse.Second,thesamesystemcouldbeusedtoallowthegovernmenttoborrow

from Greek citizens, thus bypassing the commercial banks, the hostile andsuspiciousmoneymarketsand,ofcourse,thetroika.Aswellasreceivingtaxcreditsfromthestate,citizenscouldbegiventheoptiontobuycreditsfromthetax office online, using web banking linked to their normal bank accounts.Whywouldtheywanttodothis?Becausethegovernmentwouldofferthemadiscountof,say,10percent,iftheylaterusedthosecreditstopaytheirtaxes,say, a year down the line. The state would in effect be borrowing from itscitizensataninterestrate(10percent)thatnoEuropeancangetfromanybankthesedays.Aslongasthetotalleveloftaxcreditssoldbythegovernmentwascappedandfullytransparent,theresultwouldbeafiscallyresponsibleincreasein government liquidity, greater freedom from the troika and thus a shorterpathtotheultimategoalofaviablenewagreementwiththeEUandtheIMF.Seemingly impressed,Dragasakis askedme toproduce awrittenblueprint

for thisscheme,whileAlexisandPappasappearedsoothedbythe thoughtoftheprecioustimeitwouldbuythemafterarupturewiththecreditors.Withinforty-eight hours of my return to Austin I had sent a ten-page technicalblueprinttoPappastopassontoAlexisandDragasakis.Let’s briefly fast-forward four months to March 2015 and to a cabinet

meetingoftheSyrizagovernmentwithAlexis,asprimeminister,inthechair.Afteranassessmentoftheconfrontationwiththetroikathathadbegunwithavengeance on day one, just as anticipated, I outlined a bill myministry hadtabled in parliament to combat the humanitarian crisis: debit cardswould beissuedtothreehundredthousandfamilieslivingbelowthepovertyline,withacreditofafewhundredeurospermonthtocovertheirbasicneeds.‘Butthesecardsarejustthebeginning,’Isaid.‘SoontheycouldreplaceID

cardsandprovidethebasisofapaymentssystemthatfunctionsinparallelwiththebanks.’After I explained how the system would work, I outlined its many

advantages:itwouldgivethegovernmentmorefiscalspace,supportthepoorwithoutsubjectingthemtothestigmaofusingcouponsand,aboveall,signaltothetroikathatGreecehadapaymentssystemthatwouldallowoureconomy

tofunctioneveniftheycloseddownourbanks.Lastly,Ipointedoutthatifthetroika decided to push Greece out of the eurozone, as the German financeministerhadbeenwantingtodoforyears,6thissamepaymentsystemcouldberedenominatedtoanewcurrencyatthepressofabutton.When the cabinet meeting was adjourned, most of the ministers present

approached me to express their enthusiasm, some patting me on the back,othersembracingme,onetellingmethatshewasmovedandinspired.Fivemonthslater,aftermyresignation, thepress lambastedmeforhaving

enteredintoatoughnegotiationwithoutaback-upplan.FordaysIwasmockedinthemedianotjustbyoppositionpoliticiansbutalsobymanySyrizaMPsforwalkingintothelion’sdenwithoutastrategyforwhattodoifthebankswereshutdown.IwaitedtoseeifAlexisoranyoneelseinthecabinetcameforwardtoputtherecordstraight.Nonedid.So,duringateleconferenceconductedbyDavid Marsh of the Official Monetary and Financial Institutions Forum inwhich I was replying to questions on what had gone wrong with the Greekgovernment’s negotiationswith theEUand the IMF Imadeknownmyplansforaparallelpaymentssystem.Thediscussionwassupposedlybeingheldunder theChathamHouseRule,

allowingparticipantstoquotewhatissaidbutnottoattributeittothespeaker,but this conventionwas ignored.Recordings ofmy entire presentationweresoonmadepublic.ImmediatelythosesamejournalistsandpoliticianswhohadbeenridiculingmefornothavingaPlanBsuddenlyaccusedmeofthedirectopposite:VAROUFAKIS’S SECRETGREXIT PLANwasa typicalheadline,suggestingthat I had gone behind Alexis’s back to engineer a devilish plot for gettingGreeceoutoftheeuro.Callstoindictmeoncriminalchargesbegantomount.Indeed,whiletheselinesarebeingwrittenachargeofhightreasonishangingoverme inGreece’s parliament for undermining PrimeMinister Tsipras bymeansofa‘secretplot’.Itisasourceofpersonalprideandjoytomethatthetroika’scheerleaders

withinGreeceuseeveryopportunitytheycantoundermineme.Iconsidertheirattacks a badge of honour, conferred for having dared to say no to theirdemandsintheEurogroup.Buttohaveformercabinetcolleagues,thoseverysamepeoplewhofiledpastmetopraisemyproposedpaymentssystem,eitherpretend theyhaveneverheardof itor join inwith thedenunciationsfillsmeonlywithsadness.

Theoffer

The offer caughtme completely unawares.Aroundmidnight inAlexis’s flatthe discussion moved from deterrence and parallel payments systems topractical politics. Alexis briefed me on the high probability of an earlyelection.Thegovernment’stermhadmorethantwoyearslefttorun,butitwasdoubtful itcouldsurvivebeyondMarch2015,whenthefive-yeartermofthepresidentoftherepublicexpired.UnlessPrimeMinisterSamarascouldmusterareinforcedparliamentarymajorityaroundhischosenpresidentialcandidate,parliamentwouldbeautomaticallydissolvedandelectionscalled.7Alexisthendeliveredhisoffer,unassuminglyandunderDragasakis’swatchfuleye.‘Ifwewin,andthereisnodoubtweshall,wewantyoutobecomefinance

minister.’Throughout my journey from Austin to Athens I had been reciting the

precisewordinginwhichIwouldturnhisofferdown–exceptthatIhadbeenanticipating a completely different offer from the one he had made, that ofchief negotiator under Finance Minister Dragasakis. But now Alexis wasproposingtounifythetworolesandmakemeresponsibleforboth.To buy time, and in genuine puzzlement, I turned to Dragasakis. ‘But I

thoughtthatyouwouldassumethefinanceministry.’Alexis stepped in to explain: ‘Dragasakis will be deputy prime minister

overseeing the three economicministries,’meaning theMinistry ofFinance,the Ministry of the Economy and a new Ministry of ProductiveReconstruction.8Thischangedeverything.Theproposedcabinetstructurewassensible.The

only reason for turning down Alexis’s offer now would have been doubtregardinghis andDragasakis’s true intentions, calibre or character. Itwouldhavebeenawkward,tosaytheleast,tobringupsuchfundamentaldoubtswiththemdirectly.Iraisedanotherissueofprincipleinstead.‘As you know,’ I said, ‘I have serious reservations about theThessaloniki

Programme.IndeedIhaveverylittlerespectfor itand,giventhat ithasbeenpresentedasyourpledge to theGreekpeopleoneconomicmatters, I cannotseehowIcan, inallhonesty,assumetheresponsibilityof implementingitasfinanceminister.’Predictably,Pappas jumped in at thispoint to restatehis insistence that the

ThessalonikiProgrammewasnotbindingforme.‘Youarenotevenamember

ofSyriza,’hepointedout.‘But would I not be expected to join if I am to become your finance

minister?’Iasked.Alexis interjectedwith a studied response: ‘No, under no circumstances. I

don’twantyoutobecomeamemberofSyriza.Youneedtoremainunburdenedbyourparty’stortuouscollectivedecision-making.’My head was ringing with alarm bells. Alexis’s point was reasonable but

pregnant with immense risks. One the one hand, remaining semi-detachedfromSyriza,apartywhoseflimsyeconomicpoliciesIhadcriticizedforyears,would afford me a precious degree of freedom and allow Alexis to blamethoseofmydecisionsthatcontradictedpartypolicyonthefact thatIwasnotboundtoit.Atthesametime,thisblamecouldsnowballintocondemnationofme at the drop of Alexis’s or Dragasakis’s hat, leaving me exposed toanimosity from the party whose backing I would need so badly whenstrugglingagainstthetroikaandtheGreekoligarchy.Again,thiswashardlyaconcernIcouldhavesharedwiththem.Thepressure todecidewasmounting,butIneededtoknowforsure:were

wetruly inagreementoverbothaimsandmeans?Ifnot,mylifewouldhaveremainedblissfullyuncomplicated.‘Let’ssee ifwecanagreeonfundamentalsbeforewediscussmyrole ina

Syrizagovernment,’Isaid.Myintentionwastotryoutonthemanup-to-date,firm,clear-cutversionof

theFive-ProngedStrategy Ihadproposed toAlexis in2012,before itwassoingloriouslydiscarded.9

Thecovenant

Firstandforemost,Ibegan,camemeaningfuldebtrestructuring.10Wehad toagree that this was the be-all and end-all of a Syriza government. GettingGreece out of debtors’ prison was more important than preventingprivatizationsoranyotherobjectiveonSyriza’sagenda.Theyagreed.With debt restructuring, I continued, we could finally put an end to the

austerity–deflationspiralandaimatasmallgovernmentsurplus–Ispecifiedatarget of atmost 1.5 per cent of national income. Thiswould require sharp

reductionsinVATandthecorporatetaxrateinordertore-energizetheprivatesector.‘Whyshouldbusinesspayless?’Alexisprotested.I explained that I thought the private sector should pay more in total tax

revenue,buttheonlywaytoachieveanoverallincreaseintheircontributionata time of next to no sales andwith bankrupt banks unable to provide crediteven to profitable firms was to reduce the corporate tax rate. Dragasakisstepped in to say he agreed, apparently allaying Alexis and Pappas’s initialconsternation.When it came to privatizations, I continued, we would have to make

compromises if wewanted an agreement with the EU and the IMF. Syriza’sblanket rejectionofprivatizationwouldhave tobe replacedwithapolicyofconsidering themcase by case. Fire sales of public holdings had to end, buttherewouldbesomeassets, suchasportsand railways, thatweshouldmakeavailable conditional on a minimum level of investment, on the buyer ’scommitment to granting workers proper contracts and the right to unionrepresentation, and on the state retaining a large, even if minority,shareholding,thedividendsfromwhichwouldbeusedtoassistpensionfunds.Meanwhile,thoseassetsthatweretoremainunderpublicownershipshouldbehanded over to a new public development bank, which would use them ascollateralintheraisingoffundstobeinvestedinthesesamepublicassetssoastoboosttheirvalue,createjobsandenhancefuturerevenues.Theyagreedonthistoo.Now came the delicate issue of Aris, Zorba and their fellow bankers.

Remembering the awkward conversation with Alexis in the Stoneship’sshadow,IchosemywordscarefullyinDragasakis’spresence.Iaskedthemtowhat extent they were prepared to take on bankers with Aris’s and Zorba’sbackground and force them to surrender control of their banks,whichwereessentially the property of the taxpayers. I reminded them of the curiousalliance between our bankers and the European Central Bank, which waskeepingtheirbanksaliveviagovernment-backedIOUs.Either institutionwascapableofasphyxiatingaSyrizagovernment.Pappas brimmed with revolutionary zeal, decreeing that all the bankers

wouldbe sent packing.More cautiousbut nonetheless positive,Alexis addedthat this waswhy it was important to have a senior person as deputy primeminister,meaningDragasakis,toreininthebankers.

Butwere they prepared, I asked, to adoptmyproposal that these bankruptbanksbeplacedunderthemanagementandownershipoftheEU?Iknewthiswasanextraordinarilychallengingproposalforaleft-wingpartythattendedifanythingtowardsnationalizingthebankingsector.Aperiloussilencefollowed.Alexis broke it by asking the inevitable question: ‘But why can’t we

nationalizethebanks?Thestateownsmajoritystakesinthemanyway.Can’twejustpassalawthatconvertsournon-votingtovotingshares?’IrepliedthatunlesswewerepreparedtoturnthebanksovertotheEuropean

Union, we would not be able to unburden the Greek state of the liabilitiesincurredbytheirfakerecapitalization.Banknationalizationwouldonlymakesense in the event of Grexit. ‘But we are committed to refusing to think ofGrexitasanobjective,correct?’‘Correct,’cameAlexis’simmediatereply.‘In which case, can we agree that our negotiating position on the banks

shouldbethattheirshares,alongwiththeliabilitiesfortheirrecapitalization,shouldbetransferredtotheEuropeanUnion,withnewboardsofdirectorsnolongerinthepocketofGreece’sbankers?’AlexisandPappasagreed,butInoticedthatDragasakischosenottorespond

directly, remarking only that it was important to stay within the limits oflegality – a point that ought to have been self-evident. His avoidance of thequestionreinforcedmysuspicions.Sofarthough,allthreeseemedhappywiththeagenda.Nevertheless,Ifelttheneedtorecapitulateonemoretimewhatwehadagreedouraimstobe.‘Debtrestructuringcomesfirst.Second,aprimarysurplusofnomorethan

1.5per centofnational incomeandnonewausteritymeasures.Third,wide-ranging reductions in sales and business tax rates. Fourth, strategicprivatizations under conditions that preserve labour rights and boostinvestment.Fifth,thecreationofadevelopmentbankthatwoulduseremainingpublicassetsascollateraltogenerateadomesticinvestmentdrive,andwhosedividends would be channelled into public pension funds. Sixth, a policy oftransferring bank shares and management to the European Union whilecreatingapublic“badbank”todealwiththebanks’non-performingloans,soastopreventevictionsandthemassexpropriationofsmallbusinessbyvulturefunds.’Againtheyagreed,thistimewithgreaterconviction.But I was not finished yet. Their agreement had to extend also to my

proposed negotiating strategy, complete with its key deterrent, the threat to

haircut our SMPbonds, and the parallel payments systemwithwhich to buytime in the event of an impasse that would bring on bank closures. I wentthroughthesepointsandtheyagreedoncemore.Then camemy final andmost pressing point: ‘Key to having a shot at a

decent agreement is that we share a common understanding that we are notgoingtobluffagainstthetroika.Areweclearonthat?’Ienquiredanxiously.Dragasakis asked what I meant. Was this a genuine question or tactical

amnesia?Regardless,Iwashappytomakethekeypointonceagain,thesamepointIhadbeenmakingsinceourveryfirstmeeting:‘Itisnotablufftoissueastatementof intent ifyouare intending tocarry itoutregardless ofwhat theothersidedoes.’Alexis understood: ‘Weheard.You’re saying thatwewill not sign even if

threatenedwithGrexit.Correct?’Iconfirmedthatthatwasexactlymypoint:therewasnopointenteringintoa

toughnegotiationwiththeworld’smostpowerfulcreditinstitutionsunlesswewereafteraviableagreementwithintheeuro,didnothingtojeopardizesuchan agreement, butwere also clear in ourminds that between surrender to arenewedsentenceindebtors’prisonandGrexitwepreferredthelatter.‘Areweclearonthis?’Irepeated.‘It goes without saying,’ was Alexis’s response, accompanied by another

passionate confirmation from Pappas. Dragasakis remained conspicuouslysilent,offeringonlyafriendlyandtiredsmile.Itwastheclosestwecouldhavecometoacovenant.Itwasnowmyturntodecide.

Yesorno?

Themoment of truth had arrived. In front of me there lay an offer I couldrefuse. The risks of accepting were clear and mountainous. While I likedAlexis and was willing to believe in him, the events of 2012 and, morerecently,hiscasualdisregardofourStoneshipagreementtoinvolvemeintheshaping of Syriza’s Thessaloniki Programme had given me more thansufficientcauseforscepticism.AndasDanaesaidaftermysubsequentreturnto Austin, I was exploitable because I was expendable: ‘If you bring back adecentdeal,theywillclaimthecredit.Ifnot,youwillgettheblame.’

An outsider in relation both to Syriza and to the establishment, I was theideal target to attract the slings and arrows of the troika, of the domesticestablishment, of Syriza’s loyalists and party members, and to deflect themfromAlexisandhiscaucus.Ididnotmindplayingtheroleoftarget;itiswhatfinanceministersdoonbehalfoftheirprimeministersandcabinets.Itwouldbe worth it, but only as long as our covenant was intact and everyoneunderstoodthatthiswasafightnotworthenteringunlesswewerepreparedtotake it to thewire. Iwas.Were they? Itwasaquestion Ididnothaveenoughevidencetoanswer.At the same time I faced an ethical dilemma. Did I have the right to turn

Alexis’s offer down?Herewas the primeminister-in-waiting presentingmewithanopportunitytoputmymoneywheremymouthwas–toimplementthenegotiating strategy and the economic reform programme I had beenadvocating from the sidelinesever sinceGreecewasconfined in itspeculiarprison.Socrates’definitionofagoodlifeisonethatyoudonotregretonyourdeathbed.Howwould I feelwhen, inmy old age, I recounted themoment Iturnedmybackonthatopportunity?IfonlyIcould talk it throughwithDanae, I thought.Butwith thousandsof

milesseparatingus,andaftersuchalongseanceatAlexis’sapartment,nothingless thanadecision thereand thenwoulddo.Andso I reached it.ButbeforeacceptingIhadonelastcondition:thatIfirstsucceedingettingmyselfelectedto parliament. I was not prepared to be another extra-parliamentary financeministerlikeStournarasandhissuccessor.11‘ButYanis, you have never contested an election before,’Alexis objected.

‘You don’t have the infrastructure in place, and the elections are coming upsoon,withyoulivinginTexas!’Pappasintervenedwithacompromise:Icouldbeonthelistforoneof the

places in parliament allocated by the party leader.12 Alexis then suggested itmight be appropriate if I were placed low down on the party list in an‘honorary’ position, which would not bring a seat in parliament but whichwouldsignalthehighesteeminwhichIwasheldbySyriza.I was adamant. ‘That will not do. Either I get a direct mandate from the

electorate, unmediated by the leadership, or I shall stay away.’ It was not aquestionofhonour.‘IfIamtofaceuptoWolfgangSchäubleintheEurogroup,aseasonedpoliticianwhohasreceivedhispeople’sbackingfordecades,Ineedtogointherewiththousandsofvotesbackingmetoo.Otherwise,Iwouldlackthenecessarylegitimacy.’

‘Butwhathappensifyoudonotgetelected?’Alexisinsisted.‘Thenthepeoplewillhavesaidthattheydonotwantmetorepresentthemin

theEurogroup.Simple!Theideaoftechnocratsnegotiatingeconomictreatiesonbehalfoftheignorantmassesisrepugnanttomeanddeservestobeburied.’‘Whichconstituencydoyouwanttocontest?’askedDragasakis.‘GreaterAthensistheonethatIhavebeenvotinginallmylife,soGreater

Athensitis.’Thisseemedtheobviousanswertome.‘GreaterAthensisbrutal,Yanis.Areyousure?’Alexisasked.‘Sobeit,’Ireplied.Most constituencies inGreece electmore than onemember of parliament

each.GreaterAthensisthelargestconstituencyinthecountry,withmorethan1.5millionregisteredvoters,electing44oftheparliament’s300members. IwasfullyawarethatitwasalsoPappasandDragasakis’sconstituency.13Seeingmydetermination,Pappasweighedinpositively:‘Hewillgetelected

easily,’hesaid,endingthediscussionbutnotmydisquiet.NotwantingmetojoinSyrizaasamembermadesomesense.Resistingmy

election toparliamentwasaltogethermoredisconcertingas itheightened thedisturbing possibility thatmy utility toAlexiswas inversely proportional tomy autonomous political legitimacy. Still, it could equally have been thatAlexiswassimplyconcernedthatIwouldnotdowellenoughwiththevotersonpollingday.Thisthoughtplusthecovenantwehadjustagreeduponmadeitimpossibletoturntheofferdown,despitemyseaofdoubts.Aswewerewalkingtothefrontdoor,athoughtfulAlexissaidtome,‘You

will need to put together a team to prepare in case they push us out of theeurozone.Startworkingonthissoon.’‘Iwill,Alexi,’Ireplied.ThiswasthebirthofwhatbecameknownasPlanX

–tobeactivatedonlyifandafterBerlinandtheECBactivatedtheirownPlanZforpushingGreeceoverthecliffofGrexit.14 ‘Butknowthis,Alexi,’Iadded.‘Thebestandonlywayofsecuringourplace,longterm,intheeurozoneistoshowerthecreditorswithmoderationwhilesimultaneouslysignallingtothemourunwaveringdeterminationtoactivateourdeterrencestrategyiftheytrytocrushus.’Alexisnoddedinagreement.Dragasakis, lookingverytired,smiledfaintly

andaskedmetokeephimintheloop.IpromisedhimIwould.

Chronicleofanambushforetold

Timewent into overdrive after that late-Novembermorning in 2014. Danaeand I immediately began to plan our move back to Athens by the end ofJanuary, in good time for a possible election in March. However, PrimeMinisterSamarashadadifferentplan.On8Decemberheannouncedthathewasbringingthepresidentialelection

forward,withthefirst–essentiallyritual–votetobeheldninedayslater,on17December,thesecondritualvoteon22December,andthethird–decisive–voteon27December.15Onhearingthenews,Iassumedthathemustsomehowhavefoundthenumbersheneededtosecureanothertwoyearsingovernment.Whyelsewouldhebringforwardavotethatcouldshortenhisgovernmentbytwowholemonths?ThefollowingdayIbegantoquestionmytheory.On9DecembertheGreek

financeminister applied to the Eurogroup for a two-month extension of thesecond bailout agreement, which was due to expire on 31 December 2014.Whyonlytwomonthswhenthetroikahadproposedasix-monthextension?IfSamarashadthenumbersandcouldholdontoofficeforanothertwoyears,heshouldhavewantedatleastsixmonthsbeforepushingthroughparliamentthethird bailout loan agreement that the troika’s policies necessitated.Why cuthimselfsuchashortrope?TheonlyexplanationIcouldcomeupwithwasthathewasnotcuttingitforhimself–hewascuttingitforus.SpeakingtoPappasandAlexisfromAustin,Igatheredthatthiswasindeed

thecase.Samarasknewhedidnothave thenumbers,was resigned toa late-Januaryelectionthatheknewhewouldlose,butwascountingonthetroikatoclosedownGreece’sbanksonexpiryof thebailoutagreement,whichwouldnow fall on 28 February 2015, thus snuffing out a four-week-old Syrizagovernment.Thiswouldclearthewayforatechnocraticadministration,justashadtakenofficein2012,topassthethirdbailoutloanagreement,followedbyhistriumphantreturntoMaximos.AmongourselveswebegantorefertothisasMrSamaras’s‘leftintermission’ploy.Our theorywas confirmed by two developments. First, in response to the

opinion polls, which were predicting a Syriza victory, Samaras and hisministersbegantobriefthattheirfallwouldbefollowedthenextmorningbybankclosures.Thiswastantamounttoasittinggovernmentincitingabankrun.Then,on15December,Stournaras,untilthepreviousJuneSamaras’sfinanceministerbutnowinchargeofthecountry’scentralbank,includedinanofficialspeechaphraseuniqueintheannalsofcentralbanking.

InthecontextofmydutiesasgovernoroftheBankofGreece,andinmycapacity as amember of theGoverningBoard of theEuropeanCentralBank,Imustnotethatthecrisisofthelastdaysisbecomingserious,thatliquidityinmarketsisdiminishingatahighrateandthattherisknotonlyofthereductionineconomicgrowththatrecentlyrestartedbutalsoofanirreversibleimpairmentoftheGreekeconomyislarge.16

Never before had a central banker violated so blatantly his mandate tomaintainfinancialstability.Centralbankswerecreatedinordertopreventbankruns at times of shrinking liquidity by reassuring the markets that liquiditywould remainplentiful.Withhis statementStournarashaddone theopposite,accelerating the bank run that the sitting government had begun in order toundermineafutureSyrizagovernment.On 20December the Samaras government pushed through parliament the

two-month extension to the second bailout loan agreement, casting 28February in stone as the date on which the banks would close if no newagreement with the EU–IMF were reached. A week later, Prime MinisterSamaras’scandidateforthepresidencyfailedtosecurethenecessarymajority.An electionwas called for 25 January 2015.The die had been cast. IwouldhavetorushbacktoAthenswithonlydaystocontestmyfirsteverelectioninacountryIhadnotlivedinforthreeyears.Watching all this unfold fromAustin, I saw quite clearly the ambush that

awaitedme.Nordiditcomeasasurprise.Andyettherearetimesinlifewhen,however expected themalicemay be, observing it transpire fills one’s heartwithsadness.Irecalledanoldjoke:twogolfersexchangetheirlifestoriesastheymovefromoneholetothenext.Thefirstoneconfessesthathemadehisfortune when his ailing factory burned down and he was able to claim theinsurance.Thesecondgolferthenconfessesthathealsomadeitbigwhenhisown businesswas destroyed by a flood, netting him a nice cheque from theinsurancecompany.Thefirstgolferlookspuzzled.‘Buthowdidyoustarttheflood?’heasks.PrimeMinisterSamarasandGovernorStournarashadstartedafireonour

homefront,intheformofabankrun,thatwewouldneedtoputoutwhileatthesametimenegotiatingwithpowerfulforeigncreditorswhodidnotreallywant their money back. Meanwhile, our own central bank, Europe’s centralbank,Greece’soligarchyandindeedthemediawouldbepouringfuelontothat

fire. Our only ally against such an alliance would be a battered, fed up buthopefullydetermineddemos.

Truthwithoutfear

EversinceGreecehadbeenimprisonedwithinitscageofunpayabledebt,Ihadbeenportrayedasafool.TheestablishmentcalledmeonebecauseIrefusedtoacknowledgethatsayingnototheirbailoutmeantejectionfromtheeuro.Inashow of touching bipartisanship, many leftists also called me a fool forpreciselythesamereason:theysawmyaimofemancipatingGreecewithintheeurozoneasapipedream.Thisunlikely right–left consensus toldGreeks they faceda simple choice:

suffer in silence in your debtor ’ prison to keep the few euros left in yourpocket, or get out of the euro, possibly of the European Union. Whiledisagreeing overwhich of the twooptionswas preferable, the troika and itsGreekcheerleaders, theGreekcommunistpartyandthemembersofSyriza’sLeftPlatformallagreed:Varoufakisisatbestausefulidiot,leadingGreece’srebelliouspopulaceintoahorriddefeat(theintransigentLeft’sallegation),andatworstadangerousnarcissist,possiblyanagentofsatanicforces,wishingtodestabilize Europe in association with George Soros and other American–Jewishfoesoftheeuro(theestablishment’sinsinuation).Thesetwoschoolsofthoughtmanagedtheimpossible:simultaneouslytoportraythesamepersonasanenemyofGreece’splaceinEuropeandasanagentofBrussels.Mindfuloftherealdangersposedbythispowerfulconsensus,inearly2014

Isatdownandwroteabook,publishedinGreekonlyandentitledTheGenesisofBailoutGreece. In it I restated the argument I hadbeenmaking for years:GreeceshouldneverseekGrexitbutshoulddemandaviableagreementwithinthe eurozone. Such an agreement was feasible, though far from certain,providedwewerenotintimidatedbythethreatofenforcedGrexit.Aweekbeforethegeneralelectionof25January2015Ilaunchedthebook

at the Athens Megaron Music Hall in front of hundreds of attendees andanothertwohundredthousandviewersviaalivevideostream.Thiswastobemy one and only pre-election campaign event, so I used it to present to thevotersmynegotiationaimsandstrategy, justas Ihaddone toAlexis,PappasandDragasakis,concludingasfollows.

The only conclusion that can be drawn here is that, unless we disdainsurrendermorethanGrexit,thereisnosenseinnegotiatingwiththeEU–IMF.IfSyriza,deepdown,thinksthatGrexitisworsethananotherbailout,itmightaswellsurrenderatthebeginning–orevenbetteravoidwinningthe election. This does notmean thatwe shouldwantGrexit or thatweshould beworking towards it. Itmeans that the onlyway of securing aviable agreementwithin the eurozone is to tablemoderate proposals toourcreditorsregardingacompromisenewdealwhilebeingdeterminednottocapitulateatthethreatofGrexit.Turningtoourcreditors’likelypreferences,ItrulybelievethatGrexit

is an empty threat, as it will cost the EU around one trillion euros inwritten-off public and private debt as well as a chain reaction ofbankruptcies within Europe’s financial labyrinth. Interestingly, the verysamepeoplewhoin2010wereadmonishingmefordaringtosaythatthePapandreougovernmenthadtheleveragetosaynotoBerlinandBrusselsbecause Grexit in 2010 would have blown up France and Germany’sbanks,arenowscoldingmeforproposingtoday,in2015,astrategythatcouldhaveworkedin2010.Well,Ihavenewsforthem:Iwasrightthen,astheynowacknowledge,andImayverywellberighttoday:Grexitwillstill,despiteall the things theyhavedone toring-fence themselvesfromitsshockwaves,costthemanarmandaleg–andthisiswhyIstillbelieveitisanemptythreat.OfcourseImaybewrong.Theymayfearacompromisewithusmore

thantheyfearGrexit.ButevenifIamwrong,askyourselves:despitetheundoubtedly sharp cost ofGrexit, is continuedmembership of the eurounderpermanentdebtbondageandtheeternalrecessionitbringsbetter?Ladiesandgentlemen,justlikeapeace-lovingpeopledonotwantwar

butwillnotsurrendertheirfreedombecausetheyarethreatenedwithwar,itisperfectlyrationaltodisdainGrexit,asIdo,butnotbepreparedtoliveinastateofpermanentgreatdepressionbecausewearethreatenedbyit.17

As theelectionapproachedand the rumour spread that Imightbe thenextministeroffinance,Iwaswalkingatightrope.Traditionally,financeministersare economical with the truth. Indeed, it is considered their duty to denyplanned changes, such as to interest or exchange rates, even while they arepreparingthem,inordertopreventanydamagingpre-emptivereactioninthemarketswhichwillunderminethechanges’desiredeffect.InmycaseIhadto

tell the Greek people the truth about our creditors’ forthcoming financialaggressionwithoutencouragingthebankrunthatunderminedmycapacitytonegotiateadecentdealontheirbehalf.Ichoseastrategyoftellingitasitwas,pepperedwithoptimismforthegood

outcomes thatwouldfollowifonlyweremainedcommitted toourcovenant.Interviewed on commercial television onemorning, I said, ‘If Syriza is notdeterminedtorespondtoMarioDraghi’sthreatstoclosebanksandATMsbyputting the phone down on him after reminding him that his aggressionviolates the EuropeanUnion’s treaties and spirit, there is no purpose in ourbeingelected.OurpeoplemustbereadyforsuchthreatscomingfromanECBthatbehavedthatwaytowardstheIrishandtheCypriots.’Notexactlysoothingwordsfromsomeonerumouredtobeheadingforthe

MinistryofFinance,butasthepeoplewereouronlyally,Icouldnotaffordtokeeptheminthedark.Theyhadtobepreparedfortheworst.AtthesametimeIhad tokeep their spiritsup.Asked inanother television interview if theECBwouldclosedownourbanks, I replied tactically: ‘Ifweplayourcards right,there is justasmuchofachance that thiswillhappenas there is that thesunwillnotrisefromtheeasttomorrowmorning.’In an article I published the day after that television interview Iwasmore

candid,warningthatduringournegotiationsthestockexchange,sharevaluesand all financial variables would go into spasm, while trying to balancefrankness with optimism: ‘While these negotiations last, apoplexy willconsumemarkets and speculators. But when the negotiations conclude, withGreece emerging as a solvent country, then the markets will start dancingharmoniouslytoourtune.’18Striking the rightbalance–howto informwithoutalarming,howtowarn

withoutfuellingfear–wasanagonizingdilemma.Someothersweremuchsimpler.

Rejectingtheenemy’sweapons

Many ofmy economist friends –who suspected that Iwas about to land theworstjobintheuniverse–wrotetome,emailedandphonedtolendsupport.Some suggested that on my first day in office I should introduce capitalcontrols. That is, rather thanwait for theECB to close down our banks and

ATMsonthegroundsofhaltingtheverybankrunthattheyhadbegun,whynotpre-empt them by slapping restrictions on howmuch cash depositors couldwithdrawfromtheiraccountsorwireabroad?Theideawasthatbyslowingthebank runwe could buymore timebefore the bankswere closed inwhich tonegotiateundercalmercircumstances.Therewerethreereasonsforrejectingthiscounsel.The firstwas that imposing capital controlswould have been the obvious

firststepofapartythatintendedtoreturntothenationalcurrencyinordertodevalue it and thus gain competitiveness: in that case, introducing capitalcontrols would be essential to prevent the outflow of money caused by theexpecteddevaluation.Inotherwords,introducingcapitalcontrolswouldhavebeentherightmoveonlyifwewereintendingtoleavetheeurozone–tooptforGrexit–andwouldthereforehavecontradictedbothmynegotiatingaimsandmystrategyforsignallingcrediblywhattheseaimswere.Moreover,evenifwemanagedtoconvinceBrusselsofoursinceredesiretoremainwithintheeuro, capital controls would signal a willingness to become second-ratecitizensoftheeurozone,asstragglerswhohadeurosbutwhocouldnotdoastheypleasedwiththem.Myintentionwastosignalthepreciseopposite.Thesecondreasonwasthatthetimeavailablefornegotiationswasfixedby

ourdebtrepaymentschedule,socapitalcontrolswouldnotactuallybuyusanytime. These repayments were due to begin in April 2015 and continue untilAugust,whichdemandedanewagreementbyJune2015attheverylatest.EvenifIcouldhavewavedamagicwandtostopthebankrundead,thenegotiationswouldstillhavetobecompletedwithinfour tofivemonthsat theverymost.Capitalcontrolswouldnotchangethisoneiota.The third reason was that capital controls are inconsistent with monetary

union,whosespiritandrealitytheyviolate.Thewholepointoftheeurozoneoranycommoncurrencyareaisthatmoneyisfreetomoveunimpeded.IfIwereto introduce capital controls on day one of our administration, how could Icensure theECB for threateninguswith them?Themoment I did so, all theaccusationsagainstmeandtheSyrizagovernment–ofbeinganti-European,ofpreparingGreeceforGrexit,ofunderminingtheindivisibilityoftheeurozone–wouldbevindicated.Moreover,ourownpeoplewouldbepuzzled:whyisagovernmentthatispressingforagoodagreementwithinacommoncurrencyarea stoppingus fromgettingourmoneyoutofourownbankaccounts andfrom sending it to other countries in the samemonetary union? The blamegamewouldhavebeenlostbeforethenegotiationsevenstarted.

Another suggestion for helping a Syriza government buy time during thenegotiations came from, among others, Thomas Mayer, formerly chiefeconomist at Deutsche Bank. His idea was to introduce a second currencyparalleltotheeurowithinGreeceinordertocreatemoreliquidityandspacefor us to manoeuvre. It was an interesting idea but one I had actuallyconsideredandrejectedin2010asasolutiontotheeurocrisis.19Itsgistwasthat wage rises, aimed at reversing austerity, be awarded in a new currencybacked by government debt. The new currency would of course devalueimmediately in relation to the euro.Thus,whileGreekworkers’paypacketsand pensions would increase a little, Greek labour, as measured in euros,would devalue in relation toGerman, French or Portuguese labour,makingGreecemorecompetitive.I gave Thomas Mayer two reasons why I could not endorse a parallel

currency. First, ‘Parties and interests opposed to us are already creating anatmosphere of terror by claiming that we have a hidden agenda to bringGreeceoutoftheeuro,plunderpeople’ssavingsandputGreeceontheroadtobecoming a new Argentina. Your proposal’s propaganda value to ouropponentswouldtendtoinfinity.’Second,therewasnoneedforitbecausetheparallelpaymentssystemthatIwasworkingonprovideduswiththeflexibilitywerequired.Months later it struckme that these twomeasures – capital controls and a

parallel currency – would be wielded by Germany’s finance minister, DrWolfgangSchäuble,againstme.Theearlydecisiontorejecttheenemy’sownweaponswasthusvindicated,andyet,soonafterIresignedthefinanceministryIwasaccusedofdevisingdiabolicalplanstointroducethemboth.C’estlavieinBailoutistan.

Moderatesingle-mindedness

As the election approached, it was imperative to send two signals toMarioDraghiandtherestoftheEU–IMFofficialdom,oneofmoderation,theotherof single-mindedness: you can trust me to propose a debt restructuring thatcombinessubstancewithfinesse, thatdoes thejobofgivingGreeceachancebutdoesnotclashwiththeECB’srulesand,importantly,canbesoldtofidgetyBundestagpoliticiansbyAngelaMerkelasherownwunderbaridea.Butmake

nomistake:weshallnotbebeatenback intoourpeneven ifyouclosedownGreece’sbanks.On17January2015,aweekbeforetheelection,Iissuedapressreleasein

my now official capacity of parliamentary candidate for Greater Athens, inwhichIoutlinedmyproposalsforrestructuringGreece’spublicdebt.First,weshouldsplititintoitsfourmainconstituentslices:

1. Moneyowed to theECBin the formof thebonds ithadpurchased in2010/11(theso-calledSMPbondsthatwouldhavebeenhaircutby90percentin2012hadtheynotdoneso).20

2. The largest slice (60 per cent of our total debt), owed to the rest ofEuropefromthetwobailouts.

3. A smaller slice owed to the IMF (about 10 per cent of our debtmountain).

4. Moneystillowedtoprivateinvestorsafterthe2012haircut(around15percentoftotaldebt).

ThisiswhatIproposedwedowitheachoftheseslices.OurdebtstotheIMF(3)andtoprivateinvestors(4)wouldbehonouredinfull.Thelatterwastoosmallforittobeworthopeningafrontagainsthedgefunds,whichmightleadtoanArgentina-styleinternationaldisputewithfewpotentialbenefits.Besides,theyhadalreadyswallowedahaircutof90percentofwhattheywereowedin2012.AsfortheIMF,despiteitscomplicityinenablingBrusselsandBerlintoimposedebtbondageuponGreecebypeddlingeconomicforecaststheyknewtobefalse,wewouldnotwanttoantagonizetheUnitedStates(whichconsiderstheIMFoneofitsown)inadditiontoBerlin.Moreover,ahaircutoftheIMFloanswouldalsohitnon-EuropeancountriessuchasMalaysiaandJapanthathadnothingtodowithEurope’sinternalsquabblesandwhichmightotherwiselendasympatheticeartoourgovernment.ThemoneyweowedtheECB(1),theTrichetLegacyasIcalleditafterthe

thenpresidentoftheECBwhoboughttheSMPbonds,wasanabsurddebt.WeonlyoweditbecauseoftheECB’serrorinbuyingGreekbondsafterGreecehad become insolvent at around 70 per cent of their face value when theirmarketvaluewasnotmuchmorethan10percentoffacevalue.Sincethenwehad been engaged in the pathetic ritual described fully in Chapter 3 (see‘Successstory’)ofborrowingfromtheECBinorderpaytheECBtoredeemthesebondswhilepretendingnottodoso.Thisshenaniganhadtoend.

InarationalEuropethisabsurddebtwouldsimplybewrittenoff.Alas,theECB’s charter doesnot allow for this.To accommodate theECB’s charter, ItookaleaffromtheBritishTreasury’sbook.TheBritishgovernmenthadlongpractisedtheissueofopen-ended,orperpetual,bonds.Theseyieldinterest,butthe government may repay the principal at a time of its choosing, if ever.Indeed,perpetualbondsissuedatthetimeoftheSouthSeaBubbleinthe1720sand byNevilleChamberlain andWinstonChurchill during and just after theGreatWar were only repaid by the British Treasury in late 2014 and early2015. I proposed the following: our governmentwould issue new perpetualbonds,withthesamefacevalueasthebondstheECBowned,bearingasmallinterestratebutwithnoexpiryorredemptiondate.Thesebondswouldthenbeswapped for theECB’s ones, to be parked neatly and for ever on theECB’sassets books, bearing a trickle of interest in perpetuity, thus allowingMarioDraghitorespecthischarter,sinceatnopointwouldtheGreekdebtbewrittenofforevendown.Finally, regarding the largest sliceofdebt (2), accrued in the twobailouts

andowedtoEurope’staxpayers,Iproposedanothertypeofswap.Existingdebtobligations to Europe’s bailout fund would be swapped with new Greekgovernmentthirty-yearbonds,againofthesamevalueastheexistingdebt(sonoformalhaircut)butwithtwoprovisions:first,annualpaymentsweretobesuspendeduntilthecountry’sincomerecoveredtobeyondacertainthreshold;second,therateofinterestwouldbelinkedtotherateofgrowthoftheGreekeconomy.21 That way, our creditors would become partners in Greece’srecoveryandhaveanincentivetoseethepiefromwhichtheywouldgettheirmoneybackgrow.Thesedebt-swapproposals,tabledbeforetheelection,wouldbethebasisof

my actual proposals to Greece’s creditors once I was in office. They weremoderateandpoliticallypalatabletothecreditors,astheyincludednooutrighthaircut.TheysignalledtothepublicandtopotentialinvestorsthattheEUwasaccepting a new role: no longer the harsh creditor of an insolvent state, itwould become a partner in Greece’s growth, as its own returns would beproportionaltoGreeknominalincomegrowth.Theywouldhavebeenenoughto cause an influx of investment into an investment-starved Greece. Theywould have ended the Greek recession with winners all round, the onlyexceptionsbeingthecockroachesthatflourishinthefilthcausedbyprolongedmisery.

NotoncedidanyofficialoftheEUortheIMFarticulateacriticismofthelogic behind these proposals. How could they? As the CEO of one ofAmerica’s largest investment banks remarked after hearing them, ‘You areofferingthemadealthataWallStreetbankruptcylawyercouldhavecomeupwith.’Quite. It took the election of a radical Left government inGreece forAthenstobringtoBrussels,FrankfurtandBerlinmoderatedebtproposals–anindicationof theorganizedfollythat theEuropeanUnionhaddescendedintoaftertheeurocrisishitit.However,notforamomentdidIbelieve,backtheninJanuary2015,thatthe

unquestionablelogicandobviousmoderationofmyproposalswouldwinourcreditorsover.AsIhadbeentellingAlexissince2012,anyproposalfromusthat contradicted the troika’s Greek programme would be met with nakedaggression and the threat of shuttered banks. Logic hardlymattered.Mutualeconomic advantagewas irrelevant. The creditors did not want theirmoneyback.Whatmatteredtothemwastheirauthority,andthatwasbeingchallengedbyaleftistgovernmentwhosesuccessatnegotiatinganewdealforitscountrywasthecreditors’greatestnightmare,asitmightgiveideastootherEuropeanslabouringunderthesamecrisisandthesameirrationalpolicies.Modest, reasonable, technically competent debt-swap proposals were

important,buttheywerenotenough.Itwasimperativethat,beforecrossingthethreshold of the financeministry, I should signal to the other side that theiraggressionwould cost them; that themoment theymoved to close down thebanks,Iwouldactivateourkeydeterrentandtheparallelpaymentssystem,aspermyinformalcovenantwiththeSyrizaleadership.MysignaltooktheformofastatementmadeinJanuary2015duringaBBCinterview.

My advice to the next finance minister [of Greece] is this: if the ECBthreatens toclosedownthenation’sbanks,youshould respond instantlybyhaircuttingtheGreekgovernmentbondsthattheECBstillowns.TheyarestillruledbyGreeklaw,sotheECBwouldhavetosueGreeceintheGreekcourts,not inLondonorLuxembourg.Simultaneously,heorsheshouldputinplaceapaymentssystemthatcanfunctioninparalleltothebanks so as to create euro-denominated, homegrown liquidity and,importantly,allowtheeconomytofunctioniftheECBdodecidetoclosedownthebanks.

As Iwas to establish later, themessagewas received.The battle lines hadbeendrawn.22

5

Ragingagainstthedyingofthelight

As the election approached, a strange mix of togetherness and lonelinessovercame me. On the streets, at public meetings, in taxis and at Syriza’sheadquarters,whereIwouldmeetAlexisandtherestoftheteam,Iexperiencedsolidarity,warmth, sympathy and immense support.But deep inside I knew Iwas institutionally isolated, resource-poor, entirely on my own. Not havingbeen amember of parliament before, not even a partymember, and havinglived in Austin for the previous three years, I had no support network, asAlexishadremarked.Mycolleaguesaspiringtoentergovernmenthadsecretaries,drivers,private

offices, important connections. In contrast, I hadDanae’smoral support,mymotorcycle and our apartment at the foot of the Acropolis, where I gaveinterviews, held meetings, composed my blog posts and conducted all thebusinessofthecampaign.AtonepointIreceivedacallfromSyrizaHQtellingme that as a parliamentary candidate the law requiredme to open a specialbankaccount inwhich todepositallcontributions tomycampaignand fromwhichtodrawallcampaign-relatedexpenses.Iopenedtheaccount,sinceitwasmandatory, but deposited precisely nothing in it as I neither sought norreceived any contributions, had no staff and spent precisely zero onpromotional material. My only campaigning device was a Greek-languageblogIcreatedmyself,usingafreebloggingplatform,asanaddendumtomyexistingEnglish-languageblog.Thatwasit.But while I did not need any of the trappings of conventional political

campaigningtogetelected,Iwastroubledbytheprospectofwalkingintothefinance ministry without a team, relying entirely on civil servants who haduntilthenbeenfaithfulservantsofBailoutistan,withadditionalstaffprovidedexclusivelybyDragasakisandSyrizaHQ.SoIusedthefewweeksIhadintherun-uptotheelectiontogatherthebestteamaroundmethatIcould.To help me identify a deputy finance minister for the key position of

overseeingtheTreasury,IhadcoffeewithAlekosPapadopoulos,a1990s-eraformerPASOKfinanceministerwhomIhadknownforyears,trustedforhis

probityandconsideredtheonlyfinanceministertohavehadhisfingeronthestate’s financialpulseduringhis tenure.WhileAlekos remainedanopponentofSyriza,hewaspersonallysupportiveandpromisedtocomeupwithaname.ThesamenighthetextedmethenameofDimitrisMardas,whomIhadneverheardofbutwhomyexperiencedfriendinsistedwascapableandaboveboard.NextmorningIcalledMardaswithanofferhehadneverimagined.1Evenmore crucial was the post of president of the Council of Economic

Advisers. In the eurozone heads of government cannot achieve anythingwithout the close collaboration and loyalty of the finance minister whorepresentsthemintheEurogroup.Likewise,financeministerscannotsucceedwithout a similarly close relationship with the president of their ministry’sCouncil of Economic Advisers, who represents them in the so-calledEurogroupWorkingGroup.Supposedly this iswherepreparations aremadeforEurogroupmeetings,but in reality itoperatesas theshadowycrucible inwhichthetroikaforgesitsplansandpolicies.However, this position had been filled on my behalf by Dragasakis even

beforeIsetfootonGreeksoil.DragasakishadselectedGeorgeChouliarakis,athirty-somethingeconomistwhohadtaughtatManchesterUniversitybeforebeingsecondedtotheCentralBankofGreece.‘Heisagoodladandhasbeenpreparing the ground for us, working informally with people inside theCouncil ofEconomicAdvisers,’Dragasakis toldmewhenwe firstmet aftermyarrivalinGreece,afewweeksbeforetheelection.WhilemyclosefriendWassilywasappalled,alwaysscepticalofDragasakis’sintentionsandchoices,Iwashappythatsomeonewasalreadyontheground,preparingit.Upon meeting Chouliarakis I took a liking to him, despite evidence of a

severelycircumscribedcapacity toengageandanexcessive tendencytokeephiscardsclosetohischest.MyconcernswereallayedthoughwhenhetoldmethatasanundergraduateattheUniversityofAthenshismentorshadbeentwoprogressive,highly intellectual economicsprofessorsverydear tomyheart,one of whom was my dear friend and colleague Nicholas Theocarakis, amemberoftheacademicquartetthathadformedimmediatelyaftermyarrivalattheuniversityin2000whichalsoincludedStournaras.2Thisnewswasalsoaboost in view of my plan to appoint Nicholas general secretary for fiscalpolicy.Inputting togethermy team, Iwas troubledby the thought thatnoneofus

had any experienceof actually dealingwith the troika–with the technocratswhowereusedtocomingtoAthensonbehalfoftheEU,theECBandtheIMF,

entering itsministries, interrogating itsministersof state and imposing theirwill on them like bailiffs – although this was to be expected of a group ofpeoplewhohadneverservedBailoutistanandwhomcivilservantsandtroikaofficialsaliketreatedlikemortalenemies.Fortunately,onedayIcameacrossElena Panariti, someone who knew the troika’s language and their modusoperandi.Elena hadworked for years inWashington, primarily at theWorld Bank,

wheresheforgedexcellentconnectionswithpowerfulpeopleassociatedwiththe institutions behind the so-called Washington Consensus (the package ofreforms that the US prescribed for economies in crisis), including formerTreasury Secretary Larry Summers, to whom she would later introduceme(recallChapter1),andDavidLipton,second-in-commandattheIMF.HerworkinPeruonbehalfoftheWorldBankincollaborationwiththedespoticregimeof President Fujimori had made her a figure of hatred among the Left inGreeceandelsewhere.Herdefencewas that,whoever itwas fororwith, thework itself was important and progressive, getting people living in shantytownstitledeedstotheirshacks,allowingthemtoinvestinthesedwellings,tolivewithinthemwithpeaceofmindandtousethemasanassetthatgavethemaccesstotheformalmarketplace.AsamemberofparliamentunderGeorgePapandreou,whohadappointed

her via the party list, it was true that Elena had voted in favour of the firstbailout, but she never bought the lie that the bailout was going to workfinanciallyandGreecewouldsoonbeoutofthewoods.Asshetoldmeatthetime,shevotedinfavourbecauseoftheimmensepsychologicalpressurethatPapandreou and his people had exerted upon her. And to her credit, Elenasubsequentlyturnedintooneofthebailout’sstrongestcritics.Inaremarkablemoment of parliamentary theatre she stood up during a crucial selectcommitteemeetingin2011andinhertrademarkGreek,whichisnotherfirstlanguage,hervoicebreakingwithemotion,sheslatedherownministersandtheiracquiescenceinGreece’sconversionintoadebtcolony.3SowhenImetheragainafewdaysbeforetheelectionIdidnothesitateforamomenttoaskher to joinmy team, for there isnobetterperson to fight thedevil thanonewhohasservedhimand,throughthatexperience,becomehisswornenemy.The same applied toNatashaArvaniti, a former student in the economics

PhD programme that Nicholas Theocarakis and I had set up in 2003 at theUniversityofAthens.Natashahadsince joined thecivil servicebeforebeingseconded to Brussels, where she worked for the troika. As a European

Commission technocrat, she had been sent toNicosia to enforce theCyprusbailout.Havingseenfirsthandthedevastationthatthetroikaleavesinitswakewhereveritgoes,Natashawasaverywelcomememberofmyteam.Withthehelp of people like her and Elena, I would be able to decipher the troika’smood and signals more accurately and plan our negotiating tacticsaccordingly.The downside of such recruits was that within Syriza and Alexis’s inner

circlethosekeentopulltherugfromundermehadplentyofammunitionwithwhichtoarguethatIwaspreparingoursurrender.‘We’regoing tohaveproblemswithin theparty,Yanis,’Alexiswarnedme

oneday.‘DoyoureallyneedpeoplelikeElenaandNatasha?They’retaintedbytheirassociationwiththebailouts.Ourpeoplearelivid.’‘Alexi,’ I replied, ‘do you realize how fierce our confrontation with the

troikaisgoingtobe?Theytakenoprisoners,thesepeople.Ineedtohavestaffonmy teamwhoknow them,whoknowwhat’s in theirboxof tricks,whomthey will recognize as worthy opponents.’ There was something else too, Iexplained: I trusted Elena andNatasha because, unlike our own people, theyhad guilty consciences. They had experienced the indignity of the troika’sactivitiesforthemselves;theyhadbeentoughenedbythem,andforthatreasonIwascertaintheywerelesslikelytobeco-optedbytheiropponentsthansomeofourwet-behind-the-earstroika-slayers.Unperturbed by Alexis’s discomfort, I went on to enlist the help of other

troikadefectors,someofthemfromabroad.OnewasGlennKim,whocameontherecommendationofanallyinthemedia.Glennwasabanker,hadbeeninvolved in many of the big bond deals between Greece, the eurozone andGermany, and was now working independently on contract for variousEuropeangovernments.Hewas‘quiteanexpert’,Iwastold,ontheGDP-linkedbonds that I intended to propose as part of Greece’s debt swap. I contactedGlennrightaway.A few days later, ten days before the election, Glenn and I were sipping

coffee at a café very close to Stournaras’s Bank ofGreece. He came clean,confessing to having played a leading role in designing not just the Greekbailout but the eurozone’s bailout-funding institutions on a retainer from,amongothers,theGermanfinanceministry.4‘WhatwedidtoGreecein2011and2012wasappalling,’headmitted.Iaskedhimwhathewasuptocurrently.Hetoldmehewasworkingforthe

governmentofIceland,helpingtorestructureitspublicdebtandworktowards

lifting the capital controls that had been imposed in the wake of its ownfinancialcollapsein2008.‘Your ideaofGDP-indexedbonds is good,’ he toldme, ‘and I think I can

help you refine it. It will be my way of making amends for the long-termdamagethatwe,andpeoplelikeme,didtoGreece.’Neverone to lookagifthorse in themouth, Iagreedandaskedhimtobe

readytocometoAthenson26January,ifwewontheelectionofthepreviousday.AcynicmightsaythatprofessionalslikeGlennwereinitforthemoneyand

for theirowncareerpurposes.Possibly.ButhavingpeoplesuchasGlennonmy side, who knew where all the skeletons were buried, was a pricelessweapon.(Whenthetroika’sapparatchikssawhimamongmyteam,theyalmosthadastroke.)ButIalsosuspectedthatinGlenn’scaseIcouldrelynotonlyonhis professionalism but on something beyond enlightened selfishness. Twodaysbefore the election,Glenn seemed to confirm this in an email tome inwhichhewrote, ‘Yanis, ifallgoes toplan, thegoodfolksofGreece (and infactEuropeasawhole)willhavechartedanewcoursefortheirfuture…inthinking about thisweekend, I am reminded ofHomer ’swords: “ οἰωνὸςἄριστος, ἀμύνεσθαι περὶ πάτρης.”’ This is from Homer ’s Iliad and means,‘Thereisnobetteromenthanfightingforourcountry.’Another foreign powerhouse also offered its services to our cause: the

French investment bank Lazard, led by Daniel Cohen andMatthieu Pigasse.Like Glenn, Lazard had acted as a consultant and facilitator of the secondsecondbailout,charging thestrugglingGreekstate tensofmillionsofeurosforitsservices.So,whenDanielandMatthieuaskedtoseeme,Iwaspuzzled,guarded and sceptical. But they won me over with a frank account of theircomplicity,anequallyfrankapologyandanoffertohelpgetGreecebackonitsfeetbyprovidingtheirconsiderableservicesprobono.With these illustrious defectors on our side, our technical strength was

bolsterednoend.Noone inSyrizaorknown to thepartyhadaccess tosuchexpertise.Theywouldbemyheavyartillery.Of course,myassociationwiththemwasused to suggest avarietyof sins. Itwasnocoincidence thaton thevery same day Glenn shocked the troika with his presence in Brussels, anopposition member tabled a question in parliament asking why the Greekgovernmentneededtohavea‘Korean’onitsteamandwhathislinkswithmewere, implyingsomesordidrelationshipwithAmerican,Asianorotherdarkforces.5Meanwhile, Syriza people, often wellmeaning and genuine in their

concerns, warned the party faithful that I was preparing to make a Faustianbargainwiththetroika.In fact, Elena, Natasha, Glenn and the good people of Lazard stood tall

against the troika evenafterSyriza’syoungzealots fell.Togetherwith someother former students and graduates of the University of Athens doctoraleconomics programme, these troika defectors backed our cause selflessly,producing splendid economic modelling, putting indefatigable legwork intothenegotiationsandgivingmemammothmoralsupportbeforeeachmeetingwith the Eurogroup, in Maximos or any of the other rooms where adultsbehavedvery,verybadly.Whilebuildingateamofexperts,Iwasalsoengagingfriendsandpotential

allies outsideGreece. One ofmymissives for helpwent to Lord (Norman)Lamont.‘DearNorman,’itread,

Asyoumayhavegathered frompress reports,Greeks are going to thepollsthiscomingSunday.ForbetterorforworseIamstandingforaseatin the Greater Athens constituency and, according to pollsters, I seem‘condemned’ to win it. Even worse, if my party forms the government(whichisnotunlikely)IstandtoinherittheMinistryofFinance–repletewithemptycoffersandoutrageouspressurefromBrusselsandFrankfurt.Might I count on you as a prospective counsel in the turbulent timesahead?Trustingthatyouarewell.

Yanis

Norman responded immediately. Yes, he was willing and ready to offercounsel.When I toldhim that the issue rana lotdeeper thandebtandbonds,that it pertained to our parliament’s sovereignty and raised the question ofwhetherdemocracywasaluxurytobedeniedcitizensofanindebtedstate,hereplied,

I entirely agree with what you say of course about democracy and thesovereigntyofparliament.IkeeptryingtoremindCameronandOsbornethatif theygetthechancetorenegotiateourrelationshipwiththeEU,astheyhope,itshouldbeaboutrestoringsovereigntyandnotjusteconomicsandcompetitiveness.Youand I areatoneon that. I alsoagreewithyoutherehasbeen toomuchemphasis in theeurozoneonausterityalone…

AssumingyoubecomefinanceministerIwillbeveryhappytodowhatIcantohelp…Ihavesomeideas.Goodluckpersonally.Yoursever.

Norman

My friendship with true-blue Tory and Eurosceptic Lord Lamont ofLerwick, the chancellor who had ensured that Britain dropped out of theEuropeanMonetarySystem,thusguaranteeingthattheUKwouldnotjointheeuro,wasatoddswithmyimageasaloony-leftextremist.Itwasalsotakenasfurtherproofbysomethat,guidedandproddedbyLamont,Iwashell-bentongettingGreeceoutoftheeuro.Ofcourse,preciselytheoppositewastrue.Whenafewmonthslaterthings

came to a head and Wolfgang Schäuble was pushing us towards Grexit,Norman’s advice to me was to think twice before even considering it, suchwerethecostsandperilsofreturningtoanationalcurrency.Throughoutmy162daysinofficeNormanprovedapillarofstrength,advisingmeonthefinaldraftofmy reform,debt and fiscalproposals to theEUand the IMF. Ifonlymoreleft-leaningpoliticianshadstoodasfirm,theoutcomemighthavebeenaltogetherdifferent.Besides Norman, my overseas supporters included Columbia University

economist JeffSachs,whoplayedacentral roleasadviserandadvocate, theaforementionedThomasMayerofDeutscheBank fame,LarrySummers andJamieGalbraith,whohadworked for yearswithmeon refining theModestProposal forResolving theEuroCrisis, helping reduce the antipathy towardsAlexisandSyrizainWashington,writingspeechesforAlexisandorganizingconferencestopreparetheAnglosphereforthenewSyrizaadministration.On20NovemberIdispatchedacheerfulemailtoJamie:

Jamie,Yesterday Alexis told me that he had received a phone call from aprominent bank owner, who threatened that the bank’s ATMs will notfunction the day after our election if Alexis appoints me minister offinance. Alexis responded by asking him how old he is. The bankerreplied: sixty-five. Alexis then said: If you overthrow me, I am youngenoughtoriseagain.Youarenot!

Itwasoneofthosemomentsofsheerprideinmyfriends,oldandnew,andjoyathavingacquiredviciousfoes.

Wasteland

Without theskillsofaT.S.EliotoraJohnSteinbeck, it isdifficult toconveythe scale of Greece’s devastation in January 2015. A numerical comparisonwillhavetosuffice.Britainintheearly1980ssufferedamajorconvulsionwhenunemployment

quadrupled.Thedamagewasdonebyarecessionlastingasingleyear,1980–1,whennationalincomefellby1.26percent.ThenextrecessiontohitBritaincameadecadelater,lastingalsoasingleyear(1990–1),withnationalincomeshrinking by 1.78 per cent. More recently, following the Credit Crunch,anothersingle-yearrecession(2008–9)leftthecountryreeling,withadropinnational income of a substantial 5.15 per cent. Compare and contrast thesethreetraumaswithwhatbefelltheGreeks.By 2010, the year of the first bailout, national income had fallen by a

whopping 7.5 per cent since the previous year. Did things improve as aconsequenceofthebailout?Onthecontrary,during2010–11incomesfellbyafurther8.9percent.Bycomparison,2011–12wasagoodyear, theeconomyshrinking further by a trifling 1.1 per cent. Towhat didwe owe the relativelull? Ironically, to thepolitical crisis caused by the depression,whichmeantthat we either had no government or too weak a government to legislatefurtherausterity!ButassoonasPrimeMinisterSamarascametoofficeinJune2012witha

smallbutsolidparliamentarymajority,thetroikaensuredhemadeupforlosttimebycrankingup theausteritymachinewithavengeance.The result?Thecruellestyearyet,withnational incomeplungingafurther14percentbytheendof2013andanother3.3percentduring2014.When British friends remark sympathetically that Greece is today where

BritainwasduringtheGreatDepression,Ithankthemfortheirkindlyintendedcomparisonbutamforced tocorrect them.Between1929and1932Britain’seconomyshrankby4.9percentandunemploymentrosefrom8to17percent.(At thispointI imagineaGreekversionofJohnCleese’scharacter inMontyPython’s‘FourYorkshiremen’sketchcryingout,‘Youwerelucky!’‘Luxury!’)By comparison, Greece has endured six consecutive years of recession, theloss of 28 per cent of its national income, more than one in five workerslosing their job, andanunemployment ratepropelled from7 to27per cent,withyouthunemploymentatmorethan65percent.

And yet today, as these lines are being written, there are still those whobelievethatbytheendof2014Greece’seconomywasreturningtohealthandwouldhavebeenoutofthewoodsbytheendof2015haditnotbeenfortheidiocyofthoseGreekvoterswhojeopardizedtherecoverybyvotinginpeoplelikemeon25January2015.Likeunrulychildrenscreaming,‘Arewenearlythereyet?’ fromthebackseatanddistracting thedriver, theGreekelectoratecausedtheircountrytoswerveofftheroadtorecoveryjustasitwasenteringthefinalstraight.Andhaditnotbeenfortheactionsoftheinsufferablefinanceministerof thepopulistgovernment theyelected,a thirdbailoutwouldneverhavebeennecessary.Dotheyhaveapoint?ThejaggedgreylineinFigure1showsGreece’stotalincome,undilutedby

statisticaltricksandgiveninraweuros.Theblacklinesuperimposeduponitisa four-month average, providing a clearer sense of the overall trend. Theshaded oval highlights the period in 2014when the alleged recovery began.Canyouspotit?TheGreekvoterscouldnot.

Figure1:Greece’sunadjustednationalincome(quarterly)2007-14,withafour-monthmovingaveragesuperimposed

Soon after it became clear that Imight becomeGreece’s financeminister inthis economic environment, I gave a speech attended by members of theEuropean parliament, journalists and other so-called opinionmakers. Askedwhether a new governmentmight jeopardize the ‘recent recovery’, I had noalternativebuttoexposethemtothewretchedfactsthatalmostneverappearedinthepress.

There are 10 million Greeks living in Greece (falling fast due toemigration), organized in around 2.8 million households with a‘relationship’withthetaxauthorities.Of those2.8millionhouseholds,2.3million (and3.5million tax file

numbers)haveadebttothetaxauthoritiesthattheycannotservice.Onemillionhouseholdscannotpaytheirelectricitybillinfull,forcing

the electricity company to ‘extend and pretend’, thus ensuring that amillion homes live in fear of darkness at night and the electricitycompany is insolvent. Indeed, the Public Power Corporation isdisconnecting around 30,000 homes and businesses a month due tounpaidbills.For48.6percentoffamilies,pensionsarethemainsourceofincome.

Meanwhilethetroikademandsthatpensionsbecutevenfurther.Whatwasthe €700 old age pension has been reduced by about 25 per cent since2010andisduetobehalvedoverthenextfewyears.Theminimumwagehasshrunk(onthetroika’sorders)by40percent.Otherbenefitshavebeencutbymorethan18percent.Some40per centof thepopulation say theywill not be able tomeet

theirfinancialcommitmentsthisyear.Unemployment has risen 160 per cent so that 3.5 million employed

peoplenowsupport4.7millionunemployedorinactiveGreeks.Ofthe3millionpeopleconstitutingGreece’slabourforce,1.4million

arejobless.Of the 1.4 million jobless only 10 per cent receive unemployment

benefit and only 15 per cent any benefits at all. The restmust fend forthemselves.Ofthoseemployedintheprivatesector500,000havenotbeenpaidfor

morethanthreemonths.

Contractorswhowork for thepublic sectorarepaidup to24monthsaftertheyprovidetheserviceandpre-paythesalestaxtothetaxoffice.Between 2008 and 2014 small andmedium-sized companies reduced

theirworkforceby29.3percentandtheiroutput(invalueaddedterms)by40.2percent.Half the businesses still in operation throughout the country are

seriously in arrears with their compulsory contributions to theiremployees’pensionandsocialsecurityfunds.In201336percentofthepopulationofficiallylivedatriskofpoverty

orsocialexclusion.Thatpercentageisontherise.Householddisposableincomehascontracted30percentsince2010.Healthcareexpenditurewascutby11.1percentbetween2009and2011

alone,withsignificantrisesinHIVinfections,tuberculosisandstillbirths.

Could any of these bleak statistics, which documented our nation’sconversion into awasteland, be seen as a sign of improvement?Or do theyperhaps explain the Greek voters’ inability to spot their country’s supposedeconomicrecovery?

Greek-covery?

Nonetheless,inDecember2014thegovernmentandthetroikawereadamant:theirsuccessstorywastrueandtheeconomywasshowingclearsignsofgreenshoots. They even coined a neologism: Greek-covery. But manufacturingoutput,whichin2011hadfallenby4percentandin2012byanother15percent (equal to the entire loss ofmanufacturing output duringBritain’sGreatDepression), had registered a small upturn in 2013 but in 2014 had startedshrinkingagain.Meanwhile,industrialproductionduring2014wasdownby3per cent and net investmentwas negative.6 As for employment, although theminimumwagehadfallenbyaworld-beating40percent,makingGreecethelandofdreamsfortheworld’sneoliberals,full-timeemploymentcontinuedtodecline,precariousemploymentrosebyasmidgeonandoverallhoursworkedfell.7Sowhatevidencecouldtherepossiblyhavebeentomakethisclaim?Partly, it relied on a peculiar set of statistics. Technically, real income –

economists’jargonforincomeadjustedtotakeintoaccountthechangingpriceof goods – was up. But this was a mirage created by a dramatic decline in

prices, which made purchasing power appear much stronger but took noaccountofthecountervailingandoverridingcostsofmassivedebt.Appendix1providesafulldebunkingofthisnonsense.Mainly, it relied on the fact that by 2013 Greece had become a surplus

nation,meaningessentiallythatitsexportsexceededitsimports,suggestinganoverall improvement. Since 2010 the troika had been promising the Greeksthatthesilverliningtothecloudofwagecutswouldbeagrowthinexports,asthe reduction in the costs to business within Greece would increase itscompetitiveness.Bytheendof2014thetroikaandthegovernmentwereonanI-told-you-so spree, along with the foreign media, financial newspapers,government and EU economists. ‘Greece posts first current-account surplusformanydecades,’theytrumpeted.HadtheyconsideredthelasttimeGreecepostedatradesurplus,theymight

haveunderstoodthatthesituationwasactuallyawful.Thiswasin1943,underthe Nazi occupation, when Greeks could not afford to eat, let alone importgoods fromabroad,but stillmanaged toexport a feworanges, a fewapplesand the like. In 2014 the economic collapse had produced a similar state ofaffairs. The sorry reason for our current account surplus was that thedeepening recession had crippled imports,while exports of goodswere flatdespitethemassivereductioninlabourcosts.8Acauseformourninghadbeenspunasareasontocelebrate.Therealitywasevidenteverywhere.EvenwhenthegovernmentputGreece’s

remainingfamilyjewelsupforsale,therewereeithernotakersoronlythoseof the shady variety.When, for example, the national lotterywas put on themarket,thehighestbidcamefromaconsortiumwhosewaysIwouldcometoknowall toowellafterassuming the financeministry:havingpaidapittanceforthestate’sonlycashcow,theythendemonstrateditsremarkablecapacitytoprey on hopelessness to the full. Even worse was the sale of the state gasmonopoly, in which only Mr Putin’s favourite conglomerate, Russian giantGazprom,showedaninterest.Hoursbeforethesale’sannouncement,Gazpromdecided not to meet the tiny asking price after all, with their spokespersonciting the deflationary spiral ravaging theGreek economy as the reason forwithdrawal. How could they pay even today’s price when it might be worthonlyhalfthattomorrow?theyasked.Realestate,afairlysafeinvestmentinnormaltimes,faredjustasbadly.The

siteoftheoldAthensairportatHellinikonisaprimeplot:morethantwicetheareaofLondon’sHydePark,itislocatednexttothemostupmarketsuburbsof

AthensonthecoastoftheSaronicGulfwithitsturquoisewaters.Andyetonlyonebidderappeared–anddemandedasaconditionof theirbid that thestateinvestalmostasmuchmoneyinthesite’sdevelopmentastheywereoffering.Meanwhile, the Samaras government and the international financial press

werewaxinglyricaloverthesuccessofthegreatrecapitalizationoftheGreekbankseffectedbythesecondbailout.Andyet inFebruary2014,monthsafterthe money had been received from the troika, asset management companyBlackrock reported that thebankswere so full of non-performing loans thatthey required yet more cash. By June 2014, with Schäuble running out ofpatiencewiththeSamarasgovernment,theIMFwasleakingthatanextra€15billionwasneededfor thebanks,asignificantly largersumthan theroughly€11billionleft in thekittyfromthesecondbailout loan.Bytheendof2014,withGreece’ssecondbailoutrunningoutoftimeandcash,andthegovernmentfacinganother€22billionofunfundeddebtrepaymentsthefollowingyear,thetroika could have been in no doubt that a third loanwas necessary. In otherwords,theIMFandDrSchäubleknewfullwellthatathirdbailoutloanwouldbe required at the same time as the Samaras government was insisting that,wereittobereturnedinthenextgeneralelection,therewouldbenosuchloan.Thefairytaleofanemergentrecovery–orthepromisethatonewasaround

thecorner–wastheperfectdefinitionofoneofmyfavouriteEnglishphrases:addinginsulttoinjury.Butwhyaddinsult?Wastheinjurynotenough?Thereisananswer,anditisnotpretty.On21January2015, fourdaysbeforeelectionday, Iwason thephone to

JamieGalbraithsharingmydeepestfears.Initially,theGreek-coverynonsensehadbeenastrategytowintheelection,butnowSamarasandhisministerswereresignedtolosingit,theywereredeployingtherecoveryfairytaletopreparetheground forwinning theblamegame instead.Bypretending that the thirdbailoutloanwasnotnecessary,whenthetruthbecameapparentthatitwastheycould argue that it had only become so as a result of our government’snegotiating stance. Indeed, from the troika’s perspective having a Syrizagovernment introduce the third bailout was politically perfect as it wouldabsolve them of the devastation they had been causing since 2010. All painthereafter, including the rolling-over of unsustainable debt andnewausteritymeasures,couldthenbeblamedonSyriza’srecklessattempttoconfrontthem–andononepersoninparticular.JamieagreedthatifournervewaveredduringthenegotiationsIwouldbein

trouble, but he was certain that Alexis would remain steadfast till the end.

Having been caught up in the electrifying moments at Thessaloniki in June2013,whenthethreeofushadaddressedenthusiasticcrowdstogether,Jamiedidnotsharemydoubtsinthisarea,and,withonlyafewdaysbeforethepollsopened,weneededalltheconfidenceandenthusiasmwecouldmuster.Moreover, itwasmy belief that for yearsWolfgangSchäuble,Germany’s

financeminister,hadfavouredGrexitbuthadbeenrepeatedlyfrustratedinthisambitionbyChancellorMerkel’sopposition.IwouldnothavebeensurprisedifWolfgang sawaSyrizagovernmentdetermined to clashwith the troikaasprovidinghimwiththeidealopportunitytoconvinceMerkelthatitwastimetothrowtheGreeksoutoftheeurozone.TheriskforhimwasthatSyrizamightfighttotheend,withMarioDraghiandMerkelultimatelyrelentingandgivingAlexisafairdeal.ToWolfgangSchäublethatwasthenightmarescenario,asitwould open the way for the Spaniards, the Portuguese, the Italians and anyotherEuropeanpeopletore-establishsomecontrolovertheireconomiclives.The buckwould stopwithme.Butwhatwas the alternative?An historical

accidenthadgivenusararechancetodoright,speaktruthtopower,andworktobringagenuinerecoverytoourwasteland.Itwouldhavebeenunforgivabletoturnitdown.

Gree-sterity

Whileourtroubleswerelegion,thetroikahaditsfairsharetoo.TheIMFhadbeenuneasyfromtheverybeginning,draggedintothemireofBailoutistanbyaEuropean leadership forwhom theFrenchbanks and their personal ties toGermany’s leadership mattered more than the fund’s internal rules andcohesion. Since 2011 the IMF had been making noises that debt relief wasessential, had unsuccessfully sought a common front with Athens againstBerlin in2012,had let thecatoutof thebag inJune2013bystating that theGreekbanks’2012recapitalizationhadbeengrosslyinadequateandinept,andas late as May 2014 had issued a report that ‘debt sustainability remains aseriousconcern’–politelanguageforsayingthatitwasatcatastrophiclevels.9Afteryearsofspectacularanalyticalandpredictiveerrors,theIMF’sanalysts–indeed all the troika’s officials with some economics training – had finallyrealized that theverybasisof theirGreekprogrammewasflawed,making itimpossibletoimplement.

Appendix2providesafullexplanationoftheIMF’sflawedanalysis,butforasimpledemonstrationoftheself-defeatingnatureofausterity,takealookatFigure2.The horizontal axis depicts the extent of practised (cumulative) austerity

overthefiveyearsthatfollowedthecreditcrunchupuntiljustbeforeSyriza’svictory.10Germany’stotalausterityamountedto2percent,Italy’s3percent,Portugal’s5.4percent,theUK’s6.3percent,Spain’s6.8percent,Ireland’s9per cent, andGreece’s 18 per cent. The vertical axis,meanwhile, shows thecumulativegrowthinnationalincomeduringthesameperiod.Veryclearly,thegreater the austerity the lower the growth in national income.11 Greece’sposition at the bottom right-hand side of the graph is enough to tell itsheartbreakingstory.

Figure2:Thedegreeofausterityismeasuredonthehorizontalaxisasthereductioninthegovernment’sstructuraldeficitasapercentageofnationalincome.Theverticalaxisisnominal

nationalincomegrowthoverthesameperiod.

As Christine Lagarde would later tell me in person, the conundrum thetroikafacedwasthattherewasnowtoomuchpoliticalcapitalatstaketoadmittheirerror.12Thedaybeforetheelection,afinancialjournalisttoldmeduringabreakfromourinterviewthathethoughtittookadetermineddisregardforthe truth toargue thatGreecewasrecovering. Idisagreed: ‘It isnotsomuchthattheydonotwanttotellthetruth.Theyarepanickingandmakingitupastheygoalong,keentoavoidtreadingonthetoesofbankersfirst,MrsMerkellater.Nowtheyfearfortheirjobsiftheytellthetruth.’Andyet,aswewereabouttowinthatelection,thetroika,themediaandthe

Greekgovernmentweredebatingnothowtoendthis loopofdoombutwhatlevel of austerity would suit their political agendas best: too little austeritywouldmakeamockeryofthetroika’sincoherentarithmetic,toomuchwouldundermine the Greek-covery narrative and anyway be impossible to getthroughascepticalparliament.13This is why the people of Greece voted for Syriza, an acronym for the

Alliance of the Radical Left. They had not suddenly fallen in love with theradicalleft,whichhadhithertolanguishedonthemarginsofpower.Theyhadno interest in jeopardizing any nascent recovery. They had no ambition toconfrontBrussels,Berlin,Paris,FrankfurtandWashington.Theydidnotevenmind making more sacrifices or tightening their belts further if this wouldwork.No,theyvotedforusbecausetheyhadhadenoughofmakingsacrificesthatachievednothing,enoughofmeasuresthatsankthemdeeperinindignity,insolvencyanddespairwhileotherscelebratedtheirrecovery.Thatiswhywereceived the votes not just of radicals and factoryworkers, taxi drivers andfarmers, but of decent conservatives, struggling business people, right-wingpatriots and monks – from everyone in fact concerned, like Lambros thehomelessmanwhohadmadesuchanimpressiononme,forthosepeoplewhohadnotyetfallenintotheholewaitingtoconsumethem.

Firstcontact

ItwaswhileIwasrunningforelectionthatGermany’sambassadortoGreeceinvited me to the ugly fortified embassy of the Federal Republic, a stone’sthrow from Britain’s equally ugly mission and not far from the gracefulneoclassicalmansionsservingas theembassiesof Italy,FranceandEgypt.A

tall, lanky man, the German diplomat treated me to a long and excitingafternoon.Pappaswarnedmethat theambassadorhadsignalled toAlexishiscleardissatisfactionwiththenewsthatImightbeappointedfinanceminister.Ifhehad,itdidnotshow.Whatdidshowwashiseagernesstotakemymeasure.I foundhim intelligentandpleasant to talk to, though intenseandbristling

withideasonwhatweshould,andshouldnot,dowerewetowintheelection.Overthecourseofmorethantwohours,heinductedmeintomyforthcomingjobwith a simulated but comprehensive negotiation involving everythingonGreece’s economic agenda: debt, taxation, banks, market reforms,privatization, labourmarkets.He clearly knew his stuff and did not hide hisgovernment’s attitude: in Berlin’s eyes, Greece had forfeited its sovereigntylong ago, and its government would be treated as petitioners. But he alsoshowedsomeunderstandingofBerlin’scomplicityintheGreekdisaster,withhints at a readiness to compromise that revealed his sympathy for the SPD(Germany’sSocialDemocraticParty).ThesamedayPappaspassedontomeamissivewithsomeadviceonwhatto

do after we won office from Jörg Asmussen, a youngish man of somesignificanceintheSPD.AsmussenhadstartedhispoliticalcareeratthefinanceministryunderWolfgangSchäubleduringtheturmoilof2008,atwhichtimeacoalitionofMerkel’sChristianDemocratsandtheSPDwasinpower.Hehadbeentheministry’spointmaninhelpingtosavetheGermanbanks,arolethathad given him kudos but also a front seat to witness the process by whichGreece was incarcerated in its debtors’ prison. His services to the financeministrywererewardedwithaseatontheEuropeanCentralBank’sexecutiveboard, a position of immense authority for a young man with few bankingcredentials.In2013,whenhisECBstintended,AsmussenreturnedtoBerlinasajuniorlabourministerwithakeyremit:tointroduceaminimumwageforthefirsttimeinGermany,amajorreformthatChancellorMerkelhadagreedwithherSPDcoalitionpartners,incitingthewrathofherownparty.ThemomentIheardthatAsmussenhadwrittentous,Iprickedupmyears.

HepunchedwellabovehisofficialweightandwasthemanIhadexpectedthetroika touse as a feeler, a first contact between themandus.Hewas ideallysuited to the role.ThiswasaSocialDemocratwhohadworkedcloselywitharch economic conservativeWolfgang Schäuble as the German banks werecollapsing,amanwhohadbeenat thehelmoftheECBin2012whenGrexitwas on the cards before Mario Draghi put his foot down, signalling toChancellorMerkel to take itoff the table, andoneof thevery fewpeople to

haveworked on the ECB’s Plan Z – the scheme bywhichGreecemight bedetachedfromtheeurozoneatminimumcosttotheothermemberstates.WhatI had not anticipated was that Asmussen would not be coming to us alone.Rather, hehadwrittenwith the express purposeof introducingus to anotherfunctionaryofevengreatersignificance,ThomasWieser.IknewofWieser ’sofficialrolewithintheEUbureaucracy.Aspresidentof

theEurogroupWorkingGroup,heledthecabinetofdeputieswhosejobitistoprepare theEurogroupmeetings, the forumatwhich their respective financeministersmakealltheirkeydecisions.IntheorythenThomasWieserwasthedeputy of Jeroen Dijsselbloem, Dutch finance minister and president of theEurogroup.WhatIdidnotknowthenbutcametounderstandlaterwasthatinreality he was the most powerful man in Brussels, far more so than Jean-ClaudeJuncker,presidentoftheEuropeanCommission,orPierreMoscovici,commissioner for economic and finance affairs (the commission’s financeminister), or even, on occasion, Dijsselbloem himself. At such times heseemedtorunthewholeshow.InhisemailAsmussenadoptedthepostureofaleft-leaningpotentialallyof

ournewgovernmentwhowantedtoseeussucceed.Tothatend,heaskedustotrustandworkwithWieser,anAustrianSocialDemocrat,describinghimasa‘friend’,‘reliable’,‘trustworthy’and‘akeyoneintheBrusselsmachinery’.Inaddition, Asmussen suggested Wieser would help us carve out the time weneededinwhichtoconductournegotiations.AccordingtoAsmussen,Wieserwas proposing a ‘programme extension’ as a ‘goodway forward, to have akind of protection forGreecewhile deeper renegotiations are undertaken. Itmightbeworthwhilethatyoureconomicteamgetsincontactwithhimquicklyafter theelections.’Asmussenendedwith‘if Icanbeofanyhelp, just letmeknow’.It sounded hopeful. The previous Athens government had negotiated an

extensionwith the troika thatwould end amonth after our election,more aguillotine to cut our heads off than a platform on which to build a newagreement,soyes,wewantedafurtherextension.AndifWieserandAsmussenwantedtohelpconstructone,thatwouldbesplendid.Butdidthey?AttachedtoAsmussen’semailwasanunsigned‘non-paper ’–jargonforan

unofficial document circulated for negotiation purposes which is whollyunbinding –written byWieser that began by stating the completely obvious,namelythatourgovernment‘willfaceaverytightliquiditysituation’.14 Thiswasfollowedbyadryannouncementthatweshouldnotexpecttoreceiveany

ofthemoneytheECBowedus(around€1.9billionprofitonthoseSMPbondsofoursthatitheldandhadagreedtoreturntous),noranyoftheloansagreedunder the previous government that Greece needed in order to (pretend to)repayitsdebts.15But,Wiesermadeclear,thetroikastillexpectedustohonourGreece’s debt obligations to them.16 The asphyxiation of the Greekgovernment that would be caused by this would lead to ‘liquidity concerns’and,inevitably,to‘markettension’.Inshort,weshallsqueezeyousomuchandso publicly that investorswill pull out ofGreece, depositorswill acceleratetheirbankrun,andyourgovernmentwillsuffocate.Thiswasthestick.AfterthestickcameWieser ’scarrot:thetroikamightgiveusanextensionto

theexistingsecondbailoutloanagreement,grantingusareprievebeyondtheguillotine deadline of 28 February 2015, and might increase the maximumvalue,setbytheECB,ofshort-termTreasurybills(T-bills)wewereallowedtoissueforthepurposeofquickcashloans–essentiallyourcreditcardlimit–sothatwecouldwithdrawsomeextracashwithwhichtopaytheIMFinMarch,but thiswould be conditional on our taking a ‘cooperative approach’ to thetroika.17The message could not have been clearer: we were to be fiscally

waterboardeduntilweagreedtoparticipateinthesickritualofextendingandpretendingthatwehadbeenelectedtoputanendto.18AfterreadingtheemailIbriefed Alexis and Pappas on the situation: as we had expected, they wereactivatingaplantothrottleus.Itooktheopportunitytoreiterateourcovenant:we should look to secure the extensionbeyond28February thatWieserwasoffering inorder togive thenegotiations a chance, but only ifwe remainedcommittedamongourselvestodefaultingiftheyrefusedtonegotiateingoodfaithadifferenttypeofagreement.Bothreconfirmedtheircommitment.I then sat down topenour response toWieser.Exudingmoderation and a

willingness toworkwithhim,Imadetwocrucialpoints.ThefirstconcernedtheprofitowedtousonourSMPbonds,whichWieserhadsaidweshouldnotexpect back from the troika. ‘Not handing back Greece’s own moneyunconditionally,’ I wrote, ‘is difficult to justify even if previous Greekgovernmentshaveconsentedtosomesuchlegalism.ItisourexpressviewthatthesefundsshouldbereleasedimmediatelybytheECB.Thisway,fundingissecured,usingGreece’sownrightfulassets,throughtheendofMarch.’MysecondpointaddressedWieser ’sthinlyveiledthreatof‘markettension’,

whichechoedStournaras’sincendiarystatementof15December.19

The expectation of a potential impasse does yield uncertaintywhich, inturn,may cause liquidity problems. But what causes this expectation ofimpasseinthefirstplace?ItistheinsistenceofEUandECBofficialsthat,withindaysofbeingelected,thenewGreekgovernmentmustsignonthedottedlineofanagreementthatitcampaignedinfavourofrenegotiating.Democratic Europe must give Greece fiscal space to allow its new

government to table proposals that will constitute the foundation of aviable agreement. Denying the newGreek government this fiscal spacecausestheliquidityproblems.Tothenportraytheseliquidityproblemsasexogenous constraints is to be in denial of the ECB’s and the EU’sresponsibilityforhavingcausedthem.

AfterI’dsenttheemail,justbeforeDanaeandIlefttoattendapre-electionmeeting,sheaskedmewhatIhadbeenworkingon.‘Abeautifulnewfriendship,’Ireplied.

Democracyatgunpoint

Two nights before the polls opened on 25 January 2015my Syriza friendswereagonizingonlyovertheextentofourimpendingvictoryandwhetheritwouldsuffice tosecureanoutrightmajority inparliament.Butmymindwaselsewhere.Three days earlier Glenn had emailed confirmation that the noose was

tightening.Since15December,whenStournarasacceleratedthebankrunthatPrime Minister Samaras had begun, depositors had withdrawn €9.3 billionfromGreekbanks,andtherateofwithdrawalshadhit€1billiondaily.Bythetime of the election, €11 billionwould have found its way abroad or undermattresses.20 To be able to pay out so much money, the banks had had toincreasetheirdependenceontheECBtothetuneofmorethan€60billion.Thethreat ofMarioDraghi to closedown thebankswasprovidingprecisely theconditionsheneededtojustifydoingso.21In the run-up to polling day the only future government colleague with

whomImanagedtosharemyfearswasSpyrosSagias.DanaeandImethiminhisapartmentintheAtheniancoastalsuburbwhereIhadgrownup.Surprisedbythesecuritymenstationedunderhisapartmentblock,wetookthelifttohisairy penthouse decorated with a few well-chosen pieces of contemporary

Greekartoverlookingthemarina.Sagiaswasapudgymiddle-agedmanwithareassuringlydeepvoicewhoexcusedhimselfforbeingundertheweather.Hewasnursingaheartcondition,whichdidnot seem todullhis intelligenceorpreventhimfromdemonstratingaperceptiveeye.Sagias was not a politician but, as he introduced himself half-jokingly, a

systemiclawyer.(‘Systemic’ispost-2008jargonforbanksthataredeemedtoobig to fail.) There was hardly a large-scale business deal involving privateinterests and thepublic sector thatSagias andhis successfulpracticehadnotbeeninvolvedin:privatizations,large-scaleconstructionprojects,mergers,allwerewithin his ambit. Until recently he had even provided legal counsel toCosco,theChineseconglomeratethathadacquiredpartoftheportofPiraeusand was eager to take over the whole of it, a privatization that Syrizavehemently opposed.When Pappas informedme that Sagiaswas destined tobecome our cabinet secretary, I was surprised but also pleased: at least wewouldhavea legaleagleon the team,acounsellorwhoknewhowtoauthorlegislation andmoreoverwhere all the skeletons of the ancien régime wereburied.Sagiaswent straight to the subject thatwas foremost onmymind, asking

how exactly the ECB would try to asphyxiate us. First, I explained, DraghiwouldcutoffthedirectflowofliquidityfromtheECBtoourbanks,referringthem toStournaras’sCentralBankofGreece formore expensive short-termloansinstead(theso-calledemergencyliquidityassistanceorELAmechanism,funded indirectly by the ECB). Then, the second stage, the ECB GoverningCouncil would prohibit Stournaras from providing any further ELA to thebanks,atwhichpointtellerswouldrunoutofcash,depositorswouldriotandthebankswouldclosedown.Alreadyby21January2015,ItoldSagias,twoofGreece’s four systemic banks had applied to Stournaras’s ELA for liquidity.‘The scene is set,’ I concluded. ‘They are just waiting for us to come onstage.’22I thenoutlinedourkeydeterrencestrategyand theessenceof thecovenant

with Alexis, Pappas and Dragasakis that was the basis of my accepting thefinanceministry.Heagreedwiththeplan.‘So, what brings you to this government?’ I asked. ‘Your background

doesn’timmediatelysuggestareason.’‘IamonlydoingitbecauseIbelieveinAlexis,’hereplied.Asayoungman

hehadinclinedtotheLeft,heexplained.Evenafterheshiftedtotheveryheartof the establishment, oiling the cogs of the system, deep inside he always

maintainedaromantic linkwith theLeft. ‘SowhenImetAlexis, itstruckmethatIwantedtoputmyexperienceathisdisposal.IamnothereforSyriza.IamheretoprotectAlexis.Hewillneedagreatdealofprotection.Andsowillyou.Makenomistake,Yanis:theywillalltrytoundermineyou,fromtheworstofthe bankers to Dragasakis to everyone in Syriza. It’s going to be nasty.’ Itturnedout Iwasnot theonlyone riddenwithangstaswewereabout to takeoverthereinsofgovernment.I decided I liked Sagias. He knew that he was tainted by decades of

consorting with the oligarchy and did not care to hide it, but I was moreinclinedtotrustpeoplewhohadknownandworkedfortheestablishmentthanyoung zealots, who are prone to becoming its born-again servants. Hishonesty, the way he personalized his reasons for coming on board, hiswarningsaboutDragasakisandtheSyrizaevangelists,alongwiththeartonhisapartmentwalls,mademefeelateasewithhim.Nevertheless, aswewere leaving he confessed that hewas having second

thoughts. ‘Iamstillnot100percentsure Ishallaccept theposition,’he toldme.‘Youmust!’Iurgedhim.‘Thisisa28Octobermoment,’Isaid,referringto

thedaytheGreekgovernmentrejectedMussolini’sultimatumtosurrenderin1940.‘Wecannotduckthis.’‘Iwillthinkaboutit,’hesaidinsuchawaythatledmetobelievehewould

accept.Back at our apartment, an email arrived from Jamie asking, ‘What’s the

exactagenda,sofarasyouknow?’‘Nottobethrottledatbirthbythetroikaandlocalbankers…’Ireplied.Doing my sums with Glenn’s help, it turned out that for 2015 alone the

Greekstateneeded€42.4billionjusttorolloveritsdebts,theequivalentof24percentofnationalincome.Evenifthetroikaweretodisburseallthemoneyspecifiedbythesecondbailout loanagreement,wewouldstillbe€12billionshort.Foracountrywithnocapacitytoborrowfromprivateinvestors,emptycoffersandadevastatedpopulation,meetingthesedebtrepaymentsmeantonlyone thing: the plunder of what was left in the reserves of pensions funds,municipalities, hospitals andpublic utilities,while going to the troika cap inhand to borrow huge amounts more, pledging to squeeze our pensioners,municipalities,hospitalsandpublicutilitiesyetfurther,allinordertogivethemoney back to the troika. Only a lobotomy could have convinced me thatdoingthiswasinourpeople’sinterest.

Onpollingdaypeoplewouldwalkuptomeinthestreet,patmeonthebackandmakemepromiseIwouldnotgobackonmyword.Wesupportyou,butdon’tyoudaredoaU-turn,becauseifyoudoweshallroundonyou,wastheunanimousmessage.

Partnersbeyondthepale

WhileAlexiswasdrawingupplansfor thecompositionofhiscabinet, Iwastryingtowhittledownthenumberofourpotentialenemies.GlennsuggestedIshould bring some private financiers on side. There were two reasons fordoing this: very little of Greece’s debt was owed to them as they had beenrepaidinfullfromthebailoutloans(infact,only15percentofthetotaldebtwasnowowed toprivatebodies),and theyunderstoodarithmetic; theycouldsee thatmybasicargumentwas right.Whynothavesuch rich,powerfulandwell-connected people with us, rather than antagonize them? Glenn’ssuggestionwas that Imakeovertures in the formof a statement: ‘WedonotforeseeaneedtoseekanyfurtherrestructuringofGreekGovernment-relateddebtinthehandsofprivate-sectorinvestors.’Intheevent,Iwentfurther,statingnotonlythatweforesawnoneedbutwere‘opposedtothenotion’ofit.Meanwhile,inthelittlethinkingtimeIhadtospare,Ijoinedthediscussions

aboutthegovernment’scomposition.Ifwedidnotwinaworkingmajority,acoalition was on the cards. But who would be our partners? Excluding theparties that had governed until this point and brought us the bailouts, thecommunistparty,whichwassimplynotinterested,andofcoursetheNazisoftheGoldenDawn,thereweretwopossibilities.One was the River (To Potami), a socially liberal centrist party led by a

journalistwithwhomDanaeandIhadbeenfriendlyandforwhosenewssiteIhadwrittenhundredsofarticles.Onapersonal level, thiswastheparty thatIwouldhavepreferredtogetintobedwith.ItskeyfigureswerepeoplewhomIknew and got onwellwith.But therewas amajor snag: they had adopted astronglypro-troikaposition.Negotiatewiththetroikaastoughlyasyouwantbutundernocircumstances

contemplate a rupture, they would tell me. There is no point in entering anegotiatingroomifyouarenotpreparedtocontemplatewalkingout,Iwouldretort. No, a coalition with the River would have been strategic suicide andactually pointless. The troika would know that the moment they pressed the

buttontoclosedownthebankstheRiverwouldpulltheplugonus,censuringmeinparliamentforhavingcausedarupturewiththecreditors.Inanycase,Syriza’sleadership,andAlexisinparticular,hadalreadymade

theirminds up. But while I understood their choice, the very idea of it wasnauseating. Alexis had struck a deal with Panos Kammenos, leader of theIndependent Greeks. Kammenos, the party’s founder, had been a juniorministerinpreviousNewDemocracygovernments,butin2011,tohiscredit,hevotedagainstthetechnocraticcoalitionheadedbytheformervicepresidentoftheECB,whosemissionwastopassthesecondbailoutthroughparliament.Expelled by New Democracy for doing so, he had set up the IndependentGreekswith several otherNewDemocracydefectors.Theparty they createdcould only have been born in the sad madness of Bailoutistan. In its fierceoppositiontothebailouts,itwaslocatedtotheleftofthePASOKsocialists,theRiverandtheNewDemocracyconservatives,butonsocialissuesandforeignrelations it took extreme right-wing positions, exuding ultra-nationalism,thinlyveiledracism,intensesexismandhomophobia.As if that were not enough, Kammenos was prone to making allegations

about politicians he disliked that had no basis in fact – reminiscent of thoseanti-Semitic conspiracy theories that bundle together small truths to createhuge lies – and I doubt I had endearedmyself to himwhen, in response toallegationshehadmadeaboutGeorgePapandreouandhisfamily,Iprovidedadeposition in their successful suit against him for defamation.23 The idea ofservinginthesamecabinetasKammenosdidnotfillmewithpleasure.Alexis explained his decision to enter into a coalition with Kammenos

simply and concisely.Wehad a choice, he toldme.Oneoptionwas to formquickly and painlessly a coalition government with the Independent Greeks,with Kammenos appointed minister of defence on condition that he did notinterferewithanydecisionspertainingto thenegotiationsor tosocial issues,wheretheSyrizaprogressiveagendawouldprevail.Thesecondoptionwastoenter into prolonged negotiations with the River in order to form agovernment that the troika could topple at any time. ‘It’s a no-brainer,’ heconcluded.As the following months revealed, Alexis was right. Kammenos and his

colleagueskepttheirwordandwerefullysupportiveofournegotiatingstance.Indeed, the first time we met Kammenos showed no animosity towards me.Quite the opposite, in fact. He hugged me and addressed me respectfully,promising his complete support for my strategy. Nonetheless, the sound

pragmaticreasonsforthispartnershipdidnotdampenmyabhorrenceforourpartners’blendofnationalism,xenophobiaandcommitment toapre-modernlink between church, army and state. Of all the difficult questions foreignjournalists put to me in the ensuing weeks, the most painful were the onesaboutthatuneasyalliance.

‘Ifyoucandream–andnotmakedreamsyourmaster’24

Around8p.m.on25January2015weknewwehadwonhandsomely.Afewhourslaterwediscoveredthatwewereameretwoseatsshortofanabsolutemajority.25Thestreetswerethrongedwithcelebratingcrowds.Before joining them, I sat down towrite two blog posts, onemessage of

thanks (inGreek) tomyvoters andonemessageofhope (inEnglish) to thewider world. In the first I wrote ofmy recentmeetingwith Lambros. ‘As IenterthegatesoftheMinistryofFinance,’Iwrote,‘Ishallbethinkingofhiswords. Not our interest rate spreads, not the Treasury bill yields, not theMemorandumofUnderstandingwiththetroika.Onlyhiswordswillbeonmymind.’Fornon-Greekspeakerspuzzledbyourvictory,IborrowedfromDylanThomastopostthefollowing.

Today,thepeopleofGreecegaveavoteofconfidencetohope.Theyusedtheballotbox,inthissplendidcelebrationofdemocracy,toputanendtoaself-reinforcing crisis that produces indignity in Greece and feedsEurope’sdarkestforces.ThepeopleofGreecetodaysentamessageofsolidaritytothenorth,to

thesouth,totheeastandtothewestofourcontinent.Thesimplemessageis that the time for crisis-denial, retribution and finger-pointing is over.Thatthetimeforthereinvigorationoftheidealsoffreedom,rationality,democratic process and justice has come to the continent that inventedthem.Greek democracy today chose to stop going gently into the night.

Greekdemocracyresolvedtorageagainstthedyingofthelight.Freshfromreceivingourdemocraticmandate,wecalluponthepeople

ofEurope and, indeed, theworld over, to join us in a realmof shared,sustainableprosperity.

IamoftenaskedhowIdealtwith theoverwhelmingstressof thedaysandmonthsthatfollowed.Myansweristhaton9January,thedayIannouncedmycandidatureforaGreaterAthensparliamentaryseat,Ihadwrittenasignedbutundatedletterofresignation.OnmyblogIwrote,

Itwasnevermyintentiontoentertheelectoralgame.Eversincethecrisisbegan, I entertained hopes of maintaining an open dialogue withreasonable politicians from different political parties.Alas, the bailoutsmade such anopendialogue impossible…Mygreatest fear, now that Ihavetossedmyhat in thering, is thatImayturn intoapolitician.AsanantidotetothatvirusIintendtowritemyresignationletterandkeepitinmyinsidepocket,readytosubmititthemomentIsensesignsoflosingthecommitmenttospeaktruthtopower.

On25January,beforeDanaeandIleftourapartmenttojointhecelebratingcrowdsandmakeourwaytoSyrizaHQ,ImadesurethatIhadthatletterinmyinsidepocket.FromthatSundaynightonwardsIcarrieditwithmeeverywhereIwent, frommeetings atMaximos or the financeministry to theEurogroupandWolfgangSchäuble’s office. Its presence gaveme solace and a sense offreedom. But like all freedoms, it came at a price: the more astute of myadversariesrecognizedthisfreedominmeanddetestedmeforit.At 6 a.m. onMonday,with the count completed, I received a textmessage

from my friend Wassily: ‘Unbelievable! You got 142,000 votes.’ Butsatisfactionathavingwonmyseatwithacomfortablemajorityquicklygaveway to apprehension when I checked the full results: no Syriza candidate,indeed no candidate of any party, had received more votes in the whole ofGreece.ItwasasuccessIknewIwouldeventuallybepunishedfor.That morning Alexis was sworn in at the outgoing president’s residence

beforemakinghiswaytoMaximos,wherethedepartingprimeministerwouldnormally have been waiting for the handover ceremony. But as AntonisSamaraswasnotthere,Alexisjustwalkedinandgotdowntowork;thecabinethadnotyetbeenfinalized,andthegovernmentwasduetobeswornintheverynextday.HavingresignedmyselfdaysbeforetothealliancewithKammenosandhis

Independent Greeks, my only intervention on cabinet appointments wasinsistingthattheothertwoministriescoveringkeyeconomicareasshouldbegiven to Euclid and Stathakis.While themain burden of negotiations in the

Eurogroupwouldfalluponme,IwaskeentohaveEuclidinthecabinetandinaministrylinkedtoeconomicpolicysothetwoofuscouldbackeachotherupinBerlin,Paris,BrusselsandFrankfurt.Towards that evening, Sagias, who in the end accepted the position of

secretary to the cabinet, called to discuss procedural matters. During ourconversationhedroppedabombshell:AlexishadleftEuclidoutofthecabinet.‘Whyonearth…?’Iasked.TopreserveSyriza’sinnerequilibrium,heexplained,Alexishadappointed

Panayiotis Lafazanis to the ministry instead. This was terrible. LikeDragasakis,Lafazanishadbeenanactivist in theCommunistPartyofGreeceformanyyears,butwhileDragasakishadsinceshiftedtotheRight,Lafazanisremained wedded to a Soviet mindset and led the Left Platform, whichcontrolledone-thirdofSyriza’scentralcommittee.Crucially,LafazanisandhissupportersbelievedthatGrexitshouldbepartypolicy.Overandoveragainhehadstatedhisviewthatifwedidnotthreatentoleavetheeurozonewewouldneverachieveadecentdeal.WithLafazanis inoneof thekeyministries,andwith Euclid – who agreed with our covenant – outside the cabinet, mynegotiationstrategywasinjeopardy.As soon as Sagias had put down the phone, I called Alexis to say that

Lafazanis’s appointment was a mistake and that I could not accept Euclid’sexclusionfromthecabinet.AlexisrepliedthathehadofferedEuclidapositionasmydeputyinchargeofthetaxoffice,butthathehadturneditdownangrilyonthebasisthathedidnothavetherelevantexpertise.‘Hespokebadlytome,Yanis.Sodhim!Lethimlanguishforawhileinthe

houseasSyriza’sparliamentaryspokesperson.’‘First,Euclidisright,’ItoldAlexis.‘Taxationpolicyisnothisstrongpoint.

But in any case the reason for giving him the ministry now being run byLafazaniswassothathecouldbeatmysideduringthenegotiations.’IfEuclidhad responsibility for the tax office, he would be stuck in Athens while Itravelledalone.‘Thetwoofustogether,bothministers,willmakeapowerfulteam.Thisisagraveloss,Alexi,’Isaid.‘Itistoolatenow,’Alexisreplied.‘IneedLafazanisinsidethecabinetandin

aneconomicministrytopreventhimfrompissinginfromtheoutside.IfIstriphim of it now, on the night before our swearing-in, hewill turn evenmoreagainstmethanhealreadyis.TheLeftPlatformwillbeupinarms.’Hehadapoint.IhadtothinkofanotherwaytogetEuclidintocabinet.

‘Thereisanalternative,’Isaid.WithintheMinistryofForeignAffairstherewas thepost of general secretaryof foreign economic relations. I suggestedthatweupgradetheposttoalternateministerofforeignaffairsresponsibleforforeigneconomicrelations.EuclidcouldthencomewithmeeverywhereasafullministerwithaportfoliocloselyrelatedtothenegotiationswithGermany,theEUandtheIMF.‘Whatdoyousay?’Iasked.‘SoundsOK.Butwill Euclid accept?Whenwe spoke a few hours ago he

sworeatmeandIrespondedinkind.’‘DoIhaveyourwordthatyouwillcreatesuchapositionandappointhimto

itifIsecurehisagreement?’Hegavemehisword.‘Leaveittome,Alexi.’IimmediatelycalledEuclid.Hisvoiceconveyedsadnessandanger.WhenI

explainedmysolutionheperkedupbutsaid,‘ButYani,Alexis’sbehaviourwasatrocious. The way he took back his commitment, and for what? To putLafazanis,amanwhowantstoblowupthenegotiationsbeforetheystartattheheadofacriticaleconomicministry?Iwantnothingtodowithhim.’Icalmedhimdownsomewhatbyremindinghimofthehistoricmomentwe

were facing and with a kind word for Alexis, who after all had a difficultbalancingacttoperform.‘I’m livid with him too,’ I continued, ‘but it’s time to find a solution.’ I

explainedthatthenewrolebeingofferedwasperfectforatwo-manministerialcaucustorunthenegotiations.‘Pleaseacceptit,’Ibeggedhim.‘ButIcan’ttrustAlexistoappointmetotheposition,’heretorted.‘Wellthen,trustme.Doyou?’‘Ido,’hesaid.MinuteslaterIcalledSagias,andEuclid’snamewasaddedtothecabinetto

besworninthefollowingmorning.

Theswearing-inceremonytookplaceatthepresidentialresidence.Ministers,deputyministersandjuniorministersfiledpastthepresidentandthendividedintotwogroups,onelargeonesmall.Thereasonforsuchanearlysplitinourranks?WewerethefirstGreekgovernmentinwhichmostministersdeclinedto swear an oath on theBible andopted instead for a secular affirmation ofallegiance to the constitution. But since the Independent Greeks weredetermined to swear on the holy book, we took our oaths in two separategroups.Theceremonylastednomorethananhour,thenewministerskeentogoto

their ministries for the handover ceremonies, but as my predecessor had

requested a fewmore hours to clear his desk, I was in no hurry.When thepresident had retired to his quarters,Alexis suggested I drop intoMaximos,located next to the presidential residence, for a chat before I mademywayovertotheMinistryofFinancebuildingonSyntagmaSquare.TogiveAlexistime to get settled, I immersedmyself in discussionswith a couple of otherministerswhose handovers had also beendelayed and thenwalked across tothe prime minister ’s official residence. As I went in, the police stationedoutsidesalutedasifIwereGeneralPatton.ItwassomethingInever,evergotusedto.Onceinside,Itookamomenttolookaround.Forabuildingsynonymousin

Greece with power, it was smaller than I had imagined but tasteful in anItalianesqueway.MakingmywaytotheinnersanctumIwalkedpasttheprimeminister ’ssecretaries’office,whereitwasamusingtofindourpartyworkers,more used to the dingy surroundings of Syriza’s HQ and now lookingdecidedlyoutofplaceamidthesplendourofMaximos.‘You’llgetusedtoit,Eleni,’Isaidtooneofthem.‘Yes,Minister,’sherepliedmockingly.UponenteringAlexis’snewoffice,Ilookedathimand,takingmycuefrom

Eleni,bowedmyheadwithamock-humble‘PrimeMinister…’Webothburstoutlaughing.Herosefromhischairandweembraced.‘Whatthehellhavewedone?’ I asked, still laughing. ‘What next?’ I addedmore as a lament than aquestion.Hedidnotreplybutgrinnedandshookhishead.‘Weaskedforit.’Mywandering eyes alighted on a huge andhideous painting of theGreek

flaghangingovertheprimeminister ’sdesk.ItsucceededinmakingaflagthatI am actually very fond of look ugly and domineering, suggesting the veryoppositeofthenuancedpatriotismitismeanttosymbolize.‘EitherthatgoesorIgo,’ItoldAlexis.‘Don’tworry.Itgoes.It’sawful,’hereplied.When our eyes met again, Alexis had acquired a serious look, which he

followedupwithseriouswords:‘Listen!Don’tgetcomfortableinhere.Don’tlearntolovethetrappingsofoffice.Theseoffices,thesechairs,arenotforus.Ourplaceisoutthere,onthestreets,inthesquares,withthepeople.Wegotintogetajobdoneontheirbehalf.Neverforgetthatthisiswhywearehere.Forno other reason. And be ready. If the bastards find a way to stop us fromdeliveringwhatwepromised,youandImustbereadytohandback thekeysandgetoutonthestreetsagain,toplanthenextdemonstration.’

TheearthcouldhavestoppedturningandIwouldnothavenoticed.Itwasamomenttosavour.IfeltashamedatthequalmsIhadhadaboutAlexis.Fearandanxietyevaporated.Ididnotcareifthelightdied,asitinevitablywould.Herewewere,together,ragingagainstitsdying.Itwastimetogetdowntowork.

PARTTWO

Invinciblespring

6

Itbegins…

ThesentryoutsideMaximoswasaghast.‘Areyougoingoutalone,Minister?’heasked.Inoddedas theelectricgateopened,mindfulof thewaitingphotographers

campedoutsidebutdeterminedtoarriveattheMinistryofFinanceonfootandinsolitude.Theywerejustastakenabackasthesentryandscrambledtofollowme,ladenwithequipment,fallingovertheircablesandeachother.BythetimeI had turned left onto Queen Sophia Avenue at the corner of the NationalGardens, which separate Maximos from Parliament House and SyntagmaSquare,theyhadgivenup.Walkingpast the side entrance toParliamentHouse Iwas remindedof the

exchange I had witnessed between the aggressive parliamentarian and thedemonstrator – his ‘Who are you to judge what I should or shouldn’t votefor?’andhermagnificent‘WhodoIhavetobe?’EverysteptowardsSyntagmaSquare brought back a face, a slogan, amemory from those long nights in2011whenAthens had come alive in opposition to our collective indignity.CrossingAmaliaAvenue,rightinfrontofparliament,ontoSyntagmaSquareitselfwastocrossontosacredground.ThesunhadsetandacoolJanuarybreezewasrattlingtheremainingleaves

on the trees, sendingpedestrianshurryingon theirway.Thestreet lightshadnot yet come on, and in the dusk it took a fewmoments to locate the tree,enshrined with flowers and handwritten messages, next to which DimitrisChristoulas, the retired pharmacist, had shot himself. With almost no onearound, I took amoment to build amental bridge between that tree and thebrightly lit offices of the Ministry of Finance that I could see opposite. AmomentlaterIhadcrossedPhilhellenesStreettoentertheministrythatwouldbemycrucible for thenext162days.As Ientered thebuilding,acheer rosefromthefiftyorsowomencampedoutside:someoftheministry’slegendarycleaners, who had been dismissed overnight and without compensation twoyearsbeforebythepreviousgovernment.‘Don’tbetrayus!’theyshouted.‘Iwon’t,’IrepliedfirmlyasIheadedforthelift.

The lift door opened onto the sixth floor, and a secretary led me to theministerialsuitewheremypredecessorawaited.Hewasaloneandgreetedmegraciously.Hisdeskwasstrikinglybare.Noneofthegadgetsthatfillamodernofficewasinsight,notevenacomputer.ItsonlyvisibleweaponagainsttheseaoftroublesthatbesiegeditwasaniconoftheMadonnaontheshelfbehindtheminister ’s desk. The large high-backed desk chair, which was no doubtintended to project authority, looked as uncomfortable as it was ugly. Thearray of old-fashioned phones on a side desk were straight out of a 1970smovie,andthebooksontheshelfwereclearlygiftsthatnopreviousministerhadcaredenoughtoreadortakeaway.TheoilpaintingsonthewallwereonloanfromtheNationalGallery.Itwouldhavetakenonlyawordtohavethemreplaced,butIfeltnourgetogetcomfortableinthatoffice.Therestof thefurniturehadanairofdecadence,especially thefadingred

velvetcouch–perfect, I thought,for thefinanceministryofabankruptstate.The only exception was a large rectangular wooden meeting table, which Iimmediately decided would become my workstation, a long way from theministerialdesk,whichImadeapointofneverusing.Thetablemademefeelasathomeasitwaspossibleordesirabletofeelinthatspaciousbutsadofficewith such a sorry recent past. The office had one outstanding redeemingfeature:awide,tallwindowofferingamagnificentviewofSyntagmaSquareand Parliament House beyond. One look through it is enough to stiffen theresolve of anyone who has ever harboured an ounce of pride in modernGreece’slongstrugglefordemocracy.Mypredecessorwasgentle,pleasantandvisiblyrelievedthathisordealwas

over.Hehad twodossiersforme,onemedium-sizedblueoneandabulgingredfile.Thebluedossiercontainedministerialdecreesthathehadnothadtheopportunitytosignandwhichheencouragedmetoconsider.Thereddossierwaslabelled‘FACTA’andpertainedtoadealthattheUnitedStateswasultra-keentofoistontoeverycountry,whichwouldallowtheUSTreasurytokeeptabsonAmericancitizens’foreignfinancialtransactions.1Intriguingly,hehadno documents to hand over regardingGreece’s loan agreementwith the EUandtheIMF,thoughheofferedtobriefmeonourrepaymentschedule,whichofcourseIcouldalreadyrecite,chapterandverse.Dayslater,whenIaskedforacopyoftheoriginalsecondbailoutloanagreement,Ireceivedtheastoundingreply:‘Minister,yourpredecessorseemstohavetakentheonlycopywithhim,alongwithhisprivatearchive.’Curiousasthismaysound,itwasnotthemoststupefyingdiscoveryofthoseearlydays.

While Iwouldhaveenjoyed thechance todiscusswithhimhis failed last-ditchattempttoconcludethesecondbailoutprogramme,whichwasmeant tohave ended threeweeksbefore, thediscussionwouldhavebeenof academicinterestonly–concludingthebailoutwasimpossibleforthesimplereasonthatit had been designed at the outset to fail.2Meanwhile,most of the country’snews journalists, a forest of cameras, foreign correspondents and variouscurious officials had assembled in the ministry’s press room, awaiting thetraditional press conference held jointly by the outgoing and incomingministers,andwerebecomingincreasinglyrestless.Wehadtomoveon.Beforewedid,mypredecessoraskedme togivesome thought tokeeping

threeofhisnon-permanentstaff,especiallyasinglemotherwhowouldhavefacedintolerablehardshipwereItolethergo.Naturally,Iagreed.AtthesametimeIsuddenlyrealizedthatthethreesecretariesintheminister ’sofficewhomIhadjustmetwerenotcivilservantsbuthisprivateemployees.Assuch,theywouldbe leaving too.After thepressconference Iwould return toanemptysixthfloortoengageinbattlewiththeworld’smostpowerfulcreditorswithoutsecretaries, staff or indeeda computer.Thankfully, I hadmy trusty laptop inmyrucksack.ButwhowouldfurnishmewiththeWi-Fipassword?

Parsimonyversusausterity

Afteradignifiedspeechbytheoutgoingminister,itwasmychancetosetthescene. ‘The statemust have continuity,’ I said after thankingmypredecessorfor his efforts. ‘But there will be no continuity of the motivated error thatbegan to devastate our society in 2010 and which has been repeatedcontinuously ever since: treating our state’s insolvency as a shortage ofliquidity.’Once I had outlined my analysis of how Greece’s impossible debt and

unacknowledgedbankruptcyhadcausedthedepression,Iturnedtoadistinctionof great importance, one that left-wingers and Keynesians often fail tohighlight: that between parsimony and austerity. ‘We are in favour ofparsimony,’Isaid,surprisingmanyintheaudience.

Greeks did splendidly when we lived austere lives, when we spent lessthanweearned,whenwechannelledoursavingsto theeducationofourchildren,whenwewereproudthatwewerenotindebt…Butanaustere

life isonethingandPonziausterity isquiteanother.Over thepastyearswe have had a phoney austerity that cuts the low incomes of the weakwhile adding mountains of new debt to existing mountain ranges ofunpayabledebt.Weshallendthispractice,beginningathome,withinthisministry,whereparsimonywilledgeausterityout.

With huge reductions in private expenditure and massive cuts in publicspending, families and companies were unable make ends meet. In otherwords, the government’s attempt to create an unfeasible public surplus hadmade it impossible for people to livewithin theirmeans. Put simply, publicausterityhadtoendbecauseitwaskillingprivateparsimony.Wewouldbeginwith theMinistry ofFinance’s own accounts.Todemonstrate the principle, Iannounced a symbolic move: the immediate sale of the two BMW 7 seriesarmour-plated limousines that a previous minister had ordered for himself,costing a scandalous €750,000, I was informed. My motorcycle would donicely,especially in the infuriatingAthens traffic. Ialsoannouncedthat Iandmy two deputy ministers would desist from hiring the hordes of expensiveadviserswhichhadinvadedtheministrywitheachpreviousadministration,notto mention the multinational consultancy companies that charged tens ofmillions to deliver catastrophic advice. Parsimony would thus return to theMinistryofFinanceunderanewadministrationwhosemainaimwastoputanendtoausterity.WhenafewdayslaterItravelledtoBrusselsandBerlintobegintalkswith

officials, one of the first things they took issue with was another of theannouncements I hadmade in that first press conference: the rehiring of thethree hundred cleaners who had been sacked by the previous government,some of whom had cheered me as I entered the ministry. ‘Backtracking onreforms’was the expression used to criticizeme. Some even suggested thatrehiring thecleanerswasacasusbelli.The fact that I had savedmany timestheir wages through genuine parsimony did notmatter to them, nor did theperversemoralityofcasuallypayingtensofmillionsofeurosforafewdays’worthofcalamitousadvicewhiledismissingthepeoplewhocleanedupafterthe consultants for no more than €400 a month. (The fact that standards ofhygiene had declined was apparently also considered immaterial.) If thecountry’s bankruptcy was to be blamed on its victims, then the ministry’scleanerswereidealscapegoats.

But thecleaners’genderandclass, theirdemonstrablepowerlessness, theirdependence on the state for a minimally safe job, their defiance anddeterminationtocampoutsidetheMinistryofFinanceformonthsonendwereto my mind symbolic of something else. They reminded me of the Britishwomenwhohadsetupapeacecampin1981atGreenhamCommontoprotestagainst the deployment of new medium-range US nuclear missiles. Thosewomen drew upon themselves the ire, eventually the hatred, of anestablishment that recognized in themachallenge to itspatriarchal authority.Soitwaswiththeministry’scleaningwomen:notonlydidtheysymbolizethegroundswellofpublicfeelingagainstausterity,theythreatenedtofeminizethestruggle,justaswomenpartisanshadagainsttheNazioccupationofthe1940s.Atanyrate,theirdismissal,literalandmetaphorical,exemplifiedthepolicy

of victimizing the depression’s victims in order to teach theGreek citizenrythatitwastoblameforthenation’simplosion.Bysackingthem,thepreviousgovernment was demonstrating the cleaners’ guilt. By rehiring them I wascommitting a sinworse even than championingparsimony at the expense ofausterity.

Moderationversussubservience

AsIsaw it,my taskas the financeministerofabankruptcountrywasnot tooffer false hope through fake optimism, but rather to promote moderatepoliciesandrealisticexpectations.SoIwaspleasedtobeabletoconcludethatfirstpressconferencewithagenuinelygoodpieceofnewswithregardtoourimpendingnegotiations.‘TVevangelistsofsubserviencehavebeencallinguponusforweeksnowto

issueadeclarationofallegiancetothetroikaanditsprogramme,forotherwiseEuropewillnoteven talk tous,’ I said. ‘Anyonecalling for thismusthaveapooropinionofEurope.’IthenwentontodescribeatelephoneconversationIhadhadonelectiondaywithJeroenDijsselbloem,presidentoftheEurogroupandfinanceministeroftheNetherlands.Jeroenhadcalledtocongratulatemeonourvictoryandlostnotimebefore

askingtheobviousquestion:whatwereour intentionsregardingtheongoingGreek programme? I replied as accommodatingly as possiblewhilemakingthepoint thathad tobemade:ournewgovernment, I said, recognized that ithadinheritedcertaincommitmentstotheEurogroupwhilehopingandtrusting

that itspartnerswouldalsorecognize thatwehadbeenelected to renegotiatekeyelementsofourloanagreementanditsassociatedprogramme.Thusitwasincumbentuponusalltofindcommonground–abridgeIcalledit–betweentheexistingprogrammeandthenewgovernment’sprioritiesandviews.Jeroenagreedimmediatelywithaplain,‘This isverygood,’proposingtopaymeavisit on the followingFriday, 30 January2015.Outof courtesy I offered tovisithiminBrusselsinsteadifthatsuitedhimbetter,butheinsistedthatheandhisentourageshouldhonourtheirnewGreekcolleagueswithavisit.EncouragedbyJeroen’sacceptanceofourcommontask–tothrowasolid

bridgeoverthechasmbetweentheirprogrammeandourmandate–andwithan eye to the unfolding bank run that the previous regime and the Bank ofGreecehadfuelledweeksbefore,Iemphasizedmydeterminationtoestablishcommon ground. As for the narrative of confrontation that the media wereperpetuating,Iwenttosomelengthstodispelitatthepressconference:

Journalists like to report on conflict. They see High Noon shootoutseverywhere. I was listening to the BBC portraymy impendingmeetingwithJeroenDijsselbloemasashootout,asagameofchickentoseewhowill blink first. I understand the appeal of such depictions to ratings-hungryjournalism.ButJeroenandIagreedthatweshalldeconstructthefoundationuponwhichpredictionsofbelligerentclashesarebased.Therewillbenothreats.Itisnotamatterofwhowillyieldfirst.Theeurocrisisonlyhasvictims.Theonlywinnersare thebigots, theracists, thosewhoinvest in fearanddivisionand in theserpent’segg,as IngmarBergmanmighthavesaid.3WithJeroenDijsselbloemonFridayweshallbuildonarelationshipthatannulsEurope’sdeconstruction.

Imeanteverysingleword.AfterthepressconferenceIreturnedtotheofficesonthesixthfloortofind

them eerily empty. My predecessor had left, along with his staff, leavingbehind twoyoungwomen almost trembling in expectationof being instantlydismissedbytheirnew‘radicalLeft’boss.IreassuredthemthatthelastthingIhadtimeforwasapurgeofthepreviousregime’sstaff,closedthedoorbehindme and pulled up a chair at the large table. I took my laptop out of myrucksack,pluggeditintothemainsand,whilewaitingforittobootup,lookedoutofthewindowthatframedParliamentHouse,mymindracingtocompilealistoftheday’smostpressingpriorities.

WhenI lookedbacktomylaptopscreen,IrememberedthatIdidnothavetheWi-Fi password. I got up, opened the door to the secretaries’ office andcalledout,‘Anyonehere?’Soononeofthetwovisiblyrelievedandsomewhatembarrassedsecretaries

appearedfromsomedistantroom.Halfanhourlaterwelocatedsomeonewhoknew someone else who knew the password. And thus the new ministeracquiredavery,veryslowconnectiontotheInternet–notthemostauspiciousbeginningtoalong,lonelycampaignagainstthemosthighlyweaponizedandbestpreparedcreditorsinthehistoryofcapitalism.

Americanfriends

The first phone call I received that evening from overseas came from anunrecognized number in theUnitedStates. ItwasDanae,who had arrived inAustinandwascalling toseehowIwascoping.Assoonaswehungup, thephonerangagain.OnceagaintheunknownnumberonthescreenbeganwiththeUSdiallingcode.Ipickeduptohearadistant,gentlemalevoicewithwhatsoundedlikeaNewEnglandaccent.‘You do not know me, Mr Varoufakis, but I felt the urge to call you to

congratulateyouonyour election and to lend all the support I cangive.MynameisBernieSanders,andIamasenatorfromVermont.MutualfriendshavegivenmeyournumberandIhopeyoudonotmindtheintrusion.’Mind the intrusion?Weneededasmuchsupportaswecouldmuster.After

thankinghim,IexplainedthatofcourseIknewwhohewas–JamieGalbraithhad toldme all about Vermont politics.4 Bernie went on to say that he wasabouttowritetoChristineLagardetostateinnouncertaintermsthathewouldbe watching the IMF’s behaviour towards Greece. Was there anything inparticularthatIwouldlikehimtomention?Yes,therewas.First,IaskedthathestateclearlythattheGreekprogramme

thattheIMFhadbeenpolicingsince2010hadfaileddismallyasaresultoftheridiculouslevelsofausteritytheIMFhadhelpedimpose.Second,Iaskedthathe point out that the resulting great depression had bred themonsters of theNaziGoldenDawnandthatifourdemocraticpro-Europeangovernmentweretobesquashedbyitscreditors,itwashighlylikelythatdemocracyitselfwouldbestrangledinitsbirthplace,justasithadbeenduringtheSecondWorldWar.

Bernie promised hewouldmake both these points, and added that hewouldmakeanother,onethattheInternationalMonetaryFundwouldtakeseriously:iftheIMFcontinueditsabysmalbehaviourtowardsGreece,hewouldpressintheUSSenatetoreduceitsfunding.Since 2012 Jamie Galbraith and I had worked hard to win American

progressives over to the cause of dismantling Bailoutistan. When I calledAlexis to relateBernie’sofferofhelp,Alexisprovided further evidence thatthose efforts had not beenwasted. PresidentObama had called himwith thecustomary congratulations but also with a suggestion that a meeting beorganized soon between JackLew, theUSTreasury Secretary, andmyself. IaskedAlexistoconveymyreadinesstomeetLewathisearliestconvenience.Soon after, Obama made an extraordinarily helpful public statement: ‘Youcannotkeeponsqueezingcountriesthatareinthemidstofdepression,’hetoldCNN’s Fareed Zakaria, adding, ‘At some point there has to be a growthstrategy in order for them to pay off their debts to eliminate some of theirdeficits.’An hour or so later, my mobile phone rang again with yet another US

number. It was Jeff Sachs, a Columbia University economics professor andheadoftheEarthInstitute.Hewascallingtoofferhisservicesinour‘worthystruggle’, as he put it, to convince the creditors to proceedwith large-scalemeaningful debt relief and a sustainable fiscal policy. Jeffwas one of thoseAmerican economists who aged well, turning increasingly progressive withexperience. Always close to the IMF in spirit but also in practice, he hadparticipated in IMF ‘rescue’ programmes in the 1990s, most of which hadgone badlywrong (for exampleYeltsin’s Russia)with some exceptions likePoland. Like the economist Joe Stiglitz, who became a staunch critic of theWashingtonConsensusafterwitnessingthehorrorsperpetratedbytheIMFanditsprogrammesduringthe1998SouthEastAsiancrisis,JeffhadbeenshapedbytheexperienceofseeingfromtheinsidethebadbehaviourofinternationalcreditorsandtheIMFtowardsbankruptedstatessuchasArgentina.Bothmenhadbeentransformedaseconomistsandpublicintellectualsbythesehands-onexperiencesandweretoproveremarkablygenerousanddedicatedsupportersofourcause.MylastAmericanphoneconversationofthedaywaswithJamieGalbraith.I

toldhimabout theauspiciousmessagesfromBernie,JeffandObamabeforediscussinghisarrivalinAthens,whereIwantedhimtobeginurgentworkonourPlanX–thecontingencyplanthatAlexishadfirstaskedmetoprepareat

theendofourlonglate-nightmeetingathisflatinNovember2014andwhichwastobedeployedonlyifGrexitwasforceduponus.GiventhattheECBhada plan for Grexit, devised by among others Thomas Wieser and JörgAsmussen,5asdideverymajorEuropeanbank,wehadadutytodevelopourown.Indeed,Iwasunderexpressordersfromtheprimeministertoreadyone.The reason I picked Jamie to lead the team was that the plan needed to bedeveloped in total secrecy, since public knowledge of its existence wouldundoubtedly accelerate the bank run in anticipation of the devaluation of thecurrencythatwouldinevitablyresultfromitsredenomination,whichwouldinturn provide the ECB with the perfect excuse to close our banks, therebyforcingGrexituponus:PlanXwouldbecomeself-fulfilling.IfIhadaskedacivil servant fromwithin the financeministry to head the team, a fatal leakwouldhavebeeninevitable.Infact,findinganyonewithinGreecewithJamie’sexpertiseandcapacityfordiscretionwouldhavebeenimpossible.Intheevent,heworkedforseveralmonthsonPlanXliterallynexttome–inaroomwithinmyministerialinnersanctum.Acoupleofhours later, the letter thatBernieSandershadsent toChristine

Lagardearrived inmy in-box. Itwasanabsolutegem.Thefollowingextractcapturesitsmarvellousessence.

Thisweek,theGreekpeopleelectedanewgovernmentandinvestedthatgovernmentwithamandatetoreversethefailedausteritypoliciesofthelast six years. Austerity has not only impoverished the Greek people,leadingtoanunemploymentrateofupwardsof25percent,ithascreatedapoliticalvacuumsodangerousthattheneo-NazipartyGoldenDawnhasgainedseatsinparliament…ThepeopleofSpain,Italy,andPortugalarewatching, and if this situation is not addressed with sufficientconsideration for the broad swath ofworkers and citizens involved, theresults of continued austerity could lead to more severe politicalconsequences and a worldwide financial crisis. Fortunately, this is notinevitable.TheInternationalMonetaryFund,asamulti-lateralinstitutionandone

memberofthetroika…hasanimportantroletoplayinthisepisode.AsrankingmemberoftheBudgetCommittee,IamconcernedabouttheIMFusingUnitedStatesgovernmentresourcestoimposeausterityonapeoplethatcannottakeanymoreofitandriskingseverefinancialcontagionindoing so … There is substantial debate over whether the American

governmentshouldincreasetheamountofUSresourcesavailabletotheIMF for lending to foreign countries, including questions over how toscore the cost of such commitments.Withoutwading into this debate, Iwould like to understand how our commitments are being used in thiscase,andwhether thosecommitmentsarebeingused to induce financialcontagionandright-wingpoliticalextremismthroughexcessiveausterityor to aid in helping Greece achieve a manageable debt load and asustainableeconomy.

By the time I had finished admiring the letter, it was 3 a.m. Time to putfriendlyAmericans out ofmymind and convertmymental list of domesticprioritiesintothefollowingday’sconcreteagenda:meetofficialstobebriefedon the state’s official funding situation; appoint secretarial staff and a pressofficer; convene meetings with the tax office to implement our strategy totackle taxevasion;establishclosepartnershipswithmydeputies inchargeoftax policy and budgetmanagement; liberate theministry’smacroeconomistsandstatisticiansfromtheimperativesofthetroikaandsetthemtothetasknotof obfuscating reality but of getting its measure as accurately as possible.Lastly, therewas the sensitive task of putting together a small team to beginworkontheparallelpaymentssystem.Over thenext forty-eighthours the sixth-flooroffice thatuntil so recently

hadattractedourpeople’swrath,wouldbecomemyhome.WithDanaehavingflown back to Austin the day before to close down our apartment and shipeverything back toGreece, at least I had no reason to leave the office. Thefadingredcouchwouldbeidealforthethreehours’sleepavailablebeforetheministrywoke up everymorning.Adrenalinwould do the rest.A few hourslater a bright sun rose above Parliament House bathing the office in aluminousyellow.Thenewdaydawnedhopefully.

Define‘nottoobad’

It began with a meeting involving officials from the Treasury and theministry’s public debtmanagement agency. Iwelcomed them intomyoffice,mindfuloftheneedtodispelanyfearthatIwouldturfthemoutormarginalizethemin favourofSyriza loyalists. InashortopeningspeechI told themthattheirpartypoliticalallegianceorpastcollaborationwith the troika,however

enthusiastic itmight have been,was irrelevant as far as I was concerned.6 Iemphasizedmy determination to be their greatest champion as long as theyworkeddiligentlyandloyally;equally,ImadeclearthatIwouldbetheirworstnightmare if they chose to serve other interests instead. Relief flooded theroom,andaconversationbeganinaspiritofmutualrespectandcooperation.Spreadsheetswerelaidonthelargetable,graphsanddiagramswereshared,

listsof repayments andobligationsweredrawnup, timelineswerepresented(withthecolourreddominatingthechartsfrommid-Februaryonwards).Aftereveryqualificationhadbeenmadeanduncertainassumptionsstated,Iaskedtheoneandonlyquestionthatmattered:‘Howlong?’Itwas28January2015.WhatIwasaskingwashowmanydaysdidwehave

before thestate’scofferswouldbesobareas tonecessitateachoicebetweendefaultingtoourmaincreditor,theIMF,orfailingtopayfortnightlypensionsand civil servants’ salaries. My question was followed by a few seconds’silence.Whenmy eyesmet those of a senior Treasury official, he put on abravefaceandsaid,‘Thingsarenottoobad,Minister.’‘Define“nottoobad”,’Isaid.‘Anythingbetweenelevendaysandfiveweeks,’hereplied,hiseyesturning

tohisnotestoavoidmine.‘Itdependsontherateofourtaxrevenueinflowsand some operations we can perform to repo [sell temporarily] variousreserves,’heconcluded.So much for the Greek-covery and the substantial surplus the outgoing

SamarasgovernmenthadbeencelebratinginabidtoconvincethemselvesthattheGreekpeoplehadbeenwrongtodismiss themat thepolls.Not that Ihadexpectedanythingdifferent,butitisonethingtoknowthenumbers,itisquiteanothertohavethemrecitedtoyouintheelectricchair.

Keepmeoutofjail!

Aphone call to a friend and colleaguewhohadbeen aminister in previousgovernmentssolvedmysecretarialproblem.Summonedbytheirformerboss,FotiniBakadimaandAnnaKalogeropoulouturneduptotakethereins.Theirexperiencewasevidentimmediately:itwasasiftheyhadalwaysworkedthere.In themonths that followed theywouldprove their loyaltyanddependabilitytoo.

Theotherkeyappointmentfor theteam,achiefofstaff,wastakencareofbefore I had even had the chance to look for onemyself. The deputy PM’soffice dispatched a Syriza member and lawyer by training, GeorgeKoutsoukos,whohadbeenworkingasacivilservantinthefinanceministry,to fill this role. While I was suspicious of his connections to Dragasakis,Georgewonmeover–notleastbecausehewasapublishednovelist.NoonewhopublishesnovelswhileservinginGreece’sfinanceministrydeservestobemistrusted,Ithought.Still,while Iwas determined toworkwellwithmyparachuted-in chief of

staff – and in fact ended upworking verywell with him indeed – I felt theurgentneedforaminderwhoseloyaltieswouldnotbesharedwithanyofmynew Syriza comrades, let alone the deputy PM. So I picked up the phone tosummonWassily,thedearfriendwhohadwarnedmeofDragasakismorethanayearbefore.IhadmetWassilyin1978asafirst-yearundergraduateatEssexUniversity.

Ourfirstencounterwasonabasketballcourt.Playingforoppositesides,weclashedfortheball,exchangedwordsthatarereproducibleneitherinprintnorin polite society, and had to be restrained by fellow players. For monthsafterwardsmyfeelingsforWassilywerethoseofintensedislike–aswerehisforme,apparently.ButafterthelongWinterofDiscontenthadcomeandgone,withMrsThatcherhavingmovedto10DowningStreetinAprilandtheJuneexamsapproaching, thegeneralgloomthatdescendeduponus took theedgeoff ourmutual loathing.One evening in the student union barwe agreed tocollaborate on an economics assignment. By the early morning, with theassignment completed, the antipathy had metamorphosed into an intensefriendshipthatgrewovertheyears.7‘What do youwant fromme?’Wassily asked oncewewere inmy office

alone,visiblyunimpressedbythesurroundingsorthefactthathisfriendwasnowministeroffinance.‘To keep me out of jail, Wassily,’ I replied. He understood. Ministers of

finance are at the mercy of their minders. They sign dozens of documents,decrees,contractsandappointmentsdaily.Itishumanlyimpossibletoexaminecloselyeverythingtheysign.Allittakesisahostileorabsent-mindedaide,andsuddenlytheministerfacesthewrathofthepublicorasummonstocourt.Wassilyacceptedwithoutasecondthoughtand,assoonasIhadsignedhis

secondment from the government’s Centre for Economic and PlanningResearch,gotdowntowork.Astheday’smeetingsunfolded,Wassilyroamed

the corridors toworkoutwhodidwhat towhom,asLeninmighthave said,andhowtheyimpededoraidedmywork.

Swisscheese

FamouslyNormanLamontoncequippedthatJohnMajor ’sgovernment,fromwhichhehadrecentlybeenremoved,remained‘inofficebutnotinpower ’.AsIwouldexplaintohimyearslater,hisremark’spertinencereacheditsapogeeinthecaseoftheGreekgovernmentingeneralandmyministryinparticular.Itwas not just that, like any other government, we were at the whim of themarkets’violentreactions.Itwasfar,farworsethanthat.As described in ‘Bailoutistan 2.0’ in Chapter 2, the conditionalities of the

secondbailoutloan,whichhadbeenimplementedinstagesbetween2012and2014,includedmomentousattacksnotjustonsocialspendingbutontheverysovereignty of the Greek state, specifically on its control over essentialdepartmentswithin theMinistry of Finance.Aswell as creating theHellenicFinancialStabilityFacility(HFSF),whichafter2012heldthebanks’majorityshareholdingsonbehalfofthestate,andaprivatizationunitwhosejobwastoconductfiresalesofGreece’spublicassets,bothofwhichanswerednottotheGreekpeoplebuttothetroika,thejurisdictionofthetaxofficehadalsobeenco-opted by our creditors – specifically, to the EurogroupWorking Group,presidedoverbyThomasWieser.Byscoopingoutthesethreecrucialchunksof the Ministry of Finance and placing them beyond the reach of Greece’sdemocratic process, they had effectively turned the ministry into somethingresemblingaSwisscheese.Greece’s tax office provides one of the most fascinating examples of

neocolonial rule in modern times. As Greece’s finance minister, the taxdepartmentwasundermyjurisdictionandnominalcontrol,soifataxevasionscandalbrokeIwouldbeheldresponsibleforitinparliamentandintheeyesof thepublic.Yet Ihadzeroauthorityover the activitiesof thedepartment. Ilacked the right to censure, fire or replace its head, and I was not evenconsultedonhowthedepartmentwasrun–allthisinacountryworldfamousfor tax evasion and for the tax immunity of its oligarchs. In addition, thestatistical authority whose computations of the government’s budget andbalance were used to determine whether the fiscal targets agreed with itscreditorshadbeenmetornotalsoanswerednot tomebut to the troika. Ina

nutshell, I was responsible for, but not equipped to administer, the nation’staxes,banks,propertyandstatistics.Duringthosefirstforty-eighthoursintheministry,withmythoughtstrained

ontheimpendingvisitoftheEurogrouppresident,Iwasdeeplyconsciousofthe fact that a large number of civil servantswithinmyministry understoodthat their careers depended a great dealmore on servingBrussels than theirminister or parliament’s will. In the ensuing months many of those civilservants would prove themselves to be diligent, honest and patriotic byworkinginordinatelylonghourswithconspicuousselflessnessandindefianceof exorbitant pressure from the troika. Nonetheless, reclaiming nationalsovereignty and democratic control on our parliament’s behalf over theirministries–andtheirallegiance–hadtobeashighapriorityasrestructuringthesourceofthatbondage,ourpublicdebt.Tothatend,ImadeanappointmentwiththeheadofGreece’sintelligenceservice.8Yannis Roubatis is a striking yet diminutiveman. Softly but exceptionally

well spoken, he impresses by weighing each of his words so carefully.Originallyajournalist,inthe1980sheservedastheofficialspokespersonofAndreas Papandreou’s socialist government before becoming a socialistmemberoftheEuropeanparliamentinthe1990s.9OnpaperRoubatisseemedwellqualified toheadan intelligenceservicebetterknownforUS-sponsoredsubversion ofGreek democrats and leftists than for defendingGreece fromforeignfoes:asayoungmanhehadwrittenadoctoralthesisatJohnsHopkinsUniversity that exposed the infiltrationof theGreekgovernmentby theCIA,and thegovernmentheserved in the1980sdidagreatdeal tosever the linkbetweenforeignagenciesandGreekspooks.From the word go I felt comfortable with Roubatis, or at least as

comfortableasonecanfeelwithaspychief.Hisanalysisofthesituationournewgovernmentwasfacingwasinsyncwithmine.Hisdeclarationofloyaltyto the government and stated resolve to be our non-intrusive helper werewelcome.Hisadviceonsimplemeasuresthatcouldbetakentodeterthedirtytricksthatouropponentsmightemployduringthenegotiationswaswelltaken.But most of all I appreciated his confirmation that the loyalty of wholedepartmentswithinmyministrylayelsewhereandhismakingmeprivytohowcosy the relationship between the heads of these departments and troikaofficialshadbecome.AfterthatfirstmeetingIwouldbumpintoRoubatisregularlyatMaximosin

an office next to the primeminister ’swhere he oftenwaited tomeetAlexis

beforeorafteroneoftheregularmeetingsofour‘warcabinet’–whichwashow we referred, only partially in jest, to our core negotiating team.10Roubatiswould briefme on the latest intelligence and adviseme on how tokeepmycommunicationswiththeprimeministersecure.ButasIwouldsoondiscover,theheadofone’sintelligenceservicecanimperceptiblyturnfromausefulfriendintoalethalfoe.

Ultimatum

On Friday, 30 January, three days after I had assumed the ministry, thepresident of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem,dropped in. He came with a large entourage that included Thomas Wieser,presidentoftheEurogroupWorkingGroupandthetruepowerbrokerwithinthe eurozone. I waited for them by the sixthfloor lift.Wemet, shook handswarmlyandproceededtomyofficeforsomerefreshmentsbeforemovingtoanadjacentconferenceroom, the two teamsfacingeachotheracrossa largerectangulartable.OnmysideofthetableIhadmytwoalternateministersplusChouliarakis,

chair of my Council of Economic Advisers, Stathakis, economy minister,whoseofficewasonefloorabovemine,andEuclid.Amongtheheavyweighttroika officials on Dijsselbloem andWieser ’s side was Declan Costello, anIrishman famous even in Ireland for his hardline policy towards indebtednations, now theEuropeanCommission’smission chief forGreece, plus theDutchambassadortoGreece.Dragasakismadeashortwelcomingspeechthenlefttheroomimmediately.Ifollowedupwithawelcomingspeechofmyownbefore Jeroen Dijsselbloem said a few words on behalf of the Eurogroup.Nicetieswereexchangedandgood intentionswereaired inwhatcanonlybedescribedasatenseencounter.ThenthemomentoftrutharrivedwhenIinvitedJeroenintomyofficeforatête-à-tête.With the door closed behindus, I attempted tomelt the ice by sharing the

wordsofoptimismwithwhichIhadclosedmyinauguralpressconferenceafew days earlier. Let’s defy the prophets of confrontation, I proposed. Let’sprovewrong themediawho imagine this tobesomeHighNoonencounter. Iassuredhimthatournewgovernmentwasonlyinterestedincompromisesonapath leading to amutually advantageousagreement.But to assist thebirthof

thisnewpartnership,wewouldneedtoworkoutabetternegotiationprocess,onethatwasnotinjurioustotheGreeks’senseofpride.Thetroika’smethodsinGreeceoverthepastfiveyearshadbeencounterproductive.‘Yes,’heagreed.‘Thetroikahasnotleftthebestimpressionhere.’‘That’samajorunderstatement,Jeroen,’Isaidwithasmile.Iurgedhimto

seeitfromtheperspectiveofthepeopleontheground.Foryearsnowgroupsof technocrats dispatched by the IMF, the European Commission and theEuropean Central Bank had arrived at Athens airport, from which they hadbeendrivenathighspeedunderpoliceescortinaconvoyofMercedes-Benzesto the various ministries, where they had proceeded to interrogate electedministersanddictatetothempoliciesthataffectedthelivesofmillions.Evenifthesepolicieshadbeenwonderful, theywouldhavebeen resented. ‘Wemustfindanotherwaytoworktogether,’Isaid,onethatwouldallowourpeopletoembrace whatever policies he and I agree upon. At the very least, Greece’selectedministersshouldnotbeexpectedtoconducttheirbusinesswithanyoneotherthantheirelectedequals;technocratscouldpreparetheground,establishthefactsandthefigures,butshouldnotconducttheministerialnegotiations.Iwashappytohearhimsaythat,yes,heagreedthattheprocesswouldhave

tobereconsidered,althoughinhindsightIsuspecthisaccommodatingattitudewaslesstodowithanappreciationofwhatIhadbeensayingandmoretodowithhisevidenteagernesstochangethesubjectandreturntothesamequestionhehadposedonthetelephoneafewdaysearlier:‘WhatareyourintentionsfortheGreekprogramme?Areyouplanningtocompleteit?’heasked.IrepeatedtheanswerIhadgivenhimoverthephone:ournewgovernment,I

replied,recognizedthatithadinheritedcertaincommitmentstotheEurogroupwhileatthesametrustedthatitspartnerswouldrecognizeinreturnthatithadbeenelectedonlyafewdaysbeforeinordertorenegotiatekeyelementsofthisprogramme.Hisresponsewasabruptandaggressive.‘Thiswillnotwork!’hedeclared.IremindedhimthatwhenIhadgiventhesameanswertothesamequestion

three days earlier, he had replied, ‘This is very good.’ Jeroen brushed myreminder aside. The Greek programme, he mused, was like a horse. It waseitheraliveoritwasdead.Ifitwasalive,wehadtoclimbonitandrideittoitsdestination.Ifitwasdead,thenitwasdead.Notknowingwhattomakeofhismetaphorandunwillingtoadoptit,Itriedtoreasonwithhim.Therewasareason,Iexplained,whythepreviousgovernmenthadfallenon

itsswordandcalledelectionssoearlyinitsterm.Andtherewasareasonwhy

AntonisSamarashadbeensenttotheoppositionbenchesbythevoterswhohadelected us instead. And the reason was simple: it was simply impossible tocomplete the secondGreekprogramme,and thevotersunderstood that. ‘If itcould have been, Jeroen, you and the previous government would havecompletedit,’Iremarked.For amoment he seemed lost forwords, so I continued: the troika’s own

numbers showed that even if the programme was completed and Greecereceivedthefewbillionsleftinthesecondbailoutkitty,wewouldstillbe€12billionshort.WherewouldIfindamissing€12billion?Thinkoftheeffectthisunansweredquestionishavingonprivateinvestors,Iurgedhim:itreinforcestheirresolvenottolendtotheGreekstateagainuntilaseriousrestructuringofour debt has been effected.And think of the broader picture too, I imploredhim:thegovernment’sdebtrepaymentsin2015aloneamountedto45percentof all the taxes it hoped to collect;meanwhile,national income,measured ineuros,continuedtofall,andeveryonewasanticipatinganincreaseintaxestomeet the repayments.No investor in their rightmind invests in an economywheredemandisshrinkingandtaxesarerising.Therewereonlythreeoptionsavailabletous,Isaid.Onewasathirdbailout

to cover up the failure of the second, whose purpose was to cover up thefailure of the first.Anotherwas thenewdeal forGreece Iwasproposing: anew type of agreement between the EU, the IMF andGreece, based on debtrestructuring, that diminished our reliance on new debt and replaced anineffectivereformagendawithonethatthepeopleofGreececouldown.Thethirdoptionwasamutuallydisadvantageousimpasse.You do not understand, Jeroen told me, his voice dripping with

condescension.‘Thecurrentprogrammemustbecompletedorthereisnothingelse!’Itwasanastonishingstatement.Theheadoftheeurozone’sfinanceministers

was refusing to engage with a simple funding issue. He was making itimpossible forme not to ask, ‘Butwherewill themissing €12 billion comefrom,Jeroen?AmIwrongthatthesecondprogrammecanonlybecompletedif a third one is first negotiated?Canyou see anyway thatwould render itscompletion financially feasible without a new programme that can only beagreedtoafterexhaustivenegotiationsbetweenallnineteenfinanceministers[intheEurogroup]?IsthereanydoubtthatIwillnotbeabletocompletethisprogrammeevenifIwerewillingtoviolatethemandatethattheGreekvotersgavemetorenegotiateit?’

Jeroen refused to engage with my questions and the underlying facts.Apparentlyhehadnotcome toAthens todiscussnumbersor financing.Onecould only assume that he had come instead in the expectation that I wouldperforman instantU-turn– a quickvictory allowinghim toboardhis jet atAthensairportwithmyoathofallegiancetotheprogramme,totheEurogroupandtothecreditorsinhisbriefcase.ThefactthatthepresidentoftheEurogroupwassodeludedastothinkthis

was a possibility is a fascinating comment on the recent history of theEuropeanUnion.ItrevealshowexperiencehastaughtfunctionariesoperatingonbehalfofEurope’sdeepestablishmenttoexpectnewlyelectedgovernmentministers,primeministers,eventhepresidentofFrance, tobuckleat thefirstwhiffofanultimatumbackedbytheECB’sbigguns.11Since2008,when theonlythingkeepingmosteurozonememberstates’commercialbanksopenwasthe Eurogroup’s goodwill – whichMario Draghi’s ECB needed in order toissuetheofficialwaiverthatallowedhimtoacceptthebanks’junkcollateralinreturnforcash–severalgovernmentshadsuccumbedtopoliciestheydetested:the Baltic states, Ireland, Cyprus, Spain, Portugal, all had been beaten intosubmission.12Infact,DijsselbloemhadboastedthatthewayCyprushadbeentreated in2013, soonafterhehad takenover theEurogrouppresidency,wasthe‘template’forfuturecrises.Itwasthethreatofbankclosuresthathaddoneit–thiswastheacehecarriedinhissleeveonthedayofhisvisittome–andnowheplayedit.Therewas an alternative to committing to completing the programme, he

toldme. Iwas glad to hear it, I replied hopefully. Turning his eyes tomeetmine, he said purposefully, ‘You and I hold a joint conference where weannouncethattheprogrammehascrashed.’I replied that the word ‘crash’ was not exactly soothing for markets and

citizens.Whatdowereplaceitwith?Ienquired.Ashrugofhisshouldersandalookoffauxpuzzlementwashisresponse.‘AreyouthreateningmewithGrexit,Jeroen?’Iaskedcalmly.‘No,Ihavenotsaidthis,’heprotested.‘Can we please be frank here?’ I said. ‘There is too much at stake to

pussyfootaround.YoudidsaythatifIinsistonrenegotiatingtheprogramme,theprogrammecrashes.Thismeansonethingandonethingonly.Andwebothknowwhatthatis.’ItwasofcoursethattheECB,eithercentrallyorthroughtheCentralBankof

Greece,withdrewitswaiverandrefusedtoacceptthecollateralofGreekbanks

anymore,forcingthemtoclose.Atthatpointourgovernmentwouldhavenooption but to issue its own liquidity. And if the impasse continued ournominally euro-denominated liquiditywould, at some point, turn into a newcurrency.ThiswasGrexit.‘So,youaregivingmeanultimatum,’Icontinued.‘Youareineffecttelling

me: commit to a programme that cannot work or you crash out of theeurozone.Isthereanyotherreadingtowhatyoujustsaid?’ThepresidentoftheEurogroupshruggedhisshouldersagainandgrinned.‘ItisasaddayforEuropewhentheEurogrouppresidentpresentsafreshly

elected financeministerwith an impossible ultimatum,’ I said. ‘Wewere notelected toclashwith theEurogroup, and I amnot interested inclashingwithyou.But norwerewe elected to abdicate during our firstweek in office byespousing an impossible programme that we came in with a mandate torenegotiate.’Oureyesmetinmutualrecognitionoftheimpasse.Theonlythinglefttodo

was to agree on what each of us would say during the press conferencescheduled to follow our meeting, so as to conceal the deadlock and thusprevent it affecting the financialmarkets.Heproposeda firstdraft; Imadeacoupleofcorrections;weagreed.Isuggestedthat,afterthespeeches,itwouldbe best to take no questions. He countered that we had better take a couple.Answering journalists’ pointed questions would give him the opportunity tojanglethemarkets’nervesjustalittle–enoughtoacceleratebyanotchortwothe bank run that the troika had kick-started weeks before. Loath to beportrayedasmuzzlingthepress,Iagreed.Thepressroomwaspacked.OncetheTVfeedshadbeenestablishedandthe

noisesubsided, Ibeganwithpredictablenicetiesconsistentwithmynarrativeof a new beginning in Greece’s relationship with its creditors and theEurogroup. Every word had been agreed beforehand. He too respected ouragreement and did not stray from the script as we laid a veneer of boringnormalityoverthemeeting.Thencamethequestions.ThefirstwasaddressedtoJeroen.Wouldhebeagreeabletotheconvening

ofan internationalconferenceonGreece’sdebt, similar to that inLondon in1953, which had resulted in substantial debt relief for Germany?13 Heresponded flippantly thatEurope already had a permanent debt conference –theEurogroup!Ismiledathisanswer,makingamentalnotetouseitmyselfifanopportunemomentpresenteditself.

The second question was addressed to me. Would I cooperate with thetroika?MyanswerwasfullyinlinewithwhatIhadtoldJeroeninmyoffice:‘Wemustbeclearinourmindsaboutthegreatdifferencebetweentheproperlyinstituted institutions of the European Union, such as the EuropeanCommission and the European Central Bank, as well as internationalinstitutions such as the IMF–organizations and institutions towhichGreeceproudly belongs – and a tripartite committee that is associated with theimpositionofaprogrammethatourgovernmentwaselectedtochallengeandto dispute. Our government will proceed under the principle of maximumcooperationwiththewell-constitutedlegalinstitutionsoftheEuropeanUnion,andofcourse the IMF.Butwitha tripartitecommitteewhoseobjective is theenforcement of a programmewhose logicwe consider to be anti-European,with that committee, which even the European parliament considers to beflimsilyconstructed,wehavenointentiontocooperate.’Itwas the samepoint that Ihad justmade to Jeoren inmyofficeandwith

which he had reluctantly agreed: yes to working closely and well with theinstitutions, but no to the humiliating troika process. As he listened in hisearpiece to the translation of my response, an expression of increasingdisapproval appeared on his face.When the translation finished, he angrilyremovedhisearpieceandleanedovertowhisperinmyear,‘Youjustkilledthetroika!’‘Wow!’Ianswered.‘Thisisanunearnedcompliment.’Turningaway,Jeroenjumpedtohisfeettostormout.ButIhadmanagedto

stand up at the same time and offer himmy hand. Somewhat thrown bymygesture,andashehadtowalkpastmetoreachtheexit,heawkwardlytookmyhand in his without stopping. The photographers pounced. Their picturesshowedanill-manneredEurogrouppresidentrudelybrushingpastmebeforethecustomaryhandshakehadbeencompleted.The streets of Athens would never be the same for me after that press

conference. Taxi drivers, suited gentlemen, old women, schoolchildren,policemen, conservative family men, nationalists and far-Left recalcitrantsalike–awholesocietywhosesenseofprideanddignityhadbeenoffendedbythe previous governments’ servitude to the troika and its political bosses –wouldstopmeinthestreettoofferthanksforthatbriefmoment.Abusdriverevenstoppedhisbusinthemiddleoftheroadtogetoutandshakemyhand.Likeallgoodthings,itcameataprice.Themedia,theestablishmentandthe

oligarchy now considered me Public Enemy Number One. One member of

parliament posted a message of support for the Eurogroup president onFacebook, reading, ‘Hang on, Jeroen!’ This was an echo of a famousexpressionGreek blackmarketeers had used in support of Rommel’sNorthAfricancampaign,fearful thatanAlliedvictorytherewouldbringtheendtoGreece’s occupation and consequently their business.14 Accusations ofnarcissism,boorishnessandsociopathywerethrownatmeindirectproportiontotherisingtideofwarmthandappreciationonthestreets.BesidesearningmetheundyinghatredofGreece’striangleofsin,Jeroen’s

press-room antics had amore tangible effect, boosting the expectation (andtherebythefact)ofanescalatingliquiditysqueeze.TheAthensstockexchangefell to new lows; the banks’ shares declined even faster, and withdrawalsaccelerated.Leavingthepressconference,Irealizedtherewasnotamomenttolose.ItwastimetopackmybagandgoonthetourofnorthernEuropeIhadbeen planning. Its two purposes were to steady the nerves of the world’sfinanciers and to work out the extent to which Jeroen’s ultimatum had thebacking of the IMF and the rest of the Eurogroup, France’s government inparticular.15As Imademyway back tomy office,my secretary informedme that the

French financeministerwas keen to receiveme in Paris. Thiswould be thefirst stop onmy journey,where aswell as formalmeetingswithmyFrenchcounterparts, foursecretmeetingshadbeenplanned:withPoulThomsen, theIMF’s European chief, with Pierre Moscovici, the European commissionerresponsiblefortheEU’seconomicandfinanceportfolio,withBenoîtCœuré,the ECB’s second-in-command, andwith President Hollande’s chief of staff.Next would be London, where the financial world’s heart beats. Over theprevious few days I had been in touch with Norman Lamont, who hadorganized meetings for me with people in the City, Martin Wolf at theFinancialTimesandGeorgeOsborneat11DowningStreet.Additionally,andvery importantly as it turned out, the London branch of Deutsche Bankconvenedameetingofmore than twohundred financierskeen to talk tome.AfterLondon,IwouldtraveltoRometoseePierCarloPadoan,Italy’sfinanceminister.Finally,avisit toFrankfurtwouldberequired, for talkswithMarioDraghiand the restof theECB’sexecutivecouncil in theirbrandnewofficetower.AsIwalked,IcalledEuclidtobreakthenews:wewouldbeoffthedayafter

tomorrow, I told him. Euclid protested that he needed to get hisministry insomeorderfirst.Icuthimshort:thewholepointofclashingwithAlexisand

getting Euclid into his post had been in order to take him with me aroundEurope.‘AtleastIgettokeepyourright-wingtendenciesincheck,especiallyaroundyourTorymates,’Euclidrepliedonlyhalf-jokingly.Aloneinmyoffice,Isatdowntocatchmybreath.Mymobilerang.Itwas

DanaecallingfromAustin.HowwasI?Couldn’tbebetter,Ijoked.Igaveherasketchoftheday’seventsplusmytravelplans.ShecounteredwithanaccountofherownclasheswiththepettytyrantswhoranourbuildinginAustinandthebureaucracyofvacatingtheflat.AndthensheaskedmeifIfeltoverwhelmed.Irepliedthatitwastheenemynearathandthatscaredmethemost,thedomesticestablishmentwithitstentaclesdeepinsidemyministry.Danae’sonlyconcernwasourunity: ‘IfAlexisandyoustick together,youcando it.’To thisdayIthinkshewasright.

Homefront

Ihadtwenty-fourhoursbeforeflyingofftoParis,butwagingwaragainstthedomesticestablishmentcouldnotwaituntilmyreturn.Ataround8p.m.Iwasjoinedbymychief of staffKoutsoukos andWassily.Thedeclarationofwaragainst theoligarchyhadbeenmadebefore theelection. Inan interviewwithPaulMason on the UK’sChannel 4 News I had declared, ‘We are going todestroythebasisuponwhichtheyhavebuiltfordecadeafterdecadeasystem,anetwork that viciously sucks the energy and the economic power fromeverybodyelseinsociety.’WithKoutsoukosandWassilytakingnotes,Isetouttheagenda:catchinghundredsofthousandsoftaxcheatsandshockingGreeksocietyoutof its tax-evadingways;breakingdown thecollusionbetween thesupermarketchains thatexploitedconsumersandtheirsuppliers;protectingafinanciallydesperatepopulationfromtheinvasionofgamblingmachinesthatthepreviousgovernmenthadcommittedmeto;empoweringthegovernment’sownanti-corruptionombudsman;lastly,planningtheassaultonthetowersofsleazethatwereGreece’sfoursystemicbanks.‘Whataboutthemedia?’askedWassily.Pappaswasresponsibleforthatkettleofrottingfish,Itoldhim.‘Yourgoodmate,yeah?’myfriendaskedwithameaningfulgrimace.‘DoIdetectsarcasmhere,Wassily?’Iasked.‘The question iswhether you can detect the opprobrium that yourmate is

spreadingleft,rightandcentreagainstyou,’washisretort.

ItwasnotsomethingIwantedtohear,notleastbecauseIverymuchfeareditmightbethetruth.Onebyonethebattlefieldswerediscussedandourstrategywasdecided.To

combat tax cheats, Koutsoukos suggested that I appoint Panayiotis Danisspecialsecretaryoftheministry’sfinancialandeconomiccrime-fightingunit.This was the only part of the state’s tax office that the troika had not takenunder its tutelage. Stripped of many of its powers and personnel, it was ashadowofitsformerself,butitsformalsurvivalandthefactthatitremainedundermyfullcontrolmadeitanidealfoundationonwhichtobuildateamofuntouchablesledbyDanis.16Chasingtaxcheatsusingnormalprocedureswasnotanoption.Itwouldtake

decades just to identify anything like the majority of them and centuries toprosecute them successfully; the more we caught, the more clogged up thejudicial systemwould become.We needed a different approach.OnceDaniswas on board a couple of days later, togetherwe thought of one:wewouldextract historical and real-time data from the banks on all transfers takingplace within Greece as well as in and out of the country and commissionsoftware to compare the money flows associated with each tax file numberwiththetaxreturnsofthatsamefilenumber.Thealgorithmwouldbedesignedto flag up any instance where declared income seemed to be substantiallylower than actual income.Having identified themost likelyoffenders in thisway,wewouldmakethemanoffertheycouldnotrefuse.TheplanwastoconveneapressconferenceatwhichIwouldmakeitclear

thatanyonecaughtbythenewsystemwouldbesubjectto45percenttax,largepenaltieson100percentoftheirundeclaredincomeandcriminalprosecution.Butasourgovernmentsoughttoestablishanewrelationshipoftrustbetweenstate and citizenry, there would be an opportunity to make amendsanonymously and at minimum cost. I would announce that for the nextfortnight a new portal would be open on the ministry’s website on whichanyonecouldregisteranypreviouslyundeclaredincomefortheperiod2000–14.Only15percentofthissumwouldberequiredintaxarrears,payableviawebbankingordebitcard.Inreturnforpayment, thetaxpayerwouldreceivean electronic receipt guaranteeing immunity from prosecution for previousnon-disclosure.17AlongsidethisIresolvedtoproposeasimpledealtothefinanceministerof

Switzerland,wheresomanyofGreece’staxcheatskepttheiruntaxedmoney.18In a rare example of the raw power of theEuropeanUnion being used as a

force forgood,Switzerlandhad recentlybeen forced todiscloseallbankinginformationpertainingtoEUcitizensby2017.Naturally,theSwissfearedthatlarge EU-domiciled depositors who did not want their bank balances to bereported to their country’s tax authoritiesmight shift theirmoneybefore therevelation deadline to some other jurisdiction, such as the Cayman Islands,SingaporeorPanama.MyproposalswerethusverymuchintheSwissfinanceminister ’s interests:a15percent tax ratewasa relativelysmallprice topayfor legalizinga stashandallowing it to remain in safe, conveniently locatedSwitzerland.IwouldpassalawthroughGreece’sparliamentthatwouldallowforthetaxationofmoneyinSwissbankaccountsatthisexceptionallylowrate,andinreturntheSwissfinanceministerwouldrequireallhiscountry’sbankstosendtheirGreekcustomersafriendlyletterinformingthemthat,unlesstheyproduced the electronic receipt and immunity certificate provided by myministry’swebpage,theirbankaccountwouldbeclosedwithinweeks.Tomygreatsurpriseanddelight,mySwisscounterpartagreedtotheproposal.19Themeritoftheschemewasitssimplicity.Wewouldnotbeaskingpeople

to repatriatemoney from foreign banks or even to declarewhere theywerekeepingit,whetherinSwitzerlandorunderthemattress.Byofferinginsteadalow tax rate with zero penalties or bureaucracy, I expected to replenish theemptystatecofferswithagreatdealofmoney,buyingmyministry timeandfreedom.Itwasalreadymidnightwhenwewrappedupourdiscussionofthisplan,but

we were nowhere near finished for the night. Next we discussed the greatplague that was about to be unleashed upon our weakest citizens: theapproximately 16,000 video lottery terminals that the privatized nationallotterycompanyOPAPhadsecuredalicencetointroducethroughoutGreece.Apopulationdevastatedbypovertyandlossofincome,inthemidstofagreatpsychological and economic depression, was to be milked of the lastremaining cash in its pockets through the mass installation of gamblingmachines.Icouldscarcelyimagineavilerpolicyendorsedbyacivilizedstate.InitiallyItoyedwiththeideaofrescindingthelicence.Theproblemwasthat

OPAPwouldlitigateandprobablywin,costingthestatemoneyitdidnothave.But there was another way. The finance ministry was responsible for thegamblingregulator,thequaintlynamedHellenicGamingCommission.20Sincewe could not eliminate the virus,wewould have to regulate it instead. Tworestrictionscametomind:onewasamaximumlossperpersonperday(alimitof€60 seemed reasonable); theother theobligation to type into themachine

one’staxfilenumber,whichwouldactasadisincentivetoanyonewhomightnotwant there to be an official record of their gambling, exclude underageplayersandensurethatwinningscouldbetaxedaspertheexistinglegislation.Koutsoukos liked the idea and suggested someone to chair the GamingCommission. Two months later, after many trials and tribulations, AntonisStergiotis’sappointmentwasapprovedbyparliamentatmyrecommendation.21Nextontheagendawerethecorruptpracticesofpowerfulcompanies.The

goodpeopleoftheConfederationofNorthGreekIndustrieshadalertedmetothe restrictive, cartel-like practices of certain supermarket chains, oilcompaniesand the like,whichwereundermining theeconomy.Forexample,supermarketswould require small-scale producers to pay them for stockingtheirgoods–for‘advertising’themintheirstores–ineffectforcingthemtoreducetheirprices.Yettheproducerswouldstillpaytaxonthehigherdeclaredprice, with the supermarket pocketing the difference. Similarly, I had it ongoodauthoritythatanoilcartelbigwigwasexporting€300millionworthofrefinedpetroltoBulgaria,butBulgariawasreportingimportsofnomorethan€100million.‘Whatishappeningtotheremaining€200million?’Iaskedmyinformant.‘Itispouredintosomeditchinno-man’slandbetweenGreeceandBulgaria,’ was his sarcastic answer. By that he meant that tanker trucks leftGreece with fully documented exported petrol but then re-entered via someillicitdirtroadwithoutcrossingtheBulgarianborder.ThepetrolwasthensoldinGreecesansVATandfueltax.Corruptionwithinourministrieswaswhatallowed thesebigbusinesses to

functionwithimpunity.Therewasaloneanti-corruptionwarrior,Wassilytoldme, a Mr Rakintzis, the official state ombudsman, whose job it was tocoordinate the fight against graft. I would make a point of meeting him,increase the resources available tohis depletedoffice anddo something thathadnotbeendonebefore:stageajointpressconferencethatwouldannouncethefinanceministry’sfullsupportofhimandhisoffice.ThelastitemonouragendathatnightwasGreece’sbanks.Iaskedforideas

onhowtoapproachtheimpendingconfrontationwhenIputmyproposalfor‘europeanizing’ them to the EU. Wassily interrupted me in typical fashion:‘Thehorseshavebolted,Yani,’hesaid,showingmeadecreethathadarrivedthat evening from thedeputyprimeminister ’soffice, fullyauthorizedby thecabinetsecretary.ItstipulatedthatjurisdictionoverallmatterspertainingtothebankshadbeenmovedfromtheMinistryofFinancetotheofficeofthedeputyprimeminister. ‘Don’t tellmeIdidn’t tellyouso,’ saidWassily. ‘Dragasakis

hastakenhisbankerfriendsunderhiswingtoprotectthemfromthelikesofyou.’ Fearing thatWassily might be right, I still had no choice but to giveDragasakisthebenefitofthedoubt.Before calling it a night, I asked Chouliarakis, chair of the ministry’s

CouncilofEconomicAdvisers,tocometomyoffice.Hearrivedaquarterofan hour later, clearly unhappy to have been summoned fromhis own officejustdownthecorridor.AsIwouldbemeetingsecretlywithwell-armedtroikaofficials, I told him itwould be useful to have inmy briefcase a rough andreadyfirststabatadebtsustainabilityanalysis(DSA)withwhichtomaketheinitial case for debt restructuring being our government’s top priority.Chouliarakis left the room and returned a shortwhile laterwith a two-pagedocument:itwastheDSAdrawnupbytheIMF.Giventhatwehadonlytakenover threedaysearlier, itwasperfectlyunderstandable thatChouliarakishadnotyetproducedaDSAofourown.WhatwasnotacceptablewasthathebegantodefenditsaccuracyandvaluewhenIknewthateventheIMFknewit tobewrong.InthenicestpossiblewayIaskedhimtogobacktothedrawingboardanddoitagain.Withoutexpresslyagreeingtodoso,hemadehisexcusesandleft.With the long day finally at an end, I collapsed on the red couch, where

Wassilywasalreadysprawled.Itwas3a.m.onSaturday,31January.‘Ithinkwedidwelltoday,Wassily,’Iventured.He looked at me. ‘Yes, you did well, but I am prepared to wager good

moneythatinsixmonthsDragasakiswillbeprimeministerandChouliarakiswillhavereplacedyou.’‘Maybe–’Ismiled‘–butatleastwewillknowthatwedidourbestandthey

theirworst.’That night I went home for the first time in seventy-two hours. I walked,

alone. It tooknomore than twentyminutes,pastMelinaMerkouri’soversizebustoppositeHadrian’sGate,takingarighttowardstheHerodTheatre,thenasharp left at theNewAcropolisMuseum,and Iwashome.A fewpedestriansandataxidrivernoticedmeandgavemethethumbsup.Thosesolitarywalksfromtheministrytoourflat,orbetweenMaximosandSyntagmaSquare,weretobecomemysourceofhopeandcourage.Mullingoverthepreviousday,thinkingaheadtomytripabroad,T.S.Eliot’s

linecametomind:‘Ifyouaren’tinoveryourhead,howdoyouknowhowtallyouare?’

Lull

Aknockonmydoorataround11a.m.wokemeup.ItwasEsmeralda,Danae’sdaughter,checkingonme.WherehadIbeenforthepastthreedays?WasIinonepiece?Ireassuredherthatallwaswell.Shepointedoutthatsightseershadbeen gathering outside our first-floor flat trying to get a glimpse of theinterior, the more daring of them photographing one another astride mymotorcycle. She warned me in a motherly fashion to put some clothes onbeforegoingintothekitchenareatomakecoffee.Paris-bound in theearlyevening,myplanwas tostay induring theday to

prepareaone-page technicalnon-paperondebt restructuring. Iknewthat theofficialsIwasabouttomeetlabouredunderthecarefullycultivatedimpressionthatmygovernmentwasabouttodemandadebtwrite-offthatwaspoliticallyunfeasible.Withmynon-paperIsoughttodemonstratethatmutualgainswerepossible.ForyearsIhadrecitedtomystudentsAdamSmith’sfamouslines‘Itis not from the benevolence of the butcher, the brewer, or the baker thatweexpect our dinner, but from their regard to their own interest. We addressourselves,nottotheirhumanitybuttotheirself-love,andnevertalktothemofourownnecessitiesbutoftheiradvantages.’22Similarly,itwouldbeawasteofbreathtoappealtothecreditors’humanity,

toclaimthatGreecehadbeenunfairlytreatedortoinvokesomemoralrighttodebtrelief.ThesepeopleknewperfectlywellhowtheGreekshadbeentreatedand they cared not one bit.My taskwas towin awar not a debating societyargument.TodosoIhadtoaddressmyselftothecreditors’ownadvantages.So, in the non-paper (reproduced in Appendix 4) I illustrated how not

signing up to further extend-and-pretend loans could serve the creditors’interests. It contained simple debt-swap ideas which would cost them,politically and financially, far less than the continuation of the vicious cyclethat had begun in 2010 or the throttling of our government that Jeroen hadhintedatthedaybefore.WhenIfinishedit,IcalledXenia,myeleven-year-olddaughterwholivesin

Sydney.‘Dad,’shesaidbeforeIevengotthechancetosayhi,‘doyourealizethat youhave ruinedmy life?’Apparentlypaparazzi had campedoutsideherschoolwaiting to snapa shotof theGreek financeminister ’sdaughter. Ididmy best to soothe her, to no avail. ‘Why can’t you just resign? Life isunbearable,’sheinsisted.Itoldherthatsheshouldnotworry;plentyofpeople

wereworkinghardtobringaboutmyresignation.Shewasnotreassuredintheslightest.WhenXeniahadendedourchat,alingeringworryresurfacedinthesilence

of the apartment. Would Alexis, Pappas and Dragasakis back my debt-restructuringproposals?Yes,theyhadagreedtoitsbasiclogicaspartofourcovenant and had given me carte blanche to propose such debt swaps.Nevertheless,priortomyenlistmentSyriza’spositiononpublicdebthadbeennothingmore than a crudedemand for an unqualifiedwrite-down.With halfthepartystilldemandingaunilateralhaircutofmostofthedebt,mostnotevenprivy to the idea of a debt swap, and with only a tenuous, verbal covenantbinding the leadership trio tomy strategy, I could easily imaginehaving therugpulledfromundermeathomewhileinthethickofthebattleabroad.Theonly colleague that I trusted tounderstand fully and supportmydebt-

restructuringproposalswasEuclid.AsaSyriza insider,hecouldpresentmyproposalstothepartyfaithfulforwhattheywere:ashrewdstrategyforgettingGreece the debt relief it needed without putting Chancellor Merkel in apolitically impossiblesituation. IspentanotherhourpreparingabriefingforAlexis,copiedtoPappasandDragasakis,hopingtobringthemintothefoldaswell by demystifying my proposals and providing the arguments andmotivationtheywouldneedtobackthemwithinSyriza’scentralcommitteeandin cabinet against those who might accuse me of insufficient revolutionaryfervourorofbackpedalling.Itwasafternoonbythetimethenon-paper,thebriefingtoAlexisandseveral

urgentphonecallswerebehindme.IlookedatmywatchandrealizedIhadanhourandahalfbeforeIhadtobebackattheministry,whereacar(asmallten-year-oldHyundai,now that theBMWsweregone)wouldpickmeup to takemetotheairport.Mysisterhadtextedmeearlier tosaythatourninety-year-oldfatherwasvisitingher; if Icouldspare the time,aquickvisitmightbeagoodidea,asIcouldseethemallatonce:mydadandsister,herhusbandandmyeight-year-oldniece. I jumpedon themotorcycleandwithinfiveminuteshadcarvedmywaythroughthethinSaturday-afternoontraffic.Arrivingatmysister ’sflatwastostepoutofmylifeasaministerandintoa

vibrantly comforting, other world. Seeing my relatives gathered together,doingmundanefamilythings,Irealizedhowpainfulseverallacunaehadbeen:Danae’s absence in Austin, the loneliness of my political position and,underlying them both, the loss of my mother, which I had dared not

acknowledgethesepastsevenyearsexceptattheoddmomentwhenmyguardwasdown.

7

AuspiciousFebruary

Backattheflat,Ipreparedasmallsuitcase,slippedmylaptopintomyrucksackand stepped outside to hail a taxi.Uncharacteristically forAthens, the driverwhopulledovergotoutofhis cab togreetmeandplacemy suitcase in theboot.TenminuteslaterwewereatSyntagmaSquare,infrontoftheministry.Lovelyasthedriverwas,hisgoodwishesforanoverseastripwhichthemediawerereportingas‘pivotal’forthenationweresolengthythatIwaseventuallyindangerofmissingmyflight.WhenIfinallymanagedtobidhimfarewell,IwassoanxiousthatIrushedfromthetaxiclutchingonlymyrucksack.Itwasn’tuntilIreachedthedoorwayoftheministrythatIrealizedIhadleftmysuitcaseinthecab,containingnotjustmychangeofclothesbutmyovercoat.AllIhadwithmewastheblackjacket,whiteshirtandblacktrousersIwaswearing.Toolate,Ithought.IwouldhavetodosomeshoppinginParis.Itwasamistakethatwouldleaveasmallmarkonculturalpolitics,atleastintheUK.OntheplaneEuclidwasrereadingaJaneAustennovel.Restless,Itookouta

notebookandscribbleddownmythoughts

Ourmessagetoourpartnersisitcannotbebusinessasusual.TheGreeksocialeconomyissubjecttoapersistentdoom-loopbetweenpublicdebt,privatelosses,negativeinvestmentandaviciousdeflationarydynamic…Ourmessagetoourselvesisitcannotbebusinessasusual.Weneedto

reform.Reforms are not a necessary evil – it is our dream to live in aGreece that reforms itself on the basis of a reformprogramme thatweown,notonethatappearstoussymbolicofnationalhumiliation.Nooneowes us a living.But no one has the right either to hold us in debtors’prisoninperpetuity,preventingusfromearningourkeep.The troika’s reform agenda, against the backdrop of the nation’s

pauperization, was likeMcKinsey implementing a plan to restructure acorporationwithout support from shareholders and in opposition to theBoard…

Greece has been gazing too long into the abyss. And the abyss hasbeguntogazebackatus.Timetoturnourgazetohope…In1967itwasthetanksthattoppledGreekdemocracy.YesterdayIwas

threatened,bynolessafigurethanthepresidentoftheEurogroup,withaclosureofthebanks.DemocraticEuropeshouldnottoleratethis.

Uponlanding,IwasmetbyourambassadorinParis.ItwasaftertenatnightonSaturday.MysecretaryhadalreadyinformedhimthatIwouldbearrivingwithout any coat or change of clothes, so he dutifully rushed me to theChamps-Elysées in search of a shop that wasn’t closed. Only Zara was stillopen. The ambassador and I rushed upstairs to themen’s department to findtheysoldnocoatsandthattheonlyvaguelysuitableshirtstheyhadweretwoultra-tightones,bothblue.Lackingalternatives, Ibought them.Butwhatofacoat? The shops would be closed on Sunday, and my meetings in Londonbegan at 8 a.m on Monday. More importantly, the temperature was belowfreezing. I was anxious enough at the prospect of confronting some ratherpowerfulpeople;theprospectoftremblingwithcoldasIdidsowastoomuch.‘Nottoworry,Minister,’saidtheambassadorashewasdroppingmeoffat

myhotel. ‘Ishall runhomeandfetchacoat that I thinkwill fityou.’Halfanhourlaterhereturnedbearingalongishleatherovercoat.EvenIcouldseethatitwasnotexactlyministerial,butImustadmitI thought it ratherswankyandoffbeat (and itcertainlyenhancedmyopinionofGreece’sambassador to theFrenchRepublic).Moreover it had twomajor advantages: it fittedme and itwaswarm.Littlerealizingthattwodayslaterthecoatwouldbecomefamous,Igratefullyacceptedit.At7a.m.onSundayIwasupandreadytogo.Beforemyofficialmeetings

with Michel Sapin, France’s finance minister, and Emmanuel Macron, thecountry’s economy minister, my schedule began with a series of secretmeetingstobeheldinquicksuccessioninaprivateroominthebasementofour hotel, out of sight of prying journalistic eyes. First up was PierreMoscovici, the European commissioner for economics and finance, whoapparentlylivednottoofaraway.

Promisingliaisons:1.Thecommissioner

BeforehebecameacommissionerattheEU,MoscoviciwasFrance’sfinanceminister.WhentheEuropeanCommission’stopeconomicpostbecamevacant,theFrenchpresidentFrançoisHollandeinsistedthataFrenchmanbegiventherole.But therewas a catch.Berlinwas (and remained) eager to seeBrusselsclamp down on France’s budget deficit, so the last thing theywantedwas tohandthisjobtoaFrenchman,farlessaformerfinanceministerofFrance.Ontheotherhand,BerlinhadtorewardPresidentHollandeforthemajorU-turnhe had performed on their behalf in accepting their austerity agendaimmediatelyafterwinningtheelectiononthebackofacampaignpromisetoresist it. This conundrum was solved in a manner that anyone in PierreMoscovici’splacewouldhavefounddemeaning:Moscoviciwasgiventhejob,butanewposition,vicepresidentoftheEuropeanCommission,wasinventedtooverseehim.Toaddinsulttoinjury,BerlingavethisnewposttotheformerprimeministerofLatvia,whosegreatestclaimtofamewastheimpositionofausteritymeasuressoharshthatthey‘solved’hiscountry’seconomiccrisisbycausinghalfthepopulationtoemigrate.FromtheoutsetPierreapproachedmeasafriend,acomradeeven.Hetold

meheunderstoodmyargumentsentirely.At somepointheconfessed that inhisyouthhehadbeenaMarxist.Thoughnolongeraradical,hewantedmetounderstandthattherewasenoughofaleft-wingerleftinhimtoappreciatemygovernment’sposition.NowonderBerlindidnottrusthim.WhenIdescribedmyrecentencounterwith JeroenDijsselbloem,hewincedwithdistasteathisbehaviourandadvisedmetopaynoattentiontohisthreats.TakingheartatPierre’swarmth,Itestedmyagendaonhim:itwasessential

thatadifferenttypeofagreementshouldgovernGreece’srelationshipwiththeEU,buttogetachancetohammeroutwhatthatshouldbeweneededtimeandfiscal space; we needed, in other words, a six-month bridge between thepreviousprogrammeandanewcontractbetweentheEUandGreece.Iusedtheword‘contract’inthespiritofJean-JacquesRousseau,Iexplained:amutuallybeneficial relationship between equals. This new long-term contract mustincludeproperdebtrestructuring,arealisticfiscalpolicyandareformagendathat targeted the oligarchy. Lastly, we needed to replace the troika’s currentattitudetoGreecewithaprocessthatrespectedGreeksensibilitiesandtheruleoflaw,bothEuropeananddomestic.WhenPierreresponded,Icouldhardlybelievemyears:heofferednothing

less thanapaean to the agenda Ihad justoutlined.The troika’smethodshadbeenverybadfortheEU’simage,headmitted.‘Ithastoend’werehisspecific

words. To my joy and amazement, he also agreed with my point aboutseparating the EuropeanCommission, the ECB and the IMF from the troikathat they had assembled – preciselywhat had causedDijsselbloem’s outragetwo days previously. ‘Technocrats must talk with technocrats and ministerswithministers,’heacknowledged. Iadded that itwasabsurd that theofficialscharged with representing Greece’s central bank were acting as bailiffs andimposing fire sales upon the government they were meant to serve. Pierreagreed wholeheartedly. It was unacceptable, he reiterated, adding that hethoughtitimportantnotonlyforGreecebutalsoforEuropethatthetroikabereplacedwithdirectpoliticalnegotiationsovereconomicmatters inBrusselsbetweenmeandhim.Therewashardlyanythingleftformetosay.Hehaddonemyjobforme.So

weshookhandswarmlyandagreedtoremainintouchinordertoplanforthefirstEurogroupmeeting,scheduledfor11February,whenthisnewchapterinourrelationshipwouldcommence.‘Ihope that this is indeedanewbeginning,Pierre,’ I saidas Iwalkedhim

upstairstothelobby.‘Itis,itis,’herepliedsmilingwarmly.Euclid,who had been present throughout, seemed amused. ‘Let’s seewhat

goodiesourfriendfromtheIMFhasinstoreforus,’hesaid.

Promisingliaisons:2.Thetroikaman

Poul Thomsen, my next guest in the hotel’s dungeon, is probably the mostdespisedforeignerinGreece.ThetallDane’ssurnameissynonymouswiththetroikaandBailoutistan.In2010,whenthetroikawasbeingassembled,hewasappointedbytheIMFtoheaditsGreekmission.Unlike the ECB or the European Commission, the IMF had decades of

mission experience. In the 1970s its technocrats had made a name forthemselves by visiting failing states in Africa and Latin America to imposeausterity, privatizations, school and hospital closures, liberalization of foodandfuelpricesandthelikeinexchangeforIMFloans.Whenthetroikawasputtogether by Berlin to do the same on Europe’s periphery, beginning withGreece,IMFtechnocratsweredeployedtoleadtheway.UnlikepreviousIMF

mission chiefs though, Thomsen was being entrusted with the fortunes of aFirstWorldcountry.1AsarewardforhisunmitigatedfailureinGreece,Thomsenwaspromoted

to head the IMF’s entire European department. Negotiating with Thomsenthereforepresentedaspecialdifficulty:hehadavestedinterestinresistinganyacknowledgement that the Greek programme had failed. It was a little likenegotiating the dismantling of Bernie Madoff ’s Ponzi scheme with BernieMadoff.To my intense surprise, Poul Thomsen needed no persuasion. Having

listenedtomyanalysisofGreece’spredicamentandmyagenda,heofferedaresponsethatmakesmesmileeventothisday:‘Look,weknowthatwecannotexpect a left-wing government to do things that even your right-wingpredecessorswouldn’tdo.Iunderstandthatyouneedtobringbackcollectivebargainingandcannotexpectyoutoconsenttoprivatizingeverything.2Buttheone thing that we would expect of you, in accordance with your ownpronouncements, is that you go after the oligarchs, targeting tax evasion inparticular.’WasIdreaming?Itoldhimhehadmycast-ironguaranteethatwewouldnot

leaveanystoneunturnedinpursuitofthem.Wewouldalsoselltotheprivatesectorassetswhoseprivatizationwouldbenefitoursocialeconomy,aslongasthenewownerscommittedthemselvestohighlevelsofdirectinvestmentandproper protection for workers and the environment. But, I added, for anyreformagenda towork,wewouldneedaget-out-of-debtors’-prisoncard.Atthat point I took frommy folder the one-page non-paper outliningmy debtswaps proposals and gave it to him. Thomsen looked at it, smiled anddumbfoundedmeoncemore.‘Thisisfine.Butitisnotenough.Weneedanimmediateannulmentofpart

ofyourdebt.Noswaps,nodelays.Justtake€53billionanderaseit.’That’sit,Iconcluded:Iamdreaming!Hewastalkingabouteliminatingata

stroke the entire debt thatGreece still owed the EUmember states from thefirstbailoutof2010.HadsomememberofSyriza’sLeftPlatform infiltratedThomsen’smind?Washepossessedbysomeradicalspirit?SuddenlyI foundmyselfon thedefensive. Icouldnothaveagreedmore, I

toldhim,buthowcouldBerlinbepersuadedtoagreetosuchaproposal?AndwhataboutalltheotherEUgovernments?Wasitpoliticallyfeasibleforthemtogetthisthroughtheirparliaments?

Thomsen’s reply turned on a technical point: the monies given to Athensunderthefirstbailoutagreementwereexceptionalinthattheywereallbilateralloansfromothereurozonecapitals;bycontrast,thesecondbailoutloanscamefromEurope’sbailout fund, theEFSF,whichhadalso lentmoney to Ireland,Portugal,SpainandCyprus.IfwerestructuredGreece’sdebttotheEFSF,thenDublin, Lisbon, Madrid and Nicosia would seek similar relief, whereasGreece’s first bailout could be annulled without giving the other bailed-outcountriesanygroundsforprotest.Asdesirableashisproposalwas, I toldhim, I stilldidnotseehowBerlin

would agree to it, nor how he would avoid the accusation that he wasadvocatingtheannulmentofdebtowedtoEuropebutnottotheIMF.‘I’m just telling you what the IMF position is,’ he said, shrugging his

shoulders.Notwishingtospoilawonderfulfirstmeeting,Iturnedtheconversationto

thesubjectofGreece’sprimarysurplustargetsandstressedtheimportanceoftheirbeingsensible,ataround1.5percentofnationalincome.‘Iagree,’Thomsenrepliedlaconically.MySundayinPariscouldnothavebegunbetter.Wouldmynextguestspoil

it?

Promisingliaisons:3.France’sECBman

Thirdon the listwasBenoîtCœuré,widely regardedasFrance’smanon theECB Executive Board, a description that he detests but which he can hardlyescapegiventhat,priortomovingtoFrankfurt,hehadspenthisentirecareerin the FrenchTreasury.Amild and agreeableman, Cœuré seemed tome tohaveagoodgraspofthechallengetheECBfacedgiventheeurozone’sterribleeconomicandfinancialarchitecture.I was pleased at the urgency of the first question he raised: was I really

intending to restructure unilaterally theGreek government (SMP) bonds thattheECBowned?ItwasamatterofgreatconcerninFrankfurt,hetoldme.Iwashappy to settle thismatter right away.Frommypoint ofview, these

bondswerebothablessingandacurse,Iexplained.TheywereacursebecausetheirpurchasehaddoneabsolutelynothingtohelpGreecein2010,andhadtheECBnotboughtthemthatpartofGreece’sdebtwouldhavebeenwrittendownbyaround90percentin2012.‘HavingtoborrownowfromEUtaxpayersto

pay theECB forbonds that it shouldnothavepurchased in the first place isridiculous to say the least,’ I said. At the same time, they were a blessingbecausetheygavetheECBandGreececommoncause–andleverage–againstDijsselbloem and the Eurogroup. If the ECB threatened to close down ourbanksatDijsselbloem’sbehest,wewouldreplywithacounter-threat towritedowntheSMPbondsunilaterally;neithertheECBnorGreecewantedthis.Mysimpleproposalwas: let’snot threatenoneanother. IfBenoît toldJeroen thattheECBwouldnotbepartofacoupagainsttheAthensgovernment,thenwe,the Athens government, would not even consider any unilateral moves inrelationtothesebonds.‘Canweagreeonthis?’Iasked.Hesmiled.Ofcoursethereshouldbenothreats,heagreed.WemovedontothedebtswapsIwasproposing.Igavehimmynon-paper

andbrieflytalkedthroughit.Hethankedmeforit,thoughitwasevidenthehadstudied my proposals already. He thought they were sound, but the mainconcernoftheECBExecutiveBoardwasthattheyshouldnotbeseentoviolatetheir own rulebook. I claimed that swappingSMPbonds for anewperpetualbond or equivalent debt instrument was perfectly consistent with the ECBcharter.Hethoughtaboutitforamomentand,whileheremainedconcerned,cametotheconclusionthat,‘Yes,thismightwork.’Last we discussed the burning issue of liquidity. Our government would

needafewmonthsofbreathingspaceinwhichtoconductnegotiations,whichmeant some way of meeting the repayments to the IMF that were imminentwithouthaving toscrape thebottomof thebarrelof theGreekpublicsector,endangeringpensionsandcivilservicesalaries.IremindedBenoîtofwhattheECBhaddoneinthesummerof2012tohelpthethenfreshlyelectedSamarasgovernmentduringasimilarperiodofnegotiations: ithadraisedtheircreditcard limit (in Treasury bills) from €15 billion to €18.3 billion in order toenablethemtomaketherepaymentthenduetotheECB.3Benoîtremembered.Andheagreedthatsomethingofthesortwouldhaveto

bedone.‘Exceptthat,insteadofdoingthisyouhavebeentighteningthenoosearound

ournecksevenbeforewewereelected,’Isaidtohim.Benoît pretended not to understand. So I reminded him of Stournaras’s

remarkable statement on 15December 2014,which had begun the bank run.‘This was an act of war against the next government, a uniquely offensivederelictionofdutyintheannalsofcentralbanking,’Isaid.

Benoît lowered his head and toldme that he too thought that Stournaras’sstatementhadbeen‘inappropriate’and‘inexplicable’.‘And I do not think that Stournaras actedwithout theOK from Frankfurt,

Benoît.NoonebelievesthisinAthens,’Iadded.Benoîtsaidnothing.Fillingthesilence,Icontinued: if theECBdidn’tdowhatwasnecessaryto

endabankrunofitsownmaking,ifitdidn’textendtousthehelpinghandweneeded in order to conduct our negotiations,manywould see it as politicalinterventionby theECB–one setof standards for theSamarasgovernment,another for ours. Benoît smiled again, this time more widely, as if inacknowledgement of Frankfurt’s curious position: officially apolitical but inrealityplayingakeyroleinEuropeanpolitics.

WhoareyouandwhathaveyoudonewithmyMichel?

Aftermylastinformalmeetingofthatlongmorning–whatturnedouttobeapointlessconversationwithoneofPresidentHollande’saideswhoapparentlylackedtheauthoritytosayanythingofsubstance–itwastimetoswitchfromunofficialtoofficialmode.TheGreekembassy’sGermancararrivedoutsidethehoteltotakeustomeetingswithFrance’sfinanceandeconomyministers.Thethreeofus,Euclid,theambassadorandmyself,rodequietlytoBercy,thelarge complex where both ministries are housed on the banks of the RiverSeine.At theentranceIwasmetbyaneffusiveMichelSapin.Ajovialmaninhis

earlysixties,SapinwastheonlyfinanceministerintheEurogroupwhodidnotspeakEnglish.Buthemadeupforitwithawarmcharacter.TypicallyLatininhishandgesturesandbodylanguage,hemademefeelgenuinelywelcomeaswewalkedtohisoffice.Onceweweresatdownwithouraidesandtranslator,Iwasaskedtomakean

opening statement, which I used to outline themain items on our economicagenda, my debt-restructuring ideas, including the non-paper, which Sapinseemedkeentosee,prefacedwithanexpressionofallegiancetoEuropeanismandmy contention that theGreek crisis, and its perpetuation,waswoundingEurope unnecessarily. I explained that I was proposing a new relationshipbetweenGreece and the EU based on Jean-Jacques Rousseau’s concept of acontractbetweenequals.

Michel’s response was that of a brother-in-arms: ‘Your government’ssuccesswillbeoursuccess.ItisimportantthatwechangeEuropetogether;thatwereplacethisfixationwithausteritywithapro-growthagenda.Greeceneedsit.Franceneedsit.Europeneedsit.’It was the cue I needed to put forward the basic elements of theModest

Proposal,which StuartHolland, JamieGalbraith and I had beenworking onforyears.IexplainedhowtheECBcouldpartiallyrestructurethewholeoftheeurozone’spublicdebtwithouthaircutsandwithoutaskingGermanytopayforeveryone else or guarantee the periphery’s public debt. I outlined howinvestment-ledrecoverycouldproduceanewdealforEuropebychannellingtheECB’squantitativeeasingprogrammeintoinfrastructureprojectsorgreenenergybondsissuedbytheEuropeanInvestmentBank.Michellistenedintentlyand,when Ihad finished,declared that suchproposalswere theway forwardforEurope.Wehaddelayedtheimplementationofsuchpoliciesfortoolong,he said. Togetherwemust restart Europe, he thundered. The only thing thatMicheldidnotdowassuggestwejoinhandsandrushouttostormtheBastillesingingtheMarseillaise!Our discussion, lengthened as it was by the need for translation, lasted

aroundanhourandahalf. Itwaspleasantandfreeofanydisagreement,andcomingasitdidaftersuchencouragingconversationsearlierthatmorning,Ibegan to put the confrontation with Jeroen Dijsselbloem behind me andconsideradecentcompromiseagreementasarealpossibility.AsMichel and I were making our way from his office to the obligatory

press conference – he speaking in French, which I understand, and Iresponding in English,which he grasped sufficiently – he informedme thatBerlin had been in contact. They were very upset that I had come to Pariswithoutalsooffering togo toBerlin,he toldme ina lowvoice. Iwasmorethanhappytogo toBerlin too, I toldhim.ThereasonIwas inParisandnotthere was that he had invitedme and they had not.My intention was to askWolfgangSchäuble toAthens, since he had not invitedme toBerlin.Michelsmiled.‘YoushouldgotoBerlinimmediatelyafterFrankfurt.Theyaskedmetoconveythistoyou.’‘Sure, happy to oblige. Is this an invitation or a summons?’ I asked only

half-jokingly.‘Justgo,’hereplied,pattingmeontheback.In the press room two lecterns stood side by side in front of the French,

Greek and EU flags. Michel spoke first and began by welcoming me and

saying a few words about the great sacrifices the Greek people had madeduring the past few years. But then, quite suddenly, his tone changed. Thejoviality and comradeship disappeared and were replaced with a harshnessmorefamiliarfromtheothersideoftheRiverRhine:Greecehadobligationstoitscreditors,andthenewgovernmentwouldhavetohonourthem;disciplinemust be maintained and any flexibility contained within the currentarrangements.NothingaboutthenewRousseau-inspiredsocialcontractthatwehad agreed upon. Not a word about ending austerity or adopting public-investment-ledpro-growthpoliciesforthegoodofallofEurope.Whenmy turn came, I stuck tomy prepared statementwhich included the

following.

France is for usGreeks not just a partner but also one of our spiritualhomes. The very existence of the Greek state owes a great deal to theFrench Enlightenment that sparked off our own Enlightenment andequippedtheGreeknationalliberationmovementwithitsphilosophyandelan.Today,IhadanopportunitytooutlinetoMrSapinourgovernment’splansforreformingGreecewithinachangingEuropethatputsanendtotheself-reinforcingdebt-deflationarycycledamagingeveryoneinEuropeaswespeak.Itisourviewthattoaccomplishthiswemustdeliberateinthespirit of the great Europeans who, beginning with JeanMonnet, foundpractical means to forge mutually beneficial unity out of seeminglyimplacablediscord.Weshall suggest toourpartners acrossEurope thatweresurrecttogetheroneofJeanMonnet’soperatingprinciples.Namely,thatifpartiessitdownatoppositesidesofanegotiatingtableandproceedfromlong-establishedpositions,therewillbelittlechanceofsuccess.Butif we sit on the same side of the table and place the problem on theopposite side, success is certain in a Europe with so much room formutualprosperity.Todaywesatonthesamesideoftheproverbialtable.Itisourgovernment’s intention todo the same ineveryEuropeancapital,eachtimeplacingtheproblemonthetable’soppositeside.Today,startinghereinParis,letmesaythatIamguidedbyasingleobjective:topromotethe interests not of the average Greek but the interests of the averageEuropean.Toensurethatoureconomicandmonetaryunionsucceedsbysucceedingeverywhere.

Although I managed to finish my prepared speech lauding solidarity andFrenchidealism,IfeltasifIhadbeenpunchedinthestomach.As soon as we left the press room,Michel instantly switched back to his

amicablejoviality,holdingmyhandasifIwerehisfavouritelong-lostcousin.Determinedtomaintainmyexteriorpoise,Iturnedtolookathimand,fakingpuzzlement,asked,‘WhoareyouandwhathaveyoudonetomyMichel?’Tomy great astonishment, not only did he clearly understandwhat I was

saying,hedidnotseemangeredbyitintheslightesteither.Insteadhestopped,heldmyarmalittlemoretightly,adoptedasombreexpressionand,switchingtoEnglishalmostasifhehadpractisedtheline,sharedanopinionofhistoricimportanceandsadness:‘Yanis,youmustunderstandthis.Franceisnotwhatitusedtobe.’Indeed, France is not what it used to be. In the months that followed, the

Frenchgovernmentandthecountry’sentireeliteprovedtheirinability,aswellasreluctance, todeterattacksonourgovernmentthatwere, inthelongterm,aimedatParis.WhileIneverexpectedthemtogooutoftheirwaytoassistusagainst their interests, I was ill prepared for the French establishment’sabandonment of its own interests,whichwere not served by reinforcing thesurplus countries’ domination of fiscally stressed ones.4 Michel Sapin’sperformancethatdayisanexcellentallegoryforwhatiswrongintheFrenchRepublic.IntheliftonourwaytoseeEmmanuelMacron,alsobasedatBercy,Michel

confessedthathewasnotaneconomistbytrainingandaskedmeifIknewwhathispostgraduatethesishadbeenon.IsaidIdidnot.‘ThenumismatichistoryofAegina,’heinformedmewithasmileevenbroaderthantheonewithwhichhehadfirstgreetedme.Myjawdropped.France’sministeroffinance,havingjustunleashedasurprisepublicassaultonmeonBerlin’sbehalf,wasnowtryingtobondwithmebyconfessing thathedidnotknowmuchabouteconomicsbutwasanexpertontheancientcoinsofthelittleislandoffthecoastofAtticathatDanaeandIcallhome.5IronydoesnotevenbegintoconveywhatIfelt.France’s minister for the economy was the opposite of its minister of

finance. Where Michel Sapin ducked, deferred and simulated, EmmanuelMacron listened actively and engaged directly, his eyes radiant and ready todisplayhisapprovalordisagreement.ThefactthathehadgoodEnglishandagrasp of macroeconomics as well meant we were soon on the same pageregardingEurope’sneedforagenuineinvestmentprogrammethatwouldputits trillions of idle savings to work for the collective good. Frommy first

meetingwithhim,IregretteddearlythatitwasSapinwhorepresentedFranceintheEurogroupandnotMacron.Hadtheyswappedroles,thingsmighthaveendedupdifferently.Finally,afteralongday,EuclidandIwerereadytoleaveBercy.Aswewere

walkingout,Michelcamedowntosayfarewell.Itwastherethathetaughtusonethingthatweshallalwaysrememberandthankhimfor:howtotieascarftheFrenchway.

DowningStreet

TheEurostarwasontime.Londonbeckoned.Notamomenttoosoon.BeforeIhadeventakenovertheministry,€11billion–amountingto7percentofbankdeposits inGreece–hadbeenwithdrawnthanks to theStournaras–ECBbankrun. Greek banks were already applying for the ECB’s emergency liquidityassistance.6Thenoosewastightening.Thepurposeofthis,thenextlegofmyjourney,wastochangethefinancialclimateandbuyustime.Early on Monday, 2 February 2015 I breakfasted with Martin Wolf,

economicseditorof theFinancialTimes.Withinminutes he had agreedwithmy broader macroeconomic objectives and debt restructuring proposals,expressing concern only about Europe’s political will to embrace them.AfterwardsImetNormanLamontandseveralkeyeconomistsandfinanciers,an event put together byNorman’s friendDavidMarsh, head of theOfficialMonetaryandFinancial InstitutionsForum,a centralbanking think tank.Thepurposewas the same: to brief them andwin them over tomy proposals. Itseemedstraightforward,giventheirmoderationandcommonsense.MyappointmentwithGeorgeOsbornewasfor11a.m.Greece’sambassador

to London, a seriously clever man who had served as head of Greekintelligence before Roubatis, accompaniedme and Euclid. Downing Street’siron gate was opened by smiling coppers, and the embassy’s ageing JaguarpulledupthirtymetresorsofromthedoorofNumber11.Itwasabrightbutbitterly coldMondaymorning.Should Iwear the rather striking leather coatourambassadorinFrancehadlentme,orshouldItakeitoffand,wearingonlymy light black jacket, risk shaking with cold in front of the massedphotographers?Preoccupiedwithmoresubstantivematters,Igotoutofthecar

as I was. For days thereafter images circulated throughout the media of aleather-cladfinanceministerarrivingtomeetGeorgeOsborne.BeforeIarrived inLondon,NormanLamont,whohadactedassomething

of ago-between,had signalled thatOsbornewouldbegrateful if I refrainedfrom criticizing his economic policies in public. ‘We are in a pre-electionperiodandtheatmosphereisverysensitive,’Normanhadtoldme.‘Given that I’m seekingGeorge’s support, I haveno interest in criticizing

hispolicies,’Ireplied.Inadvanceofourmeeting,Osborne’sofficehadexplainedtothepresswhy

he had good cause to hold talks with me: it was the chancellor ’s view thatGreece’sdebtcrisisposedthe‘greatestrisktotheglobaleconomy’.Thanks to these preparations, the visit went perfectly smoothly. Inside 11

Downing Street the conversation was friendly and to the point. Things gotinterestingwhenOsborne began to offer amildly critical assessment of hisown handling of the British economy. I had not expected there to be anyexpression of self-doubt in front of a left-wing finance minister, and thisfacilityforself-reflectionwarmedmetohim.HeacknowledgedhowimportantithadbeentohavethesupportoftheBankofEngland‘everystepoftheway’,and smiled sympathetically at my predicament, which could not have beenmoredifferentinthatrespect.Heagreedthat thepoliciesimposedonGreeceby the troika had given austerity a terrible name. Iwas tempted to sharemyview that his own version of austeritywould backfire on him too, but goodmannersanddeterminationnottopushmyluckstoppedme.Weturnedinsteadtowhatwethoughtshouldbedonewiththeeuro.Here George Osborne was in a bind. His fellow Tories despised the

common currency, even those who wanted Britain to remain in the EU.Osbornehadlittlepositivetosayabouttheeuroeither,butwhenIventuredtosuggest that the disintegration of the euro would be bad for the Britisheconomy,hewasnotslowtoagree.Isharedmyownsenseofthedilemma:‘Ifind myself in the peculiar situation of constantly proposing policies forshoring up a currency whose design and creation I had opposed. But I dobelieve that even those of us most critical of the euro have a moral and apolitical duty to try to fix it, simply because its disintegrationwill cause somuchhumanpain.’Osborne’s position on the eurowas also something of a paradox.Despite

being a Eurosceptic and an opponent of the euro he could also see that itsbreakdownwould cause instability and unleash powerful deflationary forces

upontheBritisheconomy.TheonlywayofshieldingBritainwasfortheeurotobesaved.Andtheonlywayofsavingtheeurowasgreaterintegrationoftheeurozone, whichwas precisely the kind of thing that themajority of Toriesdoggedlyopposed.Byproposingradicalstepstofixacurrencythatneitherofusliked,OsbornewaslosingfriendsamongBritain’sEuroscepticRightandIwas losing friends among my left-wing comrades. Despite the ideologicalchasm that separated us, the crisis caused by Europe’s ridiculous monetaryarchitecturehadputusinthesameboat.Withmost of the serious stuff out of theway,George,myself andEuclid

sippingEnglishbreakfast tea, thediscussionmovedon tomore light-heartedtopics.OsbornesawfittocomplimentmeonmyEnglish.‘Thankyou,George,butsaveyourcomplimentsuntilyou’veheardEuclid

speak.’Havingbeen raised inLondon,Euclid’sEnglishwas that of a native.ButwhattrulyimpressedGeorgewasthatEuclidwasanalumnusofStPaul’s,the public school on the bank of the Thames thatGeorge had also attended.Once they got going it sounded like a posh school reunion. Afterwards,wheneverEuclidmockedme formyTorymates, Iwould remindhimofhispublicschoolconnections.Onourwayout,Ileftmyhostwithapartingthought:itwouldbesplendidif

Icouldhavehis support inEcofin, theEU’sEconomicandFinancialAffairsCouncil,inmyeffortstoresisttheperpetuationofpoliciesforGreecethatwehadagreedwereabsurd.Osbornenoddedbutwhenthetimecamedidnothelpeven once, choosing instead the Little Englander approach, never sayinganything in Brussels unless it affected narrowBritish interests, the City’s inparticular.Suchis itspower, theCitywaswherewewereheadingnext, foraseriesofmeetingswithLondon’sfinanciersorganizedbymyacquaintancesatDeutscheBank.Whether Icouldwin themoverornotwouldbeapparent thefollowingmorningonBloombergscreensaroundtheworld.Inthemeantime,asEuclidandImadeourwayfromthedoorofNumber11totheJaguar,themassofphotographers,TVcamerasandjournalistseruptedagain.Backatthehotelforhalfanhour ’srestbeforethenextlegofthemarathon,

my mobile phone rang. ‘Where on earth did you pick up that coat?’ askedDanae.ShewascallingfromAustin,whereshehadbeenalertedtomyfashionstatementbyfriendswatchingearly-morningtelevision.‘What’swrongwithit?’Iasked.‘Ithoughtitwasratherfetching,wasn’tit?’Her censurewasemphatic and followsme to thisday. ‘Ineed to finishup

hereinAustinandreturnimmediately,’shesaid.

Yes,Ithoughttomyself.Idoneedhertoreturnassoonaspossible,butforreasonsthathavenothingtodowithstyle.

Wooingthefinancialgenie

More than two hundred representatives of all sorts of financial outfits hadassembledinthelargeroom.TheDeutscheBankfunctionaryofGreekoriginwho had kindly organized the event made a brief introduction. Rather thanstandatthelecternonstage,Ichosetoroamwithahand-heldmicrophone.AsIbegan, I was painfully aware of the challenge expressed so brilliantly byAmbroseEvans-Pritchard, theDailyTelegraph’s economics editor, in one ofhis columns: ‘Greece’s plight, while terrible, is not tragic in the ancientAtheniansense: its fate isstill in itsownhands.Withaskilfulstrategy, itcanstillallendinsmiles,nottears.’Mystrategy,atleastinthatroom,wassimple:tellitasitis,unembellished,

complete with an admission of our own government’s weaknesses. Nothingimpressesfinanciersmorethanacombinationofhonestyandsmartfinancialengineering.HonestymeantthatIwouldnotbeataboutthebushontwoissues.First,Itold

them,theGreekstatehadgonebankruptin2010,andnoamountofausterityornew loans could change that. I could see from their faces that they wererelievedtoencounteraGreekfinanceministerwhowouldnotattempt,likeallhis predecessors, to present theGreek state as illiquid but on the right tracktowards solvency.These people knew the truth andwere encouraged to hearmeacknowledgeit.Second,Iadmittedthatwehadadividedcabinet;that,yes,therewerethose

whowantedGrexit,whowerenotinterestedinnegotiatingwiththeEUandtheIMF,convincedthatnothinggoodwouldcomeofit,andwhojustwantedout.Andthentherewerethoseofusaroundtheprimeministerwhoseobjectivewasanegotiatedsolutionwithintheeurozone.But,Iaddedonapositivenote,thisdivisionwouldnot affect thenegotiations,whichwouldbe conductedbymycore team.OurGrexiteer colleagueswould not get in theway butwould bepatient and give us a chance to demonstrate that a viable agreement waspossible. As long as Greece’s official creditors, the EU and the IMF, werewillingtostrikeamutuallyadvantageousagreement,theworldoffinancehadnothingtofearfrommyLeftPlatformcolleaguesingovernment.

Then came the financial engineering proposals summarized in my non-paper.Giventhefinancialexpertiseofmyaudience,IspokeabouttheminfargreatertechnicaldetailthanIhaddoneelsewheresothattheycouldhavebeeninnodoubtthatIknewpreciselywhatIwastalkingabout–andthatthesewerethekindofproposalstheywouldhavemadethemselvesgiventheopportunity.Finally,Iturnedtoatopicclosetotheheartofneoliberal-mindedfinanciers:

privatization.Ibeganbyacknowledgingthelikelihoodthatmanyintheroom,occupying the opposite end of the political spectrum tome, would disagreewithmyviewsonthemeritsorotherwiseofprivatization.ButwhatIwassurewewouldagreeon,Isaid,wasthatitissillytosellassetsoffwhenpriceshavefallenthroughthefloor;thatfiresalestobuyerswhohadnoplanstoinvestbutwere only interested in asset-stripping were a terrible idea. Given the direcircumstances in which we found ourselves, I assured them that ourgovernmentwasnotgoingtobeideologicalaboutthis:ifIwasaskedwhetherIwasinfavouroforagainstprivatization,myanswerwouldbe,‘Itdependsonthe asset in question – a port, a railway, a beach, an electricity company?’Beaches I would never sell, I told them, just as I would never sell theParthenon. And the privatization of electricity grids reliably leads toenvironmentallyandsociallysuboptimaloutcomes.Butwhenitcametoportsandairports,Iwouldformaviewbasedonfourcriteria:howmuchthebuyerwas committing to invest in the asset; the buyer ’s commitment to workers’rightstounionrepresentationanddecentwagesandconditions;environmentalstandards;and theextent towhich thebuyerwouldbeobliged to leave roomforandencourage thebenefitof smallandmediumlocalbusinesses. If thesefourcriteriaweremet,thenIwouldbemorethanhappynotonlytoconsenttoprivatizationbutalsotopromoteitenergetically.AseaofhandswasraisedwhenIinvitedquestions.Formorethantwohours

Imademywayaroundtheroom,answeringeachandeveryoneofthem.Somewerehostile,othersfriendlier.Imadeapointofdealingexhaustivelywiththemall.Judgingbythewarmapplauseat theendof thesession,I felt that the jobhadbeendone.AsourhostsaccompaniedEuclidandmeonourwayout, threeorfourof

the most influential City players in the room approached to say they wereimpressed.‘Youwillseethisreflectedinthemarketstomorrow,’oneofthemassuredmewhileshakingmyhandcordially.‘In other circumstances, I would be compiling my report to the Central

CommitteewitharecommendationthatyouaredispatchedtotheGulag,’joked

Euclid.‘Comrade, I’mhappy to be sent to theGulag for right-wing tendencies as

longasthejobisdone–andifyoupromisetovisitmeoccasionallysothatIcanberemindedoftheexpressionofhorroronyourfacejustnow!’Iretorted.LaterthateveningweweretreatedtodinnerattheresidenceofourLondon

ambassador.NormanLamont andDavidMarshwere there, aswasmy greatAmerican supporter and adviser, Jeff Sachs, who arrived straight fromHeathrow.Iwaspleasedtohavehimatmyside.AnotheroftheguestswasRezaMoghadam.RezawaswithMorganStanleybut,likeJeffSachs,hadpreviouslyworkedat theIMF.Moresignificantly,hehadheldPoulThomsen’s jobthereuntil only a year before. My conversation with him was fascinating. HeconfirmedeverythingthatIhadbeensayingabouttheGreekprogrammesince2010–theIMF’sgrosserrorinparticipatingintheGreekbailouts,thetroika’scallousness and, in particular, the sole reason that the IMF and the EUwereasphyxiatingus:becausetheydidnothavewhatittooktoconfesstheerroroftheirways.AsIremarkedtoEuclid,whohadbeenlisteningwithincredulity,itwas one thing for us lefties to be saying all this, it was quite another to behearing it from the horse’s mouth – from the guy who had actually beenimplementingtheGreekprogrammeuntilonlyafewmonthsago.Overcoffeeandafter-dinnerdrinksIwonderedifmaybemyproposalshad

done the trick. London-based financiers, Tory politicians, influentialjournalistsandformermembersoftheIMFallappearedtoseemypoint.Yes,wewerea left-winggovernment,butallwewereaskingwas for somebasiccommonsensetoprevailatthecentreofEuropeanpower.ThatnightthemainstreampresscoverageofmyvisitstoParisandLondon

seemed positive. The BBC reported: ‘The economist-turned-finance-ministerseeking to renegotiateGreece’shugedebtobligationssayshispriority is thewell-beingofallEuropeansandhasruledoutacceptingmorebailoutcash…He said, “We have resembled drug addicts craving the next dose.What thisgovernmentisallaboutisendingtheaddiction.”’7Themessagewasgettingthroughatlast.ButasIturnedoutthelightsfora

fewhours’sleepinadvanceofmyflighttoRome,Iwasanxiouswhatthenextmorning would bring. Would the Athens stock exchange rebound? Idesperately needed a boost in the money markets to provide a signal toinvestorsandotherEUgovernmentsthatwehadwhatittooktocreateawaveofoptimism;toplanttheideainthemindsoftheEUandIMFthattheywouldbenefitfromadealwithus.

Aninconvenientachievement

At8a.m.,afterthefirstcupofcoffeeoftheday,Ireceivedaphonecallwithamost peculiar message: my menu of debt-swap proposals had received theenthusiasticapprovaloftheAdamSmithInstitute(ASI),thethinktankfoundedin 1977 that paved the way for Margaret Thatcher ’s neoliberal project andwhichtomymindrepresentedeverythingIhadopposedduringmyyearsintheUK.ThestatementbyASIfellowLarsChristensenread:

The European Central Bank’s job is to ensure nominal stability in theeurozoneeconomy.TheECBshouldnotbailoutgovernmentsandbanks.Unfortunatelyagainandagainover thepast sixyears theECBhasbeenforced to bail out eurozone states. Hence, the ECB has repeatedlyconductedcreditpolicy(rather thanmonetarypolicy) toavoideurozonecountriesdefaulting…BylinkingGreece’sEUandECBdebtstoGreeknominal GDP, as Varoufakis has suggested, Greece’s public financeswouldbelessvulnerabletomonetarypolicyfailureintheeurozone.Thechancellor George Osborne should be an enthusiastic supporter ofVaroufakis’sdebtplanas itwouldcut thecostof theECB’s tightmoneypoliciesandreducethedangerofanothermajoreurozonecrisis.8

Of course it made perfect sense: swapping outstanding debt for growth-linked bonds accompanied by a crackdown on tax evasion and moderatebudgetsurpluseswasmorealibertarian’scupofteathanaleft-winger ’s.AsIhadremarkedtotheCity’sfinanciersthepreviousday,itwasameasureofthedepth of the euro crisis that it took a radical left-wing government to tablemainstreamliberalproposalsforitssolution.TheASIwas allwell andgood,buthowwould themarkets respond?The

answerwasmagnificently!Bloomberg’s headline could not have beenmoregratifying:GREEKSTOCKSGOINGNUTS.

Greek stocks are soaring Tuesday on hopes of a resolution to the debtstandoff betweenGreece’snew radical government and its creditors.Asof 3.12 p.m.GMT (10.12 a.m.ET), theAthensStockExchangeGeneralIndex is up 11.2 per cent. The news comes after Greece’s new financeminister Yanis Varoufakis told the Financial Times that instead ofrequesting a write-off of its €315 billion (£237 billion; $357 billion)

foreigndebt,thegovernmentwouldasktoswapGreekdebtfortwonewtypesofbondslinkedtogrowth.

AquickphonecallbacktoAthensconfirmedthegoodnews.Notonlyhadthestockexchangegoneupby11.2percentbut,more importantly,shares inGreece’sbankshadrisenbymorethan20percentandthousandsofdepositorswerereturningthecashundertheirmattressestothebank.Itwasashort-termachievement but an important one: it demonstrated that our narrative of realreformsandsensibledebtrestructuringhadthepotential towinovermarketsandcitizens.ItwastimetoflytoRome.

Italiantip

IwasescortedfromRome’sFiumicinoairporttothefinanceministrybytwopolice cars and two motorcycles, sirens blaring. But stuck as we were inRome’s thick traffic, all our escortmanaged to achievewas noise pollution,irritatingother roadusers andmyownembarrassment.Creatingmorenoisethansubstance,theybroughtMateoRenzi’sgovernmenttomind.PierCarloPadoan,Italy’sfinanceministerandformerly theOECD’schief

economist,isinmanywaysatypicalEuropeansocialdemocrat:sympathetictotheLeftbutnotpreparedtorocktheboat.HeknowsthattheEUinitscurrentconfigurationisheadinginpreciselythewrongdirectionbutisonlywillingtopush for inconsequential adjustments in its course. He has the capacity tounderstandthefundamentalillnessafflictingtheeurozonebutisloathtoclashwithEurope’s chief physicians,who insist there is nothing to treat. In short,PierCarloPadoanisaconvincedinsider.Ourdiscussionwasfriendlyandefficient.Iexplainedmyproposals,andhe

signalled that he understoodwhat Iwas getting at, expressing not an iota ofcriticismbut no support. To his credit, he explainedwhy:when he had beenappointedfinanceministerafewmonthsearlier,WolfgangSchäublehadmadeapoint of having ago at himat every availableopportunity–mostly in theEurogroup. By the time we met, Padoan had managed to strike a modusvivendi with Schäuble and was evidently not prepared to jeopardize it forGreece’ssake.

IenquiredhowhehadmanagedtocurbSchäuble’shostility.PierCarlosaidthat he had asked Schäuble to tell him the one thing he could do towin hisconfidence.Thatturnedouttobe‘labourmarketreform’–codeforweakeningworkers’rights,allowingcompaniestofirethemmoreeasilywithlittleornocompensation and to hire people on lower paywith fewer protections.OncePier Carlo had passed appropriate legislation through Italy’s parliament, atsignificantpoliticalcosttotheRenzigovernment,theGermanfinanceministerwenteasyonhim.‘Whydon’tyoutrysomethingsimilar?’hesuggested.‘I’llthinkaboutit,’Ireplied.‘Butthanksforthetip.’

Centralbanksabotage

Thenextmorning,Wednesday,4February, Ihad set thealarmonmyphonefor 4 a.m. Shortly afterwards Iwas on a plane to Frankfurt, wheremy firstmeeting was with another Italian, Mario Draghi, president of the EuropeanCentralBank.Frankfurt’sstreetswerecoveredinblackice,andtheleadenskyseemedto

hoverjustabovethecar ’sroof.Itwasstillmorning.ThesurroundingsoftheECB’snewtowerstillresembledabuildingsite,sothefinalapproachtookusalongdirtroads.EuclidandIweregreetedatthedoorbyseveralfunctionariesandwhisked to the top floor in an express lift. The newnesswas potent, theviewsfromlargeglasswindowsarelieffromthesmellofpaint.IntheboardroomtheECB’stopgunshadgathered.BenoîtCœuré,whomI

hadmetinParisafewdaysearlier,wastheonlyonesportingafriendlysmile.Mario Draghi looked tense, while the two Germans on the ECB ExecutiveBoard,PeterPraetandSabineLautenschläger,werereservedintheirgreeting.Theyallsatdownonesideofalongtableoppositeme–Euclidtomyleft,theviewoverFrankfurtbehindthem–andIwasinvitedtoopenproceedingswithastatementofintent.Mindful of the importance of brevity, I began by introducing my

government’s priorities and intentions vis-à-vis the Greek programme, andthen, in nomore than tenminutes, outlined our sequence of proposals: debtrestructuring based on debt swaps that financiers theworld over consideredsensibleandproper,aprimarybudgetsurplusof1.5percent inperpetuity,adevelopment bank to replace fire sales, a public ‘bad bank’ to deal with thebanks’non-performingloans,deepreformsinvariousmarketsandsoon.AsI

concluded, IhandedMarioDraghi thenon-papersummarizingmydebt-swapproposal.DraghibeganhisreplywithabriefspeechontheECB’sindependenceand

hisdeterminationtoplaynoroleinthepoliticsofthenegotiationsbetweenmygovernment and other eurozone states, emphasizing the prohibition thatpreventstheECBfrom‘monetaryfinancing’viathecommercialbanks.‘AndImust tellyou that recentdevelopments inGreeceareputtingus in adifficultposition,’ he informed me ominously. ‘Later today our governing board ismeetinganditisverylikelythatyourwaiverwillbewithdrawn.’ThewaiverwaswhatallowedtheECBtoprovideourbankswithliquidityin

return for junk collateral.9 It could be provided only if the Eurogroupconsented – a purely political decision and one that amounted to ‘monetaryfinancing’ despite Draghi’s protestations to the contrary. Withdrawing thewaiverwasthefirstofthetwostepsrequiredtoclosedownGreece’sbanks;thesecond would be switching off emergency liquidity assistance. Draghipointedlyrefrainedfromrevealingwhetherheagreedwiththewithdrawalornot;hewasmerelywarningmethathewouldnotbesurprisedifamajorityofboardmemberssupportedit.So there Ihad it:withina fewsentencesofhiswelcomingremarks,Mario

Draghi was signalling a commitment to escalating the asphyxiation that theECBandGreece’scentralbankgovernorhadbegunbeforewewereelected.Itwasanexplicit,calculatedactofaggression.Ibeganmyreplybyexpressingmygreatandgenuinerespectforthemanner

inwhichDraghihadstrivenfromthefirstdayofhispresidencytodowhateverittooktosavetheeurowhileadheringasfaraspossibletohisbank’scharterandrules.ThisskilfulbalancingactwaswhathadboughtEurope’spoliticiansthetimetheyneededtoget theiract together,address thecrisisproperly,andthusalleviatetheimpossiblecircumstancesinwhichtheECBhadfounditself:responsible for saving the eurozone’s failing economies while beingprohibited from using the essential means – ones available to any normalcentralbank–ofdoingso.‘Alas, the politicians did not use the time you bought for us wisely, did

they?’ I said. The expression on Mario’s face conveyed embarrassedagreement.Icontinued:

YouhavedoneafantasticjobinkeepingtheeurozonetogetheraswellasinkeepingGreeceintheeuro,especiallyinthesummerof2012.WhatI

amheretoputtoyoutodayisthatyoucontinuetodothisduringthenextfew months, granting us politicians the time and monetary spacenecessary to strike aworkabledealbetweenGreece and theEurogroup;onethatendstheGreekcrisisonceandforall,thusenablingyoufullytorespectyourindependenceandyourrulebookvis-à-visGreece,whilewepoliticians get down to the business of healing our country’s woundsthroughpolicies thatbringasustainable, real recovery.Butnoneof thiswillhappenunlesswehaveyoursupport.Two days ago I went to London to soothe the nerves of the City, to

create trust and to reverse the negative ‘recent developments’ that youmentioned. It was a great success. As you know, Mario, yesterday thebanks’sharesandtheAthensStockExchangerosesharply.Iwouldhavethoughtthatitisacentralbank’sdutytohelpafinanceministerreinforcesuch a boost inmarket confidence, rather than to reverse it. If theECBtodayremoves thewaiver itwillbe tantamount todestroying themarketoptimismthatIworkedsohardinLondontocreate.

IsensedMariowasputoutbythechargeagainsthim–thathewasabouttoundo an improvement in market sentiment by resorting to legalisms. Aprerequisiteforthewaiverwasanongoingprogramme,hesaid,triggeringabitterexchange.‘Your government is not committing to the existing programme,’ he told

me,echoingJeroenDijsselbloem.‘All we are doing is seeking to renegotiate the programme to make it

viable,’Iretorted.‘Itwillbeexpiringinanycaseon28February.’‘Fine.Whydon’tyouwaituntilafterthenextEurogroupmeeting[scheduled

forWednesday, 11 February] before you pull thewaiver and undo the goodwork I did inLondon?Mario,wewongovernmentwith only fourweeks inwhich to renegotiate the programme. This deadline is so short as to beridiculous.Buttohaveitcurtailedtodaybythreeweeks[by]ourcentralbankisunacceptable.’‘It does notmattermuch,Yanis,whenwe pull thewaiver since theGreek

banks have run out of most eligible collateral.’ He spoke as if the waiverdecisionwasinevitable,beyondhiscontrol,anactofGod.Ifitdidnotmatterwhentheypulledthewaiver,Iargued,thentherewasno

need to do it that very afternoon. ‘Why notwait for theEurogroupmeeting

onlyafewdaysaway?WhysnuffoutthegainsIjustmadeinLondon?’Hisonlycomebackwas to insist that itwasnothewhowasproposing the

waiverberemoved,implyingagainthatitwasoutofhishands.At thispointIcouldhavelambastedthepresidentofEurope’scentralbank

forwashinghishandsofamajordecisiontakenbyhisownboardthatwoulddestroypreciselythethingthatcentralbankswerecreatedtoshoreup:marketconfidence.But I did not, partly because therewas a slim chance that he didopposethewaiver ’sremovalbutwasunabletostopit.InsteadItoldhimthatItrustedhewouldbeabletoprevailupontheECBGoverningCounciltokeepthewaiverandthusnotjeopardizeyesterday’sAthensstockexchangerevival,justas I trusted thathewouldsupportmydebt restructuringproposals. ‘Iamsayingthishere,at theECB,becauseit is inthisbuildingnotinBrusselsthatEuropehastheexpertscapableofunderstandingandsupportingthem.’Thefirstiteminmynon-paperwastheproposaltoswaptheSMPbondsheld

by theECB for a newGreekgovernment perpetual bond.Thiswas sensitiveground.TheSMPbondswere,aswebothknew,thebackboneofmydeterrencestrategy and his Achilles heel. If Greece unilaterally wrote them down, wewouldinallprobabilitywreckhisquantitativeeasingprogramme.Iwonderedwhathewouldhavetosayaboutthem.His tacticwas toskirtaround the issue,dismissing the ideaofaswapasa

formof ‘monetary financing’and therefore impossible. Ibegged todiffer: awrite-downmight, I conceded, be interpreted strictly as an indirect form ofmonetaryfinancing,butmyproposalwasforswappingonekindofdebt(shortterm) for another (infinitely long dated). The Greek government wouldcontinuetoowetheECB€27billion,butinsteadofrepayingthatcapitalwithina fewyears itwouldundertake tomake regular if small interestpayments tothe ECB ad infinitum. No write-down, no monetary financing. ‘This issomething that the authors of the ECB rules could not have banned simplybecausetheyhadneverconsideredit,’Iconcluded.UnexpectedhelpcamefromBenoîtCœuré.HeturnedtoDraghitosaythat

my proposal had merit and should not be dismissed. Even if the ECB wasreluctanttoacceptanewGreekperpetualbondinreturnforitsremainingSMPbonds, maybe we could ‘triangulate’: the European Stability Mechanism(ESM), the EU’s bailout fund, could give €27 billion in cash to the ECB inordertoredeemtheSMPbonds,whileGreececouldissueitsperpetualbond,with a face value of €27 billion, and give it to the ESM. I immediatelyrecognized a further merit of Benoît’s idea, which was that by leaving no

Greekbondson theECB’sbooks (perpetual orSMP),GreecewouldqualifyforDraghi’sforthcomingroundofquantitativeeasing.10Quicklychangingthesubject,Draghicomplainedthatmypubliccomments

abouttheinsolvencyoftheGreekbanksweremakingithardforhimtokeepthemopen,giventhathisrulebookbannedhimfromkeepinginsolventbanksafloat. I respondedbypointingout that thewaiver theGreekbankshadbeengranted was itself a clear admission that they were insolvent; why grant itotherwise?Theproblemwasthatthistemporaryfixhadbecomepermanentasaresultofourcollectivefailuretodealwiththeunderlyinginsolvency.‘Surelyour tasknow is to end thedeath embrace, thedoom loop, between insolventbanks–thattheECBisforcedtokeepafloatagainstitsrules–andaninsolventstateatwhichEurope’staxpayerskeepthrowinggoodmoneyafterbad?’PeterPraetandSabineLautenschläger,sittingonMario’sleft,lookedaghast,

not because what I was saying was preposterous but – I am convinced –becauseitwasveryclosetotheirowncriticismoftheGreekbailoutsandtheECB’s role in them.Praet began toquestionmeonprivatizations. I gave thesame answers as I had in London when addressing my City friends. Theyseemedsatisfiedwiththeargumentbutunhappywiththerealityonthegroundin Greece – my feelings entirely! After a few more questions and a shortstatement from Euclid, which was a little more combative than mine, themeetingdrewtoaclose.As we were leaving, Mario approached me and together we left the

boardroom.Walkingalongacorridor,awayfromothers’ears,heattemptedtomollifymeontheissueofthepossiblewithdrawalofourwaiverbytheECB’sGoverningCouncilthatafternoon.Iwouldhavenoneofit.‘Mario,Ishallholdyoupersonallyresponsibleifthewaiverisremovedon

thedayafterIpushedthebanks’sharesupby20percent.Ifyoudothisitwillbe a first in the history of central banking – a central bank working toundermineafinanceminister ’ssuccessatimprovingmarketsentiment.’Draghilookedcoy.Again,heprotestedthatitwasreallynotuptohim;that

he did not control theECBGoverningCouncil.Oncemore he argued that Iwas not helping him keep thewaiver by continuing to speak of hisAchillesheel,thepossibilityofaunilateralhaircutoftheSMPbonds.AllIwantedwasforustoworktogether,Ireassuredhim.‘NotonlywillI

nothaircutthosebondsunilaterally,Iwillnoteventhinkofit–aslongasyoudonotclosedownourbanks,’Ipromised.‘Iwilldomybest,’hereplied.‘Butitisnotalwaysuptome.’

Time and again since the euro crisis began, I have had to correct thefundamental misconception that it is a tussle between Germans and Greeks,northandsouth,betweenastingyBerlinandaprofligateEuropeanperiphery.On the contrary, the enemies of European solidarity, rationality andenlightenment reside inGreece, inGermany, in Italy – everywhere.And thesameistrueoftheirdefenders.AftertheECBmeetingacoupleofmediaengagementskeptmeinFrankfurt

fora fewhours.During that time Iwasaccompaniedby fourGermansecretservice bodyguards, two walking ahead, two trailing a few steps behind.Wheneverwe tookcars, theywouldget in last andalight first to sizeup thesurroundings. Unsmiling and intense, with their crew cuts, earpieces,microphonecufflinks,rubberbootsandsubtleuniforms,theywereimpervioustomyobjectionstotheirconstantpresence.When my interviews were done, they took me to the airport, where they

continuedtodotheir thing,silently,efficiently,asImademywaythroughtocatchmyflighttoBerlin.BeforeboardingtheplaneIaskedforpermissiontogo to the loo. One of them, obviously the team leader, followedme inside,standing toocloseforcomfort.ButIknewhewas just followingorderssoIrelaxed,andsoonIwaswashingmyhandsandonmywayout.Before we reached the other three bodyguards, who were waiting by the

gate,hespokeforthefirsttime.InverygoodEnglishheaskedpermissiontoaddressme.‘Ofcourse,’Isaid.‘Minister,’ he said, ‘I want you to know that what you are doing is very

important–notonlyforyourcountrybutalsoforus.Youaregivingushopethatthereisachancethatweshallbeliberatedtoo.’Whenever I hear people, including friends and supporters, tell me that

Europe is finished, that there can be no common path for Germans, Brits,Italians and Greeks, I reach into my memory to retrieve the words of thatGermansecretserviceofficer.

It’sforyou!

SoonafterlandinginBerlinIwasscheduledtohaveasecretdinnerwithJörgAsmussen and Jeromin Zettelmeyer. Asmussen was the junior minister forlabour affairs, but a key figure in the German political system with closecontactsattheECB,wherehehadbeenamemberoftheExecutiveBoarduntil

a year before, and a power broker within the Social Democrats (SPD), thefederal government’s junior coalition partners. Zettelmeyer worked directlyforSigmarGabriel, thevicechancellorof thefederalgovernment,economyminister and SPD leader. The purpose of the dinner was ostensibly to buildbridges between the Syriza government and the section of the GermangovernmentcontrolledbytheSocialDemocrats.TheypresentedthemselvesasouralliesandsupporterswithintheBerlinadministration,offeringmeadviceandprotection fromthe ‘bigbadwolf ’,asoneof themjokingly referred toWolfgangSchäuble.TheagreementwasthatIwouldgototherestaurantalone,incognitoandby

cab,andthatIwouldnottellanyoneweweremeeting.Theimplicationwasthatit would backfire on all of us if word leaked. ‘Let’s keep this just amongourselves,’ Jeromin had said tome on the phone.Of course the fact that hecalledmymobilemeantthatitwasalreadyquasi-publicknowledge–asYannisRoubatis, our government’s head spook, had explained to me. Just as I wasready to leavemyhotel room, I received an email from Jeromin tellingmethat theyhadchangedtherestaurantbookingbecause theoriginalchoicewas‘too public’, confirming once more the importance of discretion. Partlybecauseof this emphasison secrecy, andpartlybecause Iwas exhausted andlooking forward to disconnecting for a couple of hours, I left my mobilephoneinmyroom.Ifoundataxiinacolddarkstreetnearbyandgavethedrivertheaddressof

theout-of-the-waypizzeriawherewewerenowmeeting.Onarrival,aspermyinstructions, Iwalkedupstairs to thefirst floor,whichhadbeenreserved justforus.Overpizzaandredwineafriendlydiscussiondeveloped.JörgandJerominspoketomelikefriends,comradeseven.Itwasbecoming

a pattern among social democrats, I thought, recalling my encounter withMichelSapin.Theobjective, as theyput it,was to create a commonSyriza–SPD agenda sophisticated and sensible enough to make it hard for AngelaMerkel and Wolfgang Schäuble – their Christian Democrat colleagues ingovernmentbutpoliticalopponentsingeneral–tooppose.Itsoundedgoodtome. Too good, to be honest. Then again, if a decent agreement could behammeredoutwithJörg'sandJeromin’shelp, fine. Ifnot,whatdidIhave tolose?As our discussion drifted from one topic to another, the basic plan I was

proposing seemed to satisfy them. The question that preoccupied them waswhatobjectionstheChristianDemocratswouldmakeandhowthesecouldbe

addressed.ThemorewetalkedthemoreIfeltasifIwashavingdinnerwithapair of consultantsworking formy government.Until, that is, Jörg’s phonerang.Heansweredit,putthephonetohisear,thenlookedatmeseriouslyand,withoutspeakingasinglewordintothephone,said,‘It’sforyou.Mariowantstospeaktoyou.’Somuchforthesecrecyofourmeeting.Thesepeopledon’teventrytokeep

upthepretence,Ithoughttomyself.Igotup,tookJörg’sphoneandwalkedoutinto the dark corridor above the pizzeria’s kitchen, immersed in pleasantsmellsandnoises.‘Hello,Mario,whatcanIdoforyou?’‘Iwantedtoletyouknow,Yanis,’Draghisaidinasteadyvoice,‘beforeyou

learn it from themedia, that as I foreshadowed thismorning, theGoverningCouncilvoted towithdrawyourbanks’waiver.But thisdoesnotmeanmuchsince your banks will continue to be supported by your central bank viaemergencyliquidityassistance.’‘Iappreciateyougoingthroughallsortsofinterestingchannelstofindme

and inform me in person, Mario,’ I said. ‘Since you are giving me theopportunity to respond in person on the telephone, allowme to say that thisdecision–thewithdrawalofthewaiveradayafterIsingle-handedlyliftedthebanks’ shares and reversed the bank run, aweek after our election, indeed aweekbeforemy first Eurogroupmeeting, and threewholeweeks before theexpiry of the programme extension – can only be interpreted as a hostile,deeplypoliticalmovebytheECBagainstmygovernment.’Draghimadeafaintattempt todenythat therewasanythingpoliticalabout

thismovebutIwouldhavenoneofit.Itwasadecision,Itoldhim,thatwouldbe interpreted inAthens as an unwarranted, over-hasty and aggressivemoveconcertedwiththeEurogrouppresident’sultimatum.WhenIreturnedtothetableIfoundJörgandJeromininadifferentmood.I

putonabraveface,pretendingthatnothingmuchhadhappened,butofcoursethey knew better.Gonewas the atmosphere of comradeship, of sharing in ajoint project to rejig the Greek programme against Schäuble and Merkel’sdesigns.SoIstoppedpretendingandletthemhavemyassessmentoftheECB’sdecision.Asmussen replied as if hewas still on theECB’sExecutiveBoard,whispering unconvincing excuses. All the heroic talk of a Syriza–SPDcollaborationhadevaporatedwithasinglephonecall thatexposedthewholedinnerforwhatitwas:aclumsyset-up.

Theywerenotbadpeopleeither

I returned tomyhotel at aroundmidnight, switchedonmyphoneandcalledAlexistotellhimDraghihadpulledthewaiver.‘BeuncompromisingbutseeifGabrielcanbeofanyhelp,’headvisedme

soundingunperturbed.‘Judgingbyhistwomessengerslastnight,Alexi,Iamnothopeful,’Isaid.

WeneededtosignalpersistentlyourdeterminationtoactivateourdeterrentthemomenttheypulledtheELAonourbanks,Itoldhim.‘Get some sleep now. You have to be fresh for Schäuble,’ Alexis replied

light-heartedly.First I had to write a press release to soften the blow of the waiver

withdrawal.Thehappy taskof the financeminister, I ruminated:packagingashockasanon-event.Meanwhile,uponhearingthenews,theever-vigilantandhelpfulGlennKim

sent me an email with his analysis of its immediate financial effects. Itconfirmed that even before the stock exchange opened or depositors had achancetomakefreshwithdrawals,thebankswouldtakeamajorhit.11MytaskwastopenastatementthatontheonehandhintedatmyintensedisapprovaloftheECB’saggressionwhileatthesametimeitsteadiednerves,minimizedtheinevitablesharpturninmarketsentimentandpreservedsomeofthegainsIhadmadeinLondon.AnticipatingthatwhenIwenttoseeSchäublethefollowingdayIwouldbe

accosted outside the federal finance ministry by journalists demanding areactiontotheECBmove,Ipreparedthefollowingstatement.

TheECBisbasicallytryingtoabidebyitsownrules,motivatingbothusand our partners to reach a political and technical agreement quickly,while keeping the Greek banks liquid. I trust that Greek depositorsunderstand that day-to-day stability is guaranteed and that we arenegotiatingnewtermsthatwillbringrecoveryandapermanentsolution.To us, the timing of the ECB decisionwas particularly surprising as itriskscreatinganunnecessarysenseofurgency,giventhatwehaduntil28February before the current Greek programme expires. I trust that thehasty decision was due to the timing of the ECB Governing Council’s

regular ‘non monetary policy’ meeting yesterday. From their point ofview,itwasprobablytherighttiming.

It was all I could do. Of course, in the event the stock exchange fell, thebanks’sharesdroppedandthedepositoutflowsresumed.Someofthepreviousday’sgainswerepreservedbutitwasonlyamatterofadayortwobeforethewithdrawalwipedthoseoutaswell.Theonlysilverliningwasthatnoneofthiswouldmatterinthemediumterm.TherealissuewaswhetherBerlincouldbepersuadedtocompromise,orwouldanall-outconfrontationbenecessary,asIhadbeenexpectingsince2012.OnthewaytothefederalfinanceministryInoticedtwoemailshadarrived

on my phone. One was from Jamie Galbraith informing me that BernieSanderswasabouttowritetoJanetYellen,theUSFederalReservechair,toaskhertoindicatetotheECBthatitsbehaviourhadbeenappallingandultimatelygloballydestabilizing.ThesecondemailwasfromGlenn.ThiswasabriefonWolfgangSchäuble,forwhoseofficeGlennhadconsultedinhispreviouslife.Typicallyforafinancier ’sbrief,itcameinbulletpoints:

Heisalawyerthroughandthrough.Hiscommandofeconomicsisquiteweak.Icanrecallonmorethanoneoccasion him mixing up yields and prices and making references tofinancialswithoutunderstandingwhattheymean.Absolutelyhatesthemarkets.Thinksthatmarketsshouldbecontrolledbytechnocrats.Hepracticallyrelishesbeingthebadcop.

But:

HeisalsoanardentEuropeanist.He believes in the destiny of a German-like Europe (though unable tograspthecontradictioninsuchaterm).Heissomeonethatcanbedebatedwith.

HostilitywasinevidenceevenbeforeImetthegreatman.Iwasmetonthegroundfloorof theFederalMinistryofFinancebya juniorminister.Beforegetting into the lift, he asked me playfully, but with enough of a hint ofaggressiontoestablishthathewasnotactuallyjoking,‘WhenamIgettingmy

moneyback?’ Iwas tempted to reply, ‘WhenyoupersuadeDeutscheBank toreturnittoyou.’Isaidnothing,smilingwidely,mymindonthemaingame.The lift door opened onto a long cold corridor at the end of which

Wolfgang Schäuble was waiting in his wheelchair. This was a man whosespeeches and articles I had been reading and following for two and a halfdecades.IfullyunderstoodthattohimIwasadamnednuisance,butthesmileon my face and the hand I extended towards him were meant with genuinerespectandinthesecrethopethatwemightestablishadecent,civilizedmodusvivendi.Strangely, thatwishwasgranted in theend,despite theawfulnessofwhat happened next: refusing my offer of a handshake, Germany’s federalministeroffinanceperformedaswiftU-turninhiswheelchairandpropelledhimselfatimpressivespeedtowardshisoffice,commandingmetofollowwithawaveofhishand–whichofcourseIdid,Euclidrushingbehindmetokeepup.Once insidehisoffice,myhost relaxed,hisexpression turningkinder.We

sataroundthecustomaryconferencetable,hewithtwojuniorministersathisside opposite Euclid, our Berlin ambassador and myself. As always, I wasinvitedtomakeanopeningstatement.IgaveavariantofthesamespeechIhadgiveninmymeetingswithSapin,Osborne,PadoanandDraghi.Thedifferencewas an emphasis on two points that I knew resonated powerfully in Berlin.First,Iwasnotaskingforadebtwrite-down,andImadeclearthattheoverallutilityofmydebt-swapproposalswouldbenefitGermanyaswellasGreece.Second,IstressedtheimportanceIplacedoncatchingtaxcheatsandeffectingreformsthatwouldencourageentrepreneurship,creativityandprobityacrossGreeksociety.Schäuble’sopeninglinewasfriendlyenough,insistingthatweaddresseach

otherbyfirstname.Butimmediatelythereafterheproceededtomakeclearthathe had no interest in anything I had just said. Instead, unable to resist theopportunity tosuggestGermanprobityandGreekdelinquency,heoffered tosendfivehundredGermantaxofficials toGreecetohelpcatchtheevaders.Itold him that I verymuch appreciated his generosity but expressed concernthat, finding themselves unable to read Greek tax returns or the associateddocumentationandthereforeincapableofauditingourtaxpayers,hisofficialsmight become disheartened. I had a better idea: why didn’t he appoint thegeneralsecretaryofmyministry’staxoffice?My suggestion startled himvisibly. So I continued.Thanks to the troika, I

explained, Iwasresponsible for the taxofficebuthadnocontrolover it; the

person inchargeof itwasneitherappointedbynoranswerable tomeormyparliament,eventhoughIwasaccountableforheractions.Myproposalwasasfollows: he would choose a German tax administrator of unimpeachablecredentialsandspotlessreputationtobeappointedimmediatelyandtobefullyaccountabletothebothofus,andifsheorherequiredadditionalsupportfromhisministry, thatwas finebyme. ‘Iknowyoudon’t likedealingwithmeorwithmygovernment,’Itoldhim.‘But,bethatasitmay,youcanrestassuredthat inmeyouhaveagenuineally in thefightagainst taxevasion.’Finally, IinformedhimoftheplanIhadputinplacetocreateanalgorithmicmethodofidentifyingtaxevadersbetween2000and2014.It was not what Dr Schäuble had expected. But two things showed his

determinationtoavoidanyseriousengagementwiththisproposaleither.First,he proceeded to change the subject, away from this potentially fruitfuldiscussion,beforewehadachancetostrikeanimpressivedealonfightingtaxevasioninGreece,nevertoreturntoit.Secondwasthetopichechosetoturnto instead: his theory that the ‘overgenerous’European socialmodelwas nolonger sustainable and had to be ditched. Comparing the costs to Europe ofmaintainingwelfare states with the situation in places like India and China,where no social safety net exists at all, he argued that Europe was losingcompetitiveness and would stagnate unless social benefits were curtailed enmasse.ItwasasifhewastellingmethatastarthadtobemadesomewhereandthatthatsomewheremightaswellbeGreece.Myrejoinderwasthattheobvioussolutionwastheglobalizationofwelfare

benefits and livingwages, rather than the globalization of insecureworkingpoverty. In response, he reminisced at length about a secret mission he hadundertakeninthe1970sand1980s,toliaisewiththeEastGermanauthoritiesonbehalfofhisChristianDemocratparty.‘TheDDRpeoplewerenotbad,’hetoldme. ‘They had good intentions for a socialwelfare system thatwas noteconomicallypossible.’Theinsinuationwasperfectlyclear.‘Areyoucomparingmewithawell-meaningDDRministertryingtosustain

an unsustainable political and economic system?’ I asked. ‘Let me reassureyou,Wolfgang,thatdespitewhatyourfriendsinGreecemayhavetoldyou,Iam a committed democrat, a determined pluralist and an unwaveringEuropeanist. And so are my Syriza party colleagues. We have as much incommon with the DDR’s ways and means as the CDU has with Pinochet’sregime:nothingwhatsoever!12As for our proposals regarding pensions andwelfare benefits, they are part andparcel of a broader fiscal policyyielding

smallbutpositivebudgetprimarysurpluses.Fiscalandeconomicsustainabilityisournumber-onepriority.Greekshavehadenoughoflivingondeficits.’In response he backpedalled, protesting that he had not intended to make

suchacomparisonatall.

Gototheinstitutions!

With this unfortunate misunderstanding behind us, I channelled theconversationbacktodebtrestructuringandmydebt-swapproposals.Schäubledidnotevenglanceatmynon-paper.Hepassedittohisjuniorministerwithanairofscornsayingthatitwasamatterforthe‘institutions’–theverywordIhad used at my joint press conference with Jeroen Dijsselbloem in Athens,suggestingthateventheGermanfinanceministernowfeltuncomfortablewiththeterm‘troika’.ThiswouldbeBerlin’sstandardtacticthroughout.Wheneverwe put a proposal to Chancellor Merkel or Minister Schäuble – on debt,privatizations,pensions,taxevasionandsoon–theywouldsimplyreferustothe ‘institutions’. The implication was that there would be no negotiationbetweenBerlinandAthens;itwassimplynottheirjob.13AtthispointEuclidmadeanexcellentintervention.OntheGermanside,no

oneotherthanWolfganghadspoken.InelegantlystructuredsentencesEuclidpointedouttheirresponsibilityofleavingmattersofgreatpoliticalimportancetotechnocratswithaprovenrecordofmishandlingtheGreekfiscal,debtandsocialcrisis,revealingtheabsurdityofSchäuble’sresponse.Itwaswonderfulto have Euclid on my side, upping the ante and allowing me to make aplacatorysuggestion.IfIweretogotothe‘institutions’withmyproposals,tohaveanychanceofhammeringoutaworkabledealitwouldbeineveryone’sinterest to allow for a period of ‘peace and quiet’, of financial stability.Wolfgangnoddedasifinagreement.Thiswas incontrast to theEurogrouppresident’sattitude. Idescribedhow

hehadthreatenedmewithbankclosures,inmyoffice,amerethreedaysafterIhadmovedintoit.‘Notexactlyaconvivialmove,’Isaiddryly.Wolfgang reacted angrily. ‘He had no reason to go toGreece.He had no

mandate.’Notamantofakeemotion,SchäubleconvincedmethatDijsselbloemmust

haveactedalone.Ifhehaddonesointhehopeofaneasywinonhismaster ’s

behalf, it was fair to say that he had failed: his master was evidently notpleased.

Stunnedbythereproach,aghastatthepraise

At the customary press conference afterwards Wolfgang adopted his sternpublicpersona, telling thegatheredmedia thatwehadhadacordialmeetingduring which he had ‘explained’ that Greece had ‘obligations’ that must berespectedregardlessofwhichpartywasingovernment.‘We agreed to disagree,’ Schäuble said, dispelling any notion that our

discussionhadreachedanycommonground.‘Wedidnotevenagreeonthat,’Iinterjected.Iwantedtomakeclearthatmyhosthadbeenunwillingtodebateanything,

but also that thingshad changed:Greecenowhad aminister of financewhowouldnotbepushedaroundjustbecausetheGreekstatewasinsolvent.Havingestablished this, I made a statement aimed at healing the rift that wasdeveloping between ordinary Germans and Greeks. ‘Some are tempted toimaginethatthesolutionliesintheseparationofourpeoples,’Isaid.

Thankfully, today I did not just visit the finance minister of Europe’spowerhouseeconomy.Aboveallelse,IvisitedaEuropeanstatesmanforwhomEuropeanunityisalifelongprojectandwhoseworkandeffortstounifyEurope I have been followingwith great interest since the 1980s.Today,mymessage toMinisterSchäublewas that in thisgovernmenthehasapotentialpartnerinthesearchforEuropeansolutionstoavarietyofproblemsafflictingnotonlyGreecebuttheunionmorebroadly.

Turningtomyhost,Isaid,

Fromourgovernmentyoucanexpectafrenzyofreasonableness.YoucanexpectproposalsthatareaimednotattheinterestoftheaverageGreekbutat the interest of the average European – the average German, Slovak,Finn, Spaniard, Italian. You can expect from us an unwaveringcommitmenttotellingitasitis,withouttacticalstratagemsorsubterfuge.These are our commitments. What we request is perhaps the mostpreciousof commodities: time.A short spaceof timeduringwhichour

government can present to our partners, to the IMF, to the ECB, to theEuropeanCommission,comprehensiveproposalsandaroadmapfortheveryshortterm,forthemediumterm,andforthelongterm.

OnthechallengesfacingtheEUmoregenerally,Isuggestedthatwerespectestablished treaties and processes without crushing the delicate bud ofdemocracy. When I visited Paris, I said, I had told the French minister offinance that it had felt like a homecoming, that I was returning to one ofGreece’sspiritualhomes.InBerlinIexpressedthesamefeelinganddescribedhowforalmost twocenturies thelandofGoethe,Beethoven,HegelandKanthadbeenasourceof inspiration toGreeksacross thepolitical spectrum.Butthere was something more that bound Greece and Germany together, Icontinued.

As finance minister in a government facing emergency circumstancescausedbyasavagedebt-deflationarycrisis,IfeelthattheGermannationis the one that can understand us better than anyone else. No oneunderstandsbetter than thepeopleof this landhowaseverelydepressedeconomy combined with ritual national humiliation and unendinghopelessness can hatch the serpent’s egg within one’s society. When IreturntoAthenstonight, Ishallfindmyself inaparliament inwhichthethird-largestpartyisaNazione.WhenourprimeministerlaidawreathataniconicmemorialsiteinAthensimmediatelyafterhisswearing-in,thatwasanactofdefianceagainsttheresurgenceofNazism.14 Germanycanbe proud of the wayNazism has been eradicated here. But it is one ofhistory’s cruel ironies thatNazism is rearing its uglyhead inGreece, acountrywhichputupsuchafinestruggleagainstitinthe1940s.WeneedthepeopleofGermanytohelpusinthestruggleagainstmisanthropy.Weneedour friends in thiscountry to remainsteadfast inEurope’spostwarproject; that is, never again to allow a 1930s-like depression to divideproudEuropean nations.We shall do our duty in this regard.And I amconvincedthatsowillourEuropeanpartners.

Thenextday theGermanpress lambastedmeforhavingdared tomentiontheNazisinfrontoftheGermanfinanceministerinGöring’soldAirMinistrybuilding. Meanwhile Greek nationalists were praising me for having called

SchäubleaNazi.IwasnotsurewhetherIshouldbemoreappalledbythepraiseorbythereproach.

Siemens

After our statementsWolfgang and I tookquestions.Oneof themconcernedSiemens,theGermanconglomerate,andamancalledMichaelChristoforakoswhousedtoheadtheiroperationsinGreece.Someyearsearlierascandalhadoccurred when an investigation initiated in the United States suggested thatChristoforakos had been bribing Greek politicians to secure governmentcontracts on behalf of Siemens. Soon after the Greek authorities beganinvestigatingthematter,ChristoforakosabscondedtoGermany,wherehewasarrested.ButtheGermancourtswerepreventinghisextraditiontoAthens.‘Did you, Minister,’ asked a journalist, ‘impress upon your German

colleague theGerman state’s obligation to help theGreek government snuffoutcorruptionbyextraditingMrChristoforakostoGreece?’I tried to provide a balanced and reasonable answer: ‘I am sure that the

German authoritieswill understand the importance of assisting our troubledstateinitsstruggleagainstcorruptioninGreece.ItrustthatmycolleaguesinGermany understand the importance of not being seen to have doublestandardsanywhereinEurope.’AndwhatdidDrSchäublesayinreply?Lookingputout,hemumbledthat

this was not a matter for his finance ministry. Maybe it was not. But theSiemens case and Schäuble’s willingness to wash his hands of the problemilluminatetheunderlyingchallengethatGreeceandallEuropefaces.AsIhavefrequentlyobserved,thereisawidespreadbeliefinEurope’snorth

that the continent is populated by hard-working law-abiding ants on the onehandandlazytax-avoidinggrasshoppersontheother,andthatalltheantsliveinthenorthwhilemysteriouslythegrasshopperscongregateinthesouth.Thereality is much more muddled and sinister. Corruption takes place acrossborders,inbothnorthandsouth.Itinvolvesmultinationalcorporationswhoseconnectionstothedeepestablishmentarenotcontainedbynationalboundarieseither.Partofwhatpreventsusfromtacklingthismightynetworkisarefusalon the part of the establishment to acknowledge its true nature. WhenChristoforakoswasindictedforstuffingbribesintopoliticians’pockets,Iwasnotsurprised:byaremarkablecoincidence,myownuncleresignedfromthe

same post at Siemens in the late 1970s when he found himself beingpressurized todoprecisely the same thing.AlongwithmillionsofGreeks, Iwasoutraged that theGermanauthorities refused to extraditeChristoforakosso that he could face charges in Greece. I was even more horrified that inAthensStournaras,myformerfriendwhowasthenministeroffinance,tabledinParliamenton28August2012anout-of-courtsettlementwithSiemensthatended all prosecution of the company and paved the ground for not justChristoforakos but also the Greek politicians whose pockets he had beenaccusedofliningtoescapetrial.My press conference with Schäuble turned out to be the beginning of a

hostilemedia campaign. Especially inGermany, I was portrayed as an anti-German, reform-denying, narcissistic defender of Greek graft andinefficiency.Eventually,throughsheerrepetition,themudstuck.Monthslater,aftermy resignation,Euclidwouldbeportrayedas the sensible, responsible,understated minister who put the negotiations back on the rails and savedGreecefrommyamateurishrecalcitrance.ButEuclidandAlexiswereactuallybeing rewardedfor theendofanyseriouschallengenotonly toBailoutistanbut also to the network that binds companies like Siemens to banks andpoliticiansinbothGreeceandGermany.As these lines are beingwritten,MichaelChristoforakos continues to live

freelyinGermany,StournarascontinuesasgovernorofGreece’scentralbank,theSiemensscandalhasstillnotresultedinasinglepoliticianfacingcharges,DrSchäubleandEuclidcontinuethenon-negotiationsthatconfineGreeceevermoresecurelyinitsdebtors’prisonand,amazingly,achargeofhightreasonispendinginGreece’sparliament–againstme.

Socialdemocracy’sWaterloo

AfterWolfgangSchäuble itwas the turnofSigmarGabriel tohostmeathisEconomyMinistry.Almosteveryoneexpected this tobemysoft landing, theagreeablesocialdemocraticvicechancellorandleaderof theSPDconsolingme after what was always going to be a bloody affair at the Ministry ofFinance. But I harboured no such expectations, and not just because of thepreviousnight’sset-upinvolvingGabriel’senvoys,JörgandJeromin.ThemeetingatGabriel’soffice,withJörg,Jeromin,EuclidandourBerlin

ambassadoralsopresent,wentsplendidly.Itwasalmostacarboncopyofmy

meeting withMichel Sapin a few days earlier in Paris. The same platitudeswere aired, the same vows of undying solidarity. ‘Your success will be oursuccess,’ Sigmar told me early on in the meeting. He added, without myprompting,thatwhathadbeendonetoGreecewassinfulandwouldstigmatizeEuropeforalongtime,blamingitontheChristianDemocrats’dominationofEU politics at the time of the 2010 euro crisis. When I suggested that ourgovernment’s electionwas an opportunity forEurope to get its act together,not just in the context of the Greek drama but by redeploying existinginstitutions to procure themacroeconomic stability necessary to fendoff therise of nationalism, right-wing populism and xenophobia, Gabriel lookedpositively overjoyed. He even listened intently while I explained the basicelementsofourModestProposal,promisingtolookintothemindetail.ThentheconversationmovedtomattersspecificallyGreek.Imademypitch

for debt-swap operations, handing over my non-paper. He seemed welldisposed and even went so far as to say that a debt restructuring was longoverdue. But his preference was to focus on tax evasion and industrialdevelopment. Thatwas fine byme, as it gaveme the opportunity to explainwhat Iwas trying to dowithmy teamof untouchables and their algorithmicpursuitof taxcheats,aswellasmyplans foradevelopmentbank thatwoulduseGreece’sremainingpublicassetstoelicithomegrowninvestmentaspartofanindustrialpolicytargetingGreece’smostpromisingsectors.Gabrielseemedsatisfiedwiththedirectionoftheconversationbutwantedto

raiseapracticalpoint.WhileyachtinginGreecetheprevioussummerhehadbeenappalledathowdifficultitwasuponmooringhisyachtinalmostanyoftheislandharbourstopayhismooringfees.Hewouldapproachthecoastguardofficer in charge only to be told, ‘It’s OK. There’s no hurry – give mewhatever youwish,’ with no receipt for payment or indeed any sign of dueprocess.I agreed that informality used to cover up petty corruption, which

cumulativelyaffectstheeconomyandsocietyasawhole,wasamajorproblemthatmyministrysimplyhadnoresourcestoaddress.IalsorelatedtoGabrielhow in the summerof 2014 the number of people arriving inMykonos andSantorini, the twoCycladic islandsmost popularwith tourists, had doubled,andyetduringthesameperiodVATreceiptshaddeclinedby40percent.WhenI put this scandalous situation to the man heading my ministry’s EconomicCrimeFightingUnit, Iwas told thatasa resultofyearsofausteritycutsandattemptsby the troika to sideline theECFU,his staffhadbeen reduced tono

more thanonehundredpeople for thewholeofGreece.Whenhedispatchedofficers toMykonosorSantorini, theculpritswouldgetword that theywereheadingtheirwayevenbeforetheirferryboathadleftPiraeusharbour.To get to the bottomof these corrupt practices, I toldGabriel,we needed

innovative methods that put the fear of God into tax cheats. He agreed andsuggestedthatprobitywouldreturnonlyifproprietorswereworriedtheirnextcustomermight beworking for the tax office. I told him that I was alreadyconsideringauthorizingthetaxofficetoemployoutsidepersonnelwhosejobwould be to pose as regular customers at bars, restaurants, petrol stations,doctors’surgeriesandthelike.Lackingenforcementauthority,theirjobwouldsimply be to record transactions electronically so that the authorities couldthenworkoutifthereweregroundsforinvestigationorprosecution.Oncethewordspreadthatthetaxofficehadeyesthatsawandearsthatheard,agiganticamountofpettytaxevasionwouldend,withtremendousbenefitstothestate’sfinances.Gabrielwaskeenon the idea, and aswewerewalking to thepressroom for yet another joint press conference put his arm around me andencouragedmetoimplementit.Onceatourrespectivelecternsinfrontofthecameras,themicrophonesand

assorted journalists, it was déjà vu. More specifically, it was Paris all overagain. Gabriel was a changedman.Once again a European social democratattempted toout-SchäubleSchäuble inpublic.All the talkabouta jointsocialdemocraticprojectforGreeceandEuropevanished.Thecommongroundwehad established on industrial policy, ending austerity and debt restructuringgave way beneath my feet. The meeting of minds regarding strategies fortacklingtaxevasionevaporated.Allwasreplacedwithaggressiontowardsmygovernment and a harsh lecture on my obligations to our creditors, whichwere paramount and beyond negotiation. To add insult to injury, he added areferencetothetroika’s‘flexibility’.With my by-now outstandingly low expectations of Europe’s social

democrats further downgraded bymy previous night’s experiencewith Jörgand Jeromin, I continued unperturbed and gavemy standard spiel about ourgovernment’s quest for sustainability by means of moderate proposals torecalibrate radically the troika’s failed Greek programme. But as we wereleaving the press room, I askedSigmar how easy itwas for him to say onething inprivate andquite another inpublic. ‘It is something that I’m findingveryhard,’Iadded.

HeclaimednottounderstandwhatIwasreferringtobutdidsaythatbeingincoalitionwith theChristianDemocratswas constraining. I responded that heshould learn the lessonofPASOK, theGreek socialdemocraticparty,whichhadhadasimilarhabitofadapting theirnarrative to suit theircoalitionwiththeNewDemocracyconservatives. ‘Theycrashed from40per cent to4percent.IwouldnotwanttoseethepartyofWillyBrandtgothesameway’weremylastwordstohim.15A month later I proposed to the ‘institutions’ the idea of Greece’s tax

department employing outside personnel in an attempt to shift Greek socialnorms away from habitual petty tax evasion – just as I had discussed withSigmarGabriel thatday.Thiswasjustoneofmanyreformstothetaxofficethat I put forward, the most important being enforced digitization oftransactionsandalimitoffiftyeurosoncashdealings.Troikaofficialsleakedtheproposal to thepress,whichwent to town. Insteadof theserious reformsdemandedbythetroika(suchasraisingVATratesinabrokeneconomywherepeople evaded VAT), I was portrayed as putting forward foolish proposalsinvolvingwired-up touristsandhousewivesencouragingGreeks tosnitchontheirneighbours.Did Sigmar Gabriel or any in his circle defend the proposal that he had

seemed so keen to seeme implement? The answermay not surprise you. Ifanything,hisofficehelpedspreadthepropaganda.Ifanyonewondersaboutthenature and causes of the general Waterloo now facing European socialdemocracy, this storymay provide some clues. Of course, compared to thewaySigmarGabrielwastobehavefourmonthslater,duringthelastweekofJune2015,thischangeofheartdoesnotevenregisterontheRichterscaleofcowardice.

8

Thefrenzybeforethestorm

IreturnedtoAthenslateonThursdaynight.MyfirstEurogroupmeetingwasscheduledforthefollowingWednesday(11February).Wehadalongweekendinwhichtoprepare.Forthreedaysandnightsthesixthflooroftheministryteemedwithagroup

ofpeoplesentbyLazardandmyowncloseassociates,whichincludedGlennKim,ElenaPanariti,formerPhDstudentsandothertechnicalexpertswhohadvolunteeredtohelp.Atthetopoftheagendawerethreecrucialdocumentsthathad to be tabled at the Eurogroup: an up-to-date debt sustainability analysis(DSA) demonstrating how the debt swaps I was proposing were not onlyconsistentwithrecoverybutindispensableforreturningGreecetosustainablegrowth; a list of proper, progressive reforms to replace the troika’sprogramme; and a proposal for a more rational and efficient process formonitoringGreece’sprogress.AtthesametimeJamieGalbraitharrivedfromthe United States and took up residence in a small office hidden within theministerial suite. I greeted him with a hug and the words, ‘Welcome to thepoisonedchalice.’1,2Thequalityandvolumeofeveryone’sworkwasimpressiveandthesource

ofgreatoptimism.But toput togetheracomprehensivepolicydocument fornationwidereform,theteamrequiredinputfromtheotherministriestoo.EarlyonFridaymorningIhadputacallouttoeachofmycabinetcolleagues,askingthem to send through a complete set of the reforms they were planning toimplement.Once theyhadarrivedon the sixth floor, the teamassessed thesecontributionsandcametoseemeinmyoffice.Itwasnotlookinggood.MostweresimplyslightlyeditedversionsofSyriza’spre-electionpolicyproposals,half-baked andbadlywritten up.Wewould need to put a great deal ofworkinto them before theywere presentable inBrussels.Of course thatwas as itshouldbe:wewereanewgovernmentandneededwhatmostnewgovernmentsneed – a honeymoon period inwhich pre-election plans could be developedwiththehelpofexperiencedcivilservantsintoimplementablepolicies.Wedid

nothavethatprivilege,perhapsbecauseourswaslessagovernmentandmoreacommitteeplanningamassescapefromBailoutistan.Whilesiftingthroughthematerialthatwouldgointomysubmissiontothe

Eurogroup I receivedanemail fromWillemBuiter,Citigroup’sglobalchiefeconomist,offeringtohelpinanywayhecouldandexpressinghisamazementand anger at theECB’smove towithdraw thewaiver ‘so early’.Hours laterPaulKrugmanaddressedthesameissueinhisNewYorkTimescolumn:‘MaybetheGermansimaginethattheycanreplaytheeventsof2010,whenthecentralbankcoercedIrelandintoacceptinganausterityprogrammebythreateningtocut off its banking system.But that’s unlikely towork against a governmentthathasseenthedamagewroughtbyausterity,andwaselectedonapromisetoreversethatdamage.’ThiswaspreciselywhatIwashoping:thatourgovernmentstayedsteadfast

againstBerlin’sattempttodeploytheECBagainstus.Myonlyobjectiontothearticlewasitstitle,AGAMEOFCHICKEN.ForyearsIhadbeenarguingthatourinteractionswithGreece’screditors,andBerlininparticular,werenothinglikeagameofchicken:iftheonewhoblinksfirstloses,itonlymakessensetoholdyourgroundifyouthinkthatintheendyouropponentwillbackdown.Inourcase, however, as Krugman himself admitted, we had every reason to stayunswervingevenifwethoughtChancellorMerkelandPresidentDraghiwoulddothesame.ThiswastheessenceofmycovenantwithAlexis.Inthemeantime,theHighNoonnarrativewasparticularlydamagingtoour

causebecauseitdistractedpublicopinionworldwidefromwhatwasreallyatstake:thecommoninterestsofallEuropeans.ToaddressthisIauthoredanop-edfortheNewYorkTimesentitledNOTIMEFORGAMESINEUROPE.3 InitImadethreepoints: first,as financeministerofabankruptsmallnation I lacked themoral right tobluff.All I coulddowashonestlypresent theeconomic facts,table proposals for re-growingGreece, explainwhy thesewere in Europe’sinterest and reveal the red lines beyond which logic and duty prevented usfromgoing. Second, as I used to tellmy students, game theory only applieswhenyoucantaketheplayers’motivesforgranted.Inpokerorblackjackthisassumption is unproblematic, but in the current deliberations, I wrote, ‘thewholepointistoforgenewmotives.Tofashionafreshmindsetthattranscendsnationaldivides,dissolves thecreditor–debtordistinction in favourofapan-European perspective, and places the common European good above pettypolitics, dogma that proves toxic if universalized, and an us-versus-themmindset.’Butwhat if refusing tobackdownbrought theGreekpeoplemuch

pain?Mythirdpointwassimplythatthereare‘circumstanceswhenwemustdowhat is right not as a strategy but simply because it is… right…Onemaythink that this retreat from game theory is motivated by some radical-leftagenda. Not so. The major influence here is Immanuel Kant, the Germanphilosopherwho taughtus that therationaland thefreeescape theempireofexpediencybydoingwhatisright.’In addition to writing this article and the frenzy of preparation for the

Eurogroup, I had two other distractions to contend with. One was my firstappearance inparliament,on theoccasionof theelectionof thenewspeakerandmyandEuclid’sbelatedswearing-in(delayedbecauseofourtravels).ThesecondwasavisitfromtheUSambassador,whowouldbeaccompaniedbyadelegationfromtheUSTreasury.At midday on Friday, 6 February, I walked to parliament alone, stopping

brieflytospeakwithwell-wishersasIcrossedSyntagmaSquare.EnteringthehouseasanelectedMPfilledmewithpride.AtallpolicewomanrealizedIwasanoviceandgavemedirectionsthroughthebuilding’sunfamiliarcorridorstothe ministers’ entrance to the chamber. Walking through that door, I foundmyselfsuddenlyamidtheministerialbenches,withthepodiumtomyleftandthe speaker ’s bench towering above. In front of me, arranged like anamphitheatre, were three hundred seats, one for each member, the samenumberastherewereSpartansatthefamousbattleofThermopylae.Onthefarright (appropriately) I couldn’t help but recognize the seventeenMPs of theGoldenDawn,sokeenweretheytodressandlooklikeNazis.The decision to appoint Zoe Konstantopoulou speaker was rich in

symbolism.Over theprevious twoparliamentary terms this impressively talland uncompromising Syriza MP had single-handedly exposed the grossviolations of procedure employed by previous governments to pass thelegislationdictatedbythetroika.Votingherinasthespeakerwasajoyandastatementthatneveragainwouldparliamentbereducedtorubber-stampingitsownservitude.Andwhena fewmoments laterZoecalleduponme toaffirmmy allegiance to the constitution and thus become formally an MP, I feltimpervioustotheslingsandarrowsalreadybeingaimedatmefromBrussels,BerlinandFrankfurt.It was in this mood that I walked back across Syntagma Square to the

ministrytoreceivetheUSambassadorandthedelegationthatJackLew,theUSTreasurysecretary,haddispatchedfromWashington,DC.JeffSachsandJamieGalbraithhadbeenhardatworklobbyingkeyUSofficialssuchasJanetYellen

at the Fed, Samantha Power at the UN andDavid Lipton at the IMF to helpsecureusaninety-daybreathingspacefreeofthreatstoourbankingsystemordeadlines for impossible repayments in which to conduct our negotiations.Given PresidentObama’s helpful public statement shortly after our election,not to mention Bernie Sanders’s exquisite letter to Christine Lagarde, I feltconfidentthattheUnitedStateswouldbeanimportantsourceofsupport.Alas,mymeetingwiththeambassadorputpaidtothatparticularexpectation.Nothing of what the ambassador said was in sync with Barack Obama’s

publiclystatedviewthat‘youcannotkeeponsqueezingcountriesthatareinthemidstofdepression’.Onthecontrary,hewenttosomelengthstolecturemeonhow important it was to accept the parameters of the programme and to goalongwiththeIMF.IdidnotseehowIcoulddoboth,Iinformedhim,sincetheIMF had been saying for a while now that theGreek programme could notworkwithoutseriousdebtrestructuringandtherelaxationofcurrentlevelsofausterity. Indeed, the IMF’s European chief, Poul Thomsen, had told meexplicitly at our meeting in Paris that we needed to erase €53 billion ofGreece’spublicdebtimmediatelyandrecalibratetheprogrammetominimizeausterity and rewrite the reform agenda. With the ambassador lookinguncomfortable,IturnedtotheUSTreasurydelegationandaskedthemfortheiropinion on the matter. Their response seemed much more in tune withObama’sline,butwithinminutestheambassadorwasinterjectingtorestatehisuncompromisingmessage.There was no doubt that, for whatever reason, America’s ambassador to

AthenswasfollowingalinedifferenttothatoftheWhiteHouseandpossiblyof the US Treasury. But as time went by, I would discover that Jack Lew’sTreasurywasalsoedgingclosertotheviewsoftheambassadorthanthoseofthepresident.ThefactthatLewdidnotinvitemetoWashingtonduringthosefirstweeks,contrary toPresidentObama’ssuggestion toAlexis,shouldhavealertedmeto this rift.At thatmoment thoughonlyone thingmattered.WhenJeroenDijsselbloemtriedtobullymeintosubmissionafewdaysbefore,Ihadstooduptohim.Nottodothesamenowwouldhavebeenanindefensibleandanti-Europeandoublestandard.Lookingoutofthewindowonthatclearwinter ’sdaytowheretheinimitable

AtticsunbathedParliamentHouseinvibrantcolours,IbeganbyconfessingtotheambassadorthatIhadneveraspiredtobeaminister.Yes,Iwashappytobedoingthejob,Itoldhim,butonlyoutofmysenseofdutytoanationindebtbondage,adutywhosesolepurposewas torewrite the termsofourcontract

withtheEUandtheIMF,soas to turnitfromapredatoryrelationshipintoaworkable and equitable one. So accepting the current parameters of thatcontractwassimplynotanoption.Hereagaintheambassadorinterjected,thistimewithavague,implicitbutperfectlyrecognizablethreat.Outofrespectforthepeoplewhohadappointedmetomyoffice,Ifeltobligedtocuthimshort.‘EversinceIassumedthisministry,thisroomhasbecomethefocalpointof

the hopes and expectations of millions. But it is not my natural habitat. Mynaturalhabitatisoutthere,’Isaid,pointingtoSyntagmaSquare.‘Iamhappierthere demonstrating against this office, as I have been doing since I wasthirteen. If I am pushed to pledge allegiance to the failed programme thatcondemnsmypeople to a continuationof our present indignity, rest assuredthat I will jump at the opportunity to return there as one of thousands ofdemonstrators.Itwouldinfactmakemyday.’Theambassadorgotthemessageandwassoononhisway.Iwouldnothave

beensurprisedtolearnthat,uponreturningtohisembassy,hehaddispatchedawire:‘Varoufakis isnotfor turning.If thepresentprogrammeis tocontinue,hisremovalisimperative.’WhatIdidnotknowwaswhotherecipientofsuchamessagemightbe.TheStateDepartment?TheWhiteHouse?TheTreasury?Bymid-AprilIhadafairlygoodidea.

Pre-positioning:the70percentgesture

OnSaturdaymorning,7February,Iattendedourfirstcabinetmeeting.OscarWilde’squipaboutdemocracywasatthebackofmymind:‘It is impractical,and it goes against human nature. This is why it is worth carrying out.’4Havingwastedafewprecioushoursonalargelyceremonialoccasionatwhichtoomanyofusspokefortoolongtosaytoolittle,Irushedbacktotheoffice,wheretheLazardteamandmypeoplewereworkingonthethreenon-papersIwouldbetakingtoBrussels.Ifelttheywerecomingalongsatisfactorily.Ourdebtsustainabilityanalysis,

helpedalsofromafarbyJeffSachs,was irrefutable in itsempirical findingsandprojectionsandlentclearsupporttothedebtswapsandthefiscalpolicyIwas proposing. The reform agenda was comprehensive, especially ourproposalsforthemanagementofpublicassetsandthebanks’non-performingloans, even if the contribution of keyministries (labour, energy, health, the

environment) was thin. Lastly, the proposed replacement for the troika’sprocesswasundeniablysensible:ourplanwas tounbundle the troika into itscomponentparts,withtheECBconcentratingonitsprimarymission,namelyto keep the banks liquid and the financial markets stable, the IMF offeringtechnical assistance on a number of areas, and the European CommissionundertakingallpoliticalnegotiationswiththeGreekgovernment.BySundaynightthethreepaperswerecomplete,allowingmetoconcentrate

on preparations for my first big moment in parliament, the delivery of myprogrammaticstatement,thefinanceminister ’soutlineofeconomicpolicyfortheparliament’sfullterm,whichwouldtakeplacethefollowingmorning.WithmyfirstEurogroupduewithintwenty-fourhours,thiswasalsoanopportunitytosetout theproposals Iwouldbemaking thereand thespirit inwhich theywouldbeconveyed.Withthisinmind,Ifocusedmystatementonfourthemes:transparency, analysis, commitment to uncompromising moderation and,finally,amajorgestureofgoodwilltoourcreditors.‘Ihavethisidea,ladiesandgentlemen,’IbeganmyspeechonMonday,‘of

tryingout an innovativepolicy: of coming to thehouse to addressmemberstruthfully about the economic situation facing the country.’ Unlike previousfinance ministers, who had presented our economy’s terrible free fall as asuccessstoryofrecovery,IpromisedIwouldcontinuetorefertoourstateasbankruptuntilweachievedsolvency.ThiswaswhatImeantbytransparency.I thensuggested that thefailureofpreviousgovernments torescueGreece

from its plight was due to their acceptance ‘of impossible conditions theycouldnevercarryout,eveniftheyhadintendedto–anacceptancewhichmadesuccessiveGreekgovernments almost asguilty in acceptingwhat they couldnot fulfil as the creditors were in imposing what they were not entitled toexact’.5Thiswaswhat Imeantbyanalysis: ‘If the troika’sprogrammewas avery

bittermedicine thatcuredourdisease, Iwouldrecommendtaking it.But it isnot. Their programme is poisonous and only worsens the Greek patient’scondition,’ I concluded.The best strategywas to stop taking it.Otherwise, itthreatened to poison the whole of the European Union with its deflationaryeffects,asithadbeendoingsince2010,theonlybeneficiariesbeingtheultraRightandtheenemiesofliberaldemocracy.Onthethemeofuncompromisingmoderation,Ihadthistosay:

TomorrowIshallbetellingmyEurogroupcolleaguesthatweaccepttheprinciple of continuity between previous government undertakings andour new government’s mandate … Ours is not the only democraticgovernment in the eurozone. We have a mandate but so do the othereighteen finance ministers sitting in the Eurogroup … But this meansestablishingcommonground,throwingabridgeoverourdifferences…Itwill take goodwill to do so and a period of calm, free of the type ofthreatsthathaveunfortunatelybeenissued…Icommittonotpassinganylegislation during the negotiations that derails our target for a smallbudgetprimarysurplus.AtthesametimeIexpectourpartnerstotakeourproposalsandouranalysisseriously…Thisiswhatanegotiationoughttomean.

From the opposition benches several New Democracy and PASOK MPsinterjectedboisterously.‘Negotiateashardasyouwant,’theyshouted,‘butruleout fallingoutwith the troika.Ruleout any rupture!’ Igave theonly logicalresponseIcould:

If you cannot imagine walking out of a negotiation, you should neverenter it. If you cannot fathom the idea of an impasse youmight aswellconfine yourself to the role of a supplicantwho implores the despot togranthimseveralprivilegesbutwhoacceptsinthefinalanalysiswhateverthedespotgrants.Thiswasnotourmandateon25January.Ourmandatewastonegotiate.Whichmeanstoworktowardsavoidingarupturewhilerefusing toruleoutarupture.This iswhatIpromisedvotersand this iswhatwearedelivering.Youhadyourchanceofgettingthecountryoutofdebtors’prisonthroughyourmodelprisonerstrategy.NowitisourturntotrytoliberateGreecethroughagenuinenegotiation.

A heated debate ensued, though I had not even reached the mostcontroversialpartofmyspeech,thegestureofgoodwilltoourcreditors:‘Asreasonablepartnersweshallincludeinourreformagendaupto70percentofthe measures in the existing programme and augment them with a plan tocombat the humanitarian crisis that has afflicted our people after years ofpoliticallymotivateddenialofthecrisis’scausesandnature.’The official document describing Greece’s programme, known as the

MemorandumofUnderstanding(MoU),wasalistofreforms(austeritytargets,the institutional elimination of social benefits, privatization targets,

administrative and judicial changes and so on) that the previous governmenthadagreedtoastheconditions(conditionalitiesintroika-speak)forreceivingthe second bailout loan. There was no way we would implement theseconditions in full, since doing sowould involve acceptingmassive pain forabsolutelynogain,especiallyasmorethan90percentofthebailoutloanhadbeen disbursed before we were even elected. However, careful study of theMoU list in 2012 hadmade clear tome thatmany of itsmeasures could beimplemented without too much social damage. Accepting these elements,which comprised about 70 per cent of theMoU, in return for our demands,whilerejectingthegenuinelytoxicmeasuresoftheremaining30percent,wasastrategicmove.AsIhadarguedinmyop-edintheNewYorkTimes,whenonefindsoneselfbargainingfromapositionofrelativeweakness,aswedid,itissensible to make all the compromises upfront and then stick to one’s gunswithoutbluffsorstratagems.Thisgestureprovokedagreatfurore:theestablishmentpartiesaccusedme

of not having yielded enough to the troika, while leftists lambasted me forhavinggivenawaytoomuch.ThefollowingmorningIhadtheopportunity,asfinance minister, to wrap up the debate that preceded parliament’s vote ofconfidenceintheincominggovernment.InmyspeechItriedtoputthemattertorest.

Forusthebailoutthatwerejectmeansonething:thecombinationofnewloanspiledonexistingnon-payableprivateandpublicdebtwhichcomeunderconditions that reduce the incomes fromwhicholdandnewdebtsmust be repaid…What percentage of the twisted bailout logic do weaccept?Preciselyzeropercent.Weshallnotacceptasinglemeasurethatreinforces the doom loop boosting the debt-to-income ratio or the taxrates imposed on thosewho are already exhausted by punitive taxation.We shall not accept even one of theMoU lines that sacrifices a singleGreekcitizenonthealtarofrealitydenial.

But,Iconcluded,anagreementrequirescompromiseonbothsides.Manyofthemeasures in theMoU listwere unproblematic and could be implementedwithoutanyofthesacrificesthatwerejectedasunacceptable.Indeed,someofthemeasures, suchas the ideaofaminimumguaranteed income,were tobedesired.

In normal circumstances this position would surely have been consideredsensible and moderate. After all, it was those at the extremes – committedGrexit-supportersontheonehandanddie-hardtroikaloyalistsontheother–whowereangeredbyit.ButGreeceisnotlivinginnormalcircumstances.

EnlistingtheOECD

BeforeIheadedofftoBrusselsfortheEurogroupmeetingIhadarrangedtoreceive a delegation from the Organization of Economic Cooperation andDevelopment (OECD). Created by Washington in 1950 to administer theMarshall Plan in postwar Europe, the OECD was one of the three majorinstitutions designed by the United States to keep another Great Depression(andthustheSovietbear)atbay,theothersbeingtheIMFandtheWorldBank.It so happened that I had a good personal relationship with the OECD’s

secretary general, Ángel Gurría. Our good chemistry was born out of acommonappreciationoftheneedtorestructureunsustainabledebt.ÁngelhadmadehisnameasthefinanceministerofMexicowhohadnegotiatedamajorhaircutofitsunpayablepublicdebtinthe1980s.BeforeIevenimaginedthatIwouldbecomeGreece’sfinanceminister,ÁngelhadinvitedmetotheOECD’sofficesinParistogivealectureontheEuropeancrisisandtomeethimandhisteamaspartoftheregularbriefingstheyorganizedtokeepabreastofthelatestthinking about global capitalism. After the fateful late-night meeting withAlexis in November 2014 when I accepted his offer of a role in thegovernment,IreconnectedwithÁngelandhispeople.Syrizadidnothavetheexpertisetocomeupwithabespokefullyfledgedreformagendaonitsown.Havingsuchaprestigiousglobalinstitutionnotonlycontributetothatagendabutthenvouchforitonceitwasfinalizedwouldbeapowerfulmeansofpre-emptingtheinevitablecriticism.TheOECDdelegationhadarrivedthedaybeforeonTuesday,10February.I

metthemintheroofgardenoftheGrandeBretagne,anhistorichotelalsoonSyntagma Square. Over dinner we discussed Greece’s situation and foundourselves in complete agreement over our new collaboration. My singlerequestwasthat theypubliclyditchtheirso-calledtoolkits–asetofreformsthattheOECDhadputtogetheratthebehestofthetroikaandpreviousGreekgovernments aimed at ordinary people. Ángel promised that wewould startafresh,concedingthatthetoolkitshadnotbeentheOECD’sfinesthour.

Thedinnerlasteduntilaftermidnight.Earlynextmorningwemetagain,thistime at Maximos, in front of the cameras and with considerable pomp andceremony.Theprimeministerwelcomed theOECD’ssecretarygeneral,withmyself, Deputy PrimeMinister Dragasakis and EconomyMinister Stathakisalsopresent, thus formallymaking itknown that thenewSyrizagovernmentwouldbeworkingcloselywiththerichcountries’clubtodevelopanewpro-growth reformagenda. Inhis response toAlexis’swelcomingspeech,ÁngelGurría expressed his enthusiasm at the partnership and, as agreed, hisdisavowal of the OECD’s toolkits, which would be replaced with better andmoreappropriatemarketreforms.MyappreciationandrespectfortheformerMexicanfinanceministergrew

thatmorning.HeknewthatthetroikawouldbedispleasedandthattheOECDwould suffer the consequences of their displeasure. But hearing him speakthose words confirmed that it was possible to join forces with globallycredible institutions – that it was possible to have them as partners, notantagonists,inoureffortstobringfreshairtoGreecetodriveawaythestenchofstagnationandhopelessness.Minutes after the official ceremony ended, Iwas in a car heading for the

airportandBrussels.ThefirstEurogroupbeckoned.

AttheEurogroup

A prison is not newsworthy when the inmates suffer quietly. But when theystagearevolt,andtheauthoritiescrackdown,thenthesatellitetrucksappear.Even before my plane landed in Brussels, the press was reporting Alexis’srecent speech in parliament as evidence we were rolling back reforms anddigging our own graves.6 When I actually arrived at the EuropeanCommission’sbuilding,wheretheEurogroupwasscheduledtotakeplace,thedinoftheassembledpresscorpswasimpressive.Before theEurogroupmeeting itself, ImetChristineLagarde, headof the

IMF. Her positive attitude and openness to the proposals in our non-paperswere a psychological boost. (Itwas at the end of thismeeting that Christinemade her plea that I work within the programme, despite her remarkableacknowledgement that it was destined to fail, as described in Chapter 2.)Afterwards,hermessagetothegatheredjournalistswas:‘Theyarecompetent,

intelligent,theyhavethoughtabouttheirissues.Wehavetolistentothem.Wearestartingtoworktogether,anditisaprocessthatisstartingandisgoingtolastacertaintime.’Ashortwaydownthecorridor,aswemadeourwaytothemeetingitself,we

cameacrossJeroenDijsselbloem.SeeingChristineandmeengagedinfriendlyconversation,Jeroenlookeddecisivelysullen.PerhapstheunhappymemoryofhislucklessvisittoseemeinAthenshadsprungtomind.Weenteredandtookourplaces.TheEurogroupisaninterestingbeast.Ithasnolegalstandinginanyofthe

EUtreatiesandyetitisthebodythatmakesEurope’smostvitaldecisions.Atthe same time most Europeans, including most politicians, know almostnothingaboutit.Itconvenesaroundahugerectangulartable.Financeministersareseatedalongitstwolongersides,eachaccompaniedbyasingleaidewhoalsorepresentsthemintheEurogroupWorkingGroup.However,realpowersitsateitherendofthetable.Atoneend,tomyleft,sattheEurogrouppresident,JeroenDijsselbloem.On

hisrightwasThomasWieser,theEurogroupWorkingGrouppresidentandthereal power at that end of the table; on his leftwere the IMF representatives,ChristineLagardeandPoulThomsen.AttheotherendofthetablewasValdisDombrovskis,commissionerfortheeuroandsocialdialogue,whoserealjobwas to supervise (on behalf of Wolfgang Schäuble) Pierre Moscovici, theeconomicandfinancialaffairscommissioner,whosatontheLatvian’sleft.OnDombrovskis’s right, meanwhile, sat Benoît Cœuré and beyond him MarioDraghirepresentingtheECB.AtthesamecornerofthetableasDraghi,butonthelongersideandatright

angles to him, sat Wolfgang Schäuble. Their proximity would on occasiongiverisetointenseheat,thoughneveranyactuallight.AlongthesamesideasSchäublewerewhatIcametoseeashischeerleaders:theFinnish,Slovakian,Austrian, Portuguese, Slovenian, Latvian, Lithuanian and Maltese financeministers.My seatwas almost diagonally opposite Schäuble’s, alongside theother profligates, nicely lined up together: tomy left was Ireland’sMichaelNoonan, to my right Spain’s Luis de Guindos, and next to de Guindos wasItaly’sPierCarloPadoan.France’sMichelSapinalsosatonourside,next toPadoan.InnormalEurogroupmeetingsafascinatingritualillustratedthemannerin

whichthetroikaanditsprocesseshadtakenoverthegovernanceofcontinentalEurope – one reasonwhyGreece’s appalling drama,which gave rise to the

troika, is so significant. Every time an itemwas tabled for discussion – forexample, the French national budget or developments in Cyprus’s banks –Dijsselbloemwouldannounce the topicand then invite the representativesoftheinstitutionstopresenttheirviewsinturn:first,MoscovicionbehalfoftheEuropean Commission, then Christine Lagarde (or Poul Thomsen in herabsence)onbehalfoftheIMF,andfinallyMarioDraghionbehalfoftheECB(withBenoîtCœurésteppinginontherareoccasionsthatMariowasabsent).7Onlyaftertheseunelectedofficialshadgiventheirassessmentandsetthetoneand terms of the debate did the elected ministers get a chance to speak.Moreover, for almost all the meetings at which I was present the ministersreceived no substantial briefing on any of the topics under discussion. Areasonable and impartial spectator might easily have concluded that thepurpose of the Eurogroup is for the ministers to approve and legitimizedecisionsthathavealreadybeentakenbythethreeinstitutions.However, the Eurogroupmeeting of 11 February 2015was not a normal

one.For thefirst timeacountrywasbeingrepresentedbya financeministerwhohadbeenelectedonaplatformofconfrontingthetroika,theEurogroup’sbackbone.Theairwasfilledwithtension.BeforethemeetingDijsselbloemhadcontacted Alexis with an offer to bend the Eurogroup rules that limit eachmember state to two representatives. Given this was our government’s firstmeetingandoneofsuchvitalimportance,Jeroenwaskeentoallowthedeputyprime minister to attend as well. And so, in addition to having GeorgeChouliarakis, Dragasakis’s appointee, at my side, I had Dragasakis as well.WassilybelievedthiswasanattemptbyDijsselbloem,incahootswithAlexis,todilutemyimpact.Ididnotmindatall.Themorethemerrier,Ithought.

Continuityversusdemocracy

Finance ministers attending their first Eurogroup get the chance to presenttheir policy priorities in amaiden speech. I beganmine by appealing tomycolleagues’weariness.

IunderstandyourfatiguewiththeGreekdrama.Butbelieveme,theGreekpeople have hadmuchmore than enough of it too…Our governmentfaces the task of earning a precious currency without depleting animportantcapitalgood:wemustearnyourtrustwithoutlosingthetrustof

our people. For their support is an important capital good in Europe’sstruggletosortGreeceoutandtorenderitstableand,indeed,normal.

Next I committed our government to sound finances, deep reforms and awholesaleassaultonvestedinterests.‘WhyshouldyouexpectustodeliverthatwhichotherGreekgovernmentshavenot?’Iasked.‘Simplybecausewearenottied to any interestgroups…Wewillnotonly commit to reforms,we shalldeliverthem.’Buttosucceedinthiswewouldneedtohavethepeopleonourside.Andthis

would require them to feel justly treated.This, I explained,waswhywehadrehiredcleanersandschooljanitorswhomthecourtshadjudgedtohavebeenillegally dismissed by the previous government on the troika’s orders. Thiswaswhywe had promised to reverse cuts to pensions for old people livingbeneath the (extremely low) Greek poverty line. This was why we werelooking into ways of gradually restoring the minimum wage in the privatesector.Those assembled in theEurogroup hadmy commitment, I told them,thatnoneofthesesmall-scalemeasureswouldhaveameasurablefiscalimpact.The price tag on theseminor interventions in return for a renewed sense ofjusticewastiny.Tothinkoftheillegalfiringofacleanerasareform,andherrehiringasevidencethatreformswerebeingrolledbackwasunhelpfulifnotabsurd.To demonstrate our openness to the involvement of international

organizations, I mentioned our new collaboration with the OECD andproposedtoworkcloselywith theIMFandtheECBin itsareasofexpertise,while calling upon the European Commission to play its role as politicalmediator between Athens and the other capitals. On the question ofprivatizationsandthedevelopmentofpublicassets,Ideclaredourgovernmenttobe

undogmatic…readyandwilling toevaluateeachandeveryoneprojectonitsmeritsalone.Quickfiresalesofpublicproperty,whenassetpricesaredeeplydepressed, is not a smart policy. Instead thegovernmentwillcreate a development bank,whichwill incorporate state assets, enhancetheir equity value through reforming property rights and use them ascollateral for the purposes of providing, in association with EuropeaninvestmentinstitutionssuchastheEuropeanInvestmentBank,fundingtotheprivatesector…InassociationwiththeECBweshallsetupapublic

banktocleanupnon-performingloanstorenderthebanksabletosupportsmallbusinessandfamilies.

What happens, I asked, in a democracy when two principles clash?Democracies find a compromise that reflects the commonwill. That daywewere facing such a clash, I suggested.Therewas the principle of continuity:ourgovernment,whetherwelikeditornot,hadbeencommittedbypreviousGreek governments to a programme. But there was also the principle ofdemocraticallymandatedchange: theirgovernments,whether they liked it ornot, were obliged to respect the fact that the Greek voters had given us amandate to challenge that programme.What was our duty in this Europeanforum?ToestablishanewpartnershipthatfoundcommongroundbetweenthepreviouslyagreedGreekprogrammeandourgovernment’sfreshmandate.Tothatend,IinvitedtheIMFtostateclearlyitsviewsonourdebt’ssustainabilityandmydebt-swapproposals.Jeroen Dijsselbloem had joked in Athens that the EU already had a

permanent debt reduction conference – the Eurogroup. I turned this into aproposal:‘WewelcomeMrDijsselbloem’srecentstatementinourjointpressconference in Athens that the Eurogroup is the proper forum to act as apermanentEuropeandebtconference, addressingdebtproblems ineuro-areamemberstates.WethereforeproposetocreateaspecificEurogroupworkinggroupgatheringmemberstates’representativesandexperts.’(Whilespeaking,I noticed the angry look that Schäuble gave a seemingly apoplecticDijsselbloemandcouldnothelpbutsmile.)I thenmovedfromtheessentialbusinessofrestructuringourmassivedebt

totheneedforshort-termfinancialstability.ThetroikawasdemandingthatthebankruptGreek statepay jsutsunder€5billion to the IMFby July2015andthen,duringJulyandAugust,a further€6.7billion to itsowncentralbank. IproposedthatwebeginwithamodestagreementthattheECBwouldpaybackthe€1.9billionitowedGreecefromitspastyears’profitsonourSMPbonds.8This was Greece’s own money. If the creditors wanted us to keep up ourrepayments to them, the least they could do was give us access to our ownmoney.Anythinglesswouldsurelybeaninvitationtodefault.

Moreover,weproposetoworkurgentlyonabridgefinancingmechanismtoensureGreece’s liquiditypositionover thecomingmonths…Letmebeveryclearonthis:thegovernmentasksforthis…ontheconditionthat

itisthestartingpointforgenuinenegotiationsingoodfaithforforgingadifferentcontractbetweenus,basedonarealisticprimarysurpluseffortand efficient as well as socially just structural policies – including ofcoursemanyelementsofthepreviousprogrammethatweaccept.Weneedassurances on this point. Such an extension cannot be taken asacquiescenceto the logicof theformeragendathathasbeenrejectedbyourpeople.

Afterdelvingintosomeofthetechnicalitiesinvolved,Imademyfinalplea:

Europeiswholeandindivisible,andthegovernmentofGreececonsidersthat Greece is a permanent and inseparable member of the EuropeanUnionandourmonetaryunion…Someofyou,Iknow,weredispleasedby the victory of a radical left-wing party. To you I have this to say: itwould be a lost opportunity to see us as adversaries.We are dedicatedEuropeanists.Wecare about ourpeopledeeplybutwe arenot populistspromising all things to all Greeks. Moreover, we can carry the GreekpeoplealongwithanagreementthatisgenuinelybeneficialtotheaverageEuropean. Inusyouwill find trustworthypartnerswhodonot see thesemeetingsasameansofextractingsomethingoutofnothing,ofgainingatanyone’sexpense.

Electionsversuseconomicpolicy

DragasakisandChouliarakiswerenoddingapprovinglyasIwrappedup.LuisdeGuindos, theSpaniardonmy right, looked concerned.9As soon as I hadfinished,MichelSapin,theFrenchfinanceminister,stoodhisnameplateonitsside,thestandardwayofaskingforthefloor.Jeroenobligedhim.Shortlyafterannouncingmywillingness toaccept70percentof theMoU

measures in thecontextofanewpartnership, IhadreceivedamessagefromParisthatthisgestureappealedtotheFrenchgovernmentgreatly.Michelnowproceeded towax lyrical aboutmy suggestion that abridgebebuilt betweentheGreekprogrammeandournewgovernment’splans,pavingthewayforanew type of contract betweenGreece and the Eurogroup.But beforeMichelconcluded, Wolfgang placed his own nameplate in an ominously verticalposition. Later I would realize that this was probably the first and last time

Michel Sapin dared express unequivocal support in the Eurogroup foranything I said. The chain of commandwithin the Franco-German axis wasabouttobeestablished,evenwithinthefirsthourofmyfirstEurogroup.Ashespoke,SchäubledirectedapiercinglookatSapin.‘Electionscannotbe

allowed to change economic policy,’ he began. Greece had obligations thatcouldnotbereconsidereduntiltheGreekprogrammehadbeencompleted,asper theagreementsbetweenmypredecessorsand the troika.The fact that theGreek programme could not be completedwas apparently of no concern tohim.What startledmemore thanWolfgang Schäuble’s belief that elections are

irrelevant was his total lack of compunction in admitting to this view. Hisreasoningwassimple:ifeverytimeoneofthenineteenmemberstateschangedgovernmenttheEurogroupwasforcedtogobacktothedrawingboard,thenits overall economic policies would be derailed. Of course he had a point:democracyhadindeeddiedthemomenttheEurogroupacquiredtheauthorityto dictate economic policy to member states without anything resemblingfederaldemocraticsovereignty.AfterDrSchäuble’sspeechseveralofhischeerleaderstooktothefloorto

back him– as also did the Spanish, Irish, even theBelgian and theAustrianministers,whosepremiershadshownsupport forourgovernment inprivatemeetings.10 While some, including the Lithuanian, Slovakian and Slovenianfinanceministers, clearly believed Schäuble’s pronouncements on economicpolicy to be sound and self-evident, it became apparent that even thosewhodisagreedwiththeeconomicsofausteritywouldsupporthim–inthecaseofItaly,SpainandIrelandoutoffearthatupstartGreecemightescapehavingtodowhat theyhad been forced to do already, inwhich case their ownpeoplemightdemandtoknowwhytheyhadnotresistedausteritytoo–andinthecaseof a small but significant group, with France at its centre, out of fear thatSchäublewouldforceausterityupontheminthefutureiftheyunderminedhim.Whenmy turncame to reply, I tried tomake lightofWolfgang’sPlatonic

contemptfordemocracy.

Thenotion that elections cannotbe allowed to change economicpolicy,indeedanypolicy,isagiftto[founderandleaderofSingapore]LeeKuanYewsupportersorindeedtheChinesecommunistparty,whoalsobelievethistobetrue.Thereisofcoursealongtraditionofdoubtingtheefficacyofthedemocraticprocess.ButIwouldliketothinkthatthistraditionhas

been expelled long ago from the heart of democratic Europe. It nowseems that the euro crisis has brought it back. I urge you all to bandtogether in a collectivebid to resist it.Democracy isnot a luxury tobeaffordedtothecreditorsanddeniedtothedebtors.Indeed,itisthelackofdue democratic process in the heart of our monetary union that isperpetuatingtheeurocrisis.Thenagain,Imightbewrong.Colleagues,ifyouthinkthatIamwrong,ifyouagreewithWolfgang,thenIinviteyouto say so explicitly by proposing that elections should be suspended incountries likeGreeceuntil thecountry’sprogrammeiscompleted.Whatisthepointofspendingmoneyonelectionsandaskingourpeopletogetall fired up to elect governments that will have no capacity to changeanything?

Dragasakisleanedoverandcongratulatedme.Whateverourdifferences,hehadenjoyedhearingmemakethatpoint.Butasnooneelsehadanythingtosayonthematter,Dijsselbloemannounced,‘Weshallnowadjournfortenminutesandthenresumetodraftthecommuniqué.’Thetimewas6p.m.,oneandahalfhours since the meeting began, but our work was just beginning: thecommuniquéwasclearlyallthatreallymattered.

Communiquésanscommunication

PreviouslyIhadaskedthesecretariattocirculatemythreenon-paperssothatalltheEurogroupministerswouldbeabletoconsidermyproposalsonpaperandinsomedetail.Thesecretariatnowalertedmetoadifficulty,andJeroenDijsselbloem andThomasWieser approachedme to explain that itwas ‘notpossible’. Incredulous, I asked, ‘Areyou tellingme thatyouwillpreventmefrom communicating to my colleagues a few pages with the gist of ourproposalsonkeyissuesconcerningtheGreekprogrammethatistoday’ssoletopicofconversation?’Yes,thiswaspreciselywhattheyweretellingme.Butwhy?Whatwasthereason?Couldtherebeanyrationaleforsucharefusal?Theanswercameoncewehadreconvened–fromWolfgang.Ifhewereto

receivemyproposals,heclaimed,hewouldbelegallyobligedtotablethemintheBundestag,Germany’sfederalparliamentinBerlin.Andthenallhellwouldbreaklooseas thevariousfactionswithinhispartyand theoppositionraisedconcernsaboutthem.Myproposalswouldbedeadevenbeforetheinstitutions

hadhadachancetoconsiderthem.‘So,takeyourproposalstotheinstitutions,’he suggested oncemore. (Indeed, whenever I sought to sharemy proposalswithotherministersinvariousEurogroupmeetings,Iwouldberebuffed.Onone occasion Jeroen informedme that were I to emailmy proposals to theotherfinanceministriesIwouldbeinbreachofprotocol,whichwouldmeanthe proposals could never be considered.) Not wishing to clash overeverything at once andwith the draft communiqué about to be distributed, Iheldmytongue.Eventuallythedraftwashandedout.Oneglancewasenoughtoknowitwas

unacceptable as it explicitly committed Greece to completing the secondbailoutprogrammeviatheimplementationoftheentireMoU‘withmaximumflexibilitywithin theprogramme toaccommodate thenewGreekauthorities’priorities’.‘Maximumflexibility’isthetroika’sequivalentofHenryFord’ssalespitch

fortheModelT:youcanhaveitinanycolouryouwishaslongasitisblack.Itmeantthattheoverallleveloffiscalcutswasnon-negotiable,althoughAthenscouldpropose an alternativedistributionof thepainwithin thepopulation. ItwasthefiscalequivalentofSophie’sChoice.Taking the floor I pointed out that Jeroen’s draft constituted a wholesale

rejection of the bridge we had proposed, supported by France, between theprogrammeoftheMoUandour freshmandate.Todemonstrategoodfaith, Isaid I would accept it nonetheless if we could agree to the insertion of oneadjective which would make an important difference. ‘Could you add“amended”infrontof“programme”?’IaskedJeroen.Hewaspleasantlysurprisedbymysuggestion.InfactIwasmakingahuge

concessionbyallowingtheword“programme”toremain.‘Would you be happy to commit to the completion of the amended

programme?’hereplied.IconsultedbrieflywithDragasakisandChouliarakis.While theagreement

would be opposed bymany of our cabinet colleagues andMPs,whowouldrightly react angrily to any commitment to the programme, in the end it allhingedontheinterpretationoftheword‘amended’.Theyagreed.‘Yes,Jeroen,wearepreparedtocommittoanamendedprogrammethatis

financially sound, fiscally sustainable, socially just andcontains reforms thatourpeoplecanembrace,’Isaid.‘Weshalladjournbriefly,’theEurogrouppresidentannounced.

Whilewaiting,IstruckupajovialconversationwithmySpanishneighbour,Luis de Guindos. Despite my representing a government that constituted adeadlythreattohisown,thechemistrybetweenuswasgood.‘Youshouldhaveseen what I went through when I first landed this job and our banks werecollapsing.Itwasterrible!’hesaid,pointinginWolfgang’sdirection.Itwasnotthe beginning of a wonderful friendship between the two of us, although itwouldultimatelyyieldafascinatingexchangeafewmonthslaterinhisofficein Madrid, but there were a few officials with whom it was easy tocommunicate without nastiness, pettiness or incomprehension getting in theway. We did not agree politically or ideologically but shared a commonlanguageandthedesiretogettothebottomofwhateverproblemwasstaringatus.OnedayIrealizedwhattheyallhadincommon:theywereallGoldmanSachsalumni!Whenthemeetingreconvened,Jeroenlookeddowncast.Wolfgangcouldnot

accept the insertion of ‘amended’ in front of ‘programme’, he announced.Wolfgang switched his microphone on to explain that the insertion wouldoblige him to take the matter to the Bundestag for approval. The Greekprogramme as prescribed in the MoU had been voted in by the Germanparliament, he remindedus.Anyamendmentwouldneed tobevotedon too.But since the programmewas due to expire in exactly seventeen days, therewasnotimetoagreetodetailedamendments,tablethemattheBundestagandpassthem.Thus,theGreekgovernmenthadnoalternativebuttocommittotheexistingprogrammeoracceptthatitsbanksshouldcloseon28February.Theclash overGreece’s economic policy and reform agendawas turning into atale of two parliaments. But whileWolfgang Schäuble invoked the GermanparliamentinordertoforcetheGreekparliamenttorelinquishitsauthority,Iwasnottogranthimthatconcession.Judgingbyhisbodylanguage,heknewit.When Wolfgang had finished, Jeroen looked at me with open hostility.

‘Yanis,Ihopeyourealizethatyoucannotaffordtoleavethisroomwithoutanagreed communiqué. You are facing a hard deadline. Any extension of theprogrammeneedsatleasttwoweekstobepassedthroughthefourparliamentsthat must vote for it to satisfy constitutional imperatives.11 Our Finnishcolleaguetellsmethattheirparliamentarycalendarisextremelytightandtheyneedtostarttheprocessofapprovinganyapplicationtogiveyouanextensionbytomorrowmorning.Ifthereisnoagreedcommuniquétonight,theFinnishparliamentwillnothavethetimetoapprovetheextensionandtheECBwillbe

forced,on28February,topulltheplug.Sothereisnoroomleft.Acceptthiscommuniquénoworthetrainwillleavethestation.’Looking at him and Wolfgang, I replied, ‘It is a sad day for Europe’s

democracywhen,onhisfirstvisittotheEurogroup,afreshlyelectedfinanceministerisbeingtoldthathisargumentsandproposalsneverreallymattered,that his mandate is entirely irrelevant. For this is what you are telling me,Jeroen. You are telling me that, owing to technical constraints involvingvarious parliamentary procedures and deadlines, even if I had tabled divineproposalsthateveryoneinthisroomwereecstaticabout,andwhichcouldsavemypeopleterribleindignityandhardship,theprogrammeistheprogrammeistheprogramme,andnodeviationfromitcanbecontemplated.ItismydutyasaEuropeandemocrat,myburdenasthefinanceministerofabrokencountry,tosaynotothisultimatum.’Christine Lagarde intervened. She acknowledged the Greek government’s

right ‘to be heard’ andmade some polite noises about our debt but withoutchallengingWolfgang.Thankstoherinterventionanewadjectiveemergedasapossiblesubstitute

for‘amended’‘Wouldyoucommittoanadjustedprogramme?’Iwasasked.Thinking onmy feet, I decided to be flexible. It was a poor alternative –

‘adjustments’impliedtheprogrammewasfundamentallysound,whereasitwasbecause the programme had failed and was impossible to complete that itneededrealamendment–butwecouldacceptthisnewadjectiveinreturnforaspecific addition to the communiqué. In the spirit of cooperation with theEurogroup, I said I could recommend to the Greek prime minister that wecommit to completing an ‘adjusted programme’ as long as the communiquéalsocommittedtheEurogrouptoworkingwithourgovernmenttoaddressthehumanitarian crisis that was now afflicting our people as a result of theprogramme.‘I cannot accept this,’ Jeroen said. ‘The term “humanitarian crisis” is too

political!’‘Thereisnothingmorepolitical,Jeroen,’Isnappedback,‘thantheattempt

to overlook a humanitarian crisis because it would be too political toacknowledgeit.’It was clear that we were at an impasse. At around 10.30 p.m. another

adjournment was called. Outside Christine Lagarde approached me andattempted to persuade me to accept the word ‘adjusted’ and withdraw my

demand that the humanitarian crisis in Greece be acknowledged in thecommuniqué.‘Do you realize it is not just up tome?’ I said. ‘We have a parliamentary

partythatwillbeupinarmsifIdeclareourmandatenullandvoidatourfirstEurogroup.Ihaveaprimeministerwaitingnearbywhowouldbeappalled.’Ithenexpressedmydisappointment that sheandPoulThomsenhadnotput tothe Eurogroupwhat they had conceded in our private discussions. Christinereplied thatsuchmattersshouldbe left till later.Fornow,she insisted, itwasimportant toendorse thecommuniquéandpreventusall fromfallingoff thecliff.ItoldherIneededtoconsultwithAlexis.WithLagardepushingmetowardsWolfgang’sembraceandCommissioner

Moscovici and Finance Minister Sapin keeping their distance, only oneFrenchman was lending moral support, Emmanuel Macron, the Frencheconomyminister.HavingnoseatintheEurogrouphimself,hehadcalledtowishmewell justasIwasstepping into themeeting.During thenegotiationsover thecommuniquéhesentme regular requests forupdates.Whatwasmyfeeling? Howwas themeeting going? I replied that I was prepared to bendoverbackwards tomake adecent communiquépossible. ‘The first draftwasappalling, let’s hope that theywill not prove ridiculously stubborn,’ I textedhim. At 10.43 Emmanuel responded, advising me to keep cool and seek acompromise but only if theymoved in our direction.At 11.02 I textedback,‘They are pushing us out of the door … They wanted to roll me into acommuniquéthatnotevenSamaraswouldhavesigned.’ItwastimeforanotherconsultationwithDragasakis.Iputittohimthatwe

could either win ourselves some time by accepting ‘adjusted’, or we riskedhavingourbanksclosedownalmostimmediately,beforewehadhadachancetopreparethecountryforsuchashock.Lookingexhausted,heaskedmeformyopinion.IsaidthatIwasleaningtowardscompromiseonthecommuniquésothatwehadanopportunitytoputalltheplanswehadagreedintooperationwhile the bankswere still open.He agreed and so didChouliarakis.All thistimeAlexisandPappaswereholedup in theirnearbyhotel room,preparingfor the EU summit about to take place. During the Eurogroup I had beenkeepingthemuptodatewithtextmessages.Nowitwastimetotalkdirectlytomyprimeminister.Wespokeforalmostanhour,eventhoughJeroenapproachedtotellmethat

it was not normal for a minister to call their prime minister while in aEurogroupmeeting.Irepliedthatitwasnotnormaltoforceaministertomake

anon-the-spotdecision that could lead to the instant closureofhiscountry’sbanking system. It was an animated conversation, but with all the otherministers in the room talking in small groups, looking on, I had to keep apokerface.WhenIreadAlexisthedraftthatfeaturedthephrase‘adjustedprogramme’

hewasquicktotellmethatwecouldnotgetitpastthecabinet,letalonepassitthroughparliament.IconveyedJeroen’sthreat,‘thetrainwillleavethestation’.Alexis askedmewhatDraghi’spositionwas, given that theECBwouldgivethatproverbialtrainthegreenlighttodoso.‘Draghihassaidnothing.Hejustlooksunhappy,’Isaid.Overthecourseofourconversation,withmymobilephonegrowinghotter

and my bile rising, I must have changed my mind three or four times,oscillating between ‘Stuff them!’ and ‘Let’s accept the damned communiquéandfightthetroikawhenitcomestodefiningwhatan“adjustedprogramme”should look like.’Dragasakis,meanwhile,was signalling tome that I shouldpersuadeAlexistoyield.IconfessthatmywillwaveredandIneededAlexis’ssteadinessattheendofthephonetobolsterme.Aftertenhoursofcontinuous,confrontationaldeliberationsinanexceedinglyhostileenvironmentIsuddenlydevelopedanurgentneedtogetoutofthatfluorescent-litwindowlessroom.Ihadnever imaginedthatIwouldcraveBrussels’scold,dark,emptystreets inthemiddleofaFebruarynight, thatIcouldfeelsuchadesiretorushoutsideandsoakuptherainandbreatheintheair.ButthatisexactlyhowIfelt.ForafleetinginstantIunderstoodhowfinanceministersbeforemehadsuccumbedtothepressuretosignuptoBailoutistan.OnahumanlevelIsympathizedwiththem.OnceitwasalloverandIwasbackatmyhotel,IphonedDanaetosharethenight’sburdens,includingthisthought:‘IfwedidnothavethemillionsofGreekswhohadbelieved inus,whoexpected that in theEurogroup Iwouldrefuse to signup to thehatedprogramme, Iwouldmost likely succumb too.HowcouldPapakonstantinou,Venizelos,Stournarasresistsuchanirresistiblepressurewhenalltheyhadbackhometoshorethemupwastheoligarchsandthebankers?’Alexis,on theotherhand,atadistancefromthatcauldronofaroom,waswavering a lot less, and in the end hewas adamant.Butwithmyresolve fully recovered and having received my instructions, I saw anunseemlygameplayedoutbeforemyeyes:SchäubleandtheFinnishministerwere leaving the room. Almost immediately after they had gone, Jeroenapproached me to explain: ‘Our Finnish colleague has had to rush to theairport to catch his plane. Wolfgang has left too. There can be no further

amendmenttothecommuniquénowthattheyhavegone.Eitheryouacceptitasisoritisallover.’Nottoworry,ItoldJeroen.ItwasperhapsbestthatWolfganghadleft,aswe

couldnotpossibly sign thecommuniqué.He shouldn’t take itpersonally;wejust did not have amandate to do this. Iwas sure hewould not have signedeitheriftheDutchparliamenthaddeniedhimthemandatetodoso,Isaid.SomehowJeroenmanagedtolookevenangrier.IsatdownagainandexplainedwhathadhappenedtoDragasakis.Hedoubted

the wisdom of Alexis’s decision, but I told him that, even though I hadwavered,theprimeministerwasright.IthadbeenimportanttohaveAlexisincontactbutoutsidetheroom,inwhichtheheatandthetensionhadbluntedourjudgement.

‘Youjustranoutofmoney!’

Itwasnotclearwhatwewerewaitingfor,butJeroenandThomasWieserwerenow engaged in conversation, with Lagarde contributing occasionally andvariousfunctionariesprovidingassistance.Moscovici,ontheotherhand,hadbeen excluded. He hovered around, occasionally sending a friendly smiletowardsme.AtonepointWolfgangcamebackintotheroom.‘Theyaretoyingwithus,’I

saidtoChouliarakis.‘Themoretheydothis,themoreadamantIambecomingthatitwouldbeamistaketocompromise.’EventuallyChristineapproachedmeonemoretimetosay,calmly, thatshe

thought we hadmade amistake. Then Jeroen tried his luck onemore time:wouldItakethislastopportunitytoagreetothedraftcommuniqué?heasked.Would he accept my original proposal to insert ‘amended’ before‘programme’, an idea that he had liked before Wolfgang shot it down? Ireplied.Wehadconfirmed that the impassewas final.Ministerswerebeginning to

move towards the doors. Iwaved toDragasakis andChouliarakis that itwastimetoleave.Asweweregoing,oneofSchäuble’scheerleadingteamaskedinaconcernedvoice,‘Isityourplantoleavetheeuro?’‘Notatall,’Ireplied.‘Butthisdoesnotmeanthatweshallacceptconditions

thatcannotbefulfilledunderthethreatofexpulsion.’

AnotherministerfromtheformerSovietblocoptedforamoreaggressivestance:‘Youjustranoutofmoney,’hesaidspitefully.‘Well,that’sOK,’Irepliedwithagrin.‘TheBeatlestaughtmelongagothat

itcan’tbuymeloveanyway.’InthecorridorInoticedthatDragasakiswaswalkingunsteadily.Irushedup

behindhim, tookhis left armandhelpedhim to thebathroom.His facewaswhite and covered with sweat, his eyes unfocused, his breathing irregular. Iwaited outside andwas relievedwhen he emergedmuch steadier on his feetandwitha surer smile.Aswemadeourway towards theGreekdelegation’soffice I reflected that the human cost of the day’s charade was out of allproportion to what had been achieved. The finance ministers of nineteenEuropean countries, the leaders of the ECB, the IMF and the EuropeanCommission, not tomention deputies, countless translators and support staffhad justwasted tenhoursblackmailingoneminister.Whatawasteofhumanpotential,Ithought.Once in our office I briefly updatedAlexis on the phone. ‘Put on a brave

face,’he said. ‘Peoplearecelebrating in the streetsand supportingus.Cheerup!’Asecretaryshowedmeatweetfromhisaccountwithapictureofarallyand themessage: ‘In thecitiesofGreeceandEurope thepeopleare fightingournegotiationbattle.Theyareourstrength.’Indeed,asIwastofindout thenextday,thousandsofcheeringpeoplehadgatheredinSyntagmaSquarewhileIwas holed upwith theEurogroup.Theywere dancing andwaving bannersproclaimingBANKRUPTBUTFREEandSTOPAUSTERITY.Simultaneously,andevenmore touchingly, thousands of German demonstrators, led by the Blockupymovement,wereencirclingtheECBbuildinginFrankfurtinsolidaritywithus.AGermansupporterofacompletelydifferentstripecametomind:thesecretserviceofficeratFrankfurtairport.Themeetingmighthaveendedbutmyworkwasfarfromdone:hundredsof

reporterswerewaitinginthepressroom.Jeroenwassuretouseourrefusaltoagreetoacommuniquéasameansofacceleratingourbankrunbyensuringthenewswasbroadcastaround theglobe.My taskwouldbe toperformwithsufficient aplomb for the public and the markets not to despair at themisbehaviourofthe‘adultsintheroom’.ThatwaswhyAlexishadbeentryingtoraisemyspirits.Onmywaytothepressroomthesecuritystaffhelpedmerunthegauntletof

cameramenwho tooknoprisoners in their pursuit of the revealing close-upshot.Onceinsidethesmall,packedroom,itwasdowntometodrivealarge

wedgebetweenthewayIfeltandthewayIappeared.Myinsidesfeltcrushedbythe stress, and I feared the tensionwouldcausemyvoice tobreakor,worsestill, produce a tear or two. But when the moment came, I found to myastonishment that withinme there lived a stranger, one whowas capable ofrising to the taskof facingamediacircus,evenofdrawingstrengthfromit.Thisencounterwiththestrangerwithinwastrulyasurprise.

This Eurogroup was never meant to settle any issues. I was invitedbecause I am the new kid on the block, so to speak. I was given awonderful opportunity and a verywarmwelcome to present our views,ouranalysis,ourproposals,both regardingsubstanceand regarding theroad map. And since we are meeting again on Monday, I think it isperfectlynormalandnatural thatweshouldsimplymovetotheMondaymeeting.

Friendsandcriticshavecensuredmefordeceiving thepublic. Ihavebeenaskedmanytimes:whydidInotspillthebeansaboutwhatactuallyhappenedinthere?WhydidInotexposetheirblackmailandcontemptfordemocracy?TheanswerIgiveis:becausethetimehadnotyetcome.Ourmandatewastorejectany oath of allegiance to the existing programme, to the previousgovernments’MoU,toanynewloansorausteritymeasures.Ourpurposewasto go to thewirewithout any intention of backing down. I had accepted thefinanceministry on the understanding that wewould respond to behind-the-scenesthreatswithourowndeterrenceplan.Ourmission,inotherwords,wasneithertodeclarewarnortosurrenderatthesecretthreatofwar.Moreover,itwasimperativetocallJeroen’sbluff–thatthetrainwouldleavethestationthatverynight–bywaitinguntilthenextmorning.Ajournalistaskedmeifitwastruethattheprimeministerhadcalledduring

the Eurogroup to back me and Dragasakis in our decision to scuttle acommuniqué.IwantedtoreplythatbothDragasakisandIhadbeenwaveringinthe direction of accepting and that I owed Alexis a debt of gratitude forsupportingme during amoment ofweakness, but of course I could not sayanything of the sort. Instead, I said, ‘No one scuttled anything. Thismeetingwasaboutgettingtoknoweachotherandtocreatearoadmapforthefuture.’AnotherjournalistinterjectedtoaskformyimpressionofmyfirstEurogroupexperience. ‘It was fascinating!’ I replied. ‘I particularly enjoyed the verydifferentviewsIsampledtonight.’

Themediareportingoftheimpassedidnotgoentirelythetroika’sway.TheNewYorkTimessummeditupnicely:‘WithGreeceabouttorunoutofmoneyandinneedofGermansupportforemergencyfunds,MrVaroufakisappearedtobeoutmannedandoutgunned.Nonetheless,hewastheonewhodeliveredtheultimatum in the meeting: renegotiate Greece’s €240 billion bailout deal orriskamutuallydestructivedisaster.’Itwas3a.m.bythetimetheembassycardroppedmeoffatmyhotel.The

nightwasdark.Brusselslookedbleak.Therainwasfallinghardonthehotelawning, making an almighty racket, a northerly wind driving it almosthorizontal.ButthiswasexactlywhatIhadbeendreamingofforhours.Insteadofheadingtomyroom,Iwalkedoutintothedownpour,meanderingthroughtheemptystreets.Howthehumanmindforgesvistasofpleasureoutofpurebleaknessisafascinatingmystery.

9

Amomenttosavour,darkly

EarlynextmorningPappas,DragasakisandImetAlexisinhishotelsuite.TheEuropean Council summit was beginning that night with all eyes on theUkrainian crisis. Chancellor Merkel and President Hollande had beenimmersed in negotiations in Kiev and Moscow and would be arriving inBrussels exhausted, theirminds fullof theCrimea,Putin andwar–pressingmattersfarremovedfromGreece’stravails.We faced a risk but also an opportunity. From 2011 I had been advising

AlexisthatAngelaMerkelwasthekeytoanyresolutionoftheGreekdrama.Since I had become a minister, journalists had repeatedly asked me whoGreece’s best allies were within the EU. My response was always a singleword:Merkel.‘NotPresidentHollandeorPrimeMinisterRenzi?’theywouldask. ‘No,’ I would reply. ‘ChancellorMerkel is the only politician who canrecalibrateEurope’spoliciesonGreece.’AndsoIadvisedAlexistoapproachMerkel that very evening with a direct request to end the stalemate in theEurogroup,whereWolfgangSchäubleruledsupreme.The tension between Angela Merkel and Wolfgang Schäuble was well

documented. Schäuble dominated the Eurogroup with his control overDijsselbloem and his bloc of cheerleading finance ministers, mainly fromEastern Europe. OnlyMerkel had the authority to contain him. As I was todiscover later, the person she relied on for this task was Thomas Wieser,probablytheonlydeepestablishmentfunctionaryequidistantfromherandtheGerman financeminister.But to getMerkel temporarily to breakSchäuble’sstranglehold over the Eurogroup and thus allow for the possibility of anegotiated settlement,whichWolfgangwouldnot contemplateotherwise, shewouldneedapowerfulincentive.BeingseentobegivingGreeceachanceorbeingmagnanimoustoourpeoplewouldnotcutit.Butwhatwould?The answer I had been peddling since 2012 was Mario Draghi. Angela

MerkelwouldsurelyinterveneifDraghiweretoconvinceherthatthestabilityoftheeurozonedependedonit.AndwhatwouldmakeMariodosuchathing?SuccessfullyconvincinghimofourdeterminationtohaircuthisSMPbondsif

hecloseddownourbanks,puttinghiswholequantitativeeasingprogrammeinjeopardy.Alexis understood. He would approach Merkel during the summit. As a

brief,Iwrotedownourminimumconditionsforhimonhotelstationery:first,end the liquidity squeeze tocreate the space forpropernegotiations; second,replace the troika process with a new Brussels-based institution that wouldallowGreekministerstotalkdirectlytotheEuropeanCommission;third,endthe toxic language of ‘extending’ and ‘successfully completing’ the currentGreekprogramme;fourth,endtheescalatingausteritywithadealforasmallprimarybudget surplusnot to exceed1.5per centofnational income inanyyear.As we were discussing his approach, Alexis’s phone rang. ‘It is

Dijsselbloem,’hewhispered.ApparentlyJeroenwasofferingtocomeovertoour hotel for a chat.When he arrived, the rest of us retired to an adjacentroom,leavingAlexisalone.Afteronlytenminutes,Alexiscameintotheroomwhere therestofusawaitedwithasmileonhis face.Jeroenwanted tomakepeaceandhadofferedanewadjective: insteadof ‘amended’or ‘adjusted’hewas proposing that we commit to a ‘modified’ or ‘updated’ programme. IadvisedAlexistoinsistontherebeingmentionofthehumanitariancrisistoo.Meanwhile, Jeroenwas in the corridor speaking on his phone.He looked

likeaprimaryschoolpupilbeingreprimandedbyasevereteacher.‘Wolfganghasshothimdownoncemore,’IwhisperedtoPappas.BeforeAlexiscouldgetbacktoJeroenwithhisfurtherrequest,theclearly

upset Dutchman confessed that ‘modified’ would not work either, made hisexcuses,promisedtoreturnwithmoresuggestionsandheadedforthelift.Ashe passedme I asked him the question I had been aching to put to him eversincehehadarrivedatthehotel:‘Whathappenedtothattrain,Jeroen?Havewenot missed it after all? Has it reversed back into the station perhaps? Is itleavingagain?’Naturallyhedidnotanswer.Howcouldhe?ThepresidentoftheEurogroup

hadbeencaughtout.Thethreatshehadissuedrepeatedlyduringthepreviousnight’sshamefulambushhadevaporatedinthemorning’sfaintBelgiansun.That afternoon Jeroenwas back. This time he proposed toAlexis that the

twoof them issue a joint statement saying that theEurogroupand theGreekgovernmentwouldproceedtodiscussthetechnicalparametersformovingonfromthecurrentprogrammeinaccordancewiththenewgovernment’splans.Itwasacompleteclimbdown.AfewminuteslaterIemailedJeffSachswiththe

news:‘Wescoredatinytriumphtoday–ourrefusaltobudgeunderenormouspressureyesterdayledthemtoretreatfullyfromtheinsistencethatwesubmitanapplicationforextendingthecurrentprogrammeasis.’How had this come about? We found out when Alexis shared some

informationhehadreceivedfromaGreekforeignministrysource.OnarrivalinBrussels,exhaustedfromherUkrainianodyssey,MerkelhadcalledJeroenhoping for good news onGreece.When she heard of the stalemate she hadapparently got cross and instructed him, as Eurogroup president, to find anaccommodation–forthwith!Whichiswhathehadproceededtodo.Atinytriumphindeed.Butitalsoestablishedapatternthatwouldintheend

prove lethal: Alexis’s over-reliance on Merkel’s goodwill and Jeroen’spractice of speaking directly toAlexis. Therewas of course nothingwrongwithelicitinghelpfulinterventionsfromtheGermanchancellororwithdirectexchangesbetweenJeroenandAlexisthatunblockednegotiations.Whatwouldultimately be calamitous was the combination of two side-effects of oursuccess: onewas the confidencewhichAlexis gained, againstmy expresseddoubts, that Merkel would continue to mediate on our behalf regardless ofwhetherwewerepreparedtodeployourdeterrent;theotherwasthemannerinwhich that initialmeeting betweenDijsselbloemandAlexis developed into awedgethatwouldeventuallyestrangethepremierfromtheonlyministerwhocould,andwould,triggerthatdeterrent.

Insidethetroika’slair

ItwastheafternoonofThursday,12FebruarywhenDijsselbloemreturnedtooffer Alexis the joint statement. The next Eurogroup meeting, at which abreakthroughwasneeded,wasscheduledfor thefollowingMonday.That leftuswiththreedaysinwhichtobuildthebridgethatwehadbeenadvocating.TheGerman chancellorwanted our technical team tomeet the troika’s in

ordertobegindiscussionofourgovernment’sproposalsandpriorities.Itwasagreed that they would meet over Friday and Saturday in Brussels, leavingonly Sunday for the politicians to conduct their last-minute deliberationsbefore theEurogroup.Thatgaveme less thananhour inwhich todecideonthecompositionof the teamwewouldsendtoconfront the troika’sseasonedmercenaries, if they were to make it to Brussels for the commencement ofnegotiations thefollowingday.Working thephonefrantically frommyhotel

room, I ensured that our best people were contacted and the travelarrangementsmade.Meanwhile the troika was able to draw on hundreds, if not thousands, of

supportstaffworkingatsomeoftheworld’sbest-resourcedinstitutions–theIMF,theECBandtheEuropeanCommission.Theirpointmen–andtheywereallmen,atleastinthatfirstmeeting–hadyearsofexperienceofpushingtheir‘special adjustment programmes’ and ‘bailout’ agendas down the throats ofweak governments, Greek ones included. By contrast, our small teamcomprisedGeorgeChouliarakis,chairoftheministry’sCouncilofEconomicAdvisers,andfouryoungexpertsthatDragasakishadalsoenlistedbeforetheelection. They had only recently been brought together and had next to noexperience or support network behind them, so I asked two experiencednegotiators to join them: Elena Panariti, the only person on our side withinside experience of the IMF, and Glenn Kim, who had of course beeninstrumentalinthedesignofEurope’sbailoutfund.DespitethefirepowerthatGlenn and Elena brought to bear, Dragasakis’s team viewed them withsuspicion.Moreover,westilllackedseriousbackroomsupport.ToamelioratethisIarrangedforatechnicaladviserfromLazardandJamieGalbraithtositinaroomadjacenttothenegotiations,wheretheycouldruncalculationsanddraftproposals.Lastly,IcalledEuclidtoaskhimtocometoBrusselswithourteam toprovidepolitical supervision.Aftera fewprotestsheagreed todropeverythingandcome.OnFridaymorningweallarrivedattheEuropeanCommissionbuildingfor

thetwo-day‘consultation’.Thesecurityguardsattheentrancegaveusthethirddegree, delayingour entrybyhalf anhour.Once inside,wewere taken to aseminar room,where thepeople from the troika awaited.Among themweresome familiar faces: Declan Costello (an ‘un-Irish Irishman’, as an Irishambassador once described him) and of course Klaus Masuch, the ECBrepresentativewhohaddonesomuchtoturnthepeopleofIrelandagainstthatinstitution.1Thetroika’srepresentativesrecognizedafamiliarface–Glenn’s–andimmediatelyprotested.When I asked what the problem was, they were initially lost for words.

Costelloeventuallysaid,‘ButheisnotGreek!’‘So?’Iasked.‘SincewhenistheGreekgovernmentconstrainedtoincludein

itsnegotiatingteamonlyGreeks?Isn’tyoursidemultinational?’Theirrejoinderwasrevealing.‘Butweknowhim.Hehasbeeninvolvedin

debt-restructuringexercises.Wecannotbeseentobenegotiatingwithadebt-

restructuringexpert.’‘As I have no right to veto your teammembers, you will have to accept

mine,’Ireplied.Ourgreetingsatanend,andasIwastheonlypersonoffullministerialrank

in the room, Ibeganproceedingswithastatementofour jointpurpose.2Myclosingremarkswere:

MymessagetoyouisthatthisisagovernmentinterestedonlyinGreece’srecoverywithinapolicyframeworkthatistherapeuticfortheeurozoneasawhole.Thisisnotgoingtobeanothergovernmentthattriestofoolyouinto believing that we shall adopt a certain reform programme just inordertogetthenextloantranche.Youmayhavegatheredthatwedonotgiveadamnaboutthenextloantranche.Weprefertogodowninflamesthantokeepextendingthisindignity.TheonethingthepeopleofGreecetellustimeandagainis:stopthepracticeofthepastyearsofcomingtoyoucapinhandformoremoney,pretendingtobechangingthecountrywhenthecountrywasdeforming,notreforming.

OnthatnoteIwithdrewtoleavetheteamstotheirdiscussionsunderEuclid’ssupervision.Itwasthefirsttimethetroika’srepresentativeshadbeenorderedtonegotiatewithtechnicalstaffoftheirownrankinBrusselsratherthancross-examining our ministers in Athens. In the weeks to come they would maketheirfeelingsaboutthisdemotionabundantlyclear.OverthenexttwodaysEuclidandJamiekeptmecontinuouslyinformedof

progress.At first the troika appeared neither aggressive nor unfriendly.TheIMF’s representativeexpressed scepticismas tohowmuch, andhowquickly,wecouldclawmoneybackfromrichtaxdodgers,washappierwithourideasfor the management authority we proposed should handle the banks’ non-performing loans,and reservedhisoutrighthostility foranything todowithtrade union rights. But while the meetings themselves began in a civilizedfashion,foulplaywastakingplaceoutsidetheroom,withthetroikaleakingtothemediathat‘theGreekstorydoesn’tbindtogether ’.Maybeitdidn’tfully,Iresponded to journalists, but it did bind together a great dealmore than thetroika’sspectacularlyfailedprogramme.3On the second day,Euclid reported, the troika turned up the hostility dial.

Unwillingtoacknowledgethedesignfaultsintheircherishedprogramme,theybehaved instead as if their job was to assess our ability to implement that

programme. Some of the points they raised were frankly ludicrous, theiraccusationthatwehadnoplanforfinancingourdebtrepaymentswinningthemedal for conspicuous hypocrisy. Euclid’s assessment was that they wereconducting an experiment in calculated aggression and that it would bedisastrous toacquiesce. Jamie’sviewwas that the timehadcome forofficialEurope to realize that keepingGreece out of defaultwould require a bridgefacilityandatimeframeformajoramendments.Toimpressthisessentialfactupon them, his advice was ‘Make your exit from this swamp Tuesdayafternoon[thedayaftertheEurogroup]andletthemcometoyouiftheywantto.Apologiesifthisisallteachingmygrandmotherhowtosuckeggs.’

Thirteendaystothethreatenedbankclosures

Our team’s two-day meeting with the troika was never going to produce abreakthrough.OurpurposewastoshowgoodfaithtoChancellorMerkel,whohad intervened to ensure that our proposal for a bridge was accepted. Thetroika’spurposewastodefenditsprogrammewhileleakingtothemediathatwewereincompetentfoolswhoseideaswereallovertheplace.TherealbattlewouldtakeplaceatthepoliticallevelbeforeandduringMonday’sEurogroup– on 16 February, thirteen days, according to Jeroen’s threat, before everybank branch and ATM in Greece would shut down if we failed to reach anagreement.Meanwhilemyteamworkedfranticallyonanewnon-papercombiningand

improvingonourproposals.JeffSachsproducedexcellentworkonGreece’sdebt.TheLazardteamworkeddiligentlywithElenaonfiscalpolicy,banksandthe broader reform agenda. Jamie did wonders coordinating the work. AndEuclidstrovetopreventmefrommakingtoomanyconcessionsinmyframinganalysis.4 Theinternationalpresswasprettymuchunitedinitscondemnationofourefforts,parrotingthetroika’saccusationthatwewerebacktrackingonreformsandhadarrivedinBrusselswithoutanycoherentproposals.TheonethingtheydisagreedonwaswhatGreeceshouldbedoingtostemthebankrunthattheirreportsweredoingsomuchtofuel:halfreportedthatIwasplanningtointroducecapitalcontrols,theotherhalfadmonishedmefornotdoingso.Infact,thiswasaquestionwewereconsideringamongourselvesincasethe

MondayEurogroupfailed to reachanagreement.Participants in this internal

and secret exchange, held partly in person and partly via email, were theLazard team, Jeff Sachs,Willem Buiter of Citibank, Jamie Galbraith, ElenaPanariti, Glenn Kim, Euclid Tsakalotos and myself. I started the discussionwiththisstatement:

Aeuro‘trapped’inaeurozonememberstatebankoperatingundercapitalcontrols(e.g.Cyprus)isworthlessthanapapereurooraeuroelsewhere.Indeed, one could buy a nominal sum of euros’ worth of deposits in aCypriot bank for fewerpaper eurosor eurosdeposited in aGermanorFrenchbankaccount.Thisdiscountis,ineffect,anexchangerate.Capitalcontrols,thus,areaformof‘exit’–temporaryandreversibletobesurebutexitnevertheless.Thenameonthecurrencywouldnotchange,butinallotherrespects,thecurrencyisdevaluedovernightupontheimpositionofcapitalcontrols.5

The first responses I received came from Elena, Jamie and one of myadvisersfromLazard.TheirgistwasthatifIimposedcapitalcontrolstheECBwouldbeabsolvedofresponsibilityforthebankrunithadcausedandwouldnolongerhavetomaketheagonizingdecisiontoswitchoffliquidity(ELA)toGreece’s banks. Meanwhile, capital controls would be a godsend to theGerman government. Imposed by Athens, they would be interpreted as ouradmissionoftheneedtodenyourprofligatecitizenryaccesstotheirdeposits–allatzerocosttothecreditors,sinceourdebtwouldremaininnormal(non-devalued)euros.Itwouldbeaterribleself-inflicteddefeat.Notonlywouldwehavetoliveunderwhatwouldbetoallintentsandpurposesarestrictivetwincurrencysystem,butthetroikawouldhaveeveryrighttoclaimthatithadbeenourownchoice todoso.Theonlynon-Greeks tobehurtbycapitalcontrolswouldbetheGreeksubsidiariesofEuropeancorporations,butmostofthem–suchasCarrefourandCréditAgricole–hadalreadywithdrawnfromGreecesince2010.Jeff Sachs was the most vociferous opponent of self-inflicted capital

controls.Hephonedmetosaythatinallhisyearsofadvisinggovernmentshehad never seen a surer way of committing political suicide than a financeministerpassinglegislationthatstoppedcitizensfromwithdrawingtheirbankdeposits. Politically, itwas imperative to avoid them.And if capital controlscouldnotbeavoided– if, forexample, theECBpulled theplugonELA– itwas crucial that the sitting government opposed them fiercely and blamed

them, aswould be right and proper, on theECB that imposed them.WillemBuiterwas of the same opinion: self-imposed capital controlswould depleteourpoliticalcapitalwhiledoingnothingtohelpreduceausterityattheleveloffiscal policy.Their verdictwas clear:we shouldnever, ever embrace capitalcontrols.Somethingmore obliged us to reject them: by effectively creating a dual

currency, capital controls fundamentally damaged the integrity of theeurozone.TheSyriza government believed in the importance of doing all itcouldtosavetheeurozoneandmakeitworkforeverymemberstate,notjustGreece. As capital controls would be detrimental to the EU member states’common interests, for that reason alone we had to oppose them. And if theECBforcedcapitalcontrolsuponus,asithadthepowerto,thewholecabinetshouldjointheinevitabledemonstratorsoutsidetheclosedbankswithbannerscastigating theECB and theCentralBank ofGreece for such a fundamentalderelictionofduty.Inthatregrettablescenariowewouldbedutyboundtoputemergencymeasuresinplace,whichwouldmeaninauguratingourowneuro-denominatedparallelpaymentssystem–aswellasmakinggoodonourstatedintentiontohaircuttheECB’sSMPbonds.6Intheweeksandmonthsthatfollowed,thisremainedmyconsistentadviceto

Alexis and our war cabinet, a mantra that Alexis and especially Pappasendorsedfully.7 In themeantimemy public position on capital controlswasconsistently and repetitively the same: our government was striving for arational,mutually beneficial agreementwithin the eurozone; capital controlsmadenosenseinafunctioningcurrencyunionandwoulddamageitsintegrity,so we opposed them; if capital controls were introduced, it would not bebecausewewanted,soughtorapprovedthem.That sameweekend Jeff Sachswas hard at work on the other side of the

Atlantic,tryingtoconvincetheFedtoweighinonourbehalfandpersuadetheECBtoabandonitsongoingasphyxiationstrategy.HismessagetoJanetYellenwas simple: the newGreek government’s programme of reforms and fiscaltargetswasreasonable;theyunderstoodwellthatGrexitwasanexceptionallydangerouspath,onethatwouldnotbetakenattheirinstigationbutonlyunderduress from the ECB; Yellen ought to tell the Europeans not to riskdestabilizing the world economy over a few billion dollars and to adviseDraghitodesistfromintroducingcapitalcontrolsthatwouldsolvenothing.Meanwhilethepresswasincreasinglytargetingmepersonallyinitsreports.

InresponsetoaBBCprofilethatlabelledme‘Greece’sCassandra’,BillBlack,

the American economist who had campaigned so effectively against WallStreet,cametomydefence.

SowhydoestheBBCtreatVaroufakisasasexyleftistandDijsselbloemastherespectedspokespersonforthetroikaeventhoughDijsselbloemisafanaticideologuewhohascausedmassivehumanmiserybecauseoftheintersection of his inflexible ideology and economic incompetence?Varoufakis’sviewsontheself-destructivenatureofausterityasaresponsetotheGreatRecessionaremainstreameconomicviews.Hecertainlyisaleftist, but his policy views arise from different ideological traditionsmost peoplewould find antagonistic [to left-wing thinking].Thatmakeshimanon-ideologueasthetermisdefined.Thetroika,bycontrast,isledentirely by ideologues. The primary difference is that they areexceptionallybadeconomistsandexceptionally indifferent to thehumanmisery they inflicton theworkersof theperiphery that theydespiseandridicule.TheBBC, theNewYorkTimes and theWall Street Journal willneverwritea ‘profile’of the troika’s leadership thatmakesanyof thesepoints.TheBBCprofileisanotherexampleofwhatIcallrevealedbiases.Journalists andmedia organs routinely reveal and betray their biases –biasesthattheyhotlydenybutrarelyescape.8

ButthelinethatraisedmyspiritsmostbeforemysecondEurogroupcamenotfromaleft-wingerorpoliticalfellowtravellerbutfromCiti’sglobalchiefeconomist, Willem Buiter. At the end of an email advising against capitalcontrols, he wrote, ‘Noli illegitimi carborundum!’ which he also helpfullytranslatedforme:‘Don’tletthebastardsgrindyoudown!’

Breakthrough?

ThenightbeforetheEurogroupAlexiscalledwithgoodnews.ThepresidentoftheEuropeanCommission,Jean-ClaudeJuncker,hadsecretlysentusadraftcommuniqué:couldIlookatit?Wasitwhatwewanted?Aquicklookmadeclearitwasamajorbreakthrough.

Greecebelongsandwillstay in theeuro.The…[previous]programmeagreed betweenGreece and its European and international partnerswas

necessarytocorrectmacroeconomicimbalancesandputGreeceonapathto secure its financing and restoremarket access.But the economic andsocial impact of the crisis onGreece and its citizens has been immense.There is a need to move to a new relationship based on a mutuallybeneficialagreementforGreeceandforEuropeasawhole.Theobjectiveis towork togetheronanewgrowth-model forGreecebasedon socialfairness, sound public finances, a competitive export-oriented andinvestment-basedeconomy,astableandwell-supervisedfinancialsystemandamodernpublicadministration.

Itsre-evaluationofthetroikawasalsoexcellent.

Greece wishes to end the undue intrusive approach of the troika,understoodastechnocratswhooperatewithoutpoliticalmandate.Pendingthe agreement of a new deal by June/July, it should be possible toorganize the discussions with European and international partners in amoreconstructiveformatconcerningbothmissionsanddialogue,andtoensure that technical discussions are at every moment backed by apoliticalmandatetakingfullaccountoftheneedforgrowthandthesocialfairnessofallreforms.

Additionally,therewerehelpfulprovisionsforendingourliquiditysqueeze.

[T]emporarybridge financingcouldbemadeavailable from the releaseofSMPprofits…Progressinagreeingthisneedstobebasedonmutualtrustandcredibility[whatcountsareactionsandnotwords].Tothisend,Greeceshouldrapidlyadoptandimplementanumberofkeyreforms.9

This was nothing short of an endorsement of the proposals I had beenputtingtoeveryofficialIhadmetsincemyoriginaltriptoParis.Alexis and the rest of our leadershipwere relieved – aswas I – but deep

down I remained sceptical. It looked toogood tobe true.When Ivoicedmyconcerns,Alexis saidheunderstoodbutencouragedme tohope for thebest.ThatnightIhadalittlemoresleepthanusual.

Thecommissioner’shumiliation

ThefollowingmorningmysecretaryinformedmethatPierreMoscovici,EUeconomics and finance commissioner working under Jean-Claude Juncker,wantedtoseemeinhisofficeat1.30,halfanhourbeforetheEurogroupwasmeant to commence. I told her I could feel ‘snakes slithering inmy gut’, aGreekexpressionforbeingfilledwithforeboding.When I entered his office, Pierre stood up to greet me.We shook hands

warmlyandheinvitedmetositdown.Withoutafurtherwordhepassedmeadocument to read. It was a version of the draft communiqué I had read thepreviousnight…onlyatouchbetter.Heaskedformyopinion.‘WheredoIsign?’Ireplied.‘Really?’askedPierre.‘Absolutely.’Pierre looked tremendously satisfied. ‘Well, in that casewe shall have an

easyEurogroup.CanIgetyouacoffee?’Iacceptedhisoffer.WhilesippingmyEUstandard-issuecoffee, Iasked ifhewassure thathis

draftwouldpassthroughtheEurogroup.WouldJeroenacceptit?HowwouldWolfgangrespond?‘Nottoworry.Itisallagreed.’‘Bywhom?WhataboutChristineandMario?’‘Theyareonboardtoo.’‘Areyousure,Pierre?’‘Yes,wejusthadlunchtodiscussthis:Jean-Claude,myself,Mario,Christine

andJeroen.’‘AndwhataboutWolfgang?’‘No, Wolfgang was not part of it. He will not like it. But once he sees

everyoneelseagrees,hewillrelent.’‘I’m finding it hard to picture Jeroen agreeing with this communiqué in

oppositiontoadisaffectedWolfgang–especiallyafterourlastEurogroup.’‘Justleaveittome.AllIwantfromyouistoleaveittomeandtotheothers

to push it through. Speak as little as possible so as not to antagonizeWolfgang.’‘I’mmorethanhappytostaysilent,Pierre.‘No,no,dospeak,butsaythatyousupportthedraftcommuniquéandleave

itatthat.’Alongsilencefollowed.WehadfifteenminutesuntiltheEurogroupbegan.I

continuedtodrinkmycoffeeinastateofrelief.AneasyEurogroup;whocouldhaveimaginedit?Ithought.Eventuallymyincredulityovercameme.Itseemed

toogood tobe true, I toldPierre. I justcouldnotpictureJeroen readingoutand supporting this draft under Wolfgang’s piercing gaze. Pierre smiledconfidently, took the draft communiqué in his hands, stood up and said hewouldproveittome.WewouldgoandtalktoJeroenrightaway.Andsowedid,Pierre leading thewaydown thecorridor to Jeroen’soffice.Wehad tenminutesuntiltheEurogroupwasscheduledtocommence.Pierre knocked on Jeroen’s door and entered without waiting. The

Eurogroup president’s office was twice the size of the commissioner ’s andfilledwithaides,somesittingonacouch,othersonchairs,oneofthemonthefloor,workingbusilyonlaptops,talkingtooneanother,allpreoccupiedwithlast-minute preparations. A powerful smell of bodies and the steamed-upwindows suggested they had been labouring for a while and with someintensity.Asweentered,Jeroenwasstandingbyalongconferencetableinthemidstofhistoilingaides,readingasheetofA4.Themomenttheaidessawus,theypickeduptheirgearandpapersandleft theroom.Thethickatmosphereandthespeedoftheirretreatheightenedmypremonitionthatallwasnotwell.Jeroennoddedtoustocomeinandsitdown.Hesatattheheadofthetable,

hisbackto thewindow.Pierresat twochairsalongtoJeroen’srightwithhisdraftcommuniquéinhisrighthand.IpositionedmyselftwochairstoPierre’sright,facingJeroenwithPierre’sprofilebetweenus.JeroentooktheA4sheethehadbeenreadingandslidittowardsmeacrossthetable.‘Readthisandtellmewhatyouthink,’hesaid.I read it. It was worse even than the draft we had rejected at the first

Eurogroup. It committed the Greek government ‘to complete the currentprogramme’, allowing us to pursue our mandate only within the ‘existingbuilt-inflexibilityofthecurrentprogramme’.AlltheconcessionsinthedraftspresentedbyJunckerthepreviousnightandbyPierreafewmomentsearlierhadbeenexpunged.Eventhephrase‘adjustedprogramme’hadbeendropped.In this draft the programme, undiluted by any adjective, returned with avengeance.ItoldJeroenwhatIthought:thatthelastEurogrouphadcometoanimpasse

becausehehadinsistedonacommuniquéthatwas,ifanything,atouchmorefathomable than this one. Turning to Pierre, who was already lookingdowncast, I asked what was going on. ‘You just showed me a draftcommuniqué that I was happy to sign on the spot. You are the EU’scommissionerforeconomicaffairs.IamthefinanceministerofastrickenEU

member state. Can I please have some clarity from the only person in thisroomthathasofficialstatustorepresenttheEU?’10Without lookingatme,Pierre turned to Jeroenandmadehis first and last

attempttosalvagetheEuropeanCommission’sdignity.‘Canwecombinesomeofthephrasesinyourdraftandthis?’heimploredinabrokenvoice,pointingatthedrafthewasholdinginhisrighthand.‘No!’Jeroencuthimdownwithwhatcouldonlybedescribedascontrolled

aggression.‘Everythingthatcouldbetakenfromthatdrafthasbeentaken,’hestatedcategorically.I turned toPierre.Something importantwasat stakeat thatmoment, I told

him, something that went beyond Greece’s plight or that day’s Eurogroupmeeting:itwastheprincipleofcompromiseandofmutualrespectandoftheEuropean Commission’s authority to safeguard them. ‘Pierre,’ I asked, ‘areyou just going to submit to the enforcement of this totally one-sidedcommuniquéagainstthecommission’sviewsandthedraftthatyouprepared?’Avoiding eye contact and in a voice that quavered with dejection, Pierre

respondedwithaphrase thatmightoneday featureon theEuropeanUnion’stombstone:‘WhatevertheEurogrouppresidentsays.’Morerelaxednow,JeroenproposedthatIcrossoutwordsorphrasesI‘did

not like’ and replace them with alternatives. So I took out my pen and didexactlythat.IntheopeninglineofJeroen’scommuniqué,after‘theremarkableadjustment efforts undertaken by Greece and the Greek people of the lastyears’ I added, ‘which unfortunately failed to deliver recovery due to theexisting programme’s design faults’. Further down, I crossed out thecommitment ‘to complete the current programme’ and replaced it with acommitment ‘to work with Greece’s European and international partnerstowardsthedesignandimplementationofareformandrecoveryprogrammethattheGreekpeoplecanembraceandown’.OnceIwasdone,IslidthedraftbacktoJeroen.TheEurogrouppresidentlosthistemper.Raisinghisvoice,heaccusedme

of time-wasting and of threatening to torpedo a second Eurogroup –accusations that were being tweeted and reported only minutes later byrespectedjournalists,suchistheefficiencyofBrussels’spropagandamachine.I replied carefully but with increasing firmness, ‘Jeroen, you are in no

position to raise your voice atme. In the last Eurogroup you violated yourobligationasEurogrouppresidenttoofferguidancetoanewfinanceminister.Instead,youmisledmeintentionallybyrepeatedlyissuingathreatthatthevery

nextmorningprovedtobeempty.Istronglyadviseyoutorefrainfromraisingyour voice atme ever again. If not youwill leavemewith no option but tomakeyourscandalousbehaviourpublic.’Jeroen immediately backed down. In times of tension he sometimes got

overlyanimated,headmitted.‘Nottoworry,ithappenstoallofus.’With theanimositydissipating, Jeroen lookedathiswatch,which revealed

thatwewerelatefortheEurogroupmeeting.‘Let’snotdelayfurther,’hesaid,aseveryminutethatwentbywiththethreeofusabsentfromthefloorwouldencourage unhelpful rumours.Aswe rose to leave, he suggested that as themeetingobviouslycouldnotproduceanagreementweshouldkeepitshortinordertocontainthedamage.Itoccurredtomethatdamageofsomekindwassurelyhisintendedoutcome,butIheldmytongue.FromthemomentJeroenshotdownhissuggestionofacompromiseuntil

thethreeofuswalkedintotheEurogroup,Pierrehadremainedsilent.Duringthe Eurogroup meeting, whenever I looked at him I imagined the horrorJacquesDelorsoranyof theEU’sfoundingfatherswouldhavefelthad theyobserved the scene in Jeroen’s office. Listening to him express views in themeetingthatweresubservienttoSchäubleandDijsselbloem,viewsthatIknewperfectly well he did not agree with, I was hearing the sound of the EU’sdescentintoignominy.Hishumiliationwasemblematictomeofthecompletesubjugationof theEuropeanCommission to forces lacking legalstandingordemocratic legitimacy. In the months that followed, Pierre Moscovici and Iremained on friendly terms and agreed on allmatters of substance, but ouragreementwasas irrelevant as thedraft communiquéhewas still holding inhis handwhenwe left Jeroen’s office. Indeed, from that day onwards, everytimeheorJean-ClaudeJunckertriedtohelpourside,Ifeltasenseofdread,forIknewthatthosewithrealpowerwouldstrikeusdownpitilesslyinorderto teachMoscovici and Juncker a lessonandbeat theEuropeanCommissionbackintoitspen.A fewweeks later Pierre began to spread the story that at thatmeeting in

Dijsselbloem’sofficeon16February2015 Jeroenand Ihadnearlycome toblowsand thathehadhad tostep in toseparateus.Later, inhismemoirs,heclaimed that it had been impossible to negotiate withme andwelcomedmydisappearancefromtheEurogroup.Icanonlyassumethatthesewereattemptstodealwithhisowndisgrace.

Acrucialnon-event

ThosefifteenminutesinJeroen’sofficefeltmuchlonger–andcertainlymoremomentous–thanthehoursspentinthesubsequentEurogroupmeeting,whichbeganwitha report from the institutionson thediscussionsbetweenour twotechnicalteams.Havingmadesomepolitenoisesaboutmyteam’spresentation,the troika’s representatives expressed their ‘concerns’ that our government’splans were not inspiring them with confidence that we could ‘successfullycompletethecurrentprogramme’.Hadtheybeentryingtosoundlikeastuckrecord,theycouldnothavedonebetter.So,onceagain,IdidwhatIhadtodo.

Our reluctance to accept the phrase ‘extend the current programme andsuccessfullycompleteit’stemsfromthedeterminationofthisgovernmentnever to issue a promise that it cannot keep … I could, for instance,placate everyone by accepting for example the €5 billion privatizationtarget,soastoreachagreement.ButIknowthatIcannotdeliver.Justlikeprevious governments could not deliver in amarketplace of collapsingassetprices…Ourtaskistocarryoutthedeepreformsthatmycountryneeds and tomaximize the net present value of our debt repayments toyou.ButifIacceptthepriorities,thematrix,ofthecurrentprogramme,Iknow that I shall be giving the debt-deflationary spiral another boost, Ishall loseourpeople’ssupportand,asaresult, thecountrywillbecomeun-reformable…Astherecentlyappointedfinanceministerofacountrythathasacredibilitydeficit in thisroom,I trust thatyouwillunderstandmyreluctancetopromisethatwhichIdonotbelieveIcandeliver.

As I was speaking I was thinking of the people of Greece, of Europeanseverywhere,aswellasoftheinfamousmarkets.HowwouldtheyallrespondtothenewsthatasecondEurogrouphadconcludedwithanimpasse?Howwouldthey interpret it? I decided that the best path was one of truth and straighttalking. Inmy press conference address I felt relaxed as I told theworld aspolitelyaspossiblewhathadreallyhappenedbehindcloseddoors.

Iampleasedtoreportthatthenegotiationswereconductedinacollegialspirit, clearly revealing a unity of purpose … to establish commonground,soas toreachameaningful,sustainablenewlong-termcontract

betweenGreece,officialEuropeandtheIMF.Moreover,Ihavenodoubtthat they will continue tomorrow and the day after until there is anagreement. If this is so, why have we not managed to agree on acommuniqué,asimplephrase,thatwillunlockimmediatelythisperiodofdeliberation?Therealreasonconcernsasubstantialdisagreementonwhetherthetask

ahead is to complete a programme that this government was elected tochallengethelogicof,ortositdownwithourpartnerswithanopenmindandrethinkthisprogramme,whichinourestimationandintheestimationofmostclear-thinkingpeoplehasfailedtostabilizeGreece,hasgenerateda major humanitarian crisis and has made reforming Greece, which isabsolutely essential, ever so hard. Remember, a debt-deflationary spiraldoesnotlenditselftosuccessfulreformsoftheformthatGreeceneedsinorder to stop being dependent on loans from its partners and from theinstitutions.LastWednesday,inthepreviousEurogroupmeeting,weturneddowna

pressingdemand to subscribe to ‘extendingandsuccessfullyconcludingthe current programme’. As a result of that impasse, on the followingafternoon (last Thursday, and prior to the summit) President JeroenDijsselbloem and Prime Minister Alexis Tsipras agreed on a jointcommuniqué to the effect that the two sides would explore commonground between the current programme and the plans of the newgovernment for a new contract with Europe. This was a genuinebreakthrough.Thisafternoontherewasanotherbreakthrough.PriortotheEurogroup

meeting ImetwithMrMoscovici,whom Iwant to thank for his highlypositiveroleinthisprocess,whopresentedmewithadraftcommuniquéthatIwashappytosignthereandthen,asitrecognizedthehumanitariancrisis and spoke of an extension of the current loan agreement, whichcould take the form of a four-month intermediate programme as atransitional stage to a new contract for growth for Greece that will bedeliberated and concluded during this period. It also stated that thecommissionwould provide technical assistance toGreece to strengthenand accelerate the implementation of reforms. On the basis of thatunderstandingbetweenusandthecommission,weweremorethanhappytoapplyfortheloanagreementtobeextended…Ouronlyconditionfor

theothersidewasthatweshouldnotbeaskedtocommittomeasuresthatarerecessionaryduringtheextension,suchaspensioncutsorVAThikes.Unfortunately, minutes before the Eurogroup meeting that splendid

document was replaced by the Eurogroup president with anotherdocument that tookusbacknot even to lastThursday,but indeed to lastWednesday,whenwewerepressurized tosignup toanextensionnotofthe loan agreement but with the programme itself … Under thosecircumstances it proved impossible for the Greek government, despiteour infinite goodwill, to sign the offered communiqué. And so thediscussionscontinue.Wearereadyandwillingtodowhateverittakestoreachanhonourable

agreement over the next two days. Our government will accept all theconditions that it can deliver upon and which do not reinforce oursociety’s crisis. No one has the right to work towards an impasse,especiallyonethatismutuallydetrimentaltothepeopleofEurope.

Thiswasthesecondtimewehadsaidnotothetroikawithinfivedays.Withtwelve days left before the imposition of an indefinite and undesirable bankholiday,wehadshownthatwewouldnotblinkfor thesimplereasonthatwewerenotbluffing.

Thewarcabinet

In spite of all the evidence to the contrary, there is one abiding reason toremain confident that Europe is capable of creating good institutions: theEuropeanInvestmentBank(EIB).TheEIBisownedbyallEUmemberstates,whose finance ministers are its governors. The morning after my secondEurogroupmeeting I had the privilege of participating in the EIB board ofgovernors’meeting. Inmy inauguralpresentationIexpressedmyenthusiasmabout theEIB’spotential and saida fewwordsonhowanEIB–ECBalliancemight wrench Europe out of its deflationary spiral without any need forpoliticallydifficulttreatychanges.11Werner Hoyer, the German president of the EIB, expressed his strong

interest in developing the idea, but my oldmate George Osborne remainedsilent, preoccupied perhaps by the wave of Europhobia back home, as did

Jeroen Dijsselbloem, who must also have had more important things thanEurope’sdeflationaryforcesonhismind.ItwastimetoreturntoAthens.Arriving home, I was at last delivered from a state of loneliness that no

amount of adrenalin can compensate for. Danae had returned from Austin,having completed our move in spite of the prize-worthy bureaucraticincompetencenot justofGreecebutof theUnitedStates.Duringthefrenziedthreedaysthatfollowedthefactthatwewerestillunabletospendanypropertimetogethermatteredlittle.Itwasenoughtoknowshewasnear.AtMaximos,however,Alexis,PappasandDimitrisTzanakopoulos,Alexis’s

chief of Staff, were subject to fits of rage.12 ‘What did you expect of thetroika?’Iwouldask.‘Aquickcapitulation?’Dimitriswouldlookatmewithintensescepticism.‘Ifyouwanttosignthe

MoUyouwillhavetodoitovermydeadbody,’hewouldbellowatthetopofhisvoice.Pappaswouldregularlyshouttoo,thoughnotatanyoneinparticular.As for Alexis, while calmer than the other two, he also lost his cool onoccasion and threatened to blow up the negotiations. They were right to beoutraged:wehadjustwonanelectionfairandsquare,butofficialEuropewasgivingusabsolutelynoopportunitytodevelopourpolicies,runourministriesorevensetourownpriorities.IevenunderstoodwhyDimitriswasinclinedtodoubtme: as a non-Syriza adjunct with close ties to American insiders likeLarry Summers and Jeff Sachs, I was by definition ideologically suspect, apossiblestoogebentondraggingAlexisdown.In such a volatile atmosphere my best ally was Spyros Sagias, the burly

secretarytothecabinet,fordespiteourmanydifferences,wesharedtheviewthatanyrupturewith thecreditorsshouldbe theresultofcoldcalculation. Inthemeantime,toplacatemyagitatedcomradesandsteadytheirnerves,Ihadtopersuade them that I too was more than ready to withdraw from thenegotiations, which looked very much like a charade, but that we shouldchooseourmomentwellandcalmly,avoidinganyaccidentalbreakdowninaprocess thatwas always going to be unforgiving.Until that pointwe shouldexpendoureffortsonmakingitashardaspossibleforDraghiandMerkeltojustifythrottlingus–firsttothemselves,thentotherestoftheworld.While placating the agitated, I also had to energize the placid. In the five

yearssinceBailoutistanhadcomeintobeingmyministry’sstaffhadlearnedtotaketheGreekstate’ssubjugationtothetroikaforgranted.Itwasimperativetostiffen their resolve and make them realize it was possible to operate onceagain as civil servants of a sovereign state. The same was true beyond the

ministry as well: the whole country was in need of inspiration. With everypress conference I had given in Brussels rejecting the creditors’ demands,Greeks of all political colours and dispositions had stood taller with self-respect,but itwasvitally important toexplain that therewasnoplace inournewfounddignityfornationalistoranti-Germanbigotry.Evenatthebestoftimes,twenty-fourhoursoftenproveinsufficienttodeal

with the tsunami of problems that rise through the bureaucracy each day toland in a finance minister ’s in-box. Imagine the difficulty of running thefinance ministry of a bankrupt country in the midst of an all-consumingnegotiation such as ours. During those three days back in Athens I did myutmost tomanagethedomesticprojectswehadset inmotion,whichweresoimportanttostrikingadealwithourcreditors–ourtaxevasion-bustingeffortsaboveallelse.OnWednesday,18FebruaryIalsoworkedon twoministerial reports:one

described my team’s dealings with the troika in Brussels, summing up ourproposalsandmakingtechnicalimprovementsonthem;asecondconcentratedexclusively on reforming the tax authorities and, more broadly, publicadministration.While writing them I conducted an email correspondence with Larry

Summers, whose influential support could only help our cause. His pithyadvicewasdeliciouslyincharacter:weshouldputforwardadealthatlookedlikeawinforMerkelandtheEUbutatthesametimeservedjusticeandtruth.Easiersaidthandone,Ithought,althoughIrecognizedtheimportantpointhewasmaking.Morespecifically,LarryadvisedthatIseekasix-monthextensionto the loan agreement that was due to expire with potentially calamitousconsequencestendayslater.Irepliedthattherewasasnag:sixmonthswouldstretch into July andAugust,when€6.7 billion had to be paid to theECB toredeem some of the SMP bonds, the very bonds I was proposing should berestructuredorswappedforperpetualsorotherlong-datedinstruments.Ialsorelated Moscovici’s humiliation before my eyes, which elicited Larry’ssummaryconclusionthattheEuropeanCommissionwasdeadinthewater.During our long and detailed exchange it became clear that before

committingtohelpmeLarrywantedtobesurethatmypositionwaspragmaticrather than inflexible.Once thatwasestablished,hewanted toknowifAlexiscould be trusted to agree to a sensible deal or if he was a loose cannon. IassuredhimthatAlexiswasasinterestedinamutuallybeneficialagreementasI was, but that wewould onlymake serious concessions in public when the

othersidedemonstratedanintentiontodothesame.Withthesepreliminariesout of theway,Larry looked to get a sense of the negotiations so far and aglimpse of how things looked from our perspective. At one point herecommended thatwefindachampion,someonesympathetic toourpositionandwiththegravitastotakeourcasetothe‘highestauthorities’.‘Thisiswhywearetalkingtoyou,’Ireplied.Itwasananswerthatseemedto

pleasehim,judgingbyhisagreementtohelppushourcasewithcontactsattheIMFandtheECB.That same day Jeff Sachs phoned me with a message from Wolfgang

Schäuble’soffice.Itprovedtobeanimportantone.Berlinwassignallingthatabreakthrough was possible. It appeared that they would grant us a stay ofexecutiononcondition Iwaswilling to signal four things to theEurogroup:interest in an extensionof the loan agreement not of sixmonthsbut of onlyseventy-five days, acceptance of ‘the concept of debt sustainability’,recognitionof‘theneedforstructuralreformtoregaincompetitiveness’andagreementthattheIMFmustbepartofthe‘newparameters’.Happytooblige,IrepliedtoJeffpointbypoint.Theirrequestthatthebridge

be only seventy-five days long sat comfortably with my concern that apermanent outcome (either a good agreement or a final rupture) should bereachedwhileourgovernmentstillenjoyed incrediblepopularity (around75percentapprovalratings)andbeforetheECB’sSMPbondsexpiredinJuly.Inresponse to their request that I accept ‘the concept of debt sustainability’, IaskedJeff,‘AreourGermanfriendsacquiringasenseofhumour?Igotobedevery night and wake up every morning dreaming of what the troika’sprogrammelacks–debtsustainability!’Jeffburstoutlaughing.Regardingtherecitation of Berlin’s favourite mantra – ‘structural reforms’ to increase‘competitiveness’–IsaidthatIwashappytoindulgethem,exactlyasIdoonGoodFridaywhenevenatheistslikemeareexpectedtosingalongto‘OMySweet Spring’. Lastly, I saw no reason to expel the IMF from the ‘newparameters’aslongasIwasnotcommittingtothedestructionofwhatwasleftofthetradeunionsorthepensionsystemandwhileitcontinuedtobetheonlycreditor institution whose officials, Christine Lagarde and Poul Thomsen,wereproclaimingthatourpublicdebthadtobehaircutseverely.That afternoon the war cabinet met at Maximos, where Alexis had been

receivingsimilarlyconciliatorymessagesfromtheGermanChancellery.Theinitial subject of debate was whether we should send a formal letter toDijsselbloemrequestinganofficialstayofexecutionfromtheEurogroup.My

view, with which Sagias and Dragasakis agreed, was that requesting anextension was part of our mandate as long as we did not commit to theprogramme in order to secure it. We then discussed the four conditionsproposed by Berlin. The IMF’s continued presence proved the hardest toswallow for somemembers of thewar cabinet. Then amessage came fromBerlin that there was now a fifth commitment that we would need to makebeforebeinggrantedanextension:‘RecognizeGreece’sfinancialobligationstoallitscreditors.’Thisseemedlikeadeal-breaker.Theraisond’êtreofourgovernmentwas

debtrestructuring,withalargesegmentofthepartydemandingswiftanddeephaircuts.‘Howcanwepossiblyrecognizeourdebttoallourcreditors?’askedanenragedTzanakopoulos.Iproposedweinterprettheirrequestinanuancedway: a corporation can ‘recognize’ a debt to its bankers while still seekingdeepdebt restructuring tohelp it recover froma crisis that threatens to ruinboth its shareholders and thebank.Similarly,wecould ‘recognize’Greece’spublicdebtwhileatthesametimeinsistingthatitbeimmediatelyrestructuredso that thecreditorscouldgetmoreof theirmoneyback.ThewingofSyrizademanding immediate and unilateral haircuts on the basis that the debt itselfwasillegalwouldofcoursebeoutraged,butultimatelythisapproachprevailedwithinthewarcabinet.ItwasagreedthatIwouldwritetotheEurogroupwithaformal extension request. By implication we would be agreeing to Berlin’sconditionthatwe‘recognize’thedebt,whilenegotiatingitsrestructuring.Whilepleasedwith thedecision, Iwas concerned that thependulummight

have swung too far in the direction of compromise.Before returning tomyoffice to pen our request, I presented the cabinet with two possibilities. ThebetterscenariowasthatDraghiandMerkelhadseenenoughbynowtoknowthatwewouldnotbudge,and for this reasonwereabout topressSchäuble–and therefore theEurogroup,whichwas almost fully under his control – tograntusabridgewithaviewtonegotiatingareasonablelong-termagreement,includingdebtrestructuring,thatwouldsettletheGreekquestiononceandforall. Themore likely scenario, however,was that the extensionwas a tacticalploy:bydelayinganyoutcometheyweresimplywaitingfor thedepletionofbothourcurrentpopularityandoursmallliquidityreservessothatbythetimethe extension expired in June they could be sure of our exhaustedgovernment’stotalcapitulation.Ifthelatterwasindeedthecasethen,Iargued,ourbeststrategywouldbeto

request the extensionwhile at the same time signalling to the troika that any

attempttowearusdownthroughatighteningoftheliquiditynoosewouldbemetwitha refusal tomake the forth-coming repayments to the IMF; thatanyefforttopushusbackintothestraitjacketofitsfailedprogrammeortodenyusdebt restructuringwouldbemetwith a cessationof negotiations; and thatanythreatofclosingdownourbanksandimposingcapitalcontrolswouldbemetwithunilateralhaircutsoftheECB’sSMPbonds,withtheactivationoftheparallel payments system andwith changes to the law governing theCentralBankofGreeceinamannerthatrestoredparliament’ssovereigntyoverit.Bythesametoken,theworststrategywouldbetorequestanextension,get

it, but then fail to signal our readiness to trigger these measures if ourcreditorswere to stray from the spirit of the interimagreement.Werewe tomakethaterror,Iargued,theywoulddragusthroughthemudovertheperiodoftheextensionandthen,atthemomentofourgreatestweakness,aroundtheendofJune,slaughterus.They all agreed – Pappas and Alexis enthusiastically, Dragasakis with a

noncommittalnod,Sagiaswithahelpful reminder that theECB’sSMPbondswerethelastsliverofGreece’spublicdebtstillunderthejurisdictionofGreeklaw,whichmeantthatanychallengetoourdecisiontohaircutthemunilaterallywouldbeheardnot inahostileLondonorNewYorkcourtbut in theGreekcourts.Overthenextfourmonths,astheliquiditysqueezegrewtighterandthreats

of bank closures and capital controls mounted, I would regularly remindAlexis and thewar cabinet of this decision.Every time I did so, he and theywould confirm their commitment to it.13 Alas, as the weeks went by theirenthusiasmwanedandtheconfirmationsbegantosoundritualistic.Daybyday,weekbyweek,myworst-casescenariobegantocreepuponus.

Happydaysandconstructiveambiguity

BackatmyofficeIputtogethertheletterrequestingtheextension,haditreadbymyteam,checkedbyAlexisandSagiasinhiscapacityascabinetsecretaryandthegovernment’stoplawyerandthensentitontotheEurogrouppresident.Itsstatedpurposewas toallowGreeceand theEurogrouptobeginwork‘onthenewcontract forrecoveryandgrowth that theGreekauthoritiesenvisage

between Greece, Europe and the International Monetary Fund, which willreplacethecurrentagreement’.Itwasa letter in thespiritofcompromise. Indeed,asIhad told theFrench

financeminister at our firstmeeting in Paris, I chose theword ‘contract’ toreplace the IMF’s ‘programme’ in order to reflect Rousseau’s notion of anagreementbetweenequals.Assuch,thelettercontainedphrasesthatthetroikawoulddespise,suchas‘socialfairnessandmitigatingthegreatsocialcostsoftheongoingcrisis’and‘thesubstantive,far-reachingreformsthatareneededto restore the livingstandardsofmillionsofGreekcitizens throughgenuineeconomic growth, gainful employment and social cohesion’, as well asphrasesthatwouldbehardforourside,especiallytheSyrizarankandfile,tostomach. ‘TheGreek authorities recognizeGreece’s financial obligations toallitscreditors,’Iwrote,andintended‘tocooperatewithourpartnersinordertoaverttechnicalimpedimentsinthecontextoftheMasterFacilityAgreementwhichwe recognize asbinding’.The letter represented the furthestwecouldgotosatisfyBerlin.That night, once the letter had been dispatched and while we waited for

Brusselstoreply,Iallowedmyselfarareindulgence:DanaeandIattendedtheGreekNationalTheatretoseeaperformanceofSamuelBeckett’sHappyDays.Asweleft, thejournalistswaitingnearbyexpressedsurpriseatourchoiceofsuchableakplay.ComparedtothecrudeasphyxiationoneexperiencedattheEurogroup,Itoldthem,Beckett’svisionofawoman’sgradualburialliftedtheheartnot justbecausegreatart is inherentlyupliftingbutalsobecauseofhisprotagonist’s remarkable capacity tomeet her suffocationwith inexhaustibledefiance.NextmorningtheanswercameviabackchannelsfromBerlinandBrussels.

My letter had been deemed ‘helpful’ and a ‘good basis’ for a Eurogroupagreement the followingday.Butwhatdid thatmean?After the falsedawnafew days earlier when the European Commission’s excellent draftcommuniquéhadbeentorpedoedbytheEurogrouppresident,nothingcouldbetakenforgranted.So,on20FebruaryIflewtoBrusselsinhopebutwithoutatraceofitsuncouthcousinoptimism.Before the Eurogroup assembled, I had a quick meeting with Christine

Lagarde. Shewas confident that agreementwas around the corner. ‘ButwillWolfgang give up on his crusade to commit me to the programme and theMoU?’ I asked.The expression onChristine’s face expressed confidence butalsoconcern.

Then Imet Jeroen. Itwas our first (and last) businesslikemeeting. Jeroenwantedtobreaktwopiecesofbadnewstome.First,theextensionwouldbeforfourmonthsratherthanthesixIhadrequestedinmyletter.AsIhadindicatedto JeffSachs, I didnotmind that at all.Second, theECBwas adamant that a‘credit card’ facility of up to just under €11 billion (designed to be used onbehalf of Greece’s banks if they needed emergency capital) be transferredfromtheHFSFtoitsparentfacilityinLuxembourg,theEFSF.Thiswasalittlelikeyourbanktellingyouthatanoverdraftfacilityyouhavebeengrantedbuthavenotyetusedwouldbetransferredtoyourbank’sheadquartersfromyourlocalbranch.14I told Jeroen I would grant these concessions, which were of little real

consequenceasfarasIwasconcerned,inreturnforsomethingItrulyvalued:policyspace.EurozonememberstatesreceivingmoneyfromEurope’sbailoutfund (the EFSF and later the European Stability Mechanism) have to be‘assessed’ every fewmonths. Thiswas inescapable, andwe had always beenpreparedtoacceptitasaconditionoftheinterimagreementwewereseeking.The multi-billion-euro question was: assessed by whose criteria? WolfgangSchäuble’s immediate answer would have been the criteria laid down in theMoUoftheexistingprogramme.Mymandate,however,wastodemandthatthenewGreekgovernmentregaintherighttobetheauthor,oratleastco-author,of these criteria, and that in rewriting these criteria we put an end to theridiculouslevelsofausteritythatpreventedGreecefromrecovering.Inshort,Idemanded that theMoU, or at least the 30 per cent of its articles that wereunacceptable, be replaced with a new list of reforms proposed by ourgovernment,whileourprimarysurplustargetbereducedfrom4.5percentofnationalincometonomorethan1.5percent.To my great surprise, Jeroen agreed. As for the primary surplus, he

suggested thatwe replace the target of 4.5 per centwith thewords ‘sizeableprimarysurpluses’,leavingthequestionofwhether1.5percentwas‘sizeable’enough to be negotiated. I counter-proposed that we replace ‘sizeable’ with‘appropriate’.Againheagreed,andsoonthedraftcommuniquéwascomplete.

TheGreekauthoritieswillpresentafirst listofreformmeasures,basedon the current arrangement, by the end of Monday February 23. Theinstitutions will provide a first view [of] whether this is sufficientlycomprehensivetobeavalidstartingpointforasuccessfulconclusionof

the review. This list will be further specified and then agreed with theinstitutionsbytheendofApril.

If this paragraph made it through to the final communiqué, I thought, itwouldconstituteatriumphfortheeurozone’sweakercountries.Itwouldbethefirst time a government incarcerated within a bailout programme had beengrantedtherighttoreplacethetroika’sMoUwithanagendaforreformofitsown composition. Of course it was only a preliminary victory since theinstitutions’approvalwouldberequiredbefore theagendawasagreed,but itwasagiantstepinthedirectionofemancipation–theequivalentofaprisonerescaping from solitary confinement, jumping over the prison’s perimeterfenceandrunningthroughthewoods.The communiqué’smajor downside was that it offeredGreece no respite

fromtheliquiditysqueeze.DuringabriefmeetingwithintheEurogroupIputittoMarioDraghithat,withthisagreementinplace,theECBhadnoexcusenotto reinstate thewaiver, signallinganend to the threatofbankclosuresandareturn tonormality.As longas theECB thenallowedGreece’sbanks tobuyTreasurybillsattheratetheyhadbeendoingpriortoourelection,thenbymyteam’s calculations, assuming some serious economizing as well, we couldsurviveuntiltheendofJune,givingusfourmonthsinwhichtobuildthelong-term agreement we were seeking. Some say I should have demanded thiscommitment from Draghi in writing. Others have called me a fool for nothavingdoneso.TheyareprobablythesamepeoplewhowouldhavecalledmeanidiotifI

had demanded a written commitment from Mario, thus yielding anotherimpasse.Afterall,accordingtotheECB’srules,itsPresidentisnotatlibertytoissuesuchwrittenstatements.Thepointoftheinterimagreementwasmerelytocarve out the time necessary to see if common ground existed. Instead ofspecificity,wewere looking for language thatwas sufficientlyambiguous tosatisfybothpartieswithoutexposingtheriftsthatremainedbetweenus.Atthisstage avoiding each side’s red lines was essential if there was to be anyprogress.Euclid remindedmeof the termoften credited toHenryKissingerfor this diplomatic technique: ‘constructive ambiguity’. This was ourimmediatetask.

Whitesmoke:the20Februaryagreement

The Eurogroup meeting of 20 February 2015, a mere eight days beforeGreece’sbankswereduetobeshutdown,wastheeasiestoneIsatthrough.Amonument to studied ambiguity, it also confirmed the German chancellor ’scapacity to wrest command of the Eurogroup, albeit momentarily, from themanwhogenerallycontrolsit–herownfinanceminister.EmmanuelMacron,France’seconomyminister,sentmeatextjustbeforetheEurogrouptellingmethat he had had lunch with Angela Merkel and had pressurized her to helpdeliver a deal acceptable to both sides. Iwas also informed thatMerkel hadgivenDijsselbloemdirect instructions to end theGreek saga, at least for thetimebeing,byapprovingthecommuniqué.IneveryotherEurogroup,oncethefloorwasopenedforstatementsbythe

ministers,thesameritualoccurred.First,DrSchäuble’scheerleadingteamofEasternEuropeanministerswouldcompetewithoneanotherastowhocouldout-Schäuble Schäuble. Then ministers representing previously bailed-outcountries such as Ireland, Spain, Portugal and Cyprus – Schäuble’s modelprisoners–wouldaddtheirSchäuble-compatibletwopenn’orthbefore,finally,Wolfganghimselfwouldstepintoputthefinishingtouchestoanarrativethathad been under his thumb throughout. Alas, on 20 February 2015 nothingworked for him the way it should. Released fromWolfgang’s spell by theGermanchancellor ’sdirectinstructions,Jeroenreadoutthedraftcommuniquéandthengavemethefloortoexpressmysupportforit–whichIreadilydid,hailing it as an important moment in Europe’s history, a moment whenEuropeanleadersdemonstratedthatdemocracyisnotaluxurytobeaffordedto creditors and denied to debtors, a moment when the logic of commonground and common endeavours prevailed over dogma unsupported byeconomicreality.AftermyshortspeechJeroenopenedthedebatetotheothers.Nonameplates

were stood on their side. None! Instead of the usual rush of Schäublecheerleaders,therewasanawkwardsilence.FearfulofWolfgang,theywouldnotspeakinfavourofthedraftcommuniqué,buttheydarednotspeakagainstit either when it had the backing of Angela Merkel. Caught between twomasters,theyloweredtheirheadsandkepttheirthoughtstothemselves.Theirdilemma was made no easier when Mario Draghi and Christine Lagardeproceeded to offer the draft communiqué their support, though with noenthusiasm. Predictably outraged, Wolfgang repeatedly took to the floor todemandthatthecommuniquéreconfirmGreece’scommitmenttotheMoUand

the existing programme, which he insisted was the only show in town. ButJeroenwouldnotbudge.ThatWolfgang doggedly opposed the communiqué there is no doubt, but

every time he spoke against it, his voice grew shriller and his argumentsweaker.EventuallyIlostcountofhowmanytimesheintervened–itmusthavebeenmorethantwenty.Theonlyministers tobackhimwerePortugal’s,whospokeonly twice, andmynext-doorneighbour, theSpanishministerLuisdeGuindos, who spoke up more than ten times – surely a reflection of hisgovernment’s fear that any Syriza success would inspire support for itsequivalent,Podemos,inSpain’simpendinggeneralelection.ConfinedtotheroleofobserverinthisclashbetweenanabsentMerkeland

an omnipresent Schäuble, I had time to look at my phone and exchangemessages with my comrades. The meeting had begun at 3.30 p.m. At 8.30Euclidtextedmeanxiouslytofindouthowthingswereprogressing:‘Areweoscillatingtoasuccessfulconclusion?’‘SofarWolfgangishopelesslyisolated,’Ireplied.‘HasDraghicommittedtoreleasingthenoose?’‘Notformally.Willtalktohimsoon.’Alexisalsotexted:‘Themediaisreportingthatthingsaregoingwellforus.

Staycool,patientandpreventanyeditsthatworsenthecommuniquéforus.’‘So far so good,’ I texted back. ‘Wolfgang is failing to control the

proceedings.’At 8.39 I texted Euclid and Alexis to inform them of an extraordinary

development:Wolfganghadlefttheroom,clearlyangry.Alexiscouldnotbelieveit.‘Canweleakthis?’heasked.But a fewminutes laterWolfgang returned. I stoodupandwalkedover to

himtosaythat,whileIunderstoodhisopposition,aninterimagreementbasedonthecommuniquéonthetablewouldbeexcellentforbothourcountriesandcould become the foundation of an end to this otherwise endless drama.Heconveyedhis appreciationofmygesturebut seemed too annoyed to indulgeme.At8.56Alexisaskedmeforanupdate.TheSchäublecampwasnotgivingup,even thoughithadbeenreduced to

just the Iberian contingent and mainly to Luis de Guindos. But Jeroen wasmanagingtocontainthem.‘TheDutchmanishandlingitwell,’Ireplied.At 9.14 Alexis asked me if there was a chance that the German–Spanish

alliancecouldscuttlethecommuniqué.

‘Theyaretryingtheirbest,’Iresponded.AfewminuteslaterIinformedhimthat Lagarde had taken to the floor in support of the communiqué. ‘She issalvagingit,’Itexted.Alexisseemedpleasedbut,likeEuclid,waspreoccupiedwiththeECB.WouldDraghistoptheasphyxiation?Irepliedthatweshouldgetthisagreementinthebagfirst.ThenIwouldputittoDraghithathehadadutyto end the hostilities, beginningwith the return of thewaiver. One step at atime.At 9.28 Alexis texted again: was there a chance of failure? Had the

communiquébeenalteredsinceJeroenfirstreaditout?Nine minutes later I texted him back, ‘We won this one. But let’s not

celebrate.ThelastthingweneedistoupsetWolfgangfurther.’Alittle laterananxiousEmmanuelMacrontextedmetoo. ‘Wehadagood

result,’ I informed him. ‘Nowwe need to get down towork.Thanks for thehelp.’Emmanuelrepliedwithacomradely‘Let’skeepfighting.’Onmywayoutoftheroom,IwalkedovertoMarioDraghitohavethechat

thathewanted toavoid. I remindedhimofwhathehad toldme inhisofficesixteen days earlier as well as over the phone later that night, when he hadpulledwith suspicious haste theGreek banks’waiver, cutting them off fromECB liquidity: that once therewas an agreement at the Eurogroup level, theECBwouldno longerhave a reason todenyGreekbanks thewaiver.Marionodded and promised, now the Eurogroup had extended Greece’s loanagreement, that the ECB Executive Board would discuss the matter soon. Ipressed him for a date when Greek banks would be reconnected to ECBliquidity.Ashewaswalkingawayhesaiditwouldbe‘soon’butprobablynotbefore the following Wednesday, when the top echelons of the ECB werescheduledtomeet.FornowitwasasmuchasIcoulddo.I headed for thepress room, relieved that this time thewaiting journalists

wouldbeable toreportwhitesmokesignallinganagreement.ButIwasalsopleasedthatAlexisstillhadhiseyeontheball:inhislasttextbeforethepressconference he reminded me to emphasize in front of the cameras that thephrase‘appropriatesurpluses’inthecommuniquétranslatedintonomorethan1.5percentofnationalincomeandthe‘endof3.5percent’.Twomonthslater,asIwasmakingmywaybackfromAlexis’sofficetothe

financeministry,Iwouldrereadthattext,myspiritalmostbroken.

Amomenttosavour,darkly

IttookthreeEurogroupmeetingsforGreeceandEuropetoturnapage.Intheend, as I told the gathered press, we showed that negotiation meanscompromise but also a readiness to say no to proposals, suggestions andoffers thatwedonothave themoral right, thepolitical right, themandate tosayyesto.Wecombinedlogicandideology,respectfortherulesandrespectfordemocracy.Wecountered theviewthataheavily indebtedcountrycannothaveelections that change anything.We stood firmunder immensepressure.Ourstrugglewasnotanationalist,populistattempttoimproveourpeople’slotattheexpenseofotherEuropeans.Fromdayonewesaidthatwewerenotinthebusiness of short-changingour partners but of recalibratingour policieswith the interests of the whole of Europe in mind. We refused to see ournegotiationasazero-sumgamewhereourgainwouldbesomeoneelse’sloss.Having thanked Jeroen for steering that evening’s Eurogroup towards an

interimagreement,Ihaileditasanopportunitytogetdowntowork.Overtheweekend, I informed the press,my team and I would beworking round theclock to prepare our government’s list of reforms to be submitted in threedays’time.‘Itwillbehardwork,’Iadmitted,‘butweshalldoitgladlynowthatwe have moved on to a new relationship of equals,’ for this was ouropportunitytoprovethatpartnership,notcoercion,wastheroutetosuccess.Theweekendaheadwasgoingtobeverylongindeed.Yes,wehadwonthe

righttoreplacethemosttoxicpartoftheMoUwithourownradicallydifferentreforms. But that right did not translate automatically into a reality. It wasmerely the first step towards a new deal for Greece. The agreed processinvolved three further steps. Oncewe had submitted our list of reforms viaemail–bylateafternoononMonday,23February,lessthanseventy-twohourslater–theinstitutionswouldhaveuntilTuesdaymorningtostudytheproposalintimeforaEurogroupteleconferenceonTuesdayafternoon.There,Draghi,Lagarde and Moscovici, representing the three creditor institutions, wouldpronounceonwhethermylistwas‘sufficientlycomprehensive’tobeusedasthebenchmarkbywhichmygovernmentwouldbeassessed.Thethirdstep,theassessment,wouldbeinmid-April,whichifsuccessfulwouldleadtoareleaseof funds with which to repay the IMF. Only then, with these three stepscompleted,couldweenterthePromisedLandofnegotiations,tobeconcluded

bytheendofJune(whentheinterimagreementexpired),overthenewcontractforrecoveryandgrowththatweweredemanding–ourHolyGrail.Iamoftenaskedwhether I thought therewaseveraseriousprobabilityof

successfully navigating those treacherous waters to a new deal for Greecewithintheeurozone.Ianswerthattheactualprobabilitywasneithercomputablenor important.Wehad to give our creditors the chance to come to the tablewithhumane,logicalideas,andtheopportunitytolistentoours.Itwasalwaysgoingtobealongshot,butourmandatefromthepeopleofGreecewastodoourutmosttosecureasustainablefuturewithintheeurozone.To this day I receive ferocious criticism for having concluded the 20

FebruaryEurogroupagreement.Greece’sparliamentaryopposition,taintedbytheirsignaturesonthetwopreviousbailoutprogrammes,werekeentoclaimthat I had signed up to their MoU but, being the fool that I am, withoutreceiving any of themoney. Of course, they overlooked the fact that it hadtaken three Eurogroup meetings to remove any mention of the MoU orprogramme from the communiqué.Curiously,Syriza’sLeftPlatformarguedthe same, ascribing theblame forour eventual surrender to the20Februaryagreementratherthantoanyofthewarcabinet’ssubsequentfailures.Therearealsocriticswhoarguethatconstructiveambiguityalwaysfavoursthestrongerparty in a negotiation, neglecting tomention that Schäuble fought tooth andnail to block the agreement.And there are comrades, includingEuclid,whocriticizedmeafterthefactforfailingtoinsertintothecommuniquéaphrasethat committed the ECB to ending our liquidity squeeze, forgetting that theECB’ssacredindependencemeantnosuchphrasecouldeverbeincludedinaEurogroupcommuniqué.Nonetheless,what thehail of criticism for the20Februaryagreement that

followed our eventual defeat in July 2015 did confirmwasmy andDanae’sprognosis after I had accepted the offer of the finance ministry in Alexis’sapartment:nomatterwhat its truecausesmightbe,ourgovernment’s failurewouldhaveasingleparent–me.What is interesting though is the absurd but widespread notion that our

eventual defeat was hard-wired into that Eurogroup agreement. The interimagreementof20Februarywasanecessarybut insufficient first step towardsescapingBailoutistan.Tomakeitsufficientandsetusontheroadtoliberation,ithadtobeaccompaniedbyanunwaveringwillingnessonthepartofthewarcabinet to enact our pre-agreed battle plan during the window during thewindow of opportunity it provided.We needed constantly to be prepared to

activateourdeterrent themomentwewere threatenedwithbankclosuresandcapitalcontrols.Andtobepreparedwehadtobelievethat theworstpossibleoutcome for Greece would be to sign up to an extension of Bailoutistan inorder tokeep thebanksopen.Thisuseof the20February agreementwouldhave definitely delivered us from Bailoutistan. One way or another,sustainabilityanddignitywouldhavereturnedtoGreece,eitherbymeansofanegotiated new deal within the eurozone or through a painful rupture thatwouldatleastrestoreGreece’scapacitytomakeitswayintheworld.OntheflightfromBrusselstoAthensthoseGreekswhohappenedtobeon

theplanewereecstatic,eventhoughmostsupportedtheoppositionparties.WehadstooduptothetroikaandwerereturninghomewithanhonourableinterimagreementthatGermany’sfinanceministerhadtriedhisbesttoscupper.Whatwas not to celebrate?But despite the fatigue andmy eyelids growing heavy,onequestionhauntedme:wouldthewarcabinetdowhatwasnecessarytokeepthetroikainline?Andwouldweactivateourdeterrentifthecreditorstriedanydirtytricks?Back inAthens I received an email fromNormanLamont. ‘Iwas amused

thatTheEconomistcriticizedyouforsayingGreecewasbankrupt,’hewrote.Norman’s amusement stemmed from the fact that, by saying this, I wasimplying that the ECB’s executives had been breaking their own rules foryears,fortheEuropeanCentralBank’sownstatutesprohibiteditfromloaningmoneytobankruptstates.Clearly, thestoryoriginatedwithalliesof theECBwho, unlike Norman, were not amused andwere briefing againstme.Moreworryingly,thefactthattheseleakswerecomingfromFrankfurtafter the20FebruaryagreementsuggestedthattheECBwasnotabouttoloosenthenoose.Itconfirmedinmymind that,unlesswewere trulyprepared todefault to theIMF,haircuttheECB’sSMPbondsandprepareourparallelpaymentssystem,thecreditorswouldnothonourthespiritoftheinterimagreement.InthesameemailNormangavemehisperspectiveontheeventsofthepast

fewdays:

Youseemtobefacingalotofheadwinds(likeUlysses?)butnonethelessmakingsomehard-earnedprogressagainstthetide.Iguessthebigprizeiswhatyouget after fourmonthseven ifyouhave toyieldabiton theshortterm‘structuralreforms’(aphraseeveryoneusesbutnooneknowswhatitmeans).Anywayforwhatit isworthI thinkyouareaheadoftheunlikeableSchäubleonpoints.

That Wolfgang was furious about this widespread impression, I had nodoubt.Thathewouldhitback, Iknew.What Ihadno inklingofwas that theknifewouldbewieldedfirstfromwithinmyministryand,a little later, fromwithinourownwarcabinetand in thesameoffice inMaximoswhereAlexishadmovedmetotearsonthedayofourswearing-in.

10

Unmasked

On my way from the airport to parliament, where a relieved cabinet wasalready discussing the Eurogroup agreement, my mobile phone broughtacclaim and damnation in equal measure. Jeff Sachs emailed praise forachieving ‘a 120-day period to think and brainstorm together… an historicbreakthrough, breaking all of the rules of top-down management in theeurozone.Allkudos!’Buttwoleft-wingheroesofmychildhoodwhoseviewsIcared about deeply –ManolisGlezos, hero of the anti-Nazi resistance and amember of the European parliament in February 2015, and the legendarycomposer Mikis Theodorakis – denounced the agreement.1 They were allcorrect. It was an historic breakthrough but it would bring defeat andhumiliationifwewerenotcareful.Later thatSaturday,21February, Iarrivedbackat theministry toworkon

the list of reforms that we would propose as a substitute for theMoU. Thepadded door to my office shut behind me with a thud and I dived in. MymissionwastoexcisethetoxiccommitmentsoftheMoU–the‘miscellanyofugliness’, as some of my team liked to refer to them – which amounted tosome 30 per cent of the overall document and which pushed for greaterausterityandanintensifiedclasswaragainsttheweakest,andreplacethemwithnewpolicyintentions.Theseneededtobephrasedinsuchawaythatthetroikawouldnotobjecttothem,buthadtoopenthedoortothegenuinelytherapeuticmeasureswehadbeenarguing for,which itwouldmostcertainlyoppose. Intheory I had forty-eight hours to complete the document. In reality, with somuchelsepressinguponme,Ihadalotfewer.OnceitwassubmittedonMondayevening,MarioDraghi,ChristineLagarde

andPierreMoscoviciwouldhavethefollowingmorninginwhichtoreviewitbeforetheEurogroupteleconferencescheduledforTuesdayafternoon.Therewouldbenoquibbling;threeofthemwouldsimplypassjudgmentonthelistofmeasuresinturn,givingiteitheragreenlightoraredflag,withministershavingnosay.

Aredflagattheteleconferencewouldberuinous.Thehard-wonresultsofour efforts over the previous weeks would evaporate, the banks would shutdown and we would look like spurned petitioners. It was essential to knowwhetherthiswasgoingtohappeninadvance,wellbeforeMondaynight.Ifanimpasse was inevitable, then I would refuse to submit any reform list andinsteadhailtheinstinctsofoldwarriorslikeGlezosandTheodorakisatapressconference where the failure of the negotiations would be announced andexplained. At the same time, I was equally desperate to avoid a stalematebecause of some minor difference that could have been smoothed over. Tokeepalineofcommunicationopenwiththecreditors,IhadleftmydeputyandrepresentativeintheEurogroupWorkingGroupGeorgeChouliarakisbehindinBrussels.HisbriefwastoelicitfromkeyBrusselsfunctionarieswherethecreditorswoulddrawtheirredlines, test thecreditors’sensitivitytoourownandultimatelywarnmepriortoMondaynightifadeadlockwasonthecards.AllthatSaturdaynightIwasholedupaloneinmyoffice,sweatingoverthe

escape plan thatmy incarcerated nationwould present to its jailors. I beganwithitsfourthandfinalsection,whichIentitled‘HumanitarianCrisis’.Ichosethistitleasalitmustest.JeroenDijsselbloemhaddismissedthephraseas‘toopolitical’forinclusioninthecommuniquéatmyfirstEurogroup.IfTuesday’steleconferencerejectedmylistbecauseof thissection, Iwouldknowwhat todo:announcetheendofnegotiationsatEurogrouplevel,presstheOffbuttonon my teleconference device and call Alexis to deploy our deterrent.Throughoutthedocumentthechallengewastostriketherightbalancebetweenambiguityandspecificity.ButwhileIwouldremainintentionallyambiguousinmanyareas, thelastentryinthisfinalsectionwasveryclear.Itexpressedtheambition to commit the Greek government, and a kicking and screamingEurogroup,toprovidingpoorfamilieswithastigma-freeprepaiddebitcardtopayforfood,shelter,medicineandelectricity.With the final sectioncompleted, Ibegan tounpick thoseMoU entries that

damaged basic rights. I wrote in a ban on evictions from a family’s mainhome; a reassessment of the criteria for privatizations to include minimuminvestment levels, environmental standards, labour rights and a concern forlocal communities; the establishment of an investment bank to exploit publicassetsandsharetheprofitswiththesufferingpensionfunds;thesuspensionofpreviouslyagreedreductionsofpensions;anaffirmationofourcommitmenttoreinstate theright to tradeunionrepresentation;aguarantee thatminimumcivil servicewageswould not be cut further; and so on. In exchange I let a

largenumberoftheMoU’s‘prioractions’stand.Somewereugly,somebad,afew good. But that’s what the spirit of compromise dictated. In the closingdiscussionof the20FebruaryEurogroupDijsselbloemhadspecifiedthatmylist shouldbe ‘widebut shallow’, takingupnomore than threepages. In theendIsentthemfive.

Workingwiththeenemy

On Sunday George Chouliarakis returned from Brussels with news. He hadbeenholdingtalkswiththeEuropeanCommission’skeytroikarepresentative,Declan Costello, who apparently was positive and keen for us to passTuesday’s test. I asked if he had shown Costello my draft. He had, and theresponse had been good, but Costello wanted us to reframe the list in thetroika’spreferredlingoandtemplate.‘Theyarehappywiththecontentbutarekeen to retain their own format. Let me go to my office, freshen up, andreformatourlistintheirlanguage,’Chouliarakissuggested.Itsoundedgood.Acceptingtheirstaleformatbutlosingsomeoftheirterriblecontentwaswellwithinmyredline.WhenGeorgereturned,hebroughtwithhimadisappointingdocument. Its

language was clearly that of the troika’sMoU, but the insertions that weresupposed to reflectmy earlier draftwere also either absent or unacceptablywatered down. So I pulled out a chair and invitedGeorge to sit next tomewhile I editedhis text. Itwasanuneasycollaboration.We triedhard toworktogether, with some success, but it was clear that we were on differentwavelengths – analytically, politically, culturally. For George the documentwas an end in itself. For me it was a stepping stone to what came after thereform list was agreed: front-loaded debt restructuring. Without debtrestructuringmy reform list, indeedany reform agenda,would be renderedirrelevant by the process of extracting debt repayments. This would keepGreecetrappedwithinadebt-deflationspiral–astateinwhichanysociety isimpervious to reform and will eventually fail. At the analytical level ourdifferenceswerealsobeginningtomount.Themorewediscussedfiscalpolicythe more I was struck by George’s tolerance of the troika’s ridiculouseconomic models, which I thought engendered a disconcertingly relaxedattitudetoitsusuriousfiscaltargets.

A finance minister should have complete confidence in the chair of theirCouncilofEconomicAdvisers,whomanages the teamofeconomicanalyststhat do the minister ’s number-crunching and who represents the minister atcrucialforums.Ididnothavethatconfidence,butthatwasnotGeorge’sfault.Itwasminefornothavingmadeitmytopprioritytofindsomeoneofmyownforthatkeypositionandtoinsistontheirappointmentagainstthedeputyprimeminister ’swill. Still, therewas a job to do andwe had to do it.Overmanyhours,sittingnexttoeachother,wedidourbest.Usingmy laptop I reshapedChouliarakis’sWord document untilwewere

bothhappywithit.Justafter9p.m.wesentittoCostelloforhisresponse.Thereplyarriveda littlemore than threehours later.Happily, the litmus testhadnot been failed. To my surprise, Costello raised no objections to the‘Humanitarian Crisis’ section. Indeed, he did not even mention it, choosinginsteadtoconfrontmeon‘twootherareaswherethetextwouldcausemajorproblems’:evictionsandprivatizations.Anymoratoriumon evicting families from their primary residence jarred

terriblywiththetroika.Ithadpromisedbankersthefreedomtorepossessandauctionoffallresidences,largeandsmall,primaryorsecondary.Itdemandedthe liquidation of businesses and households in arrears, compensating themwithafewhundredeuroseachmonthwithwhichtopickthemselvesupoffthescrapheap onwhichLambros and somany otherswere already languishing.Even thoughCostello couldnothaveknownof (orgivenadamnabout)myoathtoLambros,hewassmartenoughtorealizethatIwouldnotcountenanceacceptingthesemeasures.Soheproposedsome‘language’,asheput it:howabout saying that the government was committed to ‘avoiding’ evictionswithout mentioning a moratorium ‘at this stage’? Chouliarakis thought it areasonableconcessioninthegranderschemeofthings.Iagreed.OnprivatizationsCostellopushedmeontwofronts.First,hedemandedthat

noprivatizationeffectedby thepreviousgovernmentwas tobe reversedandthat privatizations be allowed to continue if the tender process had alreadycommenced. On this I agreed to respect ongoing tenders while inserting aclause that left it to the courts to decide whether a privatization should bereversed, safe in theknowledge thatGreece’s judgeswerekeen tohave theirconstitutional powers restored to them so that, for the first time since 2010,theycouldkeepacheckonthelootingofthecountryandundothescandalousfiresales.2Second,thetroikawasdeadagainstmyproposalforanewpublicdevelopment bank that would use public assets as collateral to generate

investment and share any profit with the haemorrhaging pension funds.Costello’sdiplomaticsolutionwastosuggestIleaveitoutofmylistaltogether‘as it would take several months to develop the idea and is not somethingwhichneedstobediscussedorsettledintheimmediatefuture’.ItwasanotherconcessionthatIagreedto,makingamentalnotetoplaceitat thetopofmyprioritiesfromAprilonwards.Afterafewhours’sleeponmyofficeredcouch,Iembarkedonamarathon

ofmeetingstosecuretheconsentoftheprimeminister,warcabinetcolleaguesandkeyministers.Everyonehadastrongviewaboutone itemoranotheronmy list, while the strongest opposition came from colleagues belonging orclose to theLeft Platform. From their perspective, our negotiationswith thecreditorswerefundamentallyilladvised,andthecouchingofmylistintroika-speakborderedonthetreacherous.ThisreflectedtheirviewthatGrexitoughttobeourgoal–alinethatwasnotonlystrategicallywrong,tomymind,butalsoatoddswiththemandatewehadbeengivenbytheelectorate.Despitetheseand other objections, by the afternoon of Monday 23 February we hadachievedaconsensus.AroundthesametimeIreceivedthreeseparateemailsfromtroikaofficials

‘recommending’thatIreintroducepartsoftheMoUthatIhadexcised.Eachofthemwrote,unlikeCostello, inaprivatecapacity,as ‘friends’whowanted toaverta‘deadend’.Irepliedmatter-of-factlytoeachthatIwasnotpreparedtoresuscitate toxic measures that not even Costello had demanded. If they feltstrongly enough, I suggested, they could advise their leaders (Lagarde,Moscovici and Draghi) to reject my reform list during the following day’steleconference.They relented, informally agreeing to the list I haddispatchedonMonday

afternoon.Butnotwithoutaninjuriousdelay.Theirreluctantgreenlightsdidnot arrive until just after midnight. Was this a tactical delay? If not it wascertainly serendipitous for their side. For, unwilling as I was to formallysubmitmy list until I had hadword that itwould not be rejected, I hadbeenforcedtowait.Midnighthadcome.Nothing.Then,attenminutespast,allthreehad responded with miraculous synchronicity. By thirteen minutes pastmidnight,mylisthadbeensenttoCostelloandhiscounterpartsintheECBandtheIMF.Onemightimaginethatadelayofthirteenminutesisneitherherenorthere.

Notsowhenthedogsof thepropagandawarareout togetyou.OnTuesdaymorning the world’s media used those thirteen minutes to portray me as

incompetent,tardy,disorganized.VAROUFAKISMISSESDEADLINEFORSUBMITTINGREFORM LIST was the typical headline. It was a charge I could not challengewithout revealing that IhadbeennegotiatingsecretlywithGreece’screditorsbefore formally submitting the list. Still, as charges againstmewent duringthat period, it was trifling. That Tuesday morning the Brussels propagandamachine was hard at work, and another charge, incomparably greater in itscapacitytowound,wasonitsway.SoonafterleakingthatIhadbeenlateinsubmittingmyproposals,theywent

on to leak the list itself – hours before a meeting of the Greek cabinetconvenedtoapproveitformally.Themajorityofmyfellowministershadnotyetseenthelistandwereunderstandablypeevedthattheyshouldhavefirsthadsightof itwhile scanning thenewson their tablets on theway toParliamentHouse.Butwhat turned their legitimate annoyance into an immense politicalandpersonalblowweretheheadlinesunderwhichitappeared:COSTELLO’SLISTwas a typical example from the Greek media sympathetic to the troika.VAROUFAKIS: THE TROIKA’S LATEST STOOGE was a left-wing site’s interpretation.Oneoftheministersfilingintothemeetinggavemealookthatcombinedpityand disappointment and toldme that he had not imagined Iwould be takingordersfromCostello.DazedbythepreposterousaccusationthatCostellohadauthoredmylist,my

initialreactionwastodismissitasyetanotherfabrication,exceptthatonthisoccasionthemediahadahookonwhichtohangtheircharge.Apparently,onesmartjournalist(wholaterbecameafriend)discoveredthatbyclickingonthe‘Properties’taboftheleakeddocument,onecouldseeits‘Author ’–whichthesoftwaredefinedastheregistereduserofthecomputeronwhichthedocumenthadfirstbeencreated.HearingthisIgrabbedmylaptop,openedthedocumentcontainingmyreformlist,clickedon‘File’andthenon‘Properties’toseethatnext to ‘Author ’ it read ‘Costello Declan (ECFIN)’ and just below, under‘Company’, two words that completed my humiliation: ‘EuropeanCommission’.With thecabinetmeetingabout tocommence, it tookan immenseeffort to

stifle my fury and concentrate on gaining the ministers’ consent. Butimmediately after I had secured it, after a two-hour debate, I returned to theministryandsummonedChouliarakis.Yes,headmitted, thedocument thathehadpresentedtomeinmyoffice,whichIhadthenproceededtoeditradically,hadbeencreatedbyDeclanCostelloinBrussels,notbyhim.‘Andyoudidnotseefittotellmethis?Toinformyourministerthatyourdocument,whichIwas

clearlyunhappywith,wascomposedbyourchiefenemy?’Iasked.Noanswer.‘Let’ssaythatitescapedyouatfirst,orthatyouwereembarrassedtoadmitit,’I continued. ‘When you saw me labouring over it to amend its contentsradically, struggling with a Word document created by the troika’s sternestfunctionary,diditnotoccurtoyouthentowarnme?NotevenasIwasabouttoemailittothetroika?’Inamannerwholly typicalofChouliarakis,heshruggedoffmyquestions

withinfuriatingnonchalanceandafacewhichhidthoughtsnoonecouldhavedeciphered.3 Under normal conditions hewould have been sacked there andthen, but normalitywas a luxury that I never experiencedduringmy time inoffice.The landlinewas already ringing.TheEurogroup teleconferencewasbeginning. I took my place next to the receiver, clutching my notes, withChouliarakisnexttome.Agreaterbattledemandedmyfullattention.

Schäuble’srevenge

Whennegotiatingfromaweakposition,acracklingtelephonelineonlymakesthings worse. In face-to-facemeetings one can at least use one’s voice, eyecontact and physical presence to gain greater control of the room. Theteleconference format, by contrast, makes an already challenging meetingharder still.On this occasion, to level out thegrosslyunevenplaying field Ihad succeeded in securing a commitment from JeroenDijsselbloem that theteleconferencewouldonlyallowtheleadersofthethreeinstitutions(EuropeanCommission, ECB and IMF) to deliver a binary verdict: was my list‘sufficientlycomprehensive toactas thebasis forasuccessfulconclusionofthefinalreview’ofGreece’ssecondbailoutagreementorwasitnot?Thatwasthe only question on the table that day. Indeed, at the end of the previousEurogroup meeting on 20 February Jeroen had told everyone, much toWolfgangSchäuble’sparticulardisappointment,thattherewouldbenodebateduringour teleconferenceon24February. Its limited remitwas to allow theinstitutionstoemiteitherwhitesmokeorblack.Nothingelse.Withprioragreement tomylisthavingbeensecured,albeitunofficially, it

wouldhavebeenexceedinglysurprisingifwhitesmokedidnotappear.Butifitdid not, I had enough ammunition to expose the troika’s duplicity at a pressconferenceandwin theblamegame.Mymainfearwas thatWolfgangwould

somehowoverturnthebanonadebate,initiateoneoverthesputteringphonelineandsomehowgettheMoUbackonthetable.AllmymentalenergywentintoimagininghowhewouldtrytodothisandhowIwouldstophim.Mybestdefence lay with Jeroen’s prior and explicit commitment, but did I trust theDutchman?Asitturnedout,Wolfgangdidnothavetogatecrashtheteleconferencewith

adebate,nordidJeroenhave togobackonhispromise topreventone.Theset-up was cleverer than I had imagined. It became apparent as soon as theinstitutions’ leadersopened theirmouths.The first to speakwasDobrovskis,the Latvian vice chair of the European Commission: ‘In the view of theCommission this list is sufficiently comprehensive to act as the basis for asuccessful conclusion of the final review …’ White smoke as expected, Ithoughtwith a sighof relief.But thenDobrovskis continued: ‘Letme stress,however, that… this list does not substitute theMoU, which constitutes theofficiallegalbasisfortheprogramme.’Confounded at first, I quickly recognized what was going on: Wolfgang

Schäublehadrisenfromhishumiliationthreedaysbeforeandwasoncemorein full control.Over theweekend,while I had been struggling to produce areplacementfortheMoU, theGermanfinanceministerhadbeensuccessfullyturning the tide back in his favour – so successfully that he did not have tointerrupt,forceadebateorevenspeakatallinordertoresuscitatetheMoU.4Bystatingclearlythatmylistdidnot‘substitutetheMoU’DobrovskishaddoneSchäuble’sworkforhim.ForifthelistdidnotreplacetheMoU,thentherewasnopointinthelistatall.WewerebackattheimpasseofthefirstEurogroup.Was Dobrovskis acting alone? Pierre Moscovici, Mario Draghi and

ChristineLagardespokeuptoconfirmthathewasnot.‘Weunderstand,consistentwiththeEurogroupdecisionoflastFriday,’said

Mario, ‘that the list does not call intoquestion the current arrangements andthusexistingcommitmentsinthecontextoftheMoU,whicharethebasisofthereview.’‘ConsistentwiththeEurogroupdecisionoflastFriday’?Abetterexampleof

Orwelliandouble-speakwouldbehardtoimagine–spokenshamelesslybythepresidentoftheEuropeanCentralBankinthefullknowledgethatrestoringtheMoU’s primacywas inprecise anddirect violationof both the spirit and theletterofthe20Februaryagreement.Mario Draghi’s gigantic fib was hastily repeated by Christine Lagarde: ‘I

canliterallyendorseandadoptallthepointsmadebyMario,’shebegan.‘…

[T]hediscussionaboutcompletionofthereview…cannotbeconfinedtothelistpresentedbytheGreekgovernment,andIthinkthatMario’smentionoftheMoUisparticularlyrelevant…FinallyitwouldbeextremelyhelpfulifYaniscouldexplaintousthegovernment’sliquidityconditionsothatthereviewcanbegin.’ So there I had it. A carefully planned ambush that began with anoutrageousU-turnandendedwithathinlyveiledthreat.‘Yanis must now answer a couple of points raised in the context of the

necessity of agreeing all measures with the institutions,’ came Jeroen’stwopenn’orth.‘That’sthebasisonwhichwework.’AsIpressedthebuttonthatactivatedmymicrophone,mymindwasracing.

Whatshouldmyreactiontothisshockingviolationofouragreementbe?Howdo I pick up the gauntlet? To buy myself some thinking time, I began byaddressing all the relatively minor points mentioned by Dobrovskis,Moscovici,DraghiandLagarde.Witheveryword,theagonygrew.Acceptingtheridiculouspropositionthatthe20Februaryagreementdidnot

commit us to replacing theMemorandum ofUnderstanding with our reformlistwouldhavebeentantamount toacceptingthereinstatementof theMoU infull.Itwouldannuleverythingwehadfoughtfor.Itwouldhavebeentoaccepteverything Wolfgang Schäuble had demanded in our very first Eurogroupmeeting and everything that JeroenDijsselbloemhad tried topushdownmythroat at our first encounter. Above all, it would have constituted anunforgivablebetrayalofourpeople:thosewhohadtrustedusrecently,aswellas old warriors like Glezos and Theodorakis, who had already rushed todenouncemeforthecapitulationnowstaringmeintheface.While talking about privatizations and fiscal targets, two options were

competinginmymind.Onewastoendtheteleconferencerespectfully,statingthat the Greek government was withdrawing from negotiations at theEurogrouplevelbecausetheinstitutions’leadershadrenderedthemirrelevantwiththeirattempttoreintroducethefull-strengthMoU.Thesecondoptionwastoremainintheprocessbuttocontesttheinstitutions’interpretationofthe20February Eurogroup agreement and to state for the record that the GreekgovernmentwellandtrulyrejectedtheMoU’sreinstatementinaccordancewiththatagreement’sspiritandletter.Themomentoftruthwasapproaching.ItwasachoiceIhadtomakeonthe

spot,withonlyChouliarakislookingon.ItwasthehardestdecisionIhaveeverhadtomake.

Meamaximaculpa

Itwasclear inmymindthatwithdrawingfromtheprocesswouldtrigger theclosureofourbanks the followingmorning,Wednesday,25February2015,onemonthexactlyafterourelectionvictory.Withonly fourdays leftbeforeGreece’sloanagreementexpired,theECBwouldundoubtedlyhavepulledtheplugonthem.Immediatelyafterendingtheteleconference,therefore,Iwouldhave to rush to Maximos with the dismal news and with a firmrecommendationtoactivateourdeterrenceplanimmediately.ThiswouldmeanannouncingthedatewhentheSMPbondswouldbehaircut, theestablishmentof electronic IOUsvia the taxoffice’swebsite and an amendmentof the lawgoverningtheBankofGreece.Itwasatoughcall.ButIshouldhavemadeit.Instead, disastrously, I opted for the softer alternative. When the critical

momentarrivedduringmyspeech,thisiswhatIsaid:

Iheard fromall three institutions that [our] list isnota replacement fortheMoUandthatthislistwillsimplybegraftedupontheMoU…Now,asyouknow,wespentthreeEurogroupmeetingsdiscussing the imperativeofcombining theprogrammewithourgovernment’s imperatives.AndIwas–thisgovernmentwas–undertheimpressionthatwearemakingafresh start … We shall insist … that the review be completed on theunderstandingthatthisgovernment’slistofreformsisthestartingpoint.

Lookingback,thiswasappallinglytimid.WhileIcorrectlystatedthatthe20Februaryagreementhadsuspended theMoU and replaced itwithmy reformlist as the basis for the review, I should have made the continuation of theprocess conditional on a reaffirmation of this principle. Of course, had IinsistedonsuchanaffirmationIwouldmostprobablynothavegotit.AndthenI would have had to withdraw from the teleconference, thus triggering therupture.Butmythinkingatthetime–thereasonwhyIrefrainedfromdoingso–restedonthreeconjectures.First,thereaffirmationoftheMoUwaspurelyverbal.Ithadtakenplacein

the context of a Eurogroup teleconference that was not about to issue acommuniqué and whose remit was only to approve my list. The onlyagreement on paper remained that of the 20 February Eurogroup, whichprivilegedmyreformlist,makingnomentionoftheMoU,whilealsocreating

spaceforanegotiatedendtoausterityandalsotodebtrestructuring.5BynotwithdrawingfromtheteleconferenceIwasnotactuallyendorsingthereturnoftheMoUinanyshapeorform.Second, our government was only twenty-seven days old. Setting up the

parallelpayments systemnecessary todealwith theclosureof thebanksandpreparingforthehardshipshutteredbankswouldbringsimplyrequiredmoretime.Third, any decision by me to end the process during that teleconference

would have been taken without either the prime minister or the cabinet’sconsideration. My statement as finance minister that we rejected theinstitutions’ attempt to reinstate the MoU sufficed for the time being. Thegovernment, united and steeled by the creditors’ connivance, would, andshould, takecollectiveresponsibility for thedecisionover theprecise timingofourwithdrawalfromthenegotiations.The first two conjectures were valid. The third was not. Had it been, the

decisionImadeduringthatteleconferencewouldsincehavebeenvindicated.Ifour sidehad stood firm, as I assumed itwould, and calmly chosen the rightmomenttoretaliate,Iwouldnotbewritingtheselinesoverwhelmedbyregret.Alas,we did not stand united against the troika’s attempt on 24 February toreimposetheMoU.Weweredividedandultimatelywewereruled.DidIhavesufficientinformationatthetimetopredictthis?Ididnothavea

great deal, but with hindsight I think I had enough. The cosiness betweenChouliarakisandCostellorevealedbythatWorddocumentshouldhavealertedmetothedivisionsamongus.Blindedbymyunwillingnesstocontemplateanyalternative, I was unable to imagine that my deputy’s actions were due toanythingotherthanafailureofjudgement.Itsuitedmetoascribethatincidentto his lethargy and introversion. However, there was something elsemotivatingme–somethingmorethana justifiablereluctancetobeparanoid.Somethinglikefear.At the press conference on the night of 20 February I had celebrated the

agreementasamajorturningpoint.Iwasnotwrong.WolfgangSchäublehadbeendefeated,ifonlytemporarily,inastraightfightinhisownbackyard.AsLuis deGuindos and Jeff Sachs had noted, itwas a game-changing success.Our government and people latched on to it as a godsend.We hadwon 120daysofsomethinglikenormalityandtherighttonegotiateasubstantiallynewreformagenda,new fiscal targetsanddebt restructuring. Itwasamoment tosavour.HadIcomeoutoftheteleconferenceon24Februarywiththenewsthat

allbetswereoff,thatthedreamofanhonourablecompromisehadevaporatedandthatthebankswereclosingdownforthwith,thedisappointmentwouldhavebeenunbearable.PsychologicallyIfailedtorisetothechallengeofacceptingthatburden.Theproblemwitherrorsisthat,likecrimes,theybegetnewones.Myfailure

to pull the plug on the 24 February Eurogroup teleconference was to becompoundedwithanevengreateroneafewdayslater.

Snookered

MyfirstconcernwastobriefAlexisonthetroika’sreversalandthedecisionIhadmade.Wemetintheprimeminister ’sofficeinparliament,whereIputhiminthepicture.Thecreditorshaddupedus,Itoldhim.TheyweretryingtoputtheMoUbackonthe tableanditwouldtakeaconcertedeffort tokeepitoff.‘UnlessweremainreadytoactivateourdeterrentandtodefaultontheIMFandtheECB,theywilldragusbackintotheirprocess,defangus,exhaustusand,bytheendofJune,hangusouttodry,’Itoldhimplainly.Alexis listened carefully before tellingme that I should notworry. If they

wantedtogodownthatroad, theywouldsoonbemadetothinkagain.ItwaspreciselywhatIwantedtohear.AndsoIcontinuedwithmyeffortstokeeptheprocessontrack.Nowthat theEurogroup teleconferencehadformallyapprovedmyreform

list,ourgovernmentwasobligedtoissueaformalrequesttoitscreditorsfortheextensionofitsloanagreementfrom28Februaryto30June,ashadbeenagreed. The onus was on me to send the creditors that formal request. Theproblemlayintheformatthattherequestwouldtake.Thefollowingday,Wednesday,25February,GeorgeKoutsoukos,mychief

of staff, presented me with a template of the letter I should send to theEuropeanCommission,theECBandtheIMFrequestingtheextension.‘Wheredidthiscomefrom?’Iasked.‘FromDijsselbloem’soffice,’Koutsoukosreplied.I read itquickly. Itwasunacceptable.While Iwashappy tousecertainkey

expressionsrequiredbythecreditors,Iwasnotpreparedtosignonthedottedline of a letter written wholly by them. Our government’s commitment torecoveringGreeknationalsovereigntycompelledmetoinsist thatweshouldcompose the letter and that it should reflect our purpose and rationale in

requesting the extension to the loan agreement.Koutsoukos fully agreed butwarned me that Brussels had made it clear they would not tolerate anyamendmentoftheirdraft.Withtheletter inmyhandIdashedtoMaximosforameetingwithSpyros

Sagias,ourcabinetsecretary.Hewasasappalledandenragedbythecreditors’stanceasIwas.WetalkedtoAlexis,whoconcurred:mylettertoourcreditorscouldnotbeauthoredbythecreditors.Itwasnotamatterofsymbolismbutofessenceandsovereignty.OverthenexttwohoursSagiasandIsatinanofficeadjacent to the prime minister ’s drafting a new letter of our own. I thenreturnedtotheministrytohaveitsenttoBrusselsfortheirresponse.ThomasWieser,presidentoftheEurogroupWorkingGroup,wouldprovide

this feedback, so I askedmy representative on theWorking Group, GeorgeChouliarakis,topassitontohim.AfterwardsIwenthometofreshenup,pickupDanaeandheadoff fordinnerat theChineseambassador ’s residence, thepurpose of which was to calm the troubled waters of our government’srelationshipwithBeijing.Early next morning, Thursday, 26 February, a message from Thomas

Wieser awaited me at the ministry: the deadline for amending the letterrequestingtheextensionoftheloanagreementhadlapsed.EitherIsignedtheletterassenttomeoritwouldnotbeconsidered.‘Lapsed?’IaskedKoutsoukosangrily.‘Whendiditlapse?’Koutsoukosdid

notknow.‘Findoutbeforenoon,’Itoldhim.WhileKoutsoukosmadehisenquiries,ImademywayonfoottotheBank

ofGreece,wheremyformerfriendGovernorStournaraswasgivingaspeechon the occasion of the annual meeting of the central bank’s shareholders.Determinedtorespecttheinstitution,Ifeltitwasimportanttoattend.Anyhopethatequivalent respectmightbe shown to thegovernment I representedsoondisappeared.Listening toStournaras I realized itwas thekindof speech thatAntonisSamaras,theformerprimeminister,wouldhavemadehadhedefeateduson25January:apaeanto thepreviousgovernment’spolicies,arepetitionof the lie that Greece had been recovering prior to our election, a totalespousal of the troika’s agenda and a series of veiled threats against thegovernment.ItwasasifStournaraswasrehearsingforaninterviewinfrontofa panel made up of Schäuble, Dijsselbloem and Draghi. A sad day for thenotionofcentralbankindependence,IthoughtasIwasleaving,regrettingthatIhadwastedtwoprecioushours.

BackattheministryIcalledKoutsoukosandWassilytomyofficetogettothe bottom of Wieser ’s missive. After further enquiries I was told that thedeadlineforamendingtheletterhadpassedthreedaysago–on23February,thesamedayIhadhadtosubmitmylistofreforms.Within minutes I was back at Maximos with Alexis, Sagias and Pappas.

‘They have gone too far,’ I said. ‘Telling me on 25 February that I couldamend the letter ’s content but that thedeadline to do sohad lapsed twodaysearlier on the 23rd was a declaration of war. I cannot sign this letter afterhaving been set up in thismanner.’ They all agreed. Alexis suggested that IcontactWiesertomakeitcleartohimthat,giventheirbehaviour,Iwouldnotbesigningtheletterandwouldrevealtheirdirtytrickstotheworld.From the ministry, I composed a suitable message for Wieser: ‘You

informedmeon25FebruaryofanopportunitytoamendtheletterbywhichIshall request the loan agreement’s extension, while ensuring that thisopportunityexpiredtwodaysearlier.Naturally,Icannotproceedonthisbasis.’KoutsoukospasseditontoBrussels.TwohourslaterhebroughtmeWieser ’sreply: a letter had been sent to me on 21 February informing me of thedeadlineofthe23rd.‘Did we ever receive that letter?’ I asked Koutsoukos, Wassily and my

secretaries.None of them had seen any evidence of it. ‘CallWieser ’s officenow,’ I told them. ‘Let them know that we did not receive their letter of 21FebruaryandconsequentlyaredemandingacopyshowingwhotherecipientswereinAthens.’Itwas late in theafternoonwhenthereplycame.Wieser ’soffice informed

minethattheemailof21FebruarywithallrelevantinformationregardingtheextensionrequestprocesshadbeensenttofiveGreekofficials:Chouliarakis,in his capacity as my Eurogroup deputy and Eurogroup Working Grouprepresentative;Dragasakis(deputyprimeminister);Stournaras,asgovernorofthe Bank of Greece; the head of my ministry’s public debt managementauthority;andtheheadofthebanks’bailoutfund,theHFSF.Iaskedtoseetheemail. It was there in black and white: dated 21 February, it was indeedaddressedtothosefivepeople.Iwasflabbergasted.MyaccusationthatBrusselshadsetthedeadlineretrospectivelyhadbeenconclusivelyrefuted.OfthefivepeopleonWieser ’smailinglist,thereweretwoIcouldnothold

responsible:thechiefofthepublicdebtmanagementauthorityandthechiefoftheHFSF,whoweretangentiallyinvolvedandsimplybeingkeptintheloopbyWieser.AsforGovernorStournaras,hewas the troika’s localfunctionary in

morewaysthanone.IfIreliedonhimforinformationinmystruggleagainstthecreditorsIdeservedeverythingIgot.Thisleftmewithtwocomradeswhohad both the constitutional duty and the political responsibility to pass themessageontome:ChouliarakisandDragasakis.First I calledDragasakis.Had he received the email?He could not recall.

‘Myofficeiscopiedtosomanyemailsthatwelosecount,’washisreply.Iwasnot convinced.His staffwouldhave fullyunderstood the significanceof anyemailfromWieser,andthisoneespecially.‘Did I not tell youweeks ago?’ saidWassily. ‘Dragasakis has been setting

you up every step of the way. Only this morning his people were briefingjournalists that youwere in the clasp of the troika.’Even if thatwere true, Ilacked any evidence to accuse the deputy prime minister of intentionalmischief.With Chouliarakis things were very, very different. As my Eurogroup

deputy,hisjobwastobemylineofcommunicationwithThomasWieserandtherestof the troika. Itwashispreciseremit topassontomeeventhemostinsignificant message from the creditors, let alone an email of suchmonumental importance. When I challenged him, he too claimed that themessagehadgot‘lost’inhisin-box.‘Howcan such an email get lost in your in-box,George?’ I asked, barely

able to believewhat I had heard. Just as he had twodays earlierwhen I hadconfrontedhimwithCostello’screationoftheWordfile,Chouliarakisreactedasifhehadnothingtobeapologeticabout,asifnothingmuchhadhappened.‘Youhavenotheardthelastofthis,George,’Isaidwithutmostself-restraint

beforerushingbacktoMaximostodealwiththecrisishehadcaused.

ThisthingofdarknessIacknowledgemine

AtMaximos,SagiasandAlexiswereupinarms.Theyunderstoodthepoliticalcost of the trap that Chouliarakis had landed us in. Accepting the creditors’wordsinfullandwithoutanyemendationinarequestofthisnaturewaspurepoison:itwouldsuggestthatwehadnotwrungtheextensionfromthemonourterms,butthatthetroikahadchosentoimposeitontheirs;itwouldvindicatethose who were arguing that the troika was calling the shots and that ourattemptstowrestbackGreeksovereigntywerepatheticallymisguided.(WhenIlater told Sagias how Dragasakis and Chouliarakis had reacted when

confrontedbyme,hesmiledbitterly,touchedthesideofhisheadwithhisrightindex finger as if to say ‘I told you so’ and remindedme of his prediction,during our first days in office, that Dragasakis was aiming to undermineAlexis.)SagiasadvisedmeinthestrongesttermstosackChouliarakis.‘Getridof him immediately!’ he said, adding a variety of unpublishable expletives. Iwasdeterminedto,butfirstwehadtodealwiththesituationathand.Alexiswas highly reluctant forme sign the creditors’ letter, and,with his

lawyer ’shaton,Sagiasthoughtitextremelyriskyformetodosowithoutanyformalpoliticalbacking.Thenormalcourseofactionwouldhavebeentoputthe letter to parliament.However,Alexis could not bring himself to do this.Askingparliamenttoapprovealettertothetroikawritteninfull-blowntroika-speakwouldupsetourownMPs,playintothehandsoftheLeftPlatform,whowerealreadyaccusingusofcapitulationtothecreditors,disappointourvotersandenthusetheopposition,whowouldtakegreatpleasureincrowingthatwehadjoinedtheminyieldingtothecreditors.Eitherway,wewereinabind.IfIdid not sign the letter, either because I refused to or because parliamentrejectedourrequesttoauthorizeit,thebankswouldcloseandthethree-monthextensionwouldbelost.Ontheotherhand,ifIdidsigntheletterwewouldbeplaying straight into the hands of our enemies. Somehowwe had to reach adecision,andwehadtoreachitbeforethesunroseoverMountHymettusonFridaymorning.That Thursday night lasted an eternity. Ministers came and went, party

functionaries ebbed and flowed through the prime ministerial offices, thesurrounding hall and rooms, but none of the briefings and meetings anddiscussionsthrewanynewlightonourpredicament.Throughout,SagiasandIsat inAlexis’s office exchanging unpromising ideas, occasionally pacing upanddowntryingtosquarethecircle.AmongthosewhovisitedusthatnightwasStathakis,theeconomyminister.

HebecamesoangryatChouliarakisforhavinglandedusinthismessthathetook me to task first for hiring him – I reminded him that he had beenappointeddirectlybyDragasakis,somewhatagainstmywishes–andthenfornothavingfiredhimovertheWorddocumentinvolvingCostello.Again,Ihadto remind him that even then I would have been too late as Chouliarakis’smisdeedshadbeencontemporaneous:hehadfailedtopassWieser ’semailontomethesamedaytheCostellodocumentaffairhadbeenexposed.Inanycase,I told him, we had a serious problem to solve before firing Chouliarakis.Stathakis concurred and, nodding repeatedly, took his leave. Watching him

head home, I felt horribly envious. Thankfully, adrenalin did its duty andwithinmomentsIregainedmysenseofpurpose.The night was growing heavy and Alexis seemed lost. ‘I cannot take this

letter to parliament. The Left Platformwill slaughterme and the oppositionwill ridicule me,’ he kept repeating. I suggested that we try an innovativesolution: the truth!We should brief ourMPs on exactlywhat had happened.‘Wehavenothingtobeashamedof,’Iinsisted.WewouldsimplytellthemthatWieserhadsneakily informedonly a fewpeopleof thedeadline and thatwehadfoundoutonlyafterithadlapsed.Wecoulduseitasanopportunitytore-confirm with our MPs, including our Left Platform comrades, thegovernment’s collective commitment to our strategy: buy time to give thenegotiationsachancebutbereadytopulltheplugatatimeofourchoosingifthecreditorscontinuedtoimposetheMoUandrejectdebtrestructuring.Alexiswasunimpressed.ThiswoulddividethepartyandourMPs,hesaid.

‘Briefing them onwhat happenedwould reveal that some on our side knewabouttheletterbutfailedtotellus.’Sagias agreed.We could not afford a public display of disunity or accuse

membersofthegovernmentofincompetence–atleastnotwithoutfiringthemtoo. ‘Is this the time tobegin turningagainsteachother inpublic?When thecreditors are encircling us from all directions?’He had a point. And so thenightgrewlongerandourmooddarker.Icouldnotlettheblackholeconsumeus.Someonehadtofightagainstit.In

asplitsecondImadeadecision:IwouldrelieveAlexisofthisburdenandtakethe blame squarely on my shoulders. I was the ideal scapegoat for Syrizacriticismandtheperfecttargetfortheopposition.GivenAlexis’scommitmenttostaythecoursethatwehadbeenplottingtogether,nationalinterestdictatedthattheextensionbesecured.Personalcostwasirrelevant.‘Areyousureyoucannotgotoparliament,tellitasitis,secureavotethat

authorizesmetosigntheletterandturnthepage?’Iaskedhim.He looked tired and depressed as he turned to Sagias, who, looking the

same,advisedhimagainstit.‘In that case, Alexi,’ I said as decisively as I could, ‘I shall take sole

responsibility.I’llsignthebloodyletterwithoutparliamentaryapproval,sendittothecreditorsandturnthepage.AndifthismeansIshallbeexposedtoourcomrades’opprobrium,toalegalwitch-hunt,itisariskImusttake.Wecannotgoonlikethis.Time’sup!’Alexis’seyeslitup.‘Wouldyoudothat?’

‘Ifanyone’sgoingtogodownoverthis,letitbeme,’Isaid.‘Afterall,that’swhyyouchoseme,isn’tit?RememberyouaskedmenottojoinSyrizasothatIcoulddothingsthatpartymembershipprecluded?Well,ifnotnowwhen?I’lldothis,Alexi,butonlyontheunderstandingthatthemomentthetroikatrytoconfineustotheMoUandputuspermanentlyintodebtbondage,wepull theplug–asweagreed.Right?’Alexisdidnotanswerme.InsteadheturnedtoSagias.‘Canhesignjustlike

that?’heasked.Sagiaswassceptical.‘You’llbethrowntothewolveswithoutalegalopinion

coveringyourback,’hewarned.‘AttheveryleastweneedtogettheStateLawCouncilpresidenttogiveusawrittenlegalopinionthatitiswithintheministeroffinance’sremit.’‘Callhimnow,’Alexissaid. Itwasfour in themorning.Halfanhour later

thepoormanwasatMaximos,lookingpaleanddiffident.The State Law Council comprises conservative lawyers who provide

ministersandothergovernmentbodieswithlegalopinionscalibratedinsuchaway as to cover their collective backs.Caution is theirmantra and avoidingcontroversytheirreligion.Thesaidgentlemanhadbeeninthejobonlyafewweeks, his appointment a parting gift from the outgoing prime minister,Antonis Samaras. Summoned by the new primeminister at that godforsakenhour,withmeandSagiasstaringathimintently,helookedpetrified,somuchsothatIfeltforhim.Nonetheless,thecircumstanceswerelargerthananyofusintheroom.HislegalopinionwasnecessarybeforeIcouldsignaletter thatwouldbuyGreecethreemonthsinwhichtofindout,onceandforall,whetheradecentagreementwithitscreditorswaspossible.Legally,whatwewereaskinghimtodowasentirelyreasonable.Sagiashad

shownduediligenceand,fromaconstitutionalandjurisprudenceperspective,thesituationwascrystalclear:asfinanceministerIwasfullywithinmyrightstosignaletterrequestinganextensionofourloanagreementonbehalfofthegovernment.Theproblem,atleastaccordingtothepresidentoftheStateLawCouncil, was one of precedent. ‘Prime Minister,’ he mumbled, ‘on everyprevious occasion, the letter that the finance minister sent to the creditorsrequestingaloanagreementwasfirstapprovedbyparliament.’Alexis,SagiasandIrespondedtohisprotestationslikeawellrehearsedtrio.

There was a huge difference, we argued, between signing a new loanagreement,whichnaturallyrequiresparliamentaryapprovalasitcommitsthenationtonewliabilitiesandnewobligations,andsigningaletterthatrequests

anextensionof anexisting loanagreement,which involvesnonew loansorobligations. Our point was perfectly valid, but he seemed paralysed by thenotion of providing a legal opinion in support of something that had noprecedent.Heremainedinthatstateforsometime,duringwhichAlexisandIstroveto

shifthimfromitwithamixtureoflogicandfirmness.Intheend,ourpressureborefruit.Theharriedheadofthegovernment’slegalservicewentbacktohisoffice,authoreda legalopinion that the financeministerhad theauthority tosignthisparticularletterandsentittomyofficebyofficialcourier.AssoonasI had received the opinion, I signed the formal letter of request and, withrevulsioninmystomach,haditsenttothecreditors.Itwasathingofdarkness.AndIhadacknowledgeditasmine.Would Alexis honour our covenant in return? Was he happy to give the

negotiationsachancebutequallypreparedtoactivateourdeterrentiftheywentnowhere?IntheearlyhoursofFriday,27FebruaryIwasconfident,thoughnotcertain,thathewas.Thefollowingday,cripplingdoubtsetin.

Unmasked

Replacing Chouliarakis had become imperative. A country’s EurogroupWorking Group representative and Eurogroup deputy must be the tip of itsfinanceminister ’s spear.With a financeministry resembling Swiss cheese, Idesperatelyneededthechairofmyministry’sCouncilofEconomicAdviserstobesomeoneinwhomIhadtotalfaith,bothasaneconomistandasahumanbeing.Ihadneither.IconsideredChouliarakis’sanalyticalskillstobewoolly,his academic credentials paltry, and his reliance on the troika’s inaneeconometricsworrisome.Asforhischaracter,hewastheoppositeofa teamplayer:opaque,almostalwayslateformeetingsandoftenremarkablydifficultto locate. He rarely answered his phone when I called him, and even hissecretaryrarelyknewexactlywherehewas.FromwhatEuclidandAlexistoldme, he rarely answered their calls either. The question ‘Where isChouliarakis?’becamearunningjokeamongthethreeofus.Ifasked,Iwouldshrugmy shoulders and say, ‘How should I know? I amonlyhis boss.’Thejokehadnowwornthin,tosaytheleast.Nevertheless, far from savouring theprospect, Iwas reluctant to fire him.

The last thingwe neededwas to give the hostilemedia any sign of internal

strife. But the Costello document and the Wieser email had exposed thegovernmenttoridiculeandthenationtoaprematurerupturewithitscreditors.If nothing else, it was now impossible to keep him on as my link with thatastuteandmenacingduo.Later thatmorning, afterwehad all had a fewhours’ sleep, Iwas back at

MaximostobriefAlexisonmyplantoreplaceChouliarakis.Theideawastopromote him from chair of the Council of Economic Advisers to generalsecretaryforfiscalpolicy,apositionofhigherrankintheministrybutoneinwhichhecoulddorelativelylittledamageandwhichwascurrentlyunfilled.InhisplaceIwasproposingtoappointmycolleagueattheUniversityofAthensNicholas Theocarakis, whose appointment as general secretary for fiscalpolicyhadbeendelayedforbureaucraticreasons.AsatopCambridge-trainedeconomist, politically close toSyriza even beforeSyrizawas formed, and afriendIcouldtrustwithmylife,hewastheidealreplacement.Alexiswasnothappy.IhadtoremindhimofthedamageChouliarakishad

inflictedbecauseofhisfailuretodohisjob.Alexisdidnotdisputemyreasonsbut tomypuzzlement remainedunsupportiveofmyplan. Itwasonlywhen Itoldhim thatSagiasandStathakiswerealsoof theopinion thatChouliarakishad to go that he relented. ‘If that’swhat youwant to do, go ahead,’ he saidlookingunhappyanddeflated.OnmywaybacktotheministryIsoughtexcusesforAlexis’sreluctance.I

supposedthathewasbeingcarefulnottoupsetDragasakisashehadsuchalotinvested inhisalliancewith thedeputyprimeminister.Still,what Icouldnotunderstand was Alexis’s failure to appreciate the solution I had proposed,which involved promoting Chouliarakis, thereby sparing both him andDragasakisanyembarrassment.Withthisquestionlingeringinmymind,IcalledTheocarakis.‘Nicholas,I

haveanofferforyouthatyoucannotrefuse.IneedyoutoacceptthepositionofchairoftheCouncilofEconomicAdvisers,’Itoldhim.Nicholaswastorn.On the one hand, as a great friend and a loyal Syriza supporter, he felt heshouldaccept.Ontheotherhand,byleavingtheUniversityofAthensin2012for theUnitedStatesIhadalreadyburdenedhimwith the taskofkeeping theDepartment of Political Economy together, along with the progressivedoctoralprogrammeineconomicsthatwehadbothworkedveryhardtosetupsince2001.Ifheacceptedmyoffer,hewasconcernedthateverythinghehadbeenworkingforattheuniversitywouldcollapse.However,whenIexplained

thecritical juncture thecountry facedand thepersonnelproblemsIhadbeendealingwith,heagreed.ItwastimetosummonChouliarakis.Oncehearrivedinmyoffice,Icutto

thechase.Iexplainedthatthetworecentincidentshadmadeitimpossibleforme to have anything like the degree of trust in him that was essential forsomeoneinhis role.Anditwasnot just those twoincidents, Iadded.Even iftheycouldbeexcusedas temporary lapses, therewashis lackofpunctuality,his general unavailability andhis continueduseof the troika’s demonstrablyfaulty macroeconomic models. And so I came to my proposal that he bepromoted to general secretary for fiscal policy, with Nicholas TheocarakisreplacinghimaschairoftheCouncilofEconomicAdvisers.I knew that Chouliarakis would not like it. It was understandable; no one

likestobetoldthattheyarenottrusted,thattheireconomicmodelsarefaultyandthattheyareabouttobemovedupinordertobemovedoutoftheway.ButnotinmyworstnightmarehadIexpectedthereplyhegaveme.‘Itisyourdecision,Yanis.JustknowthatifyoudecidetotaketheCouncilof

EconomicAdvisersawayfromme,Ishallnotacceptthegeneralsecretariatforfiscalpolicy,noranyotherpositioninthegovernment.IshallinsteadgototheBankofGreece,whereStournarashasapositionreadyforme.’Themaskwas off. The cynicismwas extraordinary. He had just toldme,

quite brazenly, that hewas ready towork directly for the troika rather thansever his privileged linkswith the troika’s functionaries inmyministry.Notonly this, he had openly admitted that he was already in cahoots with thetroika’sprimaryally,thegovernoroftheGreekCentralBank,whohadbegunthebankrunintherun-uptoourelectionaspartoftheirbidtokeepusfromoffice. I was aghast. To avoid an ugly exchange, I told him that I wouldconsiderhis replyand thathecouldgo. I left instantly forMaximos towarnAlexisthatwehadafifthcolumnistinourmidst.Formonthsbeforewehadwonthegeneralelection,Alexisandhisteamhad

consideredGovernorStournarasanobstacletoaSyrizagovernment.Rightlyso. FormerPrimeMinister Samaras had shiftedStournaras from the financeministry to the governorship of the central bank precisely in order toundermineapossibleSyrizaadministration.AlexishadrepeatedlytoldmeandothersthatremovingStournaraswashistoppriority.Ironically,Ihadadvisedmoderationandtemperedhisanimosity towardsStournaras,pointingout thatthegovernmentcouldnotremovethegovernoroftheBankofGreecewithouta major clash with the ECB’s executive council. For as long as the ECB

negotiatedwithus ingood faith, I argued,weneeded to showrespect for itsGreekbranch–althoughiftheycloseddownourbanksandtriedtooverthrowourdemocraticallyelectedgovernment,thenobviouslyallbetswereoff.Butintrying to contain Alexis’s fury towards Stournaras, I had created theimpression among the Syriza leadership that I was soft on the troika’sfavouritesoninAthens.IwasconvincedthatAlexiswouldblowhistopwhenItoldhimthatthechair

ofourCouncilofEconomicAdviserswasthreateningtodefecttoStournaras.He did no such thing. Instead, he looked at me with the same depressedexpression he hadworn hours earlierwhen I had announcedmydecision tofire Chouliarakis. With apparent sympathy towards the apostate and with adisconcertingdullness inhiseyes,hesaid, ‘Iunderstand the lad–hehashadthisarrangementwithStournarasforawhilenow.’ItwasasifthedirectorofMI5hadrevealedtoBritain’sprimeministerthat

theirtopagenthadthreatenedtoworkforRussia’sFSBifhewereshiftedfromhispost,onlytohavetheprimeministerreply,‘Iunderstandthelad–hehashadthisarrangementwiththeFSBforawhilenow.’If my response to the troika’s attempt to reinstate the MoU during the

Eurogroup teleconference of 24 February had been regrettably tepid, myperformance in the faceofAlexis’s astonishing insoucianceborderedon thepathetic.AdmittedlymyglimpseintoAlexis’sinnerworldhadbeenbrief,buttheghastlinessitrevealed,howeverfleetingly,shouldhaveprovokedmeintoan eruption. Anything less than rage at Chouliarakis for having dared tothreaten uswith defection should have alertedme to the troika’s presence inthatoffice,tothefactthatitstentacleswerenotjustconfinedtomyministry.Tomyshame,Ilookedtheotherway,allowingwishfulthinkingtoairbrushwhatIhadseen.Apatternwasthusestablished.Againandagainduringtheweeksandmonthsthatfollowed,insteadofrecognizinghisevidentduplicity,IwouldfindexcusesforAlexis’sbacktrackingfromourcovenant.Iwouldblameitonfear,depressionandinexperience,relyingeventuallyonsheerfaiththatthemomentwouldcomewhenhewouldbounceback,shakeoffthetentacles,reactivatehisbelief inourcauseandhonourthemagnificentwordswithwhichheinspiredmethatfirstdayatMaximos.WhatcouldIhavedonedifferently?Hindsightblurshistoryandtorturesthe

mindwithsterilehypotheticals.Iamcertainofonething,though:hadIhadthatglimpse into the abyss before I entered the Eurogroup teleconference of 24February,Iwouldhavemostdefinitelypulledtheplugonthetroikathereand

then.TheonlyreasonIhadnotdonesowasmyconvictionthatAlexiscouldbecountedontotriggertheruptureatalater,commonlyagreed,stageifneedbe.ThatconvictionevaporatedwhenheapologizedforChouliarakis’soutrageousthreattoworkfortheenemy.Myonlyenduringexcuseforturningablindeyetohard,unwelcomefacts,

for giving Alexis the benefit of the doubt, was what was happening on thestreets of Athens, in the towns and villages of Greece. A whole nation hadreclaimeditsdignityonthebasisthatthetwoofuswouldholdourheadshighinBrussels,FrankfurtandBerlinontheirbehalf.Anoverwhelmingreluctanceto undermine that dignity stopped me from doing what I now know wasnecessary to defend it. I should have confronted Alexis’s backtracking – inpublicifnecessary.InsteadIcarriedonbelievingthatwewereasone,whilethetroika,havinginsertedtheedgeofitssteelywedgebetweenus,begantheslow,tortuousprocessofpushingitrightthrough.

11

Whittlingourspring

Springarrivedearly inGreece in2015.Thanks toawetwinter, amutinyofwildflowerswasalreadyinevidenceduringthefirstsunnydaysofMarch.Itprovided a marvellous backdrop to the people’s rebellion against theircreditors. The extension of our loan agreement had been granted, giving usuntil 30 June to forge a new contract. The grumblings of someSyrizaMPsnotwithstanding,themoodacrossthelandwasebullient.1For the troika’sofficials, sitting in their fluorescent-litoffices inBrussels,

FrankfurtandWashington,itwasanightmare.UnabletoflytoGreeceandbedriven throughAthens in convoysofMercedes-Benzes andBMWs, theyhadnowayofdemonstrating theirauthorityandregainingpsychologicalcontrolovertheGreekpeople.Iftheywerenotcareful,dangerousideasmightinfectthemindsofotherEuropeans–Spaniards,Italians,possiblytheFrench–suchas the idea that it was possible, even within this Europe, to regain one’ssovereigntyandtorestoreanation’sdignity.Forthetroika,gettingitsmoneyback would have been nice but, in the grander scheme of things, was ofsecondaryimportance.Thecreditorsknewthatmoreausterityandtherejectionof my debt swaps would shrink Greek incomes, ultimately increasing theirown long-term costs, but they did notmind.As the Slovak financeminister,Schäuble’skeenestcheerleaderintheEurogroup,putitafewmonthslater,‘WehadtobetoughonGreecebecauseoftheirGreekSpring.’2JustasthePragueSpringhadbeensmashedbySoviettanks,inAthenshopewouldbecrushedbythebanks.Thestrategyfordoingsowasasfollows.First,byrefusingtoagreearoadmaptoanyspecificdestination–letalone

our desired one – or any credible milestones along it, they cultivated andmaintained a deep and corrosive uncertainty in Greece as to its future. Anyfinancial planning, whether in the home, a small business or across a largecorporation,shorttermorlongterm,wasmadeimpossible.Such‘permanenttemporariness’ is a tried and tested strategy for keeping an occupied landsubdued.3

Second, they deployed what I have described elsewhere as fiscalwaterboarding.4 Like waterboarding a prisoner, the victim (in this case aeurozonegovernment)isbroughttotheedgeofasphyxiation.Butjustbeforean actual default, which would trigger the ECB’s closure of the country’sbanks, the creditors provide just enough liquidity to keep the suffocatinggovernment alive. During this brief respite the government passes whateverausterity or privatization measures the creditors demand. In our case, fiscalwaterboarding beganwith a carefully orchestrated bank run beforewewereevenelectedandwasrampedupwiththeremovalofourwaiveron4February2015.With a minefield of debt repayments ahead of us, and in the midst of

profounduncertainty thatmadeGreeksreluctant topay their taxes, the troikahopedthatbyearlyJuneatthelatestwewouldbegaspingforairandreadytocapitulate.TheonlydangerwasthatAlexismighthonourourcovenant:defaultonthecreditors,inaugurateaparallelpaymentssystemandthrowtheballintoMrsMerkel’scourt.Toavertthis,theydeployedathirdstrategy,onethathadallowedtheBritishempiretoruletheworldforsolongwithsofewmilitaryresources:divideandrule.Since2010ourcreditorshadsucceededinusingGreece’srulingelite–the

triangle of sin, as I called them – to carry out their occupation. As well asseparating the elite from the population at large, institutions had also beenmadeaccountabledirectlyorindirectlytothetroika.Aswehaveseen,thetaxoffice,thebankbailoutauthorityandthestatisticalofficehadallbeenremovedfromparliamentary scrutiny.Alongside this, anetworkof think tanks,mediaandmarketing outfits had dispensed trickle-down legitimacy and propagatedacquiescence. But our government’s election had broken the triangle andwoundeditsmachinery.Thetroikanowhadtodivideourgovernmentinordertoreassertitsrule.Somuchforthestrategy.Howwasittobeimplemented?

Pickingopponents

Since my first Eurogroup, Jeroen Dijsselbloem had conducted an intensivecampaigntobypassmealtogether.HewouldphoneAlexisdirectly,evenvisithiminhishotelroominBrussels.ByhintingatasofterstanceifAlexisagreed

to spare him from having to deal with me, Dijsselbloem succeeded inweakeningmypositionintheEurogroup,andbyextensionGreece’stoo.Perhapsmoresignificantly,thetroikawasbrilliantatchoosingitsopponent

at the so-called technical level as well, which is to say in the EurogroupWorkingGroup.On27February,dazedbyAlexis’sreactiontoChouliarakis’sthreattojointheenemycampandrecallingthatWolfgangSchäuble’sdeputyintheEurogroupWorkingGroupwasnotthechairofhisCouncilofEconomicAdvisersbutanofficialwithintheMinistryofFinance,theideacametometokeepChouliarakisattheCouncilofEconomicAdvisers,thusavoidingapublicfiringthatwouldhaverockedanalreadyshakyboat,buttoreplacehimasmyEurogroup deputy and as Greek representative in the Eurogroup WorkingGroup with Nicholas Theocarakis by appointing Nicholas to the formallysenior position of general secretary for fiscal policy within the financeministry.Itwasaterrible,terribleidea.ThefirsttimetheEurogroupWorkingGroup

met after Nicholas’s appointment was on 17 March in the form of ateleconference.ThomasWieser,whowaspresiding,lostnotimeinstatinghispreference:‘ItisapitythatGeorgeChouliarakiscannotjointodayandinsteadNicholasTheocarakisisontheline.’Fromthenon,Wieser,Dijsselbloemandthe rest of the troika campaigned unashamedly for Chouliarakis’sreinstatement.Ittookthemtwomonths,butbytheendofApriltheyhadtheirmanback.IunderstoodperfectlywhythetroikawishedtogetmeandNicholasoutof

the way. In contrast to Chouliarakis, Nicholas understood the econometricmodels the troika used for its fiscal predictions better than Wieser and theothersdid,knewwhat theirweakpointswere,andwasdetermined toopposethe EurogroupWorking Group’s lazy assumptions before they ended up as‘facts’ at the Eurogroup. As for me, they knew I would never sign a thirdbailoutagreement,andsinceitisonlythefinanceministerwhocansignaloanagreement on behalf of a eurozone member state, my removal wasfundamental.Besides, it is plainly a huge advantage to be able to pick one’sopponent. What litigant or general or business leader would decline theopportunity todo so?What Ihadnot seencomingwasAlexis’s readiness toacquiesce. Divide and rule produced a farce featuring a troika appointeenegotiatingwiththetroikaonbehalfofagovernmentelectedtoopposeit.

Theeurozonerunaround

HenryKissingerfamouslyquippedthatwhenhewantedtoconsultEuropehedidnotknowwhotocall.Ourpredicamentwasevenworse.Aswehaveseen,anyattempttoenterintoameaningfuldiscussionwithWolfgangSchäublewasblocked by his insistence that I ‘go to the institutions’ instead. Once there, Isoondiscoveredthattheinstitutionswerealsodivided,andinmorewaysthanone.Famously,theIMFwasdeadkeenondebtrestructuringwhiletheECBwasdeadagainstit.ButtheEuropeanCommissionwasevenworse:inprivatetalksCommissioner Moscovici would agree readily and enthusiastically with myargumentsaboutaconsistentfiscalpolicyandonissueslikelabourrelations.But then the commission’s representative in the EurogroupWorkingGroup,DeclanCostello,wouldrejectalltheseideasoutofhand.The uninitiatedmay be excused for thinking that this eurozone runaround

was theresultof incompetenceon thepartof thecreditors.While there isanelementoftruthinthis,itwouldbethewrongconclusion.Therunaroundisasystemic means of control over governments of countries whose bankingand/or public sectors are financially stressed. Indeed, to politicians likeWolfgangSchäubleitisawelcomefeatureoftheeurozone.Afinanceministerwhowantstotable,say,debt-restructuringproposalsissimplydeniedthenameof any person to speak to or a telephone number to call so that she or hesimply does not know who to talk to. As for apparatchiks like Wieser andCostello,therunaroundisessentialtotheirpersonalpower.

TheSwedishnationalanthemroutine

Ontheassumptionthatgoodideasencouragefruitfuldialogueandcanbreakanimpasse,myteamandIworkedveryhardtoputforwardproposalsbasedon serious econometricwork and sound economic analysis. Once these hadbeentestedonsomeofthehighestauthoritiesintheirfields,fromWallStreetandtheCity to top-notchacademics,IwouldtakethemtoGreece’screditors.ThenIwouldsitbackandobservealandscapeofblankstares.ItwasasifIhadnotspoken,asiftherewasnodocumentinfrontofthem.ItwasevidentfromtheirbodylanguagethattheydeniedtheveryexistenceofthepiecesofpaperIhadplacedbeforethem.Theirresponses,whentheycame,tooknoaccountof

anything I had said. Imight aswell have been singing the Swedish nationalanthem.Itwouldhavemadenodifference.Possibly because of my academic background, this was the Brussels

experience I least expected and foundmost frustrating. In academia onegetsusedtohavingone’sthesistornapart,sometimeswithlittledecorum;whatoneneverexperiencesisdeadsilence,arefusaltoengage,apretencethatnothesishasbeenputforwardatall.Atapartywhenyoufindyourselfstuckwithaself-centredborewhosayswhattheywanttosayirrespectiveofyourcontributionto the conversation, you can take your glass and disappear to some distantcorneroftheroom.Butwhenyourcountry’srecoverydependsontheongoingconversation,whenthereisnoothercorneroftheroomtoretreatto,irritationcan turn intodespair–or fury ifyougraspwhat is reallygoingon:a tacticwhosepurposeistonullifyanythingthatisinimicaltothetroika’spower.

ThePeneloperuse

Delayingtacticsarealwaysusedbythesidethatconsidersthetickingclockitsally. The troika’s approach was to give my proposals the Swedish nationalanthem treatmentwhile refusing tomakeanyproposalsof theirownbeyondthe non-viable programmme of theirMoU, squeezing the last remnants ofliquidityfromtheGreekstateinthemeantime.Inaddition,theydeployedwhatIreferredtoasthePeneloperuse.In the Homeric tale of Odysseus’ faithful wife, Penelope fends off

aggressive suitors in her husband’s absence by telling them that she willannounce whom among them she will marry only after she has completedweaving a burial shroud for Laertes, Odysseus’ father. During the day sheweavesincessantlybutatnightunravelsherwork.Thetroika’sPeneloperusehad two elements.Onewas to threaten that ifwe daredmake our proposalspublic,theywouldneverbediscussed–justasPenelopetoldhersuitorsthatifthey proposed to her before her weaving was finished, she would discountthem from selection altogether. The other was to issue endless requests fordata, for fact-findingmissions to Athens, for information about every bankaccount held by every public organization or company. Like Penelope, theywould spend all night undoing the spreadsheets of data that they had puttogetherduringtheday.

Absurdly, they even demanded access to ministry departments that wereentirelyunder theirowncontrol. It is a simple fact thatpartsof someGreekministries–whatIreferredtoastheholesintheSwisscheese–senttheirdataand documents first to the troika for its approval and only later to us, theirministers.Nevertheless,thetroikademandedtherighttosendpeopletoAthenstovisit those sameministries in order to gather theverydata that theyweresiftingandapprovingbeforewehadevenlaideyesonit.Themoredatatheymined, theworse the reality itpurported todescribebecame, thegreateroursociety’spainandthefasterourstate’sliquidityevaporated.

Truthreversalandallornothing

Meanwhile, Operation Truth Reversal was on. Through tweets, leaks and acampaign of disinformation involving key nodes in the Brussels medianetwork,thetroikaspreadthewordthatIwastheonewastingtime,arrivingatmeetings either with no proposals at all or with proposals that lackedquantification, consisting only of empty ideological rhetoric. In contrast, thetroika succeeded in presenting itself as the champion of a whollycomprehensivesolutionthatincludedreformofallaspectsofGreece’ssocialeconomy. How I longed for such a comprehensive solution! Except that thetroikawasadvocatingoneinnametomakeitimpossibleinpractice.No comprehensive agreement was possible – or indeed viable – unless it

includedsomeformofdebtrestructuringandprovisiontodealwiththebanks’bankruptcy.Without this,nofiscalpolicywouldaddupin the longterm,andno Greek would be willing to embrace the proposed reforms. But Berlinsimply refused todiscussdebt restructuring.Givenhow little timewehad tostrike a deal, a realistic approach would have been to identify four or fiveareas where agreement could be reached quickly, draft the necessarylegislation,pushitthroughGreece’sparliamentandthusestablishafoundationfora longer-termagreement.By insistingonacomprehensivedeal inwhicheverythingwasagreedatonce–withthesoleexceptionofthesingleissueonwhicheverythingrelied–theyensuredthatnothingcouldbeagreedatall.

Causalconfusion

Bulliesblametheirvictims.Cleverbulliesmaketheirvictims’culpabilityseemself-evident. Of the three institutions I was dealing with, the ECB provedparticularlyadeptatthis.ItallhingedonthevexedquestionofTreasurybills,orT-bills.T-bills are short-term IOUs that a government issues to gain immediate

access to liquidity. Usually T-bills are considered ultra-safe as they maturewithin, say, threemonths, and it ismost unlikely that a governmentwill gobankruptinsuchashorttime.SothereisconsiderabledemandforT-billsfrominstitutional investors such as banks and insurance companies, who need topark their cash somewhere safe. Moreover, investors can post them ascollateral with their central bank to get cash. In short, T-bills are almost asliquidascashbuttheyalsobearinterest.That’swhytheyareindemand.However,theECBplacesrestrictionsonhowmuchoutstandingT-billdebta

government can have at any one time, as excessive issuing of newones canundermine trust in the government’s capacity to redeem its outstandingTreasurybills,renderingtheT-billsthemselvesunsafe.Inotherwords,T-billsprovideagovernmentwiththeequivalentofacreditcard,withtheborrowinglimitsetbytheECB.Greece’sliquiditybetweenthe20Februaryagreementandthe30JunedeadlinedependedforthemostpartonMarioDraghimaintainingour credit card limit andon therebeing continueddemand forourTreasurybills among Greece’s banks. Previously, just after the Samaras governmentwaselected,theECBincreaseditsT-billlimitfrom€15billionto€18.3billion– albeit for the purely self-serving purpose of funding the government’sredemptionofitsbondsheldbytheECB.However, when our new government took office, with only a few days

beforethecashranout,demandforGreekT-billsdriedup.MarioDraghiusedthisasevidence thatourT-billswere too riskyand thus justifiedbanning theGreek banks from buying them, ostensibly to shield them from the risk buteffectively to suffocate our government. By reversing the direction ofcausality,hecreatedalethalweaponagainstus.ThefactthatXhappensbeforeYdoesnotalwaysmeanthatXcausesY.Forexample,thefactthatthedemandfor toys increases prior to Christmas every single year does not mean thatChristmasiscausedbyapriorincreaseinthedemandfortoys.Andsoitwaswithmyministry’sT-bills.Thereasondemanddriedupwas

the anticipation, fuelled by leaks from within the ECB, that the ECB wouldsqueeze our government’s liquidity, thus bringing Greece to the verge ofbankruptcy. Just as the anticipation of Christmas causes an increase in the

demandfortoys,sotheanticipationthattheECBwouldasphyxiateuscausedadecreaseindemandformyministry’sT-bills.5Mario Draghi’s claim that he was only following the ECB’s rules in

stopping Greek banks from buying new T-bills – thus preventing us fromrollingoverthedebtfromouroutstandingT-billsintonewonesastheexistingonesmatured–was ingenious.Howcanyoublameaman for following therules imposed on him by the charter of his institution? Surely there wasnothingelsehecoulddo?SurelythefaultwasmineforimaginingthatIcouldconvincehim,throughposturingandmoralizingspeeches,todootherwise?ItwassimplyprudentactiononthepartofanECBthatprioritizedthehealthofourbanks,theimplicationbeingthatourgovernmenthadbroughtitsliquidityproblemsuponitself.Orwasit?Inreality,after2008anyattemptbytheECBtoimposeitscharter

rigorously and dispassionately would have ruled out any of the variouswaivers, reinterpretations and extraordinary shenanigans that have so farpreventedtheeurozonefromcollapsingaltogether.Farfrombeingapolitical,theECB’shugediscretionarypoweroverwhentoenforceitsrulesandwhentocircumvent them–whentostrangleagovernmentandwhennot to–makeitthe most political central bank in the world. Like any tragic despot toopowerfultoremainidlebutatthesametimepowerlesstoactdecently,Draghiendedupmakingourgovernmenttheexceptionbyimposinguponusrulesthathadbeenwaivedforeveryoneelse.

Thedragon’steeth

While the ECB’s shameful threat to choke the Greek government wasresponsibleforthelackofinterestinourT-bills,wewerenonethelessfallinginto Draghi’s trap by indulging an archaic leftist hostility to potentiallyadvantageousforeigninvestment,enablingthetroikatopresentusasboorishleftistswhodeservedtheECB’sasphyxiation.Iwasdeterminedtoputanendtothisbykillingtwobirdswithonestone:byattractingforeigninvestment intotherealeconomywhiledemonstratingourcapacitytoattractbuyersforourT-bills.Syriza’s instinctswere right on one count:Greece did not need anymore

fire-sale privatizations. What we needed were patient investors willing to

plough large sums of foreign money into our rusting infrastructure andbreathenewlifeintoourfadingindustry.Ifthisrequiredpartialprivatization,Iwas all for it. The best possible start I could make in this direction was toreverse Syriza’s foolhardy commitment to getting rid of Cosco, a Chinese-government-ownedconglomerate,fromtheportofPiraeus.Since 2008 Cosco had been running two of the three container quays in

Athens’s main port. Moreover, after years of negotiations with previousgovernments, Cosco was close to securing a 67 per cent shareholding in athirty-five-year lease of the third quay in a bid to control the port almostcompletely.6From2008 to2015Syrizahadcampaignednotonly topreventthis but also to eject Cosco altogether from Piraeus. In fact a couple ofmyfellowcabinetministersowedtheirelectiontoparliamenttothiscampaign.Naturally, news of Syriza’s electoral success did not go down well in

Beijing.Fromastrategicperspective,itstruckmeasdafttoantagonizeBeijingata

timewhen the battle lines againstBerlin, Frankfurt andBrusselswere beingdrawn.Beyondstrategy,however,IwasalsoconvincedthatSyrizawaswrongto target Cosco and theChinese.Years beforewe came to power,whilemySyrizacolleaguesrailedagainstCosco,IhadpublishedarticlesinwhichInotonly backed Cosco’s involvement in Piraeus butwent on to recommend thesaleofGreece’santiquated,dysfunctionaland loss-makingrailwaysystemtoChinese companies too. As I explained at the time, while I considered theprivatizationofBritishRailacolossalblunder,Greecewasinaleagueofitsown. Our ports and railways were nineteenth-century museum piecesdemandingmassiveinvestmentthattheGreekeconomycouldnot(andFrenchandGermancompanieswouldnot) provide.Chinawas theobvious solution.Chinese companies had access to billions in investment funding, remarkableengineeringcapacitiesandalong-terminterestincompletingtheirprizednewSilkRoad,linkingChinatoEuropeviatherevampedSuezCanalandarailwayfromPiraeustoCentralEurope,thuscuttingfreightdeliverytimestotheheartofthecontinentbyeightwholedaysascomparedtosailingaroundGibraltarto Rotterdam. All that was necessary was an honest, mutually beneficialagreementbetweenthegovernmentsofourtwoancientcivilizations.Frommy first day in office I had had it in mind to initiate this process.

GlennKimhaddonehis researchand reportedbackwithunsurprisingnews:yes,Beijingwasdisturbedbytheanti-Coscopronouncementsofsomeofmycabinetcolleagues,buttherewasasplendidopportunitytorepair thedamage

by launching a charm offensive. Glenn summed up the tangible benefits offollowinghisrecommendationsasfollows.

Firstpriorityistosecureshort-termfundingfor[Greece],whichmaybevital in the coming days ahead. Secondly, secure long-term investmentmoniesthatwillbringaboutsignificantcapitalimprovementsinpartsofthe nation’s commercial infrastructure, as well as create potential newjobs. Thirdly, demonstrate to your European partners that the newgovernmentisabletoattractkeyforeigninvestmentmoniesintheearliestdaysofitsadministration.

Precisely what I had been thinking. To test the waters I had asked mysecretary to accept a dinner invitation from the Chinese ambassador for theevening of 25 February. (Had I known as I was accepting the ambassador ’sinvitation that itwouldcoincidewith thedramaover the letter requesting theextensionofourloanagreement,Imighthavethoughttwice.Ihadtodeclineinvitations from almost every ambassador toGreece in the aftermath ofmyelection and appointment for lack of time.) The fact that I chose to dropeverythinginordertokeepthisappointmentwasameasureoftheimportanceIattached to mending fences with the Chinese and investing in a long-termrelationshipwiththem.Thenightbefore,IhadexplainedthesignificanceofthedinnertoDanae.On

the 25th, having rushed fromMaximos back to our flat, I was startled andpleasedtoseeDanaewearingafabulousChinesesilkdressthatshehadboughtin 2006, when we had visited Shanghai on our travels – during a differentlifetime, itseemed.Theambassadorandhiswifewereclearlypleasedbymyacceptance of their invitation, not to mention Danae’s dress, but at first hidbehindaveilofreservedcourtesy.However,bytheendofthenightthemoodhadturnedpositivelyupbeat,friendly,celebratoryeven.During the entrées andmain course I listened as the ambassador gave the

Chinese side of the story. In a soliloquy that conveyed great frustration hebeseechedmetoavertanyhostileactionsagainstCosco.ClearlymistakingmeforoneofthecontingentwithinSyrizakeentoevicttheChinesefromPiraeus,hewas aiming low, hoping only to convinceme that itwould be terrible toundo what Cosco had already built up. Thus when I stated my case duringdessert, the ambassador could not contain his satisfaction. WhileacknowledgingthattherewouldberesistancewithinSyriza,Isharedmyvision

withourhost–avisionthatnotonlyinvolvedanenhancedpresenceforCoscoinPiraeus,underspecificconditions,butalotmoretoboot.‘Greek shipyards are dying, and skills acquired overmillennia are dying

with them,’ I told the ambassador. So I proposed, in a second phase ofcollaboration, that Cosco and other Chinese companies should invest in ourthreemainshipyards,turningthemintorepairhubsforthecontainershipsthatCoscowouldincreasinglyattracttoourpartoftheMediterranean.‘ButwhatisthepointofsecuringtheportofPiraeus,’Icontinued,‘iftherailwaythatwilltransport your containers to central Europe is derelict, slow and unsafe?’ Iargued that a similar investment in Greece’s railways made sense as well.Lastly:‘Greecehasahighlyeducatedworkforce,yetwageshavefallenby40percent.WhynotgetcompanieslikeFoxconntobuildproductionorassemblyfacilitiesinatechpark,enjoyingaspecialbusinesstaxregimeinanareaclosetoPiraeus?’Stimulatedbythiscatalogueofjointventures,theambassadorchangedgear.

FrompetitioningforastayofexecutionforCosco,hebegantospeakwiththeself-assuranceofapartneraswediscussedthemanybenefitsofembarkingonthiscollaboration.Butwhilesuspicionabated,cautionremained.‘Minister,youmustunderstandthat,fromBeijing’sperspective,Coscoisthe

dragon’s jaw.First,wemust ensure that its teethbitehard so that thedragongets in.Once it is in, havenoconcernsordoubt: the restof thedragonwillfollow.’Themessagewasclear:let’scompletetheCoscodealfirst;everythingelse

willfollow.I agreed. ‘Will you signal to Beijing that their worries about our

governmentaremisplaced?’Iasked.‘Themomentyouandyourwifesaddenusbydeparting,’heanswered.Then

headded,‘Beijingwouldappreciatesomepublictokenofcommitmenttoournewrelationship,somegesturethatwilldemonstratetothosesceptical inourgovernmentthatwehaveanewsituation.’‘Howabout visitingCosco’sPiraeusoperationswithyou in the following

days?Willthisdo?’Isuggested.‘Would you do that,Minister?Really?’ he askedwith the smile of a child

promisedanenormouspresent.‘Yes,ofcourse.Whatyouseeandheariswhatyougetfromme,’Ireassured

him.‘CanwebringaChinesecameracrewalong?’heaskedincredulously.

‘Iinsistthatyoudo.’Therestoftheeveningwaslikeareunionofoldfriends.ThePiraeusvisit

was scheduled for twodays later, tobe followedby ameeting inmyoffice,wherewewouldagreeinitialterms.WhenCabinetSecretarySpyrosSagiasfoundoutaboutmyagreementwith

the ambassador and my impending tour of Cosco’s facilities, he could notcontainhisjoy.PriortothegeneralelectionSagiashadprovidedlegaladvicetoCosco.AssuchhewasconstrainedbyanalmightyconflictofinterestfromcanvassinginfavourofCosco.Havingdonesomyself,Ihadnotonlyrelievedhimofhisconflictofinterest,Ihadredirectedthewrathofanti-CoscoSyrizacabinetministersfirmlyinmydirection.Itwasariskymoveonmypartbut,asIexplainedtohim,Ihadtakenitbecauseitwasimportantthatsomeoneshould.‘Youdidvery,verywell,’Sagiassaid.ThevisittoPiraeusaccomplishedallitwasmeantto.Despitetheheavyrain

thatpersistedthroughoutthemorningandoverlunch,DanaeandIweretreatedto a full tour of the facilities. Captain Fong, Cosco’s local manager, wasrugged,fullyontopoftheentireoperationandextremelysmart.HeallowedaGreekmanagerandthecompany’slawyertoactasourguides,whilesteeringthe eventwith gestures, an effusive smile and a few carefully chosenwords.Without pointing it out, he made sure that we noticed the sharp contrastbetween Cosco’s part of the container port, which was super-modern andrunning beautifully, and the adjacent quay, still under state control, whichlookedsad,rustyandalmostabandoned.As we were making our way to lunch, I spotted a canteen where some

employees were taking a break and broke away frommy hosts to speak tothem. They shook my hand and smiled a lot, but when I asked them aboutworkingforCoscotheywerecoy.‘It’sgood,’wasaboutasmuchastheywerewillingtosay.Theexpressionsontheirfaceswerehardtoread.Lookingovermy shoulder, I saw Captain Fong and his Greek white-collar entouragewatchingus.Imadeamentalnotetoinsistonfullunionrightsforallworkersasaprerequisiteforanydealbeforesayingmygoodbyes.Fromtheremyhostswhiskedmeuptothecompanyrestaurant,wherearare

viewawaitedus:theancientharbourimmediatelybelow,theislandofSalamisinthebackground,andbetweenthemthestraitswherethefamousnavalbattlebetweenthePersiansandAthenianstookplacein480BC.Nowathirdancientpeopleweremakingtheirmarkinhistoryhere.

‘Whichdoyouwantfirst,Minister,thegoodnewsorthebad?’

After lunch,which featured an odd but pleasant blend ofGreek andChineserecipesandaquickinterviewforaChineseTVcrew,wearrangedafollow-upmeetingwithCosco’sGreekrepresentativeandSagiasinordertonegotiatethetermsofthedeal.Afewdayslater,ontheeveningof2March,weconvenedatmyministry.Themeetingwasshortandefficient.I repeated my commitment to speed up the privatization of the port of

Piraeus,tobefollowedbyevenbiggerandbolderjointventures,andspelledoutthesameconditionsthatIhadalreadyexplainedtotheChineseambassador:Cosco’sshareholdinginPiraeuswouldbereducedfrom67to51percent,withthedifference(16percentoftheequity)toberetainedbytheGreekstatewithaview to passing it on to the suffering pension funds of naval, shipyard andmunicipal workers; Cosco would commit to an investment of up to €300million within eighteen months; all Cosco employees at Piraeus would beunionized, collective agreements on wages and conditions would apply andthere would be no workers hired via subcontractors; and coastal shippingwouldbehandledbythemunicipalityofPiraeus,withtheactiveparticipationof the local authorities of the islands served by the port, ensuring thatcommunitiesintheareasharedinthebenefits.Lastly, as a tokenof its desire tohelpGreeceget backon its feet again, I

requiredacommitmentfromtheChinesegovernmenttopurchaseimmediately€1.5billionof theT-bills thatMarioDraghi’sECBhadprohibited theGreekbanksfrombuying.Andoncetheimpassewithourcreditorshadbeenbrought,onewayoranother,toanend,Isaid,‘AthenswouldbetremendouslygratefultothepeopleofChinaifBeijinghelpedGreecelaunchitsfirstnewbondissuewithapurchaseofatleast€10billion.’Cosco’s representative seemed confident that my terms would be given a

sympathetichearinginBeijing,andfurthercommunicationswith theChineseambassadorconfirmedthatmynewfriendswerehappywiththedealandthatapositiveresponsewouldbeforthcomingfromthelandofthedragon,nowthatitsteethwerein.Indeed,atangiblesignofgoodfaithfollowedlessthanforty-eighthourslater,onthemorningof4March,whentheheadofmyministry’spublic debt management department called me with the news that China’s

treasuryhad,indirectlyandsecretly,bought€100millionworthofourT-bills–newsthatbroughtmetothebrinkofsatisfaction.But not quite there. Lest we forget, two days later I would have to find

€301.8 million to hand over to the IMF. A week after that, on 13March, Iwouldhave todo the samewith anotherwadof €339.6million.Three shortdaysafterthat,on16March,Iwouldhavetocomeupwithawhopping€565.9million towire to the IMF.Then, on 20March, €339.6millionmorewouldhavetobeextractedfromourdepletedcofferstobesentthesameway.DuringMarchalone,then,wewouldhaemorrhagetotheIMFmorethan€1.5billion.Inthatcontext,the€1.5billionT-billpurchasepromisedbyBeijingwouldhavegiven me three weeks in which to catch my breath before the fiscalwaterboarding recommenced on 13 April, when a further €452.7 millionwould have to be paid to the IMF. After that, between 12May and 19 June,another six instalments were due to the IMF totalling €2.52 billion. But thehottest months were yet to come: in July we would have to pay almost €4billiontothecreditorswithanother€3.2billiontofollowinAugust.7In other words China’s liquidity injection of €1.5 billion would not have

nearlysufficed.Indeed,howeverwillingBeijingmighthavebeen,noinjectionofloans,howeverlarge,couldhavesavedusfrominsolvency.AsIhadbeensaying foryears, theycouldonlyhaveextended it.Nevertheless,€1.5billionwouldhaveboughtusatleasttwomonthstoascertainwhetheranewcontractwithourcreditorswaspossible,whilemakingitimpossibleforMarioDraghito maintain his argument that no one other than the Greek banks cared topurchase ourT-bills.At the same time, itwould also have demonstrated ourcapacitytoattractforeigninvestment,tobeflexibleandtoturnacolonialfiresaleintoamutuallybeneficialagreementwithoneoftheworld’ssuperpowers.Sagias and I briefed Alexis and began preparations. The intention was to

restart the formal bidding process for the port of Piraeus under the newconditions that the Chinese had accepted, while behind the scenes the twogovernments agreed theChinese loans to theGreek state.Soon theplanwasfinalized and ready for implementation. First, Beijing would inject theremaining €1.4 billion of the promised €1.5 billion into our T-bills.AlmostsimultaneouslyDeputyPrimeMinisterDragasakiswouldmakeaformaltriptoBeijing to strengthen relations between the two governments and informallyseal the agreement. Lastly, Alexis would follow up with a full state visit inAprilorMaytomakepublicandsignthecomprehensiveagreementbetweenAthensandBeijing.

Itwasasplendidopportunityforbothcountries.AlifelineforGreeceandagiant leap forward for China’s new Silk Road into the heart of Europe.Dragasakis left for Beijing on 25 March, accompanied by our foreignminister.Countingonthe€1.4billionthatwouldpourintomyministrybytheendofthemonth,Iscrapedthebottomofthebarreltofindthe€1.5billionwewereobligedtopaytheIMFduringMarch.Theideawastousethatmonthtogive thecreditorsone lastchance to reachout touswithserious intent foraviable agreement. China now had a stake in our success, and our ability toattractChinese investmentwouldbea significantweapon in thenegotiations.Thecash itselfwould thenbuyusa furthermonth inwhich to tableourownfullyfledgedplanforGreece’srecovery.On31March, thedayBeijinghadpromised thebreakthroughpurchaseof

€1.4billion inT-bills, Iwas atmyofficewaiting for thephone to ring.Theauction was meant to end at around 11.00 a.m. At 10.30, unable to containmyself,Icalledtheministry’spublicdebtmanager.‘Nonewsyet,’Iwastold,‘butdon’tworry.TheChinesemakeahabitofenteringauctionsattheverylastmoment.’SoIwaited.At 11.02 my phone rang. I jumped to answer it. ‘There’s good news and

there’s bad news,Minister.Which do you want first?’ asked the public debtmanager.‘Beginwiththegoodnews,’Isaid.‘Well,theChinesehaveenteredtheauction,butthebadnewsisthattheyonly

boughtanother€100million.’Before we had hung up, I was dialling the Chinese ambassador on my

mobile.OnceIhadtoldhimwhathadhappened,hesaid,‘Icannotbelievethis.CanIcometoyourofficerightaway?’‘Ofcourse,’Ireplied.Half an hour later, a frazzled Chinese ambassador was sitting onmy red

sofa. Inwhat I believe to have been genuine anguish, he pleadedwithme tobelievethathehadhadnoinklingthatsomethinglikethiswouldhappen,thathe was hugely embarrassed and that he would do all he could to get to thebottom of the shortfall. Fromwithinmy office he tried to place calls to theChineseministryoffinancebutcouldnotgetthrough.Sohewentbacktohisofficepromisingtogetbacktomeassoonasheheard.A few hours later he called, sounding far more relaxed. ‘Minister, I can

assureyouitwasatechnicalhitch.Beijingisverysorryaboutit.Intwodays’time,whenyouhaveanotherT-Billauction,thepurchasewillgothrough.’

Ifeltamixtureofreliefandincredulity.OntheonehanditmadenosenseforBeijingtolieviaitsambassador,whoappearedgenuinelykeentocementour deal. On the other, the idea that China’s technocrats had simplymade amistakewasequallyunbelievable.Timewouldtell.Twodays later Iwas inmyoffice awaiting the samecall fromourpublic

debtmanager.At 11.05 the phone rang. ‘There’s good news and there’s badnews,Minister.Whichdoyouwantfirst?’Notagain,Ithought.‘Pleasedon’ttellmethattheyenteredthemarketwithanother€100million,’

Iimploredhim.‘Preciselywhattheydid,’camehisreply.ThistimeIdidnotbothertocalltheambassador;IwentstraighttoMaximos.

ThereItoldAlexiswhathadhappenedandsuggestedstronglythathecontactedtheChineseprimeminister.ThenextdayAlexisrelayedthenewsfromBeijing.Someonehadapparently

calledBeijingfromBerlinwithabluntmessage:stayoutofanydealswiththeGreeksuntilwearefinishedwiththem.WhenIspoketotheChineseambassadoragain,Itriedtoconveytohimhow

our people felt when foreign powers, pretending to be our partners,steamrolleredtheirhopesforrecoveryanddignity‘Iunderstand,Iunderstand,’hereplied.AndIbelievedhim.Soendedadreadful episode in the long sagaof the creditorswhohadno

interest in getting their money back – with the scuttling of a marvellousagreementbetweentwoancientcountries.8

ThetidesofMarch

AtthebeginningofMarchitfeltasifthetidehadsuddenlygoneout,leavingthe hopes I had carried back to Athens after the 20 February Eurogroupagreementexposed,bedraggled,stranded.Thecreditors’promisestoallowustoco-authorourowncountry’s reformagendaand tonegotiatea life-savingdebt restructuring had been withdrawn even before February was over. ButunlikeFebruary,whosecoldbreezehadbracedmyresolve,March’swarmertouchmademefreeze.The difference was the narrow crack that had opened up across the bond

linking me to Alexis – narrow but now impossible to ignore. However

successfullyImanagedtoputitoutofsight,Icouldnotputitentirelyoutofmind. With every concession we made that month and with each delay inAlexis’sreactionsto thetroika’saggression,Isankdeeper intodoubt.Wouldhebepreparedtoactivateourdeterrentwhenthetroikachosetoputhimtothetest? By the end of March, and certainly by the beginning of April, theimpartialspectatorwithinwastellingmethatouropponentshadsucceededinintimidatinghim.Ittookalittlewhilelongerfortherestofmetocatchup.Thereweretwoaspectstoourtalkswiththecreditors:thenegotiationover

our reformagenda,whichwasmeant to be concludedbymid-April, and thenegotiationoverdebtrestructuringandendingausterity.Tokeephope’sflamealive, itwas essential that these two strands not be separated: onlywith debtrestructuring would a reform agenda make any sense. But despite thedifferences between them, the creditorswere impressively united towards usandinvestedtremendouseffortintoprisingthestrandsapart:onlyoncewehadaccepted their reform priorities would they contemplate discussing debtrestructuring. It was an increasingly lonely struggle. Alexis, Pappas,DragasakisandevenmyfriendEuclidseemed increasinglyready toacceptadeal that included only vague promises on debt as long as someofSyriza’ssacredcows–thereintroductionofcollectivebargainingagreementsandthepreservation of pensions, for example – were left alive. They were driftingintothementalityofthefamousBrusselsfudge.The contrast between the troika’s rigid will and my side’s shrinking

ambitions enhancedmy sense of dread and loneliness.War cabinetmeetingswere turning into exercises in weighing up the utility of different forms ofsurrender based on Syriza survivability come the next election. At suchmomentsIfeltcontemptuousofintra-partypoliticsandgladthatIkeptoutofthem.Pappaswouldgoonandonaboutpreservingtheadministrativebanonlarge-scaledismissals that theIMFwaskeen toabolish.Alexis focusedmoreon the pensions that Berlin had in their sights. Others banged on aboutprivatization.Icouldnotbearit. I toocareddeeplyaboutall theseissues,butwhatwasthepointifwedidnotfirstandforemostendthedoomloop?Whatwas the point of preserving an administrative ban on mass dismissals ifausterity were to be reinforced thus causing companies of all sizes to fail?What was the point of focusing on pensions when the state on which ourpensionsystemsdependedwasinsolvent?Everyattempt Imade to returnourdeliberations towhat reallymattered–

debtrestructuring,theendofausterity,investmentandbadbanks–wastreated

asadistractionfromthemainagenda.Werewestillcommitted,Iwouldask,tostart defaulting on the IMF and later theECBby the end ofMarch or at thelatestthebeginningofAprilifthetroikarefusedtodiscussdebtrestructuringseriously? Were we still determined to retaliate to their threats of capitalcontrols and bank holidays with haircuts of the ECB’s SMP bonds and theactivation of our parallel payments system? In response theywould humourme, ever less convincingly, with repetition of oaths of allegiance to ourstrategy.BackattheministryIwouldattempttopickupmyspiritsandploughahead.

Thefactthatanyagreementwouldrequiremysignature,andminealone,mademe feel simultaneously pivotal and expendable. But until I was expended, Ithought,Ihadsomepowertokeepdebtreliefatthetopofthelist,tounifythetwo negotiations, to continue to hold Alexis to our covenant, to strive forinternational alliances, to push for the completion of our algorithmiccorneringofmajor tax cheats, todevelopourparallelpayments systemand,lastbutnotleast,topromoteabilltoaddressthehumanitariancrisis.Itwastheleast I could do for Lambros and themillions of otherswho, to use an oldPeloponneseexpressionfavouredbymygrandmother,hadmadeustheobjectof‘alltheirdevotionsand[shouldwedisappointthem]alltheircurses’.ThenextEurogroupmeetinginBrussels,wherewewouldtakestockofthe

negotiations,wason9March.Itwaswhollyinthetroika’sintereststhatthereshould be no progress to report, a shortcomingwhich theywould blameonourrecalcitrance,andwhentheIMF’sPoulThomsencalledmeon1MarchtoannouncethatthetroikawasreadytoflytoAthens,Iknewtheyweregoinginforthekill.Welcoming the troika’s officials into ourministrieswould have triggered

precisely the wrong kind of negotiation, in which technocrats from theEuropeanCommission,theECBandtheIMFwoulddemandconcessionsfromourministersontheminutiaeofthetroikaprogramme.Ifweweretorespondbyagreeingtotalkaboutsuchmattersonlyaslongaswealsotalkedaboutdebtswapsandausterity too, theywould simply refuse, tellingus thatnegotiatingourdebtwasabovetheirpaygrade,whichofcourseitwas.TheonlywaytoavoidbeingcorneredinthiswaywastoinsistthattherebenonegotiationsinAthens between the troika’s middle managers and our elected ministers. Inother words, our refusal was not just symbolic, it was critically strategic.Nonetheless, troika officials began reporting to the press that our refusal to

welcomethemtoAthenswas‘ideological’,whereastheysimplywantedtogetthenecessaryworkdone.On 3 March I briefed my team on the importance of keeping the two

negotiationsunifiedandinsistingonacomprehensiveagreement.Irememberwarningthemthatthetroikawouldrespondwiththreatsofcapitalcontrolsandinforming themost trustedamong themof thedeterrent that a tiny teamwasworking on: the parallel payments system and the SMP bond haircuts.Meanwhile,JeffSachswashardatworkinWashingtonmeetingDavidLipton,numbertwoattheIMF,andPoulThomseninadesperateattempttobridgeourdifferences.The media battled continued. A day or two later, Mario Draghi publicly

describedmeandAlexisas‘loquacious’.JamieGalbraithrespondedintypicalstyle:‘Normallyacentralbankerwoulddeliversuchamessageinprivate,andthefactthathechosetodootherwisewasevidenceofloquacity.’WhenaskedbyItaliandailyLaRepubblicatocommentontheaccusationthatIspoketomyEurogroup colleagues with greater ‘candour ’ than one would expect of afinance minister, Jamie replied, ‘While it might be true that Varoufakis hasdeparted from the customary standard of candour among finance ministers,sinceIsupportraisingthosestandardsanyway,itisnotevidenttomethatthereisaproblem.’On 5 March, in an attempt to upset troika strategy, I sent a letter to the

Eurogrouppresident,JeroenDijsselbloem,demandingthecommencementofnegotiations, including a proposal to implement immediately seven of thereforms the institutions had approved in our teleconference of 24 February.Theirresponsewastorubbishthesevenproposedreformsaccompanyingmyletter to Jeroen, targeting for greatest ridicule the idea that German ViceChancellorSigmarGabrielhadbeensokeenon inourmeeting inFebruary:clampingdownontaxevasionbyemployingpeoplefromallwalksoflifetorecord transactions as they happened.9 Ever since, our plans for thealgorithmic capture of large-scale tax evasion had been entirely ignored,dismissedwithderisivereferencesto‘wiredtourists’.That same day my alternate finance minister Nadia Valavani and I were

working to finalize our Humanitarian Crisis Bill. At its heart were twomeasures: theprovisionofaprepaidcreditcard for300,000 families livingwithoutfood,shelterandelectricity,andaHerculeanefforttobringthe40percentof theGreekpopulationwhohaddroppedoutof the taxsystembecausetheywereinarrearstothestatebackintothefold.How?Bylettingthempay

back a small amount, even €20, each month. Although millions had beenrendered so impecuniousby thecrisis that theywouldhavedifficultypayingevensuchasmallamount,wewereconfidentthattheywoulddoalltheycouldtofinditinreturnfortherighttoreactivatetheirtaxfilenumbersandleavethepurgatory of official bankruptcy. It was an act of mercy and economiccommonsense.Indeed,withinamonthofthesystem’ssubsequentintroduction€700millionhadbeenpaidintothestatecoffersbythosestrivingtoreturntotheformalsector.10WiththeHumanitarianCrisisBillalmostdone,Ihadanimportantphonecall

tomake.MysecretaryhadinformedmethatUSTreasurySecretaryJackLewwanted tospeak tome.Ourconversationbeganwellenoughwithhis requestthatIupdatehimonthenegotiations.Itoldhimthat,despiteourhopethatthe120-day interimagreementof20Februarywould lead to anewprocess thatwouldbreakthedeadlock,overthepastweektheinstitutionsandsomeoftheirkey partners had issued statements that apparently reversed the agreement,violated its spirit anddemanded thatwe revert to thepreviousarrangements,somethingwecouldnotandwouldnotdo.Hisresponsewasmoreinkeepingwith the line taken by the US ambassador to Greece than that of PresidentObama’spublicstatements:inessence,theUSTreasuryagreedwithusontheissueofausteritybutwestillhadtogivein.IexplainedthatIwasnotconfidentof raising thepaymentowed to the IMFon18March.SecretaryLewrepliedwithacommenttotheeffectthatweshouldplaceourtrustinourcreditors.Kemal Dervish, a Turkish former finance minister who was working at

BrookingsinWashingtonandwithwhomIwascorresponding,warnedmenottoheedsuchadvice.Inhisview,PoulThomsen’spromotionfromchiefoftheIMF’smission inGreece toEuropeandirectorwasdisastrous forus: theoldGreek programme might be a dismal failure but it was his baby. ‘There isnothing you or anybody can do about it, but [it’s] all themore important tomeetChristineLagardepersonally,’hesaid.‘Idohavegoodrelationswithher,andsheisfundamentallyaveryreasonablewoman.Butshehassomanyfirestofight,notleastofcoursetheUkrainemess,whichtendstoswampeverythinghere.’11 This was not too far off my estimation, but was there any way ofcoming to a sensible agreementwithChristine that sidelined theprogrammethatherEuropeandirectorwasdeterminedtodefend?AfarmorelikelypersontounlockthenegotiationswasAngelaMerkel.She

was the only reason we had found common ground at the 20 FebruaryEurogroup. But the moment Merkel turned her back on Schäuble and

Dijsselbloem,theMoUwasbroughtbackand theprocesscollapsed.With thenextEurogroupmeetingaroundthecornerandthenegotiationsstillstalled,Isuggested toAlexis that he callMerkel: ‘Surely, if shewants to prevent hergood work from two weeks ago from going to waste, she must interveneagain?’That night Alexis spoke to the chancellor on the phone. She responded

warmlyandpositively.ShesaidshewouldsendThomasWiesertoAthensonamission to find a way forward. We were encouraged. Thomas Wieser wasexorbitantly dull, incrediblypowerful and amanwhoknewhow towalk thetightrope binding Angela Merkel and Wolfgang Schäuble together. He wasideal.

Emissarywithoutamissive

The condition on which Chancellor Merkel sent Wieser to us was absoluteconfidentiality.Ourministrieswere not to be involved in planning his visit;therewouldbenogovernmentcartopickhimup,andthemeetingwouldhavetobeheldatasecludedprivateresidence.Idecidedthatourflatwasideal.Anunofficial carwas sent to pickThomas up from the airport and deliver himstraighttous.Theemptystreetoutsideourbuilding,thankstoacoldgreyday,put paid to any concern that tourists visiting the New Acropolis Museumoppositemightrecognizehim.It is fair to say thatThomasWieserbrought theweatherwithhim into the

flat.Ourseven-personparty–Dragasakis,Theocarakis,Chouliarakis,Euclid,Alexis’ssecretary,Danaeandmyself–waskeentowelcomeWieserwarmly.Wieser was equally keen to keep his distance. His first sentence wasdisheartening:‘I’mhappytobehereeventhoughIdonotknowwhyI’mhere.’Surely the person who had asked him to visit us must have explained thereason,Iasked.‘Ihavenoideawhosentme,’hereplied.‘IjustfoundanoteatmyofficeinstructingmetoboardaplaneforAthens.’Unwilling to beat about the bush, I spelled out the facts: we were at an

impasse,onethatonlyChancellorMerkel’sinterventioncouldovercome.Shehadprovedamenabletosuchaninterventionandhadofferedtosendhimtousinformallytodiscusshowtorebootthenegotiations.Incredibly,Wieserwouldhavenoneofit,continuingtodenyanyknowledge

of the chancellor ’s involvement in his trip. Instead, over the course of a

lengthy meal, he laid down the law with the charisma of a bailiff and thesensitivityofalitigator.Outliningthecomingweeksandmonths,hecarefullyavoidedthesubstanceofthenegotiations,insteadgivinguschapterandverseonEurogroupandEurogroupWorkingGrouprulesandconstraints.Fromhislitany of troika-speak, one thing of interest emerged: we should expect noeasingofthesqueezeonourliquiditybefore30April–whichwaspresentedasanatural,apoliticalconsequenceofbureaucraticconstraints.InresponseI toldWieserthatunlesswereceivedasignfromthecreditors

that they were serious about a compromise on the reform agenda and asensible fiscal policy made possible by meaningful debt restructuring, wewouldnot reach30Aprilwithoutadefault to the IMF. ‘Independentlyofourpreferences andpoliticalwill,’ I said, ‘our liquiditywill runoutwell beforethen.’He replied that we could last much longer by plundering the reserves of

non-governmental but publicly owned institutions such as pension funds,universities,utilitycompaniesandlocalauthorities.‘Andwhywouldwewant to do that?’ I asked. If the creditors showed no

interest in negotiating in good faith, why should we continue to extract yetmorefleshfromthescrawnybodyofoursocietyinordertoserviceadebttotheIMFthatevenitconsideredtobeultimatelyunpayable?Facedwiththisquestion,Wieser ’strainingkickedin.Herecoiledbehindthe

factthathehadnomandatetodiscussdebtrestructuringandausterity.Realizingthatthislineofconversationwasawasteoftime,Ibroughtupthe

€1.2 billion thatmy legal and financial advisers informedmeGreece couldclaimfromthecreditorsasitsown.Apparently,thepreviousgovernmenthadspent that sum from the state’s reserves on bailing out a few of Greece’ssmaller banks even though it had been agreed that this money should havecomefromthesecondbailoutloandepositedwiththeHFSF.GiventhatIwasnot willing to plunder the remaining reserves as he had suggested, I askedWieserwhetherwecouldusethiscredittomeetourIMFpaymentsforMarch,buyingusbothextratimetonegotiate.‘Itsoundsreasonable,’repliedWieser,advisingmetosendaformalrequesttoJeroen,hisboss,foraccesstothat€1.2billion. (Days later,whenIdidso,Jeroenreferredme to thepresidentof theEurogroup Working Group … Thomas Wieser! And what was Wieser ’sverdict, now that hehadbeengiven the authority todecide?Thatwhat Iwasrequestingwas‘toocomplicated’.)

Seeing no glimpse of a potential breakthrough, the only useful thing thatremainedwastotrytoestablishsomeformofhumanbondbetweenus–toatleastbringsomehumanityintotheproceedings,ifonlyforthesheerhellofit.Euclid,NicholasTheocarakis,DanaeandItookthelead,changingthesubjecttoanythingotherthanthenegotiations:wespokeofart,music,literature,ourownfamilies.ForsixhoursinallweatesimplebutexcellentGreekfoodanddrank a considerable amount of wine followed by Cretan raki. ThomasWieser ’sresistancewasextraordinary.Heateanddrankandsmiledfrequently,buttheforcefieldthatheerectedtopreventanycamaraderiefromdevelopingbetweenusprovedimpenetrable.Astheeveningdrewtoaclose,NicholasaskedWieserifhewasrelatedto

Friedrich von Wieser, the pioneering right-wing economist and Austrianfinanceministerwhose thinkinghadshaped themindsof libertarianssuchasLudwig vonMises and Friedrich vonHayek. Thomas answered that, yes, hewas indeed the grandson of his cousin, but confessed that he did not knowmuch about his works. Reaching into our bookshelves, I pulled out a thickvolumethatNicholasandIhadco-authored in2011, inwhichwereferred tovonWieser ’s influence inachapteraptly titled‘Empiresof Indifference’.12 IofferedittoThomasforhimtokeep.Heaccepted.Ashewasleaving,headingtoahotelbeforehisflightbacktoBrusselsthe

followingmorning,Ilongedformyacademicdays,whendisagreementswereresolvedthroughthepowerofargumentrather thanbruteforce.Weekslater,as the troika’s brute force was reaching its climax, I recalled one of vonWieser ’smostmemorable lines,wonderingwhether hewould be pleased orappalledbyhisdescendant’spartintheeurozone’stravails:‘Freedomhastobesupersededbyasystemoforder.’

TotheEurogroup!

Wieser ’s visit brought homea stark reality:with twenty-fourhours left untilthenextEurogroupmeeting,Merkelwasnotwilling to intervene as she haddone previously. Perhaps she was never serious about achieving commongroundwithus;perhapsshehadlosttacticalgroundtoWolfgangSchäuble.Itdidn’tmatter.Thechoicefacinguswasthesame:withholdallpaymentstothetroikaforaslongastheycontinuedtoasphyxiateus,signalthattherewouldbe

nonegotiationsonthebasisoftheirMoU,insistthatdebtrestructuringandanendtopunitiveausteritywerestrictprerequisites.Orpreparetosurrender.Before flying to Brussels, I briefed Alexis and the war cabinet on the

demandsweshouldexpecttofaceattheEurogroup:first,thatwesuckthelifeout of our non-governmental public institutions to keep repaying the IMF;second,thatweallowthetroikatoreturnvictoriouslytoAthens;third,thatthetalksbeconfinedwithinthetemplateoftheMoU.Iwasalarmedthatthesecondof these seemed to exercise themmost and that their anger did not seem toextendtothethird.It transpiredthatIhadgoodcausetobeconcerned.AsIwaspreparingfor

mytrip,Igotscentofaninterestingdevelopment:Chouliarakishadresurfacedin Maximos and was now heading an informal team of Syriza advisersworking behindmy back on a list of concessions to be gifted to the troika.Havingasecondteamofeconomicadviserstoshadowthefinanceministry’sisnotnecessarilyabadthingforaprimeminister.Giventheseriousnessofthesituationwefaced,suchchecksandbalanceswereprudent,but thisparticularteamandthemannerinwhichAlexiswasusingthemposedarealdanger.Theycombined the worst of Syriza’s fixations with the most obnoxious of thetroika’sobsessions,advocating increases incorporation tax, forexample–aperfectly good left-wing policy under normal circumstances but not whenbusinesswasbleeding todeath– inorder tomeet the troika’sdemands forahigher government surplus. This worst-of-both-worlds economic policydirectly undermined my advocacy of reduced austerity as a prelude toloweringtaxrates.Meanwhile,SpyrosSagiaswasdevisingbillsrelatedtofinancialmattersthat

were outside both his remit and his competence – for example, on transferpricing, which relates to the exchange of goods between two separatesubsidiaries of the same conglomerate – and trying to impose them onme.Even worse, the day before I was due to fly to Brussels to attend theEurogroup, our defenceminister, the right-wing conspiracy theorist we hadhadtotolerateinordertoretainourparliamentarymajority,madeastatementstraight from Mephistopheles’s notebook. The London Daily Telegraphheadline summed it up: GREECE’S DEFENCE MINISTER THREATENS TO SEND

MIGRANTSINCLUDINGJIHADISTSTOWESTERNEUROPE.13Itwasexactlywhatwedidnot need.GraduallyMaximoswaswriting the textbook on hownot to run anegotiation.

IhadonelastmeetingwithAlexisbeforeboardingmyplane.Iwarnedhimthatthetroikawouldstall,blameusforthedelay,demandthatwelegislatetoplunderallourremainingreservesinordertokeeppayingtheIMF,andthen,onceGreecewasasdryasaPeloponnesesultana,closedownthebankstoturnthepeopleagainstus.Wehadtostoptherot.IftheforthcomingEurogroupwastheset-upIwasexpectingittobe,ouronlyrecoursewasaharddefaultontheIMFandtheparallelactivationofourdeterrent.AsIwashandinghimvariousnon-papers that Iwasplanning topresent in

Brussels,ItoldAlexis,‘Ishalltalkprivatelytoallofthem,theIMF,Schäuble,Draghi,Moscovici.Ishallbeconciliatorybeyondbelief,readytocompromiseasmuch as it is possible without jeopardizing Greece’s recovery chances. Ishallspeakonlythelanguageofcooperationandgoodwill.Butif,Alexi,theyrespondwith theirusualmixof aggressionand truth reversal, leavingusnoroom tomanoeuvre, uponmy returnwemust act decisively. I trust that youagree.’Alexis agreed. And so I set off for Brussels determined to bemaximally

compromising – to make sure beyond a shadow of a doubt that Greece’screditorswerecommittedtodenyingusevenaminimallyrationalagreement.SoonIhadmyproofthatthiswasso.AndJeffSachs,whoaccompaniedme

inallthebilateralmeetingsIhad,ismywitness.14

12

Merkel’sspell

At 11 a.m. on 9March, themorning of the Eurogroupmeeting, I met PoulThomsen in the lobby of my hotel in Jeff ’s presence. Poul began theconversationbyassuringmethattheIMFwere‘notdogmatic’.TheyhadlostpatiencewiththeGreekprogrammewellbeforeourleft-winggovernmentwaselected, he toldme. Poul spoke angrily about the Samaras government. ‘Welostpatiencewith them.Theyfailed todeliveronalmosteverything theyhadcommitted to,’ he claimed. ‘Samaras told the Germans what they wanted tohear,didnothingelse,andtheninviewoftheelectionusedthemoneyhegottopourtaxwaiversandotherfavoursonhispeople.’AtthatpointIinterjectedtosaythat,inviewofhisexperienceswithprevious

Greek governments, surely he would appreciate our reluctance to makepromises thatweeitherdidnot intendto,orsimplycouldnot,keep.‘Poul,’Itoldhimsincerely,‘justknowthat,ifyouandIcometoaviableagreement,Ishallmoveheavenandearthtoimplementmysideofthedeal.Butwecannotdo this while in the toxic fog of permanent bankruptcy. We need debtsustainabilitybeforeanythingelse.’‘Greece needs debt relief before it can agree to any compromises,’ Jeff

added.‘Firstthecreditorsmustallowitoxygentobreatheandthen[theycan]placefurtherdemands.’Thomsen seemed in agreement, judging by his nodding and positive

expression.‘Idonotthinkthatareasonabledebtsustainabilityanalysiswouldbe difficult or that your short-term liquidity issues would be difficult tosurmount,’hesaid.Irepliedbytakinghispointtoitsnaturalconclusion:‘Yes,Poul,Ihaveno

doubtthatyourgoodpeopleinDChaveexcellentanalysesofwhyourdebtisridiculously unsustainable. Nor do I doubt that our short-term liquiditydifficultiescanbesortedoutwithonewaveofMarioDraghi’shand,oroftheIMF’sforthatmatter.Buthoweverhelpfulthatwouldbe,itisnottheissue,isit? The elephant in the room is the question of debt restructuring, withoutwhichweshallremaininsolventandun-reformable.Neitheryouranalysisthat

thisissonorarelaxationofourliquidityconstraintscanchangethat.Weneedtohaveupfrontdebtrelief.Andyou,theIMF,aretheonlyoneswhocanpushforthis.Sotheballisinyourcourt.Willyou?’Thomsen clearly understood but remained non-committal, mumbling

something about ‘the Europeans’ being difficult to shift on the matter. Iinsisted: either they shifted or there would be no agreement, and a veryexpensive,verypreventableaccidentwouldoccur.‘TheEuropeanshavetheirways…’wasPoul’scrypticfinalcomment.The next of our bilateralmeetingswaswith the two leading lights of the

centralbankwhoseheavybootwasonourthroats.Jeff and I walked into a small office to meet Mario Draghi and Benoît

Cœuré.MariogreetedJefflikeanoldfriendandwasclearlyimpressedthathewas by my side, but despite the warmth in his voice, his message wasunchanged. In the spirit of maintaining its apolitical independence, the ECBwas not going to lift a finger, let alone its boot, from our throat without agreenlightfromtheEurogroup.Irehearsedmyusualcounter-argument: thatthere was nothing more political than reducing our liquidity during thesenegotiations,given that theECBhad increased itduring itsnegotiationswiththeSamarasgovernmentinthesummerof2012.Draghiattemptedtodismissthispointonatechnicality.Jeffintervenedtosaythatwherethereisgoodwillthereisawaytopreventanaccident.Draghiwasunmoved.Ithenmadethepointthat,attheveryleast,theECBcouldreleasetousthe

almost€2billionprofitithadmadeonourSMPbonds,whichwastohavebeenpaid toGreece in2014.As I spoke I looked squarely atBenoît,who I knewagreed with this argument. ‘If you want us to pay the IMF during the nextweeks, and given that we lack the money to do it, this is a reasonablesuggestion.Itisourmoneyafterall,’Isaid.MariorepliedthatreleasingtheprofitontheSMPbondstouswasnotwithin

his gift. He was obliged to pass it on to the central banks of the eurozonememberstates,theytotheirgovernmentsandthegovernmentstoGreeceafteragreementattheEurogroup.‘Iknowallthis,Mario,’Isaid,‘butitisourmoneynevertheless.’Whatever

arcane rules the Eurogroup had concocted – without the approval of theEuropeanparliamentoranylegitimatebodyoftheEU–IwasmerelytryingtofindapracticalwaytoavoiddefaultingontheIMFinthenexttwoweeks,Itoldhim.‘Thesituationissimple:weoweonepartofthetroika,theIMF,asumthatwedonothave.Atthesametimeanotherpartofthetroika,theECB,owesusa

similarsum.Logicdictatesthatwecanceloutthesetwosums.’Iwasnotevenaskingthecreditorstotrustmewithourmoney,simplytotakethemoneythetroika conceded it owed us and use it to pay itself. ‘Have the moneytransferred, if need be, from theECB to national central banks, tomember-stategovernmentsandthendirectlytotheIMF.Thisisapractical,logical,fairsolution.’‘Thisisnotuptome,’Draghisaid.‘ItisuptotheEurogroup.’Jefftriedvaliantlyonemoretime.‘Mario,’hesaid,‘Ihavebeenlisteningto

thisdiscussionandImusttellyouthatIamconcerned.Yanishasbeentryingtopropose a practical solution to a simple-to-solve problem.You rejected thatsolution,which is fairenough if thereare technicalproblems,but Ihavenotheardfromyouanyalternativesolutions.’Mario shruggedhis shoulders. ‘It is not for the central bank tooffer such

solutions.Thisisamatterforthepoliticians.’‘JustwaitandseewhatthepoliticiansdowhenIraisethesubjectwiththem,’

I said to Jeff as we were leaving. ‘They will refer me to back to the ECB,possiblytoPoulThomsen.’Jeffshookhisheadindisbelief.I met Nicholas Theocarakis, who had replaced Chouliarakis as my

Eurogoupdeputy,attheentrancetothemeeting.Thiswouldbehisbaptismoffire.ButaswewalkedintotheroomwhoshouldIseeatthechairnexttominebutGeorgeChouliarakis!Nicholas and I greeted him, and the three of us sat down as the other

ministersandtheirdeputiesfiledin.Chouliarakisknewthateachministerwasallowedonly a single deputy at theEurogroup– leaving aside the exceptionmadeforourgovernment’sfirstEurogroup,whenDragasakiswasallowedtosit in–andtothisdayIcannotimaginewhathewasthinking.WhenI leanedovertoaskpolitelythathewaitforuswithJeffSachsintheGreekdelegation’soffice,herefused,explainingthathehadneglectedtoinformWieserformallythatNicholashadreplacedhim.‘Don’tworryaboutthat,’Itoldhim.‘IwilldealwithWieser.’Meanwhile, Jeroen had declared the meeting open. Sitting next to him,

WieserhadspottedthescenethatChouliarakiswasmaking.Neveronetomissan opportunity to criticize us, hewalked over to tell us that one ofmy twoassociateshad to leave.Huffingandpuffing,Chouliarakis finallygotupandleft.LaterIfoundoutthat,insteadofwaitinginouroffice,hesimplywenttotheairportandboardedaflightbacktoAthens.

TheEurogroup of 9Marchwas awholly predictable affair.One after theother,likearsonistswatchingablazethattheyhadstartedandcommentingonitsprogress,thetroika’sleadersblamedusforstallingthenegotiations.Whenmyturncame,IexplainedasmoderatelyasIcouldthetwocausesofthestasis:the troika’s refusal to enter into genuinely comprehensive negotiations thatincluded my debt-swap proposals and the relaxation of austerity that thesewould enable, and their demand, the IMF’s in particular, that their so-calledmissions return to Athens for direct ‘consultations’ with our ministers. Ireminded my fellow finance ministers that I had written to Dijsselbloemdemanding the commencement of negotiations and concludedwith a plea toend the stonewalling and the asphyxiation of our government using thepractical proposals that I had already presented toMarioDraghi andBenoîtCœuré.Once more Draghi repeated his insistence that the ECB was operating

strictlywithinitsruleswhileavoidingdecisionsthatwouldpoliticizeitswork.Idecidedtoexposethisliegentlybutfirmly.

Thepresentcircumstancesaresimilarto[thoseof]thesummerof2012,in the sense that there is a new Greek government, the programme issuspended, therearenegotiationsaboutnegotiations,andtheGreekstatehas pressing repayments coming up. But the ECB today is refusing tobehave towards our government in a manner comparable to how itbehavedin2012towardsthepreviousgovernment.Mario’sclaimthattheECB is above politics is not supported by the facts. Indeed, the onlyreasonable explanation of its behaviour today is that the ECB is biasedagainst a government that its governing council members dislike forpurelypoliticalreasons.

As I outlined the facts and figures that made this contention irrefutable, Icould see in the corner of my eye that Mario Draghi was lookinguncomfortable.Wolfgang Schäuble, on the other hand, looked anything but.UnwillingtolettheECBpresidentoffthehook,Icontinued:

Before the 20February agreement, theECBpresident had toldme that,once we strike an interim agreement with the Eurogroup, the waiverwouldbereturnedandliquidityrestoredtotheGreekbanks.Thispromiseremains unfulfilled. And it is not the only one. When requesting therestorationofourT-bill limit,Mariohad toldme innouncertain terms

that itwouldhappenonce therewasevidenceofdemand forourT-billsfrom customers other than the Greek banks. Well, I have it on goodauthoritythatfivedaysagoaChineseinvestorpurchased€100millionofour T-bills. Alas, there has been no relaxation of the asphyxiatingconstraint.Iamtiringyouwiththesedetailsforonereasononly:becauseourhardworktogettothe20Februaryagreementisbeingunderminedinwaysthatyoumaynotbeprivytoandforwhichourgovernmentisnotresponsible.

InsteadofengagingwithmyveryseriousaccusationthattheECBwasactingpolitically,Jeroenhastilyattemptedtoendthediscussion.Heproposedthatweissue a quick statement saying that the negotiationswould begin in twodayswith the institutionscoming toAthens. I immediatelyreplied that Iwelcomedthe commencement of negotiations but proposed they take place in Brusselsinstead.Jeroenretortedthatthenegotiatorsmightneeddatathatcouldonlybefound in our ministries. I said that we were happy to welcome technicalpersonnelfromtheinstitutionstoAthensinordertocollectdatatobebroughtto the two sides’ negotiators in Brussels. At that point, in a rare helpfulintervention,PierreMoscovicisuggested thatheandIwork thisoutover thenext couple of days. We had successfully avoided falling into the trap ofacceptingthetroika’sreturn.Judgingbytheexchangeoftextmessagesthatfollowedthemeeting,Alexis

washappy.‘Wearespinningitasasuccess:politicalnegotiationstocommenceinBrusselsalong the linesof the20Februaryagreement inorder toend theimpasse.’Healsohadawarningforme.ApparentlyMichaelNoonan,theIrishfinanceminister,wasreportedtohavesaidthatIwasabouttobereplaced.‘Wehavedeniedthis,’Alexistextedme.Inaseparatemessageheadded,‘IthinkthattheIrishmanistryingtofacilitatethecreditors’plantoundermineyoubecauseyouareatoughnegotiator.’Separately,AlexistextedmetosaythatJeroenhadcontactedhimdirectlyto

pushforthetroikatocometoAthenstwodayslateron11March:‘Hetoldusthatyouagreed to that.Pappas replied thathedidnotbelieve thatVaroufakiswouldeverhaveagreed.’I responded, ‘He threatened that it will all be over if the troika does not

return.Itoldhimhisthreatswillnotwork.’Alexis fumed at Jeroen’s cheap tactics: ‘Jeroen threatened me with a

cessationofthenegotiationsashewas“gettingtired”.Pappastoldhimtotake

a deep breath becausewewere only at the beginning of an historic process.Yani,endthistodaybeforeittakesusunder.’I knewwhat hemeant: ensure that the negotiations tookplace inBrussels;

preventat all costs the returnof the troika toAthens. ‘Not toworry,Alexi. Ishall nip this in the bud,’ I reassured him. To do so I needed to talk toMoscoviciurgently.ButfirstIhadtwoappointmentstokeep.

Jeff’sshock

After the obligatory post-Eurogroup press conference, at which Jeroenlamented a ‘wasted two weeks’, clearly implying that we were the onesresponsible for the delay, I collected Jeff from our delegation office andheadeddownthecorridortotheofficeoftheFederalRepublicofGermany.To aEuropeanist likeme there is somethingbeautiful about that corridor,

off which every European country has an office. Admittedly it is on anondescript floor in an ugly building, but the fact of its existence should besomethingtobeseriouslyproudof.Asitwas,IheadedforWolfgang’sofficewithJeffandNicholasTheocarakis,dreadingwhatmightoccurbutwithaplan.Thinkingback towhat transpiredIamremindedofMikeTyson’s fantastic

lineat theheightofhis tumultuousboxingcareer:‘Everyonehasaplanuntiltheygetpunchedinthemouth.’MyplanhadbeeninspiredbyatipIreceivedfromPierCarloPadoan, the Italian financeminister,when I hadmet him inRomealittlemorethanamonthearlier.PierCarlohadmanagedtobreaktheice with the German finance minister by offering to push through Italy’sparliamentareformbillWolfgangwasproposing.ItssuccessfulpassagewonhimWolfgang’s trust. ‘Offer him something similar,’ had been Pier Carlo’sadvice.Wolfgang began themeeting in top form. ‘Your primeminister and your

cabinethavemanagedtomakeusloseallconfidenceinyourgovernment,’washisopeningline.‘But,Wolfgang,’Isaidgenuinelybemused,‘weneverhadyourconfidence.

Weare,forgoodness’sake,agovernmentofGreece’sradicalLeftparty!Howcouldyouhaveconfidence inus?’Wolfgang smiledatmy frankness. ‘But,’ Ihastenedtoadd,‘believemewhenItellyouthatIwanttoearnyourconfidenceand your trust.’ I continued: ‘The question is how? I will not lie to you,Wolfgang, like others beforeme with promises that I can neither fulfil nor

intend to. Thatwould accomplish the opposite. The onlyway I know towinyourtrustisbymakingapromisethatisdifficulttofulfilbutwhich,firstly,Iwanttofulfiland,secondly,youwantmetofulfil.So,hereismysuggestion:whydon’tyoutellmewhatarethethreeorfourmajorreformsthatyouthinkwe should implement in Greece? If we can agree on three or four majorreformbills,thatwebothagreewouldbetherapeuticforGreeceandincreaseyourchancesofgettingyourmoneyback,thenallIaskyouisforfourweekswithout the present liquidity squeeze. During those four weeks I shallendeavourtopassthesebillsthroughourparliamentandbeginimplementingthem.IfIamsuccessful,youwillthenhavecausetobegintotrustme.Ifnot,proceedwithyourplantothrottleus.’IhadnotbriefedJeffaboutmyplan,butitseemedtogodownwellwithhim

and he appeared eager to hear Wolfgang’s response. I suspect Wolfgang’sreplycameassomethingofasurprisetohim.‘Iamnotgoingtonegotiatewithyou.AsIhavetoldyoulasttime,youmustgototheinstitutions!’‘ButWolfgang,’ I replied, ‘time is running out. In aweek or twowewill

havetodefaulttotheIMFwithuntoldconsequencesforall.Youtellmetogoto the institutions. But the institutions simply lack themandate to dowhat ittakes to avert a crash or to negotiatewith us a viable agreement forGreecewithintheeurozone.Iamtellingyouallthisbecausethereareforcesatworktryingtoderailtheprocess.’Wolfgang’s face went from apathy to engagement. Even though I had

learnedfrompastmeetingsthatsuchchangesinWolfgang’sexpressionwerepregnantwith disappointment, on that occasion I could never have predictedhisextraordinaryresponse.‘Idon’tthinkthatanygovernmentcankeepGreeceintheeurozone,’hedeclared.‘Isthisthechancellor ’sviewtoo?’Iasked.‘Shehasotherideas,’hereplieddismissively.IfIhadanyremainingdoubtsthatgettingtheirmoneybackwastowardsthe

bottom of our creditors’ priorities, Wolfgang had just put paid to them. ItappearedthatGermany’sfinanceministerhadresignedhimselftotheideathathiscountrywouldnotbegettinganymoneybackatall.ForifacountrylikeGreecewere to leave theeuro, itsnewcurrencywoulddevalue substantially,andsoanalreadyunsustainableeurodebtwouldbecomeevenmoreunpayable.With that bombshell Wolfgang had killed our conversation. Anything I

mightsaytohimaboutfindingawayforGreecetorepayasizeableportionofits debts was redundant in the face of his conviction that Greece could not

survive in the euro, irrespective of how the country was run. But anydiscussionaboutGrexitwas impossible tooasMrsMerkelhad‘other ideas’.Stalemate!Asweleftforournextmeeting,Jeffwaspracticallypullinghishairout.‘I

cannot believe what my ears just heard,’ he said, his face contorted. ‘DoesWolfgang not realize that he is jeopardizing everything that we have beenbuildingforsixtyyears?’1HecontinuedtovoicehisexasperationaswemadeourwaybacktotheGreekoffice:‘Evenifweassumethattheydon’tcareaboutpeopleinneed,aretheseguysnotawarethat,forarelativelysmallamountofmoney, theyarerunningtheriskofpissingoffmanyveryrichandpowerfulpeople?’Hisquestionwaslefthangingaswewentin.Klaus Regling, whom Wolfgang Schäuble had appointed head of the

eurozone’sbailoutfund(initiallytheEFSF,latertheESM),waswaitingforus.Afunctionarywithnext tonodiscretionarypower,he lacked theauthority tomakeanydifferencetooursituation.Stillhehadaskedtoseemeand,outofcourtesy, I had agreed. I hoped to use the opportunity to put to him severalideasregardingthedebtswapsIwasproposingwhichfellwithintheremitofhisfund.Fromtheoutset,however,heprovedevenmoreunwillingtodiscusssolutionsthananyoneelseIhadspokentothatlong,longday.TheonlythingheseemedkeentosaywasthatIowedhim€142.6billion.Astherewasverylittle toreplytothat,exceptperhapstorecite thetitleof

Dario Fo’s playCan’t PayWon’t Pay, I presented him instead with a moraldilemma:‘Giventhat,asitseems,inaweekortwoweshallrunoutofmoneywithwhichbothtorepaytheIMFandtopaysalariesandpensions,whatdoyouadviseme todo,Klaus?Thechoice isbetweendefaultingon theoldand thefrail or defaulting to the IMF.Which is of course an unnecessary dilemmagiventhatourcentralbankowesusasimilaramount.’For Klaus it was a no-brainer. ‘You must never, ever default to the IMF.

Suspendallpensionpaymentsinstead.Thisiswhatyoumustdo,’hesaidwithstrikingconviction.Ichosenot topointout that,even ifwe leteveryoldagepensionerdieof

hunger,itwouldstillbeimpossibletorepaytheIMFandtheECBoverthenextfew months, but said, ‘It is a sad day when the head of Europe’s stabilitymechanismisadvisingmetodosomethingthatwillviolentlydestabilizeoursocietyandeconomy.’At theendofabusybutariddaypunctuatedonlybyWolfgangSchäuble’s

statementthatGrexitwasinevitable,JeffrewardedmewithwhatItooktobea

massive compliment: ‘Having sat in your meetings with Thomsen, Draghi,SchäubleandRegling,ImusttellyouthatIhaveneverseenanythinglikethisinmydecadesof experiencewithmeetingsbetweendebtorgovernments andcreditors such as the IMF, the US government, theWorld Bank… In everymeetingyouwerepositive,bristlingwith ideas regardingpractical solutions.Andtheykeptknockingyourideasdown,eventhoughtheyweregoodideas,withoutproposingasingleoneoftheirown.Unbelievable!’

Cagingthetroika

Alexis’s directive had been crystal clear: the troika could not be allowed toreturn toAthensas ifnothinghadchanged.SowasJeroen’s threat that if thetroika’sreturntoAthenswereimpeded,hewouldendtheprocess.Smiling, I dismissed his threats. ‘What matters now,’ I said, ‘is that the

negotiationsbegininafashionmaximizingthechancesofanagreement.Tryto be a littlemore positive about this. In any case, didwe not agree that thepreciselocationandprocesswouldbethesubjectoftalksbetweenMoscoviciandme?’‘Fine,’ he conceded sullenly, ‘but I want this settled within twenty-four

hours.’PierreMoscoviciandImetthatsamemorninginBrussels.Hewasentirely

sympathetictoourrejectionofthetroika’sreturn.Infact,herepeatedhisviewthatthetroikaprocesshadbeenahumiliationnotonlyforGreecebutalsofortheEuropeanCommission,whoserolethetroika’sbehaviourundermined.Andin less than a quarter of an hour we had agreed on a sensible process: thepoliticalnegotiationsoverdebtrestructuring,fiscalpolicyandreformagendawould takeplace inBrussels.Ministerswould talk toministersand toPierre(whoasacommissionerisequivalentinranktoaminister),whileourdeputiesdeliberated in adjacent rooms. Meanwhile, the institutions would be free todispatch ‘technicians’ toAthens for the purposes of on-the-spot dataminingand fact finding.Theywould talkonly toGreek ‘technicians’ about the factsand the data they sought and would refrain entirely from debating ornegotiatingpoliticaldecisions.Instead,thefactsanddatatheygatheredwouldbepassedbacktothoseengagedinthepoliticalnegotiationsinBrussels.Pierreproposed the new process be called the Brussels Group – the Bee Gees, asNicholasTheocarakisjokinglynamedit.

OncePierreandIhadagreedontheBeeGees,wediscussedhowtopreventill-intentionedmembersofthetroikafromunderminingouragreement.PierrethoughtitcrucialthatwekeeptheplansecretuntilMarioDraghiandChristineLagardewere onboard.He feared that if certain people gotwindof it, theywouldfindwaystokillitoffbeforeitevengotgoing.(Whilehementionednonames,IamsurehislistofpotentialspoilersincludedThomasWieser,DeclanCostello and of course Poul Thomsen.) So he asked me to maintain radiosilencewhilehetriedtoconvinceMarioandChristine.IpromisedthatIwouldtellonlyAlexis,andhepromisedtogetbacktomewithintwenty-fourhours–beforeJeroen’slatestdeadlineexpired.Atensedayfollowed,inwhichPierreandIexchangedmessagesanddrafted

ajointcommuniquédescribingthenewprocess,butwesucceededwellwithinthedeadline.TheBeeGeeswerereadytoroll. IcalledNicholasTheocarakisandaskedhimtoassembleourtroopstoarriveinBrusselsthenextmorning,ready for battle. I also called Spyros Sagias, who was to orchestrate thereceptionofthetroika’stechniciansinAthens.Sagiasfearedrightlythat,onceinAthens,thetroika’sstormtrooperswould

attempttoreverttotheirusualways,whileAlexiswasadamantthattheyshouldnot be allowed the unconstrained access to our ministries they wereaccustomedto.SothegovernmentbookedawholefloorattheAthensHiltonandreservedaconferenceareainitsbasementtohousethetroika’stechnicalHQ.At the troika’s request,ministry officials and technicians fromour sidewould visit them at the Hilton, bearing the files, laptops and hard drivesnecessarytosatisfytheirentirelydisingenuoushungerfordataandfacts–dataandfactsthattheyknewevenbeforewedidastheycontrolledourministries’departmentsmorethanwedid.Thefirstskirmishoccurredlessthantwelvehoursafterourvisitorssettled

in,whenChristineLagardesignalledtomyofficethatherIMFteaminAthenswas dismayed at being incarcerated in the Hilton and feared for its safety.Allegedly, theGreek government had not provided any security personnel. Itelephoned Roubatis, our chief spook, to get the lowdown, and thenimmediately calledChristine.She repeated the story shehadbeen told– thather people in Athens were distressed at their vulnerability. I told her thataround three hundred plain-clothes police and secret service officers wereguarding theHilton, asRoubatishad just informedme.Neverbefore, I said,hadsomuchsecuritybeenprovidedfortheIMF’smissiontoAthens.Christinewas taken aback and expressed a preference for uniformed police. ‘Why?’ I

asked. I did not get an answer. Could the reason have been that the troikawantedtobevisible?Withouttheirmotorcadesescortedbypolicewithsirensblaring,howwould theGreekpeopleknow that theyhadarrived?Perhaps itwas only to be expected that they needed to be seen to be in Athens and incontrol.From day one the troika teams in Athens strove to violate the separation

betweenthepoliticalandthetechnicalthatPierreandIhadagreed.Questionssubmitted to our ministries included: ‘How do you intend to deal with thepensionfunds’chronicdeficitsinviewofGreece’sdemographics?’Whilethiswasaperfectlygoodquestion, itpertained topoliticalchoicesandnot to theestablishment of facts or themeasurement of our situation.Meanwhile, theiractual requests fordataweresoextensiveandvoluminous that itwouldhavetakenanarmyofcivilservantsweekstofulfilthem.In the Brussels Group, meanwhile, the political negotiations were going

nowhere thanks toapotentcocktailof theeurozone runaround, thePeneloperuse and the Swedish national anthem routine. To be fair, our side alsocontributed to the fiasco that these negotiations were turning into. NicholasTheocarakishadtheoneroustaskofmanaginganalreadydisparateteamthatwas fundamentally split in two:betweenmy teamofprofessionals, includingElena Panariti, Lazard personnel and Glenn Kim, and Chouliarakis and hisyoungerSyrizacohort.Chouliarakisandcompanyrefusedtocoordinatewithmyteam,arrivinglateformeetings,goingforlunchesanddinnersatcriticalmoments and generally behaving with the arrogance of those who believedtheyhadtheprimeminister ’sear.‘AttimesIfeltlikeachildminder,’washowNicholasexpressedhisfrustrationtome.By contrast, although they had nothing of substance to propose and their

onlyconcernwashowtoavoidanydiscussionofdebtrestructuring,thetroikawereontime,intuneandontarget.NicholasreportedtomethatwhenGlennKim entered the room, Declan Costello protested again: ‘We cannot havesomeone in the room who works on debt write-downs.’ Naturally Nicholasassertedourrighttohavewhoeverwechoseinourteam,butCostello’stacticwastelling:warmandfuzzywithChouliarakisandhisgang,coldandbrazenwithGlenn,NicholasandElena–classicdivideandrule.Our side’s failingswere apparent inAthens too. The troika’s requests for

non-existent facts and reams of data they already possessed may have beenridiculous, but it is also true that ourministrieswere less than competent inresponding. Some, especially those under the control of the Left Platform,

refusedpoint-blanktocooperateonthegroundsthatthewholeexercisewasacharade.Thatwasafairpoint,butforbetterorworseourgovernment’spolicywas to cooperate fully within the framework of my agreement with PierreMoscovici and within the spirit of the 20 February Eurogroup agreement,whichcommittedustodoingourutmosttoestablishcommongroundwiththecreditors. For as long as Alexis and the war cabinet were committed tonegotiatingingoodfaith,thefactthatthecreditorswereviolatingtheirsideofthe bargain did not justify non-cooperation. Theocarakis, Sagias and I spenthoursnegotiatingwithsomeofourcolleagues,sometimespleadingwiththemto reply to requests for data competently and on time. Often we failed toconvince them to do so. Sometimes we had to get the data from alternativesources outside the ministry in question or call on the cooperativefunctionaries of one ministry to get answers that another ministry ought tohaveprovided.Despiteourownside’s failings, there isnot a shadowofadoubt that they

werenotresponsiblefortheimpasse.EvenifourBrusselsGroupteamandtheministries at homehad acted in exemplary fashion, the outcomewould havebeen exactly the same. In the spring of 2015Greece’s creditors were in nomood to negotiate; they were resolved to re-establish their authority over aterritoryoftheirempirethathadrebelledandtoensurethatnoneoftheirotherpossessionsgotasimilaridea.WhilecommentariesintheWallStreetJournalandtheFinancialTimesmadeoutthatBrusselsandAthenswerethescenesofamajordisagreementoverfiscaltargets,taxratesandadministrativereforms,inreality what was happening was the equivalent of the nineteenth-centurygunboatdiplomacyusedbytheBritishEmpire.Alexis,SagiasandPappasseemedtounderstandthis.Although,littlebylittle

andtomygreatdistress,theywereabandoningourobjectiveofrestructuringthe debt and ending austerity, at this stage they were still prepared to takedecisiveactioninordertopreventthetroika’sreoccupationofourministries.Sagiasworked tirelessly to keep their technical team confined to theHilton,whilePappaswasthreateningtoexpelthemaltogether.Andon15March,whena ridiculous list of questions related to pensions arrived from the troika’stechnicalteam,Alexisexclaimed,‘Enoughisenough!’Hewasright.Thequestionshadnothingtodowithdataorfacts;theywere

purelypolitical.Indeed,theywerequestionsthatnotevenWolfgangSchäublecould have answered had he been asked them. Germany’s mature and well-fundedstatehasnotworkedouthowtorenderitspensionsystemsustainablein

thelongrun,givenitscountry’sdifficultdemographics.HowcouldtheGreekgovernmentbeexpectedtoanswersuchquestionsgivenitsnewness,thestate’sinsolvency and a situation inwhich one in two families had no one in paidworkandsurvivedonasinglepension?Byputtingsuchquestionstothecivilservantsofouroverwhelmedsocialsecuritydepartment,thetroika’stechnicalrepresentatives were inciting them to an act of bad faith: either they wouldrefusetoanswer,inwhichcasetheycouldbeaccusedoffailingtocooperate,ortheywouldbeforcedtogowellbeyondtheirremit.With a Eurogroup Working Group teleconference approaching on 17

March,atwhichwewereto‘takestock’ofthenegotiations,AlexisorderedmetoinstructNicholastomakeitclearthatthetroika’sAthensteamhadcrossedared line. To make sure there would be no misunderstanding, I sat down inAlexis’soffice towriteNicholas’sstatementso thatAlexiscould read it firstandapproveit,whichhedidthemomenthelaideyesonit.Theproceedingsofwhatturnedouttobeanhistoricteleconferencebeganin

the usual fashion with the troika’s representatives presenting their position.Declan Costello spoke first, then Benoît Cœuré, finally Poul Thomsen. Allthreereadfromthesamepredictablescript.

TherewillbenoagreementinAprilunlesstheGreeksideaccelerates…weneedacomprehensiveapproach…thereisanurgencytostepuptheintensityofthework…theGreeksmustunderstandtheneednotonlytorespect previous commitments but also the European provisions … itwouldbeapityiftheyviolatedtheprocessofconsultationstowhichtheyare committed … we are worried about Athens’s temptation towardsunilateral action… the humanitarian deal and new instalment law is amatter of concern to us… the process is highly unsatisfactory… theytreatthemissionasanuisance…

Once they had finished, and Thomas Wieser as chair had expressed hisregret thatGreecewasnotbeing representedbyGeorgeChouliarakis, itwasNicholas’s turn to read the script that Alexis had instructedme towrite andwhichhehadapproved.Inaninitiallyunsteadyvoice,owingtothegravityofwhathewasabouttodo,Nicholassaidthefollowing:

Iamsorrytoreportthatthebehaviouroftheinstitutions’technicalteamsinAthens, in theopinionofmygovernmentand theprimeminister,hasviolated the agreement that the technical team in Athens would only

collect facts and data. My prime minister has now elevated thenegotiations at the highest political level. The solution now must bereachednotatthetechnicallevelbutatthepoliticallevel,whichismuchabovetheEuroWorkingGrouplevel.InthissenseIdonotthinkthatthisteleconferenceservesausefulpurposeandIamclearlyandunequivocallynotauthorizedtosayanymorehere.

For a few seconds there was silence. Weiser then tried to carry on as ifNicholashadnotspoken.Othersjoinedhiminabizarreefforttopretendthatdiscussionof thenegotiationswithGreececouldproceed.Instructedtodosoby Alexis and myself, Nicholas reached for our teleconference device andpressed theOff button.We looked at each other.And smiled. Itwas a proudmomentbutoneweknewwewouldpayfordearly.Withinhours,leakstothemedia from the usual sources were portraying Nicholas, one of the mostcongenial,cultivated,nuanced,moderateandbrilliantlyeducatedEuropeansIknow,asabrute,animbecileandaspoiler.ThatsamedayDeclanCostellosentanemailtoNicholas,tobepassedonto

me, warning us not to table our Humanitarian Crisis Bill in parliament. He‘stronglyurgedus’toconsultwithhim,ThomasWieser,PoulThomsenetal.beforeproceeding.‘Doingotherwisewouldbeproceedingunilaterallyandinapiecemealmanner that is inconsistentwithyourcommitments,’hewrote. Itwas a perfect gift –my cue to push the bill immediately through parliamentwhilemakingCostello’semailpublic,thusexposingthetroika’soppositiontoourplantoextendurgenthelptothoseGreekfamiliessufferingthemost.Theoutcry in Greece and beyond was deafening. Costello must have kickedhimself. But the troika learned their lesson well: from then on they neveremailedorput inwritinganything that revealed their intentorcharacter–atleast,notuntilonedayinlateJunewhentheywerereadyforthekill.Thenextmorningthetroika’stechnicalteamheadedfortheairport.Forthe

first time inweeks I felt that theremight still be a chance to unite our sidebehindacomprehensiveplantoendthecrisiswrittenfortheGreekpeoplebytheirowngovernment.Buttosucceeditwouldrequireacollectivewillingnesstodo toMarioDraghi,AngelaMerkel andChristineLagardewhatNicholashaddoneinhisinauguralEurogroupWorkingGroupteleconference:presstheOffbutton.

Merkel’sspell

DuringhisyearsinoppositionAlexishadbeenpubliclydisparagingabouttheGermanchancellor.Hissarcasticquipsabout‘Frau’or‘Madame’Merkelhadbeen plastered all over the press, while Syriza had been promising that themomenttheywonofficetheywouldunilaterallytearuptheMoU,writeoffthedebtandperformotheramazingfeatsinconsistentwiththeirstatedintentionofnegotiatinganewdeal forGreecewithin theeurozoneand theEU.Alexis inparticular had laboured under the illusion that forces beyond Europe, fromRussiaandChinatotheUnitedStatesandIran,wouldcometoourassistance,whileEurope’speripherywouldsomehowhelpcontainBerliningeneralandMrsMerkelinparticular.This was in direct contrast to my oft-stated opinion that of all Greece’s

potentialalliesinEuropeorbeyond,MrsMerkelwasourbesthope.Naturally,this view startled those, including Alexis, who expected me to look insteadtowardscountriessuchasFrance,ItalyorSpain,forwhomMerkelrepresentedthe common enemy. But I was convinced that no government of a deficiteurozone countrywould dare opposeBerlin, even if theywanted to in theirheart of hearts. Instead, the key to our success lay in Angela Merkel’sdetermination to keep the eurozone together, as a result of her small-‘c’conservatismandheraversiontostructuralbreaks.2From2010to2014IhadmadeitmybusinesstoconvinceGreekpoliticians

that theonlyway to forceChancellorMerkel to step in todeliverdebt reliefandareasonableagreementforGreecewouldbetopresentherwithasimplechoice: evict us from the eurozone at your own political cost or deliver usfrom the workhouse. I was and remain convinced that, unlike WolfgangSchäuble,whowould have jumped at the opportunity to chuck us out of theeurozone, Angela Merkel would shy away from this course, howeverreluctantly.AndfromthedayIassumedthefinanceministryIhadkeptmyeyeontheGermanleader,ensuringthatnothingwedidwouldpreventher, ifshechose,frompresentingourdebt-swapproposalsandrevisedreformagendatotheBundestagasherownsolutiontotheGreekcrisis.Allowinghertoportraytheseproposalsasherownwasanecessaryconditionforadecentagreement.Butitwasnowherenearsufficient.TomotivatehertoadoptourproposalsatallwehadtoremaindeterminedtostandourgroundinthefaceofWolfgangandhissidekicks’threatsofGrexit.Onlythenwouldthechancellorstepin.

AndtherelaythedifferencebetweenAlexisandme.Hehadaverynegativeview of Merkel, seeing her as an enemy who would never yield unlessWashingtonorMoscoworsomeotherpowerforcedherto.ButIsawinherapragmatic politician who would, once all other alternatives had beenexhausted,dotherightthing.UnlikemanyGreeks,IneitherdemonizedMerkelbut nor did I expect her to act on our behalf without duemotivation. Thus,when she intervened helpfully before the 20 February Eurogroup, myexpectationswereconfirmed: thechancellorwould step inat the lastmomentand as a last resort if she feared that we would not budge. Equally, when acouple of weeks later she promised another positive intervention whichWieser ’svisit toour flatputpaid to,myexpectationswerealso fulfilled: thechancellorwouldneveryielduntilshehadto.ButAlexissawMerkel’sbehaviourdifferently.Whensheintervenedbefore

20 February, his negative expectations resulted in euphoric surprise. Then,withhisexpectationsraised,Merkelwasatlibertytodashthematwill,causingAlexis to sink into the depths of misery. She used this capacity to toy withAlexis, liftinghisspirits,depressing themandraising themagainas it suitedher. I didmy best toweaken her influence overmy primeministerwithmyown analysis of her behaviour, arguing that the onlyway to secure a decentagreementwas toensureshewasconstantlyaware thatwewerenotafraid topresstheOffbutton.Butitwasnotworking.ByAprilIsensedthatAlexishadsuccumbedtothechancellor ’sspell.The reader would be wrong to think that Alexis was easy prey for Mrs

Merkel. He was not. It took the legacy of the ColdWar to push our youngprimeminister towardsher, and it tookher astoundingworkethic to subduehimfullyoncehewasthere.Thecataclysmiccivilwarofthe1940shadleftGreeksbitterlydividedand

inaweof twohegemons:RussiaandAmerica.Rightists looked to theUnitedStates as their bulwark against the red bear, while leftists hoped the USSRwouldsupportthemweretheyevertowingovernment.OfcoursebythetimeSyriza came to power, the USSR no longer existed, yet a section of Syrizacontinued to see Moscow as a potential friend in our struggle against theneoliberal troika. Quite a few even nursed fantasies of petrodollars sent byVladimirPutintosupportourcause.While relativelyunsusceptible to thisdelusion,Alexis seemednevertheless

convincedthatsomehelpwouldcomefromRussia.WhenhetoldmethisIdidmybesttodiscouragehim.‘RussiaisnotChina,’Iremembertellinghim.Even

if Putin was prepared to provide money in exchange for some pipeline orstate-ownedcompany,I toldAlexisweshouldturnitdownfor threereasons.First,Putinwasanunsafe friend,andRussianbusinessnotoriously incapableofanddisinclinedtowardsproper long-terminvestment–unlikefor instancethe Chinese. Second, Russia was at sea financially, and any promise ofsubstantial help would prove hollow. Third, Putin and his regime had anappalling human rights record: did we, whose only real backers were theprogressivesofEurope,wanttobeassociatedwithsuchastate?Atthesametime,ourproblematiccoalitionpartnersfromthefarRighthad

theoppositeidea:thatwethrowourselvesatthefeetoftheUnitedStatessoasto extricate ourselves fromMerkel’s grip.On one occasion, during a breakfromacabinetmeeting,DefenceMinisterKammenoswalkedovertosaythatIshouldnot allow theGermans toworryme. ‘I cangetyoubillions from theothersideoftheAtlanticandaswapdealwiththeFedthatwillmakeitpainlesstogetoutoftheeuro,’hesaid.3Ismiledandtriedhardnottogivehimapieceofmymind. He continued, suggesting that I meet a friend of his, a Greek-AmericanonWallStreetwhohad itallworkedout.Alexiswas listeningandsaidthatIshouldlookintoit.Asthefinanceministerofafinanciallystressedcountry I had an obligation to leave no stone unturned, so although I wasconvinceditwasasham,IdidmydutyandmetthesaidgentlemanatmyofficeandevenaskedJamieGalbraith tovisithisassociates inNewYork.As Ihadguessed, the proposed dollar lifeline was a phantom.4 By the time I hadconfirmedandreportedtoAlexisthattheFedswapandtheAmericancavalrywereadelusion,PutinhadapparentlyalsotoldhimnottoexpectanymoneyorindeedanyhelpatallfromRussia.‘YoumuststrikeadealwiththeGermans,’hesaid.5WithnohopeofsupportfromeitherColdWarsuperpower,Alexishadlittle

optionbut to turn toMerkel,which left himvulnerable toherpsychologicalmanipulationandremarkablediligence.InthewakeofthefruitlessfiascothatwastheEurogroupof9March,Alexis

spoke to Angela Merkel on the phone to ask for a second intervention. InresponsethechancellorrequestedthathehavehispeoplecarefullyannotatetheMoUwiththeirprecisepointsofdisagreementandwhattheyproposedinstead.Naturally,AlexisagreedandcalledmeimmediatelyafterwardswitharequestthatIpreparethedocument.ThatnightIstayedattheofficealone,oncemoredoingbattlewith theMoU’s fifteenparagraphs.Underneath eachparagraph Iwroteacolour-codedcommentary: ingreen Iexplainedwhichaspectsof the

paragraphweagreedwithandwhy;inredIlistedourobjectionsandexplainedthem; finally, in blue, I presented alternative policies with which to replacewhat we objected to. By the following morning, the original four-pagedocumenthadgrowntotwenty-sevenpages.On 20 March, three days after the Eurogroup Working Group

teleconference at which Theocarakis had pressed theOff button, Alexis wasdueinBrusselsforanEUsummit.AngelaMerkelhadsuggestedthataftertheformal dinner the two of them get together so that he could present thedocumentandtheycoulddiscussit.Intheeventtheformaldinnerdraggedonlonger than expected, almost tomidnight, andAlexis thought that the chancefortheirtête-à-têtehaddisappeared.Notso.TheindefatigableAngelatookhimtoanadjacentseminarroomandproceedtospendhourswithhim,goingovereverysentence,everyword,everynuance in thedocument.Whenat last theyhadfinished,shecongratulatedhimonthetexthehadbrought–twice,infact,asAlexistoldmewithaself-satisfiedglow.Hercongratulations,herdiligenceandhermastery of theGreekprogramme in incredible detailmade quite animpressiononAlexis.6Merkel’s influence over him had been growing steadily, and when the

chancellor finally delivered her coup de grâce, it targeted the solidaritybetween Alexis and me. In essence, her proposal was this: given the deepdislikethatmostGreeksharbouredforWolfgangSchäuble,shesuggestedthattheysidelinetheirfinanceministers–letVaroufakis‘cancelout’Schäuble,andSchäuble ‘cancel out’ Varoufakis, to use her words – while she and Alexisworkedbehindthescenestoreachareasonableagreement.Todothis,AngelaMerkelsuggestedtheyestablishathirdlevelofnegotiations,separatefromtheBrussels Group and the Eurogroup and free of me and Schäuble, at whichAlexiswaspromisedconcessionsimpossibleattheEurogroup.Alexis loved the idea.A secretmeetingwas thus arranged to takeplace in

Frankfurt between their envoys, who would be known thereafter as theFrankfurtGroup.MerkelchoseMartinSelmayr,aGermanfunctionary in theEuropeanCommission, to representher,whileAlexis selectedNikosPappas.They were joined by Benoît Cœuré, representing Mario Draghi, and theubiquitous Poul Thomsen, representing Christine Lagarde. The FrankfurtGroup was a microcosm of the Eurogroup except for three casualties:Wolfgang, myself and Pierre Moscovici, who was replaced as Juncker ’srepresentativebyanotherFrenchman,LucTholoniat,whoalsoworkedforthecommission.

The Frankfurt Group proved largely irrelevant, but it had its one major,intendedeffect:Alexisbecameconvinced(orsohesaid)thatIwasmakinganenormouscontributiontothecauseby‘cancellingout’Wolfgang,butinrealityAngelaMerkel had succeeded in sideliningme. Itwas a brilliant ploywhichsucceededinspreadingdiscordinourranksandofferingAlexishopethatshefullyintendedtodash.WithinamonthoftheformationoftheFrankfurtGroup,bundling me and Schäuble together had had a sinister side-effect: in thecollective consciousness of thewar cabinetWolfgang and Iwerenow in thesame mental box – two combatants that neutralized one another. But by themiddleofMay,whathadbegunasacompliment–thatinsacrificingmyselfIhad succeeded in taking out Schäuble – had metamorphosed into a chargeagainstme: that Iwas in cahootswithWolfgangSchäuble, plottingwithhimbehind thebackof thechancellorandmyprimeminister to introducecapitalcontrolsandbringGreeceoutoftheeuro.Such an insinuation could never have been believed without generous

assistancefromwithinourWarCabinet.ImaginemyhorrorwhenIdiscoveredthat not only was assistance being given but that it was based on, possiblyinitiatedby,falsereportsfromGreece’sintelligenceservices.Tothisdaypeoplestillaskme, ‘WhenwasAlexis turned?’It isaquestion

thatIrefusetoengagewithsinceIknowIshallneverbeabletoanswerittomysatisfaction.NeverthelessIlistentotheanswersothersgivewithsomeinterest.Ofthose,onefascinatedme.Inearly2016DanaeandIwerehavingdinnerwithanothercouple,afilmdirectorandhiswife.Asourpartnersweredebatingthequestion, the film director and I kept silent, until suddenly he volunteered alaconicanswer:23March2015.Startledbyhisaccuracyandcertainty,Iaskedwhythatparticulardate.Beingthevisualartistthatheis,hepulledoutatabletto show me two photographs by way of explanation: one was of Alexisentering theChancelleryonhis first formalvisit toBerlin, a coupleofdaysafter his late-night meeting with Merkel in Brussels.7 In it he lookeddowntrodden.ThesecondwasofhimleavinganhourorsolateraccompaniedbyChancellorMerkel,withamilitaryguardofhonourpayingitsrespects.Helookedjubilant.‘Doyouknowwhathe’sthinkingashe’sexitingtheChancellery?’myfriend

asked.‘Ihavenoidea.’‘What the hell am I going to do now with Varoufakis? That’s what he’s

thinking.’

13

Therightstuff,foiled

‘Whenhasarevolutioneverdeliveredanythingotherthandisaster?’Afellowlecturerat theUniversityofEastAnglia,whereIwas teaching in

the mid-1980s, once put this question to me. For him, an EnglishmaninfluencedbythethinkingofEdmundBurke,itwasarhetoricalquestionrichwithtruthandwisdom.ForaGreekitwasnonsense.Ourverycountrywouldnotexisthaditnotbeenfortherevolutionof1821–aninsurrectionagainsttheOttoman empire that stood a tiny chance of success andwas opposed at thetimeasrecklessbyalargepartoftheGreekelite.Everyyear,on25March,everyvillage,townandcityinthecountryputson

a parade to celebrate that reckless utopian act of faith which, almost byaccident, yieldedmodernGreece. I have to admit I have always found theseparades a little too kitsch andmilitaristic, but in 2015 the spirit of the 1821insurgencyseemed toacquirenewmeaningfor themajorityofGreeks.Thistime the spring was brimming with something more than wildflowers andswallows; pride and dignity were blossoming again throughout the land, aswell as among the Greek diaspora in the Americas and Australia. So whenAlexisaskedmetorepresentthegovernmentatoneoftheparades,IsaidyesandrequestedthatitbetheparadeinChania,theCretancitywherethelargestparadeontheislandwasscheduledforthatyear.Apartfromsomeancestorsoneachofmyparents’sides,Ihavelittlelinking

metotheisland,andyetCreteisspecialtome.DanaeisconvincedthatIhaveaCretancharacter,whateverthatmeans,andmyAustralian-borndaughter,whohas been to Crete only once, tells her mates in Sydney that she is Cretan.Whatever the background, I was excited that Danae and I would attend theGreek Revolution Day parade in Chania. When the day came, we walkedaroundthecentreofChaniawithalargegroupoflocalofficials,makingourwayslowlytoamarquee,whereI thenstoodnexttothearchbishopofCrete,the mayor and the chief of police to watch the procession of localschoolchildren,policeunits,firefighters,ambulancestaff,platoonsofmenandwomendressedinrevolution-eragearand,touchingly,fiveveteransfromthe

Battle ofCrete inwheelchairs pushedby their grandchildren.1As the paradepassed, the participants turned towards me to salute their government’srepresentative. Itmademe feel at once proud and ridiculous, but I confess Ienjoyedeverymomentof it,despite theanarchist inmeconstantly taking themickey.Afterwards,welaidawreathatthewarmemorialandmadeourwayslowlythroughadensecrowdtowardsthetavernawherelunchhadbeenlaidout.Aswewalked,men andwomen anxiously squeezedmyhand, huggedme,

spokewords of encouragement, all conveying onemessage: ‘Don’t give in!Donotdaresurrender!NoU-turn!’AtonepointInoticedajournalistfilmingus.When a middle-aged lady repeated the slogan ‘Rupture now!’ I stopped,tookherhandand,withaneyetothereporter,said,‘I’msureyouunderstandthat thisissomethingthatwemustbeunitedbehind.It’snotjustforustodo.Wemusthangtogether.’‘We’rewithyou!’sheinsisted.‘Yes,butyoumustbewithusonthedayaftertherupturetoo!’Thefootagewasthemainnewsitemonalltelevisionstationsthatnight,asI

hadhoped.Genuinenegotiationswithourcreditorshadstillnotbegun,andthemomentofeitherruptureorsurrenderwasapproaching.Millionswereurgingustowardstheformer.Alexishadalreadyputthequestioninthewarcabinet:‘Wouldthosecallingforrupturetodaybewithusafterwards?Orwilltheythencurseus forhavingbrought the ruptureabout?’ Itwasan importantquestionandonethatIwantedtoaddresspublicly.AfterwearrivedbackinAthensthatnight,AlexisandIhadalongtelephone

conversation.‘Didyoureallytellagrannythatshehadbetterbewithusafterarupture?’heasked.‘Yes,Alexi,Idid.Wemustprepareourpeople.Itisinexcusabletobehaveas

if there is nothing toworry about.Wemust gradually let them into the truepictureifwewantthembyoursidesintheeventofaclash.’Alexis agreed but cautioned that alarming people would worsen the bank

run. It was a valid point, but I sensed that Alexis was gradually retreatingtowardsdelayatallcosts.Changingthesubject,IrelayedtoAlexisaphoneconversationIhadjusthad

withLarry Summers,who had calledwith information and solid advice: theIMFwasplanningtodemandawickedturnoftheausterityscrew.Theywouldclaimwewerefacingahugeprimarybudgetdeficitofbetween-2percentand-5percentofnationalincome.Itwasanabsurdprojection,giventhatwewere

running a primary surplus at the time; indeed, even after the events of thesummerof2015,thefinancialyearclosedwithoutaprimarydeficit.Alexis was upset and expressed some animosity towards Summers. I

explainedthatLarrywasnotcondoningtheIMFposition;hewastellingusthatwhateverelseweconcededwemustnotacceptmoreausterity.Obama,Lew,theIMF,everybankerinWallStreetandtheCityallunderstoodthatitwasacruel,unusualandstupidpunishment.‘Larry’smessageissimple,’Isaid.‘Weshouldnotyieldontheonethingthattheworld’smostpowerfulpeopleagreewithuson.’Alexisacceptedthepointandseemedmorerelaxed.Todefusethetensionwe

exchangedajokeortwobeforehangingup.Itwaslate,wellafter2a.m.DanaeandIsatonthesofaforamoment’speace

and togetherness before turning in. She asked me how I felt. As I began toanswer, she got out her phone and started videoing. ‘These are historicmoments,’sheexplained.ItwassomethingthatDanaewouldgoontodoquitea few times thereafter. The experience of watching those videos has beenpainfulenoughtodetermefromreturningtothemmorethanonce.Thatnightmy spontaneous response was: ‘I feel alone, Danae. I sit in my ministerialoffice,supposedlytheheadoffourteenthousandcivilservants.ButinrealityIam onmy own, confronting a large, fullyweaponized armywithout even asmallshieldforprotection…hell,withoutevenaproperpressofficetolettheworld know of the solid policy work that my tiny team is doing; let aloneprotectmefromliesanddistortionsthatwouldmakeJosephGoebbelsproud.’Thatfeeling–andevidencethatitwasjustified–wouldonlygetstronger.

Fromgloomtothesublimetotheabsurd

BytheendofMarchalltheGreekstate’sspareliquidityhadbeenspentonourIMF repayments. According to the second bailout loan agreement, theserepayments, amounting to around €1.5 billion, were meant to have beencoveredbymeansofdisbursements fromEurope’sbailout fundand theIMF,but these had of course been withheld as part of the strategy to force us tocapitulate.The€1.9 billion theECBowedus had also beenwithheld and the€1.5billionthatBeijinghadofferedushadbeenblocked.Itwasamiraclethatmyministrymanagedtofindthat€1.5billionfortheIMFwhilealsomeetingourobligationstocivilservantsandpensioners.Itprovedthat,despitethedeep

crisis, theGreekstatewaslivingwellwithinitsmeansandthatall thetalkofmy demanding loans from other European countries to pay for extravagantpensionsandsalarieswasnonsense.Nonetheless,wehadcometotheendoftheroad.Wehadgiventhecreditors

awholemonthtotesttheirwillingnesstomeetushalfway,tocometothetableingoodfaithanddiscussaproperplanforendingtheGreekcrisis.Theyhadfailed that test purposely. The Brussels Group was stalled as the troikadismissedeveryoneofourproposalswhileputtingforwardnoideasoftheirown.Notoncehadwereceivedevenasinglepagefromthemcontaininganypractical solution or policy. And yet the mainstream media even in GreecewerereportingthattheGreekgovernmentwasfailingtosubmitcostedplanstomatchthe‘meticulouslyprepared’proposalsoftheinstitutions.Themammothgapbetweentheirreportsandrealityconvincedmethatweweresleepwalkingtoourdoom.Urgentactionwasnecessary.Itwastimeeithertosurrenderortofight.Itwastimetofoldortodefault.As a first step we needed to announce that we did not intend to continue

repaying the IMF, and later the ECB, as long as the Eurogroup and theinstitutions refused to talk business. On 3 April an informal inner cabinetmeeting was convened at the prime minister ’s office. I arrived at Maximosearly in order to confront Alexis and convince him that a decision wasoverdue: he must either announce an imminent default to the IMF or callMerkel with a request for the terms of our surrender. ‘You have no otheroption,Alexi,’ I insisted. ‘Prolonging thepresent stasisonlyhelpsWolfgangandhissatellites,whoareedgingusoutoftheeurozonethroughaprocessofattrition.’Alexiswasunenthusiastic.Evidentlydownheartedhegavemehisusualline:

wewoulddefaultbutnotyet.‘Wemustnotlosetheblamegame…LetmetalktoAngelaagain…Thetimeisnotright.’Iretortedthatwehadalreadylosttheblamegame.‘Readthepress,Alexi,’I

said.‘Everydaythatpassesisreportedasanotherdaywhenwehavefailedtoputforwardproposalsthataddup.’Wehadwaitedlongenough,demonstratedourreadinesstocompromiseandgiventheothersideachancetocompromisetoo.On20Februarywehadalienatedmanyofourownpeopleinordertodoso. And what had been the response? They had reneged on the agreementwithindays. ‘Thatwasamonthago,Alexi.Since then theyhavebeenuppingtheantewhileAngelahas,despiteherkindwordsandpromisestoyou,failedtointervene.Ifnotnow,whenarewegoingtodefault?’

The ensuing conversation lasted a while. Tenaciously, though with littleenthusiasm,hefollowedhisusualpracticeofagreeingwitheverythingIsaidbut drawing the opposite conclusion. He spoke slowly and lethargically,lookingevermoredownhearted.Eventuallyweranoutoftime:theministersweregatheringintheconferenceroomoppositehisoffice.Ilefthisofficetojointhem,givingAlexistheopportunitytofreshenupalittlebeforechairingameetingwhose purposewas not just to brief keyministers but also to raisetheirspirits.ShortlyafterIhadtakenmyseatatthetable,Alexisenteredlookingalittle

better.Asusual,hekickedoffthemeetingwithabriefingonthestateofplay,butwithnogoodnewstoreportnoranyannouncementsofvaliantinitiatives,hesoonflagged.Confinedtoagrimassessmentofaprocessthatwasevidentlygoingnowhere,themorehetalkedthegreaterthegloomintheroom.Bythetime he had concluded, therewas a leaden atmosphere of resignation.Everyministerwhocontributedtotheensuingdiscussionspokeinadistincttoneofmelancholy.Onceeveryonewhowantedtohadspoken,Alexis tooktheflooragaintowrapupthemeeting.Hebeganmuchashehadendedhisintroductoryspeech – slow, subdued, almost depressed – recounting how difficult thesituationwasand thedangers involved,butgraduallyhepickedupa little inspeedandbuoyancy.

Before you all came in, Iwas talkingwithVaroufakis inmy office.Hewas trying to convinceme that it is time to default to the IMF.Hewastellingme that theyare showingno signsofwanting tocompromise sothatadifficultbutdecentagreement,onethatiseconomicallyviableandpoliticallymanageableforus,canbereached.Iexplainedtohimthatthisis not the right time to default.Thatwewill lose the blamegamewhenthere are still three months left in the extension we secured on 20February.That defaulting to the IMFwill trigger the cross-defaults thusgivingDraghitherighttoclosedownourbanks.2

Herewe go, I thought.He is having it out with me in cabinet without myhavingsaidaword!Except that I was badly mistaken. After a short but theatrical pause he

continued,hisvoicesuddenlygrowinginconfidence–andnotjusthisvoice;hiswholebodybegangraduallytoresonatewithenergy.TomyastonishmentIheardhimsay,‘Butyouknowwhat,comrades?I thinkheisright.Enoughis

enough.Wehave beenplaying by their rules.We accepted their process.Webentoverbackwardstoshowthemthatwearewillingtocompromise.Andallthey did was to delay us and then blame us for the delay. Greece is still asovereigncountryandwe,thecabinet,havethedutytosay,“Enough!”’Then,risingfromhischairandwithhisvoicegrowinglouder,hepointedatmeandbellowed, ‘Not only are we going to default but you are going to get on aplane,gotoWashingtonandtelltheladyinpersonthatweshalldefaultontheIMF!’The room erupted with cheers. Colleagues looked to one another for

confirmationofwhattheyhadheard,fullyrecognizingitshistoricnature.Thegloomanddarknessvanishedasifacurtainhadbeenrippedbackonasunnyday. Like everyone else but perhaps more, much more, I allowed myself amoment of elation.At thatmoment it felt like the nearest thing to a sublimeEucharistabunchofatheistscanexperience.AsIheadedoutofMaximos,AlexisandIhuggedsilently.Euclidwalkedout

withme, looking just as chuffed.Aswewere going in the samedirection, Igave him a lift onmymotorcycle. The photo of two Greekministers on aYamahaXJRwentaroundtheworld.ThatnightEuclidsentmeatextmessage:‘Mydaughtersarejealous.Theyalsowantarideonyourbike.’Itwasararehappyday.That night I worked for hours with Spyros Sagias, preparing the legal

argument thatIwouldpresent toChristineLagarde.SpyroswasscribblinginGreekinalegalnotebook;Iwastypingintomylaptop,thetwoofusmanaginglittlebylittletoproduceGreek-andEnglish-languageversionsofourofficiallettertotheIMFmanagingdirector.Itsgistwasthat,intheGreekgovernment’sopinion, the IMF could not expect us to pay up while, first, the troika hadsuspended disbursements toGreece even of its ownmoney and, second, theECBwasreducingourliquidity.3Meanwhile, my secretary was trying to get hold of Christine Lagarde’s

office. It took some timebecause itwasGoodFriday.4 Alexiswantedme toleaveimmediatelyforWashington,DC,whichmeantarrivingthereonEasterSunday.OncewehadgotthroughtoChristine’sofficeandexplainedthattherewere special circumstances that demanded a meeting, we were told that shewouldcutshortherEasterbreakandmeetmeatherofficeinthelateafternoonofEasterSunday.On the long flight toWashingtonviaMunich IwasaccompaniedbyTakis

Roumeliotis, a former representative of Greece at the IMF who had

distinguishedhimselfasanearlycriticoftheIMF’sGreekprogramme.5Inmybags I carried the official letter that would accompany my verbalannouncement thatmyministrywouldnotbemaking thenextpayment to theIMFof€462.5million,dueon9April2015,whileinmymindIwasplanningthebestwaytouseourimpendingdefaultasawayofextricatingGreecefromitsdoomloop.Thelongflightatleastofferedmeafewhoursofisolationinwhichtorewritethedocumentthatwas,withthehelpofJeffSachsandothers,tobecomemyministry’sconstructivesubstitutefortheMoU.Firstdefault,thenreturn immediatelywith amoderate, sensible plan forGreece – thatwas theonlywayofshakingupthecreditorsandendingtheviciouscircle.UponarrivingatRonaldReaganWashingtonNationalAirportIdiscovered

thatmyUSvisawasnolongervalid,despitehavinganotheryeartorun,sinceIhadresignedfromtheUniversityofTexastocontesttheparliamentaryelectioninGreece.Ofcourse,thefactthatIwasaministerofstateexpectedbytheheadof the IMF within two hours and had appointments the next day at the USTreasuryandtheWhiteHousemeantnothingtotheUSimmigrationofficers.LikeanyotherforeignerIhadtogothroughtheprocessofmakinganofficialapplication online, which I proceeded to do at the immigration checkpoint.Eventhoughitwasaninconvenience,therewassomethingpleasingabouttheegalitarianismofUSimmigration.The extra time it took to clear the border delayed the turning on of my

mobilephone.Inretrospect,thisgavemeanotherhourorsoofmentalpeace,forwhenIdidswitchiton,IfoundatersetextmessagefromAlexis:‘Callme.’Naturally,Ididsoimmediately.‘Look,Yani,’ he said, ‘we’ve decided thatwe’re not going to default, not

yet.’Flabbergasted,Iasked,‘Who’s“we”?Whodecidedthat“we”won’tdefault?’Alexis,soundingcoy,said,‘Me,Sagias,Dragasakis…wedecidedthat it’s

nottherightmovejustbeforeEaster.’‘Thanks for tellingme,’ I replied, fuming and dejected.Adopting as cool

anddispassionateatoneasIcould,Iasked,‘SowhatdoIdonow?Getonthesameplaneandreturn?What’sthepointofseeingLagardenow?’‘No, youmust hold themeeting.Youmust go ahead aswe agreed.Go in

thereandtelltheladythatwe’lldefault.’ItwasthemostabsurdthingIhaveprobablyeverheard.Icannotbehearing

thisright, I toldmyself. Ineededclarification. ‘Whatdoyoumean?Tellherthatwe’lldefaulteventhoughyou’vedecidedthatwewon’tbedefaulting?’

‘Yes,’ said Alexis. ‘Threaten her so that she gets anxious enough to callDraghiandpushhim tostop the liquiditysqueeze.Thenwe’ll reciprocatebyannouncingthatwe’renotdefaultingtotheIMF.’Theadrenalin racing throughmedissolvedall tracesof fatigueor jet lag.

Keepingmyindignation incheck, Iasked, ‘Andwhat ifDraghidoesn’t relaxtheliquiditysqueezeuponhearingfromLagardethatIthreatenedtodefaultontheIMF?Whatthen,Alexi?’‘They will give in, Yani, they will!’ came back his baselessly optimistic

prediction.‘And what if they don’t? Don’t you see that when David’s facing down

Goliathwithonlyasmallcatapultasaweapon,it’ssillytoputthecatapultinjeopardy?Ourcatapult is the threatofdefault.Youshouldonly take itout ifyouintendtouseit.Forifyouthreatentouseitandthenblinkwhentheenemycallsyourbluff,we’re finished.Then they’llnever fearyour threats.Wearetooweaktobluff,Alexi.And,asyourfinanceminister,Icannotletyouwasteouronlyweapon.IcannottellLagardewe’lldefaultafteryouhavejustmadeitcleartomeyoudon’tintendtoletmedefault.’‘You will tell her we’ll default. Consider this an order from the prime

minister.’ItwasthefirsttimeAlexishadpulledrankonme.Andhedidsotowasteour

only trump card. As I was switching off my mobile phone it suddenly feltunbearably hot and heavy. Watching Takis walk ahead of me towards theterminal exit and thewaiting car, escorted by embassy staff, I felt separatedfromhimbyahazeofgrief.Ienviedhimfornotknowingandforhisfreedomfromthequestionsricochetingthroughmymind.HadDragasakisandSagiaschangedAlexis’smindwhileIwasinmid-air?HadAlexis’srousingspeechinMaximosduringwhichhehadembracedmyproposaltodefaultmerelybeenaruse to lift the spirits of his cabinet before cynically calling off the default?HowcouldIserveaprimeministerwhosocasuallyembracedanemptythreatagainsttheworld’smostpowerfulfinancialinstitution?AsthecarpulledawayfromthekerbIknewIhadtofindawayofsilencing

thecacophonyinmyhead.TheunanswerablequestionsaboutwhatwasgoingoninMaximoshadtowait.ChristineLagardewasexpectingmeinherofficeat an otherwise empty IMF headquarters. And I was under orders from myprimeministertowalkinandthreatenherwithsomethingIbelievedweshoulddobutwhichhehadsaidhewouldnot.

There’saladywhoknows…

Of the many offices I visited during my brief ministerial stint, ChristineLagarde’sattheIMFwastheonlyoneborderingontheaestheticallypleasing.Sheherselfwasrelaxedandwarm.ButtheabsurdinstructionsIhadbeengivenoverrodeallelse.ItwasasifIhadathornlodgeddeeplyinmyfoot:everystepintothatroomwaspainful.Therewasachance,Ibelieved,thatChristineandImightreachsomekindofconsensus,but theappearanceofPoulThomsenathersideeradicatedanyremaininghopeofthat.I apologized for spoiling her Easter Sundaywhile agonising about how I

could possibly carry out Alexis’s diktat without damaging our credibility.‘Noneofuswantstowritehistoryinanegativeway,’washowIbroachedtheissue.Ithentriedtoimpressuponherwhatadifficultspotthey,ourcreditors,had put us in. I was armed with an impressive number: 14.21 per cent, theproportionofGreece’spunynationalincomethatmyministryhadhadtofindduring our government’s first three months just to repay the IMF.6 I toldChristine that, given our superhuman repayments in March and the ECB’sstubbornness, ‘asof9Aprilweare in thedangerzone.Toput itbluntly, thegovernment will be pushed into the hideous dilemma of having to choosebetween defaulting to the IMF or to pensioners and civil servants. As youunderstandwheneveragovernmenthasthisdilemma—’Christineinterruptedmehelpfullytosay,‘Yes,itisano-brainer.’Toher immense credit, the IMFmanaging director ’s viewof how to deal

with this dilemmawas precisely the opposite of that ofKlausReglingwhenJeff and I hadmet him after theEurogroupmeeting of 9March.Of course,when I pushed a little harder and asked herwhat shewould do as a financeministerfacedwiththisconundrum,Christinewriggledoutofitbysayingthatshewouldhavetriednottobefacedwiththisconundrum.ThetimehadcometodelivermymessagefromAthens.‘Letmeconveyto

youanargumentthathasbeengaininggroundinAthensunderlegaladvice,’Isaid,gearinguptoreadouttheletterthatIhadscriptedwithSagias.Thegistofour casewas simple, I explained.Greece and its creditorswere bound by aloanagreement.Theloanagreementspecified,first,ascheduleofrepayments(fromGreecetothecreditors),second,ascheduleofdisbursements(fromthecreditorstoGreece)and,third,asetofconditionalities(theMoU)underwhichthe disbursements would be made. Since the general election three major

developments had occurred: first, the disbursements had ceased, second,Greece’sliquidityhadbeencurtailedbytheECBand,third,theconditionalitieswere under renegotiation in the context of the 20 February Eurogroupagreement. Ergo, until this renegotiation delivered a new set ofconditionalities, our repayments should be suspended alongside thedisbursements–atleastforaslongastheECBexerciseditspowertoreduceourliquidity.7Christine answered quickly, shrewdly, albeit in a manner that violated the

spirit of the 20 February agreement. If Athens insisted on a moratorium ofrepayments based on the argument that the conditionalities were underrenegotiation,herrejoinderwouldbethattherewerenonegotiationsovertheconditionalities.8Smiling,Iaskedherwhatonearthwewerenegotiatingaboutif not the conditionalities? Naturally I got a nebulous reply: ‘It is aboutmatchingtheMoUwithyourcommitments.’Sincewewerenotinacourtoflawcompetenttosettletheissue,therewas

nothingmoreforme todoat thatmomentother than tosaywhatAlexishadorderedmetosay:‘Iamnotauthorizedtoenterintoawarofwordswithyou.ButIamauthorizedtoinformyouthatinfourdays’timeweshalldefaultonourscheduledrepaymenttotheIMF,aslongasourcreditorscontinuetostallthenegotiationsandtheECBcontinuestolimitourliquidity.’AndIwouldhavesaidthesewordsproudly,butonlyif theywerebackedbytheintentiontoactonthem.Intheabsenceofthatintention,Iwentaboutthingsdifferently:ItriedtowintheIMFmanagingdirectoroverwithanhonestaccountofthesituation.Ourconversationlastedalongtimeandcoveredabroadrangeofissues.It

wasfriendly,constructiveandpleasantbecausebothofusmadeanefforttoseetheother ’spointofview.Keen toavoid theusual subterfuges, I explained toher my greatest worry: that all the Eurogroup discussions, including theBrussels Group negotiations, were taking place under false pretences. ThatGreece’s recovery and sustainabilitywithin the eurozonewas notwhat thoserunningtheshowcaredfor.TodrivethepointhomeIsharedwithChristinemyconversationswithWolfgangSchäuble,myoffertohimofthreeorfourmajorreformbillsthatwewoulddraftcollaboratively,andhowhehaddismissedthisideabecause,inhisview,noGreekgovernmentcouldkeepGreeceinsidetheeurozone.‘So,doyouseeChristine,’Ibeseechedher,‘whyweneedsomeevidencethat

weareallon thesamepage?Thatweallwantacomprehensivesolution for

Greecewithintheeurozone?Wearenotconfidentthatweareallonthesamepage.’‘Doyoumeanpolitically?’sheaskedwithconcernevidentonherface.‘Yes,politically,’ Ianswered. ‘Wecraveevidence thateveryonearound the

Eurogrouptablewantstoavoidan“accident”.IhopeIamwrong,butmyviewis that this is not at all evident.Amajority are craving the accident.Wewillcompromise, but we do not intend to end up compromised in the sense ofsigninguptoanMoUwhichwethinkisunenforceableandnothelpfulevenifitisenforced.’‘Whatdoyoumeannotenforceable?’Iexplainedhowdestructivefurtherausteritywouldbeforacountrythathad

alreadybrokentheworldausterityrecord:itwouldleadtoaworld-recordriseintherateofourdebt-to-incomeratio.MoreausterityandthecontinueddenialoftheneedtorestructureGreece’sdebtwouldleadwithmathematicalcertaintytothecountryeventuallybeingevictedfrom,orfallingoutof,theeurozone.FromthecornerofmyeyeIcouldseethatPoulThomsen’sgazewasfixed

on the floor and recalledhowhehadenthusiastically endorsedeveryword Ihad just uttered on our firstmeeting in Paris.9 Recalling also that Poul andother troikaoperativeshadrepeatedlyaccusedusof‘ideologicalfixations’,Italkedaboutthetroika’sideologicalfixationsusingexamples:‘Only9percentof the unemployed ever receive unemployment benefits. Greece is alibertarian’swetdream.Wehavefivehundred thousandpeoplewhohavenotbeenpaidforsixmonths.One-thirdofpaidlabourisundeclared.ThetemplatewithwhichtheIMFcomestoeverycountryisirrelevantinGreece.Ourmajorproblem is not labourmarket inflexibility. It is undeclared labour, theworstcase of informal flexibility. Even a boost in tourism does not create theincreaseinaggregatedemandnecessary.Youhavepeopleintheirearlysixtieswhoareunemployedandunemployableandwithnoaccesstosocialsecurity,leadingtopressuretoputthemintothepensionsystem.ThesearetheissuesIwanttotalkabout.’‘We want to talk about these issues too,’ said Christine in a thoroughly

conciliatorymanner.ExceptthatPoulintervenedjustatthatpointtomakesurethatwedidn’t.Insteadheturnedtheconversationtowardsthe‘process’oftheongoingnegotiations.‘Theissueistheprocess,’hesaidpredictably.‘Bringingittoconclusionis

possible.Ifyouengagewithus,Icanseelightattheendofthetunnel.Telluswhatyoudonotlikeabouttheprogramme.’

IrelatedhowChancellorMerkelhadalreadyaskedAlexisforpreciselysucha document. I explained how I had produced a twenty-seven-page documentwithareasofagreementanddisagreementandourcounter-proposalscodedbycolour.Ialsotoldthemaboutthelate-nightmeetingduringwhichAlexisandAngelasweatedoverthedocument.‘Sheisveryimpressive,’Isaid.‘Thechancellor?’askedChristine‘Yes,thechancellor,’Iconfirmed.‘Weallloveher,’wasChristine’sreaction.TowhichIreplied,‘Nowthat’stakingmattersalittletoofar!’I then handed over the document. Thomsen seemed very pleased with it.

Going through, he said, ‘This is very helpful,’ adding that the IMF ‘needagreementoncomprehensivemeasures’.Thatwouldbefine, I retorted. Iwantednothingmore than tositdownand

produceafullycomprehensiveplanforthelongterm,Itoldthem.Wedidnotwant to postpone these discussions for one second. ‘But let’s overcome theliquidity cliff,’ I said, ‘while showingour people and the institutions thatwemeanbusiness…Let’scomeupwiththreebillsthatgothroughparliamentintwo weeks and generate reformist momentum. And of course let’s talksimultaneouslyaboutthedebtrestructuringwithoutwhichnoagreementcanbecomprehensive.’Christine stepped in. ‘Maybe your approach is the right one, but I’m

sceptical … I don’t think that they [the ‘Europeans’] will like the idea ofworkingonthreeorfourbills.YouwillgettheWolfgangreaction.Ithinkitisbetterto“gocomprehensive”[accepttheprocessofacomprehensivereview]anddemonstratethatyouaredetermined.’SensingthatIhadconvincedher,thoughnotPoul,Iploughedon:‘Christine,

the idea that first we agree on everything and then we can do somethingtangibleonpressingreforms,ontheliquiditycrunch,soundstouslikethereisa lackof interest in finding a solution… I’mconvinced that there are goodintentions on both sides – us and the IMF. But I’m not convinced about theothers. I want to have my mind changed on this. Wolfgang’s position isimmovableanddisappointing. It ishim thatyoushouldbearguingwith.Notme.ThisiswhywewenttoMerkel.Becauseweneedclarityonintentions.’IndicatingthatIwasindeedgettingthroughtoher,ChristineturnedtoPoul

toaskhim, ‘Canyoudescribe the [Greek]government’spriorities regarding

thesethree,fourorfivebillsthattheywanttopushthrough?Howcanthisbemadeagreeablewiththecomprehensiveprocess?’PoulwasnothappythatChristinewaswarmingtomyproposalandtriedto

kicktheballoffthepitch.‘WhatweneedistogetstartedinAthenstobuildonwhatIagreehasbeenabettertechnicalprocess,’hesaiddraggingusontohisfavouritesubject:thetroika’sreturntoAthens.Itwasmyturntofrustratehim.‘Iamafraid,Poul,’Isaid,‘thatyourpeople

inAthensbehavedappallingly,tryingtobuildup[their]career[s]byemulatingwhatyouhadbeendoingthereastheIMF’sGreekmissionchiefsince2010.’Christineintervened,laughing,‘Ohno,no,no…Icannotagreewiththis,’

shesaidunabletocontainheramusement.‘Ihavetosupportmyteam!’‘Ofcourseyouhave tosupportyour team,’Iacknowledged, laughing too,

‘likeIhavetosupportmine!’Poulinterruptedthelaughterinhiscustomaryhumourlessstyle:‘Ithink…

togetbacktowork—’Only this time he was interrupted by Christine, who added, ‘On an

acceleratedway.’(Meaningafasternegotiationprocess.)Ithencutinwithmyownchallenge:‘Poul,youtalkaboutgettingtoworkon

a comprehensive programme, but letme put to you the awful truth: nobodywants to talkwith us aboutGreece’s sustainability and get down towork tomakeithappen.’‘Wewanttotalkaboutit,’saidChristine.‘Your people in Athens and your people at the Brussels Group are not

interestedinaseriousdiscussion,’Isaid.‘YouspeaklikeKeynesnow,’shereplied.Icouldnothelplaughingagain.Choosingnottorespondtohercomment,I

continued:‘Thewayyourpeopleareconductingtheconversationisasiftheyareeitherpushingusoutoftheeurozoneorwishingtokeepusinasazombie.AngelaMerkel’s position is clear. Shewants a pseudo-solution thatmuddlesthrough, does nothing to resolve our insolvency but keeps Greece in theeurozone.WolfgangSchäuble’s is even clearer.He does notwant a solutionwithin the eurozone. He wants Greece out of the eurozone. We are merelycollateraldamageofhisattempttodisciplinetherestoftheeurozone.AndthisisagravedangertoEurope.’Afteranotherminuteorsoofdisagreement,Christineeventuallyconceded

thepoint.‘MakinganexampleofGreeceisnotsmart,’sheadmitted,justifying

my hunch that, unencumbered by Thomsen, Schäuble and others, she and Icouldhavefoundcommonground.In a bid to showmyappreciation, I then said something that triggered the

followingexchange.

VAROUFAKIS:Iamhappytoacceleratebutweneedtofindasolutiontotheliquidityproblem…WhenIdonotknowwhetherIshallbeindefaultinafortnightitisveryhardtositaroundthetablewithaclearmindtoplanfor2025.Theideathatwewillcompletethisreviewbeforethelastdropofliquidityrunsoutisabsurd.Considerthis:wewouldnotbeheretodayifourmoniesfromtheECB’sSMPprofitswerepassedontoyouon our behalf, as I have proposed.No liquidity, no progress. It’s thatsimple.10

LAGARDE: You must press Mario Draghi on this. He appreciates thespeeding-upoverthepasttendaysofthediscussions.Presshimonthis.

VAROUFAKIS:TheIMFcanpresshimtoo.YoucannotexpectyourmoneybackwhileMarioisdryingusup.

LAGARDE:We talk all the time. But this is a resolution that he needs toreachbyhimself,afterhearinghisownteam.

VAROUFAKIS: I think you need to pressurize him, Christine, too.We aredoing our bit. But given thatwe have an IMF redemption coming upwhichwecannotmeetwithoutdefaulting toourpeople, the IMFmustdecide: do you think a post-mortem is more desirable than amoratorium?Isn’titbettertoprevailupontheECBtodoitsjob?ThereisaderelictionofdutyherebytheECB.

LAGARDE:Buttheyarenotlendersoflastresort,astheywilltellyou.VAROUFAKIS:TheyweretotheSamarasgovernmentinJuly2012.IfMariodoesnotwanttobetaintedasapoliticizedECBpresidentthenhemustapplythesamerules.Wearenotaskingforspecialtreatment.

Afascinatingdebateonwhathad tobedone to takeourdefault to theIMFoff the tablewas reaching its natural conclusion. I had to exploit that uniqueopportunity topresent the cruxof theproblem to theonly interlocutor that Icouldcommunicatewithproperly.

VAROUFAKIS:Let’sgetserioushere.Youfolks–Mario,Angelaandyou–have to give us a roadmap. I am leavingWolfgang out because we

know where his map would take us. We cannot just drift into theunknownonthebasisofhearsaythatsomethingmayhappenonedaytorenderGreeceviable.Weneedtohaveanadultconversationwithclearmarkersondatessothaton13Aprilorthereaboutstheliquiditytapisturnedbackon.IcannotgobacktoAthenstosaytomycabinetthatweagreed thatsomethingmagicalmighthappenatsomepointbeforewereach the cliff ’s edge. I cannot energize my colleagues withoutsomeonepickingupthephoneandgivingussomeassurancesthatwehaveaprocess that comeswith [the] liquidityprovisionsnecessary tosalvagethenegotiationprocess.

LAGARDE:Butthereisaclearlinkbetweenthetwo.VAROUFAKIS:Yes,butweneedmore than that.Weneedan indication thattheprocesswillbetimely.

Poulsteppedintoputmebackinthedock,unwittinglyIhope,unlesshehadeavesdroppedonmylastconversationwithAlexis.‘Notpayingontheninthisnot the solution,’ he said, ‘if that is what you will tell your colleagues inEurope.’‘Ineversaidthat,’Iprotested.Christineintervenedinmyfavour.‘Hedidnotsaythat,’sheconfirmed.‘What I did say,’ I clarified, ‘was that if we do not get any liquidity

provisioningthenwewillbeforcedtodefaultindependentlyofourwill.’Returning to my request for an ‘adult conversation’, Christine counter-

proposed: ‘But it must be a grown-up conversation without drama, withoutjournalists chasingme, no game[s], no improvisation –we are very boringpeople.Ithastobeverytechnical,boring.Wehavenotbeenabletohavethatconversation.Itisjustbeginningnow.Wearepreparedtodoitday,night,ontheweekend,nomatterwhere.WewouldprefertodoeverythinginAthens.Butfrom an optics point of view [from the perspective of public perception inGreece]wecanhavesomeof it inBrussels.Whatyouareproposing,a littleless shallow than your list of reforms [meaning if they were fleshed outfurther],isactuallytomeettheobjectivesoftheinitialproposal.’We were on the right path. To broaden that path as far as possible, I

suggestedthatwestartournewcollaborationwithasmallstep:bothinAthensand at the Brussels Group, from now on we should divide our discussionsthematically, so that a deadlock over one issue did not prevent progresselsewhere.Christineverymuch liked the idea,andPoulseemedhappy too. It

wasprogress.Wehadestablishedthebasisforacommonunderstandingofthequestionsifnottheanswers.For the first timewewere facedwith the opportunity of having a serious

discussion about what reforms each of us thought were pressing. I invitedChristinetohaveafirststab.‘Can I?Can I?’ sheaskedexcitedly. ‘Iknow that this isanecdotal,andyou

mightfindthistrivial—’‘Notthepharmacists,please!’Iinterrupted.‘Isthiswhatyouweregoingto

say?’‘Whynot?’shereplied.‘IfinditjustamazingthatintheWallStreetJournal

youdefendedthepharmacists.Ithought,NotYanis!Ifounditamazingthatyousupport theirmonopolyofbaby foodsandcosmetics–which Iknowcausesproblems,fromwhenIwasfinanceminister.AndIhadmyfights.’I knew of the IMF’s obsession with Greek pharmacies. These invariably

small family-owned businesses were protected by a law that permitted onlypharmacy school graduates to own one and prohibited the sale of non-prescription drugs by supermarkets. But that, of all possible subjects thatneeded tackling, the managing director of the IMF, faced with a Europeancountry on the brink of default, wanted to discuss this one? I had to pinchmyself.Iexplainedthatthepharmacies’monopolyoverthesaleofbabyfoodsandcosmeticshadalreadyended,and thatwhat Iopposedwasnot theendoftheirmonopoly over certain other commodities but the proletarianization ofthousands of owner-pharmacists via the takeover of the pharmacy sector byoneortwomultinationalchains.Givingmethebenefitofthedoubtonthismatter,Christinethentookmeto

taskforourtaxarrearsinstalmentsmeasure–partofmyHumanitarianCrisisBill aimed at bringing the 40 per cent of Greek citizens back into the taxsystem by allowing them to pay even very small instalments each month –whichshe‘foundshocking’:11

LAGARDE: I cannotbelieve thatyouwould introduce this reschedulingoftaxpaymentswithoutdiscriminatingbetweenthosewhocannotpayandthosewhoorganizethemselvessoasnottopay.

VAROUFAKIS:Letmeexplainthepracticesofrichdefaulters.Whenchargedtheytakethetaxofficetocourtandgetacourthearingfor2022.Inthemeantimewecannottouchthem.Sowhatwearedoingisgivingthemtheopportunitytostartrepayinglittlebylittlewhileorganizingout-of-

courtsettlementprocedures.Atthatpointwecanforcethingstoaheadandconfiscateavailablefundsofstrategicdefaulters.

LAGARDE:That’sfine.VAROUFAKIS:Buttobetoldthatwhatwedidisaunilateralmoveand[be]ordered to take it back,whenwe have 3.6million people owing lessthan€3000to thestate that theycan’tpay–whoaredyingtobecomepartoftheformaleconomyagainbystartingtopaysmallsumslittlebylittle—

LAGARDE:Butyoucouldhavecheckedtheircapacity—VAROUFAKIS:Ourtaxauthoritiesdonothavetheresourcestocheckthreetofourmillionpeopleinashorttime.So,whatweplantodoistoletthemgetintotheinstalmentplan–startrepaying–andthengoafterthestrategicdefaulters.

ItwasnowmyturntotellChristinewhichreformsIthoughttrulymattered.Thesewerenotevenonherradarscreen,and,asIwouldgoontoexplain,thefactthatshedidnotknowofthemwasintimatelylinkedtotheliquiditycrunchour government was facing. It all related to Greece’s corrupt bankers. ‘I’msureyou’renotprivy to thisbut theword“reform”becomesadirtyone themoment the troika pats on the back our corrupt bankers while targeting thepharmacistsandthepensioners.Evenworse,whentheECBcollaborateswiththe same bankers to deny liquidity from the government that the people justelected,inordertoforceustoacceptcutsinthelowestofpensions,thewholepopulationturnsagainsttheECB,you,everyoneinauthority.’Christineseemedfascinated.Iproceededtotellherofthetrickpulledbythe

Greekbankers(recallAris,Zorbaandtheirilk)whichkeptthemincontrolofthebanksthattheyhadbankrupted,allwiththeactivesupportoftheEurogroupWorkingGroup,whichdominatedtheHFSF,whosefundskeptthebanksgoingand the bankers unaccountable.As I talked, Poul looked like aman about tohave a stroke. But there was more. The bankers, I explained, then used theliquidity provided by the ECB and the capital channelled to them by thecreditors, which of course burdened the weakest taxpayers, to fund mediaoutletsandspreadpropagandainfavourof thosepoliticianswhowere in thebankers’pockets:thetriangleofsin.‘WhentheECBgetsintobedwithcorruptandcorruptingbankers,whoare

actively sabotagingdemocracy,we consider this enemyaction,’ I said. ‘I amnottellingyouthatMarioknowsthis.ButsomeoneinFrankfurtmustknowitif

Ido.YourpeopleinAthensaresmartenoughtohavepickeditup,eventhoughI do not doubt that they keep it from you. When our people see the samefigures,aidedandabettedby the troika, retaincontrolofbankruptbanksandbankrupt media with new debt burdening the little people against whoseinterests thebanksand themedia labour,youcannotexpect them to takeyouseriously.Ortakeusseriouslyifwedoasyoutellus.‘Wecannotgoonlike this,Christine.This isveryhardforus.Wewant to

talkabout reforms.But in this stateofwarfare, andwithWolfgangSchäubletellingme,“Iamnotgoing to talk toyou,”Iamsoundinganalarmbell thatthisisnottheEuropethatwesignedupto.Wearemightilypro-European.Wewant to keep Greece in the euro. I think it would be excellent for officialEurope to demonstrate that Europe can do business not only with theestablishmentpoliticalpartiesitisaffiliatedtobutwithpro-Europeanpoliticalpartieswhohaveadifferent–weirdforyou–viewoftheworld.AndtoshowtheGreekpeople that theycanbepartof thisprocess.Alas,all thepeopleofGreecenowsee isyour functionaries inbedwithouroligarchy’s triangleofsin:bankruptbanks,toxictelevisionchannels,corruptprocurement…’ChristinelookedconcernedandIbelieveshegenuinelywas.

LAGARDE:Butwhydon’tyougoafterthem,ifyouhaveevidencethatthey—

VAROUFAKIS: They have all the cards. The press are their agents. Thejudiciaryisineffectualandinsomecasescorrupt.Ofcoursewewillgoafter themeven if itmeans falling.But that iswhyweneedbreathingspace…TheTV stations are lambastingus for throwing the countryontotherocksbyresistingthetroikawhileatthesametimecriticizingmeforcomingheretonegotiatepensioncutswithyou.Wewillprevailbecausewearedoingverywellwith thepeople andbecausewehavemanagedtocreateadisconnectbetweenthemajorityofGreeksandtheTV channels, which is a remarkable achievement – they are notinfluencedby themanymore.Forhow long I donot know.Whatweneedisalittlepeaceandquiet.Whatweareaskingforisninetydays—

LAGARDE:Youcancreatethat—VAROUFAKIS:Ihopeso.LAGARDE:Todemonstratethatyouhavethewilltodoit,wewillgooutofourway.Workingwithyou.

PoulthenmadeapointofsayingthatChristineandhespokewithonevoice,somethingthat Ihad justwitnessedwasuntrue. ‘Anythingyouhearfromme,or fromourmission inAthens,’heclaimed, ‘beassured thateveryoneat theIMFspeaksasone.’Incapable of resisting, I said, ‘Yes, I know. You are like the Catholic

Church!’Christinetookthejokewithgoodhumour, insistingtheIMFwasthebetter

institution.By now night had fallen.Aswewerewrapping up,Christinewas keen to

know that Iwouldnotnowbeheading to thepress toannouncean imminentdefault.AndIwaseagertogethertocommittodoingsomethingtoeasethewaterboarding.We had understood each other butwewere obliged to finishwith a last rendition of our tussle, one thatwas performedwith the greatestcourtesy.

LAGARDE:AdefaultwouldbeterribleforGreece.VAROUFAKIS: Of course, but it would be terrible for the IMF and forEuropetoo.

Lagarde:Yes,yes.VAROUFAKIS: Defaulting to you, to the IMF, would trigger the cross-defaults,andthenMariowouldrefusetoliftELAwiththeresultthatthebankswouldrunout.

LAGARDE:Thencapitalcontrols—VAROUFAKIS: We would not accept that, Christine. This is a politicaldecision.It isanightmareofcourse.Wedonotsleepatnight.Butwecannot accept capital controls in a monetary union. And we arepreparingasweshould.

LAGARDE:ThatwouldbeterribleforGreece.Thinkaboutinflation.VAROUFAKIS:Why?Doyouthinkthathavingcapitalcontrolsimposedandturningintoakindofprotectoratewithoutanyaccesstoliquiditywouldbebetter?

Wehadsaidalltherewastosay,butaswegotuptoleaveChristineaskedmetostaybackforawordinprivate.Shewas‘flabbergasted’shesaidbywhatIhadtoldheraboutthetriangleofsinandinparticularaboutourbankers.‘I’malawyer,andIwouldlovetounderstand…IknowitishotsensitivebutIwouldlovetounderstandwhatishappening.’Isharedwithhermyplanforcleansing

thebanks,bywhichTakis,mycompanionthatday,wouldbeappointedchairoftheHFSFandnewCEOswouldbebroughtintothekeybanks.12Shenodded,ifnotinagreementthenatleasttoshowshehadaclearunderstandingofwhatIwasuptoandwhatIwasproposing.Inalowvoice,shethensaid,‘IwillspeaktoMario.Icannotguaranteetheoutcome.’ItwasthebestIcouldget,giventhepositionIhadarrivedin.Asiftooffermesomesolace,Christine’spartinggiftwasapromisetodo

some ‘digging’ into the background and activities ofGreek individualswhomightjeopardizemyworkandtogetbacktomeaboutthem.Eventhoughshenever did get back, which I never expected her to, it was the thought thatcounted.‘ThanksoncemoreforsacrificingyourEasterSunday,’weremylastwords

asImademywayout.

14

Thecruellestmonth

The next day I flew back to Greece knowing that I would be returning toWashingtonaweek later to try towinPresidentObama’speopleover toourside.1AweekearlierIwouldhavebeenoverthemoonwithexcitementattheprospect.Alas,asmytrustinmycomradeshadwithered,anysuchexcitementhaddiedwithit.SoIfeltnoneoftheexcitementIhadpreviouslyfeltonotherreturnshome

atthethoughtofgoingtoMaximostobriefAlexis.IcouldpictureinmymindhowhewouldagreewitheverythingIsaidbutactonnothing.Yetthevolume,substanceandurgencyofwhatIhadtotellhimweresuchthatIdecideditwasmy duty to put my brief in writing in the form of a comprehensive policyproposalforrecoveringcontrolofourfate.BythetimeIgotofftheplane,itwas almost complete. I called it theN+1Plan, the ‘N’ referring to the largenumberofreformsthatwouldberequiredbutwhosenumberwasflexible,andthe‘1’tothedebtrestructuringwithoutwhichnothingelsemattered.WhenIsawAlexisIwasblunt.‘Timehasrunout.Wehaveafortnightuntil

Riga[wherethenextEurogroupmeetingwastobeheldon24April].MytriptoWashington is crucial. Either we take the initiative with a comprehensivepolicyproposalofourown,’ Isaidwhilehandingovermybrief, ‘orwearedeadmeat.’Alexis’s eyes glazed over as he glanced at the document,whichcontainedaday-by-dayactionplanforthefortnightahead.2Itwasclearthathewaseitherunwillingorunabletoengagewithit.Sad but unfazed, I returned to theministry toworkwithmy team on our

latest debt sustainability analysis and debt swap proposals. Four days ofunrelentingtoillater,theimprovedN+1Planwasreadytobepresentedtothecabinet at a meeting convened on 14 April, the day before I flew back toWashington.AtthemeetingIwarnedmyfellowministersthatwewereoutoftimeandthattheN+1Planinfrontofthemwasourlastchance.

Ifwedonotwanttosurrender,wemusttellthecreditorsthatthisplanis,fromnowon,thesolebasisofourdiscussions.Tobackthisdemand,we

must issue two promises: first, tell Draghi that if he moves to imposecapitalcontrols,weshallhaircutunilaterallyhisSMPbondsandactivateourparallelpaymentssystem;second,tellMerkelthatifshesuccumbstoSchäuble’splantoejectusfromtheeuro,weshallnotgobeggingtoher,readytosignanythingshegivesus–weshallreluctantlyfallbackonourPlanX,whichisbeingcompletedasIspeak.Theonlyalternativetothisstrategyissurrender.

ThenextdayIflewbacktoWashington.Perhapsthemosttellingsignofthecomplete breakdown in our government’s discipline was that Chouliarakiscalledme to sayhewould rather go toBrussels to spend timewithThomasWieserandCo.Iinsistedthat,aschairofmyCouncilofEconomicAdvisers,heshouldaccompanyme,notleastinordertoattendtheIMFspringmeetingsthatweretakingplace.HeinsistedthathewasgoingtoBrussels.Igaveup.Itwas hopeless arguing. Besides, if I could salvage anything inWashington itwouldbeinspiteofChouliarakisandWieser,notbecauseofthem.MyfirstdayinDCcouldnothavebeenfuller.Itbeganwithaheart-warming

visit to the offices of the American Federation of Labor and Congress ofIndustrialOrganizations, thecountry’scentre for tradeunions.RichTrumka,itspresident, toldmethatoursuccesswouldstrengthenlabour ’svoicewithintheDemocratic Party, whileDamon Silvers, the policy director, encouragedmewith somewise advice: ‘They complain you are unreasonable until theyrealize they can’t buy you or bluff you or intimidate you. Then they reallynegotiate,oftenlateatnight.’Richshowedmeasignoverhisdeskthatread,NOTHINGWASEVERACCOMPLISHEDBYAREASONABLEPERSON.Next Imet a bunch of friendly journalists to deliver a grimmessage: the

Greek government was losing the propaganda war. The troika had investedincredibleresourcesinblackeningourimage,mineinparticular,soweneededa professional lobbyist and PR firm in Brussels. But I can’t even afford aproperpressofficeinAthens,IthoughttomyselfasImademywaytotheIMFbuildingformynextmeeting–withChristineLagardeandPoulThomsen.InChristine’s office I felt embarrassedwhen she complained that our side

hadnotmovedwiththespeedthatwehadagreedaweekearlier.Shewasright,but how could I admit to the exasperation that I was feeling at the state ofparalysis in Maximos? It was a short meeting but in it she conveyed animportantmessage:unlikemanyinBerlinandelsewhere,sheagreedwithmethatEuropecouldnotmanageGrexitsmoothly.AndshehadspokentoDraghi

aboutthisandaboutourliquidity.But,oncemore,sheimploredustospeedupwhateveritwasweweredoing.Ionlywisheditwasuptome.Mynext stopwas the venerableBrookings Institution,where I delivered a

high-profile speech on the causes of theGreek crisis andmy proposals forendingit.ItsohappenedthatacoupleofhoursearlierWolfgangSchäublehaddeliveredapolicyspeechofhisownthere.Aftertheeventmyhostswereboldenoughtocompareandcontrastthetwo:whereasmyeconomicanalysisheldwaterandcontainedtangibleproposals, theytoldme,Wolfgang’sspeechwasan hour-long exercise in denial, offering not one idea on how to rebalanceEurope.Perhaps,asgoodhosts,theywereexaggerating,buttheymadeitclearthattheyhadgivenWolfgangatoughreceptionandopenlydisagreedwithhim.

Notinourcase,MrPresident!

FromBrookingsmyminders rushedme to theWhiteHouse,where Iwouldhave the chance of a brief chat with President Obama. That day, 15 April,ObamahadinvitedmembersoftheGreek-Americancommunitytocelebrate,belatedly,Greece’snationalday (25March). Ihadbeen told that if Iattendedthereceptionthepresidentwouldwanttotalkwithmeinformally.‘WehavetheGreekfinanceministerinourmidst,’saidthepresidentinhis

welcomingspeechatthereception.‘Imightaswellwalkuptohimandasktoborrowsomemoney.’Despitetheunderwhelmingjokeandthecircumstances,whichwere far from ideal, our brief discussion, aswe stood among all theother guests, turned out to be more substantial than many I have had withofficialsinsecludedrooms.

OBAMA: I don’t envy you at all. You have a difficult task under tryingcircumstances.Weshalltrytohelpthebestwaywecan.

VAROUFAKIS: Thank you, Mr President. From your first supportivestatementafterourelectionyouhavebeenabreathoffreshairforourpeople,andforus.

OBAMA: I knowwhat itmeans to inherit a gigantic crisis uponwinningoffice.Ihadtodealwithitin2009.

VAROUFAKIS: The greatest since 1929, we all recall. However, the maindifference,Mr President, is that you had a central bank backing youeverystepof theway.Wehaveacentralbankstabbingus in theback

every stepof theway–becauseweare trying todo things similar towhatyoudidin2009!

OBAMA:Iunderstand.ButyoumustknowthatIwasforcedtodothingsthatwere very hard forme. Things that I did notwant to do. Things thatamountedtopoliticalpoison.IhadtogoagainstmypolicytosaveWallStreet.Tocollaboratewithpeoplethathadcreatedtheproblem.

VAROUFAKIS:Weappreciatethiswell,MrPresident.Believeme,wetooarereadytocollaborateevenwiththosewhocausedourcrisis.Totakethepoliticalcostofdoingso.Aslongasthebalancesheetisintheblack,aslong as the benefits outweigh the losses. I’m sure you know that thecombination of unpayable debt and austerity have generated ahumanitariancrisis.

OBAMA: I know, I know. Austerity sucks! But you must compromise inyourdealingwiththeinstitutionssothatanagreementcanbelockedin.

VAROUFAKIS:MrPresident,wearereadytocompromise,compromiseandcompromisesomemore.Butwearenotreadytoendupcompromised.

Obamasmiledatthatpointandplacedhisrighthandsympatheticallyonmyleftarm.Hismindersweretryingtogethisattention,indicatingthathewaslateforhisnextmeeting.Heshookmyhandandbegantowalkaway.Butthenhechanged his mind and turned back – to the poorly hidden annoyance of abodyguard.

OBAMA:WewillhelpbykeepingthepressureontheEuropeans.Butyoumustmeetthemhalfway.

VAROUFAKIS:More than halfway,Mr President.We have already walkedfour-fifthsofthewaytowardsthembuttheyarenotbudgingatall.

OBAMA:Youhavenootheralternativebuttokeeptrying.Andwewillhelp.VAROUFAKIS:IhopethatthisappliestoyourTreasurytoo.ImusttellyouthatwearedisappointedthatJackLewisnottoeingtheObamalineonthis. In his official statements he blames the lack of progress on ourside.

OBAMA: [laughing] You know how it is. Finance ministers are moreconservativethantheirleaders.

VAROUFAKIS:[almostlaughing]Notinourcase,MrPresident…Butstill,wewouldappreciateitifyourTreasurywasclosertoyourwavelength.

Anotherwarmhandshake,anotherfriendlysmileandhewasgone.

I too had to leave. Nearby, at the legendary Cosmos Club, around fifteenGreek-Americanpoliticianshadgathered tohavedinnerwithme.Ithadbeenorganized by Jamie Galbraith and Phil Angelides, former California statetreasurer and chair of the Financial Crisis Inquiry Commission charged byPresidentObamawithinvestigatingWallStreet’scollapsein2008.3Ittooklessthananhourtodispelthedistortionsofmypolicyobjectivesandpracticesthepresshadbeenfeedingthemandthuswinthemover.Soenthusiasticweretheyby the end that, before we called it a night, they formed a five-membercommitteetocoordinatesupportforourgovernmentinCongress.4BythetimeIleftitwasalreadylate,butthelongdaywasnowherenearover.

AcallsummonedmetotheIMFofficesforabriefdiscussioninordertopavetheway for the following day’smeetings. From there Iwalked alone to thehotelbarwhere ImetLarrySummers for adrinkand the long, illuminatingconversationwithwhichthisbookbegan.

ImprobableAmericanfriends

TradeunionofficialsandGreek-Americanpoliticianswerealwaysgoingtobesupportive,butittooktwoAmericansfewwouldconsiderGreece’sfriendstorestoremy depleted energies. One of themwas Lee Buchheit, a high-flyingWashingtonbankruptcylawyer;theotherwasDavidLipton,numbertwoattheIMF. I met both the following day, between countless other insubstantialmeetingswithfarmorecelebratedfolk.IvisitedLeeathis firm’soffices, accompaniedby JamieGalbraith. Iwent

incognitobecauseLeeBuchheitisrenownedasthefairygodmotheroffinanceministers seeking debt restructuring. If the press gotword of ourmeeting itwouldbeportrayedasaunilateralmovetorenegeonourdebt.Evenifthisiswhatweshouldhavedone,thetimehadnotcomeforsuchheadlines.JamieandIwalkedthereandenteredthroughasideentrance.AlongthewayItoldJamiewhat Mario Draghi had just told me over the course of an hour-longconversation.Mariohadgoneoutofhisway toconvinceme thathewasnotpartofanyconspiracytooverthrowtheSyrizagovernmentbutthathis‘handswere tied’. I believed him. Despite his protestations of independence, noWesterncentralbankerismoreaffectedbydiscreetpoliticalmachinationsthantheECB’spresident.‘Theone,fascinatingthingIgotoutofMariojustnow,’I

told Jamie, ‘is his advice that I should seek an agreement with the IMF. Heconcurred on the importance of debt relief. Ergo, only an agreement and acloseworkingrelationshipwiththeIMFwouldworkforGreece.’LeeBuchheit is an intensely clever, gentlemanly figure seemingly from a

bygoneera.Before talkingabout thepresent,hewanted tocomecleanabouthis past association with Greece’s governments, which in his view hademployed his skills in a manner that squandered a fantastic opportunity toliberateGreecefromitsdebtors’prison.5Hemadenobonesaboutit:hesawinourmeetingachance for redemption.As for thepresent,hisassessmentwasbleak. ‘They are determined to demolish you with threats that may well beempty.’Hisadvicewassharpandclear:weneededtosignaltoAngelaMerkelthatwewerenotgoingtobecowedintosubmissionbythethreatofGrexit.Itwasouronlychanceforadecentagreementwithintheeuro.Itwaslikehearingmyselfspeak.Lee suggested two practical moves. First, within the next week, Alexis

should pre-empt the threat of Grexit by relaying to Angela Merkel that theinstitutions were dragging their feet to an extent that an accident seemedincreasingly unavoidable and that, as responsible leaders, they needed toprepare for this.Alexis should thenpropose thatMerkeldispatch to aGreekislandthreeorfourtechnicianswhosecompetenceanddiscretionshetrusted.Theretheycouldworkalongsideourteamoftechniciansonhowtodealwiththeaccident,quietly,professionallyandfarawayfrompublicity.Theyshouldreport only to Merkel and Alexis. To prevent any leaks, but also for itssymbolicvalue,Leesuggested that thismessagebeconveyedbyanenvoy toBerlin and spokenaloud to the chancellorwithouthandingover anythingonpaper.WewouldsoonfindoutwhetherMerkelwaspreparedtogoalongwithWolfgang’s push for Grexit or whether she would step in to offer us theminimumdebtrestructuringthatwecouldnotlivewithout.Lee’ssecondrecommendationconcernedthecentralbankofGreeceandour

golddeposits.

MakesurethatthepropertyrightsoverGreece’sgolddonotbelongtotheCentralBankofGreecebutaretransferredtotheGreekgovernment.ForifthereisaclashwiththeECB,MarioDraghiwilltrytoseizeyourgoldand all the assets of the Central Bank of Greece in lieu of the latter ’sliabilitieswithintheEuropeansystemofcentralbanks.Ifyouareforced

to start a new currency, create a new central bank to do it and let theexistingonefail,sothatallofFrankfurt’sclaimsuponitdiewithit.6

MyheadspinningwithLee’sadvice, Iheadedfor theUSTreasury tomeetJackLew.ForthereasonsIhadexplainedtoPresidentObama,Itookwithmelittleexpectationofanyusefuloutcometothediscussion.Predictablyenough,hepressurizedme to submit toBerlin,making it clear that, even thoughmyanalysiswas right, theUnitedStates consideredGreece tobewithinBerlin’ssphereofeconomicinfluence.TheonlypositivethingIgotoutofourtediousencounterwas an admission, similar toLagarde’s, that ‘theEuropeans’weredeludedtothinkthattheycouldmanageaGrexit.7Aftera longandsimilarly tedioussessionat the IMF,atwhich theworld’s

financeministersandtheirminderscongregatedforasuccessionofpointlessspeeches,ImetJeffSachs,whowasbearingbadnews:Wolfganghadmanagedto turnmost ofWashington’s establishment against us, he toldme. Jeff wasparticularlyworriedbytheanimositythatDavidLiptonharbouredagainstus.‘Youmustseehimtonight,’heinsisted.Jeff judgedthatonlyanalliancewithLipton,theIMF’slinkwiththeWhiteHouse,couldbringinMarioDraghiandultimatelypersuadeAngelaMerkeltogetoffthefenceonoursideratherthanSchäuble’s.‘IhavearrangedforyoutoseeDavidtonightathisoffice.’That night, accompanied by Elena Panariti, who knew Lipton from her

Washington days, I returned once more to the IMF to meet him. A stocky,pricklyman,Liptondid not try to hide the hostility that Jeff hadwarnedmeabout. It took an hour of extreme reasonableness onmy part before Liptonbegantomellow.HethenmentionedhisconversationswithJeffSachs,tellingme thathewashis former student and soquite impressedby thekindwordsJeffhadforme.Butdespitethewarmeratmosphere,ourconversationstalled,withLipton repeating ad nauseam the IMF’s standard line that they needed acomprehensive reviewbasedon theMoU andwithme repeating adnauseamwhythatwasarecipeforanunwantedaccident.Suddenly,Liptonsurprisedme,breaking off from his mantra and looking at me as if he had had a eurekamoment,saying,‘Unless…’followedbyalongpause.‘Unless?’Iasked.‘UnlessyouadoptthePolishstrategy,’hesaidthoughtfully.Ihavenoideaifthiswasspontaneousorifhehadplanneditinadvance.It

didn’t matter. It was a major breakthrough. The Polish strategy, as heexplained, was simple. In the 1990s, when Poland was burdened by huge

communist-era debts and the IMF had been called in to impose austerity,reform and a debt-restructuring programme, the Warsaw government hadrefusedtoaccepttheIMF’sMoU-basedprocess.‘Justlikeyou’rerefusing,’hesaid. What the Poles did was to put together their own plan covering debt,fiscalpolicyandreforms,whichtheypresentedtotheIMFasthebasisofthenegotiations.‘ItwastheonlyoccasionIknowofwhentheIMFwasforcedtoabandonitsownprogrammeandtoacceptasthebasisofnegotiationsthatofthegovernment.’Glancingattheceiling,Liptonasked,‘Whydon’tyoutrythePolishstrategy?Afterall,Jeffhadhelpedthemputittogether.’Itwasonethingtoinsist,asIhadon20February,thatwereplacetheMoU

withanewcontractofwhichwewereat thevery least theco-authors.But tohaveAmerica’smanat theIMF,ChristineLagarde’ssecond incommandandJeff’sformerstudent,tellmenotonlythatweshouldwriteourownplanfromscratchbut that therewasaprecedent inPolandfor thisbeingadoptedbytheIMF was something altogether different. This was the most encouragingbreakthrough I had had since 20 February. Together with Lee Buccheit’sadvice,itseemedthefoundationofawinningstrategy.‘ThisisthebestadviceIhave had,David,’ I told himwhile shaking his hand on theway out. ‘Jeff iswaiting at my hotel as we speak,’ I added. ‘We shall get down to workimmediately.’Smiling for the first timeduringourencounter,Liptonwishedmeluck.Backatmyhotelbar,ImetJeff.WehuggedandItoldhimwhatLiptonhad

suggested.Jeffwaspleasedandreadytostopeverythinghewasdoingtoworkwith me on our own Polish strategy, but he warned me, ‘You must still bepreparedfor theclash.Iampleadingwithyoutogetyourprimeministeronboard, toallowyou toprepare for thebankclosures that theywill tryout tointimidate you. Even if you manage to forge an alliance with Lipton andDraghi,SchäublehastheEurogroupstitchedupandisdeterminedtodragyouthroughnegotiationswithyourbanksclosed.’ItwasexactlywhatIhadbeenthinking:toutilizeDavidLipton’sadvicewe

wouldhavetocombineitwithLeeBuccheit’s.Wehadtoworkontwofronts:compileourowncomprehensiveanti-MoUPlanforGreecewhileconvincingAlexistosendanenvoytoBerlinwiththemessageLeehadscriptedforus.Itwastheonlyway.ButwasitonethatmyexhaustedcomradeatMaximoswouldcountenance?

ThetroikainParis

The following day, 16April, was spent entirely at the IMF inmeetings.Myexperience of the morning’s plenary session resembled that of a soldier:prolonged boredompunctuated by suddenmoments of intense agitation. FormuchofthemeetingIwassittingnexttoBenoîtCœuré,secondincommandattheECB.Whiletheinterminablelecturesdraggedon,thetwoofuschattedlikenaughtyschoolchildren.Alwaysfriendly,evereagertopresenthimselfasourfriend at the ECB, Benoît’s apparent concern could not disguise the threatimplicitinhiswordswhen,atonepointinourconversation,hesaid,‘Wemustpreparenowforanaccident.’Hisadvicewas that I request the impositionofcapitalcontrols.‘Are you referring to the “accident” the ECB has been working towards

sinceDecember?’Iaskedsarcastically.Hewasunashamed: ‘If there is abank runand if theECBdonot increase

ELA liquidity then maybe we shall have to close the banks down while thenegotiationscontinue.’Just as I was telling him that it would be unreasonable to expect us to

cooperate in blackmailing ourselves by asking for capital controls and thattheywerefundamentallyatoddswiththeprinciplesofmonetaryunion,MichelSapin, theFrenchfinanceminister,approached toaskme if Ihadnewsfromthe Brussels Group and our negotiations with the institutions. A brief chatensued,afterwhichMichelresumedhisseatontheothersideofthehallnexttoWolfgang Schäuble. Benoît and I had resumed our whispered conversationwhensuddenlyIheardshouting.Benoîtlookedconcerned.‘Whathappened?’Iaskedhim.ConcentratingasIhadbeenonmydiscussion

withBenoît,Ihadfailedtonoticethedramaunfoldingbehindme.‘MichelshoutedatWolfgang,’hereplied.‘Why?’ I had been aware only of raised voices,whereasBenoît,whowas

facingme,had seeneverythingandmightalsohaveactuallyheardwhatwassaid.‘BecauseWolfgangsaidthathewantsthetroikainParis,’saidBenoîtwitha

bittergrin.Itallmadeperfectsense.ThetroikathathadbeenbornandraisedinAthens

wasnowParis-boundbecause its ultimatemissionwas to control theFrenchnational budget. The harsh and failed policies imposed upon Greece had

nothingtodowithourcountry.Thethreat toclosedownGreece’sbanksthatBenoîthadbeenrelayingtomeattheverymomentMichelyelledatWolfganghad nothing to dowith our banks. TheywereWolfgang’s signal to Paris: ifFrance wanted the euro, it must forfeit sovereignty over its budget deficits.Therewasalogictoallthis–atwistedlogicperhaps,alogicofthetypethatwould end up damaging the European Union irreversibly, but a logicnevertheless. One thing remained puzzling, though: the manner in whichMichelandBenoîtwerecolludingintheFrenchgovernment’ssubjugationbyplayingtheirpartinours.On my way back to Athens I bumped into another Frenchman, Pierre

Moscovici,atWashingtonairport.Withhalfanhourtosparebeforeboardingour respective planes,we struck up a conversation. ‘Germany is a problem,andnotonlyforyou,’hesuggested.Butheaddedthatanagreementbetweenusandourcreditorswaspossible‘despiteSchäuble’.IretortedthatthenewsIwastaking home with me from the IMF and the US administration was that anagreementcouldonlybesealedwiththejointconsentofWashington,theECBand the European Commission. He agreed. I mentioned my exchange withBenoîtandthethreatofbankclosuresduringthenegotiations.‘SuchloosetalkcaneasilybeinterpretedinAthensasanexistentialthreat,’I

toldPierre.‘Don’tworry,’CommissionerMoscovicireplied.‘Benoît ispronetoangst

and, as a central banker, feels the need to have contingency plans overeverything.Ishallspeaktohimonyourbehalf.’Weagreedtomeetthefollowingweek.Unconvincedbyhisreassurances,I

badehimfarewell.Back inAthens,Benoît calledme tocomplete theconversation interrupted

byMichel’sspatwithWolfgang.PossiblybecausePierrehadcalledhiminthemeantime, Benoît was far more reassuring. I then took him to task on theveiledthreatofbankclosures,remindinghimthat thebankswouldbeclosednotbynaturalcausesorbecauseofsomeaccidentbutasa resultofapurelypoliticaldecisionbyhisECB.

CŒURÉ:Don’tsaythat.Thebanksmayclosebecausetheyhaverunoutofeligiblecollateral.

VAROUFAKIS:Thisisimpossible.Inmycapacityasfinanceminister,everyotherweekIguaranteeworthlessIOUsissuedbythebankstothetuneoftensofbillionsofeuroswhichtheythenpostforcollateralwiththe

BankofGreece.Theonlywaytheywillrunoutofeligiblecollateralisif you guys at the ECB ban the Bank of Greece from accepting myguarantees.And this is 100 per cent a political decision, sincewe allknowthattheGreekgovernmentneverhadthecapacitytohonourtheseguarantees.

CŒURÉ:Youareright.ButasacentralbankerImustbereadyforsuchadecisionbytwo-thirdsofthegoverningcouncil.8

VAROUFAKIS: I understand this. Just know that, if this happens, ourgovernment will not stay passive and simply await the Cyprus-style‘solution’thatsomeareplanningforus.Weshallnotbudge.Insteadweshall, even if you close down our banks, create our own euro-denominatedliquiditybasedonelectronic tax-backedIOUs.Ofcourseifyoupushusdown that road,withdefaultson the IMFand theECB,youwillbepushingus,againstourwill,tothepointofnoreturn.

CŒURÉ:Thankyoufortellingmeallthis.ItisgoodthatIknowit.Nowletmemakemyowncommitmenttoyou:ifIsensethateventsaremovinginthatdirection,againstourwill,IpromisetoletyouknowinadvancesothatyoucancallforanextraordinaryEUCouncilsummittodemandapoliticaldecisionatthehighestlevel.

VAROUFAKIS:Iamhappytohearthis,Benoît.Thesemattersareaboveourpaygrade.

Andsotheywere.ThedecisionwouldrestwithAlexis.

AmbushedinRiga

Twodays.That’s all the time Ihad inAthens inwhich toconvinceAlexis toadoptthestrategythatmyWashingtontriphadproduced–thePlanforGreecealongthelinesofthePolishstrategywhichDavidLiptonhadsuggestedandthemissive toMerkelproposedbyLeeBuchheit–beforeflying toRiga,Latvia,foraEurogroupmeetingon24Aprilthatwouldsurelybethebeginningoftheendgame. I put my proposal in writing, taking care to ensure that no copycouldescapeonlineandthattheonlycopyAlexisreceivedwastheprintoutthatIhandedhimmyself.MymeetingwithAlexiswentexactlyasIhadfeared.‘Theywillconsiderita

casusbelli,’hesaidwithhisfamiliarexpressionofmelancholyinresponseto

theideathatweputforwardourownPlanforGreece.AsforBuchheit’sidea,Alexisbarelygaveitasecondthought.Havingskimmedmywrittenproposalforafewseconds,hesetitasideandsaid,‘Merkelpromisedmethatshewillstepin.Let’snotcrosshernow.’‘Shewillgiveyounothing,’Ireplied,‘unlesswepresentourowncredible

agendaandbackitupwithoutourownpre-emptivestrike.’‘Nowisnotthetime.YougotoRigatomorrowandyieldonnothing.Don’t

be intimidated. Just hold the fort there. I shall be talking to Merkel againtomorrownighttogettoanagreementatourlevel.’ItwasclearthatMerkel’sspellhadtakenhold.AllIcoulddowashopethat

somehowAlexiswouldconvincehertodosomethingsheneitherwantednorhadacompellingreasontodo.The Eurogroup of 24 April had been convened primarily as part of the

celebrationsforLatvia’spresidencyoftheEU.Intheoryitwouldberelativelyinformal,andthewholemeetinghadbeenscheduledtolastnomorethantwohours.ThedayNicholasTheocarakisandI flewtoRiga,Alexiscontacteduswithwordsofencouragement: ‘ItwillbeaneasyEurogroup,as it is largelyceremonialandnothingmuchwillbesaidaboutGreece.Whateveryoudobecoolanddonotyieldaninchtothem.’Alexis’scapacitytoliftmyspiritswithafew well chosen words was undiminished. Despite the qualms weighing medown,hishearteningmessagewouldservemewellinthehellofRiga.Fotini,my secretary, alertedme to the first sign that somethingwasamiss

themomentwearrivedintheLatviancapital:myteamwasbookedintoahotelafairdistanceawayfromwhereIwasstaying,makingithardforustomeetfor essential consultations. Unwilling to succumb to conspiracy theories, Idecidedtointerpretitasalogisticalcock-up.Onthatfirstnight,afteragaladinnerofnoconsequence,Ireturnedtomy

hotel. Unable to relax, I summoned Nicholas from his distant hotel tobrainstorm the next morning’s Eurogroup.With half an hour to kill beforeNicholasarrived,Iwentdownstairs towaitforhiminthelobby.ThereIsawthem.Allthetroikaplayerswereatthebar:PoulThomsen,BenoîtCœuré,Thomas

Wieser, Jeroen Dijsselbloem, Pierre Moscovici and some others I cannotrecall.Idecidedtosayacollegiatehello.Theyweretongue-tiedandmanifestlyuncomfortable. To break the ice, I asked playfully, ‘So,what havewe here?HaveIcaughtyouin theact?’Mylight-heartedremarkwasnotreciprocated;

insteadIwastoldthattheywerehavingameetingbutIwouldbewelcometojointhemalittlelater.Ismiled,wishedthemagoodnightandleft.Next morning, Nicholas and I were walking towards the roomwhere the

Eurogroup was to be held. Behind me I heard Pierre Moscovici greet meconvivially.Sowewalked together and chatted. ‘I amproudwe did this,’ hesaid, referring to theBrusselsGroup. ‘It isonly right that thesenegotiationstakeplaceinBrusselswithministerstalkingonlytoministersandtechnocratstalkingwithtechnocrats.’SomeofthelosthonouroftheCommissionhadbeenrecovered,Itoldhimaswearrived.Theroomwaseerilyhalf-empty.Wherewaseverybody?ApartfromPierre,

Nicholasandme,onlyJeroenDijsselbloem,ThomasWieserandfourorfiveother delegations were present. Wolfgang Schäuble, Mario Draghi, PoulThomsen,MichelSapinandotherkeyministersweremissing.Asthemeetingbegan,NicholasandIlookedateachother,convincedthatsomethingdistinctlyunpleasantwasbrewingnearby.Thefirstitemontheagendawasaproceduralissuethatrequirednodebate.Oncethathadbeendealtwith,Jeroensaid,‘OK,colleagues, let us nowmove on to the second item on the agenda, Greece.’Suddenlythedoorsopened,andWolfgang,Mario,Poul,Michelandtheothermissingministersfloodedin.FirstbloodwasdrawnbyJeroen.Inhisintroductorystatementhedemanded

thetroika’sreturntoAthensinordertoendthe‘inefficiency’oftheBrusselsGroup.IlookedatPierre.Wouldhedefendtheprocesshehadsorecentlybeenpraising? Itwasas if theEurogroup’spresidenthadplanned tohumiliate thecommissioneroncemorebymakinghimeathiswords,justashehadbeforethesecondEurogroupmeeting inFebruary.9Andeat themhedid. ‘Technicaldiscussions and political ones,’ Pierre conceded in the last sentence of hisstatement, ‘must be combined and held at the same place, together.’ In caseanyonewas inanydoubt,PoulThomsenhastened toclarify that theplacehewasreferringtowasAthens.Poulthenperformedavolte-faceofhisowntorivalPierre’s.Thesameman

whohadconfessedtomeon1FebruaryduringourfirstencounterinParisthatGreece’sdebtwasunsustainableandthattensofbillionsofeurosofdebtreliefshouldhavebeengrantedwellbefore2015nowsangaradicallydifferenttune.UntiltheSyrizagovernmentwaselected,Poulargued,Greece’sdebthadbeensustainable; it was only after we had come to power that it had becomeunsustainable; neither debt relief nor extra money would now be necessarywereitnotforourgovernment.10

ThegroundforthenextblowwaspreparedbyMarioDraghi,whopresentedhis view that, unlike previous bank runs, the current one inGreecewas notinfectingtherestoftheeurozone.Inotherwords,GrexitwouldhurttheGreeksbut not the other countries who shared its currency. This was the cue forSchäuble’s cheerleading brigade of financeministers to go on the offensivewith the threat of Grexit. In response to Thomsen’s absurd report that ourbacktracking and delays had pushed us once more into the red, the Slovakministerexclaimed,‘Unbelievable!’andwentontomakeaspeechthatended,‘WearereadytohelpGreece.ButifGreecedoesnotneedhelp,maybethetimehas come to talk consequences.’ Soon after, Wolfgang Schäuble lent hissupporttotheSlovak’stoughtalk:‘Wehavemovedfastinthewrongdirection… [Laughing. More exclamations of ‘Unbelievable! Unbelievable!’] … Icannot imagine how we shall have a solution.’ The task of speaking theunmentionable words fell to the Slovenian minister: ‘There is no waySlovenians canbepersuaded,whoaremost exposed toGreece, that theyputadditionalefforttohelpGreecegetoutofthesituation.So,Ithinkweshouldtalk about Plan B… I know that we did not want to talk about Plan B.Wewanted,includingSlovenia,toresolvethis.ButnowIdon’tseethis.’Ibeganmyresponsebycoollyandmoderatelyaddressingeverypoint that

hadbeenraisedandputtingtobedeveryinaccuracybeforecomingtothecrux:‘PlanB should not [even] bementioned. It is highly and immoderately anti-European even to bring about this discussion. My dear colleague fromSloveniashouldknowthat it isnot in the interestofhiscitizens thatweevendiscussthisatthemoment.Irejectsuchadiscussion.Ourgovernmentintendstodowhateverittakestoremainsustainablywithintheeurozone.’Fromthatpointon,everytimeIopenedmymouthtospeakitwastopresent

constructiveproposalsforreachinganagreementquickly.EachtimeIdidso,Jeroenreactedwithaggression,demandingthatIconsenttothetroika’sreturntoAthens,agreenot to legislatewithout thetroika’sconsentandacquiescetothetroika’sall-or-nothingapproach,whichmeantditchingmyproposalforaninterimagreementbasedonthreeorfourreformbillsandaviablefiscalplan.FaithfultoAlexis’sdirectivenotto‘yieldaninch’,Istoodmyground.

Characterassassination

Thetroika’sassaultinRigawasaccompaniedbyawell-preparedpropagandadrive.DuringthetenseEurogroupmeetingthemediahadreportedfalselythatmyfellowministershadreproachedmepersonally.AccordingtoaBloombergreport, ‘Euro-area finance chiefs saidVaroufakis’s handlingof the talkswasirresponsible and accused him of being a time-waster, a gambler and anamateur,apersonfamiliarwiththeconversationssaid,askingnottobenamedbecausethediscussionswereprivate.’11Atthepressconferencethatfollowed,JeroenwasaskedexplicitlywhetherIhadbeencalledthesenames.Insteadofsimplysayingno,theEurogrouppresidentgavethefakenewscredencebynotdenying it and instead, smilingmeaningfully, replied, ‘It was a very criticaldiscussionanditshowedagreatsenseofurgencyaroundtheroom.’That night, after my own press conference was over and my official

businessforthedaywasdone,Iwastoldthatfinanceministerswereinvitedtoan informal dinner in thenearby countryside, a forty-five-minute coach rideaway. Exhausted and wishing to prepare my speech for the followingmorning’sEcofinmeeting, I decided togive it amiss. Instead, I arranged tohave dinner with Nicholas, Fotini and another member of my team indowntownRigasothatwecouldtakestockoftheday’seventsandplanahead.Walking bymyself across town through the cold tomeet them promised torevivemesufficientlyforthelongnight’sworkthatawaitedmeonmyreturn.Howinvigoratingitwas!Iwalkedforabouthalfanhour,takingintheold

buildings bathed in the orange rays of the street lights which pierced thefreezinghaze,breathinginthecrispair,feelinghumanagain.Dinnerwithmycolleagues at a German-themed beer-and-sausage restaurant was just asrestorativeasIhadhopeditwouldbeandremindedmewhatitwasliketohaveanormallife.ThenextmorningReuterscarriedthefollowingreport.

AsthebusescarryingEuropeanfinanceministersleftforagaladinnerintheLatviancapitalonFridaynight,oneofthepartyhungbackatthehotelandthenwanderedoffaloneintothedusk.Greece’sYanisVaroufakishadotherdinnerplans,hesaid,afterabruisingfirstdayofmeetingsinRigathatunderlinedhisisolationashetriestoavertnationalbankruptcy.Whileother ministers were feted by their entourages with food and warmclothingduringthemeetinginRiga,Varoufakiswasseenaloneatalmostevery turn, eschewing aides or any security detail. ‘He is completelyisolated,’ a senior eurozone official told Reuters on condition ofanonymity.‘Hedidn’tevencometothedinnertorepresenthiscountry.’12

‘Gambler ’, ‘amateur ’, ‘time-waster ’andnow‘aloneat almostevery turn’,‘isolated’, disrespectful of other ministers and unwilling to represent hiscountry.ItwasalmostpreciselyasthatfriendlyofficialattheUSTreasuryhadwarnedme:thatIwouldfaceacharacterassassinationcampaignwithinaweek.Hewasoutbyonlyoneday.Ofcourseitwastheworst-keptsecretinBrusselsandbeyondthatIwastobe

targeted in thisway.InearlyFebruary2015,aroundthe timeofmyfirst twoEurogroupmeetings,someGreekjournalistsweretoldasmuchbyareporterwith first-hand knowledge of the campaign. One of those Greek journalistslaterreportedtheconversation.

‘WillMrVaroufakisbeabletosurvivethepressure?’askedthereporter.‘AtleastMrTsiprasstilltrustshim,’we[theGreekjournalists]replied.‘TheninformtheminGreece,boththegovernmentandthepeople,that

theycanexpectevenmoreoftheseattacks,’hesaid.13

ThebondoftrustbetweenAlexisandmewasthetroika’sgreatestobstacle.Iknewit.Evidentlytheyknewittoo.AndasIwasabouttodiscover,Alexisknewitalso.

Thejumper’sthread

On the flight from Riga back to Athens I was informed that Alexis’sconversationwithAngelaMerkel,onwhichhehadpinnedsomuch,hadgonebadly.Tomakethingsworse,theChancelleryhadleakedtothemediathattheGerman leader not only gave Alexis the cold shoulder but that she wasunhappywithhisattempt tobypass theEurogroup. Itwasanextraordinary ifunsurprising act of bad faith. Having promised Alexis that the two of themwould find a solution behind the scenes while Varoufakis and Schäublecancelledeachotherout,shewasnowhanginghimouttodry.ArrivingatAthensairportIaskedtobedrivendirectlytoMaximos.Oncein

Alexis’s office I realized what a beautiful spring afternoon it was. Attica’sgentle sunlight streamed through the largebaywindow.Alexis and I huggedand sat down in two armchairs by the baywindow, away from his desk andfromtheconferencetablewherethewarcabinetmet,directlyinthesunlight.Ispoke first, describing what had happened in the Eurogroup, and gave my

opinion that the three major developments – Merkel reneging on him, thetroika’s ambush at Riga and Benoît’s pressure that we request the capitalcontrols with which they were threatening us – were combining to form aformidableonslaught.14Before Alexis had a chance to respond, I spoke to him from the heart:

‘Alexi,allowmetoremindyouwhyIamhere.IdidnotleavemyjobinTexasbecauseIwantedtobeminister.Icameovertohelpyoupersonally.AndIdidthisbecauseyoutoldmeyouagreedwithmyplanforendingthedoomloop.Butnowweareatacrossroads.Ihaveattractedthecreditors’arrows,bulletsandmissiles.IdonotmindthisatallasIfullyexpectedtobethelightningrodthat shieldsyou.However,youseem tohavedevelopeddifferent ideas to theonesweagreedon.MaybeIamnowinyourway.Maybeyoufeelthatanotherfinance minister would suit your plans better, given that I still think ouroriginalplanofferstheonlychance.Ifso,youshouldreplacemewithmyfullpublicsupport.RememberwhyIamhere?Tohelpyou.’Alexisgavemealongwarmcomradelylookand,afterapause,said,‘Yani,

listen.YouandIarelikeawoollenjumper.Ifweletthemgetholdofathreadandstartpullingit,eventuallythejumperwillbeundone.Thisistheirstrategy.Theyareaimingatyourundoingtoundome.Theywant togetyoutogetatme.Wearenotgoingtoletthem,right?Wearegoingtostandtogether.Idonotwanttohearagainaboutthisnonsense.Staystrong.Wehaveawartowin.’Oncemore it took only a fewwords fromAlexis tomakeme forget and

forgive.Combinedwithmydeepdesiretobelievewhathesaidandthegenuineopportunitywehadtoextractourcountryfromitsviciouscycle,theyrevivedmyhopesandsteeledmynerves.A few minutes later that sense of purpose received another boost when

NikosPappaswalkedin.HesmiledwidelyuponseeingmeandcongratulatedmeforhavingstooduptothetroikainRiga,brieflyrevivingthespiritofourearlier meetings in Psyrri. Pappas had some news: apparently, JeroenDijsselbloemhadjustemailedAlexis’sofficetodemandthatIbereplaced.‘See?’ Alexis said, looking at me. ‘They’re at it! Trying to divide us.’

TurningtoPappas,hesaid,‘Niko,tellhimtogojumpoffacliff.’But Pappas responded aggressively: ‘It is all your fault, Alexi,’ he said,

addinganumberofadjectivesthatIwouldrathernotrepeat.‘Bytalkingtohimdirectly,insteadofreferringhimtoYanis,yougaveJeroentheimpressionthathecanhavedirectaccesstotheprimeministerandbypassthefinanceminister

thatstandsuptohim.Youhavenoonetoblamebutyourself,’heconcludedatthetopofhisvoice.Alexis acknowledged his ‘mistake’ and said, ‘I shall email him tonight,

makingitclearthatanythinghewantstosaytoushemustsayviaVaroufakis.’ThatnightIwenthomefeelinghopefulagain.‘Thejumperseemsintact,’I

toldDanaecrypticallybeforeexplainingmyself.The following day, after a meeting of the war cabinet, I asked Alexis

whetherhehadsent theemail toJeroen.‘No,Idecidednot to,Yani,’hesaid.‘Why antagonize himneedlessly?Let him findout the hardway that hewillhave to deal with you.’ Alarmed at this decision, I nevertheless failed torecognizethebittertruth:thejumperwasalreadyunravelling.

ThecruellestAprilday

‘April is the cruellestmonth,’ wrote T.S. Eliot in the opening ofThe WasteLand. IntheAprilof2015,Monday27wasitscruellestday.Ourwarcabinetlasted six hours and fifteen minutes. It began with Alexis announcing hisdecision to give the troika something as an expression of goodwill. That‘something’was theheadofmydeputy,NicholasTheocarakis, themanwho,on the orders of our prime minister, had put the phone down on ThomasWieserandtheEurogroupWorkingGroup.Alexissoundedalmostreasonablewhenheexplainedhisdecision.‘Italked

to Dijsselbloem twice. He demanded Varoufakis’s head. He also wantedChouliarakistorepresentusattheEurogroupWorkingGroup.Ican’tlethimchoose for us, but at the same time we cannot say no to everything. So IdecidedtoburnTheocarakisandrestoreChouliarakis.’Spyros Sagias, the cabinet secretary, was first to respond. He spoke of a

‘faulty negotiation’, that we had been pursuing the ‘wrong process’, of theneedtowrapupadealquickly.Itwasadrawn-outspeechdeliveredwithlowintensity, in which I was not mentioned by name but which laid the blameclearly at my door. George Stathakis, the economy minister and a long-standing academic colleague of mine, went further: ‘The duo Varoufakis–Theocarakis, I love them both as brothers, but they cannot bring home anagreement.Chouliarakiscan.’If by ‘agreement’ he meant capitulation to Wieser and Dijsselbloem’s

demands,thenStathakiswasperfectlycorrect.Chouliarakiswastherightman

to signa surrenderdocument. I intervened to say so.Mybrief statementwasgreetedwithanawkwardsilence.ThenEuclid took the floor.Surelyhewouldoppose thedevelopingcoup?

He didn’t. Instead, without mentioning either Chouliarakis or me, hepronouncedTheocarakisafinescholar,thinkerandcomradebutnotsomeonewith the organizational skills necessary for such complex negotiations. Byimplication,hewasendorsingChouliarakis’sreturn.I never felt the slightest animosity towards Stathakis. His views had been

clear from the beginning:we should acceptwhatever the troika presenteduswith. Itwas thoseofmycomradeswhohadpledgednever to surrenderwhodisappointedmebitterly.Euclid’sposition saddenedme immensely.HeknewwhoChouliarakiswasandwhathehaddone.Hehadtalkedtomeabouthiminlanguagemore scathing than I would ever have used.Whywas Euclid nowtearing strips off our friend Theocarakis in support of Alexis’s horrendousproposition? Why did he not at least stay silent like Pappas, who hadswallowedhisbravadoof twodaysbefore,orevenDragasakis,whowasnodoubthappyatthedecisionbutfeltnoneedtosayasingleword?TheanswerarrivedminuteslaterwhenAlexisannouncedthatEuclidwouldcoordinatethenegotiationsoftheBrusselsGroupwiththetechnicalprocessinAthensandmystrugglesattheEurogroup.Duringtheremainderofthatlong,longmeetingIkeptuncharacteristically

silent while the rest plotted a course of complete alignment with theMoUprocess,instarkcontrasttotheplanthatIhadbroughtbackfromWashington.The reason for my silence was that in my head I was scripting a newresignationletter.Theendoftheroadhadarrived.Therewasnoplaceformeinacabinetthathadwittinglyorunwittinglysurrendered.

Likebloodtoashark

LaterthatdayIvisitedAlexisathisparliamentaryofficewithmyresignationletter inmypocket. Ihadnot spoken toa singlepersonabout it, not even toDanae.IwantedtogiveAlexisonemorechancetoreconsider,andIwouldnotbe satisfied this time with rousing words that masked the unpleasant truth.Thankfully,therewerenone.WhenIarrived,Alexiswelcomedmeinbutaskedmetowaitforaminute

whilehewenttothebathroom.AsIwassittingdownonthecouchtoawaithis

return,IcaughtsightofafewA4pagesontheadjacentcoffeetable.Ipickedthem up. When Alexis emerged, my expression no doubt conveyed myindignationatwhatIhadread.Withthepagesinmyhand,Iasked,‘AmIrightinpresumingthatyoudidn’t

runtheseconcessionsbymebecauseyouknewIwouldvetothem?’‘Yes,’heconfessedwithaguiltysmile.‘Doyouunderstandwhatthesenumbersare,Alexi?Doyourealizewhatyou

have done by conceding them?Don’t you get it that you have just acceptedhugenewausterity?’Themain number I had inmind –which had snaggedmy attention like a

rusty nail – was 3.5. The pages were a letter signed by the Greek primeminister and addressed to the troika, committing to a budgetwith a primarysurplus target of 3.5 per cent of national income. Unbelievably, the samenumberappearednexttotheyears2018,2019…allthewayto2028.WiththeexceptionsofSingaporeandoil-richNorway,nocountryintheworldhaseverposteda3.5percentbudgetprimarysurplusfortenyearsinsuccession.Thechance that a depressed economy lacking functional banks andwithnegativeinvestment could do so was the nearest to the theatre of the absurd thateconomicpolicycanproduce.‘Howdidthishappen,Alexi?’Idemanded.‘Chouliarakis thinks that we need to make this concession to get an

agreement,’washisanswer.Evidently,thiswaswhatStathakishadmeantwhenhe said that Chouliarakis was the only one who could bring home a quickagreement:completecapitulation.Itookadeepbreathtocomposemyself.‘IbetChouliarakiswasalsotheone

who convinced you to send these concessions to Wieser and Dijsselbloemwithoutaskingme.’‘No,’ replied Alexis, ‘that was my idea. Admit it, Yani. You would have

objected, for good reasons I am sure. But Yani, when negotiating youmustgivesomethingtogetsomethingback.’‘Andwhatisitthatyougotback?WhatdidChouliarakistellyoutoexpect

fromthetroikainexchangeforanotherlostdecadeofpunishingausterityforapeoplethatelectedustoputanendtotheworstandlongestausteritydriveincapitalisthistory?’‘They’llnowhavetogiveussomethingondebtrelief,’hereplied.ForamomentIwaslostforwords.Thefollyinhisargumentwaschoking

me.ThenforthefirsttimeIspoketohimcondescendingly.

‘Areyouserious?Haveyougonecompletelyoffyourrocker?Whywouldtheyeverconcedeondebtrestructuringifyouofferthem3.5percentprimarysurplusesforever?Yourargumentisliketryingtofendoffasharkbypouringbloodintothesea.Thinkaboutit:indeclaringyourreadinesstoextractfromthebodyofwhat’sleftoftheGreekeconomy3.5percentofnationalincomeeveryyear in the formof a surplus you’re implicitly declaring that you canpaythecreditors3.5percentofnationalincomeeveryyearfortenyears!Howdifficult is it toseethat, insayingthis,youaredeclaringthatwedon’treallyneeddebtrelief?Thatwewouldlikeitbutthatwedon’treallyneedit?’‘Chouliarakisbelievesthatwecanachievethe3.5percentsurplustargetif

westartgrowingagain.’Thiswastheinaneargumentoftheregimewehadfoughtsohardtoreplace.‘If this is so,Alexi,whydidwestrive towingovernment?For theglory?

DidwenotarguestronglyagainsttheSamarasgovernmentthatoureconomywillneverrecoverunlessweendausterity,whichmeanstearingupridiculoussurplustargetsandreplacingthemwithoneofatmost1.5percent?’Alexislookedtroubledandtriedtomollifyme.‘Nothingisfinal,Yani.Until

there’sacomprehensiveagreementnoconcessionIhavemadeiscastinstone–Icanalwaystakeitback.’‘What?’Iexploded.‘Doyoureallythinkthatyoucantakebackthemassive

austerityyoujustgavethem?Yougavethesharkatasteofyourblood,itsjawsgrabbedyourarm,andnowyouthinkyoucanpullitbackbecausethereisnodealuntilthereisafinaldeal?Areyouconfusinguswiththepowerfulsideinthisnegotiation?’Bythatstagemybloodwasboiling.InfactIwassoenragedduringmostof

this exchange that I almost forgot I had visited him to offermy resignation.WhenIdidremember,towardstheend,Idecidednottomakeahastymoveinanger. I needed to leave, calm down and think things over beforemaking afinaldecision.WhenIreturnedtomyoffice,IcalledmyfriendWassilyandtoldhimwhat

had happened. He breathed in deeply and emitted a sound expressing deepdiscontent before telling me to forget about resigning. ‘Remember the onehundredandfortythousandpeoplewhovotedforyou.Theydon’twantyoutoresign.Theywanttoseeyoustayinthemixandgivethosebastardshell.’Backathome,withoutknowingwhatWassilyhadsaid tome,Danaemade

thesamepoint.‘Thinkoftheonehundredandfortythousandpeoplewhoputtheirtrust inyou,’shesaid.I thenspentaheart-wrenchinghouronthephone

explainingtoNicholasTheocarakisthattheprimeministerhad‘burned’himinfavourofChouliarakis.Ifacedamercilessdilemma.TheFinancialTimes,asNicholasinformedme,

was already reporting that I had been replaced as chief negotiator byEuclideventhoughinrealitythenegotiationswereclearlybeinghandledbyGeorgeChouliarakis. The war cabinet, meanwhile, had been turned, with a largemajority now favouring wholesale capitulation and seeing me as the mainimpediment.DignitydemandedthatIresign.Butthatnight,onceIhadcalmeddown and thought things through, I realized that it was not just duty thatobligedmetostayon.Beneath Alexis’s political, economic and moral error in surrendering to

austeritylayanother, largererror:hisbelief that thetroikawouldgivehimaspeedy agreement and a third bailout in return. Undoubtedly, Merkel andWieser had encouraged Alexis and Chouliarakis to believe this. But settingasidethefactthatwehadnomandatefromourvotersforsuchanagreement,thereweretworeasonswhynoteventhiswasonthecards.First,thecreditorswould surely want tomake an example of Alexis – who had spent years inopposition,andsomemonthsingovernment,lambastingthem–asadeterrenttoanyotherpoliticianinSpain,Italy,PortugalorindeedFrancewhomightbetemptedtoconfrontthem.Forthistheywouldneednotjusthiscapitulationbuthisverypublichumiliationtoo.Second,thetroikahadbeendenyingforyearsthat either a third bailout loan or significant debt reliefwere necessary. Theonlywaytheycouldexplainathirdbailoutloannowwasbyclaiming,asPoulThomsenhaddoneduringtheRigaEurogroup,thattheGreekdebthadinfactbeen sustainable until Syriza won government, and to prove their charge itwouldbenecessary toclosedownGreece’sbanks,causemassivenewlossesandbankruptciesandthenblamethecostsonAlexis’sgovernment.Just before dawn I arrived at the conclusion that the more concessions

Alexismade, themore theywouldaskfor, that therewouldbenoagreementuntilafterthebankshadbeenshutdownandthatthenhewouldbeforcedintoanagreementsodegradingthattheEurogroupcouldholdituptothecamerasand say to all Europeans, ‘This is what you get if you cross us!’ ThisrealizationinvitedthequestionofhowAlexiswouldreact.Hewasonlyforty-twoyearsold,Ithoughttomyself.Surelyhecouldnotcontemplatehidingfordecades after acquiescing in such disgrace? When he finally saw what thetroikaandAngelaMerkelweredemanding–hisignominyandthecrushingofourpeople–theremustbeastrongchancethathewouldrefuse.Andaslong

astherewasasignificantchanceofthatIhadadutytobethere,readytoassistbyputtingforwardourPlanforGreeceandactivatingthepaymentssystemthatwould allowus to continue to functionuntilMerkelmadehermindup: sidewith Wolfgang Schäuble in kick-starting the eurozone’s disintegrationbeginningwithGrexit,oracceptourplanasthebasisforanagreement.So I decided to stay on. Iwould dedicatemyself to keeping our deterrent

aliveforthemomentAlexismightneeditandtofinishingourPlanforGreecetogetherwith Jeff Sachs andNicholasTheocarakis –whom I also dissuadedthat night from resigning – and aided by supporters including NormanLamont,LarrySummers,ThomasMayeraswellasmyimmediateteam.Itwasa hard, thankless path. I had known all along that the troika saw me as itsprimaryobstacle,butnowIknewthatourownwarcabinetfeltthesame.ThesinglethreadofhopethatkeptmegoingwasthatAlexiswould,atthemomentofhisimpendinghumiliation,cometomeandfinallysay,‘Let’sdoit!’

Tapped

Friends chastiseme formy forbearance. They think Iwas naive tomaintainfaith, despite all the evidence, thatAlexismight bounce back.Hopefully, thefollowing two episodes will help convey something of the pressure welabouredunderandthescaleofwhatwefaced.When I arrived home fromMaximos that evening, Danae bombardedme

withquestions,videoingmyreplieswithherphone.Asshewasdoingso,mymobile rang. It was Jeff Sachs. Reluctant to conveymy desperation over anunsecuredline,Ichosetosharewithhimtheonlygoodnewsoftheday:almosta month too late we were at last ready to default to the IMF.While Sagias,DragasakisandChouliarakishadobjected,Alexis,PappasandEuclidhadsidedwithmeonthis.Thecofferswerebare.IftheIMFwanteditsmoney,itwastimefortherestofthetroikatoreleasesomeliquidity.‘Thediehasbeencast,’ItoldJeff.‘IthinkAlexismeansitthistime.ThenextpaymenttotheIMFwillnotbemade.’Jeffwasecstatic.‘Itwasabouttime,’heremarkedbeforeofferingadviceon

howtohandlethefalloutofadefault.Halfanhourlatermyphonerangagain.ItwasJeff,laughinguncontrollably.

‘Youwill not believe this,Yanis,’ he said. ‘Fiveminutes afterwe hung up, Ireceived a call from the [US]NationalSecurityCouncil.They askedme if I

thoughtyoumeantwhatyou’dsaid!Itoldthemthatyoudidmeanitandthat,iftheywanttoavertadefaulttotheIMF,they’dbetterknocksomesenseintotheEuropeans.’Ihadfullyexpectedmyphonetobetapped,buttwothingsmadeJeff’snews

remarkable.First,theeavesdroppersnotonlyhadthecapacitytorecognizethatwhat Ihadsaidwasof realsignificancebut theymustalsohavehadanopenlinetotheNSC.Second,theyhadnocompunctionwhatsoeveraboutrevealingtheyweretappingmyphone!It was around three in the morning, but I called Alexis to inform him.

Despite the collapse of our united front, despite our shattered bond, suchmomentsremindedmethatwewere,ultimately,fightingacommonenemy.

Danae’sfeat

Theotherepisodecamethefollowingevening,whenIwasinforararetreat:dinner with Danae and a friend visiting from Australia at our favouriterestaurantinExarcheia.ExarcheiaiswhereIlivedwhenIfirstmetDanae.Itwasatmyflattherethat

mydaughterXeniatookherfirststeps;infact,theinnercitysuburbwaswhereIhad takenmy first steps as a teenager in the1970s.Aneighbourhoodon thewilder side ofAthens, it is known for its off-beat record stores, bookshops,bars and, last but not least, for the powerful presence there of Greece’smultifarious anarchist groups. In short, Exarcheia was, and to some extentremains,myneighbourhood,eventhoughIhavenotlivedtheresince2005.Danae and our friend arrived first. I came straight from a meeting with

Dragasakis and his team, parked my motorcycle outside the restaurant andjoined them at a table in a corner of its lovelywalled garden onValtetsiouStreet.ItwasalmostMay,andthejasminebusheswerespreadingtheirhypnoticscent through thewarmspringevening.After anemotionallydrainingday itwasamuch-neededtonictositinthatgarden,sippingwineandrelaxingwithclosecompanions.I heard thembefore I saw them.Anhour or so later, aswewere about to

orderdessert, threehoodedmenentered thegardenshoutingabuse.At first Ididnot realize that Iwas their target,but then they threwsomebottleswhichsmashedonthebrickfloorjustinfrontofourtable,shardsofglasshittingmyfeet. Telling the other patrons to leave, the attackers approached our table,

wielding broken beer bottles and continuing to shout abuse. I sprang up andwalked towards them in order to screenmy companions from themenbut IhadnotfactoredinDanae’sdeterminationandspeed.Danaejumpedbetweentheattackersandme,huggingme,herbacktowards

them,herhandscoveringthetopofmyhead.Sheliterallyturnedherselfintoahuman shield. I tried to push her away towards safety but her hold was sostrong I realized that Iwould not be able to get her offwithout hurting her.Meanwhile,withthesideofherheadpressedfirmlyintomyfacetoshieldit,sheyelledatthem,‘You’llhavetogetthroughmefirst!’The hooded men tried to get at me with the jagged bottles, but Danae’s

embracewastoopowerfulandherbodycoveredmesofullythattheycouldn’twithouthittingher.Frustrated,theydroppedthebottlesandlandedafewblowswiththeirhandsandfistsonusboth.AsDanaereceivedmoreoftheblowsthanIdid,theyrelented,nodoubtreluctanttohitawoman,andleftthewaytheyhadcome,bellowingcursesand threats.Stunned,wesatdownatour tableagain,ourAustralianfriendshaking.However, the night was still young. Our attackers must have called for

reinforcements,forwithinhalfanhourmorethansixtyofthemwerelinedupoutsidetherestaurant,whichwasnowemptyexceptforus,thepatronsofoneother tablewho seemed unperturbed, and the staff,whowere concerned andapologetic.Iinsistedthattheynotcallthepolice:weretheytoarriveinlargenumbers,therewouldmostdefinitelybebloodshed.Infact,itwasjustaswellperhapsthatIdidnothaveapoliceescortwithmealready.15‘Whatwillyoudo?’askedourfriend.Therestaurantownerofferedtoputus

upforthenightintherestaurant.‘I shall justwalkout and engage them indialogue. If theywant tohitme,

thentheywillhitme.’OurfriendthoughtIwascrazy.Danaesaid,‘OK,let’sdoit.’Wetoldourfriendtostayputuntiltheganghad

left,andthenthetwoofus,DanaeandI,steppedoutontothepavement.SixtyhoodedyoungstersshoutingandswearingonanarrowAthenianstreet

isasighttobehold.MyheartwasbeatingfastbutIdidnotexpectthemtohitusagain.Danaehadimpressedthem,andIwassuretheywouldappreciatethefactthat we had neither called the cops nor hidden in the restaurant. I was alsoencouraged by the fact that they had not damaged my motorcycle, as theyeasilycouldhave,butinsteadremainedtenmetresorsoaway.Iftheyhadbeenplanningtoattackusagain,Ithought,theywouldhavebeenalloverthebike.

SoDanaeandIwalkedstraighttowardsmymotorcycle,holdingourhelmetsbutnotwearingthem.Themobcontinuedtoshoutabuseatusbutdidnotmakeamove.AfterIhadunlockedthebike,Danaesatonitandslowlybegantoputherhelmeton,butIdecidedIwasnotgoingtobechasedoutofExarcheia,myownneighbourhood.SoIleftmyhelmetonthebikeandwalkedtowardsthem.‘I’mhere.Tellmewhyyouwanttohitme.I’mallears,’Isaid.Theringleaderwarnedmeoff:‘Ifyoucomecloseryou’llregretit.’‘IwanttoknowwhatI’vedonetoangeryou.IfthismeansI’llbehit,sobe

it,’Isaid,takingcouragefromthefactthattheyhadstillnotattacked.Thusanimprobable,boisterousdialoguebegan.Atfirsttheywerereluctant

to explain their anger but simply continued swearing and threatening.Eventually, after a lot of prompting, they accused the police inExarcheia ofbeingincahootswithheroindealers.ItoldthemthatIwouldnotbesurprisedifthatwerethecase.‘Butwhysomuchangeratme?’Iasked.‘Don’tbe stupid,’one toldme. Itwasnotme,personally, theywereangry

with,but‘stateterroranditsrepresentatives.Youareoneofthem.Aminister.Fuckoffoutofhere.Exarcheia isour liberatedzone.Goanywhereelseyoulike.Justnothere.Leaveusinpeace.’FreshfrommyclashwithAlexisandthewarcabinetandalltooawarethat

GreeceandEurope’sdeepestablishmentweretryingtopulverizeme,Idecidedtoletthemintoasecret.‘Iseeyourpoint,’Isaid.‘IcanacceptthatyouhatemebecauseIrepresent

statepower.Butknowthis:thesameestablishmentthatyouloathe,loathesme.Iamathornintheirbacksideand,believeme,theyareabouttodiscardme.Tovomitmeout.Justsothatyouknow…’Miraculouslytheirangerdissipated.Apauseensued,afterwhichtheirleader

spokeforthefirsttimeinacalm,almostfriendly,voice:‘Enoughnow.Getonyourmotorcycleandgohome.’I made my way back towards the motorcycle and to Danae, but before

puttingonmyhelmetandgettingonthebike,I turnedroundandsaid,‘IwasroamingaroundExarcheiadecadesbeforeyouwereborn.Areyounowtellingme that I cannot come back here? Are you banning me from myneighbourhood?’He thought about it for a couple of seconds before responding: ‘You’re

welcometoreturnwhenyou’renolongeraminister.’‘Seeyousoonthen,’Ireplied.

Aswe setoff on themotorcycle, I looked inmymirrors.The sixtyor sosuddenlylookedmorelikeguardsensuringoursafedeparturethanattackers.Whenwearrivedhomeand Iwasputting themotorcycleon its stand,Danaehuggedme.Ihuggedherback,bothofustremblingalittle.Thenextmorninga journalist whowas usually critical ofmewrote, ‘Last night, the anarcho-fascisthoodlumsofExarcheiaweredealttheirgreatestdefeatinthirtyyearsbyawoman:DanaeStratou.’Butnowamoresinisterkindofviolencewascomingourway.

PARTTHREE

Endgame

15

Countdowntoperdition

AfterthatnightinExarcheia,ittooksixty-sixdaysfortheendgametounfold.A political cartoon by the artist Yannis Ioannou sums them up vividly. In itGreeceappearsonherknees,herarmsboundbehindherback,struggling toescape.AmenacingfigurerepresentingtheEU,wieldinganexecutioner ’saxe,castigates her for refusing to stay still and place her head obediently on theblock:‘Willyouatlastshowamodicumofresponsibility?’My own experience of those days is better encapsulated by a different

culturalreference:SamuelBeckett’splayEndgame–whichmightalsoserveastheleitmotifofEurope’sestablishmentsincethefinancialcalamityof2008leftitbereftofideasastohowtosustainoursocietiesyetunabletorelinquishitsgriponthem–depictsablindauthoritarianbarkingordersathisservant,Clov,whomhe took in as a child, in a grinding repetition of pointless behaviour,movingeverclosertoanendthatisbothinevitablebutelusive,simultaneouslycursedanddesired.ForthroughoutMayandJuneIwasundernoillusionthatthegamethatAlexisandthewarcabinethadchosentoplaywasalreadylost.We were merely going through the motions leading to an inescapablecheckmate. The one illusion that did remain wasmy faint belief that Alexiswouldultimatelybaulkatthehumiliationthetroikawereplanningforhimandatthelastmomentchoosetoplayanothergame–theonewehadplannedallalong.Thatbelieffadedwitheverydaythatpassed,butaslongasitendured,howeverfaintly,Iwouldstayput.IfnothingelseIwasnotgoingtomakeitanyeasier for the creditors to replace the financeministerwhose signature theyrequiredinordertorenewGreece’sindefinitejailsentence.I dedicated my remaining energy to four tasks: the campaign against tax

cheatsandgamblingmachines,preparingmypresentationsfortheEurogroupsothattheywereasimmaculateaspossible,developingtheparallelpaymentssystem, including Plan X, and, top of the agenda, compiling our Plan forGreece. Jeff Sachs and I were already working on the last of these, and inadditiontocontributionsfromNormanLamont,LarrySummersandThomas

Mayer, we had the help of Jamie Galbraith and fellow economist MarianaMazzucato.On7MayIwouldbedeliveringakeynotespeechinBrussels.Itwouldbean

opportunitytotestthewaterwithanearlydraftoftheplanbeforepresentingitat the nextEurogroup,whichwas scheduled for 11May, atwhich point JeffwouldstartcanvassingsupportforitattheIMFandelsewhereinWashington.Ididnot imagine foramoment that itwouldbewelcomedwithopenarmsbyWolfgang and his people,whatever its calibre, but therewas a chance that aconvincingplanwouldpromptother, lesshostile,ministers tobreakranksinitssupport.BeforethespeechinBrussels,IdecidedtoflytoParisandRome,andthenafterthespeechtoMadrid,toseeifmyplancutanyicethere.

Withfoeslikethesewhoneedsfriends?

HavinglittletoloseandknowingthatthecurrentimpasseworriedtheFrench,Italians and Spanish too, I resolved to be frank and ask them directly torespond to a bold suggestion. I proposed that the Greek prime ministerpersuade theGerman chancellor that the onlyway forwardwas for them totakeajointGraeco-Germanproposaltotheinstitutions.Thiswouldcomprise,first, a package of reforms to be passed throughGreece’s parliament by theend ofMay (including a revised fiscal plan, a simplification ofVAT,majorreorganization of the tax administration, severe limitations on earlyretirement,etc.),whichwouldbecomethenew‘commonconditionalities’forcompletionofGreece’scurrentprogramme;and, second,a long-termGreekrecovery contract between the EU andGreece (our Plan forGreece),whichwoulditselfcomprisethedebtswapsIhadbeenproposing,amajorinvestmentinitiative, a public bad bank to deal with the banks’ non-performing loans,manymuch-neededreformsinpublicadministrationandproductmarketsandaprogrammeforcombatingthehumanitariancrisis.1IarguedthatapproachingMerkelwiththisplanwasouronlychance.Itwas

amoderate proposal, containing everything thatGreece needed immediatelyandinthelongerrunwhilemaximizingthecreditors’chancesofgettingtheirmoneyback,butaboveallthisstrategywouldallowthechancellortopresentitas her own idea. If she refused it, I argued, thenno sustainable solutionwaspossible.Inthatcase,Isaid,letthechipsfallwheretheymay.

InParis,on5May,ImetMichelSapinandPierreMoscovici.Theytalkedatcross-purposes,offeringtheusualemptypromisesofsupportandnoideasoftheirown,andwhenitcametothestrategicquestion–ofwhethertoapproachMerkel in thisway – theywere neither in favour nor against. But therewasanotherFrenchpoliticianImetthatdaywhotrulyengagedwiththeplan,whotold me it was a good one and who encouraged me to proceed with it:EmmanuelMacron.InRome,on6May,PierCarloPadoanhadamajorsurpriseinstoreforme.

In theEurogrouphewas reliably conformistwithone eye firmly trainedonWolfgang for his approval. In his own office, however, he revealed what Isupposedwerehistruecolours.‘Youmustmostcertainlygoaheadwiththis,’hetoldme.‘Thereisnotimetowaste.YourprimeministermustcallMerkelnow,oratmostbytomorrow,andpressheronthis.DonotwaituntilMonday[11May, thedayof theEurogroup].Bythen, if there isnoactionbyAngela,Wolfgangwillhavetheupperhand.’Iwasastounded.Butthatwasnotall.Tostrengthenourargumentthatthere

shouldnotbe twosetsofconditions forus toadhere to–whichwouldhavemeantbeingunabletoembarkonournewagreementuntilwehadsatisfiedtheconditions of the current programme – but common conditionalities thatcovered themboth,PierCarlo advisedus tomake the case that the previoustwotroikaprogrammes–thoserejectedbytheGreekpeoplewhentheyelectedus–werebasedonthelogicoftheIMF,whereasanynewarrangementshoulddepartfromtheIMF’slogicandcomeclosertothedevelopmentallogicoftheWorldBank.PierCarlo’sonlypieceofcriticismwasthat itwasamistaketorefer to a ‘humanitarian crisis’. ‘They don’t like being criticized for havingcaused such a thing,’ he toldme. He suggested using the term ‘anti-povertycampaign’ instead, advice that I adopted instantly. As I left his office forFiumicino Airport, I was both pleased and aghast: pleased that there wasintellectuallifeandhonestyinatleastoneofEurope’sseatsofpower;aghastthatEurope had conspired to ensure that neither ever showed its face in ourcommoninstitutions,especiallyintheEurogroup.HavingdeliveredmyspeechinBrusselson7May,IarrivedinMadridon8

Maytobereceivedbymynext-doorneighbourattheEurogrouptable,LuisdeGuindos.As the financeminister of a conservative Spanish government thatwas the sworn enemy of Syriza’s sister party in Spain, Podemos, Luis hadnevermissedanopportunity in theEurogroup tosidewithWolfgangagainstme,butIhadalreadygatheredthatthismightwellbeduetotacticalexpediency

rather than out of conviction. That day in his office he confirmed mysuspicion.Overasimplebutfabulousdishofpaella,withaglassofexcellentredwine to complement it, a disarmingly friendly conversation ensued.NotonlywasLuisquicktoendorsemyideaforbreakingthedeadlock,butwhenItoldhimofPierCarlo’ssimilarreactionheshookhisheadappreciativelyandsaid,‘You,theItaliansandwemustbandtogether.’Intrigued, Iencouragedhim tocomeclean. ‘Areyou tellingme,Luis, that

you are no longer interested in overthrowingour government?Was that notyournot-so-secretdesire?’Luisthoughtaboutthatforamoment.‘Notanymore,’hesaidwithawicked

smile.‘What changed?’ I asked. ‘I was under the impression you had joined

WolfganginseekingGrexit.’‘What changed,’Luis replied thoughtfully, ‘is thatPodemosareno longer

posingathreattousthewaytheyhadbeenafewmonthsago.And,also,InowfearGrexitmorethanIdid.Iamnotsureanymorethatwecancontainit.’Spain’s credit-fuelled mini-recovery was indeed fragile and incapable of

surviving theshocks thatGrexitwouldcause,and itwas true thatPodemos’srisehadstalledowingtointernaldivisions.Eventhoughhewouldnevercomeout and say so in public, a pact betweenGreece, Italy andSpain that avertedGrexitandcalmedthemarketsmadesensefromhisperspective.2OntheflighthomefromMadridIwasplaguedbythethoughtofmissingthe

opportunity we now had before us. The French economy minister and thefinance ministers of Italy and Spain had agreed wholeheartedly that Alexisshould immediately call the German chancellor with my proposition. Theywouldnevertaketheleadthemselvesofcourse,butifAlexisdid,theywouldsupportus,atleastfrombehindthescenes.By the timeI landed inAthens, thePlanofGreecehadbeenfinalized. Jeff

Sachshadbeautifullyedited thedraft Ihadsenthimacoupleofdaysbefore;NormanLamonthadaddedsomeimportantvignettes;thepeoplefromLazardhad refined the debt-swap proposal, and Larry Summers had provided hisendorsement.Therewereothercontributionstoo,includingsterlingworkonadebtsustainabilityanalysisandabadbankpolicy.Jeffsuggestedthatthetitleofthepaper shouldmake it soundboringandmodest, theway the IMF liked it,and it accordingly became A Policy Framework for Greece’s FiscalConsolidation, Recovery and Growth. Co-signed by policymakers who

combined exceptional pedigrees with experience of the highest levels ofgovernancefromacrossthepoliticalspectrum,itwasapowerfulweapon.3ThatSaturdaymorning,twodaysbeforeflyingbacktoBrusselsforthe11

May Eurogroup, I hadmy office print out copies of thePolicy Framework,placedafewinmyrucksack,gotonmybikeandheadedovertoMaximostoseeAlexis.ThereItoldhimoftheencouragingreceptionofmypropositioninParis,RomeandMadridandhandedhimcopiesofthePolicyFrameworkwithfirmadvicethatitwashisonlyremainingweaponifnottowinthewar,atleasttopreventannihilation.Withoutevenpretendingthathewantedtoreadit,AlexispushedthePolicy

Frameworkaside.‘Thisisnotthetimetoantagonizeher,’hesaid,referringtoMerkel.Words eludedme. In refusing the opportunity to adopt this document and

proclaimitourgovernment’santi-MoU,hewaswastingthechanceto tableaplan forGreece’s recovery devised by theGreek government for theGreekpeople with the able assistance of some of the world’s brightest and mostexperiencedpolicymakers.Deniedtheprimeminister ’sstampofapproval,thePolicyFrameworkwasfromthenonnothingmorethanaMinistryofFinancegreenpaper,handingthecreditorsalicencetoignoreitaltogether.Alexis’soneactofresistanceremainedhisthreattodefaulttotheIMF(while

signalling behind the scenes toMerkel his readiness to roll over). The nextIMF payment, totalling €765million, was due on Tuesday, 12May, the dayaftertheEurogroupmeeting.ButonSunday,10May,justbeforeanotherwarcabinet gathering, Yannis Stournaras, governor of the Greek central bank,called to relate that €650 million had miraculously been discovered idlingaround insomeforgottenaccount thathappened tobe stuffedwith funds thatwewereallowedtousetorepaytheIMF.Therewasnowaywecouldjustifydefaultingovertheremaining€115million.‘Bastards!Theyhaveresortedtopayingthemselvestostopourdefault,’washowAlexisputit.‘Thefactthatthey’repayingthemselvesratherthanannouncingadefaultby

Greeceshouldgiveyoustrengthandcourage,Alexi,’Itoldhim.‘Itshowsthekindofpoweryouhave.’Myattempttorevivehisspiritswentunnoticed,andoverthenextfewhours,

as thewar cabinet discussed newways to succumb to the old programme, Iremainedquiet.Only towards theendof themeetingdid I ask, ‘TomorrowIhavetoflytoBrusselstoattendanotherEurogroup.Whataremyinstructions?’

TheanswerIreceivedwastofendoffWolfgangandhistroopsinthehopethatMerkelwouldcometoourrescue.

Wolfgang’smove

Keeping my friends close but my enemies even closer, I arranged to visitWolfgang, along with Theocarakis and Chouliarakis, at the Germandelegation’s Brussels office an hour before the Eurogroup began.4 Hereceived us with his two deputies by his side. Setting aside the usualpreliminaries, he got straight to the point. ‘Look,’ he said, ‘it’s amistake tobelieveanythingthecommissiontellyou.Whatcantheyofferyou?Theytalkandtalkandtalkbutitisalljusttalk.Paynoattentiontothem.’Onpast experiencehewas right.What Ihadnot expected, andwhat Inow

discovered,was that his advice to ignore the EuropeanCommission appliedequallytohisownchancellor.‘Iknowthatyourprimeministertalkstoherallthetime,’hesaid.Growingvisiblyagitated,heasked,‘Whyishetalkingtoherall the time?What for?Whatdoesheexpect fromher?There isnothing shecangivehim!’Perhapsrealizingthathehadexceededthelimitsofpropriety,he took a step back: ‘Iwas very pleased to have heard your primeministermention thepossibilityof a referendumbecause thatwouldbe fantastic! Butyoumustbeverycareful.Youmustmakeitveryclear–very,veryclear– tothe Greek people what their choice is. Opinion polls say that they want theeuro.YoumusttellthemthatiftheywanttheeurotheymusthavetheMoU. Iftheydon’twanttheMoUthenthat’sfine,moveon.Justmoveon.’I retorted that membership of the eurozone could hardly be made

conditional on consenting to failed policies that made one’s countryunsustainablewithinthatsameeurozone.Hedismissedmyargument immediately:‘TheMoU, theMoUas it is,with

nochanges.Orthedrachma.YouhavetotaketheMoUifyouwanttheeuro.Ifyou don’t want the euro, that’s another matter. The people of Greece mustdecidethatquestion.That’swhyIwashappytohearyourprimeministerspeakofareferendum.Youshouldsetupthisreferendum.And,youknow,ifittakessixmonths for theGreekpeople tohaveplentyof time inorder tomakeuptheirminds,that’sfine.Wewillfundyoucompletelyforsixmonths.’

So there I had it.All the talk about theECBmerely following its rules indenyingusliquiditywasclaptrap.Iftheywantedto,forpoliticalpurposestheywouldfundGreece’sdebtobligations‘completely’.Andnotjustforthetwoorthree weeks that we had been requesting but for six whole months – whichwouldamountto€11billion!‘ButWolfgang,’Ireplied,stillreelingathiswords,‘asresponsibleleaders

and Europeans,we should do allwe can to preventGrexit and to offer ourpeoples a clear vision of a decent lifewithin the eurozone. Pushing them tomakeachoicebetweenacatastrophicfiscalpolicywithin theeurozoneandacatastrophicexitfromtheeurozoneisnotthemarkofanenlightenedpoliticalleadership.Don’t you see that the problemwith theMoU is that it offers nohopewhatsoeverforadecentfuture?’Ofcoursehecouldseeit,headmitted.‘TheMoUisbadforyourpeople.It

willnotallowyoutorecover.Itisnotgoodforgrowth.That’swhyyouneedthereferendum.Tomakethisclear.’Shocked at the ease with which he appeared willing to endorse the

disintegrationoftheeurozone,Isaid,‘LeavingasideGreeceforamoment,doyou really think thatyoucancontrol thedemonic forces thataGrexitwouldunleash?Thisispurefolly.Noonecancontrolthem.Itwouldbeanerrorofhistoricproportions.’‘Don’tcallitaGrexitthen,’Wolfgangsaid.‘Youdon’thavetothinkofitas

Grexit. Think of it as a time out.Theway I understand it, you get out for awhile, you rebound very quickly, so you gain your competitiveness againthroughthedevaluation.Andthenayearlaterorso,whenyouhaverecoveredalargepartofyourlostcompetitiveness,youcancomebackin.’I hardly knewwhere to begin. ‘Wolfgang, I cannot condoneGreece’s exit

fromacurrencythatadmittedlyweshouldneverhaveentered.Sinceittakesupto a year to create a new currency before devaluing it, it is equivalent toannouncing a currencydevaluation a year in advance.The short-to-medium-termcostswouldbe immense.While I fear these costs less than the costs ofstayingadinfinitumintheeurounderadestructiveMoU,IinsistthatputtingusintheMoU-or-drachmadilemmaisnotconsistentwiththeinterestsofEurope.Evenifyoudon’tcareaboutGreece,Grexit–oraGreektimeout,orhoweveryouwanttospinit–willendtheeuro’sauraofinevitability.ThiswillhitItalyand Spain badly and immediately, before the secondary effects reach Paris.AndthereisnothingthatMarioDraghicandotoamelioratethisdamageeven

if he prints pyramids of euros. The monetary union will be unstitchedeverywherebyforcesthatyouwillnotbeabletocontrol.’Wolfgangdisagreed,butexpressedhisdisagreementviaacuriousoverlap

inouropinions.‘IntheEurogroupyouareprobablytheonewhounderstandsthat the eurozone is unsustainable,’ he said. ‘The eurozone is constructedwrongly.Weshouldhaveapoliticalunion,thereisnodoubtaboutit.’‘Ialwaysknewyoutobeadedicatedfederalist,’Iinterrupted.‘Irecallyour

disagreement with your colleagues back in the early 1990s. I am sure MrsMerkelcouldnotseeaswellasyoudid the importanceofafederalpoliticalstructuretogoalongwiththemonetaryunion.’He seemed pleased for amoment. ‘And the French too,’ he added. ‘They

opposedme.’‘Iknow,’Isaid.‘TheywantedtouseyourDeutschmarkbutwithoutsharing

sovereignty!’Wolfgangagreedheartily.‘Yes,thisisso.AndIwon’tacceptit.So,yousee,’

hecontinued,‘theonlywayIcankeepthis thingtogether, theonlywayIcanhold this thing together, isbygreaterdiscipline.Anyonewhowants theeuromust accept discipline. And it will be a much stronger eurozone if it isdisciplinedbyGrexit.’From the corner of my eye I could see Chouliarakis going pale.

Theocarakis,ontheotherhand,lookedimpressedbutunsurprisedbythesightof theGerman financeminister firing on all cylinders.Takingmy chance, Isaid,‘Youwillnotbeable tocontrol thechaoticprocess thataGrexitwouldtrigger.Forgetaboutatemporarytimeout.Onceoneisout,oneisout,andtherestwillbegintofallouttoo.Youareplanningforadynamicthatyouwillnotbeabletocontrol.’‘I don’t agree with you,’ he replied, shaking his head and looking at the

floor.‘Wecansafeguardtheeuromuchbetterafteryouleave,withhugehelpfromus,andthenyoucancomebackin.’It was evidently pointless to challenge his faith in his ability to control a

vicious force of nature, and when the German financeminister offers yourbatteredcountry‘hugehelp’,youhaveaduty,asitsfinanceminister,toaskforclarification. So I asked him, ‘OK,when you say “with huge help”,what doyoumeanby“huge”?Bytheway,Wolfgang,haveyoubriefedthechancelloronthis?’Lookingatmeintenselyandwithameaingfulsmilehesaid,‘IfIanswerthis

questionandyouleakthis,I’mgoingtokillyouwithmyownhands!’

‘Wolfgang,’Isaid,‘haveIeverleakedanythingwehavetalkedaboutinourmeetings?Youhave,but,asyouknow,Ihavenot!’Helaughedandsaid,‘Yes,youareright,youareright.SheknowsandIwill

convinceherthatit’sagoodidea.’As I had suspected, the chancellor knew of Wolfgang’s plan but had not

approved it. At that point it hit me: he and I had something important incommon.Wedisagreedoneverything,Grexitincluded,buttherewasonethingweshared:aleaderwhowasmuddlingthrough.‘Fromwhatyouaretellingme,’Iprobed,‘thisisaconversationthatyoudo

nothaveamandatetohavewithme.’‘Yes, you need a mandate from your prime minister for us to have this

conversationandIneedamandatefromthechancellor.’‘OK,’ I said. ‘I’ll call you later.’ We exchanged telephone numbers and

agreedtotalkagainlater.Meanwhile, we had the Eurogroup meeting to attend. From within the

Eurogroup I texted Alexis with Wolfgang’s news. The following rapidexchangeensued.

VAROUFAKIS: [16.21] Wolfgang pirouetted amazingly today during ourmeeting.

TSIPRAS:[16.22]Meaning?VAROUFAKIS:[16.25]Heissendingyouamessageaboutatimeout…TSIPRAS:[16.26]Isheproposingexitoradoptingaparallelcurrency?VAROUFAKIS: [16.27] The former by means of the latter; in the fullknowledgethattheMoUisthrottlingus.

TSIPRAS:[16.30]Inthatcasetellhimthat,ifhemeansit,let’sdiscusshowitcould happen under the best terms. Funding, consensus and mutualassistancewithoutdefault.

VAROUFAKIS:[16.35]Heisofferinghugehelpforthetransition.

AtthatpointJeroencalledonmetorespondtotheusualchargesagainsttheGreek government: causing delays, being unwilling to offer credibleproposals and so on.After deliveringmy by then standard rejoinder and anurgentpleaforabalancedcommuniqué,IresumedmyexchangewithAlexis.

TSIPRAS:[17.50]Iamcurioustofindoutwhatonearthhehasinmind.Tellhimalsoaboutthatotherproposaltoseehowheseesit.5

VAROUFAKIS: [17.51]OK.Do I haveyour green light to talkwithhim instrictconfidentialityaboutallthesematters?

TSIPRAS: [17.53] Yes, but make sure that you do not give him theimpressionthatyouagree.Andbecarefulthathedoesnotleakit.

VAROUFAKIS: [17.53]OK.Our line is: 1.That I am simply speakingwithhimtoexplorehisproposalwithoutanycommitmenttoit.2.Ifheleaksitweshalldenyit.

As the Eurogroup moved on from discussion of Greece to other topics,Wolfgangbeckonedmeover tohis sideof the enormous conference table. Iwalkedoverandkneltdownnexttohim.

SCHÄUBLE:Ihavebeenthinkingaboutwhatweweresaying.VAROUFAKIS:Metoo.AndIamgladtoreportthatIhavemymandatefrommy prime minister to discuss your idea, without any agreement orcommitmenttoit.

SCHÄUBLE:Listen,itisnotenoughforustohavethemandatetotalk.Itisimportantthattheytalkaboutitfirst.

I could see his point: it would be very easy for both of us to land in hotwater,accusedofgoingrogueonsuchacrucialmatter.

VAROUFAKIS:Isee.Howshouldwethengoaboutit?Inanycase,didyougetyourmandatefromthechancellorsincewespoke?

SCHÄUBLE:Ishalltalkwithhertomorrowmorning.Butit’snotenoughforher to agree. She and Tsipras must have this discussion first. Whydoesn’tyourprimeminister,inoneoftheirmanytalks,mentionit?

VAROUFAKIS:[smiling]Come,come,Wolfgang.Youdonotexpecthimtomake such a mistake? If he does mention it, the next moment theFinancial Times or Der Spiegel will be reporting that the GreekgovernmentisputtingGrexitonthetable!Ihaveabetteridea:whydoesthechancellornotmentionthisideatoTsiprasinstead?

SCHÄUBLE: [smiling] Because then you will leak that the chancellor ispushingGreeceoutoftheeurozone.

VAROUFAKIS:Thissoundslikeastalemate,Wolfgang,doesn’tit?

Wolfgangscreweduphisfaceindeepthoughtandthen,afewsecondslater,sharedafreshideawithme:‘Whydoesn’tTsipras,whenevertheytalk,askher

aggressively, “What’s this idea that Schäuble is pushing onVaroufakis for atimeout?”Ifhesaysthisasanaccusation,noonewillbeabletoleakthisaseitherTsiprasoryouhavingendorsedmyproposal.But,atthesametime,thechancellorwillhavethechancetosay,“Itmaynotbeabadidea,let’sdiscussit.”Iftheydo,thenyouandIcanhaveourdiscussionaboutwhat“hugehelp”means.’IagreedanduponmyreturntoAthensrelatedfaithfullythewholeexchange

toAlexis.Somewhatbemused,heneverthelesspromised toput toMerkel theaggressivequestionWolfganghaddevised.

Meltedeuros,sunkenhearts

Almostamonthlater,on8June2015,IwasinBerlin.AccompaniedbyJamieGalbraith,ImetWolfganginhisofficeforthelasttime.Schäublereceivedmewarmly,eventhoughhecouldnotresistabarbedjoke.Oncewehadsatdown,heproducedapileofeurocoinsmadeofmilkchocolate.‘TheyweregiventomebyGermanschoolchildren,butItoldthemIwasgoingtodeliverthemtomyGreekcolleaguebecausehewouldneed them tocalmhisnerves.’ I tookthemwithasmile,offeredhimone(whichherejected),peeledthealuminiumfoiloffanotherandateit.‘Pretty good for the nerves,’ I confirmed before unnerving himwith bad

news.‘Wolfgang,itseemsthatyoumostdefinitelydonothaveamandateforthatconversationthatyoustartedamonthagoinBrussels.’Genuinelypuzzled,heasked toknowmore, so I toldhimwhatAlexishad

relayedtome.HehadspokentoAngelaMerkel.Asadvised,hehadconfrontedherwith the question: ‘What on earth is Schäuble tellingVaroufakis about atime out?’ Shewas annoyed and toldAlexis that thiswas not something shewishedtocontemplate,addingportentously,‘Ifhe[Schäuble]approachesyouwiththisagain,letmeknow!’6Wolfganglookedasifhehadhadthewindknockedoutofhim.Thathedid

not even try to contest Alexis’s account suggested it was in tune with hisunderstanding of Merkel’s attitude. His smile disappeared, his shouldersdrooped,hischeerfulnessvanished.Heshruggedrepeatedlyandtoldmethat,giventhisdevelopment,hewasoutofideas.Heseemedlostforwords.Againandagainhe saidhehad ‘no idea’abouthow to resolve the impasse, thathe

had ‘no authority’ to discuss an agreement within the eurozone behind theinstitutions’backs.ForthefirsttimeIrecognizednotalackofinterestorsomecynical stratagem but genuine helplessness, so, I tried to revive his spirits alittle.‘Thepeopleoutthere,Wolfgang,’Isaid,pointingoutofthewindow,‘donot

look toMario [Draghi] or to Christine [Lagarde] to do what is right, avertdisasterandfindsolutions.Theynevervotedforthosepeople.Theyvotedforyouandformetogettogetherandhammeroutanagreement.Theymandatedustofindasolutionandwillblameusifwedonot.’Herefusedtolookmeintheeye.Infact,hedidnotlookwell.‘Ourconundrum,’Icontinued,‘ourtaskistofindasolutionthatminimizes

painunderthetwinconstraintsthatyouandIhaveagreedarebinding:first,theMoUdoesnotofferaviablesolutionforGreeceand,second,neitheryounorIhaveamandatetodiscussGrexit,timeoutsandthelike.Solet’sfindthebestsolutionwithinourcurrent setofconstraints.This iswhatelectedpoliticiansmustdo.’‘What could that solution be?’ he asked, leaving the door ajar for me to

proposeanalternative.Itwasmychancetoconnectwithhimoverapracticalresolution.Iexplainedhowdebtcouldbeswappedinamannerthathecouldselltothe

Bundestag,howGreecewouldneednonewmoney,howwecouldguaranteethatAthenswouldneverfallintotheignominyofaprimarydeficitagain,howwecould institute far-reaching reforms thatheand IcouldagreeuponandadevelopmentbankalongthelinesofproposalsIhaddevelopedinconjunctionwithGermanconsultantsclosebothtotheChancelleryandtohisownministry.Inshort,IgaveasummaryoftherevampedversionofmyPolicyFrameworkpaper,whichwehadbeenworkingonthatpastmonthandwhichnowfeaturednew ideas and a new title: Ending the Greek Crisis: Structural reforms,investment-ledgrowth&debtmanagement.7MyrecollectionisthatWolfgangfoundnothingtofaultinmyproposition.

Later, seeking a second opinion on his response, I asked JamieGalbraith towritedownhisimpressions.HereishowhedescribedWolfgang’sreaction.

Schäuble listened to the presentation at length with close attention andbody language that suggested no disagreement on any point of theargument.Varoufakisstatedrepeatedlythatasolutionshouldbedefinitiveandnotapredicateforfurtherfailureandongoingbailouts…Themost

importantfactaboutSchäuble’sresponsewasthathesaid,repeatedlyandwithashrug,thathehas‘noidea’abouthowtoresolvethismatter.

I pressurized him for somekind of response. ‘Here I am, asking you, thefinanceministeroftherichestandmostpowerfulcountryinEurope,totellmewhatIshoulddo.Yourejectmyideas;yourownproposalwasrejectedbyyourchancellor,andmeanwhilethenegotiationsbetweenmyprimeminister ’steamand the troika in the Brussels Group are heading in a direction that is theoppositeofasolution.WhatshouldIdo,Wolfgang?’Helookedupforthefirsttimeinawhileandsaidwithoutanyenthusiasm,

‘SigntheMoU.’Wehadcomefullcircle.‘OK,’Isaid.‘Let’ssupposeIdoit.Let’sassumethatIsignthedamnedthing.

Tellmethis:arewenotgoingtobeinthesamesituationagaininsixortwelvemonths? With another funding crunch feeding GREECE ON THE VERGE AGAINheadlines,morerecession,andapoliticalbacklashintheEurogroup?’Perking up a little,Wolfgang agreed and said, ‘This iswhy I told you to

convinceyourprimeministertoconsideratimeout.’‘Exceptthatyourchancellorputanendtothatdiscussion.’‘Well,thatleavesyouwiththeMoU,’hesaid,fallingbackoncemoreonthe

samenon-solution.Onlyamovebeyondreasoningandrhetoriccouldbreaktheviciouscycle,I

thought, a human gesture. ‘Will you do me a favour, Wolfgang?’ I askedhumbly.Henoddedwarmly.‘Youhavebeendoingthisforfortyyears,’Isaid;‘I have only been doing it for five months. You know from our earliermeetingsthatIhavefollowedwithinterestyourarticlesandspeechessincethelate1980s.Ineedtoaskyoutoforgetforafewminutesthatweareministers.Iwant to ask you for your advice. Not to tell me what to do. To advise meinstead.Willyoudothisforme?’Under the watchful eye of his deputies, he nodded again. Taking heart, I

thanked him and sought his answer as an elder statesman, not an enforcer.‘Wouldyousign theMoU if youwere inmyplace?’ Iwas expectinghim togiveme thepredictableanswer– that,under thecircumstances, therewasnoalternative–alongwithalltheusual,senselessarguments.Hedidn’t.Insteadhelooked out of thewindow. By Berlin standards, it was a hot and sunny day.Thenheturnedandstunnedmewithhisanswer.‘Asapatriot,no.It’sbadforyourpeople.’

Achinkhadappeared.Naturally,Itriedtopriseitopen.IsaidthatsincewenowagreedthattheMoUwas‘bad’andGrexitwasoffthetable,anagreementliketheoneIwasproposingwastheonlysolutionconsistentwithourmandateanddutytoourpeople–theGermansaswellastheGreeks.ButbythatstageWolfganglookedlikeabrokenman.ThecynicwouldsaythatDrSchäublewasplayingalargergame–that,as

hehadsaidattheIMFconference,causingMichelSapin’soutburst,andashehad said to me before the Eurogroup on 11 May, Grexit to him was aninstrument with which to pursue his vision of a smaller, more disciplinedeurozone, with the troika firmly entrenched in Paris. The cynic would bealmostright.8Exceptitwouldnotbethewholestory.AsIdepartedthatday,Iwas not leaving behindme aMachiavellian dictator; I was leaving behind asunkenheart,amanostensiblymorepowerful thanalmostanyone inEuropewhonevertheless feltutterlypowerless todowhatheknewwas right.As thegreat tragedianshave taughtus,nothingcausesgreaterwretchedness than thecombinationofsupremeauthorityandwholesalepowerlessness.Before leaving his office, I took the chocolate euros and put them in the

insidepocketofmyjacket.Wesaidourgoodbyes.Itookthelifttothegroundfloorandwalkedoutintothesunniestofdays.AsIgotintothecarthatawaitedus,IlookedupinthedirectionofWolfgang’sofficesurprisedtofeelastrangesadnessatthememoryofhissunkenspirits.LaterIwouldbemakingaspeechatBerlin cathedral.Who among the enthusiastic crowd that receivedme thatnight would have believed I had felt this way?9 By the time I arrived at thecathedral,theheathadmeltedtheeurocoins.TheundatedresignationletterthatImadeapointofkeepinginthesamepocketwassmudgedwithchocolate.

Thewarofthemodels

‘A Taste of Armageddon’, episode twenty-three of the very first Star Trektelevision series, first aired in1967, tells the storyofa five-century-oldwarbetween two planets, Eminiar and Vendikar. In order to reduce the war ’seconomic costs, the combatants have come to an interesting arrangement.Insteadoffiringrealmissilesatoneanother,theyhaveagreedtocontinuetheirconflict in the purely digital environment of a computer model where theirattacks on one another are simulated, with model-based missiles unleashed

againsteachother ’smodel-basedcities.Butwhilenomaterialdamageisdone,thecasualtiesareveryreal.Fortheagreementalsocompelseachsidetosendto specially made ‘disintegration chambers’ the number of people who,accordingtothemodel,wouldhavediedhadtheattacksbeenreal.During thenegotiationswith the troikaa similar ‘warof themodels’ took

place,withrealcasualtiesamongtheGreekpeople.Forexample,wheneverIargued that in a struggling economymarred by poverty and tax evasion thebestwaytoincreasethestate’srevenuesfromVATorfromcorporatetaxwasto reduce VAT and corporate tax rates, the troika would retort that theircomputermodelsshowedtheopposite:onlybyincreasingtherateofVATandcorporatetaxwouldtaxrevenuerise.Andmyministry’sCouncilofEconomicAdvisers,underGeorgeChouliarakis,wasusingthesamemodelstoproducethesameargumentsinfavourofausterity.Oneday,incensedandincredulous,Iaskedtobeallowedaglimpse inside themodels. Iwas told thatsuchmodelswerecomplex,theimplicationbeingIwouldnotunderstand,butIinsisted:inapreviouslifeIhadbeenaneconometrician,Ireplied.Whentheyshowedmetheirmodels,Irealizedwhytheyhadbeenreluctant

todo so. Inside there laya scrupulouseconomist’snightmare: an inbuilt andfrankly ridiculousassumption thatprice increases suchas thoseproducedbyVATincreasesnever reducesales,andthatrises incorporatetaxratesalwayslead to more tax paid by business. They had omitted to include any ‘priceelasticities’intheirmodels–tousethetechnicaltermforthisblunder.Tomyknowledge, no economist ever assumes that a price increase,however steep,will leave sales unaffected. Or, conversely, that a price drop will neverstimulate sales. Or that increasing corporate tax rates will always lead tocorporationspayingmoretaxestothestate.Andyetthetroika,myCouncilofEconomicAdvisersandtherespectedfinancialpress–eventhoseamongthemwho refused to endorse higher tax rates for Greece – implicitly endorsedpreciselythiseconomicidiocyeverytimetheydefendedthesemodelsagainstmyarguments.Todemonstratetheflaw,Iperformedasimpleexercise:Iaskedthetroika’s

modeltosimulatetheimpactonthegovernment’srevenuesofraisingtheVATrate from 23 per cent to 223 per cent. We all know what would happen inrealityaftersucha ludicroustaxhike:saleswouldcollapseandsowouldthegovernment’s revenues. But not in the troika’s model, which produced amassive increase in revenues. Like all models, garbage assumptions begetgarbage predictions. Even so, just as in ‘A Taste of Armageddon’, the

casualties would be real enough: poor pensioners further impoverished,businessespushedovertheprecipice,awholesocialeconomyontheedge.Tocounterthetroika’smodelsIurgentlyneededourown,onescientifically

superior and socially humane. Normally, this would fall to the Council ofEconomicAdvisers to provide, except thatChouliarakis lacked the expertiseand,more importantly, thewill.He seemedperfectly satisfied todefer to thetroika’smodels,whoseresultsstrengthenedWieserandCostello’shand.ButashenowhadthefullsupportofMaximos,therewasnopointarguingwithhim.Instead,Iaskedmyownteam,underElenaPanaritis,tocreateadecentmodelfromscratch.Withouttheresourcesoftheseventy-strongCouncilofEconomicAdvisers,

without even a proper office to work in, this tiny team did magnificently.Together we worked out the econometrics, built in decent estimates of theresponsivenessofdifferentmarketstopriceandtaxchangesandcompletedthecoding.Withinafortnighteventhetroika’stechniciansinAthensadmittedthatourmodelwassuperiortotheirs.Thetrouble,ofcourse,wasthatthiswasnoacademic game in which themost accuratemodel won; it was a war of themodels in which the most powerful side won. This can be illustrated by anepisodeinvolvingtheIMF’sPoulThomsen.One evening in Brussels Poul was wearying me with his standard tirade

about ourVAT systemandhow it ought to be simplified: ‘It is ridiculous tohave six rates of VAT,’ he thundered. ‘It makes the system susceptible toarbitrageandfraud.’10My response was that the real problem with VAT in Greece was not its

complexitybutthefactthat23percentwastoohigharateforaneconomyinaslumpandasocietysomiredinpovertythatmillionscouldnotaffordtopayit.We needed to offer theGreek people a new social contract: the governmentwould reduce the rates and in return the people would actually pay the tax.Additionally, I argued, we needed to digitize transactions to discourage taxevasion.Poulwasadamant: toomanyrates is theproblem,hekeptsayingoverand

overagain.‘Youneedtogotojusttworates,’heinsisted.Ithadbeenalongday,andIwastiredsoIdecidedtocuttothechase:‘OK,

Poul.Here’sthedeal.IshalladoptyourideaofjusttwoVATratesnationwideonconditionthatyouagreethatthey’re6percentand15percent,plusa3percent increase for transactionsusingcash insteadofdebitcards.Whatdoyousay?’

Poul looked at me. ‘Do you mean it?’ he asked, evidently pleased at mysuggestion.‘Yes,Ido,’Ireplied.‘Let’sshakeonit.’Hegavemehishandandweshook.Back in Athens it took a vast effort to convince Alexis’s people and the

cabinettoendorsethenewpolicy.Myargumentwasthatitwouldgivepeopleandbusinessesahugebreathing space, itwouldhelpestablishanew rapportbetween thepopulationand itsgovernment,and itwouldbe the first timewehad seen eye to eyewith the IMFon amajor reform.While I got the greenlight, itwas clear thatmanywere not happy.Chouliarakiswas upset that histroika-sourcedmodel had been set aside, aswere others forwhom the veryexistenceofmyteamwastherealproblem.On18MayIwastobeinterviewedliveonGreektelevision.Beforehand,I

asked Alexis for permission to mention the new VAT policy as a sign ofprogressinthenegotiationsandofourplanstoproviderelieffromexcessivetaxation.Heagreed,andsoIdid.Thedayaftertheinterviewpartsofthepressattacked the VAT proposal as ‘unfeasible’ and ‘a figment of Varoufakis’simagination’. My press officer and Wassily reported that the deputy primeminister ’s office and Chouliarakis were briefing journalists against theannouncedpolicy. I told themthat Icouldnotbebotheredanymorewithmycomrades’backstabbing:‘IhaveanagreementwithThomsenandAlexis,andthat’sgoodenoughforme.’Two days later I received a call from one of our Brussels Group

representatives.HehadbeenveryhappywiththedealPoulandIhadstruckandhad been eager to seal it at the level of the Brussels Group. He soundedincensed. ‘The IMF has gone back on your deal. Their mission chief didmentionthatThomsenandyouagreedontworates,butheclaimsthatthetoponeshouldgofromthecurrent23percentnotto15butto24percent.Thisiswhattheirmodelsays.’ThewordsofcautionthatJeffSachshadoncesharedwithme rang true: ‘These people lie. Don’t trust them.’ Still I could hardlybelievethatPoulcouldhavebeensoblatant.The next time I saw him, we were passing one another in a corridor in

Brussels. He had his eyes fixed on the floor, clearly keen to avoid aconversation.Istoppedhim.‘Poul,’Isaid,‘whathappenedtoouragreementontwoVATrates,oneat6percenttheotherat15percent,plusasurchargeforcash?What’s this about a top rateof24per cent thatmypeople report?’Hemumbled something incomprehensible about the revenues not being highenough.‘Wehadadeal,Poul,’Iinsisted.

Grinningmischievously,hesaid,‘Willyougivemethelabourreforms?’11Thiswasnowaytonegotiate,Ithought.Sayingnothing,Iwalkedaway.Despite theridiculeof theGreekpress, Ididnotgive in.For thewholeof

June my team and I repeatedly demonstrated the superior accuracy of ourmodelandperseveredinourarguments.Thesituationwastrulyabsurd:aleft-wing finance minister representing Syriza, the Alliance of the Radical Left,was arguing like a Reaganite Republican in favour of lower tax rates,including for business, against supposedly neoliberal functionaries insistingon increasing them. It was a sure sign that this negotiation had no basis ineconomics.One day atMaximosAlexis congratulatedme. ‘Yourmodel has won,’ he

saidapprovingly.‘Brusselsconcededthat it isbetter thantheirs.’Andthenheadded, ‘But, Yanis, they still insist on the same parametric reforms [in taxrates],andwedecidedtoletthemhavethem.’12HeremindedmeofAnan7,theleader of Eminiar in ‘Taste of Armageddon’, who demanded that his ownpeople voluntarily enter the disintegration chambers because this iswhat themodelhehadagreedwiththeenemyrequired.

Cleanbreak

Of the many disgraceful acts the previous government had perpetrated, twoconcerned the arts and our broader cultural milieu. One was the closure ofERT, the state radio and television broadcaster – our equivalent of theBBC.The other was the illegal removal from the directorship of the NationalMuseumfor theContemporaryArts (EMST)ofAnnaKafetsi, a curatorwhohadmadeitsestablishment,completionandsuccessherlife’swork.13WheninoppositionSyrizahadpledgedtoreversetheseoutrages.Despitetheirdifferingbackgrounds,Sagias,aproductoftheancienrégime,

andPappas,wholikedtopresenthimselfasAlexis’sradicalalteregoandtheguarantorofourdefiance,wereacrucialcomponentofthemajorityinthewarcabinet that defended our original covenant.The first time I got awhiff thatPappas and Sagiaswere going over to the other sidewaswhen they backedaway from our commitments regarding ERT and EMST. During that cruelApril Sagias dropped a bomb. In reply to an idle question regarding whowould be appointed CEO of the reopened ERT, he mentioned Labis

Tagmatarchis,theformerCEOwhohadoverseenmyblacklistingfromERTin2011.14‘Is this the new era we’re planning for ERT?’ I asked. ‘Did we fight to

reopenitonlytorestoreLabis?Arewekeentoreturntothebadolddaysofdirectgovernmentcontroloveralowbrowpublicbroadcaster?’Sagiasshruggedhisshoulders.‘That’swhatIheard,’hesaid.‘Don’tchastise

me.TalktoPappas.’Thenextday,onthesidelinesofaregularwarcabinetmeeting,Iconfronted

Pappas,whowas theministerof statewith responsibility for themedia. ‘AreyouseriouslyconsideringrestoringLabistotheERTthrone?’‘Don’tbeabsurd,’hereplied.‘AsifIwouldgoforhim!’Reassured,Iaskedhimwhomhewasthinkingofinstead.Pappasmentioned

GeorgeAvgeropoulos,abrilliantyoungdocumentarymakerandformerwarcorrespondent. He struckme as being an excellent choice. That night I toldDanaeIfeltbadaboutdoubtingPappas–amistakenregret,asitturnedout.Meanwhile, every time I bumped into our minister of culture I would

enquireaboutAnaKafetsi’sreturntoEMST.‘Whendoyouthinkwecanhaveherback?’Iwouldask.‘As soon as possible,’was his standard reply, occasionally pepperedwith

encouragingstatementssuchas‘She’stheonlyonewhocanopenthemuseumproperlyandwhohaswhat it takes tomake itgloballysignificant.’Preciselymythinking,Ithought.In short order two announcements wreckedmy illusions: Pappas issued a

press release that Labis Tagmatarchis was to become CEO of the reopenedERT,andtheMinistryofCultureannouncedthattheactingdirectorofEMST,who had replaced Anna Kafetsi by a Samaras government decree, wouldcontinueinherpositionindefinitely.Countlesspeoplecontactedme,incensedthatwehadrenegedontwocommitmentstothethousandswhohadgonetothebarricadestodemandadifferentERTandtothosearoundtheworldwhohadprotestedagainstAnna’sremoval.IwasevenmoreincensedthanthepublicbecauseIwasawareofthingsthat

mightnothavebeenwidelyknown.TheactingdirectorofEMSTwasLabis’slifepartner,whileSagiashimselfhadtoldmeofhislong-termfriendshipwithLabis. Pappas was getting closer and closer to Sagias when he reappointedLabisERT’sCEOandwasknownbyallministerstohavetheearoftheprimeminister – including theminister of culture. Even if these appointments had

beenonmerit, theyseemedtometobeawarningofnepotismcreeping intoourranksandofacosyinguptotheregimewehadsworntoreplace.Itwasnocoincidenceeither,Ithought,thattheycameatthesametimeasa

crucial shift within the war cabinet, with Pappas and Sagias clearly driftingawayfromourcovenant.AndasPappasandSagiasdriftedaway,thefour-to-twomajority thathadbacked theoriginalbattleplan–withAlexisprovidingthefifthvoteinitsfavourat theendofeachmeeting–becameafour-to-twominority,withmyselfandEuclidincreasinglyisolated.

Fakeintelligence

PappasandSagiaswerenottheonlycolleagueswhoseshifttowardsthetroikawas signalled by seemingly inconsequential choices over personnel. Oneafternoon in March, Yannis Roubatis, the chief of Greece’s nationalintelligenceagency,approachedmeatMaximoswitharequest.Hewanted,heexplained,toputinagoodwordforthemanwhohadbeenpresidingovertheHellenicGamingCommission,theregulatoryauthorityoverseeinggambling.‘Heisveryclosetothepreviousregime,’Roubatisadmitted,‘butIbelievehehas found a way to keep that dodgy sector relatively clean. It would be amistake to remove him just because he is not one of our own.’ I wasdetermined to maintain continuity wherever possible, and Roubatis’s wordwouldnormallyhavesufficed,especiallygivenourgoodrelationshipandthesignificantesteemIheldhimin.However, at the ministry my team would not hear of it. ‘If there is one

person you must remove, he is it,’ they said about the man whose servicesRoubatiswantedmetoretain.Afterresearchingtheirclaimsandassessingthesituation, I did remove him. This kick-started a personal campaign by theprivatizednationallotterycorporationagainstmeandthepeopleIappointedtothe new Hellenic Gaming Commission.15 It also coincided, perhapsaccidentally,withthecessationofthehelpfulbriefingsthatRoubatishadbeengivingmeuntilthen.Meanwhile Pappas and Sagias’s behaviour towards me deteriorated

markedly.Alexis’sdecisionon27ApriltoaccedetoDijsselbloem’sdemandsby dismissing Theocarakismarked a significant downturn, and they becameincreasingly impolite.Within amonth theirmanner towardsmehad evolved

into downright rudeness and aggression. One day on the sidelines of a warcabinetmeetingIaskedAlexiswhetherhehadnoticedit.Nonchalantlyhesaidhehad.AndwhenIenquiredifheknewwhy,heshockedmewithhisanswer.

TSIPRAS:SagiasisconvincedthatyouareincahootswithSchäubletotakeusoutoftheeuro.AndIthinkthathehasconvincedPappastoo.

VAROUFAKIS:Doyoubelievethistobeso,Alexi?TSIPRAS:No,buttheyareconvinced.VAROUFAKIS:Why?How?Onwhatbasis?IfIhavesucceededinanythingitisatblockingSchäuble’sGrexiteffortsonyourbehalf.

TSIPRAS:Roubatishasfedtheminformationtothecontrary.

Whiletherestofthewarcabinetcontinuedtheirdiscussion,Itriedtomakesenseinmyheadofthisastoundinginformation.Roubatisis tellingthemI’min cahoots with Schäuble? If so, our chief spook is peddling outright lies, Ithought.Evidently,someonehas influenced twoofmywarcabinetcolleagues,whohave in turn influencedAlexis.But I’mgettingall this fromAlexis.Howcan that be? If Alexis believes I’m Schäuble’s stooge, why is he telling me?Surelyhewouldusethisinformationtobaitmebeforegettingridofme?Thenagain, if Alexis does not believe this, why doesn’t he side with me againstSagiasandPappas?CoulditbethatAlexisislyingandRoubatisdidnotaccusemeofcollaboratingwithSchäuble?Ineededtofindoutthetruth.IgotmychancethenightbeforetheEurogroupmeetingof11May.Thewar

cabinethaddecidedthestrategythatIshouldtakewithmetothemeetingandwasintheprocessofadjourning.Roubatishappenedtohavejoinedusforthelastquarterofanhourofdiscussions.Asweweregettinguptoleave,Alexisturned tome and said in front of everyone, ‘Be calm tomorrow.Don’t loseyourcool.’Ismiledandinacalmvoicesaid,‘Iamalwaysultra-coolduringEurogroup

meetings.’LookingatRoubatis,IaskedAlexis,‘HaveyoubeentoldotherwiseAlexi?’AlexisglancedatRoubatisbutsaidnothing.‘YoudidloseyourcoolatRiga,Yani,’Roubatissaid.‘No, I did not.Not for onemoment did I losemy cool. If you have been

tellingmycolleaguesotherwise,’ I said toRoubatis,pointingat theothers intheroom,‘eitheryouhavebeenmisinformedbyyouragentsoryouarelying.’

Back at my office I downloaded from my phone onto my computer myrecordingof theRigaEurogroup.IcopieditontoaUSBstickandgaveit tomy secretary with instructions that the stick be reproduced and deliveredpersonally to themembersof thewarcabinet,withanote fromme: ‘Here iswhatreallyhappened.’Interestingly,noneofthemevermentionedittome.TothisdayIdonotknowwhethertheyevenbotheredtolistentoit.

Countdowntoperdition

Withlittlesupportfrommyministry’skeydepartments,suchasthetaxofficeand theCouncilofEconomicAdvisers, Iwasnowwholly reliantona smallteam of advisers. The strength of their models and their tenacity werenonetheless a great source of annoyance to those who had workedharmoniouslywith the troika fromthestartaswellas to thosewhohadnowchosen, mid-course, the path to surrender. One of those advisers was ElenaPanaritis.InearlyMayI informedtheIMFthatElenawouldbetakingontheroleof

Greece’srepresentativetotheIMF.IdidsowithAlexis’spermissionandwiththefullsupportofTakisRoumeliotis,ourformerIMFrepresentative,aswellas that of our economy minister, George Stathakis. Her appointment wasapprovedafewdayslater.Inmid-May,however,Alexisaskedmetodumpherbecause‘thepartycannottoleratesomeonewhohadsignedanMoU’.Truthbetold,Elenahadaconspicuouslyneoliberalbackground,attendedgatheringsofneoliberalpoliticiansandeconomistsandaddressed themedia in themannerof a formermember of parliament, which shewas, rather than in themoredeferentialstyleexpectedofaminister ’sadviser–thatGreekwasnotherfirstlanguagemay not have helped either.But the only thing thatmattered tomewas that she represented me and our government brilliantly at internationalforums and was absolutely committed to the task of getting Greece off thehook.Shewasbyfarthebestpersonforthejob.In response to Alexis, I explained that it was precisely because of the

intellectualandmoralcouragewithwhichshehadturnedagainstthelogicoftheMoU that I trusted her, certainly more than I trusted unschooled Syrizamilitantswho did not knowwhat theywere up against. Alexis smiled atmyreasoning but repeated that we had a problem. I put my foot down. Thisappointmentwasforthefinanceministertomake.Fullstop.However,inorder

tohelphimfendoffpressurefromthepartyranks,Iproposedwegothroughanopenrecruitmentprocess,withDragasakis,Stathakis,Euclidandmyselfonthe deciding committee, to assess Elena’s suitability in the context of othercandidates.Alexisagreed.OnceagainElenawasjudgedtherightcandidateandappointed.16 A fresh letter to the IMF reconfirming her appointment wasdispatched.Four days later a newspaper reported that Sagias could not stomach her

appointment,callingElenaan‘MoUchoice’.Thefact thathewasat thatverymoment striving to drag Alexis down a path that led back to theMoU wasironic to say the least. But by 1 June, under immense new pressure fromAlexis,Elenahadresigned.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 topostponedebt relief and increase tax rates, so thePlan forGreecehad tobeshotdownbecausedebtreliefwasatitsheart,andthetaxationmodelsmyteamandIhadbeenworkingonhadtovanish.Elena’sremovalwasagreathelptoSagiasandChouliarakis’scampaign,supportedbyPappasandDragasakis, tosteertheSyrizagovernmentawayfromseekingdebtrelief.During awar cabinetmeeting, Pappas –who had approachedme in 2012

becauseofmydedicationtodebtrestructuringandhadinsistedthatIbecomefinanceminister in2015–accusedmecontemptuouslyofbeing ‘fixated’onGreece’sdebt.‘YoubetIam,’Ireplied.‘Wheninaprisoncamponehasadutytobefixated

onescaping.’SagiasrushedtoPappas’said,makingtheincredibleargumentthatthedebt

wasnotaproblemaslongasthetroikafundeditsrepayment.WatchingAlexisfail to respond to this disavowal of literally everythingwe had been sayingsince 2010 was mortifying. Submitting to the troika’s MoU process andremakingourgovernmentintoasofterversionoftheSamarasadministrationwasnowtheirgoal.IrememberhangingaroundwithEuclidatMaximosaswewaited for the war cabinet to begin while in an adjacent room Sagias andChouliarakis, with Dragasakis hovering to lend them support, wrote andrewrote the troika’s so-called Staff Level Agreement (SLA). This waseffectivelyanewMoU,identicaltotheoldexceptbutforafewfigleavesandagreatdeallessfiscalsustainability.Theawfulnessofitallwasexcruciating.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 evenmore depressed.Meanwhile, Jeff Sachswas sendingme urgentwarnings:‘TheydemandanSLAfirst,promisingtalksaboutdebtreliefandthelike later.But they lie!Onceyougive themtheSLAtheywilldeny theyeverpromisedyouanything.Don’tfallforit!’HowcouldItellJeffthatInolongerhadAlexis’sear?Thatheseemedcompelledtogoinexorablydownthatpath?By the end of May, Alexis seemed too depressed to control war cabinet

meetings. They were now dominated by Sagias, who with the consent ofDragasakisandPappaswasintentonouradoptionofthelanguageandcontentof the troika’s SLA. We were conceding everything – fiscal targets thatrequired austerity, the creditors’ tax models and rate hikes, privatizationswithout limit–andgettingnothing in return.Whenever Ipointedout thatweweremakingcommitmentsthatwereimpossibletomeet,ImetwithresponsesthatweremoreorlessarepriseoftheSamarasgovernment’sarguments:thatfuture commitments were immaterial as long as we got new loans in themeantime; that debt was not an issue because, sooner or later, it would berestructured.InadesperateattempttorefocusAlexis’sattention,withGlennKim’shelpI

compiled yet another, even milder and more moderate version of our debtswap proposals and suggested that Alexis present it at his forthcominginformal tripartite meeting with the German chancellor and PresidentHollande, arguing that any agreement based on Sagias’s SLA would bepolitical poison in Greece if it didn’t include at least some kind of debtrestructuring.AlexisdidasIsuggestedandcalledmeuplaterwiththe‘goodnews’. The meeting had gone quite well, he told me. ‘Angela said she waspreparedtohaveourdebtproposalsstudiedandaskedmetosendsomeonetodiscussthemwithWieser.’But Euclid’s separate report from Brussels told a different story: ‘The

tripartitewentbadlysowewillgivethemmore!’‘Alexi,’Isaid,‘shereferredyoutoourgravedigger,ThomasWieser,who

clearlyhasnomandate todiscussdebt reliefwithus, andyouare tellingmethisisgoodnews?’Nevertheless, Iwas happy to sendGlennKim toBrussels tomeetWieser,

just in case. Glennwas as brilliant as ever in demonstrating toWieser howsimpleandeffectivethedebtswapswewereproposingwouldbeandthattheywouldcomeatminimalpoliticalcost tothechancellor.Wieserwasforcedtoconcede that our proposals hadmerit, but the fact that therewas no crediblethreatfromoursideanymoremeantthatGlenn’ssuccessledtonothing.

Atameetingof thewarcabineton30May,whenSagiasandChouliarakissuggested to Alexis that anothermeeting withWieser should be arranged, Iinterjected,weighingmywordscarefully, ‘Idon’tmindus talking toWieseragain,ifyouwish,butknowthatnothingwillcomeofit.Ouronlychanceofregainingcontrolofourfateisifourprimeminister,atmostbyWednesdayorThursday,tablesforpublicscrutinyanddebateourownanti-MoU–ourfinalproposalbothforendingthecurrentprogrammeandforanewcontractwiththeEU.InsteadofspeakingonthebasisoftheirSLA,todiscussonthebasisofourPlan forGreece. Ihavebeensaying this for twomonthsnowand Ihavebeenworkingonatextfitforthatpurpose…’Sagias,whowas sittingnext tome,was repeating sarcastically, ‘A rupture

proposal,aruptureproposal,aruptureproposal…That’swhatyouaredoing.Proposingafalling-out.’Ihadreachedthelimitsofmypatience.Ibangedmyhandonthetableand

said,‘Lookhere!Youwillnot interruptmeagain.Norwillyouputwordsinmymouthtodistortmymeaning.Thetroikaanditsmediaaredoingaperfectjobofthat.Butnotinhere.Ifyoudisagree,youwillwaituntilyourturncomestoputforwardyourviews.’‘Nowyou’vescaredme!’Sagiassaidwithaggressivecondescension.‘Spyro, careful now. You are descending into the realm of political

hooliganism.’Sagiasshoutedatme,‘Ihavefortyyearsofstrugglinginthiscountryunlike

somewhosawtheirchancetoreturnfromabroadtomakeacareerhere.’‘I am glad themasks are off so thatwe can all see clearlywho has been

underminingthefinanceministerfromwithin,’Ireplied.Afterwards, talking toElenaPanaritis inDanae’s presence, I described the

unpleasantnessandthehavocthatfollowedthisangryexchange:‘OnceagainIwas inches from resigning today.But I amnot going to do them the favour.Alexistriedtodefendmebutdidsoclumsily.’‘Theyhaveenchantedhim,’saidElena.‘No,it’snotthat,’Isaid.‘Hehassurrenderedinternally.Heistiredandhas

lost his spirit. But he is our last hope. I shall stay until that hope disappearstotally.’

16

Adultsintheroom

Hopecontinuedtodissipateoverthenextmonthasthenewsreelofourdeclinewentintofast-forward.On1JuneGeorgeSorostriestocontactAlexisviamychannels.ForyearsI

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 primeminister comes as a perverse vindication. ‘Fire Varoufakis! Europe cannotafford to have two open wounds at once – Greece and the Ukraine [wherefierce fightingwas takingplace].Athensmust capitulate toGermanynowsothatEuropecandedicateitselftoresolvingUkraine.ForthisVaroufakismustberemoved.’Monthslater,afurther,bittervindicationarriveswhentheEUandtheIMFannouncethatthesamedebtswapsandnominalincomeindexedbondsthat Ihadbeenproposing forGreecewouldbeused to restructureUkraine’spublicdebt.On 2 June Euclid texts me from Brussels: ‘We are being defeated on all

fronts!’On3Junethetroikaannouncesthat,forthefirsttimeever,theywillpresent

us with their proposals. Fearful that we will leak them, they summonChouliarakis to a seminar room at a godforsaken hour to present theirdemands by PowerPoint,withGeorge taking notes.Having read his notes, IsendAlexismyinterpretation:‘ThisproposalwaswrittenbytheIMFwiththeintentionof forcingyou to reject it.Theirstrategy isclear:demandsomuchausterityandlossofsovereigntythateitherBerlinwillyieldondebtrelieforGreecewillbreak.’On4JuneIaskEuclid,‘Didwepresentourplantothetroika?Ordidwelet

thembeatusabouttheheadwiththeirSLA?’Euclidtextsback:‘Noprizesforguessing!’On5JuneourattemptstodefaultontheIMFfailagain.Thistime,insteadof

discoveringahiddenstashofmoney,theIMFdefersourpaymenttotheendof

the month, to be bundled up with later tranches, something which ChristineLagardetoldmeinherWashingtonofficetwomonthsearlierwasimpossible.1On 6 June I inform Alexis of curious meetings taking place between a

memberofourwarcabinetandafunctionarywithinmyministrywhohasbeenunderminingmy algorithmicmethod for identifying tax evaders. That samedayPappasexplainstojournalistsviatextthatIhavetoberemovedbecauseIam the ‘anchor ’ that has been holding us back from an agreement with thetroika.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 meetGreenandSPDparliamentariansanddelivermyspeechatBerlincathedral.Init, I recountUS Secretary of State James F. Byrnes’s 1946 Speech ofHope,which triggered Germany’s rehabilitation and reindustrialisation, and inviteAngelaMerkeltodeliverherownSpeechofHopeforGreece.In response, between 10 and 15 June, Gesine Schwan, twice the SPD’s

candidate for the German federal presidency, impressed by my speech inBerlin and by the Plan for Greece that I shared with her, tries to convinceGermany’svicechancellor,SigmarGabriel,todobusinesswithme.Hisofficerespondspositivelytothelatestversionofmyplan,signallingthatitisagoodbasis for an agreement. A promising dialogue evolves until 15 June, whenGabriel tells the German tabloid Bild, ‘The game theorists of the Greekgovernmentareintheprocessofgamblingawaythefutureoftheircountry…EuropeandGermanywillnotletthemselvesbeblackmailed.Andwewillnotlet the exaggerated electoral pledges of a partly communist government bepaidforbyGermanworkersandtheirfamilies.’Gesineisappalled.Sheemailsme to say she feels ashamed for Gabriel. That same afternoon I travel toHerakleion, the capital of Crete,where I address thousands of people in themainsquare.On16JuneameetingofSyrizaMPstakesplaceintheoldSenateRoomat

ParliamentHouse.AllseatsintheauditoriumaretakenbythetimeIarrive,butinsteadofacceptinganinvitationtotakeaministerialseatnexttothepodiumIchoose to sit on a step in the stalls next to a friend and former academiccolleagueIhavenotseenforawhile.On17Junethenewspapersprintanimageofmesittingonthestepunderthe

headline FLOORED! and accuseme of a lack of respect for parliament. Uponseeing a photo of me on the front page of the Financial Times, NormanLamontemailsme:‘DearYanis,Iseeyouremainbloodiedbutunbowed.You

lookedtiredbutabsolutelydetermined…Andrightlyso,let’shopeforsomelight and reasonableness soon.’ That same day I contact Ángel Gurría,secretary general of the OECD, seeking more help with my version of thereformagenda.ÁngelrepliesthattheOECDandhisteamareatmydisposal.Thenextday,18June,theEurogroupmeets.Itisthetroika’sfinalonslaught.

Adultsbehavingbadly

ChristineLagardearrivedattheEurogroupmeetingof18Junefuming.Atthemeetingofourparliamentarypartyon16June,whereIhadsaton thefloor,AlexishadclaimedthattheIMFbore‘criminalresponsibility’forthesituationin Greece. ‘Hi, the criminal-in-chief is here,’ said Christine sarcastically bywayofgreeting.Myexpressionseemedtocalmherdown.‘Iamnotholdingyouresponsible,’shesaidgraciously.Thefree-for-allagainstuswasledbyMarioDraghi.Hiswaslessaspeech

and more a recital of the numbers of euros that Greek depositors hadwithdrawn from their accounts during the pastweek: ‘Monday, 358million.Tuesday,563million.Wednesday,856million.Thursday,1,080million.’LuisdeGuindoslaterasked,‘Willthebanksopentomorrow?’TheanswerfromBenoîtCœuré,Draghi’sdeputy,was,‘Yes,theywillopen

tomorrow.ButMonday?’Nothingspeedsupabankrunmoreeffectivelythanacentralbankerreciting

its progress while his deputy signals their intention not to intervene exceptperhapsbyclosingthebanksinthreedays’time.Monthslater,awhistle-blowerfromwithintheECBletitbeknownthaton

18 June, the very same day as the Eurogroup meeting, Mario Draghicommissioned an independent legal opinion from an outside law firm. ThequestionheaskedwaswhethertheclosureofGreece’sbankswaslegalornot.TheECB has a large, competent and expensive legal department of its own.ThatMario should choose to bypass it and go to a private firm suggests acertainqueasinessaboutwhathewasabouttodo–shutGreece’sbanks.2Meanwhile,Wolfgang’sEurogroupcheerleadersweretakingpotshotsnotat

Greece this time but at the troika – for being too lenient on us. Slovenia’sfinanceminister chastised Lagarde andMoscovici for havingwatered downthe originalMoU, a criticism Christine and Pierre no doubt welcomed as

evidenceof theireven-handedness towardsus.MeanwhileWolfgang reprisedoneofhisfavouriteroutines,demandingthatnoonesendhimanyamendmentsto theMoU inwriting because hewould then be obliged to take them to theBundestag.Whenmyturncame,inadditiontomyusualreviewoftheburningissues–

reforms, debt swaps, the need for credible targets, a management plan forinvestment and non-performing loans, the reasons why the institutions’PowerPointproposalsmadeno financial,economicorpolitical sense– Iputforwardonenewproposal.Insteadofquarrellingaboutthedetailsoftaxrateson the basis of unsafe models, I said, how about ‘a deeper, morecomprehensive, permanent reform? An automated hard deficit brake that islegislated and monitored by the independent fiscal council that we and theinstitutionshavealreadyagreedupon…Consider this tobea firmproposalthatourgovernmentwillimplementimmediatelyafteranagreement.’3Iftheyhadanyinterestinreachinganagreementwithus,theyoughttohave

jumped atmy proposal.Michel Sapinmade some encouraging noises. ‘TheinstitutionsmusttakeYanis’sproposalseriously.Yanisisrightonthis.Hewasrightoninvestmenttoo…Expertscannotresolveeverything.TheEurogroupis a political forum. It should make its political contribution – even if thematter is elevated to a higher political level.’ But from everyone else, IreceivedtheSwedishnationalanthemtreatment.When, later in the meeting, I expressed my astonishment that such a

momentous proposal had been ignored, Jeroen killed the discussion withmajesticauthority: ‘[A]nynewproposalsbrought todaymustbe lookedatbytheinstitutions.ItisnotfortheEurogrouptoassessthem.’Induecourse,mydebtbrakeproposalwasdroppedbyChouliarakisandSagiassoastoappeaseWieserandtheEurogroupWorkingGroup.Atthepost-EurogrouppressconferenceaGreekjournalistaskedChristine

LagardewhethershewashappythattherestoftheEurogrouphadquashedtheIMF’ssupportforGreekdebtrelief.Christinepointedlyignoredthequestion’ssubstanceandchosetoventherangerinstead:‘Forthemomentweareshortofa dialogue; the key emergency is to restore the dialogue with adults in theroom.’Shewasofcourseright.WeneededadultsintheEurogroup,adultsinBerlin

andadultsinMaximos.Theproblemwasthattherewasascarcityofadultsinall three.However, themedia reportedLagarde’swords as an attack onme,providinganadditiontothelonglistofepithetstheyhadusedtodescribeme

thusfar–‘adolescent’.ThenexttimeIsawChristine,Isaid,‘Thepressreportthatyourwe-need-adults-in-the-roomcommentreferredtome.’‘Nonsense,’sherepliedamicably.The next day, 19 June, I received amessage fromGesine Schwan: ‘Iwas

moved by your speech at the Eurogroup.’ By that stage I had learned mylesson:togetroundthemedia’sdistortionsandfendofffuturemisreportingofmyEurogroupcontributions, Iwasnowpostingmyspeechesonmywebsiteverbatim.‘GabrielandtheSPDmustbemadnottoseethemeritinwhatyouproposed,’shesaid.InmydiaryIwrote,‘IfonlyAlexishadbeenmovedtoo.’On Gabriel and the SPD, recalling my not-so-secret dinner with JörgAsmussen and JerominZettelmeyer in early February inBerlin, I scribbled,‘They arenotmad.They simply seem to shareMrsMerkel’s strategynot totouchtheissueofdebtrestructuring.’Thatnight,backinAthens,DanaeandI tookabreaktohavedinnerwitha

friendandhiswife.Olga said something thathit anerve: ‘Youseem tohavelost this battle. From what you are telling me, Alexis wants to surrender.Encouragehimtodosowithsomedignity.Tellthepeoplethatthisbattlehasbeenlost.’On20June,asSagiasandChouliarakiscontinuedtheircomicalattemptsto

writethefinalSLAonthetroika’sbehalf,ImetAlexisinMaximosandofferedhimapieceofadvicethatwasverydifferenttoanythingIhadventuredbefore.I told him that it was now clear tome that hismindwasmade up – that hewantedtosurrender–andthatwhileIdisagreedwithhisdecisionwitheverysinew, as he knew, he was prime minister and must be the one to decide.‘However,whateveryoudecide,don’tforgoodness’sakemisleadourpeople.Do not get them out onto the street, fire them up, only to deceive themafterwards.Ihearyouoccasionallyspeakofareferendum.Don’tdoitunlessyouwanttoreviveouroriginalbattleplan.Ifyouwanttosurrender,surrender.Butdoitthisway…’Ihandedhimasinglepagewithadraftofashortspeech,anaddresstothenationtobereadoutontelevision

Fellow Greeks. We have fought valiantly against an ironclad troika ofcreditors.Wegaveitourall.Alas,itishardtoarguewithcreditorswhodo not want their money back. We faced down the world’s strongestinstitutions,thelocaloligarchy,powersmuchgreaterthanours.Wehavereceived no help from anyone. Some, like President Obama, had kindwordsforus.Others, likeChina,lookedsympatheticallytowardsus.But

noonecame forward toofferany tangibleassistanceagainst thosewhoaredeterminedtocrushus.Wearenotgivingup.TodayIamsignallingtoyouthatwechoosetolivetofightanotherday.TomorrowmorningIshallaccedetothetroika’sdemands.Butonlybecausethiswarhasmanybattlesahead. As of tomorrow, and after I yield to the troika’s terms, myministers and I will embark upon a pan-European tour to inform thepeoples of Europe aboutwhat happened, to energize them and to invitethem into a common struggle to end the rot and to reclaim Europe’sdemocraticprinciplesandtraditions.

After reading itAlexissaid inhisnowfamiliardejectedmanner, ‘Icannotadmit toourpeople that I’mgoing to surrender.’Hismeaningwas clear: hehad indeed decided to surrender; he just could not bring himself to tell thepeople.A special eurozone summit had been scheduled for Monday, 22 June in

Brussels.Atourcabinetmeeting thedaybefore I toldmycolleagues thatwefacedanhistoricchoicebetweentwoclearoptions.Onewastosurrender,andItoldthemaboutthespeechIhadsuggestedAlexismaketothenation.Theotheroptionwastofighton.Butifwedidso,Iwarnedthem,

AsofTuesday theECBwill attempt to close the banks andput in placecapitalcontrols.Itonlymakessensetogodownthatroadifwemeantorespondtotheirthreatwithonesofourown:thatweshallrespondtotheECB’s aggressivemove by deferring unilaterally the redemption of the€27 billion of the ECB’s SMP-era Greek government bonds to somedistantfuturedate;andthatweshallactivatetheparallelpaymentssystemthat I first introduced to you last February. If we are not prepared torespondthisway,weshouldsurrendertomorrow.

Beforetheeurozonesummit,aEurogroupmeetingwasheldinpreparation.In my speech I reviewed and defended the concessions Alexis had madewithoutmentioningmy strongdisagreementwith themand added a concreteproposalthatwouldhelpreducethenewloansthatwouldberequiredfromtheEurogroupintheeventthattheywereaccepted.4 Lookingback,Iamamazedatmy loyalty to a cause I considered both lost and wrong. But I suppose IremainedloyalnotonlybecauseIhadadutytodosobutbecauseIknewthatthetroikawasnotinterestedinAlexis’sconcessions.Theyweredeterminedto

shutdownthebankstomakeanexampleofhim–atwhichpointtherewasaslightchance, I thought, thathemightshakeoffhisacquiescenceandbounceback.The otherwise pointless Eurogroup meeting featured two interesting

exchanges. At one point Wolfgang Schäuble attacked Pierre Moscovici fordaring tomakepositive comments aboutAlexis’s concessionsbeforehehadbeen given the green light to do so by the IMF or, indeed, byBerlin.WhenPierreattemptedtodenythis,suggestingthattheIMFhadbeentardyingivingitsconsent,Wolfgangblewhistop.‘Therehavebeenpositivecommentsbythecommission…Wearenot idiots!Youcanplayanygame toblame the IMF.WithoutthefullinvolvementoftheIMFthereisnoway…’Browbeaten, Pierre begged for mercy. ‘It was never, never, never in the

mind of the commission to blame the IMF,’ he pleaded. ‘Maybe we reactedfasterbutweworktogether.’The second exchangewas betweenSchäuble andMarioDraghi.Wolfgang

demanded to know how much longer the ECB would provide emergencyliquidity assistance to Greece’s banks. Visibly angered,Mario responded, ‘Iunderstand that there isan interest inhowlongweprovideELA.Iappreciatethe interest in knowinghow longwe shall continueprovidingELA.But youwillwanttoappreciatethatourindependenceisevenmoreimportant.So,likeIamaskingyouquestionsaboutfiscalpolicy,andIhavetorestrainmyselffromdoingso,Iwouldexpectthesamerestraintfromyourself.’FortherestofthemeetingWolfgangandMariowereclearlyangrywithoneanother.Afterwards,Alexis and ImetDonaldTusk, thePolish president of theEU

Council.Hismessagewasstark: thereshouldbenomentionofdebt relief inanymeetingfromthenon.Aswewereleaving,IsaidtoAlexis,‘Yourdutyistomentionnothingelse,unlessyouwanttofold–inwhichcasedoitquicklytoendtheagony.’Hisexpressionmadeitclearthathewantedto.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,Merkelwouldnotallowhimto.Hisconcessionsweredismissedasinsufficientandhewastoldtoreturntothetroika,concludeafurtheragreementwiththemandthenpassthatthroughanotherEurogroupintwodays’time.On 23 June Sagias andChouliarakis continued their pitiable redrafting of

thetroika’sSLA,convincedthatgreaterconcessionswouldsecurethemadealwiththetroikathefollowingmorning,whichwouldbeformallyagreedintheEurogroupmeetingthatafternoon.ItwasasifFaustwerepreparingtosellhis

soul toMephistopheles, not realizing thatMephistopheles had no interest inbuying.Intheeventtherewasnodeal.AllthattheseconcessionsboughtAlexiswasaproposalfromthetroikafora three-monthextensionofGreece’s loanagreement,afterwhichthecreditorswouldcomebackformore–muchmore.At the ensuing Eurogroup the gathered finance ministers were justifiably

annoyed that they had been convened to no purpose. Jeroen DijsselbloemundershothisownlowstandardsbyrefusingtodistributetherevisedSLAthatAlexishadtabled,distributingonlythetroika’sproposedSLAinstead.Takingadvantage of everyone’s fatigue, I suggested that the Eurogroup as a wholedeservedabreakfromGreece,andthattheproposedextensionbeincreasedbyafurthersixmonthsat least,untilMarch2016,soas tospare those involvedtheseincessantmeetings.Almosteveryoneseemedsympathetictotheproposal,whichwasarareexperienceforme,butultimatelynoonedaredtosupportit.Twohourslaterweadjourneduntilthefollowingdayinthehope,whichIdidnot harbour, that Alexis’s team and the troika would reach an agreementovernight.Backat thehotel,Alexis,Sagias,Dragasakis,Euclid,Pappas,Chouliarakis

withsomeofhisteamandIgatheredinameetingroom.Ihadnothingtosay.They all knewwhere I stood.Thosewho had been confident that significantconcessionswouldleadtosomekindofagreementweredeflated.Instead,theEurogrouphadendedwithanagreementthatwewouldallmeetupat6a.m.toresume work on our concessions. Leadership was needed. It was time forAlexis to show his strength, but hewent to ground, announcing that hewastiredandwouldbediningwithKammenos,ourright-wingministerofdefence.As he left the room, Euclid and Dragasakis erupted into a huge row for

reasonsIdidnotcatch,whichendedwithEuclidstormingout.DragasakisandSagias thendisappeared, leavingmebehindwithChouliarakisandtwoofhisaides.PerhapsitwassheerinertiathatimpelledthemtocontinueworkontheSLA.Whateverthereason,theywerebusilywritinginyetmoreconcessions.Itooka lookatwhat theyweredoing.‘There’snowaythatourMPswillvotefor the eliminationof the tiny “solidarity”benefit topensionerson less than€200amonth,’Itoldthem.‘ThereareMPsfromotherpartiesthatwill,’oneofthemreplied.ThereIhadit:wewerealreadycountingonenlistingpro-troikaopposition

MPs.OperationSplitSyrizawasunderway.Euclidwouldnotanswerhisphoneoropenhisdoor.Anhourlaterhetexted

mewithapologiesandamessagethathecouldnolongerstand‘theirfrivolity’

andhadneededtoventhisfrustration.Justaftermidnight,hetextedmeagain:‘Andneedlesstosaythefrivolitydoesnotholdforustwo.’InmyreplyIsaid,‘IthinkthatthebestservicewecanofferAlexisnowisto

abstain.Tostayinourhotel.Maybehewillrealizethatheneedstorethinkhismodusoperandi.’Obviously embarrassed, Euclid replied that they were all currently at the

EuropeanCommission,beingpressurizedbythe troika. ‘Iassumedyouwerein another car,’ he texted. I told him that the finance minister had not beeninvited.Euclid said, ‘Iwill insist they bring you in,’ towhich I replied, ‘Noneed,Euclid.Notcoming.ItisclearthatIamdecorative.Can’tlegitimizethatorthemanymore.’EarlynextmorningEuclidcalledmetosaythatthelate-nighttalkshadbeen

anotherdisasterbutthatwewereabouttomeetthemagain.‘It’simportantthatyoucome.Oursideisveryweak.’ThatnightIhadwrittenwhatwas,Ithink,asixthdraftofmyresignationletter.IwasplanningtorepresentGreeceatthatday’sEurogroupmeetingand then resignat theendof thepress conference,citingmygovernment’sabandonmentofdebt restructuring,which tomewastheAand theZofourmandate, as the reason for steppingdown.But for aslongas I remained financeminister, I thought Imightaswellattend thepre-EurogroupmeetingasEuclidhadsuggested.When we arrived at the commission, I was not invited to join Alexis,

Dragasakis, Pappas and Chouliarakis in the meeting with Lagarde, Draghi,Juncker,WieserandDijsselbloem,butafewminutes laterAlexisemergedtofetchme. As wewere walking to the conference room, he toldme, ‘Euclidinsistedyoushouldcome.IagreedeventhoughDijsselbloemwillbeannoyedtoseeyou.’ItappearedthatJeroenhadbeentheonetovetomypresence.Iwashorrifiedby thedynamic in the room.The latestSLA the troikawas

proposingseemeddesignedtoensurethatAlexiswouldbelynchedonarrivalback inAthenswere he to accept it. It demanded, for example, that VAT onhotelsshouldjumpfrom4to23percent; intheTurkishresortsonthecoastopposite 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 adolescentinanities.ItwaslefttoAlexistoaddressthetroikalikeasupplicant.Christine and Mario, meanwhile, were being allowed to get away with

statements that held littlewaterwhile Jeroen steered themeeting skilfully toanotherimpasse.Imadetwointerventionsthatexposedtheincoherenceofthe

troika’s funding formula,butwhileChristineandMario tooksomenotice, ithadbecomeapparent to everyone thatmy rolewas indeeddecorative.A fewmonths later Alexis told a journalist in reference to this particularmeeting,‘Yanis was good and said useful things but it was clear that he had nocredibilityintheroom.’

Rekindled

NowthattheGreekfinanceministerhadbeenvanquished,mycolleaguesattheEurogroupmeetingof25Juneoughttohavefeltinvincible,butitdidnotpanout thatway. That afternoon I entered themeeting convinced itwasmy last,with my revised resignation letter ready in my pocket. Maybe the sense ofrelief it imparted,ormaybebecause Ihadnothing left to lose (Janice JoplinandNikosKazantzakis’sdefinitionof freedom), Igavewhat turnedout tobequite an effective performance, driving a wedge between the troikainstitutions.5The proceedings began with Jeroen informing us that no agreement had

beenreached.He thendistributed the troika’s finaloffer in the formof threedocuments: a full Staff Level Agreement (SLA) comprising the harshestausterity imaginable, full-on firesale privatizations and further losses ofnationalsovereigntyoverkeyareasofpublicpolicyandproperty;a fundingproposal that would take us only to November 2015, meaning that a freshroundofEurogroupmeetingswouldsoonberequiredtoextenditfurther;andadebtsustainabilityanalysis.Remarkably,theIMFwasrefusingtoendorsethislastdocument.Moreover,forthefirsttimeeverMarioDraghirefrainedfromsayingawordaboutfunding.Isensedtherewasdiscordbetweenandpossiblywithin the institutions.Andnowonder: the latter twodocumentswereclearlybuiltonsandandreadytobetoppledbytheslightestoftouches.For the first time inmyEurogroupcareer Idecided to focusmyattention

not on the reforms being proposed but on questions of funding and debtsustainability.

I take it that the institutions want us to pass the austerity and reformmeasures. These are difficult decisions for an economy in recession.Whatareyouofferingus in return?Doyouenvisage thatyour reformsandfundingproposalsopenupaclearpathoutof thedebt–recessionary

cycle?Isthereacrediblepathforcomingoutofthewoods?Icannottableatmyparliamentprioractions,likeyoucan’t,Wolfgang,tablethemattheBundestag,withoutbeingabletoanswerthequestion:isthissustainable?Colleagues,nooneinthisroomhashadthecouragetostandupandsaythatwhattheinstitutionsareproposingisrenderingGreecesustainableinthe medium term. This should be of great concern to all of us – asEuropeans. Here we have, after many meetings and months ofnegotiations, aproposal from the institutions that raisesmajorconcernsaboutthewaywearerunningourmonetaryunion.WeshouldnotbeinapositionwherewethrowourhandsupintheairandwedeclarethatwedonotknowhowtostabilizeacountrylikeGreeceforthemediumterm.

Christine Lagarde and Mario Draghi were not looking happy. WolfgangSchäuble seemed livid.But Ihadonly justgot started. Inowpointedout twotechnicalproblems.Thefirstwasthatthetroika’sfundingproposalwentonlyas far asNovember 2015, ‘But the IMF’s programme continues untilMarch2016.Whichmeans it is illegal for the IMF to continuewith its programmesince there is a fundinggapbetweenNovember2015 andMarch2016.’TheIMF’srulesareclearonthis:itcannotlendtoandparticipateinthereformofacountrywhose funding needs are not fully covered during the period of itscontractwiththeIMF.Thesecondtechnicalerroralsorelatedtothefundingproposal:‘Fromwhat

Iseehere, it isproposed that theSMPbondredemptions inJulyandAugust,amounting to a total of €6.7billion,will be takenout of theHFSF [HellenicFinancial Stability Facility] kitty of €10.9 billion … I submit to you,colleagues, that this is not something Wolfgang can pass through theBundesbank.’Sensingthetensionintheroom,Iproceededtoexplainwhy.

Iremindyouthatthe€10.9billionkittyoftheHFSFwasapprovedaspartof the second bailout agreement for the purpose of recapitalizingGreece’sweakbanks.Suppose thatwe all turned ablind eye to this andagreed to cannibalize this kitty to repay the ECB this summer, as theinstitutionspropose.WhathappenstomorroworinthenextfewmonthsiftheECB,initsroleofourbanks’supervisor,deemsthatGreece’sbanksneedmorecapital?WiththeHFSFkittygone, therewillbenomoneytodoit.WhenIaskedBenoîtCœuréaboutthisherepliedthat,ifitcametothis,thentheHFSFkittywillbereplenishedbynewloansfromtheESM

[EuropeanStabilityMechanism]–fromyourtaxpayers,thatis.Andherelies the problem: for this to happen,Wolfgang’s parliament, and otherparliaments,willneedtoapproveathirdbailout,athirdprogrammeforGreece.Butthewholepointoftheinstitutions’proposalwastoextendthesecondbailout,asecondprogramme,inordertoavoida thirdbailout,athirdprogramme.ButbycannibalizingtheHFSFkittytopaytheECByouareembeddingathirdintothesecondprogramme.Thisisbothillegalandillogical. And the only alternative is to repay the ECB by allowing theGreekbankstobuy€7billionmoreofGreekgovernmentT-bills.Icannotpropose this to my parliament. Can you, Wolfgang? And remember,colleagues, thatwemust answer these questions now.Wedo not have arightnottoreachanagreementtoday.

Afterthepreviousnight’sdiscoverythatChouliarakis’steamwasplottinganalliance with the opposition, I had refused to have him at my side in theEurogroup.Euclid,whohadsteppedin toreplacehim,nowwhisperedinmyear,‘Impeccable!’Wolfgang’s intervention in response was a gift to me and a blow to the

troika.

ArewebeingaskedtoagreethatGreecewillfinanceitsobligationsbytheissueofT-billsinNovembertoreplacethemoniesfromtheEFSFbuffer?Is this a joke? To replace the EFSF buffer by T-bills? Come on! …Lookingat thedebt sustainabilityanalysis,youcanseenohardanalysisforathree-yearprogramme.Imustrepeatmyself:IcannotseeawayoutoftheSMPproblemin2015…AndIwouldhavetoaskforallofthosechanges to be approved by parliament.Do you imagine that thatwouldwork?…IcannotimaginethatIcanconvincemyparliament.

AsWolfgangtoldthetroikathatitsfinaloffertouswasworthless,onethathecouldnottaketohisparliament,IwhisperedtoEuclid,‘ThisiswhyIlikethisguy,’fullyawareasIdidsothatourintelligenceservicewouldprobablyrelaythisbacktoMaximosasfurtherevidencethatIwasWolfgang’sstooge.The Slovenian minister, having missed the significance of Wolfgang’s

intervention,continuedas ifnothinghadhappened:‘Theonlythingwecoulddo today,’ he asserted, ‘is to say to Greece, “Take it or leave it.”’ Malta’srepresentativesharedhisconcernthattheconcessionsthetroikawasofferingGreecewere so lenient as to bring intodoubt theEurogroup’s credibility.A

fewothers spoke too,butwithWolfgangopposing the commissionandwithJeroenandDraghisilent,ouropponentswerebackedintoacorner.Havingrequested the flooragain, I turned toChristineLagardeandasked,

‘IsittheviewoftheIMFthatGreece’sdebtissustainableundertheproposedagreement?’Whenherturncametospeak,Christinetriedtoavoidtheissuebutin the end conceded thatGreece’s public debt ‘had to be looked at again’. Iinterjected that tomymind thismeant that theSLA Iwasbeingpressured toaccept lacked the IMF’s seal of approval. Not only was it insufficientlycomprehensive, it was unsustainable. Not only would it be impossible forWolfgangtopushitthroughtheBundestag,itwasalsoincontraventionoftheIMF’sinternalguidelines.Christine looked off-colour. It later transpired that the previous night the

IMF had been pressured into withholding its latest sustainability analysis ofGreece’sdebt.Nodoubt thereasonwas that,as theNewYorkTimes reported,‘having run the numbers, the fund now accepted the central argument beingmade by Mr Varoufakis: Greece was bankrupt and needed debt relief fromEurope to survive.’6 As I discovered a little later, the silencing of the IMFduring the Eurogroup of 25 June had caused a rebellion at its Washingtonheadquarters. People I know who work at the fund confirmed that ‘thingsreachedbreakingpoint’,andChristine’sleadershipwaslookingshaky.BeforeChristine had a chance to respond,Wolfgang dived in oncemore.

‘Theinstitutions’paperisnotacceptabletous,’hesaid.‘Therecanbenonewmoney…Wedonotwanttoextendevenbyamonth…Therecanbenonewfinancingsotheymustrelyonmoregrowth.’DespiteWolfgang’sclearposition,Jeroencontinuedtoputpressureonme

toaccepttheinstitutions’proposals.ItwasasifhehadnotheardWolfgangatall. I admit that Iwas almost enjoyingmyselfwhen I asked Jeroen, ‘Does itmean that either we accept the institutions’ document or else? Is it, as acolleaguesaid,a“take-it-or-leave-it”?I’maskingbecauseIneedtoconveythistomygovernment.’Looking frazzled, Jeroen replied in typical fashion: ‘Thereneeds tobe an

agreement.Andifyouwantatake-it-or-leave-itapproach,that’salsopossible.Youcansimplysayyes.Thatisalsoanoption.Seriously.’Perhapsseeingthathewasnotgettinganywhere,Jeroencalledforashortbreak.‘Hewilluseittoconcoctsomethingagainstus,’ItoldEuclid,whonodded.During thebreak,when Icameback into the roomWolfganggestured for

me to join him. ‘Sit down,’ he said, offering me his deputy’s chair. Our

conversation lasted twenty-five minutes. Jeroen, who wanted to restart themeeting, did not dare towhileWolfgangwas talking tome.Our chatwas adirectextensionofourearlierconversations.

SCHÄUBLE:Iamveryworried.VAROUFAKIS:Metoo.SCHÄUBLE:Iknow.Europeisnotgoingwell.VAROUFAKIS:Evidently.SCHÄUBLE:Icannotseeanagreementemerginghere.VAROUFAKIS:NordoI.Butisthisnotwhatyouwant?SCHÄUBLE:No, Iwanta solution. Idonotwantanagreement thatmakesthingsworseinthefuture.

VAROUFAKIS:Thisiswhywewereelected,becausethat’swhattheseMoUsand loans did. They extended the crisis into the future pretending tohaveresolvedit.

SCHÄUBLE:Iknow,yes.VAROUFAKIS:Tellme,Wolfgang, something: ifyouwereme,wouldyoutaketoyourparliamentwhattheinstitutionsarepushingfor?ToraiseVATonhotelsinSamos,Lesbos,KosandChiosto23percentwhentheTurkishrate,astone’sthrowoverthesea,is7percent?Tourismisouronlyindustryleftstanding.Wouldyoudoit?

SCHÄUBLE:Ifyoudoityouwillhavetoanswertoyourpeople!VAROUFAKIS:That’swhyI’mnotdoingit.SCHÄUBLE: You are doing the right thing. You have to convince yourprimeministeraboutthethingswetalkedaboutlasttime.

VAROUFAKIS:We’ve been through this,Wolfgang.You cannot askme tosay this. Not just because I do not think it is the best solution butprimarilybecauseofacertainlackofmandateonyourpart.

Iwas referringof course to the fact thatChancellorMerkelhad explicitlyquashedWolfgang’sideaofGreecetakinga‘timeout’fromtheeurozone.Whatever Jeroen might have been planning during the break, watching

Wolfgangandme talkamicably forso longmusthaveputpaid to it.Afteraneutral wrapping-up, the meeting was declared closed. Afterwards, thecommuniqué Jeroen put out ended with the sentence: ‘Ministers invited theGreek authorities to accept the proposal by the institutions.’ Nothing couldhave been further from the truth.The onlyway Jeroen could have got away

withsofalseastatementwasifithadthebackingofsomeonemorepowerfulthan Schäuble, Draghi and Lagarde. The only person that could be wasChancellorMerkel.

Emergencyexit

Earlynextmorning,Friday,26June,Alexisgatheredusallonthetopfloorofour hotel, which overlooked the centre of Brussels. Along with me wereDragasakis,Sagias,Euclid,Pappas,Stathakis,Chouliarakisandmaybeoneortwoaides.GreaterprecautionsthanusualweretakentopreventeavesdroppingbeforeAlexis explainedwhatwould nowhappen.With no scope to reach anagreement,everyoneapartfrommeandEuclid,whowererequiredatanotherEurogroupthefollowingday,andChouliarakis,whomightberequiredforaEurogroupWorkingGroup,wouldgobacktoAthens.ThatnightAlexiswouldconvenethecabinet,wherehewouldproposethattheinstitutions’ultimatumbeputtoareferendum,totakeplacejustoveraweeklater,onSunday,5July,inwhichwewouldadviseourpeopletovoteno.‘Iwant tomake thisveryclear toallofyou,’hesaid. ‘Idemandcomplete

radio silence. It is crucial that no one finds out until we announce thereferendumformallyinAthensafterthecabinetmeeting.Donottalktoanyone–journalists,yourwivesonthephoneandespeciallynottoanytroikapeople.OK?’Therewaslittlediscussion.Weallrecognizedtheenormityofwhathadbeen

decided.Iaskedonlyonequestion:‘Arewecallingthisreferendumtowinitortoloseit?’The only answer I got, and I believe it was an honest one, came from

Dragasakis:‘Weneedanemergencyexit.’Likehim,Iwasconvincedthatwewouldlosethereferendum.InJanuarythe

combinedpro-governmentvotehadonlybeen40percent,andwewerenowfacingawholeweekofclosedbanksandscarestories in themediabefore5July. But unlike me, Dragasakis wanted to lose so as to legitimize ouracceptanceofthetroika’sterms.As everyone was leaving, I approached Chouliarakis to deliver a blunt

message:‘Youheardwhattheprimeministersaid.Iknowthatyoufindithardtokeepawayfromyourtroikafriends.IfIfindoutthatyouhavebeentalking

to Wieser or Costello, I shall deal with you personally. OK?’ Chouliarakissignalledheunderstood.When I got back to my room, I took the resignation letter I had been

planning tosubmit toAlexis thatday, tore itupandput thepieces in thebin.Nowwehadareferendumtofight.Ifnecessary,Iwoulddraftanotherletterina little over a week’s time. I then set about preparing my speech for thefollowingday’sEurogroupmeetinganddraftinganofficialletterrequestingaone-month extensionof our loan agreement to allow the referendum to takeplace.Afterseveralhours,Ilookedoutofthewindowandrealizedithadgotdark.

Idecidedtostepoutsideforsomefreshairandsomethingtoeat.InthehotellobbyIbumpedintoGlennKim,slightlysurprisedthathewasstillinBrussels.Always happy to see Glenn, I invited him to join me. Immediately I sensedreluctance.‘Ihaveameetingtoattend,’hesaid.‘Really?’Ireplied.‘Whowith?’‘WithChouliarakis,WieserandCostello.’Over the pastweeks, despite initial resistance from somewithin Syriza to

Glenn’sinvolvementinmyteam,Sagiashadrecognizedhisskillsandenlistedhis help in drafting their concessions to the troika.Embarrassing asGlenn’sreplywas for both of us, itwas the presence ofWieser andCostello at thismeetingthatreallydisturbedme.Ibadehimgoodnight,saidnothingelseandwalkedoutintothestreet.IthencalledChouliarakisandcalmlyaskedhimwhatthemeetingwasabout

andwhetherIhadfailedtomakemyselfclearearlierthatday.‘It’snobigdeal,’hesaid.‘We’rejustmeetingtoexchangeideas.’Withoutanotherword,IhungupanddialledAlexis’snumber.Hissecretary

answered and told me that he was about to start the cabinet meeting. ‘It isimperativethatIspeaktohim,’Ipersisted.WhenAlexiscametothephone,ItoldhimhowChouliarakiswasdisregardinghis explicit instruction toavoidanycontactwiththetroika.For the first timeever,Alexis raisedhisvoice atme. ‘I’vehad enoughof

youranimositytowardsChouliarakis,’hesaid.‘IfyoucontinueIshallhavetoputthephonedownonyou.’Fed up and exasperated, I said, ‘Go ahead! Put the phone down on me,

Alexi!’He did. Two minutes later he called me back to apologize, blaming his

outburstonstress.‘AsforChouliarakis,itdoesn’tmatteranymore,’headded.

‘SoonIshallbeannouncingthereferendum.’Overmysolitarydinner I thought thingsover.Howevermuch Iwanted to

escape this cesspit, I had two jobs to do: first, see through the next day’sEurogroupand,second,returntoAthenstoensurethatthenocampaigngotthebestpossiblesupportinthereferendum.Alexiswasissuingacalltoarms.ForthefirsttimetheGreekpeoplewouldbegiventheopportunitytoexpresstheirwill.Thiswasnotimeforintroversionorsquabbling.OnthemorningofSaturday,27June,justbeforetheEurogroup,Euclidand

ImetDijsselbloem,WieserandMichelSapin.Unsettledbytheannouncementof the referendum, they pushed me to have it cancelled. I explained therationalethatlaybehindthedecision:wedidnotfeelwehadamandatefromthepeopleofGreeceeithertoclashwithourEuropeanpartnersortosignanagreement that made no sense, not just to us but to the German financeminister, to another five financeministers and indeed to the staffof the IMF.Jeroen then tookme to task for the recommendationweweremaking to theGreekpeoplewhentheycametocasttheirvotes.

DIJSSELBLOEM:Yourecommendtheysayno.VAROUFAKIS: The sovereign power is the electorate. It is not thegovernment, not the minister.We get our marching orders from theelectorate.

DIJSSELBLOEM:Politicalpartiescampaign…VAROUFAKIS:Ofcourse.Andthatisnotthesubjectofthisdiscussion.Whatwearegoingtocampaignforisourbusiness.Whatyouneedtoknow—

DIJSSELBLOEM:Butitshowsyourintentions.VAROUFAKIS:Yourviewofourintentionsaspoliticians,Jeroen,isneitherherenorthere.Justlikemyviewsaboutyourintentionsasapoliticianareneitherherenorthere.Itisbetweenyourselfandyourelectorate.

At that point Sapin objected that we would be asking the Greeks to voteagainstthetoughpartsofthedeal,suchasausterity,withoutacknowledgingitsadvantages.Iaskedwhatadvantageshewasreferringto.‘Thedebtmeasures,investment help and so on,’ Sapin replied. Euclid pointed out that these hadnever been on the table, as our creditors had refused doggedly to put themthere,andJeroensteppedinagain.

DIJSSELBLOEM:Letuslookatpoliticalfeasibility.Buildtrust,andtheneven

thetoughestministersafterthesummerwillbepreparedtodiscussthis.If theyhavegainedsomeconfidence that theprogrammewillbebackontrack.

VAROUFAKIS: I accept that. I understand that. But do you understand thatconfidence isa two-wayprocess?That theGreekpopulationdoesnothaveconfidenceintheEurogrouptodeliverthis?TheEurogroupdoesnothaveconfidenceinGreekgovernments,buttrusthasbrokendownonbothsidesof theequation,Jeroen.Youneedsomethingbindingonthetableandsodowe.

The ensuing conversation did not get usmuch further, so I suggestedweleaveitforthetimebeingandresumeourdiscussionsintheEurogroupafewminuteslater,witheveryonepresent.

TheEurogroupdoesnotexist!

The Eurogroup Meeting of Saturday, 27 June 2015 will not go down as aproud moment in European history. Our request that the Greek people begranted a brief window in which to decide whether to accept or reject theinstitutions’ proposals was denied. As the extension of the loan agreement,whichIhadsecuredon20February,expiredon30June,therejectionofourrequestforanotherextensionmeantthattheECBwouldbewithinitsrightstorefuse theGreekbanksmore liquidityvia theCentralBankofGreece’sELAfacility.Inotherwords,theGreekbankswouldnotreopenonMonday.Interestingly, the idea that a government should consult its people on a

problematicproposalputtoitbytheinstitutionsmetwithincomprehensionandwas treatedwith a disdain that bordered on contempt. How couldwe expectnormalpeopletounderstandsuchcomplexissues?IwasaskedbyItaly’sPierCarloPadoan.‘Wearestrongbelieversinthecapacityofthepeople,ofvoters,tobeactive

citizens,’ I replied. ‘And to make a considered analysis and take decisionsresponsiblyconcerningthefutureoftheircountry.Thisiswhatdemocracyisallabout.’The fact that I had tomake this point and the negative reaction to it from

almosteveryone in theroomreflectedbadlyonEuropeandemocracyand itsinstitutions.

Afterourrequesthadbeenrejected,theEurogrouppresidentbrokewithEUtradition to make two extraordinary announcements. The first was that hewouldissueacommuniquéwithoutGreece’sconsent,violatingtheEurogroup(andEU) convention that unanimitywas required.The secondwas that, laterthat day, he would reconvene the Eurogroup without inviting Greece’srepresentativeinordertodiscussthe‘nextsteps’.AtthatpointIaskedthesecretariat,whichsatatatablebehindDijsselbloem

andWieser,‘IstheEurogrouppresidentatlibertytoissuecommuniquéswhenthere is no unanimity and also to exclude finance ministers at will fromEurogroup meetings?’ There was a short adjournment while some of themmadephonecallsandothersconsultedthickvolumes.Afterawhile,Jeroencalledusbacktoorderandamemberofthesecretariat

addressedme:‘Minister,theEurogroupdoesnotexistinlaw,asitisnotpartofanyof theEUtreaties. It isan informalgroupof thefinanceministersof theeurozone member states. Thus there are no written rules about the way itconductsitsbusiness,andthereforeitspresidentisnotlegallybound.’Onmywayout,asIwaswaitingfortheliftIbumpedintoaworried-looking

andunexpectedlyfriendlyMarioDraghi.‘WhatonearthisJeroendoing?’hesaid.‘DamagingEurope,Mario.DamagingEurope,’Ireplied.Henodded, lookingevenmoreconcerned.We took the liftdownand then

partedsilently.

17

Lionsledbydonkeys

BackinMaximosthatnight,thewarcabinetconvened.AssoonasEuclidandIenteredtheroom,Iremindedthemoftheagreementwhichtheyhadrepeatedlysworntouphold:iftheECBweretoclosedownourbanks,wewouldrespondby haircutting the SMP bonds owned by the ECB, activating the euro-denominatedparallelpaymentssystemandannouncingourintentiontoreturntheCentralBankofGreecetothefullcontrolof theGreekparliament.I toldAlexisthatthemomenthadnowcome;onMondaythebankswouldbeclosed.Wouldwenowimplementthecountermeasuresthatwealwayssaidwewould?‘We don’t have to rush into them,’ I said. ‘Just signal them today. My

proposalisthatweannouncetodaythatweshalldeferDraghi’sSMPJulyandAugustrepaymentsbyacoupleofyears.Also,wecanannouncetheactivationof the parallel payments system for the week after the referendum. And thechange in the law regarding our central bank for next month. That way wesignal that we are not rolling over but also that we want to leave them anopeningtocomebacktouswithadecentproposalsoon.’Dragasakis spoke against my proposal with uncharacteristic energy and

speed.Hedismisseditasdangerousbluster,usingaGreekwordthatdenotesalion’s roar. ‘Iveto this,’hesaid‘Ipropose thatwedonotantagonizeDraghibutproceedconsensuallywithhim.’Nooneelsespoke.EveryonewaslookingatAlexis.Hewalkedovertothe

baywindow;hewas smoking a cigar– a relatively recenthabit.After a fewmomentshe turned towardsme, took anothermoment and said, ‘Wewill gowithDragasakis,Yani.’IlookedaroundtheroomtoseethatonlyEuclidwasonmyside.Iwasina

minorityoftwo.Thediscussionthenmovedontothemanagementofthegreatestnightmare

afinanceministercanfaceinpeacetime:theindefiniteclosureofthecountry’sbanks. Itwasessential, Iargued, thatwemakeclearwhowasresponsibleforthis calamity. Ever since our election, we had bent over backwards, evenacceptingconcessionsthatweknewtobeimpossibletoimplement,inorderto

keepthebanksopen;StournarasandDraghi,incontrast,haddoneeverythingintheirpowertocreateandfuelthebankrunthathadprecipitatedtheclosure.Weshouldnotdothemthefavour,Iargued,oflettingourselvesbeportrayedas the government that chose to deny its citizens access to their deposits. IthereforeproposedthatweletthebanksopenonMondaymorningasusual,sothatwhenthecountersranoutofcashthemanagerswouldbeforcedtoclosedowntheirbranchesthemselves.Atthatpointweshouldbeoutside,protestingwiththepeopleagainstthetroika.Naively,Ihadanticipatedagreement.ThistimenotevenEuclidwasonmy

side. If banks opened only then to run out of cash, itwas argued,we riskedcivil disorder inside and outside the branches. There was something in thisargument, but the risk, I thought, was grossly exaggerated and variousmeasures could be taken to mitigate it, whereas failing to protest publiclyagainstthebankclosuresandinsteadallowingthemtobepresentedasourideawas a catastrophic political error. I told them that to close the banks bygovernment decreewouldmean losing the blame game domestically, whichmeantdefeatatthereferendum.ItwasaswewereleavingMaximosthattherealizationhitmehard:thiswas,

infact,theirintention.Butitwasnottheywhowouldtaketheblame;itwouldbeme.Aswemadeourwayout,Dragasakisapproachedme lookingsurprisingly

friendly.‘TomorrowyoumustconvenetheCouncilforSystemicStability,’hesaid. ‘Iwill not be able to come but I am sure you can handle it well.’ TheCouncilforSystemicStabilityisabodythatnofinanceministereverwishestoconvene.Itonlymeetswhenthebanksmustbecloseddowninanemergency.Fromdayoneofourgovernment,Dragasakis’sofficehad issuedaseriesofdecreesthatremovedallpowersoverregulationofthebanksfromthefinanceministryandplaced them insteadunderhis control asdeputyprimeminister.Now that the war cabinet had decided, at his behest and against my expressopinion, that the government should convene the Council for SystemicStabilityinordertoshutdownthebanks,hewouldnotevenattendthemeeting,letalonechairit.HewasconfidentIwouldswallowthepoisonhehadhandedme becausemy only alternative, being in aminority of one within theWarCabinet, would have been to resign as finance minister, and he knew that Iwouldnot contemplatedoing so for fear of causing a rift among thosewhosupported the no campaign.Unspeakably cowardly as itwas, the strategy ofmakingmeconvene theCouncildespitemypassionateopposition to the idea

worked.TothisdaysectionsoftheGreecepressrefertomeasthemanwhoclosedthebanks.Alongside my own deputies, the members of the Council for Systemic

Stability includedStournaras,hisdeputyat theBankofGreeceandtheCEOsofGreece’scommercialbanks.Ibeganthemeetingwithanexplanationofhowwe had come to our current predicament. Inmy speech I made it clear thatStournaraswasoneof thedriving forcesbehind thecalamity.Stournarasdidnot seem to mind at all. In fact, he radiated happiness and was extremelyfriendlytowardsme.That night, once the meeting was over, my team and I embarked on the

gigantic job of devising a formula to determine how much cash the ATMsshouldrelease,workingoutwhattodoforthe85percentofpensionerswhodidnotpossessdebitorATMcardsanddecidingwhichimportstofinancewiththelittleliquiditythatwasleftinourcentralbank.LiketheHydra’sheads,newproblemssprangupwhereveronewasdispatched.At1.40a.m.thatMondayIreceived a text message from Stournaras: ‘Dear Yani, thank you for theexquisite collaboration.’ Knowing him well, I think the appreciation heconveyedwasjustasgenuineashisevidentgleeatthesuccessofhisprojecttoundermine our government, ever since Samaras appointed him to thegovernorshipofthebanktwelvemonthsearlier.Formypart, theadrenalincoursing throughmybloodhelpedmefendoff

despair and work ceaselessly with my team until 9 a.m. Normally, this waswhenthebanksopened;instead,ourtelevisionscreenswerefilledwithscenesofendlessqueuesatATMsastheGreekpeopleattemptedtowithdrawthesixtyeuroswehadcalculatedwasthemosteachaccountholderwasallowedifweweretosurviveuntilthemorningafterthereferendumon5July.Itwasatthispoint that Iwas informed thatover theweekend,before thedecree imposinglimitsonwithdrawalshadbeenannounced,MPshademptiedtheATMslocatedin Parliament House five times over. I was scandalized that the people’srepresentativesshouldabusetheiraccesstoParliamentHouse’sATMs,whichwere evidently re-stocked more diligently than all others were. So when aBloombergcorrespondentaskedmeifIhadlineduptowithdrawsomecashatanATM,IrepliedthatIhadnothadtimebutthatinanycaseIdidnotthinkitappropriate.ItwassoonreportedinthepressthatI,themanwhohadclosedthebanks,thoughtmyselftooimportanttoqueueupwiththerestofthepopulation.LaterthatweekIwasinterviewedfortheNewYorkerbyajournalisttowhom

Ihadgrantedspecialaccess, including toourapartmentandmembersofmy

family. During dinner with friends at which the journalist was present, Idescribed the irony and the sheer pain of having to shut down the banks onbehalfofawarcabinet thathad turnedagainstmystrategy forkeeping themopen. ‘Idon’twish this fateonmyworst enemy,’ I said.Realizing that Ihadcastadepressingcloudovertheparty,Itriedtobrightenthemoodalittleandjoked,with light-heartedself-pity, thatacruel screenwriterdramatizing theseeventswouldhavehadmesaytoDanae,‘Honey,Ishutthebanks’–areferencetotheHollywoodfilmHoney,IShrunktheKids.TheNewYorkerpiecefeaturedthat reference, to which the Greek media gave their own special spin:‘Varoufakiscelebratedasheclosedthebanks,tellingDanae,“Honey,Ishutthebanks!”’Myimageandthedistortionsthatweremeanttodestroyitareunimportant

inthemselves,exceptthat,intarnishingme,myenemiesweredamagingthenocampaign and the brave people who took it upon themselves to save ourcollectivedignitybysupportingit.Theywereindeedlionsledbydonkeys.Andthe donkeys came in a variety of colours. I recall being approached inparliament by a SyrizaMP, amember of the pro-Grexit Left Platform,whowas displeased withme. This was hardly surprising given that he had spentmonthscriticizingmefornotimplementingcapitalcontrolsandnotgettingusoutoftheeurozone.Whatwassurprisingwasthereasonforhisangernowthatcapital controls were in place: owing to the restrictions on wiring moneyabroad,hewasnowunabletopaythemortgageonhishouseinLondon.‘Butyouwereinfavourof thedrachmaandofcapitalcontrols,’Iexclaimed.‘IfIhaddonewhatyouwereimploringmetodo,howwouldyoubepayingyourLondon mortgage? In drachmas?’ This was not the kind of leadership ourpeopledeserved.BackatMaximos,IsuggestedthatministersshouldtraveltoallofGreece’s

majorcitiesand islands tocampaignforanovote.Despiteassurances that itwould be done, nothing transpired. Instead, Pappas and Dragasakis’s officewere leaking fake stories about me to the press, whileWassily showed meevidencethatmyownministry’sCouncilofEconomicAdvisers,stillchairedby Chouliarakis, was campaigning openly for yes. My greatest concern,though,wasthatthestanceofthewarcabinetprohibitedmefromexplainingtotheelectoratewhatanovoteactuallymeant.Itwasessential,Ithought,tomakeclearthatanovotewouldbeaninstructiontothegovernmentnottoleavetheeurozonebuttoholdfirminordertobrokeranewagreementwithinit–onethat freed us from debtors’ prison, recovered our dignity and ended the

downwardspiral.IfMarioDraghiandAngelaMerkelrefusedusthis,anovotemeant haircutting the ECB’s Greek bonds and starting a euro-denominatedparallelpaymentssystemthatwouldbuyusandthecreditorsspaceandtimetoreturn from the brink of Grexit. And ifWolfgang’s Grexit strategywere toprevail,theeuro-denominatedparallelpaymentssystemcouldpotentiallyturnintothefoundationofanewnationalcurrency.Ifwespokeopenlytovotersandexplainedthestrategyinfull,Ifeltcertain

ourhandwouldbestrengthenedbecauseDraghiandMerkelwouldbeforcedto takenoticeandaproper compromisewould surelybe found.For asECBVice President Vítor Constâncio confessed in the autumn of 2015, the ECBwouldnever carry through the threat ofGrexit.But themajority view in thewarcabinetprohibitedmefromsayinganyofthis.ThebestIcoulddowastoproclaimourdeterminationnot toplaywithGrexitbut alsonot to fear it orbucklewhenthreatenedwithit,andleavetherestforthevoterstoinfer.Occasional boosts tomy spirits came from abroad.On the day the banks

closed a goodAmerican friend sent yet another letter to Christine Lagarde,whichhisofficecopiedtome.‘Inmyview,’wroteBernieSanders,‘theGreekshaveeveryrighttovotenointhereferendum.BythreateningtoforceGreeceoutoftheeuro,GermanChancellorAngelaMerkel,FrenchPresidentFrançoisHollande and Italian Prime Minister Mateo Renzi are playing a dangerousgamewiththestabilityoftheglobalfinancialsystemaswellastheveryfabricofEuropeandemocracy.’That same day, at a meeting in Maximos to discuss the plight of Greek

pensioners, many of whom were distrustful of technology and preferred tovisit the – now closed – banks in person towithdraw their pensions,Alexislooked atme happily. ‘Juncker called to say that he accepts your debt swapproposals.Youscoundrel,yougotwhatyouhavebeengoingonandonaboutforyears.Yougotyourdebt restructuring.But thepriceJuncker isasking isthattheycrushusonsocialissues:VAT,islands,pharmacies,labourrelations,privatization– they’redemandingeverything.’HeshowedmeJuncker ’snon-paperandasked,‘Isthisabasisforreopeningthenegotiations?’Ireaditquickly.‘Yes,itis,’Isaid.‘Itopensanewwindowtoasustainable

futureandputsthesecondbailoutbehindus.’Thatwas the last I heard of Juncker ’s proposal.Whether itwas killed off

directlybyMerkel,whocouldnowseethatwehadcapitulated,orindirectlybyDragasakis,SagiasandChouliarakis,whohadgivenupondebtrestructuring

longbefore,Ishallneverknow.WhatIdidknowwasthat,hadwestucktothestrategywehadoriginallyagreed,Brusselswouldhavemetushalfway.ButofallthemovesmadebypoliticiansseekingtosalvageEurope’shonour

duringthatweek,themostinterestingandgenuinearrivedasatextmessageonBlackSunday,thedaybeforethebanksshutdown.

Macron’sgesture

EmmanuelMacron,economyministerofFrance,textedmeataround6p.m.onSunday, 28 June to informme that hewas attempting to convince PresidentHollande andSigmarGabriel,Germany’s social democratic vice chancellor,tofindasolution.‘IdonotwantmygenerationtobetheoneresponsibleforGreeceexitingEurope,’hesaid.LessthanaminutelaterIreplied,‘Butofcourse.Justknowthatweneedan

agreementthatoffersrespiteforthelongrunandaprospectthatthissituationwillnotberepeatedinafewmonths.’Emmanuel agreed. He would talk to his president and get back to me.

‘Sustainablesolutioniskey,Iagreewithyou,’hesaid,proposingthathetraveltoAthens the next day, incognito, to have dinnerwithme andAlexis and tohammeroutadealbetweenAthens,BerlinandParis.After midnight, while we were in the thick of preparations for the bank

closures, Emmanuel wrote again to inform me that President Hollande wasplanning to issue a statement in the morning announcing the reopening ofnegotiations. ‘Would Alexis agree to go to Paris on Monday evening orTuesday morning?’ he asked. I implored him to come to Athens himselfinstead.With the situation in Greece so volatile, Alexis could not leave thecountryforopen-endedtalks.‘OK,’Emmanuel said. ‘I am ready, and I amsure thatAlexis, youandme

could find a deal … I will convince the president tomorrow. We have tosucceed!’Deeplyappreciative,Itextedhim:‘IalwaysfeltthatyouandIcouldseeeye

to eye. The difficulty will be to find a solution that is viable for us andacceptabletoWolfgang.’OnMonday,29June, thedayhewasmeant tocome toAthens,Emmanuel

called,askingforafavour:couldAlexiscontactPresidentHollandetolethimknow that he was ready and willing to receive Emmanuel in Athens as the

French president’s emissary? I called Alexis, explained the opportunity thatwasbeingpresentedtous,andheagreed.Anhourlater,however,Alexiscalledme back, understandably cross. ‘What’s going on?Hollande’s office repliedthat they have no idea about a possiblemission byMacron toAthens. TheyreferredustoMichelSapin.Ishepullingyourleg?’When I relayed this exchange to Emmanuel, his explanation shocked me.

‘The people around Hollande do not want me to come to Athens. They areclosertotheBerlinChancellerythantoourgovernment.TheyclearlyblockedAlexis’sapproach.Butletmehavehispersonalmobilephonenumber.Ishallgo to theÉlyséepersonally inanhour tospeakwithhim[Hollande]andaskhimtocallAlexisdirectly.’Somehourspassed,butHollandenevercalledAlexis.SoItextedEmmanuel:

‘Do I take it there has been no progress? And that your trip has beencancelled?’AdejectedMacronconfirmedthathehadbeenblockedbyhispresidentand

thepresident’sentourage.‘Iwillpushagaintohelpyou,Yanis,believeme,’hepromised.Ibelievedhim,andofcourseIunderstoodexactlyhowhefelt.Three months after my resignation, in October, Emmanuel invited me to

visit him at hisministerial office even though I was not in government anymore.Hetoldmethatatasummitmeetingbeforehisfailedattempttomediatewith Alexis he had used my line that the troika’s deal for Greece was amodern-day version of the Versailles Treaty. Merkel had heard him and,according toEmmanuel, orderedHollande tokeepMacronoutof theGreeknegotiations.Merkel’sspellwaseverybitaspowerfulasIhadimagined.

AveryGreekfarce

It is both absurd and lethal for a financeministry to lack the support of itscentralbank.Oneoftheabsurditiesduringthatawfulweek,aswestruggledtomakeverylittleliquiditylastaslongaspossible,wasthatIdidnotevenknowhowmuchliquiditytherewasinthesystem.ButthefactthattheBankofGreecewasheadedbythegovernorwhohadstartedthebankrunandwhowasplainlyecstaticthenightthebanksclosedmademesuspectitwasunder-reportingtheamountofavailablecash.After performing some research, to which Jeff Sachs contributed, I

discoveredaninterestingifunusablepieceofinformation:notonlywasthere

moreliquidityinthesystemthantheBankofGreecewasreporting,therewasalso €16 billion of ECB-owned cash stashed in the vaults of its branchesaroundthecountry.Itwasthereasaconsequenceof thepreviouscashcrisis,whichhad takenplace in the summerof 2012,when theECBhadorganizedhundreds of cargo flights into Athens from Frankfurt in order to keepGreece’sATMsstockedwithbanknotes.Topreventtheneedforanotherairlift,theECBhadbeenbuildingupcashreservesinGreece,justincase.That day, on my daily visit to Maximos, I found Alexis in his office

entertaining Alekos Flabouraris, a minister without portfolio in thegovernment and something of a father figure to him.As usual, I briefed theprimeminister on everything of consequence that day, primarily the rate atwhichcashwasleakingoutoftheATMs.Ialsomentionedthe€16billionstash.Alexis’seyeslitup.‘What?Thereis€16billionincashlyingaroundandwe

arenotusingittostufftheATMsandmakethemfunctionnormally?’Iexplainedthatwecouldnottouchthemoney.Confiscatingitwouldbetheft.

‘But,Yani,’protestedAlexis, ‘ifmychild isstarving,andIhavenomoney,Ihaveamoralrighttostealamilkcarton.Isthisnotsimilarhere?’‘SincewhendidtheftbecomepartoftheLeft’sarsenal?’Iasked.Flabouraris leaped to his protégé’s defence. ‘We have every right,’ he

bellowed,‘togetthatmoneytostopthepeople’ssuffering.’As the conversation unfolded, another minister joined us, Panagiotis

Lafazanis, the leaderof theLeftPlatform,adeclaredenemyof theeurozoneand a passionate Grexiteer. He asked what was going on. Alexis andFlabouraris informed him that I had discovered €16 billion in cash.FlabouraristoldLafazanisthatheandAlexis,unlikeme,believedthesituationjustifiedourtappingintothiscash,currentlylanguishinginstate-ownedvaults.I triedtocalmthemdownand, inviewofLafazanis’spro-Grexitposition, toexplainwhatourrealoptionswere.If we wanted to stay in the eurozone, I told them, we could not possibly

confiscatetheECB’smoney.If,ontheotherhand,wewantedGrexit,thentherewassomethingusefulwecoulddowiththecashwithoutbeingbrandedthieves:we could nationalize the €16 billion, stamp the notes with special ink toinvalidate themaseurosand rebrand themasnewdrachmas,put them in theATMsandusethemasanewcurrency.WewouldhavetoapologizetoMarioDraghi, explain thatwewere in a national emergency and askhim to tell uswhatthepapervalueofhis€16billioncashwassothatwecouldcompensatehim.

Ialsoreiteratedmyownview,whichwasthatweshoulddononeofthisbutinstead activate the electronic parallel payments system that I had beenpreparing.Thiswouldextendour fiscal spacewithin theeuroeven ifwedidultimately reach a good agreement with the troika, and if there was noagreement, itwould buyus timeor, in themost extreme scenario ofGrexit,serveasthefoundationofanewdigitalnationalcurrency.Naturally Lafazanis liked the idea of using Draghi’s €16 billion as the

foundation for a new drachma and agreed, were we to do so, that the ECBshouldbecompensatedfor theproductioncostsof thebills.Butashe lackedthepowertopersuadeAlexistopursueGrexit,theideawasacademic.AsforAlexis, he soon forgot about the €16 billion but continued to block theactivationofmyparallelpaymentssystem,holding toDragasakis’svetoofafewdaysbefore.Monthslater,aconservativepro-troikanewspaperpublishedasfactthefalse

andlibellousrumourthatLafazanishadplannedtostormtheBankofGreece’svaults,arrestStournarasandstealthecash.Someofthereportsevenportrayedmeasapartytothisconspiracy.Itspurposewasclear:vilifyanyonewhohadsincerelysupportedthenocampaigninordertopresentAlexis,bycontrast,asa sensiblemanwhoat the lastmoment saw the light and savedGreece fromrogues inhisownparty.Thefact that itwasAlexisandFlabourariswhohadmomentarilytoyedwiththeideaofstormingtheBankofGreece’svaultsneverreachedthepublic’sattention.

Gazingintoanabyss:comradesinretrospect

‘Ifthougazelongintoanabyss,theabysswillalsogazeintothee.’Nietzsche’sdisturbingdictumcaptureswhat itwas like topeer intomycomrades’ souls.After an academic career in which success largely depended on my ownefforts,Ihadfoundmyselfonthefrontlineofawar,dependingoncomradesto guard my flanks and rear. Deciphering their thinking in order to gaugewhethertheyhadmybackornotwasthehardestthingIhadtodo.Friends and critics criticizeme for having seen things inAlexis thatwere

notthere.Ithinktheyarewrong.HisdesiretoliberateGreecefromitsviciouscycle was there. His intelligence and capacity to learn quickly were self-evident.His enthusiasm for thedeterrent Ihadproposedand thedebt relief Iwasprioritizingwasreal.HisappreciationofwhatIbrought tohis teamwas

genuine. When he had instructed me, in front of our cabinet, to fly toWashingtontotellChristineLagardeweweregoingtodefault,theenthusiasmhadbeenauthentic.ThereasonIhadseenallthesethingsinhimwasthattheywere there.Mymistake was tomiss other things that were bundled up withthem:hisback-upplan,whichwould inevitablyannulmywork;his frivolity;histendencytomelancholy;andlastlyhisintensedesiretoprovetoascepticalworldthathewasnoshootingstar.Whenheinstructedme,onourfirstdayinoffice,toremainreadytohandoverthekeysofourofficestotheoppositionrather than capitulate, hewas not lying. The part of him tellingme thatwasspeakingthetruth.ThisiswhyIwasbroughttotearsbyhiswords.ThisiswhyIbelievedhim.Ibelievedhimalso,despitehisdistressingU-turns,becauseoftheinhuman

pressurehewasunder.DuringthatfirstweekofJuly,withthebanksclosedandwhileIwasgivingeverythingIhadinthecampaignforanovote,IpresentedhimwiththefinalversionofPlanX–thecontingencyplanthathehadaskedmetocompileincaseGrexitwasforceduponus.AsIwashandingitover,heaskedme,‘Isitdoable?’I answered him honestly: ‘Read it and weep.’ The transition to a new

drachmawould be so painful as to be debilitating. PlanX outlined the pain,blowbyblow.Ashesankintohisseat,IremindedhimthatPlanXwastheretohave but not to use, unless Schäuble got his way with Merkel. But I didrecommend that we activate immediately the euro-denominated parallelpaymentssystem,whichwastheoppositeofPlanX:asystemthatwouldallowus, in the eventof anovote at the referendum, to stay in the eurozone longenough forMerkel andDraghi to have the chance to come back to us – asJuncker had done already – with an agreement that included our minimumdemandsofdebtreliefandanendtoself-reinforcingausterity.Alexislookedatmeserenelyandasked,‘Whatarethechancesthattheywill

comebacktouswithsomethingdecent,Yani?’Atthatcriticaljunctureinourcountry’shistoryIwasobligedtoanswerwith

thegreatestpossibleprecision.Itoldhimthattheprobabilitytheywoulddosowas100percent if theyactedrationally.But, Iwarned,asDanEllsberg, thegreat American economist and Pentagon strategist turned pacifist whistle-blower,hademailedmeafewweeksbefore,‘Keepinmindthattherulingclasscanbeself-destructivelymad;notjustpretending!’‘Powerful European leaders have a track record of being bad at serving

their interests, of falling prey to irrational urges,’ I said. And given that

irrationality breeds unpredictability, I estimated that a more sensibleprobability – that Chancellor Merkel would opt for the mutually assureddamageofGrexitratherthanamutuallyadvantageousdeal–wasaroundfifty-fifty.1Watchinghimbuckleunderthepressureofthatprobabilitymademewantto

forgive, legitimize and rationalize his unforgivable, unethical and irrationalslip-ups. Thereweremany of these, but two above all: his retreat from ourfirm agreement, on which we had based our original strategy, that acontinuationofthenation’sinsolvencythroughanewbailoutwouldbeworsethanGrexit,howeverpainfulGrexitmightbe;andhisrejectionofmypleatoaddressthenationwiththedignifiedsurrenderspeechIhadpreparedforhim,insteadoforganizingareferendumthathesecretlyhopedtolose.DuringthereferendumcampaignIissuedastatementtothepressthatifyes

weretowinIwouldresign.‘Asademocrat,’Isaid,‘Ishallrespectthepeople’schoice tohave theirgovernmentaccept thecreditors’ terms.But, at the sametime,Ihavenoobligationtosignandimplementthatagreementmyself.Ifyeswins, I shall resign and let my successor do it.’ The fact that none of mygovernmentcolleagues,AlexisandEuclid included,committed themselves todoingthesametoldmeeverythingIneededtoknow.Inessence,thedifferencebetween my Syriza comrades and me was that I concentrated all mystrategizingagainstthetroika.Incontrast,afterthatcruelday,27April,whenAlexisdecidedtoburnTheocarakisandsidelineme,evenasIwasattemptingtopersuadehimthatneutralizinghisfinanceministerinthefaceoftheruthlessEurogroupandtheformidableforcesofMerkel–Schäublewasself-defeating,hewasbusilystrategizinghowbesttosacrificeme.If therewas callousness inAlexis, I did not discern it. I think its apparent

absencewasdue tohiscapacity todosomething that Ibelieve the restofhisentourage could not: reflect upon himself. I remember one May afternoonwhenwewereinhisofficeatParliamentHouse,wellafterheandIhadclashedover theconcessionshewasmakingto the troika.BeforeIhadthechancetochallengehimonwhateverdoomedtactichewascurrentlyproposing,hetoldme,‘IwasreadinganarticlebyStavrosLygeros[apoliticalcommentator]justnow. The rascal has me all sized up. He likened my situation to swordfishfishing.IhavetakenthehookbutIamtoostrongforthemtopullmeoutofthewater.So theybide their time.Theypullme in forawhileand thengivememoreline.Thentheypullmebackin.AndtheywillcarryondoingthisuntilI

amexhausted.Oncetheysensemyweakness,theywilltheypullmeoutinoneviolentmove.’Theothers,likeDragasakisandChouliarakis,couldneverhavefooledme.I

would never have believed their subterfuges nor joined any cause theyespoused.WithAlexisitwasdifferent.Hehadtotalkhimselfintocrossinghisownredlines,whichistheoppositeofneverhavingtheintentionofkeepingtothem. I can imagineAlexis saying tohimself, likeShakespeare’sRichard III,‘And therefore, since I cannot prove a lover, / To entertain these fair well-spokendays,/Iamdeterminedtoproveavillain’,exceptinsteadof‘lover ’itwould be ‘insurgent’, and instead of ‘villain’ it would be ‘insider ’. Alexis’sactions were not banal, to adopt Hannah Arendt’s sense of the word; hestruggled hard to reconcile himself to them and to find peace. It was, I amconvinced,thatinnervoiceofhisthatwasbothhisstrengthandhisdownfall,both the usurper of our commonproject and the reasonwhy I believed himalmosttothebitterend.The puzzlement Alexis’s inner voice caused me was compounded by my

friendEuclid–ararehybrid:anacademicfromamilieuclosetominebutalsoa party apparatchik. Euclid and I met in the English language, to borrowanother of Arendt’s phrases.2 We shared the same jokes, the same culturalreferences, the same radical Europeanism, the same understanding of‘Blighty’.He liked topretend thathewaspolitically tomy left, actingasmyleft-wingconsciencewhosejobwastopullmeintolineandpreventmefromdrifting into bourgeois tendencies and suspect friendships, such as withNormanLamont,somethingIenjoyedlettinghimdo.HisdislikeandscornforAlexisandPappas,whichwerereciprocatedbythem,coupledwiththefactthatIhadhadtofighthardtohavehimincludedinthecabinet,mademefeelsafeinhiscompany.WhenAlexisbrokewithmeon27AprilunderMerkelandDijsselbloem’s

pressure,hetoldtheworldthatEuclidwasthenewlyappointedcoordinatorofour negotiating team. The media relayed the news around the globe andheraldedEuclid as our chief negotiator.Of course, neither he nor I had anyreal influence over the timeline of concessions Alexis was making. WhenEuclidfoundoutaboutAlexis’ssurrendertonewausterity–theacceptanceofadecadeof3.5percentbudget surplus targets–hewas just as shockedandlividasIhadbeen.UntiltheendwefrequentlyfoundourselvesatMaximosorinsomeBrusselsroom,staringateachotherinbewildermentwhileSagiasandChouliarakisediteddraftsoftheSLA,wonderingwhatourrolewas.Asortof

gallows humour developed between us: I would ask himwhat on earth wasgoingon,andhewouldanswer,‘Areyouconfusingmewithsomeonein theknow?’However,wedifferedinacrucialrespect:EuclidwasaSyrizafunctionary,

andIwasnot.Byappearingtoperformhisallottedroleaschiefnegotiatorandtherebyallowing theworld to think thatanykindofnegotiationwasactuallytakingplace,helentthehideousnegotiationprocesslegitimacy.Iclungoninthe hope that after a rupture Alexis would require my expertise with theparallelpaymentssystemanddebtrestructuringwhiledeterminedtoresignthemoment it became clear that I would be asked to sign an unsustainableagreement.LulledbytheassumptionthatEuclidandIwereofonemind, thatwe were somehow interchangeable, I failed to foresee quite what beinginterchangeable would lead to – that Euclid would ultimately become thepersonusedbytheestablishmenttosigntheloanagreement,whichtheyknewIneverwouldsign.UntilthereferendumIdidnotseethatthiscouldhappen,eventhoughIhad

noticed two incongruities which should have alerted me. The first was thatwhenjustthetwoofusweretalking,Euclidwouldbemagnificentlywittyandaccurateinhisdisparagementoftherestofthewarcabinet,ChouliarakisandAlexis in particular, but during war cabinet meetings his interventions weremeek,verboseandunrecognizableasviewsthatsupportedmine.Frequentlyhewouldnotbackmeupatall.Thesecondwasthatinourprivateexchangeshewould habitually agree with my assessment of the day’s events, but when Iproposedthatwereactbeforeitwastoolate,hewouldadvisemetobidemytime and warn against developing a bunker mentality. One day I had hadenough. ‘When inabunker,’ I saidemphatically, ‘abunkermentalitymaybehelpful.Giventhattheyaretryingtogetme,itisnotparanoiatothinkthattheyaretryingtogetme!’After it was all over it took me some time to diagnose the cause of my

failure to read my two comrades: Alexis’s inner dialogue and Euclid’shybridity had blocked my sensors very effectively. It took the referendumoutcome and their sudden metamorphosis to unblock them. It was atransformation portrayed by Syriza’s ideologues as true radicals behavingtruly responsibly, but to me it is best summed up by the ending of GeorgeOrwell’sNineteenEighty-Four.

Hewasnotrunningorcheeringanylonger…Hewasinthepublicdock,confessing everything, implicating everybody … The long-hoped-forbulletwas entering his brain…O cruel, needlessmisunderstanding!Ostubborn, selfwilled exile from the lovingbreast!Twogin-scented tearstrickleddownfromthesidesofhisnose.Butitwasallright,everythingwasallright,thestrugglewasfinished.Hewonthevictoryoverhimself.HelovedBigBrother.

Squareofhopeandglory

On the afternoon of Friday, 3 June, as the working day drew to a close, Ibreathedasighofrelief.Aweekofclosedbankswasalmostover.Despitethelong queues at ATMs and the uncertainty of what awaited us the followingMonday,therehadbeennoviolence,nopanic,nocivilunrest.TheGreekshadprovedthemselvesasensiblepeople.The media, however, had managed to fall below their already absurdly

debased standards, competing with one another to find the most innovativewaystofrightenthepublicawayfromvotingno.Muchofthereportingoftheno sponsors and supporters would in other countries have been deemedincitementtoviolence.Theopinionpollsconsistentlypredictedthatyeswouldwinwithmorethan60percentofthevote,whilecommentwritersfoamedatthemouth at the government’s audacity in holding a referendum against thecreditors’ wishes. Meanwhile, the parliamentary opposition had managed topersuadeitssupporterstotaketothestreetsinsomenumbers,wavingEUflagsandplacardsproclaiming,WEARESTAYINGINEUROPE!3Later that Friday afternoon I received an email from Klaus Regling, the

managing director of the European Stability Mechanism, the eurozone’sbailoutfund.Itwasareminderthathehadthelegalrighttodemandfrommefullandimmediaterepaymentofthe€146.3billionlenttoGreeceaspartofthefirst two bailouts. It was phrased in such a way as to suggest that I waspersonally liable, not least because as financeministermy namewas on theloan agreement. It was too good an opportunity to pass up. I instructed myofficetoreplytoourmaincreditor–tothemanwhohadadvisedmetodefaulttomypensionersinsteadoftheIMF–withtwoancientwords.Thesewerethedefiant responseof thekingofSparta, leaderof the threehundredmenwho

attempted to resist the entire Persian army at the legendary battle ofThermopylae in 480BC, when instructed by the enemy to throw down theirweapons:‘Μολώνλαβέ’–‘Comeandgetthem!’Thateveningtworalliestookplace,oneinfavourofyes,outsidetheancient

Olympicstadiumwhere the firstmodernOlympicswerestaged in1896,andoneatSyntagmaSquareforthenocampaign.Theyesrallywasheldinthelateafternoon, andwas large andgoodnatured, but theno rally atSyntagmawasone for the ages. Since I was a boy, I had attended some magnificent, life-changingralliesatSyntagmaSquare,butwhatDanaeandIparticipatedinthatnightwasunprecedented.WewalkedtoSyntagmafromMaximoswithAlexisandothermembersof

thecabinet,theirpartnersandaides.Onthewayweweremobbedbyrapturoussupporters.Asweapproachedthesquare,thecrowd’senergyexploded.Aseaoffivehundredthousandbodiesconsumedus.Wewerepulledintoitsdepthsbyaforestofarms:tough-lookingmenwithmoisteyes,middle-agedwomenwith determination written all over their faces, young boys and girls withboundless energy, older people eager to hug us and shower us with goodwishes. For two hours, struggling to hold hands so as not to be separated,Danae and Iwere absorbed by a single body of peoplewho had simply hadenough.People from different generations saw their distinct struggles coalesce on

that night into one gigantic celebration of freedom from fear. An elderlypartisanfromtheSecondWorldWarpushedintomypocketacarnationandapiece of paper bearing the phrase ‘Resistance is NEVER futile!’ Studentsforcedtoemigratebythecrisiswhohadreturnedtocasttheirvotesbeggedmenottogiveup.Apensionerpromisedmethatheandhissickwifedidnotmindlosingtheirpensionsas longas theyrecoveredtheirdignity.Andeverybody,withoutasingleexception,shoutedatme,‘Nosurrender,whateverthecost!’Ibelievedtheymeantit.Thebankshadalreadybeenclosedforaweek.The

hardshipimposedbythecreditorswasplainlyvisible.Andyet,heretheywere,thesemagnificent people saying in oneword everything that had to be said:‘No!’ Not because they were recalcitrant or Eurosceptic. They craved theopportunitytosayabigfatyestoEurope.ButyestoaEuropeforitspeople,asopposedtoaEuropehell-bentoncrushingthem.Thatnight,asDanaeandIeventuallyfoundourselveswalkingupthemarble

stepsleadingtoparliament,thephraseIhadbeenlookingfortodescribewhatallthiswasaboutfinallycametome:constructivedisobedience.Thiswaswhat

IhadbeentryingtopractiseintheEurogroupallalong:puttingforwardmild,moderate,sensibleproposals,butwhenthedeepestablishmentrefusedeventoengageinnegotiation,todisobeytheircommandsandsayno.Thewarcabinethad never understood this, but the body of humanity that filled SyntagmaSquarethatnightsurelydid.

Onefortruebelievers

Thatnightthemonthsoffrustration,eachterriblemomentinMaximos,everydisappointmentalong theway,all thenastinessand thestresshadbeenwipedaway,leavingnothingbutcontentment,andyetIwasstillnotconvincedthatthenocampaignwouldwinthereferendum.Thedemonstrationsuggestedsupportforthecausehadrisen,butwiththebanksclosedandthemediascreamingbluemurderatanyonewhoevencontemplatedvotingno,successlookedunlikely.Over dinner with Danae, Jamie and some other friends at an outdoor

restaurant in the neighbourhood of Plaka, I was asked if Alexis and Euclidwouldresignwereyestowin.‘Alexiswillformacoalitiongovernmentwiththe opposition,’ I predicted, ‘after most of the true believers resign or arepushed.’And Iwould be long gone by then, I said.But Jamie insisted Iwaswrong. No would win, he believed, and my leverage with Alexis wouldskyrocket, as I would have played a large part in delivering the result.Unconvinced,InonethelessraisedmyglasstotoastJamie’soptimism.‘¡Hastalavictoriasiempre!’hesaidwithanintenseandcommittedlook–‘Tovictory,always!’On the day of the referendum I drove to Palaio Phaliro, the southern

AtheniansuburbwhereIgrewupandwheremyfatherstilllives.Togetherwemade our way to the polling station. Inside, the majority of voters wereebullientwhentheysawme,exceptforoneortwowhoremonstratedangrilywithmethatIhadcloseddownthebanks.Withthetelevisioncamerasrolling,Itoldoneangrymanthatthetroikahadgivenusanultimatumandthatacceptingitwouldshapehisandhischildren’sfuture.Whatwehaddonewastogivehimthe opportunity to vote for or against it. ‘Vote yes if you think it is amanageabledeal.Wearetheonlygovernmentthathaverespectedyourrighttodecide.Thefactthatthetroikadecidedtoclosethebanksdownbeforeyougotthechancetoexpressyourselfissomethingthatonlyyoucaninterpret.’

Aftervoting,asIwashelpingmyfatherbacktothecar,anelderlywomanapproached me, surrounded by the usual television cameras. She asked mesternlyifIknewwhereshelived.IadmittedIdidn’t.‘Isleepinanorphanagehere in Palaio Phaliro. And do you know why they let me? Because yourmotherworked tirelessly to let vagrants likemehave apermanent shelter.’ Ithankedher forherspontaneousandwonderfulmemoryofmymother.4 Butshewasnotfinished.‘Iblesshereveryday.Butdothesebastardsknowthis?’shesaidpointingat thecamerasand theTVcrews. ‘Ibet theydon’tand theydon’tevencare.’‘Itdoesn’tmatter,’Iassuredher.Eveniftheydidn’t,itwasenoughthatshe

knew.Nonetheless, Iwasupsetwhenontheeveningnewsourheart-warmingencounterwaspresentedasmebeingaccostedbyahomelesswomanblamingmeforherdestitution.Itwasnotuntil late that afternoon that Ibegan to senseanhistoricvictory

might be on the cards.Atmyoffice I composed a piece, inEnglish, formyblog.‘In1967,’Iwrote,‘foreignpowers, incahootswithlocalstooges,usedtankstooverthrowGreekdemocracy.In2015foreignpowers triedtodothesamebyusing thebanks.But they cameup against an insanelybravepeoplewhorefusedtosubmittofear.Forfivemonths,ourgovernmentragedagainstthedyingofthelight.Today,wearecallinguponallEuropeanstoragewithusso that the flickering light does not dim anywhere, from Athens to Dublin,fromHelsinkitoLisbon.’By8p.m.Icouldseefromthedroopingshouldersandmoroseexpressions

ofTVpresenters thatwehadwon.WhatIdidnotyetknowwastheextentofourvictory.MyfearwasthatacloseshavewouldgiveAlexistheexcusetosaywe had a divided nation and thus insufficient support for a rupturewith thetroika.Itoldmyteamthatthemagicnumberwas55percent.Ifthevotesforno were any greater, Alexis would have to honour the result. I thoughtcarefullyofwhatIwouldsaytothejournalistsgatheredinmyministry’spressroom in order to give him the necessary impetus to do so. By 9 p.m. I hadwrittenmyspeech.Traditionally,ministerswaitfortheprimeministertomakehisstatementbeforeissuingtheirown,soIwaitedinmyofficeforAlexis toaddressthepressatMaximos.At9.30Ibegantofeelsomethingwaswrong.Theresultsweremoreorless

final,indicatingthatthe55percentmarkhadbeenreached,butAlexiswasstillholedupinhisoffice.Mychiefofstaffwaspressurizingmetogotoourpressroomasthejournalistsweregettingagitatedandwerebeginningtotweetthat

somethingsinisterwasafoot.Iwaiteduntilafter10.00p.m.IcalledAlexis.Hedidnotpickup,andnordidasecretary.Wassilywalkedintoinformmethatother ministers were beginning to speak to the media, issuing lukewarmstatements in response to what was in reality an earth-shattering outcome. Icouldnotallowthistocontinue.Ourvotersdeservedaproperresponse.So at around 10.30 I headed for the press room to make my statement,

intendingtogotoMaximosstraightafterwardstodiscoverwhatwasgoingonthere.AsIreadoutmypreparedstatementIhadtheverystrongfeelingthatitwould bemy last as aminister. That feeling, combinedwith thememory ofSyntagmaSquaretwonightsearlier,mademereaditdefiantly,brazenlyeven.

On25 Januarydignitywas restored to thepeopleofGreece. In the fivemonthsthathasintervenedsincethen,webecamethefirstgovernmentthatdared raise itsvoice, speakingonbehalfof thepeople, sayingno to thedamagingirrationalityofourextend-and-pretendbailoutprogramme.WeconfinedthetroikatoitsBrusselslair;articulated,forthefirsttimeintheEurogroup, a sophisticated economic argument to which there was nocredible response; internationalizedGreece’s humanitarian crisis and itsrootsinintentionallyrecessionarypolicies;spreadhopebeyondGreece’sborders that democracy can breathe within a monetary union hithertodominatedbyfear.Endinginterminableself-defeatingausterityandrestructuringGreece’s

publicdebtwereour two targets.But these twowerealsoourcreditors’targets.Fromthemomentourelectionseemedlikely, thepowers thatbestartedabankrunandplanned,eventually, toshutGreece’sbanksdown.Theirpurpose?Tohumiliateourgovernmentbyforcingustosuccumbtostringentausterity.And todragus intoanagreement thatoffersno firmcommitmentstoasensible,well-defineddebtrestructure.The ultimatum of 25 June was the means by which they planned to

achievetheseaims.ThepeopleofGreecetodayreturnedthisultimatumtoitssenders,despitethefear-mongeringthatthedomesticoligarchicmediatransmittednightanddayintotheirhomes.Ournoisamajestic,bigyes toademocraticEurope.It isanoto the

dystopic vision of a eurozone that functions like an iron cage for itspeoples. But it is a loud yes to the vision of a eurozone offering theprospectofsocialjusticewithsharedprosperityforallEuropeans.

AsIsteppedoutintoSyntagmaSquareIsawdelightinthefacesaroundme.Aproudpeoplehadbeenvindicatedandwerejustlycelebrating.Thenightairwas full of anticipation and confidence. Alexis’s silence filled me withapprehension,but I refused tobelieve thatMaximoswassealedoff fromthatintoxicatingairofdefiance.Surely,Ithought,ithadfounditswayinthroughsomecrackinthewallsorthroughtheheartsofthepeopleworkingtherewhohad also learned their politics at Syntagma Square. And yet, as I walked in,Maximosfeltascoldasamorgue,asjoyfulasacemetery.

Theoverthrowingofapeople

In Maximos the ministers and functionaries I encountered looked numb,uncomfortable inmypresence, as if theyhad just suffered amajor electoraldefeat. Alexis was with the president in the adjacent presidential palace andwouldseeme later,hissecretary informedme,so Iwaited in theconferenceroom with other ministers, watching as the last results were declared ontelevision.Whenthefinalnumberflasheduponthescreen,61.31percentforno in a turnout of 62.5 per cent, I jumped up and punched the air, only torealizethatIwastheonlyoneintheroomcelebrating.5AsIsatwaitingforAlexis,IfoundamessageonmyphonefromNorman

Lamont:‘DearYanis,congratulations.Afamousvictory.Surelytheywilllistennow.Goodluck!’Theywouldlisten,Ithought,butonlyifwewerepreparedtospeakup.Sittingthere,Ibegannoticingthingsaboutthepeoplearoundmethathad previously escaped me. The men had shed the rough Syriza look andresembledaccountants.Thewomenweredressedas if forastategala.WhenDanaejoinedme,IrealizedthatnotonlywerewetheonlyhappypeopleintheplacebuttheonlyonesinjeansandT-shirts.Itfeltalittlelikebeinginoneofthosesci-fimoviesinwhichbody-snatchingalienshavequietlytakenover.EventuallyAlexis arrived and, half an hour later, addressed the nation on

television.Twokeyphrasesinhisspeechunlockedthevaultofhisintentions.Oneruledoutarupturewiththetroika;theotherwashisannouncementthathehad just asked the president to convene immediately a council of politicalleaders.On themorning after their decisive defeat, the pro-troika leaders oftheancienrégimewere being summoned to join him at the discussion table.‘HeissplittingSyrizaandpreparingacoalitionwiththeoppositiontopushthe

troika’snewbailoutthrough,’ItoldDanae.Iwaitedanotherhourandahalfasheheld separatemeetingswithSagias andRoubatisbeforehewould receiveme.Itwasafter1.30a.m.whenIenteredhisoffice.Alexisstaredatmeandsaid

wehadmessedupbadly.6‘Idon’tseeitthatway,’Irepliedflatly.‘Therewereplentyofmistakes,but

onthenightofsuchatriumphwehaveadutytorejoiceandhonourtheresult.’Alexis askedme if I minded Dimitris Tzanakopoulos, theMaximos legal

adviser,sittinginonourmeeting.‘Sure,’Ireplied.‘InfactIwanthimhereasawitness.’Thiswasnotgoingto

bejustanotherchat.Alexisaskedif thebankswouldopensoon.Itwasa trickquestion.Hewas

looking to justify his decision to capitulate. I pretended not to understand,sayingthattohonourthenovotewehadimmediatelytostartissuingelectronicIOUsbackedbyfuturetaxesandtohaircutDraghi’sSMPbonds.‘Withoutthesemoves to bolster your bargaining power,’ I said, ‘the 61.3 per cent will bescattered in thewinds.But ifwe announce this tonight,with61.3per cent ofvotersbackingus, I canassureyou thatDraghi andMerkelwill come to thetableveryquicklywithadecentdeal.Thenthebankswillopenthenextday.Ifyoudon’tmakethisannouncement,theywillsteamrolleryou.’IexplainedthatIneeded only a couple of days to activate this system using the tax office’swebsite.Hepretendedtobeimpressed,soIcontinued.‘This61.3percentresultisacapitalassetthatyoumustusewell.Youmust

manageitwithgreaterrespecttothepeopleouttherethanyoushowedbeforethereferendum.Youmustrespectyourselfmoretoo.Aftertonightyouhaveasimple choice.Eitheryou reactivateourplan,givingme the tools I need,oryousurrender.’We talked for a long time.We reviewed the previous months, weeks and

days.Itooknoprisoners,givingalitanyofhiserrors,pointingoutthewaysinwhich members of the war cabinet had jeopardized our struggle, often incollaborationwiththetroikaanditsoperatives.Isharedwithhimevidenceofoneofthembehavinginawaythatborderedoncorruption.Lookingsurprised,AlexisaskedDimitris:wasthepersonIreferredtosuch

aproblem?Dimitrisanswered,‘Yes,evenmoreso.’The conversation was meandering, so I decided to put it to him straight:

wouldhehonourthenovote,Iasked,bygoingbacktoouroriginalcovenant,

orwasheabouttothrowinthetowel?Hisanswerwaselliptical,buttherewasnomistakingthedirectioninwhich

itheaded:towardsunconditionalsurrender.Thefirsttimeinthatconversationthathespokedecisivelywaswhenhesaid,‘Look,Yani,youare theonlyonewhose predictions were confirmed. But here is the problem: if any othergovernmenthadgiventhemwhatIdid,thetroikawouldhavesealedthedealbynow. I gave them more than Samaras ever would, and they still wanted topunishme,asyouhadsaidtheywould.But–let’sfaceit–theydonotwanttogive an agreement either to you or to me. Let’s be honest. They want tooverthrowus.However,withthe61.3percenttheycannottouchmenow.Buttheycandestroyyou.’‘Don’tworryaboutme,Alexi,’ I said. ‘Worryabouthonouring thepeople

out there celebrating tonight while you’re planning to give in. If we sticktogether, activate our deterrent and show themwe’re united, theywill touchneitheryounorme.Wecouldproposetothemadealthattheycouldpackagecrediblyastheirownidea,theirowntriumph.’AtthatpointAlexisconfessedtosomethingIhadnotanticipated.Hetoldme

thathefeareda‘Goudi’fateawaitedus ifwepersevered–areferenceto theexecutionof six politicians andmilitary leaders in 1922.7 I laughed this off,sayingthatiftheyexecutedusafterwehadwon61.3percentofthevote,ourplace in history would be guaranteed. Alexis then began to insinuate thatsomething like a coupmight take place, tellingme that the president of therepublic,Stournaras,theintelligenceservicesandmembersofourgovernmentwereina‘readiedstate’.AgainIfendedhimoff:‘Letthemdotheirworst!Doyourealizewhat61.3percentmeans?’AlexistoldmethatDragasakishadbeentryingtopersuadehimtogetridof

me,everyonefromtheLeftPlatformandKammenos’sIndependentGreeksandinstead forge a coalition government with New Democracy, PASOK andPotami.Dragasakis had assured him that once the agreementwith the troikahad been signed,Alexis could then get rid ofNewDemocracy, PASOK andPotamiandbringmeback.ItoldhimitwasthestupidestideaIhadeverheard.Hesmiled,seemingtoagree,andusedanexpressionforDragasakisthatis

notreproduciblehere.‘Butthereissomethingtotheideaofproceedingintwoways, one public, one hidden. Publicly, we can approach the creditors in aright-wingmanner,involvingareshufflethatsays,“We’regoodkidsnow,”butatthesametime,hiddenfrompublicview,wecanprepareacounterstroke.’

‘This is bad thinking, Alexi,’ I told him. ‘Look, tonight the people voted.Theydidn’tvotenoforyoutoturnitintoayes.’ItoldhimhehadtocomeoutandsaywhatIhadsaidinmypressstatementearlier:thatthenovotehadgivenhimthemandateherequiredtobringaboutasolutionincooperationwithourEuropeanpartners.‘Addsomecomplimentarywordsforthecommission,theIMF, even for theECB, to illustrate thatwemean itwhenwe saywewant acooperative solution, but simultaneously project strength. None of thisnonsenseaboutpreparingforanundergroundwarinthecatacombs.’Itoldhimthat whatever we did now, we had to do it out in the open.We had to stateclearlythatwewerepreparingourownliquidity,aswehadadutytodowhenthe ECBwas keeping our banks closed.Andwe had to state clearly that theECB’s SMP bonds would be restructured according to Greek law, the lawunderwhichtheywerecreated.‘Itwillbeverydifficultforthemtogiveusasolution,Yani,’hesaid.‘Youkeepmaking themistakeof thinkingofa solutionas something they

give us,’ I replied. ‘That’s not the right way to think about it. They need asolution as much as we do. It’s not something that they hand out. We mustextractitfromthem.Butthisrequiresthatwehaveacrediblethreat.TheSMPhaircutandourownliquidityisexactlythat!’Weweregoingroundincircles,ourbodiesandmindswreckedbyfatigue,

so I told him that, since he hadmade hismind up to surrender oneway oranother,hehadbetter just tellmewhathehaddecided todonow.Hesaidhewas thinkingof reshuffling the cabinet so as to stop the troika, the creditorsandthemediafromtargetingme.HeaskedmewhoI thoughtshouldreplacemeatthefinanceministry.Hehadclearlydecidedwhoitwouldbealready,butIdecidedtoplayalong,suggestingthepersonwhoIwascertainhadagreedtotakeover frommealready–mygoodfriendEuclid. Ievenoffered to try toconvinceEuclidtoaccept.(AndwhenIdid,Euclidpretendedheneededtothinkaboutit.)‘Iwouldliketoaskyoutotakeovertheeconomyministry,soastoteamup

againwithEuclid,’Alexissaid.‘WhataboutStathakis?’Iasked.‘I’ll be happy not to see him in front ofme again. Let him vanish to the

backbenches.’‘No,Alexi,I’mnotinterested.’Itoldhim.‘YoumetmeyearsagobecauseI

turnedGreece’sdebtintothedragontobeslain,andbecauseofmyproposalsforhowtoslay it. I live,breathe, thinkanddreamofdebt restructuring,ofa

reduction in surplus targets, an end to austerity, tax rate reductions and theredistributionofwealthandincome.Nothingelseinterestsme.Totakeontheeconomyministry tomanage theEU’s structural fundhandouts, just soas toremainminister, is not something Iwant to do.Do you recallwhy Imovedfrom America? Because you asked me to help you to liberate Greecefinancially. I ran for parliament not because I was dying to be an MP butbecause I did not want to be a technocrat, an unelected finance minister. Ithought that thatway Iwould bemore useful to the cause.Now, given yourabandonment of that cause, I have no reason to be a minister. It’s OK. Letsomeoneelsedoit.Ishallbeinparliament,whereIwillhelptothebestofmyability.’‘Youcanhavesomeotherministry–maybeculture,whichyouandDanae

knowsomuchabout?’hesaidlaughing.‘Inanycase,therewillbemanypostsinthefuturewhereyoucanhelp.’‘You’reagainconfusingmewithsomeonewhocaresaboutpositions,Alexi.

There’sonlyonethingIcareabout,andyouknowwhatitis!’‘Let’ssleeponit,let’sthinkaboutit.’‘There’snothingtothinkabout,’Isaid.‘There’snotime.Youhavealotto

do.’WhenIsawDanaeafterwards,sheaskedmewhathadhappened.‘Tonightwe

hadthecuriousphenomenonofagovernmentoverthrowingitspeople,’Isaid.

Ministernomore

Backattheflat,InarratedmydiscussionwithAlexisforDanaeandhercameraandsleptforacoupleofhoursbeforewritingmyseventhandfinalresignationletter.Afterproofreadingitafewtimes,Iposteditonmyblogunderthetitle‘MinisterNoMore’.ItwasoneofthehardestpiecesofproseIhadeverhadtocompose.Ontheonehand,Ihadadutytowarnthepeople,theGreekdemos,thattheir

mandate was about to be trashed. On the other hand, I felt an obligation topreservewhatever progressivemomentum therewaswithin our governmentand within Syriza. At that stage I still believed strongly that comrades likeEuclid,withcloutinthepartythatIlacked,wouldnotsignuptothesurrenderdocument Alexis and Dragasakis were preparing. Losing a second financeminister inamonthor two,ifEuclidrefusedtobecomecomplicit inanother

harshandhopelessbailout,mightcausea rupturewithin thegovernmentandthe party. This in turn might lead to new elections, which could furtherundermine the chances of our honouring the wishes of the 61.3 per cent. Ineededtosignalbothmydefiantcommitmenttothenovotebutalsotoissueacallforunity.Theresultwasthefollowingtext.

Likeallstrugglesfordemocraticrights,so too thishistoricrejectionoftheEurogroup’s25Juneultimatumcomeswithalargepricetagattached.It is therefore essential that the great capital bestowed upon ourgovernmentbythesplendidnovotebeinvestedimmediatelyintoayestoa proper resolution – to an agreement that involves debt restructuring,lessausterity,redistributioninfavouroftheneedyandrealreforms.Soon after the announcement of the referendum results, I was made

aware of a certain preference by some Eurogroup participants, andassorted‘partners’,formy…‘absence’fromitsmeetings;anideathattheprime minister judged to be potentially helpful to him in reaching anagreement.ForthisreasonIamleavingtheMinistryofFinancetoday.Iconsider itmyduty tohelpAlexisTsiprasexploit,asheseesfit, the

capitalthattheGreekpeoplegrantedusthroughyesterday’sreferendum.AndIshallwearthecreditors’loathingwithpride.We of the Left know how to act collectively with no care for the

privilegesofoffice.IshallsupportfullyPrimeMinisterTsipras,thenewministeroffinanceandourgovernment.Thesuperhumaneffort tohonourthebravepeopleofGreece,andthe

famous no that they granted to democrats the world over, is justbeginning.

Inhindsight,IshouldhavesoundedamuchlouderalarmbellaboutAlexis’sintentions. That I did not reflects mymisplaced trust in many people in thegovernment – Euclid primarily – to carry out the task of preventing arecapitulation of the Samaras government. But I am not sure that a clearerwarningwouldhavemademuchdifference.EveryoneIhavespoken tosincethatmorningunderstoodverywellwhathadhappenedthemomenttheyheardIhadresignedonthenightofourtriumph.Aswellasthecreditorsandtheirgroupies,therewasoneotherpersonwho

was unconditionally happy at my decision. On hearing the news that I hadresigned, my daughter Xenia, who had come fromAustralia to seeme two

weeksbeforebuthadhardlylaideyesonme,gavemeasleepyearly-morninglookandsaid,‘Thankgoodness,Dad.Whattookyousolong?’

Youdidthat,didn’tyou?

Over the days that followed I watched Alexis’s surrender evolve atbreathtaking pace. Unwilling to be a dividing force within a party and agovernmentthatmightstillrebelagainstitsownannulment,Ikeptquietforacouple of weeks, but there was no rebellion. Paving the way for the thirdbailout, at a eurozone summit meeting on 13 July Alexis acceded to thetroika’sdemandsbysigninghisownversionoftheTreatyofVersailles,whichhe condemned as a coup against democracy while promising to honour it.Duringtheensuingdays,themorehedemonstratedhisdeterminationtodoasthecreditorsprescribed,theharshertheattacksagainstmebecame.For weeks I was ridiculed for clashing with the troika without a credible

deterrent,butwhen,asIdescribedinChapter4,‘Aparallelpaymentssystem’,IeventuallyletitbeknownthatIdidinfacthaveawell-planneddeterrent,whichAlexishadpreventedmefromactivating,suddenly thosewhohad laughedatmy foolishness accused me instead of treachery.8 The charge of nationaltraitor, first laidagainstme in2010, turned intoa fully fledgedcampaign toconveneaspecialcourttotrymeforhightreason.9AtthetimeofwritingIstillstandaccusedofhavingintentionallydelayedan

agreement with the troika in order to bring about bank closures, so that, incahootswithWolfgangSchäuble,Imightengineeraparallelcurrencyleadingto Greece’s exit from the euro. Imagine if the soldiers who returned fromDunkirk in June 1940 had beenmet in Britain with the accusation that theywereresponsible for theSecondWorldWar,whileBerlinwascelebratedforitsrationalrestorationoforder.10Itwasacomicalturnaround:treasonchargesforme,adulationandrespectforthosewhohaddonetheirbesttoshutdownGreece’sbanksandpushustothebrinkofGrexit.The motives of the troika and Greece’s domestic oligarchy are obvious.

Debt is creditor power, and unsustainable debt gives creditors exorbitantpower.TheGreekSpringchallengedtherightofcreditorsandtheirdomesticagents to govern a debtor nation.The 61.3 per centwhovoted no had to be

discredited as a people led astraybyopportunists, and sinceAlexis hadnowrepented,thatleftmeinthetroika’ssights.Troika functionaries like Klaus Regling and Yannis Stournaras argue

seriously that I cost theGreek economy around €100 billion. These are thesamepeopleresponsibleforpilingsomuchdebtonbankruptGreecewiththebailout loansof2010and2012thatby2015theonlysolutionwastohaircutour debt by €100 billion. I told the Greek people this explicitly, and theyelectedustodojustthat.Butthetroikawasunwillingtoadmititsculpability,so theycrushedourgovernment inorder toroll thedebtover instead. Itwasthe same storywithinGreece. The very political parties, bankers andmediaownerswhohaddemanded that I sign the troika’sagreementprotestedat thetax increases the agreement entailed. The same peoplewho had orchestratedthebankrunblamedmeforthebankrun.ThejournalistswhohadridiculedmeforbeingremovedfromthenegotiationsinAprilblamedmefor thestallingofnegotiationsinMayandJune.Thesamepeoplewhowanttoseemeinthedock on charges of high treason for gambling with Greece’s place in theeurozonearefullofadmirationforMarioDraghiandWolfgangSchäuble,thetwomenwhojeopardizedtheintegrityoftheentireeurozonebyclosingdownGreece’sbanks.FriendsaskDanaeandmehowwecopewiththeopprobrium,especially from within Greece. My answer is that I can only consider it anhonourtohavetheantipathyofsuchpeople.Havingsaidallthat,itistimeforaconfession.AlthoughIamimmunetothe

slings and arrows of the troika, which I fully expected, having formercolleagues – my parliamentary comrades who stayed in government andassentedtothethirdbailout–dothesameishurtful.It began with silence. When opposition MPs delivered fiery speeches

condemningmeforhavingbroughtthecountrytoitsknees,SyrizaMPswouldstare at the ceiling and say nothing. Then some of them began to join in,confessing ithadbeenagreaterror tohaveentrusted thefinanceministry tome.Thenformercabinetcolleaguesbegantotelltallstoriesthatcontradictedoneanother.InoneaccountIwaseagertopushAlexisintosurrenderingtothetroikainFebruary2015,whileinanotherIwasresponsibleforafutileclashwiththecreditorsthatsamemonth.Thensomeevenwentsofarastoendorsethe call for me to be tried in a special court. For the most part Alexis andEuclid would let these allegations run for a while, before intervening,suspiciously belatedly, to rule out charges against me by damning me with

faintpraise.WhateverIhaddone,theywouldsay,atleastIwasnotacrook;itwouldabsurdtoblameeverythingonVaroufakis,theywouldinsist.One explanation for this behaviour is that those sameMPs and ministers

werevotinginfavourofbillstheyknewtobecalamitousandwhosepassageannulledeverythingtheyhadstoodforsinceenteringpolitics.Whenapersonbelievesonethingbutchoosesorisforcedtoadvocateitsopposite,theresultiscognitivedissonance.Eventually,inordertoenduretheinternalconflict,oneis forced, like Orwell’s Winston Smith, to change one’s mind. But theemotional fallout from such stress must somehow be vented; someone elsemusttaketheblame.SinceIhadbeenchosentoperformtheroleofscapegoatby thevictorious trinka, Iwas theobviouschoice formydefeatedcomradestoo.Butofcoursethisisnotthewholestory.Irecallsomethingmyfathersaidto

mewhenhe realized that, at ayoungage, Iwasbecomingenthusiastic aboutleft-wingpolitics.‘WhenIwasintheconcentrationcampasacommunist,’hesaid,‘Iknewthat,hadoursidewonthecivilwar,Iwouldbeinthesamecamponly with different guards.’ Since my resignation, when witnessing thenastinessandblatantuntruthsofmyformercomrades,Ihavebeenremindedofmyfather ’sprescience.Drawingupa finalbalance sheet for theGreekSpringof2015mayseem

likeatallorder.Itisnot.OnThursday,23July2015Ihadtwoexperiencesthatplacethisbook’sstoryinitsrightfulcontext.That day I had two appointments to keep in the late morning with the

internationalmedia.Thefirst,aroundmid-morning,tookplaceatanofficeinadilapidatedoldarcadenearSyntagmaSquare.WhenIleft,therewerecameraswaiting downstairs in the arcade and journalists asking for a statement.As Iwasspeaking,amiddle-agedmanbegantoabuseme,accusingmeofhavingdestroyed his business by shutting down the banks. I tried to enter into aconversationwithhimbuthewasonly interested inshoutingabuse,soIsaidmygoodbyesandheadedtowardstheexitofthearcade,wheremymotorcyclewas parked.Theman followedme tomy bike, continuing to abuseme.Thenewsbulletins thatnightwere fullof thestory: ‘Varoufakishoundedby iratebusinessmanwhoselivingtheformerministerdestroyed’.A little later I had a second appointment inside theNationalGardens, just

behind parliament – for a photo shoot with a German magazine about topublishamajorinterviewwithmeontheEurogroupandthestateofEurope.Alittlewayfromwheretheshootwastakingplace,acoupleofyoungboyswere

playing.Inoticedtheirmodestclothesandthefactthattheywereunsupervised.Theyoungerboy,wholookedaboutfiveyearsold,rememberedhavingseenmeontelevisionbutcouldnotputanametome.Hecalledtohisolderbrother,whoseemedaroundeight,toaskwhoIwas.Theolderboyrecognizedmeatonceandapproached.Surprisingly,itwastothankme.‘Doyouknowwhothisguyis?’heaskedhisbrotherwhilepointingatme.‘Heistheguywhogaveourmother her plastic card. It lets her buy stuff from the supermarket. Twohundred euros a month!’ he said, proud to have remembered the number.Turningtomeagainheasked,‘Youdidthat,didn’tyou?Didyoureally?’‘We tried our best,’ I replied and hugged the boy. No one was there to

witnessthissceneexcepttheGermanphotographer,whodidn’tunderstandourexchangeinGreek,whichmadethewholethingsomuchmoresatisfying.ThatsamenightIwasathomechattingwithDanaeanda journalist friend,

with the TV on in the background. When the footage of the strickenbusinessman accosting me was replayed, our friend pointed out somethinginteresting. ‘Did you notice that while the camera filming the scene isstationary,andthetwoofyouaremovingawayfromit,yourvoicefadesbutthe businessman’s doesn’t?’ I said that it seemed so. ‘Can’t you see? Thebusinessmanwaswiredforsound.Youweresetup!’‘Notforthefirsttime,’Ireplied,somehowrelieved.Onceour friendhad leftandDanaehadgone tobed, Icheckedmyemails

and stumbled upon one sent by the Spanish journalist who had broughtLambros, the homeless translator, into our flat just before my election inJanuary2015.InitshesaidthatLambroshadusedthebillIhadpassedtogetassistance with his rent. This was the same bill that had provided the boys’motherwithhercardandtheverysamebillthatDeclanCostelloandhistroikacohorts were so upset by and so eager to kill off. The Spanish journalist’semailfinished:‘Lambroswantsmetotellyouthatheismovingintohisnewapartment tomorrow,and thathe isveryproudofyou,and thatyouhavehissupportmorethanever.’When allwas said and done, how could I considermyself anything other

thanundeservedlyprivileged?

Epilogue

In mid-August 2015 Alexis and Euclid brought the third bailout loanagreementanditsaccompanyingMoU toparliament.Conveningat9p.m,wereceivedmorethanathousandpages–whichreadasiftranslatedfromtroika-English into Greek by something like Google Translate – to sift throughovernightbeforethevotescheduledforearlythefollowingmorning.Sittinginparliamentthatlongnight–anightthatresembledawakemorethanadebate–IstudiedtheMoU.The full horror was evident from its first page, in which the Greek

authoritiescommittedtoagreetoeverythingthecreditorsdemanded,withnoreciprocal commitment from the troika to agree on anything in return – apledge of utter subservience that no court of law would ever recognize asbinding.Incensed,IworkedthroughthenighttoproduceanannotatedversionoftheMoU.1By9a.m.118SyrizaMPsand114pro-troikaoppositionMPshadacceptedournewsentencetodebtors’prison.Iwasoneof32SyrizaMPswhovotedno,whileanother11abstained.Predictably, therepercussionsweredevastating.All taxessoared.VATrose

on everything: food, hotels, books, pharmaceuticals, utility bills. Businessestiny, medium and large saw their taxes and social security contributionsincreaseand,staggeringly,wereforcedtoprepayimmediately100percentofthe following year ’s estimated taxes. The small sum paid to pensionersreceivinglessthanthestandard€300permonthwascut,whilethemajorityofpensionswerecurtailed.Allthestate’sremainingassetswereputupforsaleaspart of a new fund to be controlled directly by the troika. The catalogue ofhorrorswasendless.Theywere thekindofmeasuresyou imposeonaweakeconomyifyouwanttocrushit.A few months later, at a conference in Italy, Jens Spahn, Wolfgang

Schäuble’s deputy, reprimanded me for saying that the third bailout was anexampleoflatter-daygunboatdiplomacy.‘Butyourparliamentvotedinfavourof it with a large majority, didn’t it?’ he pointed out. Sure it did, I replied.Except that consent without the freedom to say no is a form of slavery, asfeministsandcivilrightcampaignerstaughtuslongago.

Shortly after my resignation I received two dismaying phone calls. OnecamefromPanagiotisDanis,withwhomwehadsetupthefinanceministry’steamofuntouchableschargedwith thealgorithmichuntfor taxcheats. ‘Theyare about to pull the plug,’ he told me, ‘just when we were about to catchhundredsofthousandsoflarge-scaleevaders,rakinginbillionsforthestate.’Ilooked at theMoU. Buried in its verbiage there it was: a provision for thetroika-dominated tax office to absorb Danis’s team and thus defang it.Exercising my prerogative as a member of parliament, I made a speechwarningagainstthistravesty.‘Wecreatedafantasticopportunitytostrikeattheheartoftaxevasion,tocollectverylargesumsandtogiveourpeopleasenseofjustice.DonotsacrificeitonthealtaroftheMoU,’Isaid.Euclidlistenedinsilencefromtheministerialbenches.MyfellowSyrizaMPslookedatmeasifI were the village idiot, incapable of shutting up about inconvenient truths.Nothingwas reported in the press. By the autumnDanis had resigned, aftersubmitting his report toAlexis. The tax-evading oligarchy, aided by its bestfriendthetroika,hadgotawayscot-free.The other phone call came from Antonis Stergiotis, my appointee to the

regulatory body overseeing the gaming industry – whose appointment hadcoincidedwithmy estrangement fromRoubatis. He told a similar story: theindustry lobby, in collaborationwith the deputy primeminister ’s office andwiththeacquiescenceofthefinanceministry,waspushinghimoutinordertorescind themeasureswe had put in place to halt the spread of thousands ofvideolotteryterminals.BytheendoftheyearStergiotiswasgoneandsowerethe constraints we had imposed upon those trying to profit from thedesperationofourimpoverishedpopulation.

Liberalestablishment?

Despite theprideIretaininhavingplayedapart in theGreekSpringandthereal,albeitbrief,scareitgaveGreece’sirresponsibleandinhu-manecreditors,ourdefeatcameatagreatcost.Theeconomicbillforthatdefeatwasfooted,ofcourse, byGreece’sweakest andneediest. Its political price,meanwhile,waspaid by progressives around the world, whose hearts sank when they sawSyriza succumb to the dogmaofTINA–There IsNoAlternative –with thesame enthusiasm thatOrwell’sWinstonSmith realizes he lovesBigBrother.

Butadefeatisalwayseasiertobearifonecanrecognizeitasbutoneepisodeinalargerstruggle.‘ObservingtheEuropeanUnion’sattemptstodealwiththecrisisisabitlike

watchingOthello–onewondershowour rulerscanbesodeluded…In thistitanic battle for Europe’s integrity and soul, the forces of reason andhumanismwillhavetofacedownthegrowingauthoritarianism.’Ispokethesewords in2013 ina speechentitledTheDirtyWar forEurope’s IntegrityandSoul.2AlittlelessthanayearaftermyresignationthepeopleofBritainvotedtoleavetheEuropeanUnion.TheninNovember2016DonaldTrumprompedintotheWhiteHouse.XenophobicEuroscepticswereappearingeverywhere–inFrance,Germany, theNetherlands, Italy,Hungary,Poland.The scandaloustreatment of the refugees landing onGreece’s shoreswas a symptomof thesame change.Meanwhile, commentators and those in authority began to fretaboutthisunexpectedchallengetotheliberalestablishment.Having just emerged from an intense engagement with that very

establishment, ‘liberal’ is the last adjective I would use to describe it. Onceuponatimetheliberalprojectwasaboutthereadinessto‘payanyprice,bearanyburden,meetanyhardship,supportanyfriend,opposeanyfoe,inordertoassure the survival and the success of liberty with hope and justice’, to useJFK’sstirringwords.Anestablishment thatused truth-reversal socasually toannulademocraticmandateandtoimposepoliciesthatitsfunctionariesknewwouldfailcannotbedescribedasliberal.ImpoverishingJilltokeepJackinhisplace is theoppositeof liberalism.Somethingother than liberalism,or evenneoliberalism,hadtakenovertheestablishmentwithoutanyonenoticing.ThethirdMoUthatIreadandannotatedthatnightinparliamentbeginswith

thewords‘GreecehasrequestedsupportfromitsEuropeanpartners,torestoresustainablegrowth,createjobs,reduceinequalities,andaddresstheriskstoitsown financial stability and to that of the euro area. This Memorandum ofUnderstanding (MoU) has been prepared in response to a request of 8 July2015fromtheHellenicRepublic…’Thevictimwasbeingforcedtopretendthatithadrequesteditspunishment

andthatthecreditorswereonlyrespondinggenerouslytothatrequest.JustasanunnamedUSofficerintheVietnamWarhadclaimedthataparticulartownhad to be destroyed in order to be saved from the Vietcong, our country’sfiscalwaterboardingwascelebratedasasensiblewayofbringingalostpeopleback into the fold. In a sense, Greece experienced collectively the sametreatment that Britain’s poor receivewhen they go to claim their benefits at

Jobcentres, where they must consent to their humiliation by espousing‘affirmation’ phrases such as ‘My only limitations are the ones I set formyself.’3Inthebonfireofits illusionsthatfollowedthefinancialcrashof2008and

thesubsequenteurocrisis,Europe’sdeepestablishment lostallsenseofself-restraint. IwitnessedfirsthandwhatIcanonlydescribeasanakedclasswarthattargetedtheweakandscandalouslyfavouredtherulingclass.Itcametomyattention,forexample,thatsomeoftheemployeesinmyministry,specificallythe chair,CEOandmembers of theboardof theHellenicFinancialStabilityFacility (HFSF), were collecting what I considered to be outrageously highsalaries.Toeconomizebutalsotorestorefairness,Iusedthepowersvestedinmebylawtoannounceasalarycutof40percentfortheseposts,reflectingtheaverage reduction inwages throughoutGreece since the crisis had begun in2010.TheCEO,whohadbeenpaid€180,000inacountrywhereahighcourtjudgeearnsnotmore than€60,000and theprimeminister€105,000,wouldnowreceive€129,000–stillalargesumbycrisis-riddenGreece’sstandards.Didour creditors,usually sokeen to shrinkmyministry’soutlaysonwagesandpensions,embracemydecisionenthusiastically?No,theydidnot.Instead,ThomasWieserwrotetomerepeatedlyonbehalfofthetroikatodemandthatIreversethedecision.Why?Becausethesesalarieswenttofunctionariesthatthetroikaconsidered theirown.After Ihad left theministry, thosesalarieswereraisedbyupto71percent,theCEO’ssalarybeingbumpedupto€220,000.This iswhat happenswhen thosewith unwarranted power lose legitimacy

and self-confidence: they turn ugly. No longer interested in winning theintellectual or ideological argument, the establishment resorted instead tocharacterassassinationandpunitivemeasuresthatitknewwouldresultinlessprosperity and less freedom. It employedbrute force to impose policies thatnot even Ronald Reagan andMargaret Thatcher would have endorsed. Andonce it had throttled the rebellion against itself, it imposed performativeincantations such as ourMoU upon the defeated andwent about shutting offanyspacewheredebateorcriticalinquirymighttakeplace.Inshort,itbecameahighlyilliberalestablishment.DuringmydiscussionswiththecreditorsIoftenwarnedthemthatcrushing

us was not in their interests. If our democratic, Europeanist, progressivechallenge was strangled, the deepening crisis would produce a xenophobic,illiberal, anti-Europeanist nationalist international. This is exactly whattranspiredafterthecrushingoftheGreekSpring.Howdidtheso-calledliberal

establishment respond to the nationalist, bigoted backlash that its dark anddangerous illiberalism brought about?A little like the parricidewho throwshimself on the court’s mercy, demanding lenience because he is now anorphan.

Unwelcomevindication

Beforethecrisis,asanacademicwritingobscurescholarlyarticlesandlovingeveryminute of it, I was keen to avoid two kinds of people: followers andenemies. After my stint in government I now have plenty of both but notenough people willing to hear me out critically before either agreeing ordisagreeing.ThisIregret.ButIdonotregretthedecisiontoentergovernmenttoopposecontinental-scaleirrationality.But,‘Isn’titidiotictoputyourjobonthe line to eradicate idiocy?’ anAmerican journalist once askedme. ‘Not ifyoudon’tcareforthejobexceptasaleveragainstidiocy,’Ireplied.Accusations such as ‘You gambled with your country and lost’ hold no

water.Itwasmybasictenetthat,asthefinanceministerofabankruptcountry,Ihadnorighttogamblewithitsfuture.AndIdidn’t.Itisnotagambletoadoptastance that isoptimal irrespectiveofhowyouropponentchooses to respond.Toresistthethirdbailoutwastherightthingtodowhetherthecreditorsagreedtoasustainablesetofpoliciesoroptedtoevictusfromtheeurozone.Whilewe had a strong preference for the former, the latter was better thancapitulation.Denunciations for having resisted the creditors for too long cutno ice either, given that even Wolfgang Schäuble told me he would haverefusedtosignthethirdbailoutagreementwereheinmyshoes.OnenightinMarch2016IspentafewhoursinEcuador ’sLondonembassy

with Julian Assange listening to a recording of a telephone conversationbetween the IMF’s Poul Thomsen and his Greek mission chief. With bittersatisfaction I heard Poul confirm everything I had been saying about theunsustainability of the third bailout agreement. I also heard him insistpassionatelythatthecorrectfiscaltargetsweretheonesIhadbeenproposing–andwhich hewas, interestingly, rejecting in the Eurogroup.4 Vindication indefeat may be hollow, but at least it steels one’s nerves in the face of theensuingwitch-hunt,whosepurposehasbeen toshieldfromblame thosewho

abandoned our plan midway and to absolve the illiberal establishment ofresponsibilityforforcingsuchaplanonusinthefirstplace.

Nocountryisanisland

NomanisanIsland,entireofitself;everymanisapieceoftheContinent,apartofthemain;ifaclodbewashedawaybythesea,Europeistheless…JohnDonne,DevotionsuponEmergentOccasions,‘MeditationXVII’

In the summer of 2015,with our people defeated yet unbowed, Iwas underpressuretostartanewpoliticalpartytokeeptheGreekSpringalive.Theideafailed to light a fire in me. Then, one day in August, Danae and I foundourselves at a political meeting out in rural France. I was to speak. To myconsiderablesurprise,alargecrowdhadgathered.Isuspectedtheywerethereless to show solidarity withme or tomy defeated country than for anotherreason,andItestedmysuspicionbytellingthemthis.

I am here because ourAthens Springwas crushed, just like the PragueSpringbeforeit.ButIamnotheretodaytodrumupsupportforGreece’scrushed democracy. I am here to lend the Greek people’s support andsolidarity to France’s democracy. For this is what is at stake. Frenchdemocracy. Spanish democracy. British democracy. Italian democracy.DemocracythroughoutEurope.Greecewas,andunfortunatelyremains,alaboratorywherethedestructivepowersofextend-and-pretendloansplusself-defeatingausterityweretriedandtested.GreeceisabattlegroundonwhichawaragainstEuropeandemocracy,againstFrenchdemocracy, istriedandtested.Greecewasnevertheissueforthetroikaanditsminions.Youare!ThisiswhyIamhere.Iamherebecausewhathappenedtousisbeginningtohappentoyou.

Judging from the roarof approval this received, I knew Ihadhit anerve.TheyhadgatheredbecausetheycouldsensethatwhathadbeendonetoGreecewascomingtheirway.TheywerefullyalivetoWolfgangSchäuble’sdesiretoseethetroikainParis.InthatfieldinFranceIsawwhathadtobedone.Similarexperiences atmeetings inGerman townhalls reinforcedmyconviction:we

needed to band together regardless of nationality and transcend the dividebetweendebtorandcreditorcountries.Theonlypracticalwaytoopposeboththedeepestablishmentand thenationalist international ithadspawnedwas toform a pan-European, democratic, humanist movement whose purpose is tosucceedwherethegenerationof1929failed:toreachoutacrossbordersandpoliticaldivisionstostemthedescentintoapost-modern1930s.Afewmonthslater,on9February2016,thatmovementwasborn.Wechose

Berlin’sfamousVolksbühnetheatretoinaugurateDiEM25,theDemocracyinEuropeMovement.TheenergythathadfailedtorisewithinmeatthethoughtofstartinganewpartyinGreeceoverflowedinresponsetothehungeracrossEurope for the spirit of the Greek Spring. One day, soon I hope, thattransplanted spirit may be strong enough to return home to fire up ourinordinatelybraveandvirtuouspeopleagain.Whenthatdaycomes,theGreeksmay be able to address the rest of Europe by paraphrasing poet GeorgeSeferis:‘Wewhohadnothingtaughtyoutranquillity.’5Overthewinterandspringof2016Ipuzzledmanyfriends in theUKwith

mycampaignagainstBrexit. ‘Howcanyou tellus tostay in theEUafter thewayGreecehasbeentreated?’theywouldprotest.‘Wewantourcountryback!’wastheirwhollylegitimatedemand.‘Sodowe,’Iwouldrespond.Buttotakebackourcountries,Iwouldexplain,weneedtoreclaimcommondecencyandrestorecommonsenseacrossEurope.Justasnoonecountrycantackleclimatechange by itself, the task we face cannot be achieved by solitary nations.‘Would theweak inBritainsuffer lessafterBrexit?’ Iwouldask. ‘Would theweak in Europe be better off ?’ Or would reinforced borders and Europe’sdisintegration favour the deep establishment and the political monsters itsfailureshavespawned?Somewere convinced, others remained sceptical. The idea of Europe has

beenwoundedsodeeply,andmainlybytheeventsof2015, thatgoodpeopleare turning away from it. Even some who sympathize with DiEM25’s pan-Europeanism dismiss it as utopian. But allow me, dear reader, to share astronglyheldbeliefasmypartingshot:ourmovementmaybeutopian,butitspolicyofconstructivedisobediencewithintheEU,ofbeingbothinandagainstthisilliberalandanti-democraticEurope,istheonlypracticalalternativetothedystopia unfolding as Europe disintegrates. That wasmy stance asGreece’sfinanceminister.Itremainsmystancetoday.OfcourseImaybewrong.Evenso,Ibelieveit isacauseworthpursuing.

Thedangerisnotthatweshallaimtoohighandmiss;therealdangeristhat

wetrainoureyesonthefloorandendupthere.MinutesaftertheinaugurationofDiEM25inBerlin,filledwithadrenalinandhope,mycolleaguesandIcameacrossanolderGermanactivistwholookedunimpressed.‘Thismovementisdoomed,’hetoldusgloomily.‘Sowhatthehellareyoudoinghere?’myslightlypeevedcolleagueasked

him.‘Iwanttobearoundthepeoplewhowillhavetopickupthepieceswhenthe

wholeedificecomestumblingdown,’hereplied.That’sagoodenoughreasontokeepalive,acrossEurope,thesmallflame

litbythepeopleofGreeceduringthespringof2015.

Notes

Chapter1Introduction

1. A few months after I had resigned the ministry, my good friend andacademiccolleagueTonyAspromourgos,uponhearingaboutmyexchangeswithLarrySummers,confirmedmysuspicionwhenhesentmethisquotationfromSenatorElizabethWarren,documentedin2014:

Lateintheevening,Larryleanedbackinhischairandofferedmesomeadvice…Heteeditupthisway:Ihadachoice.IcouldbeaninsiderorIcouldbeanoutsider.Outsiderscansaywhatevertheywant.Butpeopleontheinsidedon’tlistentothem.Insiders,however,getlotsofaccessandachance topush their ideas.People–powerfulpeople– listen towhat they have to say. But insiders also understand one unbreakablerule:theydon’tcriticizeotherinsiders.Ihadbeenwarned.John Cassidy (2014), ‘Elizabeth Warren’s Moment’, New York

ReviewofBooks,Vol.61(no.9),22/5–4/6/14,pp.4–8.

2.Quotations fromcatalogueentry forDanaeStratou’s2012exhibition It istimetoopentheblackboxes!

Chapter2Bailoutistan

1. One-third of the €110 billion came from the IMF,whichmeans from thetaxpayersoftheIMF’smemberstates,whichismoreorlessthewholeworld.TheremaindercamefromtheEU’staxpayers.2. ‘Programme’ is shorthand for the troika’s enforced measures of fiscalconsolidationandreform–theso-calledconditionalitiesofthebailoutloan–whosepurposewas the recoveryofGreece’s economyand its government’scapacity to borrow from private investors. In reality, itmeant cuttingwagesandbenefitssavagely,raisingtaxesandsellingoffthefamilysilveronbehalfofthecreditors.NotealsoLagarde’suseof‘they’insteadof‘we’.Thisreflectsthe fact that the IMFhas consistently disagreedwith important aspects of theconditionsplaceduponGreeceby theEuropeanmembersof the troika.Still,

thesedisagreementsnevertriggeredtheIMF’sveto.Inthefinalanalysis,afterIMFofficialsexpressedtheirreservations,eventheirapologiestoGreece,theIMFconsistentlybackedtheEuropeanpowers’absurddecisions.3.Greek government bondswere trading at 19 per cent of their face value,meaning that German banks wanting to offload Greek debt by selling it toinvestorswouldhavetotakean81percentloss.4. http://www.telegraph.co.uk/news/worldnews/europe/eu/10874230/Jean-Claude-Juncker-profile-When-it-becomes-serious-you-have-to-lie.html5.ThesenumbersreflectthefactthatGermanyrepresentedaround27percentoftheeurozone’stotalincome,France’saround20percent,andsoon.6.The IMFwas ina slightlydifferentposition, in thatChristineLagarde feltimmensepressurefromnon-Europeanmembersofthefundtoretrieveeverypenny loaned to Athens. These members, such as Brazil, were immenselyannoyedwiththeEuropeanleadershipof theIMFforhavingembroiledtheminamelee thatwasnoneof theirbusiness, throughbending theIMF’ssacredruleandjeopardizingtheirmoney.7.This isastatement thatMrsThatchermadeoftenand inavarietyofways.Forexample,inaninterviewforThamesTV(ThisWeek,5February1976)shesaid ‘… and socialist governments traditionally do make a financial mess.They [socialists] always run out of other people’s money. It’s quite acharacteristicofthem.’8.As if thatwerenotenough, foreverydollar,poundoreuro thatEurope’sbanks had access to, they had lent, or wagered, a cool forty. Given this so-calledleverageratioof40:1,aback-of-an-envelopecalculationrevealsthatifamere10percentofthesebetsorloansweretogobad,someonewouldhavetopump$2.25trillionintothebanks,orelsetheATMswoulddryupandthebanks’shutterswouldcomedownpermanently.9. One of them in fact was Yannis Dragasakis, who would become deputyprimeministerintheSyrizagovernmentinwhichIservedasfinanceminister.10.To illustrate thepoint, in2015 theBritishTreasury repaidabond issuedduringtheSouthSeaBubblecrisisofthe1720s.11.As lateasearly2008 its incomemountainwasrisingatahealthyrateof5.8percentwhileitsdebtholewasincreasingbyamere4.4percent.12.Thestatewouldfrequentlyborrowfromforeignbanksandpassthemoneyontodeveloperstobuildmotorwaysandthelike.13. From its 5.8 per cent growth a year before it subsided by 4.5 per cent.Meanwhile, thedebtholedeepenedata rateof5.7percent,up from4.4per

centyearonyear.14.ItisfuntolookatwhatafullyfledgedausteritydrivewouldhavedonetoBritain’seconomy.Around2010theUK’spublicdebtcametoalmost80percent,orfour-fifths,ofnationalincome.AtthesametimetheUKgovernment’stotalexpenditurewasabouthalfofnationalincome.Now,supposeChancellorOsbornehadgivenhispro-austerityinstinctsfreereinandgoneintoafrenzy,slashinggovernmentspendingbyhalf,acutbackequaltoaquarterofnationalincome.Cuttingthismuchgovernmentspendingwouldreducenationalincomeby at least a fifth. Suddenly public debt would go from four-fifths to four-quarters, or 100 per cent, of national income,without even counting all thepublicmoneythat‘had’tobegiventotheCity’sbankers.Thisiswhyausterity,in times of private-sector consolidation, fails by its own criteria – theconsolidationofpublicdebt.15. Indeedthenumbersaretelling.Duringhisfirst twoyearsintheTreasury(2010–12)Osborneactuallyincreasedgovernmentexpenditureby6.9percent.In this sense no actual austerity was practised by the Cameron–Osbornegovernmentatall.Austeritywasutilizedby themasacover forasubstantialredistributionofspendingandtaxcutsthatfavouredtherichanddisadvantagedthepoor.Insimpleterms,thetop20percentbenefitedgreatlywhilethebottom20percentsufferedevenmore.16.Theorderwasnotissuedimmediately.Ithappenedafewdayslater,inmypresence,whenIsharedapanelwiththesaidminister.Whentheshowfinished,aggrievedbymycriticisms,he turned to theproducerangrily. ‘Wepayyoursalariesandyoukeepinvitinghimheretoundermineus?Neveragain!’Afterthattheinvitationsceased.However,tomygreatsurpriseanERTproducerdidcallmeafewweekslaterwithaninvitationtoappearthefollowingday.Itoldherthat,whileperfectlyhappytoacceptherkindinvitation,perhapssheshouldlookintothematteroncemore,mentioningmyblacklisting.Herreactionwasone of healthy incredulity. ‘The days of fascism at ERT are well and trulyover,’shepronounced.‘Bethatas itmay,’Isaid,‘askaroundandifyoustillwantmetoappearonyourprogrammetomorrow,givemeacallandIshallbethere.’Twohourslatermyphonerangagain.Inasubduedvoicecamethesadadmission: ‘I had been awayonmaternity leave and, as the orderwas neverwrittendown, Ididnotknow. I amever so sorry.Forusmore than foryou.Thankyouforprotectingme.’17. Iwas to find this out duringoneofmyministerial visits toWashington,DC.

18.Greekpension funds, like inmost countries,were forcedby law toholdmuchoftheirreservesinGreekgovernmentbonds.Ineffect,pensionersweremade to lend their fund reserves to the state. The charters of professionalbodies, like the lawyers’ association, also compelled their fundmanagers toinvest in government bonds. Greece’s bankers would be hit too, but unlikepensioners and private investors they would be compensated fully with theEuropean taxpayers’money that theGreek statewouldborrowaspartof thesecond bailout loan and return to the bankers – in the interests of financialstability,ofcourse.19. The interim governmentwas formed in the autumn of 2011; the secondbailout legislationwasapprovedin thespringof2012,andthenewelectionswere called in May 2012. Having produced a hung parliament, they wererepeatedamonthlater,inJune,atwhichpointMrSamarasmanagedtoform,under his premiership, a coalition government with the massively depletedPASOKandatinypro-establishmentpartyoftheLeft.20. Unlike Greek pension funds, professional organizations and smallbondholders, who lost up to 90 per cent of the money they had lent to theGreekstate,veryfewforeignownersofGreekgovernmentbondssufferedaloss. The reason is that, by the time the haircut kicked in, in 2012, foreignbanks and other institutional investors had already sold, at a discount, theirGreekgovernmentbondseithertotheEuropeanCentralBankortorisk-lovinghedge funds. By 2012 the foreign institutions holding Greek governmentbondswerepayinglessthan30percentoftheirfacevalueforthem.So,theyevenmademoneyfromthe2012officialhaircut,takingintoconsiderationthe‘incentives’theywereofferedtoacceptthetermsofthehaircut.21.WhenIbecamefinanceminister, the fine lady inchargeof the taxofficehadnoobligationeventobriefmeonwhatshewasdoing.ButwhileneitherInor parliament could fire herwithout the troika’s consent, I nonethelesswasanswerable to parliament for any scandal, misdemeanour or failure tomeettargetsbyheroffice.22. Margaret Thatcher, the politician who made privatization her politicallegacy,wouldhavebeenappalled.Herarguments in favourof sellingpublicassetsweretheenhancementofcompetitionandthereductionoftaxratesmadepossiblebytheinjectionofincomeandlowerrunningcosts.InBailoutistan2.0privatizationsmeantsomethingelse:sellingpublicassetsforsmallchange,astheeconomicdepressionhadsentprices throughthefloor,with theproceedsthrownintothebottomlesspitofGreece’sunpayablepublicdebt.

Chapter3Theybendtheirtonguesliketheirbows

1.An evenmoreoutrageous trickwas employed: in addition to themillionsfrom Zorba’s bank, the Aris family’s offshore companies also borrowedmillions from Aris’s own bank. These loans were also written off asunserviceable or non-performing, orwere used to buyoffice space thatwasthenresoldtootherpartiesonlytobeleasedbacktothebankorsoldtoitatinflatedprices.Thenewlyconjured-upfundsor‘profits’wouldalsobeusedtobuynewsharesinthesamebank,keepingupthepretencethatinvestorswereinjectingprivatecapitalintothem.2.MyconstituencybeingGreaterAthens (orAthensB,as it isknown), IdidnothavetheopportunitytovoteforAlexisinthatmayoralelection.ButinanycaseIwouldnothavedoneso,asIwasscepticalofSyriza.3.Tobeprecise, thepartywasnotyetknownasSyriza.Priorto2013itwascalled Synaspismos, meaning ‘Alliance’. In the 2009 election Synaspismosformed a broader coalition with many quasi-independent parties andmovements.Inthe2012twinelections(MayandJune)itstoodunderthenameSyriza(AllianceoftheRadicalLeft)asonepartyinordertobecomeeligibleforprivilegesnotaffordedtocoalitionsofparties.ItwasonlyinJuly2013thatacongresswasheldthatturnedSyrizaintoaunitaryparty.4. Yanis Varoufakis, Foundations of Economics: A Beginner’s Companion(1998),Routledge,London.5. A summary of theModest Proposal, which in 2013 received amakeoverwiththehelpofanewco-author,JamieGalbraith,canbefoundasanappendixtoYanisVaroufakis,AndtheWeakSufferWhatTheyMust?Europe,AusterityandtheThreattoGlobalStability(2016),TheBodleyHead,London.6.Argentina,likeMexicoandotherLatinAmericancountries,hadpeggeditscurrency at one peso to one dollar, but this made Argentinian exportsprohibitivelyexpensiveandfloodedArgentinawithimports.Asthecountry’strade deficit burgeoned and dollar debts accumulated within Argentina, iteventuallybecamecleartoeveryonethatsomethinghadtogive.Theexodusofcapitalfromthecountryandthecollapseofitsdomesticeconomywascured,eventually,byendingtheone-peso-for-one-dollarrate.Technicallythiswasasimpleoperation,eventhoughitleftmanyArgentinianswithdollardebtstheycould not service once their pesos lost value. All it tookwas a governmentdecisiononaFridayafternoonthatthepesowouldnolongerbeworthoneUSdollar.

7. To my genuine surprise, we discussed in depth the Modest Proposal’sremediesforEurope’ssub-crisesofpublicdebt,insolventbanksandultralowinvestment.8. YanisVaroufakis,TheGlobalMinotaur: America, the True Causes of theFinancial Crisis, and the Future of the World Economy (2011), Zed Books,London. Since then there have been two new editions, in 2013 and in 2015,withthesubtitle:America,EuropeandtheFutureoftheWorldEconomy.9.Myfirstexperienceofmovingcountriescameattheageofseventeen,whenalong with thousands of other Greeks my age I moved to Britain to study.Then, in 1988, asphyxiating in Margaret Thatcher ’s Britain, I migrated toAustralia,where I tookupa lectureshipat theUniversityofSydney.Mynextmigratoryflightoccurredwhen,at theageofforty, Idecided toresignfromSydney and return toGreece, accepting a professorship at theUniversity ofAthens.Our2012movetotheUnitedStateswasmypenultimateshift,thefinalone(Ihopeandtrust)beingthepassagein2015intothearenaofpolitics.10.AngelaMerkelwasofcourseGermany’schancellor,andMarioMontitheunelected economist who had replaced the ghastly, but elected, SylvioBerlusconiasprimeministerofItaly.Monti,despitehisreputationasMerkel’sman,didhiscountryamajorservicebypressingMerkeltoacceptdebtsharingacrosstheeurozone(nottobeconfusedwithloans)aswellasthecreationofaproper banking union. That he failed is not due to his lack of effort (seeVaroufakis, 2016, Chapter 6) but rather to a combination of Merkel’sunwillingnesstocometotheaidofthemanshehadbackedandtoMonti’slackofdomesticsupport.11. A video game company whose multi-million-strong player/customercommunity had spontaneously generated a substantial macroeconomy,includinganevolvedmonetarysystem,whichIwaskeentostudy.12.SeeVaroufakis,2016.13. The coalition also included a small, openly racist, ultra-nationalist,Christian fundamentalist party calledLAOS,whichwas later absorbedpartlybyNewDemocracybutmainlybytheemergentNazisofGoldenDawn.14.PASOKhadlostthebulkofitssupportin2009aftershepherdingthroughthe first bailout (down from 44 to a mere 13.2 per cent) while NewDemocracy,whichhadlentahandinthesecondbailout,sawitselectoralbaseshrinkfrom33.5percentin2009to18.8inMay2012.15.Technicallythiswouldbesimple.Thesecondbailoutmoney,fromwhichGreece’s bankerswould receive up to €50 billion, came from theEuropean

Financial Stability Facility. The EFSF (effectively Europe’s bailout fund)belongs to all eurozonemember states and borrows on behalf of Europeantaxpayers in order to pass themoneyon toGreek banks, Spanish banks, thePortuguesestate,etc.Myproposalwasthat,astheEFSFwaspumpingmoneyinto theGreekbanksonbehalf ofEurope’s taxpayers, theEFSF shouldowntheir shares, becoming their owner on behalf of all Europeans. The banks’directorswouldthenbereplacedbyappointeesoftheEFSF(andpossiblytheEuropeanCentralBank)withtheremit tocleanseand‘europeanize’Greece’sbanks.16. The technical term for this is ‘nominal GDP-indexing’. It means thatrepayments would be suspended until Greece’s national income, in euros,exceeded a certain level (for example the pre-crisis level of GDP or someagreedpercentageofit)anditsgrowthratewasabovesomeannualpercentagethreshold.17.Inhisspeech,echoingtheviewsofSyriza’sinnercircle,AlexiscalledfortaxingcapitaltransfersoutofGreece(notpermissiblewithintheeurozone),ahome-grown investmentprogramme(whendomestic investment fundingwastotallyabsent),ataxonshipowners(whoaredomiciledmostlyinLondonandtherefore cannot be touched by the Greek tax office), legislating to forceGreekstorepatriatetheirforeignbankdeposits(legallyimpossiblewithintheEU) and, last but not least, the nationalization of the banks (ignoring mybriefingthattheGreekstatecouldnotaffordtocapitalizethebankswithintheeurozone). Most of these pronouncements required Greece to exit theeurozone,butinthesamespeechAlexisproclaimedthatSyriza’spolicywastostaywithinit.18. Syriza did make further large gains between the May and June 2012generalelections:upfrom16.8percent inMay to26.9percent inJune.ButNewDemocracymadesimilargains,from18.8to29.7percent,cannibalizingthePASOKsocialists,whofellyetagainfrom12.3to4.68percent.19.Thenewcoalitiongovernmentwasaninterestingtwistonthepreviousone,thatledbyLucasPapademos,theformerECBvicepresident.Atitscorewerestill NewDemocracy and PASOK, but the third party changed dramatically:LAOS,nowabsorbedintoGoldenDawnandNewDemocracy,wasreplacedbyasmallsplinterofSyrizacalledDemocraticLeft–moderateleft-wingerswhohad accepted the basic logic of the troika’s Greek programme. The otherdifferencewasthatthenewcoalitionwasdominatedbyNewDemocracy,givenPASOK’simplosion.

20.Rumours spread by Peter Spiegel of theFinancialTimes and others thatStournarashadplayeda role inmyappointmentare false.Heand I firstmetaftermy appointment,whichwas the result of a rare unanimous vote by theEconomics FacultyBoard. In fact, the original invitation to return toAthensandconsidertakingupaposttherecameintheearly1990sfromaGerman-trainedleft-winggrowththeorist,aprofessoroftheoldschoolwhogracedtheuniversitywithhiseruditionandvirtue.21. Stournaras toldme an amusing story about the famed ‘Greek statistics’,whichhavebeenblamedfor lettinga thoroughlyunpreparedGreece into thequicksandsof theeurozone.Allheandhis colleagueshad todo toconvinceofficialEuropetoletGreeceinwastocopythetricksthatothers–primarilytheItaliansbutalsotheGermanFinanceMinistry–hadusedtomassagetheirstatistics soas topresent themasconsistentwith theeurozone’s rules.GiventhatAthenswas not using any trickery not used byRome, or indeedBerlin,Stournaras’ssubtlestrategywastoletitbeknownthat,wereGreecetobeleftout, theworldmightcometoknowwhatRomeandBerlinhadbeenupto.Inotherwords, itwas notGreek statistics that gotGreece into the eurozone; itwasEuropeanstatisticscoupledwithalargedoseofhypocrisy.22.ThebankwaslaterrenamedtheEmporikiBank.In2004,afterStournaraswasfiredbythenewconservativegovernment,theEmporikiBankwassoldtoCrédit Agricole. Following the 2010 crisis the Emporiki bank was wounddown.23. For example, the international PhD in economics programme weintroduced required candidates to spend two years taking full-time courses.Previously, some professors would have candidates work for a pittance ontheirown lucrativeprojects (or in theirbusiness) inexchange forapromisethat, one day, four or five years later, they would be awarded a doctorate.Naturally,thedissertationsthatresultedfromthissystemwereworthless,asthestudents neither received any proper education nor had the time to study ontheirown.Thenewprogrammeputanendtothepracticeandmademevery,veryunpopularamongthosecolleagues.24. Stournaras had been a party functionary or, as he preferred to think ofhimself, a PASOK technocrat. But he was close to, and had worked with,Papandreou’s predecessor, whose legacy Papandreou had been trying toexpungesince2004.ThusStournaraswassidelined,makinghimfeelbitteranddistant from the party that he identified with. In contrast, I was close to thePapandreoufamilybutnottotheparty,whichIcouldnotbringmyselftovote

for. Even though I did respond to Papandreou’s request to help him and histeam (with speechwriting, economic analyses, proposals for encouraging acooperative enterprise sector, etc.), I did so as an outsider and as a personalfavour to Papandreou. Nevertheless, by 2006 I could not work with hiseconomic team and I resigned even my informal advising role. This, quiteaccidentally,broughtStournaras andmecloser, aswenowsharedadistancefromPapandreou.25. The government’s primary budget surplus is the difference between itsrevenues (taxes, customs duties, returns on public investments, etc.) and itsexpenditures,notcounting themoney thegovernmentpays to itscreditors intheformofdebtinstalments(interestandprincipal).26. This story was relayed on 9 January 2014 in a report in theFinancialTimes by Peter Spiegel and Kerin Hope. They quote Stournaras: ‘“Poul[Thomsen,theIMF’spointmaninAthens]andLagardesaidIhadto[stand]bytheir side,” he recalled. “I said: ‘OK, but if I come by your side, it is whatwould really help Greece, but it’s something which is totally out of thequestion.’ Schäuble toldme: ‘Stournaras, forget it.’ So it cannot be done, sowhatcanIdo?”’27.ThechancellorhadvisitedBeijingwithanumberofrequests,oneofwhichwas that China use a small part of its foreign currency reserves to fund theeurozone’s bailout fund (by buying the bonds it issued). A high-rankingChineseofficialconfirmed tome thatBeijingagreed todo thisonconditionthatAngelaMerkel tookGrexit ‘off the table’.TheChinesewere right: theycouldnotbeaskedtofundtheeurozone’sbailoutfundwhenmostoftheloansithadhandedoutwerelikelytobewrittenoff–whichispreciselywhatwouldhappenifGreece,themainrecipient,nolongerhadaccesstoeuros.28. After the summer of 2012, markets had received a signal from theEuropeanCentralBank that itwould buy unlimited amounts of Irish, Italian,PortugueseandSpanishgovernmentbonds tostemtheeuro’sdeconstruction.Indeed, it took Mario Draghi almost a year to make this signal possible,winning over to his cause Angela Merkel against the Bundesbank’s severeopposition. Greece was never offered a place under the ECB’s protectiveumbrella.29.Thepreciseconditionwasthatthegovernmentachievedapositiveprimarysurplus – its revenues exceeded all government expenditures, excluding themind-bogglingdebtrepayments.

30. The reason why early 2015 was the focal point is that the president ofGreece’stermexpiredinMarch2015.Greekpresidentsareelectedindirectly,byparliament, and if nocandidatemusters the required figure,parliament isdissolved.PrimeMinisterSamarascouldonlythereforeavoidanewelectioninMarch2015bysecuringthevotesofsmallerpartiesandindependentsinthepresidential election. He liked neither the prospect of doing that nor hischancesofsucceedingevenifhetried.31.Anextractfromthespeech:

The fear-mongers will tell you that our party will, if it comes togovernment, tearup the loanagreementwith theEuropeanUnionandthe IMF, that it will take the country out of the eurozone, that it willseverGreece’slinkswiththecivilizedWest,thatGreecewillbecomeanewNorthKorea.Thisisfear-mongeringatitsworst.Syriza,myparty,wantsnoneofthat.Wehavealwaysbeen,andalwayswillremain,apro-Europeanparty.ThatwenowthinkthatEuropehaslostitswayandthatit is imposing misanthropic policies on its own peoples is not to beanti-European.ItistobeloyaltothepeopleofEurope.TotheideathatEuropeisourhomeandweneedtodefenditfromthegreatdepressionthat is spreading andwhich is threatening not only us Europeans butalso thewholeglobaleconomy.Wewant tostop the fragmentationofEurope. And thismeans opposing Europe’s current policies…DoesthismeanthataSyriza-ledgovernmentwilltearupitsloanagreementwith the troika? No. What we are saying is far more basic. We aresaying that this agreement is beingviolated daily by reality.The IMFitselfiswarningBrussels,FrankfurtandBerlinthatthisagreementhasbeen overtaken by reality. That it is impossible to implementsuccessfully even if Syriza convinces every Greek man, woman andchild to wake up every day and go to sleep every night intent onimplementing it … So, if Syriza’s radical Left politics is not aboutgettingGreeceoutoftheeurozone.AndifitisnotabouttearingupouragreementswiththeEuropeanUnion.WhatdoesourradicalLeftlabelsignify?It signifies that we will not be party to depression-era economic

policies.ItsignifiesthatwewillkeepinsistingthattheEurozoneisredesigned

rationally,insteadofhavingitspeopleswaterboardedeverydayofthe

week.It signifies that we shall not accept Herbert Hoover ’s European

reincarnationtohauntEurope’speoples.ItsignifiesthatwewilldemandanewdealforEuropethatmobilizes

ourcontinent’sproductivecapacitiesagainstwant,againstpovertyandagainsthopelessness.Lastbutnotleast,mymessagetothisaudience,hereatBrookings,is

that our party wants to establish a mutually profitable dialogue withwell-meaning,progressivethinkersonyoursideoftheAtlantic.IwanttotellyouthatthepeopleofGreece,evenitsradicalLeft,thinkofyouas partners in the complex but important enterprise of restoringprosperityandhopeonbothsidesoftheAtlantic.Therestoftheworld,having made huge progress over the past decades, is watching usEuropeansandAmericanswithanxiety.Wemustnotfailthemjustaswemustnotfailourownpeople.

32.‘OnlySyrizaCanSaveGreece’,23June2013:

Greece’sproblemtodayiswithEurope,andMrTsiprasdoesn’twanttopickafightwithWashington.TheglobalfinancialsectorwouldviewaSyrizavictorywithhorror.ButbanksandhedgefundsknowthatmostGreekdebtisheldbyEuropeantaxpayersandbytheEuropeanCentralBank, and what’s left is being snapped up by investors because theyknow itwill be paid.Big Finance isworried aboutwhatmay happenelsewhere if a left-wing partywins inGreece. This instinct is naturalforbankers.ButfortheAmericangovernmenttoadoptthesamefear-driven stance would be strategically shortsighted. Indeed, right now,Syriza may be Europe’s best hope. Greeks neither want to leave theeuro nor see the eurozone disintegrate, an eventuality likely to bringdown theEuropeanUnion.TheyalsoknowthatEurope’sapproach tothecrisis, involving increasinglyharshausterityand larger loans,hasfailedmiserably.

33.Thefullbackgroundto this isasfollows.At the timeof thefirstbailout,under a lesser president thanMarioDraghi, theECBhad purchased a lot ofGreek government debt (bonds) in a desperate and ill-fated bid to keep itsolvent. This doomed operation was the so-called Securities MarketProgramme (SMP). By buyingGreek, Portuguese, Irish, Spanish and Italian

governmentbonds,theECBhopedtoquellthepanic-sellingofthosebondsbyinvestors. Incredibly, though, the ECB had also signalled to investors that itwould not be spending more than €200 billion – a clear invitation tospeculatorstowagerthattheSMPpurchaseswouldfailtopreventthedropinthevalueofthesebonds.WhentheSMPsfailed,theECBwasleftholdingtensofbillionsofunpayableGreekdebt.In2012,whentheGreekdebtwashaircutby imposing large lossesonprivateownersofgovernmentbondsaspartofthesecondbailout,theECB-ownedSMPbondswereexempted.Thismeantthatthe bankruptGreek government had to repay theECB in full for bonds thatwouldhavebeenhaircutbyupto90percentifitwerenotforthefollyoftheECB’spreviouspresident inpurchasing them.Inshort, theECB,ournation’scentralbank,wasbehavinglikeahedgefundhold-outagainstabankruptstate.Hedge funds often buy distressed debt (bonds) of countries in trouble atludicrously low prices, wait for other creditors to agree a haircut (or debtrestructuring)with thegovernmentand then refuse toparticipate in thisdeal,holdingoutforfullpayment–hencetheterm‘hold-out’orthemoreemotive‘vulture fund’. Only in Europe could such a travesty be perpetuated anddefendedassensiblepolicy.34. TheBundesbank had a long history of clashingwithGermany’s federalgovernment (see Varoufakis, 2016). Jens Weidmann, the Bundesbank’spresident,wassoopposedto theECBpurchasingthepotentiallybaddebtsoftheGraeco-RomanstatesandbanksthathesuedDraghiandtheECB(ofwhichtheBundesbankisanintegralpart!)inGermany’sconstitutionalcourt,tablinga fiery 120-page deposition. The luckless German judges, unwilling to ruleover this most peculiar dispute, which went totally over their heads andexpertise,decidedto…notdecide.35. The ECB’s desperate need to keep up the pretence that Greece wasredeeming theGreek government bonds that theECBownedwas the deepercauseoftheremarkabletrickerydescribedearlierunder‘Successstory’.36. Syriza was built as a loose alliance of socialists, ecologists, socialdemocrats andcommunists.TheLeftPlatformwasoneof its larger factionswithhistoricallinkstotheoldpro-Sovietcommunistparty,priortoitssplitin1991. The Left Platformwas traditionally, as the communists remain to thisday, in favour of Greece pulling out of the eurozone. Once the euro crisiserupted and the Greek economy went into sharp recession, Left PlatformSyrizamembersbegancampaigningstronglyforGrexit.

37.TheEuropeanSystemofCentralBanks,builtaroundtheECB,isastrangeconfederacyofthenationalcentralbanksthatmakeuptheeurozone.Whilethenational central banks have no right to issue currency or the ability to setinterestrates,theyretainsomeimportantfunctions.Themostsignificantisthatof providing the banks domiciled in their country with emergency liquidityassistance(ELA).Theideaisthis:undernormalcircumstances,thebanksofacountrysuchasGreeceorItalytapdirectlyintotheFrankfurt-basedECBforcash. They post collateral with the ECB (government bonds,mortgages andotherpaperassetsthattheyown)andreceivecashinreturn,butifthecollateralis considered to be of poor quality, the ECB can refuse it. If matters wereallowed to rest there, thesebankswouldhave to closedown immediately, astheywouldnotbeable togiveoutcash to theirdepositors, triggeringa run.This iswhenELAkicks in.Effectively, theECB tells thebank, ‘Nocash foryoufromusinFrankfurtbutdotryyourfriendlynationalcentralbank;itmayacceptyourpoorcollateral.’Sothedistressedbankertakeshispoorcollateralto his national central bank, which is essentially a branch of the ECB, andpleads for cash in return. The national central bank is unlikely to turn thebankerdownbecauseotherwiseadomesticbankingcrisiswoulderupt.TherearetworeasonswhybankersdonotliketobedivertedfromtheECBtotheirnationalcentralbank:itisbadfortheirreputation(revealingthattheECBhasdeemedtheircollateraltobepoor)anditisbadfortheirbottomline(asELAcashcoststhebanksmorethanECBcashintermsoftheinterestratecharged).Finally, and importantly, the right and capacity of a national central bank toprovideELAcash tobankers canbecurtailedby theECB.All it takes is fortwo-thirdsoftheECBGoverningCouncil(thirteenofthenineteengovernorsoftheeurozone’scentralbanks)tovoteinfavourofshuttingdownamemberstate’s national central bank’sELA.Then the banks of the saidmember staterunoutofcashwithinhoursanditswholebankingsystemcollapses.

Chapter4Treadingwater

1.‘Blood,sweatandtears’,15September2014,protagon.gr.2.ForaconciseversionoftheModestProposalforResolvingtheEuroCrisis,co-authoredbymyself, StuartHolland and JamieGalbraith, seeAppendix inVaroufakis,2016.TothisdayIremainconvincedthathadthoseproposalsbeenimplemented they would have prevented the European Union’s slide intoignominyanddeconstruction,includingBrexit.

3.ElectionsinGreecearealwaysheldonaSunday.4.2015wasaminefieldofrepaymentsforanyincominggovernment,withtheIMFandtheECBalonedemandingfromtheGreekgovernmentasumequaltoalmosthalfofitstaxrevenues.Lookingattherepaymentschedulewasenoughtogivetheincomingfinanceministeramigraine.

6March €301.8million–IMF13March €339.6million–IMF16March €565.9million–IMF20March €339.6million–IMF13April €452.7million–IMF12May €969.1million–IMF5June €301.8million–IMF12June €339.5million–IMF16June €565.9million–IMF19June €339.5million–IMF13July €452.7million–IMFJuly €3,490million–ECBAugust €3,170million–ECB6August €189.5million–IMF4September €301.8million–IMF14September €339.5million–IMF16September €565.9million–IMF21September €339.5million–IMF13October €452.7million–IMF6November €166.5million–IMF7December €301.8million–IMF16December €565.9million–IMF21December €339.5million–IMFSubtotal €8.53billion–IMF

Subtotal €6.66billion–ECBTotal €15.19billion

5.Myinformation that topECBofficialswereworriedabout theeffectsofahaircut of the ECB’s Greek government bonds on their freedom to embarkfully inMarch 2015 on quantitative easing (the usual term formassive debtpurchases)hadcomefromasourcehighuptheECBhierarchy.Morerecently,inJune2016,thatinsiderinformationwasconfirmedbyapressreleaseoftheGerman Constitutional Court (Bundesverfassungsgericht) concerning aninterpretation of the European Court of Justice decision on the ECB’s debt-purchasing activities, in particular on the so-called outright monetarytransactionsprogrammethatDraghihadintroducedasapreambletohisfullyfledged quantitative easing programme. In it the German judges ruled that‘although the European Court of Justice considers the policy decision to bepermissibleevenwithoutfurtherspecifications,itsimplementationmustfulfilfurtherconditions inorder for thepurchaseprogrammetonotviolateUnionlaw’ [emphasis added]. Which conditions? One was that all purchases ofgovernment debt, presumably extending to past ones, ‘do not manifestlyviolate theprohibitionofmonetaryfinancingof thebudget’.AsDraghioncetoldmeinperson,anydelayinredeemingtheGreekgovernmentbondsownedbytheECBwouldbeconsidered‘monetaryfinancing’,thusgivingtheGermanconstitutional court a trigger to stop the ECB’s crucial debt-purchasingprogramme. Furthermore, theGerman judges also stipulated that ‘purchasedbonds areonly in exceptional cases’ tobe ‘helduntilmaturity’. If theGreekgovernment were to legislate the prolongation of repayment two decadesbeyondmaturity(asIwasproposing),DraghiandtheECBwouldhavefallenfoulof theGermanConstitutionalCourt.Evenif thelatterdidnotactagainstDraghi upon such a Greek government move, the markets would panic,interpreting theGreekactionasa significantboost to theprobability that theECB’s trillion-euro debt purchases were in jeopardy. SeeBundesverfassungsgericht press release no. 34/2016, 21 June 2016,‘Constitutional Complaints and Organstreit Proceedings Against the OMTProgramme of the European Central Bank Unsuccessful’,http://www.bundesverfassungsgericht.de/SharedDocs/Pressemitteilungen/EN/2016/bvg16-034.html,lastaccessed11November2016.6.AformerPASOKfinanceministerreportedin2011thatWolfgangSchäublehad expressed his preference for Greece to exit the euro and return to the

drachma. My conversations with Dr Schäuble, described fully in followingchapters,confirmedthis.7. The president of the Hellenic Republic is voted in by parliament. Threeballotsareallowed.Inthefirstonethewinningcandidatemustbevotedinbyaminimumof200of the300membersofparliament. Ifnocandidate securesthis two-thirds majority, a second ballot takes place under the same rule. Ifagainnocandidatesucceeds, thenthereisafinalballot inwhichtherequirednumber of votes falls from 200 to 180. If no candidate secures 180 votes,parliament is automatically dissolved and the next parliament elects thepresidentwithasimplemajority(151membersoutof300).InDecember2014theSamarasgovernmentcouldcountononly153membersandwouldhavetosecurethesupportofasmallercentre-Leftpartyplusahandfulofindependentstoachievethenecessary180votes.8.TheMinistryoftheEconomyincludestrade,industry,shipping,tourismandthecrucialportfolioofmanagingtheEU’sstructuralfunds.ThenewMinistryof Productive Reconstruction would include public works, energy and theenvironment.9.When I askedAlexis in privatewhy Syriza had ditchedmyFive-ProngedStrategy,hismasterfulresponsewasthatthepartywasnotsufficientlymature.HesaidtheleadershiplackedthedeterminationtowintheJune2012electionandadmittedtheywerenotpreparedforgovernment.10.Ialsosaidthatourproposalsmustcorrespondtosubstantialdebtreliefbutbeof the sort thatMerkel couldpresent toher people as her own idea.Thiscould be achieved without an outright haircut by utilizing financial‘engineering’ordebtswaps–ofthetypeIendedupproposingtoBerlinandtotheEurogroupinFebruary2015(seeChapters5and6).11.UnlikeBritain,whereministersmustbemembersofparliament,theGreekprime minister can appoint extra-parliamentarian ministers, as long as thegovernmentwinsageneralvoteofconfidenceinparliament.12. Greek electoral law specifies that a small number of members ofparliamentaredrawnfromarankedpartylist.IfSyriza,forinstance,winsfoursuchpositions,thefirstfourcandidatesontheSyrizalistbecomemembersofparliament. Each party’s quota for these seats is based on its nationwidepercentageofthevote.13.Voters first choosewhich party they prefer by picking the party’s ballotpaper and then indicatewhich of the party’s candidates theywant to send toparliament.

14. Plan Z, the troika’s plan for ejecting Greece from the eurozone andmanaging Grexit’s repercussions, was devised within the ECB but incollaborationwith theGermangovernmentandtheEuropeanCommission.Itinvolvedavery smallnumberofofficialswhoworked in secret.See ‘Insidethe ECB’s Plan Z’ by Peter Spiegel in the Financial Times, 14 May 2014.https://www.ft.com/content/0ac1306e-d508-11e3-9187-00144feabdc015.The first twoballots for the electionofGreece’spresident are ritualisticunlessthetwolargerpartieshaveagreedonacommoncandidate(seeChapter4,Note7).16. ‘Xenophon Zolotas: Parallels and Lessons from back then for today’,SpeechbyBankofGreeceGovernor,MrYannisStournaras,BankofGreece,15December2014.17.SeeAppendix3foramoreanalyticalpresentationofthisargument.18.NotcontentwiththeaccusationsofidiocyandirresponsibilityIfacedfromestablishmentopinionmakers,Iinventedtoughquestionsofmyown.HereisaQ&AthatIpublishedonlinearoundthesametime.

Q: WhatwillyoudoifBerlinandFrankfurtrespondtoyouroverturesforarenegotiateddealwithafatNein,decidingtopunishyouwithaliquidityswitch-off?

A: This is a pertinent question, as such a development would beseriously unpleasant for Greece. But allow me to answer with aquestionofmyown: is there anydemandby thecreditors towhichyou would say no, incurring a similar threat from them? Do youpossessnothinredlineofyourown?Ifyoudon’t,doesthisnotmeanthatyouare relyingon thekindness, andwisdom,of the creditors?DoesitnotalsorelyonthemcaringaboutGreece,ratherthanusingGreece’s crisis as collateral damage in their tussle against Paris,Rome andMadrid. Please tell the voters and let them decidewhichpolicyismostdangerousandleastdignified.Yoursorours?

19. I met Thomas Mayer at the conference in Florence that I attended inNovember2014,thedaybeforeflyingtoAthensforthepivotalmeetingwithAlexis,PappasandDragasakis.Wehadalong,interestingconversationaboutthe eurozone and exchanged details.He called his parallel currency solutionthe G-euro. Other advocates of a parallel currency included DimitriPapadimitriou,wholedtheLevyInstituteatBardCollege.

20.SeeChapter3,Note32.21.Togive it itspropername, thebailout fundwas the temporaryEuropeanFinancial Stability Facility (EFSF), based in Luxembourg and subsequentlymergedwiththepermanentEuropeanStabilityMechanism(ESM).22. Even astute private-sector operatives cottoned on. A day after that BBCinterview(broadcast13January2015),Iknownotwhetherasaresultofitorindependently,MohamedEl-Erian, thenAllianz’schiefeconomicadviserandPimco’sCEO,wrotethefollowinginhisBloombergcolumn.

As it prepares for a possible role in government, Syriza should besupplementing its emphasis on orderly economicmanagementwithinthe eurozonewith behind-closed-doorswork on themechanics of anexit, should such an event prove inevitable. In addition to careful anddetailedinternalpreparationsforaPlanBforalternativeexchangeandpayments regimes, this would require clear communication of analternativeeconomicvisionforthecountry.

KeentosignalthatourgovernmentwasneitherplanningfornortremblingatthekneeswhenthreatenedwithGrexit,IrepliedtoEl-Erianonmyblogwithaclarification: our alternative ‘payments regime’ did not involve a parallelcurrency but a parallel payments system that would allow usmore room tonegotiateadecentdealwithintheeurozone.Andyes,wewerereadytopresentanalternativeeconomicvisionbasedonanendtoausterity,apermanentendtogovernmentdeficits andacombinationof lower tax rates forbusinessesandcitizenscoupledwithadevelopmentbanktogeneratenewinvestments,apublicbad bank to deal with non-performing loans and a reinforced system ofaddressingdestitutionanddespair.

Chapter5Ragingagainstthedyingofthelight

1. Alekos Papadopoulos had been close to my mother, a PASOK stalwartherselfandone-timedeputymayorofoursouthAthensmunicipality.Shehadused her remarkable capacity to deliver votes in parliamentary elections tosupport Alekos over many elections, something that he rememberedappreciatively.Mum liked and trustedAlekoswell before I got to know andwork with him. Our relationship solidified when, holed up in the foreignaffairs ministry over three days and nights, we worked feverishly to puttogetherPASOK’splatform for theApril 2004 election campaign in a futile

bidtohelpGeorgePapandreoudevelopahalf-decenteconomicplan.Neitherofustrulybelievedthatitwaspossiblebutsawitasanimportantexercise.Unfortunately,asitturnedout,Iendedupregrettinghisrecommendationfor

a deputy minister in charge of the Treasury. Within a month or so of hisappointmentIrealizedhehadnocapacitytoseethroughthesubterfugeoftheTreasuryofficialshewasmeanttooverseeandwasconcernedathisapparentinterest in influencing the appointment of high-powered positions in state-ownedor-controlledorganizations.2.SeeChapter3,‘Afriendship’slastgasp’.TheotherwastheGerman-trainedgrowththeoristwhohadapproachedmeintheearly1990saboutmovingfromSydneytoAthensUniversity.3.ThiswasaroundthetimeIwasblacklistedfromstateradioandTV,soIwasnot surprised to see the video of her performance speedily removed fromparliament’swebsite.4.TheseinstitutionsweretheEFSFanditssuccessortheESM,whosecharterandrulebookGlennhadahandinauthoring.5. Racism is very thinly veiled in Greek establishment circles. Glenn is asKoreanasBarackObamaisKenyan.6.When gross fixed capital formation (investment in physical infrastructuresuchasmachinery)iszero,thismeansthatitisnotevenenoughtocoverthereplacementofbrokenmachineryordepreciationinitsvalue.7. If ever proof were needed that wage cuts in the midst of a harsh multi-dimensional recession fail to instil confidence in employers, Greece hasprovided it. Anecdotally, meanwhile, I asked a business acquaintance whosefactorymadebathroomfurniturewhyhedidnotemploymorepeoplenowthatlabourwas dirt cheap.His answer: ‘Whowill buymy toilet bowls now thatwages are so low everywhere that no one can afford to refurbish theirbathrooms?’8. The standard troika response to this observation is: exports did not risebecauseGreecedidnot reform sufficiently.But this is to shift thegoalposts.Neoliberalismpredictsthat,allotherthingsbeingequal,areductioninaveragewages in a eurozone country should boost exports, so exports should haveincreasedafterwagesfell,evenifnoreformhadtakenplace.Theydidn’t.9.On19May2014theIMF’sdebtsustainabilityanalysiswasmadepublic.Initthefundstated,

morefiscaladjustmentisneededtorestoredebtsustainability.Andoncethere,theprimarysurpluswillhavetobemaintainedatabovefourpercentofGDPoverthefullpoliticalcycleformanyyearstocome.Theadjustmentfatiguenowevidentandthe‘socialdividends’and‘nonewmeasures’ promised by political leaders suggest that the politicalcommitmenttothedebtstrategywillbeseverelytestedgoingforward.This strategy leavesno scope for anynotable increases inwages andpensionsfromcurrentlevelsintherun-uptonationalelectionsin2015and2016.Onthecontrary,withtaxratesalreadyhighanddiscretionaryspending compressed, achieving the necessary additional fiscaladjustmentwithoutfurthercutsinwagesandsocialtransfers,notleastpensions,whichremainhighrelativetoGDP,willonlybepossiblewithadramatic improvement in theefficiencyof thepublicsector…Debtsustainability remains a serious concern.Debt toGDP is yet to peak,andtheextraordinarylevelsprojectedwellintothenextdecadesuggestthat sustainability concerns will remain an obstacle for the recentimprovementininvestorsentimentstotranslateintoadurablerecovery,especiallyifdoubtsresurfaceaboutthepoliticalresolve.

10.Austerity ismeasuredhere in termsof the reduction in thegovernment’sbudgetstructuraldeficit(orincreaseinitssurplus)asapercentageofnominalnationalincome.11.Britainisaninterestingoutlier,thereasonbeingthatitistheonlycountryon this chart with its own central bank, which under George Osborne’s‘expansionary contraction’ policy pumped oodles of cash into the Britisheconomywhilethechancellorpractisedhiscontractionaryausterity.12.SeeChapter2,‘Prisonersoftheirowndevice’.13.Chapter6,Note2describesanemail frommy immediatepredecessor tothetroika,whichIsawontakingoffice,thatillustratestheCatch-22beautifully.14.InMarchalone€1.1billionwouldbeneededtorepayfourdebtinstalmentstotheIMF.15. Wieser ’s actual words were: ‘Based on current cash-flow projections,which assume no further IMF or EFSF disbursement and no transfer ofEuropean Central Bank profits on Greek bonds held as part of the SMPprogramme…’TheEFSFwasthesourceofthesecondbailoutloansextendedtoGreecein2012.TheoriginoftheECBprofitsonGreece’sSMPbondswasas follows: in 2010–11 the ECB had bought these bonds from French and

Germanbanksat less than70percentof their facevalue,when theirmarketpricewaslanguishingataround10percentoffacevalue(seeChapter3,Note32).ThiswasamajorboostforNorthernEuropeanbanksdisguisedasamovetohelpGreece’sdebtretainitsvalue–morefakesolidaritywithGreece.Everytimeoneofthesebondsmatured,thebankruptGreekgovernmentwasforcedto borrow from Europe’s taxpayers (the EFSF) in order to repay – at facevalue–theECB,whichnowownedthosebonds.Inotherwords,theECBwasmakingaheftyprofitattheexpenseofthebankruptGreekstateandEurope’staxpayers.Sometimein2012theEurogroupdecidedthatsomeoftheseprofitswouldbe returned to theGreekgovernment, not because theEurogrouphadseentheerrorofitswaysbutbecauseitwaskeentoreducetheheadlinefigureofhowmuchmoreofEurope’staxpayers’moneyitwouldbegivingAthenstocontinuewiththeextending-and-pretendingofitsinsolvency.ThemeaningofWieser ’ssentence,then,isthis:Youwillbegettingnoneoftheloaninstalmentswehadagreedwiththepreviousgovernment.Youwillnotevenreceiveanyofthe profits the ECB made from Greek bonds – your money – that we hadagreed to return to you. But you will be expected to make all the debtrepaymentsthepreviousgovernmentwascommittedto.16. Note that both Athens’s repayments to the troika and the troika’sdisbursementstoAthenswerefullyspecifiedinthetimescheduleofthesecondbailoutloanagreement.17. To quote Wieser: ‘To avoid defaulting on Greece’s debt obligations afurtherextensionofthecurrent“programme”mustbesought…[a]measuretofillthefinancinggap,alreadyusedinthemidstofthecrisisinAugust2012,wouldbeanextraissuanceofT-bills[butthis]requiresapprovalbythetroika,whichwouldonlyhappeninthecontextofacooperativeapproachbythenewgovernment.’ The T-bills he refers to are short-term Treasury bills, IOUsissuedby thestatewithanexpiryperiodofusually threemonths.BecauseT-billsaresoshortterm,theyarenormallyconsideredsafeandattractinvestorsatlowinterestrates.Andbecausetheyaresafeandliquid,centralbanksacceptthem readily as collateral in exchange for cash loans, so commercial bankstendtobuytheseT-bills,post themwiththecentralbankforcashandcollectthe interest from the state.Theproblememergeswhen the statehasnootherwayofborrowingexceptT-bills.Topreventthestatefromissuingtoomanyofthem and thus making them unsafe and less acceptable as collateral by thecentralbank,theECBplacesrestrictionsonhowmuchoutstandingT-billdebtagovernment canhaveat anypoint in time. In thecaseofGreece, this limit

was set at €15 billion. But in the summer of 2012, when the Samarasgovernmenthadjustbeenelected,theECBincreasedthelimitto€18.3billion.The reason was self-serving: in August 2012 the Greek government had toredeemGreekgovernmentbonds that theECBowned.Lacking themoney todoso,theECBallowedAthenstoissueanadditional€3.3billionofT-billssoas to repay it. Wieser also informed us that we would need to secure thisextension before 10 February as it would need to be approved by variousparliamentsbeforetheguillotine-deadlineof28February.18.SeeVaroufakis,2016,pp.160–1.19.SeeChapter4,‘Chronicleofanambushforetold’.20.Thiswasawithdrawalof6.7percentoftotaldeposits,bringingthemdownto€152billion,atotalsimilartothepreviouslowinJune2012whenasimilarpanichadreducedthemto€150.5billion.21. There was no other justification for it. TheGreek banks were nomoreinherently troubled than, say, the Italianbanks.Onlya fewmonthsearlier, infact,theECBitselfhaddeclaredthattheGreekbankshadpassedthestresstestsit subjected them too.This is incontrast to theCypriotbanks in2013or theIrishonesin2009,whichhadwellandtrulyfailed.22.Inhisemailof21January2015,Glennadded,

An ECB decision is also due to be discussed today post the ELAapplications by Eurobank and Alpha Bank and presumably the othertwoaswell. Iwouldhave thought thataccess toELAisallbutcertaingiventheescalationofeventsevenbeforetheirPillarIIbondslosetheireligibilityascollateralwiththeECBfundingattheend-February.ThisdrainonliquidityshouldalsobeseeninthecontextofmarginscallsonSwiss Franc deposits and the potential need for the government tocontinue tapping investors for short-term Treasury-bill funding.MeanwhiletheNewYorkTimespickedupyesterdayonyourcommentsthat the ECB’s quantitative easing would not in itself solve GreekliquidityissuesandyourcallupontheECBnottoexcludeGreecefromitsbond-buyingprogram.

23.Tocutalongstoryshort,KammenosallegedthatGeorgePapandreouhadbankrupted Greece on purpose to enrich himself and his family. How? ByhavinghisyoungerbrotherAndreas(afriendandcolleagueofmine)purchasecreditdefaultswap(CDS)derivativeswhichwereduetopayouttotheirowner

in the event of a Greek government default from the Greek Postbank. (Thefigures Kammenos mentioned were in the tens of billions of euros.) In mydepositionIshowedthat:theactualpayoutsfromthesaidCDSswererelativelyminuscule;Andreas,ifhewantedtoconspireinthismanner,wouldneverhaveboughtCDSsfromtheGreekPostbankbutinWallStreetortheCitydirectly;andPrimeMinisterPapandreou’s‘crime’wasnotthathebankruptedGreecetoenrichhimselfbutthathedidnotadmittothestate’sbankruptcyatall.24.FromRudyardKipling’s‘If’.25. Syriza won 149 seats. The Independent Greeks won 13, giving us aparliamentarymajorityof12.Theofficialopposition,NewDemocracy,won76 (the lowest number in their history), the River (To Potami) won 17, theGolden Dawn won 17, the Greek Communist Party 15, and the depletedPASOK-socialistswon13.

Chapter6Itbegins…

1.ForeignAccountTaxComplianceAct,alawpassedin2010thatobligesUScitizenstoreportalltheirforeigntransactions.2.InDecember2014,amonthbeforeourmeeting,mypredecessorhadsentanemailtothetroikainwhichheproposedaseriesofreforms.HisandAntonisSamaras’s hope was that the troika would accept these as the last batch ofausteritymeasuresanddisbursetheremaining€7.2billionthatGreeceshouldhave received from the troika,mostly to repay the troika. Therewere threemajor reasonswhy that emailwas ignored: first, the new austeritymeasurestherein were too much for the Samaras government to push throughparliament; second, they were too little to satisfy the troika’s voraciousappetite; third, a thirdbailoutwas essential tokeep extending-and-pretendingthe state’s bankruptcy, something that the Samaras government was neitherwillingnorabletopassthroughparliamentgivenitsdepletedmajority.3. The Serpent’s Egg is a film by Swedish director Ingmar Bergman. ItsdepictionofthegenesisoftheNazimindsetamongscientistshadshakenmeupwhenIfirstwatcheditasayoungman.4.Jamie’sbrotherPeterservedasaVermontstatesenatorafterretiringfromtheStateDepartment’sdiplomaticservice.Hewas thefirstUSambassador inCroatia and East Timor, while also playing a significant role in IraqiKurdistan.5.SeeChapter4,Note13.

6. That was perfectly accurate. But what I did not say was that my Syrizafriendswanted themout. InparticularDeputyPrimeMinisterDragasakiswaskeen to replace them with people from his own burgeoning circle ofapparatchiks.7.In1990,shortlyaftermovingtoAustralia,IarrangedforWassilytofollowme.HeendedupteachingeconomicsatCharlesSturtUniversitywhileItaughtattheUniversityofSydney.FourorfiveyearslaterhereturnedtoGreecetojoin KEPE – the Greek government’s Economics and Planning ResearchCentre.8. This is the EYP, the government’s National Intelligence Agency, thoughmostGreeksstillrefertoitastheCentralIntelligenceAgency(KYP),asitwasknown during the seven-year dictatorship (1967–74), when it was fullycontrolledbytheAmericanCIA.9. Andreas Papandreou, prime minister 1981–9 and then again from 1993untilhisdeathin1996,wasthefatherofGeorgePapandreou,whowaselectedPMin2009andjettisonedbyChancellorMerkel,with thehelpofpretenderswithin his father ’s party, in 2011 (see Chapter 2). The original GeorgePapandreou, George Junior ’s grandfather and Andreas’s father, was primeminister in the 1960s. His overthrow set Greece on course for the militarycoupd’étaton21April1967whichushered in thedictatorshipduringwhichmygenerationgrewup.10.When itsmemberswere inGreece, rather than inBrusselsorelsewhere,the war cabinet met daily. It comprised Alexis, Deputy Prime MinisterDragasakis,Alexis’s alter egoNikos Pappas,myself, Euclid and Sagias, thecabinetsecretary.OftenwewerejoinedbyChouliarakis,chairoftheCouncilof Economic Advisers, Stathakis, the economy minister, and GabrielSakellaridis,thegovernment’sspokesperson.Lateron,astheplotthickenedinMay and June, two Syriza party representatives were added to the group,ostensiblytoprovidealinkwiththepartyfaithful.11.Consider theexampleofFrançoisHollande.Hewaselected in2012onacombativepledgetoopposeChancellorMerkel’s‘fiscalcompact’ofausterityandtouseFrance’smighttodragtheEUintoapro-growth,public-investment-led recovery programme. And yet on the day after his election, all thatcourageoustalkwasforgotten,nevertoberecalledagain.Why?Sourcesclosetothepresidenttoldmethatimmediatelyafterhiselectionhereceivedaphonecall fromthegovernorofFrance’scentralbankwarninghimthat theFrench

bankswere still in serious trouble and that the ECB’s indispensable supportmightnotcomeifhecontinuedtoantagonizeBerlin.12.SeeChapter6inVaroufakis,2016.13. In 1953 the US government brokered the so-called London DebtAgreement. In essence, the United States leaned on Britain, France, Greece,Italy, Spain, Sweden, Yugoslavia, Norway, Switzerland and many othercountriestowriteoffthegreatestpartofGermany’spre-wardebttothem.TheBritishgovernmentprotested,arguingthatGermanyhadboththecapacityandthemoral duty to pay.Washington vetoed London and, to lead by example,immediately wrote off the loans that it had forwarded to Bonn after 1945.Germany’sdebtstonationsandprivatecreditorswerehaircutbymorethan70percent.SeeVaroufakis,2016.14.ΒάσταΡόμελ!–fromtheGreekverbβαστώorβαστάζω,whichtranslatesas‘tobear ’,‘toholdon’,‘tohangon’.15. I took it for granted that Jeroenwould never have issued the ultimatumwithoutBerlin’sapproval.IalsoassumedthatwecouldnotcountonParisforsignificantsupport.Nevertheless,itwasincumbentuponmetoverifytheextenttowhichParishadpre-agreedwithBerlinourasphyxiationortowhatextentIcouldcountontheFrenchfinanceministerforsupportintheEurogroup.16.SDOEwas theGreekacronym, standing forΣώμαΔίωξηςΟικονομικούΕγκλήματος.17.Tomake it all possible, I appointedMichalisHatzitheodorouheadof theministry’sGeneral Secretariat for Information Systems.Having completed aPhDatColumbiainimageprocessing,hereturnedtoGreecetosetupasmallIT-service-providing company. With no connections to politics or theoligarchy,andwithanadamantinecharacterthatIcouldvouchforpersonally(wehadbeenfriendssinceschool),hewasidealforthejob.18.While shewasFrance’s financeminister,ChristineLagarde had sentmypredecessorsingovernmentalistofnamesofGreekswithaccountsatHSBCSwitzerlandthatawhistle-blowerhadleaked.Unlike theGerman,FrenchandSpanishtaxauthorities,whichusedtheinformationtoascertaintaxevasionbytheircitizensand recoversignificant sums,previousGreekgovernmentshadbeen conspicuous by their refusal to act. This was not the only such list incirculation.Butwhileitwasimportanttolookintosuchlists,Ididnottrustthetaxoffice’scapacityorwillingnesstodelveproperlyandeffectivelyintothem.Additionally,thelistswereold(goingbackto2004)andweremeresnapshotsof bank account balances and therefore of little use in uncovering actual

income streams. Finally, without the cooperation of the Swiss authorities,whichwaswhollyunforthcoming,itwouldbedifficulttousewhatinformationwehadtomakeanyprosecutionstick.ThedealImadewiththeSwissfinanceminister tackled the underlying problem – the holding of untaxed GreekincomeinSwitzerland–whilecircumventingalltheseobstaclestodoingso.19. As these agreements take some time to complete, the Swiss financeministerandIshookhandsonthisdealon28Aprilinmyoffice.20.ΕπιτροπήΠαιγνίων.21.StergiotisstooduptoOPAP,whichwenttogreatlengthstounderminemypolicies.Hepaidthepricefordoingso,withhistermcutshortonceIwasoutoftheministry.22.AnInquiryintotheNatureandCausesoftheWealthofNations,1776,Book1,Chapter2.

Chapter7AuspiciousFebruary

1.Thenotionof‘Bankruptocracy’inVaroufakis,2011,isrelevant:aregimeinwhichbankruptbanksrulebasedontheprinciplethatthegreaterone’slosses,thegreaterone’spowertoextractrentsfromtherestofsociety.2. Collective bargaining was dismantled by the previous New Democracy–PASOKgovernmentatthebehestofthetroika,withtheIMFleadingthecharge.3.AsexplainedinChapter5,‘Firstcontact’.Theonlydifferencebetweenthesituation of our newly elected government and Samaras’s was that ourrepaymentwasduenottotheECBbuttotheIMF.4. See Varoufakis, 2016 for a historical and economic account of how theFrenchelites’determinationtoshareacurrencywithGermanyputFranceonalongpathtowardspoliticalandeconomicdecline.5.AeginahasarichhistorygoingbacktotheNeolithicageandwasthefirstGreekpolistomintofficialcoins.6.ELAwouldprovidearound€22billionof liquidity.ThepeopleatMorganStanley, who for some reason saw fit to send me helpful updates on theirviews, informedmethat inaddition to thisGreece’sfoursystemicbankshadanother€30billiontoplaywithcourtesyofstructured(or,astheycalltheminthe trade, ABS/Covered) bonds at their disposal. They added that, in theiropinion,theeurozonewouldnotdaretochokeuscompletelyasGrexitwouldcostitdearly.7.Seehttp://www.bbc.com/news/world-europe-31083574

8. See http://www.cityam.com/208589/adam-smith-institute-calls-osborne-back-varoufakiss-greek-debt-swap-plan9.ExplainedmorefullyinChapter3,Note36,andmentionedcruciallyintheconfrontationwithJeroenDijsselbloeminChapter6,‘Ultimatum’.10.TogetMerkeltoagreetothequantitativeeasingprogrammeinspiteofthewishesoftheBundesbank,oneoftheconditionsthatDraghihadtoimposewasthat no more than a certain percentage of a government’s outstandingbonds/debt could be purchased by the ECB. If the new perpetual bond Iwasrecommending had stayed on the ECB’s books, it would have limited thenumber of newGreek bonds that the ECB could purchase, thus limiting thepositive impactofquantitativeeasingon theGreekgovernment’s capacity toborrowagain,afresh,fromprivateinvestors.11.Glenn’semailconfirmedthatthefourGreekbankswouldbehitbadlybyDraghi’smove.‘FromwhatIsee,’Glennwrote,thewaiverremovalwould

involvesome€27billionofcashcollateral(outofatotal€41billionofpre-waiver withdrawal ECB exposure) which will come at a cost of1.55percent.ThemostaffectedwouldbeEurobank(roughlya6–7percenthit to2015net interest income)andAlpha (6percenthit),whilePiraeus(4percent)andNationalBankofGreece(2percent)wouldbetheleastaffected.Note,however,thatbankshaveincreasedexposuretoECB after deposits outflows by I guess about €20 to €21 billion…hence the real impact couldmuchhigher than that.At this stage,onlyEFSFbondswillbestilleligibleforECBfunding.

12. The economic mantra of General Augusto Pinochet’s fascist regime inChileandthatofSchäuble’swingoftheCDUhadmanysimilarities.13. Of course, when we did go to the institutions with our proposals, theinstitutions would also refuse to engage with them, demanding reams andreamsofdatainstead.Thepurposeofthisinterminabledatagatheringwastoavoid any response, positive or negative, to our proposals. Meanwhile thepress would broadcast that I was arriving in Berlin, Brussels and Frankfurtwithnoproposals.14. Alexis’s wreath-laying had been interpreted in Germany as a hostilegesture.BymentioningitduringaspeechinwhichIwaspraisingtheGermansfortheirsuccessfulpurgeofNazism,Iwastryingtobuildabridge.Mypointwas that Greeks and Germans shared a common experience of Nazism and

thereforeacommonaim:combatingitseconomicunderpinning,whichwasapermanentlydeflationaryeconomy.15. Willy Brandt was the SPD’s leader 1964–87 and West Germany’schancellor1969–74.DuringthelatterperiodhehadplayedanimportantroleinmarginalizingGreece’s right-wingdictatorswhileat thesame timegivingsanctuarytofleeingGreekdemocrats.

Chapter8Thefrenzybeforethestorm

1.The title of hismemoir about thatwork suggests thosewords stayedwithhim. See James K. Galbraith, Welcome to the Poisoned Chalice: TheDestructionofGreeceandtheFutureofEurope,2016,Yale.2.Without this small army of aides I would have been at the mercy of theministry’s Council of EconomicAdvisers led byGeorge Chouliarakis, whohad already demonstrated himself and his team to be utterly unwilling andpossiblyincapableofdoinganythingbeyondregurgitatingthetroika’smodelsandprojections.WiththeclocktickingIthoughtitbesttodeferaconfrontationuntilafteraninterimagreementhadbeenreachedattheEurogroup.3. https://www.nytimes.com/2015/02/17/opinion/yanis-varoufakis-no-time-for-games-in-europe.html?_r=04.OscarWilde,TheSoulofManUnderSocialism,1891.5. I was paraphrasing John Maynard Keynes, who wrote of the VersaillesTreaty: ‘[the German government’s] insincere acceptance … of impossibleconditionswhichitwasnotintendedtocarryout–anacceptancewhichmadeGermanyasguilty toacceptwhatshecouldnotfulfilas theAllies to imposewhattheywerenotentitledtoexact’.SeeJohnMaynardKeynes,DrMelchior:ADefeatedEnemy,1920andChapter8ofVaroufakis,2016.6.SuchevidenceincludedtherehiringofthecleanerswhohadbeendismissedfromtheFinanceMinistryillegally(accordingtotheGreekcourts)aswellasa few hundred state school janitors, and a pledge not to reduce pensionsbeyondthetwelveseparatecutsthathadalreadyreducedthembyastupendous40percent.7.EventhoughDombrovskiswasseniortoMoscovici,herarelytookthelead.Isuspectthiswasbecausehispresentationskillsleftmuchtobedesired.Inanycase,hisrealjobwastowatchoverPierre,ratherthanleadanything,letaloneadiscussion.

8. Recall that, well before our election, the Eurogroup had agreed that theECB’sprofitson theGreekgovernmentbondspurchasedaspartof theSMPprogrammeshouldbereturnedatregularintervalstoAthens,butasWieser ’snon-paper, sent to us via email by Thomas Asmussen, had made clear, thetroikanowintendedtowithholdthatmoney.SeeChapter5,‘Firstcontact’.9. Just before I entered the room, Glenn Kim had sent me a warning.According to his sources, Chancellor Merkel, unwilling to get involvedherself,wasinclinedtolettheEuropeanCommissionfindasolutiontothenewGreek drama, but the Spanish government was kicking and screaming. Thereasonwas that they faced elections in which Syriza’s equivalent, Podemos,wasthreateningtodowell.GlennrecommendedthatIkeepaneyeoutforanysabotageLuisdeGuindosattempted.10.TheAustrianandBelgiangovernmentswereinternallydividedinthattheywereheadedbysocialdemocratswhiletheirfinanceministerscamefromtheequivalentofWolfgangSchäuble’sChristianDemocrats.11.Somememberstates’constitutionsorparliamentaryrulesrequireanyEUdecisionwith a potential impact on the state’s finances to be passed throughtheir parliaments. This includes Germany, Austria and Finland. But in mostmember states, such as Italy or France, there is no need for a parliamentaryvote.

Chapter9Amomenttosavour,darkly

1.SeeChapter6inVaroufakis,2016.2. In my introduction I repeated my argument that reforming the troika’sprogramme was essential if we were to persuade the people of Greece toacceptit,andthatthemannerinwhichthetroikahadconducteditselfinAthensuntil then had been counterproductive in that regard. ‘Our commitment toworkingwitheachoneofthethreeinstitutionsisunwavering…Weconsidertoday’s meeting here in Brussels to be a new beginning that will serve theinterestsbothofGreeceandtheEU…WehavereviewedtheMoUindetailandwanttodiscussitwithyou.’Iwasfrankaboutourgovernment’sinexperience,andcontrastedourteam’smeagreresourceswiththeirs.Butourinexperiencewas a normal feature of the democratic process, I assured them, was to beexpectedwheneveranelectoratevoted inanewgovernment,andgrantinganincominggovernmentahoneymoonperiodinwhichtodevelopitsideasintopolicywasanessentialpartofthatprocess.ThatbeingthecaseIsuggestedthat

themeetingconsiderourteam’soverarchingpolicyframeworkratherthangetbogged down in minutiae. After all, the Eurogroup was waiting for anagreementinprinciplebasedontheidentificationofcommongroundbetweenthe MoU and our government’s plans. I also mentioned my team ofuntouchablesandour seriousattempt toapprehendhundredsof thousandsoftaxcheats.Ifthetroikawasinterestedinreformsofsubstanceandalarge-scaleinfusionofcashintoourstate’scoffers,ItoldthemIexpectedthemtosupportthisparticulareffortenthusiastically.3. Over the course of the first day the leaks got worse. At one point Jamiereportedtomethatourteamwasupsetatthepress’ssuggestionthattheywereincapableofputtingforwardproposalsfor‘extendingtheprogramme’thatthetroikacouldaccept.ImmediatelyIwroteback,

Wemustturntheirownnarrativeagainstthem,simplybysaying:thankyouforpointing thisout.Youare right.Weareunable topresentanypoliciesleadingtosuccessfulcompletionofthecurrentprogrammeforthesimplereasonthatthisprogrammecannotbesalvaged.ThisiswhyweinsistedintheEurogrouponmajoramendments.Indeed,ourteamsare meeting today and tomorrow on a mission not to complete thecurrentprogrammebut tobuildabridgetonew,viablearrangements.Without amendments on the logic of its financial, debt and reformsagenda,andtranquillityoverthetimerequiredtoreachthem,therecanbenoprogramme.

4. For example, in my summary of our discussions with the troika I hadwritten, ‘On structural reforms, good progresswasmade to identify a largenumberofareaswheretheGreekauthoritiescansupporttheongoingreformagenda…Timeisneededoverthecomingweeksforthenewgovernmenttomakeamoredetailedassessmentofongoingreforms.TheGreekgovernmentisfullycommittedtocontinueeffortsmadein theseareas.’Euclid toldmetodelete ‘large’ in the first sentence and recommended that I replace the lastsentence with: ‘The Greek government is committed to continue a reformagendawhich takes the best elements of the current programme and its ownreformagenda.’ElsewhereIhadwritten,‘TheGreekauthoritiesarecommittedto continued primary surpluses over the next decade to ensure sound publicfinances.’Headvisedmetoreplace‘decade’with‘nearfuture’,adding,‘Afterall we are seeking a debt conference which should make such a promise

redundant.’HowthingswouldchangeafewmonthslaterwhenEuclidreplacedme.5.Thisisalsotrueofpapermoneyifrestrictionsareinplaceonitsremovalfromthecountry.6. A frequent criticism of my planned parallel payments system was that itwould be euro-denominated only in theory, but in reality a euro within theparallelpaymentsystemwouldbeworthlessthana‘proper ’papereuro.Thisis true, but if theECB introducedcapital controls, then the countrywould ineffecthaveadualcurrencyalready,sotheargumentissomewhatacademic.7.At thecoreof this informaland rather loosewarcabinet,whichhadbeenconveningintheprimeminister ’sofficeatMaximostodiscussstrategyinthepreviousweeks,wereAlexis,Pappas,Tzanakopoulos,Dragasakis,SagiasandEuclid.8.Inanadmirabledisplayofrestraint,thepressmadeverylittleofthestoryofhowJeroenDijsselbloem’sofficehadretractedaclaimitoriginallymade,thathehadbeenawardedaMastersdegreebyanIrishuniversity.Ioftenwonderedhow the same journalists would have treatedme ifmy credentials had beensubjecttosimilarcontroversy.9.Juncker ’sdraftproposedtheadoptionofacodeofcivilprocedure,changestotheincometaxcodeandthetaxprocedurescode,legislationtobroadenthedefinitionoftaxfraudandevasionandreformofthegasmarket.Italsoaskeduswhether therewere other reforms that could be adopted swiftly – amostcollaborativeandthuswelcomeapproach.10.TheEuropeanCommissionistheclosesttheEUhastoagovernment,andacommissioner has a status equivalent to a minister of state, whereas theEurogroup,aspreviouslymentioned,hasno legal standing inanyof theEUtreaties. In that sense,Dijsselbloemwas, officially and legally, nomore thantheDutchfinanceminister,outrankedinlawbyMoscovici.11.InourModestProposaltheEIBishailedasapossiblepillarforeconomicdevelopment,tositalongsidethepillaroffinancialstabilitythattheECBwasmeanttobe.SeeAppendixinVaroufakis,2016.12.DimitrisTzanakopouloswasayounglawyerandSyrizaactivistwhowaselevatedtogovernmentspokespersonandgivenaministrywithoutportfolioafewmonthsaftermyresignation.13.OnlyGeorgeStathakis,myacademiccolleagueandeconomyminister,wasprepared openly to dispute the strength of this commitment – and he did sofromtheveryfirstdaywewereingovernment.Irememberhimtellingmein

privatethatwhenthecrunchcame‘wewouldacceptwhatevertheygaveus’.Atthe time Iwasoutraged, aswasAlexis,who for this reasonkeptStathakis atarm’s length,which explainswhyStathakiswas not a regular attendee at thewarcabinetduringour firstmonths ingovernment.As it turnedout,Georgewas the onlySyriza insiderwhowas consistently honestwithme, and to hisfurther 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’srecapitalizationofGreece’sbanks,worth€50billionintotal–seeChapter2,‘Bailoutistan 2.0’ and Chapter 5, ‘Greek-covery’. This left-over capital wasinsufficient to restore the Greek banks to health, in view of the huge non-performingloansontheirbooks,andthetroikawasreluctanttolettheGreekgovernmentpourmoregoodmoneyafterbadbeforesomesolutionhadbeenfoundforthenon-performingloans.TheIMFandtheECBwantedthistotakethe form of foreclosures and auctions of repossessed homes and offices.Politically that would have been exceptionally toxic, so the €10.9 billionsimplysatgatheringdustonthebooksoftheHFSF,theEFSF’sGreekbranch,in the formofEFSFbonds.TheECBwanted to repatriate theseEFSFbondsfrom theHFSF to the EFSF.Why? For effect, to demonstrate that theyweregettingtoughonus.Butinrealityitmadenodifferencesince,evenwhentheseEFSF bondswere in the bosom of theHFSF, theGreek government had noauthority to use them without the authorization of the Eurogroup WorkingGroup and thus of the ECB. Remarkably, the opposition in our parliamentportrayed this inconsequential transfer as ‘Varoufakis’s loss of €11 billionfromunderhisnose’.

Chapter10Unmasked

1. Manolis Glezos called the 20 February agreement an exercise in‘rebrandingmeatas fish’– inOrthodoxChristianityconsumptionofmeat isprohibited during Lent, but fish is sometimes deemed acceptable – andapologizedtothepeopleofGreeceforhavingsupportedourgovernmentandthus participated in their deception. Mikis Theodorakis described me andAlexisasinsectsluredbyaruthlessspiderintoitsweb.2. It is remarkable that a minister of state had to negotiate for the right tointroduceaclauseintoanagreementwithinternationalcreditorsstatingthatthecourtsofthelandshouldbeallowedtocarryoutthedutiesvestedinthemby

theconstitution.Frommydiscussionswith judges fromGreece’sCouncilofStateitwasclearthat,sincethefirstbailout,theyhadbeenleanedupontomakerulingsthatwentagainsttheiractuallegalopinions–theultimatehumiliationfordecentmenandwomenwhohaddedicatedtheirlivestotheruleoflaw.3.GeorgeChouliarakisistheonlypersontohavesucceededinmypresenceinmakingEuclidTsakalotossofuriousastoswear.4. The reader may suspect that Wolfgang Schäuble’s opposition to thecommuniqué of the 20 FebruaryEurogroupwasmere pretence, designed toluremeintothebeliefthatIhadgotmywayinordertotrapmeatthemeetingof 23 February. I do not believe so. During the Eurogroup of 20 FebruaryWolfgang was visibly agitated. He is neither as duplicitous nor as good anactoraswouldberequiredforsuchanelaborateploy.5.Therelevantpassagestated,‘TheGreekauthoritieshavealsocommittedtoensuretheappropriateprimaryfiscalsurplusesorfinancingproceedsrequiredto guarantee debt sustainability in line with the November 2012 Eurogroupstatement.The institutionswill, for the 2015primary surplus target, take theeconomic circumstances in 2015 into account.’ The phrase ‘appropriateprimaryfiscalsurpluses’signalledthattheprevioustargetshadbeensetasideandwereopen tonegotiationwithourgovernment, recognizingour right tonegotiate theendofausterity,while thephrase ‘guaranteedebt sustainability’openedthedoortoagenuinenegotiationondebtrestructuring.

Chapter11Whittlingourspring

1.Syrizamembersofparliamentweresplitbetweenthosewhowererelievedattheextensionoftheloanagreementandthose,mainlyfromtheLeftPlatform,who were livid that it had been extended instead of rescinded. Interestingly,almost none objected to the lack of prior parliamentary approval per se,concentratinginsteadonwhethertheextensionshouldhavebeensecuredatall.(Had they known how between 20 and 25 February our position had beenjeopardizedbymyrepresentativeintheEurogroupWorkingGroup,Iamsurethey would have reacted differently.) At a specially convened tumultuousparliamentary party meeting I spent a good hour on the podium explainingwhy the extension had been necessary, taking personal responsibility for thewholeaffairwhileAlexis,PappasandDragasakislookedon.2. See Paul Mason, 2016, ‘The Inside Story of Syriza’s Struggle to SaveGreece: Exclusive interviews with the party’s top players shed light on the

eurozone showdown’,TheNation http://www.thenation.com/article/the-inside-story-of-syrizas-struggle-to-save-greece/3. SeeAlastairCrooke, 2011, ‘Permanent temporariness’,London Review ofBooks,Vol.33,no.5,pp.24–5.4.SeeChapter6ofVaroufakis,2016.5.FormoreonT-billsseeChapter5,Note17.6. With the remaining 33 per cent dispersed across multiple investors whowouldgraduallyselltheirsharetoCosco.7.SeeChapter4,Note4forthefullrepaymentschedule.ThepaymentsinJulyincluded€3.49billiontotheECBtoredeemsomeoftheinfamousSMPbonds,andthepaymentsinAugustwerealltotheECBinlieuofmorematuringSMPbonds.8. In January 2016 the creditors proceeded with the transfer of the port ofPiraeus to Cosco on the terms that pre-existed our government. Coscomayhaveendedupwiththe67percentequityinthethirdquayitsought,butChinalostouton the long-term large-scale investments Ihadproposed inGreece’srailways, which the troika sold to an Italian company incapable of seriousinvestment,atechparkandshipyards,whichatthetimeofwritingareclosetopermanent closure. The privatization took place without the minimuminvestment or labour protection or safeguards for the local economy thatBeijinghadcommittedtoinourdealings.AlsolostwasBeijing’sreadinesstohelptheGreekstategetbackonitsfeet(bybuyinggovernmentbonds)whenonedayit regainssolvency.Inotherwords,Greecelostastrategic industrialpartnershipthatwentfarbeyondaportdeal.9.SeeChapter7,‘Socialdemocracy’sWaterloo’.10.When I took over the financeministry, arrears to the state amounted to€76.08 billion. Of this the tax office estimated that only €8.9 billion waspotentially collectable.When I pressed them they confessed that of that €8.9billion, €1.6 billion was owed by 3.5 million citizens who owed less than€2,000 each – the little peoplewho had been squashed by the crisis and theensuingausterity. Itwas these littlepeople that thebill aimed to rescue fromofficialinsolvency.Thetroika’sretortwasthatrichGreeks,whohaddefaultedstrategicallyseekingtohavetheirarrearstothestatewrittendown,wereletoffthehookbyourlegislation–anditwastheywhoowedthebulkofthe€76.08billion.Correct.ExceptthatmyministryandGreece’scourtsdidnothavetheresources and mechanisms necessary to identify strategic defaulters andseparate them from the little people. It would take years for these to be

developed,andthelittlepeoplewouldperishinthemeantime.Besides,asIkepttelling the troika, the strategic defaulters were mostly beyond our reach, asthey lived in London, New York, Paris and so on. ‘Let us release the littlepeople from theirdebtbondage,’ I remember tellingChristineLagarde, ‘andthen,inafewmonths,onceouralgorithmicmethodforcatchingthecheatsisinplace,wewilldealwiththemseparately.’Butno,thetroikaknewbetter.Asthese lines are beingwritten twoyears later, arrears to the state have topped€90billion.11. Kemal Dervish also advised me to resist fire sales and blanketprivatizations.ThisintriguedmebecausehehadareputationintheWestasagreatneoliberalmodernizer.Buthisrealstoryisdifferent.Takeforexamplethe case of TurkishAirlines. In 2001 the IMF placedKemal under immensepressuretoprivatizeloss-makingTurkishAirlines,buthechosenotto.Insteadhe identified the cause of the losses: ‘stupid price controls, no peak-loadpricing and political interference’ as he put it to me. Instead of giving thecompany away to a foreign airline Kemal reformed the aviation law andallowedaggressivepeak-loadpricing.TodayTurkishAirlinesisrecognizedasa leading airlineworldwide.Kemal finishedhis excellent advice tomewith:onlyprivatizewhenyouthinkthepriceisright.12. SeeYanisVaroufakis, JosephHalevi andNicholas Theocarakis,ModernPoliticalEconomics:Makingsenseofthepost-2008world (2011),Routledge,LondonandNewYork,pp.125–7.13. http://www.telegraph.co.uk/news/worldnews/islamic-state/11459675/Greeces-defence-minister-threatens-to-send-migrants-including-jihadists-to-Western-Europe.html14. Since by early March it was clear that the creditors were leakingfalsehoodstothemediaaboutwhatIwastellingthem,whattheyweretellingmeandthelevelofsophisticationofmypresentations,Imadesuretherewasan eyewitness present at those meetings. Jeff Sachs’s personal acquaintancewithmostofthemajorplayersincludingLagardeandDraghiandtherespecttheyhadforhimmadehimtheidealcandidate.

Chapter12Merkel’sspell

1. Jeff was referring to the postwar Americans and Europeans who haddesignedandbuilttheEuropeanUnion.

2. For example, seemy article ‘EuropeNeeds anHegemonicGermany’, 24July2013,intheGermanfinancialdailyHandelsblatt.3. A swap deal between central banks of different countries means that onebankcommitstoexchangeacertainamountofitscurrencywiththecurrencyoftheother.AswapdealbetweentheFedandtheCentralBankofGreecewaslikelytogiveusaccesstodollars(afterGrexit)atagivenexchangeratewithGreece’snewcurrency.4.JamiewastedadayortwotravellingtoWallStreettomeetthesegentlemen.Hereportedbacktomethattheytalkedagoodtalk,hadbookedofficesinthebuildingwherethelegendaryPaulVolcker ’sofficeswereandwereconcoctinga mechanism by which a Fed swap line would be combined with Greeceproviding US companies with oil and gas drilling rights in the EasternMediterraneanbasin.Theunfortunatehitchwas that noonehad talked to theFed. Itwasa little likesaying thatyour studentnewspapercouldoffermajorpublicity exposure once Rupert Murdoch had invested massively in it butneglectingtodiscusstheideawithRupert.5. SoAlexis reported tome.After an initial trip toMoscowAlexis returnedfullofsmiles,ashehadsecuredanadvanceof€5billionfromPutinfor theconstructionofapipeline.Alexishadexpectedmetobeenthused–€5billion,hethought,wouldgoalongway–butIhaddisappointedhimbyreplyingthat,even if themoneywasavailable,weshoulddelay receiving it foras longaspossible. Ifwe took it, the troikawouldsimplydelaynegotiationsso that theentiresumwouldgoonpayingbacktheIMFandtheECB.Thankfullywewerespared this dilemma by theRussians.During his second visit to Russia, thistime toStPetersburg,Alexis reported thatPutinhadwithdrawnhisofferandtoldhim togo to theGermans instead. Ihad thisconfirmedpersonallywhentheRussianfinanceministercalledmetosaythatinternationalsanctionsweredepletingMoscow’scoffersandunfortunatelyhedidnothave thecapacity tohelpus.As Ihadneitherexpectednorwanted theirhelp, Iwasnotespeciallydisappointed,butIcouldforeseethenegativeimpactitwouldhaveonAlexis.6.Notbeingtheretowitnessanyofthis,IambasingthispartofthenarrativeonthedescriptionAlexisgavetomeonhisreturn.7. Itwasduring their late-nightmeeting inBrussels in the earlyhoursof21MarchthatMerkelformallyinvitedAlexistoBerlin,anothermovebyherthatgaveAlexistheillusionofaspecialrelationshipbetweenthem.

Chapter13Therightstuff,foiled

1.TheBattleofCretebeganon20May1941.MainlandGreecehadalreadyfallen to the Nazis when Hitler ordered the first mass airborne invasion inhistoryinordertocapturetheisland.CretewasdefendedbyGreek,Britishandwhatwere still referred to asANZAC troops inCrete andAustralia, but thecivilian population, including women, old men and children, also foughtpitched battles against the German invaders using farm tools and kitchenimplements.Theislandwassubduedby1June1941andmanycivilianswereexecuted by the occupiers. To this day Cretans walk tall as a result of theirdefiance.2.HiscorrectpointwasthatGreece’sfirstandsecondbailoutloanagreementsspecified thatdefaulting tooneof the threecreditorscouldbeconsideredbytheothertwoasgroundsfordeclaringGreecetobeindefaulttothemtoo.3.Thekeyargument inmy letter toChristineLagardewas, ‘ThecontractualarrangementbindingtheGreekauthoritiesandtheinstitutionstogetherimpliesthat…whilewearerenegotiatingtheloanagreement’sconditionalities,partiescannotcallaneventofdefault,andamoratoriumofpaymentshouldapply.Inthis context, and with a view to allowing the necessary “quiet time” forreaching the 24 April Eurogroup meeting without an “event”, we aresuggestingeitheramoratoriumofrepaymentsbyGreecetotheIMFuntilthatdateor,alternatively,theremoval(priorto8April)oftheECB’srestrictions(i.e. the return of the waiver and/or the end of limits on the Greek banks’constrainttostaywithinverylowlimitsofT-billownership).’4. In 2015 the Catholic/Protestant Easter fell on 5 April whereas the GreekOrthodoxEastercameaweeklater,on12April.5.Roumeliotis rose toprominenceasaPASOKfunctionaryandgovernmentminister in the 1980s. In 2010, despite his PASOKbackground,Roumeliotissoon came out into the open with caustic criticisms of the first bailout. Hiscourageous stance was noticed and appreciated by Alexis and others withinSyriza.AtthetimeofmytriptoWashingtonon5April,IwasintheprocessofappointingRoumeliotis chairof theboardof theHellenicFinancialStabilityFacility(atDragasakis’sencouragement)–anappointmentthatthetroika,viaThomasWieser, eventually blocked. (In the end, Roumeliotis was appointedchair of the board of Athens Eleftherios Venizelos Airport.) Given hisknowledgeoftheIMF,Iwasgladtohavehimwithme,especiallyasourIMFrepresentativeat the time,anappointeeof thepreviousgovernment,operatedas if he worked for the IMF, rather than as our representative promotingGreece’scasewithintheIMF.

6. From our election to that day in April 2015, our repayments to the IMFamountedto6percentofthatperiod’sseasonallyadjustednationalincome.Inaddition,thispeakinIMFpaymentscoincidedwiththeperiodoftheyearwhennational income and thus tax receipts are at their lowest – about 0.86 lowerthan average owing to the drop in sales after Christmas and low tourismincome. Add to that the financial shortfall we inherited from the Samarasgovernmentof4.9percentofnationalincome,andweareupto11.76percent.Finally, factor in the ECB’s liquidity squeeze, which forced us to dig evendeeperintostatereserves,andthetotalpercentageofnationalincomethatwehad to plunder tomeet the IMF repayments climbs to 14.21 per cent. For agovernmentlockedoutofthemoneymarketswithahumanitariancrisisonitshands,extractingsomuchcashfromitspeopletowiretoasinglecreditorisunbearable. We had done it, I told Christine, to show our commitment tomeetingourobligationsandtonegotiatingingoodfaith.‘ButwecannotcarryondoingitwhentheECBissqueezingusdryand,toboot,BrusselsandBerlinare all refusing to negotiate matters of life and death to us – like a debtrestructure.’ This last point was intended to touch a raw nerve at the IMF,especiallygivenPoulThomsen’sconfessiontomeinParisinearlyFebruary.7. My precise words were: ‘Given that the disbursements the Greek loanagreement had specified have ceased but at the same time, under the 20February Eurogroup agreement, we are renegotiating the conditionalities ofthatloanagreement,thereseemstobeacaseunderEnglishandUSlawforamoratoriumonourrepaymentsaswellasforrefrainingfromcallingacreditevent.Onthisbasis,IhavebeenauthorizedtorequestthateithertheECBwillperform its duty or wemust discuss the possibility of postponing the AprilrepaymentuntilthereisafinalagreementbytheEurogroup.’8. She also said something that history disproved: that there could be nothirtyday delay after amissed payment beforeGreecewas declared to be indefault. For when in June we did default on a payment to the IMF, the IMFboard unilaterally bundled that payment with future ones, thus delaying byalmostamonththedeclarationofaGreekdefault.SeeChapter15,‘Countdowntoperdition’.9.SeeChapter7,‘Promisingliaisons–2.Thetroikaman’.10.LagardemadetheexcellentifsadpointabouttheseSMPprofitsthatitwasnotDraghi’s fault that I hadnever received them. ItwasWolfgang’s.This iswhy.TheECB’sprofitsfromallthebondtradingthatitdoesaredistributedtothevariousnationalcentralbanksinproportiontoeachcountry’sGDP.Asthe

central bank of the richest country in the eurozone (the country with the‘largest’ economy), theBundesbankgets the largest cut.Thenational centralbanksthenwirethatmoneytotheirrespectivefinanceministriestobeusedinanywaytheywant.InthecaseoftheprofitsoftheGreekbondsthattheECBhad bought under the SMP programme, the Eurogroup had agreed that theywouldbereturnedtoAthens,butSchäubleandtheotherfinanceministershadalready banked that money in 2014. Indeed, they had already spent it. Thismeantthatreturningittouswasnotreallypossibleasitwouldrequirethemtotake themoneyout of their 2015 tax revenues, something that Schäublewaseagertoavoid.11.SeeChapter11,Note10.12.ThisishowInarratedmybank-cleansingplan.‘Thelastthingwewantourpartnerstothinkisthatourleft-winggovernmentissnatchingthebanks.Atthesametimeweshallnotallowthebankerstoruletheland.WhatIwouldliketodoistohaveTakisappointedchairmanoftheHFSF.IhaveagoodrelationshipwiththeCEOoftheHFSF,eventhoughshewasclosetoandappointedbytheprevious government, and I think with her and with Takis we can do goodworktocleansethebanks.AtthesametimeweshouldbringinnewCEOs(wearethemainshareholdersanyway),establishedbankerswithagoodreputationfromNorthernEurope.SomethingsimilartowhathappenedwiththeBankofCyprus,whichbroughtinAckermantorunit.Thisistheonlywayofmovingforward.Iamnotaskingyouforanopinion;Iamsimplysharingthiswithyou.I cannot think of any other solution – to end the revolving-door syndromebetweentheGreekstateandtheoligarchy.OurpartyhasnoconnectionswiththeGreek banking community and thuswe are well placed to break up thismafia-like group by bringing in reputablewell-established bankers from theoutside.IwasthinkingofEngland,butthenIconcludedthatGermansmightbebetter,signallingtoBerlinadeterminationtodobusiness.’

Chapter14Thecruellestmonth

1.Before returning toAthens Ihad twoexploratorymeetings:oneat theUSTreasury with Under Secretary Nathan Steets (as Jack Lew was not inWashingtonthatday),theotherattheWhiteHousewithCarolineAtkinsonofthe National Security Council. They were like chalk and cheese. Steets wassympathetic,whileAtkinsonsoundedlikeacrossbetweenalowlyfunctionaryoftheGermanfinanceministryandathrowbacktotheIMF’spre-2008days.It

wasmyfirstwhiffofhowmixedthemessagesIwouldreceiveinWashingtonwouldbe.2. My proposed timetable was as follows. On 12 April Theocarakis wouldpresent the N+1 Plan to the Brussels Group. Over the next two days, by 14April,wewouldamenditinresponsetofeedback.On15AprilIwouldpresentit at the Brookings Institution,Washington, DC,where I had been invited todeliveramajorpolicyspeech.Meanwhile,EuclidandPappaswouldtraveltoBrussels to present it toMoscoviciwhileAlexis andDragasakis approachedMerkel and Juncker to tell them that, as far as the Greek government wasconcerned,thiswouldbethebasisoffurthernegotiations.On17AprilIwouldpresenttheN+1PlantoUSTreasurySecretaryJackLew.On19AprilPappasshouldconvenetheFrankfurtGroupanddemandacceptanceoftheN+1Planasthebasisfordraftingthelegislationbymeansofwhichthefinalreviewwouldbecompleted.Finally,between20and24April,whentheRigaEurogroupwasscheduled, the drafting of legislation consistentwith theN+1 Planwould becompleted. ‘Only in this manner and by means of such a tight schedule,’ Iconcluded,‘willwebeabletostrikeanagreementwiththecreditors.’3.ThefinalreportoftheFinancialCrisisInquiryCommissionwashailedbytheNewYorkReviewofBooks as ‘themost comprehensive indictment of theAmericanfinancialfailurethathasyetbeenmade’and‘thedefinitivehistoryofthisperiod’.SeeJeffMadrick,‘TheWallStreetLeviathan’,NewYorkReviewofBooks,28April2011.4. The committee comprised Phil Angelides, Dina Titus (Democratcongresswoman for Nevada), John Sarbanes (Democrat congressman forMaryland),Niki Tsongas (Democrat congresswoman forMassachusetts) andJamesBilirakis(RepublicancongressmanforFlorida).5.Lee related the storyofhis involvement in somedetail. In2011,when thePASOKadministrationwasindenialaboutGreece’sbankruptcy,hewasvisitedbythethenfinanceminister,GeorgePapakonstantinou.ItwascleartoLeethatPapakonstantinouwasnot therebychoicebut ratherat thebehestof the IMF.The thenGreekgovernment didnot evenwant to hear of debt restructuring,indeed went out of its way to vilify people likeme for daring to speak thewords.But,accordingtoLee,theIMFwasalreadyfreakingoutatthethoughtthat they had lent to a bankrupt government without first organizing arestructuringofitsdebts–hencethepressureonPapakonstantinoutoseeLee,theworld’s foremostauthorityondebt restructuring. ‘They leanedonhimtocome and seeme,’ Lee toldme. ‘He was clearly unhappy to be having that

conversation with me.’ According to Lee, Papakonstantinou delayed ameaningfuldebthaircut to suchanextent that the IMFwantedhimout.AfterPapakonstantinou was replaced by another PASOK politician, VangelisVenizelos, in thesummerof2011,Leewasapproachedagain.He toldmehecouldnotbelievethatthenewministerwouldnottakeseriouslyhiswarningsagainst thekindofdebt restructuring thatBerlinwas imposingonGreece: amassivehaircutonprivatelyowneddebtcoupledwithahugenew loan fromEurope’s taxpayers. Lee was pulling his hair out at Athens squandering awonderfulopportunityfordebtreliefsoasnottorufflefeathersinBerlin.Intheend,beingtheprofessionalthatLeeis,hedeliveredthedebtrestructuringthat Berlin demanded. It was to be the largest haircut in history while,remarkably, leaving Greece’s debt thoroughly unpayable. ‘It was a terriblethingtohavedonetothepeopleofGreece,andanexcellentopportunitytocutyourdebtthatwaswasted,withmyparticipation,’hesaid.‘IfthereisanythingIcandotohelpnowIwoulddoitunreservedly.Greecedeservesabreak.’6.Thiswasseriouslygoodadvice,despiteitsalarmingcontentandthesenseofdreaditinstilled.Twoyearslater,inearly2017,whenthedebateastowhetherItalyshouldleavetheeurozoneheatedup,MarioDraghisignalledtohisfellowItaliansthat,wereItalytoleavetheeuro,theCentralBankofItalywouldhavetopayhundredsofbillionsofeurostotheECB.IfanyItalianpolicymakersarereadingthis,IwouldthoroughlyrecommendabriefchatwithLeeBuccheit.7.ItwaswhileIwasleavingthismeetingwithJackLewthatIwasapproachedbyanofficialwhokindlywarnedmeoftheimpendingcharacterassassinationplannedagainstme.SeeChapter1,‘Theseusbeforethelabyrinth’.8. The decision to close a country’s banks (by refusing themmore liquidityfromtheirnationalcentralbank’sELA)requiresa two-thirdsmajorityof theECBgoverningcouncil.9.SeeChapter9,‘Thecommissioner ’shumiliation’.10. Poul Thomsen’s precise words were: ‘It means that six months ago wethoughtthatGreececouldgobacktothemarketsandtherewouldbenoneedfornewmoney.Nowtherewillbenewneedforverysignificantnewmoney.Secondly, until sixmonths agowe thought therewould be no need for debtrelief.Wethoughtthatthetargetswouldbeachievable.’11. See https://www.bloomberg.com/news/articles/2015–04-24/varoufakis-said-to-take-hammering-from-frustrated-euro-ministers12. Seehttp://www.reuters.com/article/us-eurozone-greece-varoufakis-idUSK-BN0NG0EO20150425

13. See Nikos Sverkos, ‘Secrets of the Brussels Media Machine’,ThePressProject, 2 May 2015,https://www.thepressproject.gr/article/76506/Secrets-of-the-Brussels-media-machine14.Thatmorning,Saturday,25April,before flying toAthens Ihadattendedthe Ecofinmeeting. Being a rather ceremonial occasion, eachmember statewas represented by not only its finance minister but also its central bankgovernor.WhileweweresittingtogetherStournarassaidtomethathethoughtthetimehadcometointroducecapitalcontrols–justasBenoîtCœuréhadtoldmeaweekearlier,on16April,inWashington.(Seethischapter,‘ThetroikainParis’.) My reply to Stournaras was the same as my reply to Benoît: ourgovernment opposed capital controls as we did not believe they wereconsistentwithamonetaryunion.15. InDecember2008apolicemanhadshotandkilledayouth inExarcheia,claiminghefeltthreatened.Theresultwasnotjustthedeathofateenagerbuttendaysoffireandviolence.

Chapter15Countdowntoperdition

1.AlongwiththedebtswapswouldbeanagreementthatwouldallowGreeceto enter the ECB’s quantitative easing programme, thus reducing ourdependence on European taxpayers’money. The investment initiativewas toinvolvetheEuropeanInvestmentBankandthecreationofadevelopmentbankutilizingthenation’sremainingpublicassets.2.Therewasanother,morepersonal, factor thatmayhavebeen involved. Inthesummerof2015thetermof theEurogrouppresidencyexpired.Luiswasambitious to replace Jeroen and was clearly soliciting votes from financeministersatthistime.3. The co-signatories, as they appeared on the cover page, were: James K.Galbraith (University of Texas at Austin), Jeff Sachs (Columbia University,special adviser to the UN secretary general), Lord (Norman) Lamont(formerly Britain’s chancellor of the exchequer), Mariana Mazzucato(UniversityofSussexandauthorofTheEntrepreneurialState),ThomasMayer(director of Flossbach von Storch, formerly chief economist at DeutscheBank), and Larry Summers (Harvard University, formerly US Treasurysecretary).

4.JustbeforethisWolfgangandIhadbeenatameetingoffinanceministersdiscussingthepossibilityofimposingafinancialtransactionstax(FTT)acrossasubgroupofEUmemberstates.Atthatmeetingthetwoofusmanagedtobeinagreementforonce,votingtogetheragainstothermemberstates’objectionstotheFTT.Whenthatmeetingended,Wolfgangretiredtohisoffice,whereIvisitedhimwithmydeputies.5. The ‘other proposal’ he was referring to was that of a German firm offinancial and investment advisers, Goetzpartners, whose proposals wereconsistent with my idea of a development bank utilizing public assets ascollateral. In the weeks that followed I collaborated with the GoetzpartnersrepresentativestoimprovemyPolicyFramework.SeeNote7,below.6. This is the scene as Alexis had described it to me. Of course I was notpresentandcannotcorroborateAlexis’saccountofexactlywhatwassaidandhow.7. This new document differed from the earlier Policy Framework in twomajorways.ThefirstwasthatIhadincorporated,despitemymisgivings,thefiscal targets thatAlexishadaccepted.Asa loyalmemberofhisgovernmentandhisfinanceminister,Ihadtoacceptcollectiveresponsibilityforthewoefulconcessionshehadmadewhile trying tosalvagewhat remained.Thesecondchangewasamajorimprovementinthedesignoftheproposeddevelopmentbank.Thiswould in one stroke stop the fire sales of public assets the troikawasinsistinguponwhileputtinganendtotheirunderutilizationbytheGreekstate. This policy initiative was developed in association with the GermanconsultingfirmGoetzpartners,anoutfitwithcloseconnectionstobothwiththeChancelleryandthefederalfinanceministry.8.Infact,monthslaterIputtogethermyinterpretationofSchäuble’svisioninan article published in Die Zeit entitled ‘Dr Schäuble’s Plan’:http://www.zeit.de/2015/29/schuldenkrise-europa-wolfgang-schaeuble-yanis-varoufakis. For an English-language version seehttps://www.yanisvaroufakis.eu/2015/07/17/dr-schaubles-plan-for-europe-do-europeans-approve-english-version-of-my-article-in-die-zeit/9.Inanop-edIcontributedtotheGermanfinancialdailyHandelsblatton24July2013(‘EuropeneedsanhegemonicGermany’)IhadsurprisedmanybyarguinginfavourofastrongGermanyasthebestwayofleadingEuropeoutofitsdifficulties.InthatcontextitshouldnothavebeensurprisingthatIwanteda robustSchäuble singing inunisonwith anenergisedMerkel anddoing theright thing. In my mind at least, that wish was perfectly compatible with a

determinationgotowaragainstthemiftheyinsistedondoingthewrongthingbyEuropebydemandingoursurrender.10.Infact,likemanyotherEuropeancountries,GreecehadthreeVATrates:6,11 and 23 per cent.But, dating back to the 1940s, the islands of theAegeanreceivedadiscountof30percentonVATbecause transportwassodifficultandasaresultthecostofdoingbusinessorlivingtherewashigher.Thomsencountedthediscountedratesontheislandsasanextrathree,addinguptosixratesnationwide.ThefactthatothercountriessuchasSpain,whichincludestheCanaryIslands,hadsimilararrangementswasirrelevanttohim.11.ThelabourreformsThomsenwantedwereacommitmentonoursidenottoreintroducetherightoftradeunionstocollectivebargaining,andtoreleaselargebusinesses,mainlybanksandsupermarkets, from the legal restraintonmassdismissals.12. A model’s parameters are its constants – its inbuilt assumptions – asopposedtoitsvariables.Thetaxrateinourmodelswasaconstant,whereastherevenue from them was a variable, depending on myriad other factors. Aparametricreformwouldthereforebeachangeinthemodel’sassumptions–inthiscase,thetaxrate.13.Kafetsihadbeenthemuseum’sinauguraldirectorin2000.Formorethanadecade she had struggled, mostly alone, to find a dedicated building in thecentreofAthensforthemuseum.Eventuallyshesucceededinsecuringanoldbrewery for the purpose and having it suitably converted, but only weeksbefore it was due to open the Samaras government removed her from herposition.Ayear later,afterwehadwontheelection,EMSTremainedclosed.Mysourcesreportedthatabankerwasblockingitsopeninginordertopreventaletterofcredithehadofferedthemuseumfrombeingcashedin.14.SeeChapter2,‘Blacklisted’.15.SeeChapter6,‘Homefront’.16.On26MayEuclidvotedagainstElena;StathakisandIvotedforher,andDragasakis abstained because, as he explained, Elena was clearly the mostsuitablecandidatebut,atthesametime,thepartydidnotwanther.

Chapter16Adultsintheroom

1.SeeChapter13,Note8.2.Amonthafterthebankswereshutdown,aGermanmemberoftheEuropeanparliament, Fabio DeMasi, wrote to Mario requesting a copy of that legal

opinion. Mario replied that ‘confidentiality’ did not permit him to share itscontents. Later, Fabio and I launched a campaign, Release #TheGreekFiles,involving politicians, academics, law experts andmembers of the public, tohavethislegalopinionreleased.3. I also said, ‘The fiscal council would, under this agreement,monitor thestate budget’s execution on a weekly basis, issue warnings if a minimumprimarysurplustargetlookslikebeingviolatedintheforeseeablefutureand,atsomepoint,triggerautomatedacross-the-boardhorizontalreductionsinalloutlaysinordertopreventaslidebelowthepre-agreedthreshold.ThatwayafailsafesystemwillbeinplacethatensuresthesolvencyoftheGreekstateandits primary surplus while the Greek government retains the policy space itneeds in order to remain sovereign and able to governwithin a democraticcontext.’Iproposedthedeficitbrakeasanalternativetopre-emptiveausterity.IneffectIwassayingtothecreditors,‘Youletmecuttaxratesandmaintaintheminimumpensions,andifIfailtoraiseincomesandrevenues,theautomateddeficit brake will kick in to increase tax rates and cut minimum pensions.’Having ignored thisproposal, ayearaftermy resignationmysuccessorwasforcedtointroducebothnewpre-emptiveausterityandadeficitbreakontopof it, i.e. a high surplus target with pension cuts and tax-rate hikes, plus anautomated, pre-agreed, further spate of austerity, including even deeperpension cuts and even sharper tax-rate increases, to come into force in theeventthattheirludicroustargetswerenotmet.4. I said, ‘The conditionalities that we agree upon should be the basis ofcompletingthecurrent–thefifth–review.Andat thesametimewe[should]have a new agreement with the ESM, using the same conditionalit[ies],allowingustoperformanSMPbuybackfromtheECB,withtheSMPprofits,which will be around €9 billion, to be disbursed in tranches, with reviewseverytimeso that the implementationof theMoU issupervisedproperly.Ontop of that, we can have an arrangement that Greece’s participation in theECB’squantitativeeasingisalsosubjecttothesuccessfulcompletionofthesereviewsofthenewMoU.TheonlyreasonwhyIamtiringyouwithallthisisthatweneed toanswer thequestion:howcanweensure that theMoUweareworkingtowards–thesetofconditionalities–become[s]notonlypoliticallyfeasiblebut[is]combinedwithafinancialarrangementthatallowsittobreathe…sothatthisEurogroupisnotsaddledyetagain,inafewmonths’time,withmorecrunchmeetingslikethisone.’

5.NikosKazantzakis’epitaphreads, ‘Ihopefornothing. I fearnothing. Iamfree.’SeealsothefirstlineofJaniceJoplin’s‘MeandBobbyMcGee’.6. See ‘TheGreekDebtDeal’sMissing Piece’, 15August 2015, by LandonThomas Junior:https://www.nytimes.com/2015/08/16/business/international/the-greek-debt-deals-missing-piece.html

Chapter17Lionsledbydonkeys

1.LordAdairTurner, formerheadofBritain’sFinancialServicesAuthority,hadalsosharedwithme,atameetinginParis,hisfearthatBerlinwasgoingtogo forGrexit even though itwouldbeacatastrophe forEurope. ‘Theyhaveconvincedthemselvestheycancontainit,’hesaid.2.ArendtusedtosaythatshemetMartinHeideggerintheGermanlanguage.3.Thefirstpro-troikarallytookplaceinSyntagmaSquareon18June,whileIwasinBrusselsatoneofthemanyEurogroupmeetings.Agoodtentofifteenthousandpeoplegathered,makingAlexisandtherestofusfeeluneasy.4.Mymother, Eleni Tsaggaraki-Varoufaki, served as a local councillor anddeputymayorof thePalaioPhaliroMunicipality for twentyyearsor so.Shehad indeed been responsible for the management of the local facilities,including orphanages, that were converted into shelters for young and oldpeople.5.62.5percentwasaveryhighturnoutgiventhatnopostalorremotevotingwaspermitted.6.HisprecisewordsweresooffensivethatIdonotreproducethemhere.7.TheexecutedmenwereheldresponsiblefortheroutoftheGreekarmyandthe sacking of ethnicGreek cities, villages and communities by the armyofKemal Atatürk and Turkish irregulars, eradicating all Greeks from AsiaMinor,wheretheyhadlivedsinceHomer ’stime.HundredsofthousandsdiedandevenmorefloodedintomainlandGreeceasrefugees.Acoupd’étatensuedin Greece, and a military tribunal was convened at which the political andmilitaryleadersofthedisastrouscampaignwerefoundguiltyofhightreason.8.Inresponsetothemediafrenzythatfollowedmyrevelation,Ipublishedanexplanation of the thinking behind my parallel payments system in theFinancial Times: ‘Something is rotten in the Eurozone kingdom’, 28 July2015:https://www.ft.com/content/27db9c44-3483-11e5-bdbb-35e55cbae1759.SeeChapter2,‘“Nationaltraitor”–theoriginsofaquaintcharge’.

10.Thisisnotmycomparison.IoweittosomeonewhoappearedonaBBCtelevision discussion programme who said, ‘Saying that Varoufakis isresponsible for Greece’s economic woes is like saying Dunkirk wasresponsibleforWorldWarII.’

Epilogue

1. That annotated version of the August 2015 MoU can be found at:https://www.yanisvaroufakis.eu/wp-content/uploads/2015/08/mou-annotated-by-yv.pdf2.ThiswastheinauguralEuropeLectureoftheUniversityofWesternSydney,whichIdeliveredon23October2013at theNewSouthWalesStateLibrary,Sydney. The entire text can be read at:https://www.yanisvaroufakis.eu/2013/10/25/the-dirty-war-for-europes-integrity-and-soul-europe-inaugu-ral-public-lecture-uws-state-library-of-new/.AnaudiorecordingmadebyABCRadio’sBigIdeasprogrammecanbeheardat: http://www.abc.net.au/radiona-tional/programs/bigideas/the-dirty-war-for-europee28099s-integrity-and-soul/62615343. See ‘Positive affect as coercive strategy’ by Lynne Friedli and RobertStearn:http://mh.bmj.com/content/41/1/404. The complete transcript is available on the Wikileaks website:https://wikileaks.org/imf-internal-20160319/5. ‘Let thevictims’heads turn towardsErebus [thedeepdarkness]: /Wewhohadnothingwillteachthemtranquillity./Letthemnotforgetus.’Fromapoementitled‘Mythistorima’ inGeorgeSeferis,Poems (1989), Ikaros,Athens(mytranslation).

Acknowledgements

To thank all those who deserve gratitude for a book of this nature wouldrequireevenmorepagesthanthisheftyvolumealreadycontains.Trustingthattheyknow the extent ofmygratitude, I shall confinemyself to thanking justtwo persons: Will Hammond, my editor, whose perseverance, skills andtoleranceIhaveexploitedshamelessly,andChristineLagarde,towhomIowethebook’stitle.

APPENDICES

Appendix1Falsedawnsindeflationarytimes

Thereisadataseriesthatsupportstheestablishment’sviewthat2014didseearise in Greece’s national income. It is derived from so-called real nationalincome, or real GDP (gross domestic product) data – except that duringperiods of deflation (negative inflation) the economic term ‘real’ meanspreciselyitsopposite.Thisfascinatingstatisticalmirage,inwhichadepressionlooksdesirable,worksasfollows.Askedwhetheryouarebetterofftodaycomparedtoayearago,youwould

answerintheaffirmativeifyourmoneyincome(itsdollar,pound,eurooryenvalue)hadrisenduringthelasttwelvemonths.Butyoumightaccompanyyourresponsewith thereasonableproviso that thecostof livinghadgoneup too.Toaccountforthegapbetweenyourmoneyincomeanditscapacitytobuyyouthings, economists focus on yourmoney income’s purchasing power – alsoknownasrealincome–whichismoneyincomeadjustedforaverageprices.So toowith themeasurement of a nation’s aggregate income. Economists

begin by totalling everyone’s money incomes to derive nominal grossdomestic product – or, for simplicity, the nation’s total money income (N).ThentheyadjustthisnumberNforchangesinaverageprices(P)bydividingN by P. The resulting ratio (R) is used as the measure of the nation’s realincome(R=N/P).During inflationary times theutilityof the realnational incomenumber is

thatitstopsusfromgettingoverexcitedwhenwehearthatmoneyincomehasrisensubstantially.Forexample,atatimewhenpricesarerisingby,say,8percent,a9percentincreaseinmoneyincomestranslatedintoamere1percentgrowth in real income. So, clearly, in inflationary times the real nationalincome number is the one to look at before rejoicing that the economy isgrowing.OnlywhenR rises stronglydowehavegood cause tobelieve thateconomicactivityisrising.However, in periods of deflation (when prices are falling)R can be very,

verymisleading.Considerthefictitiousexampleinthetablebelowdepictingadeflationaryeconomy.

FromYear1toYear2thenation’smoneyincome(N)shrankby2percent(from100 to98)while the indexof averageprices fellby1per cent (from100 to 99). In the following year (Year 3), the recession deepened, with afurther2.04percentdropinmoneynational income(from98to96)andaneven larger fall in prices as deflation hit 6.06 per cent. This is what aneconomyslidingfromrecessiontowardssomethingreminiscentofdepressionlookslike:fallingincomesbutanevenfasterdeclineinprices.But lookat the last row:realnational incomeseemstohavebouncedback

emphaticallyinYear3,upfromYear2byahealthy4.28percent.Howcouldthat be? Well, this is a mirage caused by falling prices. Put simply, indeflationaryeconomieswherepeopleandthestatebearsignificantdebts,onlyrises in money (as opposed to so-called real) income are a cause forcelebration.Onemay retort that the rising ‘real’ number is always good news even if

money incomes are falling. For if prices are falling faster than moneyincomes,surelythismeansthatwecanaffordtobuymoreforless?Isthisnotagoodthing?Itisintheabsenceoftheusualspannerintheworks:debt.Forwhen people and governments are deep in debt, and as long as they paypositive interest on that debt, declining national income is a recipe forcollectiveinsolvency.Lastly, and for the record, in 2014 Greek nominal national income was

downby€2.8billionor–1.569percentwheninflationwas–2.21percent.Ifyou subtract – 2.21 per cent from – 1.569 you get a positive real growthnumber – a statisticalmirage covering up for a depression (falling income,fallingprices,risingdebt-to-incomeratios).Bycontrast,thatwasnotthecase

in2013,whennominalGDPfell–5.66percentandpricesby–2.54percent:subtract–2.54from–5.66andtheresultisstillanegativenumber.

Appendix2TheIMF'smotivatederror

TheIMF’smiscalculationoftheimpactthatthebailoutprogrammewouldhaveonGreece’seconomysurelyqualifiesastheworstbutalsothemostlucrativeinthehistoryofeconomicforecasting.AtthetimeofthefirstbailouttheIMFpredictedthatin2011itwoulddepressinvestmentby11.8percent.Theactualdrop in the investment level in 2011 was 19.4 per cent. For 2012 the IMFpredictedaboostof0.8percent,butitinfactfellagainby19.4percent.Andfor2013 the IMFhadpredicted investmentgrowthof4.8percent,but it felloncemore,thistimeby13.2percent.Turningtopriceinflation,theIMFwaspredicting–0.5percentfor2011,1percentfor2012,0.7percentfor2013,1percent for2014and1.1percentfor2015.Actualprice inflationwas1percentin2011,–0.3percentin2012,–2.1percentin2013and–2.6percentin2014.AttheheartoftheIMF’scalculationswasaseriouserror.Inordertopretend

thatby2022Greece’sdebtwouldbecurtailed,toendthecountry’sbankruptcy,theauthorsoftheGreekprogrammehadcalculated:

Howmuch surplus the state shouldgenerateover theperiod2015–22soastorepayitscreditors.Let’scallthisS(surplus).Howmuchnationalincome,orGDP,hadtogrowbyinorderforthatsurplustobepossible,giventhetaxes.Let’scallthisG(growth).The level of overall taxes the government should milk from theeconomytopayitscreditorsandrunthestate.Let’scallthisT(taxes).

Once theyhad these numbers, they announced themas targets.Theymadethe Greek financeministers and primeministers sign affidavits (also calledmemorandaofunderstanding)which said things like, ‘TheGreekauthoritiescommit to striving for a growth rate ofG thatwill allow for taxes T to becollected and leave at the end of each year a surplus equal to S. As S willsuffice to meet Greece’s debt repayments to creditors, Greece’s debt issustainable.’Itallsoundedgreatexceptforonelittleproblem:thethreenumbers(S,Gand

T)werecalculatedbackwards,startingfromwhatwasneededin2022torepayGreece’sdebt(intermsofcumulativesurplusS)andendingupwiththegrowth

rate G that should come into play at the beginning – from 2015. But theannouncement that the governmentwould be taxing business and families tothe tuneofT(theextraordinarysumnecessary togenerateS)wasenough tostopbusinessinvestingandfamiliesconsumingin2015.Putsimply,theTandSnumbersnecessarytomaketheprogrammework,tomakethe‘numbersaddup’(asIMFofficialsalwayssay),werenotjustinconsistentbutfundamentallyatoddswiththegrowthrateGthatwasnecessarytobringthemabout.DespiteitsspectacularpredictiveblunderGreeceprovedanicelittleearner

for the IMF. By the time I resigned, the bankrupt state had paid over €3.5billion in interestandfees to theIMF,averaging37percentof IMFtotalnetincome, and covering 79 per cent of its total internal expenses. Ever sinceGreeceentereddebtors’prison,theIMFhashadanaverageoperatingprofitof63 per cent, much larger than that of Goldman Sachs or J.P. Morgan. AndwherehavetheIMF’sprofitscomefrom?Europe’staxpayers,ofcourse.Inasense,BrusselsandBerlin-basedofficialswholookdiscomfitedeverytimetheIMF calls upon them to grant Athens debt relief do have a point: theInternational Monetary Fund wants Greece’s European creditors, who haveprovided the IMFwith immenseprofits, tohaircut thecountry’sdebt to thembutnot to itself.And thusGreece iscaughtbetween the IMF,whichcorrectlyproposesdebtreliefdespitehavingprofitedfromGreece’sbeingdeniedit,andtheEU,whichhasusedtheIMFtodenyGreecedebtrelief.

Appendix3WhyIhadruledoutbluffing

OneofthecoursesItaughtduring2012–14attheLyndonB.JohnsonSchoolof Public Affairs of the University of Texas was on Europe’s financial andeconomic crisis. As part of the course, I devised a game to demonstrate tostudents how simple game-theory analysis can elucidate a complex strategicinteraction.Thefollowingiscopiedfrommynotestostudents.

ThedayafteraSyrizagovernmentwinsofficeonamandatetochallengethelogicofthebailoutagreementkeepingGreeceinapermanentstateofdisrepair,theofficialcreditorsoftheEUandtheIMF(let’scallthemthetroika)willfaceachoice:

Thetroika’sfirstchoice

1. Be accommodating to the new government, leading to a viableagreement(Outcome1).(Gameover)

2. Adopt an aggressive stance towards the new government,including fomenting a bank run, preparing bank closures andthreateningGreecewithGrexit if Syriza do not sign up to theirfreshbailout.(Syriza’sturntomove)

Inthecaseof2above,Syrizahastwooptions:

Syriza’schoice

3.Surrenderandacceptthirdbailout(Outcome2).(Gameover)4.Fightback.(TheTroika’sturntomove)

Inthecaseof4above,thetroikahastwooptions:

Thetroika’ssecondchoice

5.Acquiescetoaviableagreement(Outcome3).(Gameover)6.PushGreeceoutoftheeurozone(Outcome4).(Gameover)

How will this confrontation play out? The answer depends on the twosides’ preference orderings. Figure 3 examines what will happen if thetwosidesare rational in theneoclassical senseofbehaving inamannerthat satisfies their preferencesbest, given logicallydefensiblebeliefs ofwhattheothersidewilldo,assumingitsknownpreferences.Thefollowingiscommonknowledge.ThetroikaprefersOutcome2to

1 andOutcome 1 to 3 – in symbols {2,1}& {1,3}. In plainwords, thetroika prefers a Syriza surrender to offering Syriza a fair deal at theoutset,butitalsoprefersofferingSyrizaafairdealattheoutsettodoingso after a fight with Syriza. The Syriza government prefers a quickcompromiseonafairdeal,Outcome1,toafairdealafterafight–{1,3}&{3,2}.WhatwilldeterminetheoutcomehingesonSyriza’srankingofGrexit

(Outcome4)inrelationtosurrender(Outcome2)andthetroika’srankingofGrexit (Outcome4) in relation to a fair deal once a fight has begun(Outcome3).Therearefourpossiblecases,depictedinFigure3below.

1. Syriza prefers surrender and a third bailout (Outcome 2) to Grexit(Outcome4),whilethetroikaprefersGrexittoanycompromise.Inthatcasethetroikawillbeaggressive,predictingthatSyrizawillsurrender,apredictionthatwillbeconfirmed.Thus,Outcome2.

2. SyrizaprefersGrexit(Outcome4)tosurrender(Outcome2),whilethetroikaalsoprefersGrexit(Outcome4)toacquiescingafterSyrizahasfought(Outcome3).InthiscaseGrexitisguaranteed,evenifboththetroikaandSyrizapreferaquickfairdeal.Thus,Outcome4.

3. Syriza prefers surrender and a third bailout (Outcome 2) to Grexit(Outcome4),butthetroikatooisGrexit-averse,preferringOutcome3toOutcome4.Thus,Outcome1.

4. Syriza prefersGrexit (Outcome4) to surrender (Outcome2), but thetroika isGrexit-averse,preferringOutcome3 toGrexit (Outcome4).InthiscasethetroikawillpredictthatSyrizawillfightifprovokedandsosettleimmediately–optforOutcome1bychoosingnon-aggression.Thus,Outcome1.

Theaboveofcoursepresupposesthateachsideknowsthepreferencesof the other. If they do not, a Grexit-averse troika may test the Syriza

government with initial aggression or, equivalently, a Grexit-averseSyrizamaytestthetroikabyfightingafterthetroika’sinitialaggression.

Reading these lecturenotesyears later,after theeventsnarrated in thisbook,should explain clearly why at the time I ruled out bluffing and insteadconcentrated all my energies on convincing my colleagues that, unless wefeared Grexit less than we feared surrender, there was no point in beingelected; indeed, the only way of keeping Greece within the eurozonesustainablywastofearGrexitlessthanwefearedathirdbailout.

Figure3:OutcomesdependingonthepreferenceorderingofthetroikaandSyriza.NB{X,Y}denotesapreferenceof

OutcomeXoverOutcomeY

Appendix4OptionsforGreekdebtliabilitymanagement

The debt-restructuring proposal in my non-paper contained three sectionscorrespondingtothreedifferentslicesofGreece’spublicdebtandwasbasedon earlier work I had done when still in Austin, with additional input fromLazard.

1.PERPETUALBONDSINEXCHANGEFORTHEECB’SSMPBONDS

CreditorshavealreadymentionedthepossibilityoflengtheningthematuritiesandreducingtheinterestbillchargedonGreece.Thisideashouldbetakentoits logical limit in the case of the SMP bonds that are held by the ECB andwhich would have been haircut massively had the ECB not purchased them.OurproposalisthatthissliceofGreece’sdebt,whichpresentlycomesto€27billion, should be swapped for a new perpetual bond, so as to avoid anyamortization.TheproposedswapoftheSMPbondsforanewperpetualbondwillnotreducethenominaldebt,butthisisasecondaryissuecomparedtothebenefitsofforegoingamortization.

2.GDP-INDEXEDBONDSTOBESWAPPEDFORTHEFIRSTGREEKLOANDEBT

Theoutstanding firstGreekprogrammedebt (alsoknownas theGreek loanfacility) can be swapped against GDP indexed bonds and/or asset-backedsecurities.Thatway,Greececouldsharewithitsofficialcreditorsthebenefitsoftherecovery.AspointedoutinanotebytheGermaninstituteDWI,themeritofGDP-indexed bonds is to introduce countercyclicality by linking the debtservicetothecountrygrowthperformance.However,given thehigh levelofinterestconcessionalityalreadygrantedonthedebt,theindexationcouldratherfocus on the amount of principal debt redemption. Asset-backed securitiescouldalsobeswapped inexchangefor theEFSFdebt. In thespecificcaseofbanks sharescurrentlyheldby theEFSF’sGreekbranch,Greececould swap

theseassetsforEFSFbonds,thusbenefitingfromthenewcapacitygrantedtotheEuropeanStabilityMechanismdirectlytoholdbankingassets.

3.SPLITTINGTHESECONDGREEKLOANEFSFDEBTINTOTWOPARTS

The outstanding second Greek programme debt to the EFSF can also beswappedforGDP-indexedbondsand/orasset-backedsecurities.Additionally,a splitting operation could help too: Greece’s debt obligations vis-à-vis theEFSFintotwoinstruments;halfofitturningintoa5percentinterest-bearinginstrument,andtheotherhalfintoaseriesofnon-interest-bearinginstruments(zerocouponbonds),repayingtheother50percentprincipalatmaturity.Thisidea follows the comment made by Klaus Regling, European StabilityMechanismdirectorgeneral,in2013statingthatthetrueeconomicburdenofthedebtisnotcorrectlycapturedbytheDSAanalysesundertakenbytheIMF.Thedebtparametersareas important toassessdebt sustainabilityas thedebtnominal level itself: EFSF loans are very long term,with very concessionalinterest rate reduced toEFSF funding cost.Themerit ofmaking explicit theconcessionality of the debt is to allow for a wider range of options. Theliability management exercise would then focus on the non-interest-bearingasset. In thesimpleroption thecreditorscouldcancel thepart thatcarriesnocoupon.Inrealeconomictermstheywouldloselittle,onlythemarketvalueofthe non-interest-bearing bonds, and would still cash the amount of interestoriginallydue.However,theimpactofdebtcancellationofhalfoftheEFSF’sclaim would have direct negative consequences on the EFSF itself and,subsequently, on member states’ fiscal accounts. One key objective of theforthcomingdiscussionwithEuropeancreditors,andpossiblytheECB,couldbe to structure amechanism thatwould bring toGreece the benefits of debtcancellationwhilespreadingovertime,inaphasedfashion,thedirectfinancialimpactoncreditors’publicaccounts.Inanotheroption,Greececouldoffertoswap the non-interest-bearing asset against other instruments such as asset-backed securities or theGDP-indexed bond previouslymentioned. In a thirdoption, thegovernment coulddirectly sell someof its assets to extinguishatmarketprice thenon-interest-bearing instrumentheldby theEFSF.TheEFSFcould then use these resources to purchase in the market zero-coupon

instruments to match its balance sheet. The debt owed by Greece would benominallyreducedbyhalfinsuchascheme.

Index

Thepagereferencesinthisindexcorrespondtotheprintededitionfromwhichthis ebook was created. To find a specific word or phrase from the index,pleaseusethesearchfeatureofyourebookreader.

Acropolis,Athens,42,70,117AdamSmithInstitute(ASI),198‘adultsintheroom’,2,122,246Aegina,Greece,191Aeschylus,21agora,42,51alt-right,2AmericanFederationofLabor,373anarchism,397Angelides,Phil,376anti-Semitism,71,142,428Arendt,Hannah,459Argentina,33,58–9,112,158Ariadne,13ArisandZorba,53–4,85,87,101,368ArtandConn,52–3,73Arvaniti,Natasha,120,122Asianfinancialcrisis(1997–98),158Asmussen,Jörg,134–7,158,206–8,217,219,432Assange,Julian,482Athens,GreeceAcropolis,42,70,117ByzantineandChristianMuseum,85Exarcheia,397–400Germanembassy,133–4GrandeBretagneHotel,230GreaterAthensconstituency,104–5,143GreekNationalTheatre,272

Hadrian’sGate,177HerodTheatre,177HiltonHotel,341,343MaximosMansion,45,122MegaronMusicHall,108MinistryofFinance,42,150NationalGallery,151NationalGardens,150,476NationalMuseumfortheContemporaryArts,420–21NewAcropolisMuseum,177,326PalaioPhaliro,464ParliamentHouse,42,78,150,156,223–9,429,450–51,459Plaka,464Psyrri,51,56,64,390StockExchange,197–9,202SyntagmaSquare,seeSyntagmaSquare

ATMs,450–51,454Austen,Jane,180austerity,7,9,33–7,40,123,131–3,152–4,375anddebtrestructuring,100,102,393andfeminism,154inGermany,40,132andbailout,first(2010),33–7andbailout,second(2012),50,58,60,72,125andbailout,third(2015),130andcentralbanks,29,35inIreland,132inItaly,132inLatvia,182andNewDemocracy,39andparallelcurrencies,112andparsimony,152–4inPortugal,132inSpain,34,40,42,132andtroikabudget(2015),392–5inUnitedKingdom,33–6,132,193andwarofthemodels,416–20

Austin,Texas,7,61–2,77,83Australia,35,68,397,473Austria,232,237

bailout,first(2010),19–20,26–7,29,33–4,37–8,119,306andausterity,33–7anddebtrestructuring,26,33,60,66,92,185–6andFrance,26–8,31,33–4,37,41,109andGermany,20,21,26–8,33–4,37,41,48,49,66,92,109andGrexit,33,109andInternationalMonetaryFund,19–20,26–7,29,38,41,46,55,157,184,197

andnationalincome,124andtaxpayers,27–9,32,37,114,186

bailout,second(2012),41,44–7,51–5,58–68,70–74,92,121,130,152,365andausterity,50,58,60,72,125anddebtrestructuring,38–41,44,45,74,92,185–6HellenicFinancialStabilityFund(HFSF),46–7,163,295,327,368MemorandumofUnderstanding(MoU),228–9andtaxpayers,46,47,52,53,59,65,70,114

bailout,third(2015),92,106,125,130,167,307,394–5MemorandumofUnderstanding(MoU),478–80,482parliamentaryvote,478–9referendum,443–77

Bailoutistan,9Bakadima,Fotini,161,384,387BankofEngland,22,35,193BankofGreece,118,155,2702012debtrepaymenttoECB,732014Stournarasappointedgovernor,72,77,84;announcementonliquidity,106–7,137–9,187,191,201

2015 withdrawal of junk collateral waiver, 168, 204, 207; Stournaras’sspeech to shareholders, 294;Chouliarakis faces firing fromCouncil ofEconomicAdvisers,302–4;IMFdefaultthreat,378,382;plantopayIMFannounced, 406; ninth Brussels Eurogroup, 446, 448; Council forSystemicStabilityconvened,450;BlackSunday,455,456

bankruptocracy,28–9

banksArisandZorba,53–4,85,87,101,368andausterity,100andbailout,first(2010),23–9,34,37,38,41,48,49,52,109andbailout,second(2012),46–7,51,52,60–61,106,130,131–2,368closuresof,seeclosureofbanksanddebtrepayments,73debtrestructuring,38derivatives,10,25,30,31Dragasakis’srelationswith,85–6,87,101,139,161,176europeanizationof,65–7,80,101,176globalfinancialcrisis(2008),11,23–6,30,31,33,35,48,134HellenicFinancialStabilityFund(HFSF),46–7,163,295,327,368,371junkcollateral,168,201–4andmedia,55nationalizationof,67,101non-performingloans,53,54,102,201,234,253offshorebanking,53,54–5runson,91,106–7,110–11,136,138–9,187,381,385,455andSpeculativeBubble,75–6taxpayerownershipof,65–7,80,101,176toobigtofail,138zombiebanks,55

BattleofCrete(1941),352BattleofThermopylae(480BC),223,317,462beaches,196Beatles,The,245Beckett,Samuel,272,402BeeGees,340Beethoven,Ludwigvan,214Belgium,237Bergman,Ingmar,156Bernanke,Ben,13Bible,146Bild,429Black,Bill,55,256BlackDeath,40

BlackSunday(2015),453–6Blackrock,130Blockupymovement,245‘Blood,SweatandTears’(Varoufakis),88–9Bloomberg,61,195,198,387,451BMW,153,179,305‘boomandbust’,12,48Brandt,Willy,220Brazil,27,74Brexit,1,22–3,480,484–5BritishBroadcastingCorporation(BBC),22,32–3,82,115,155,197,256–7,420

BritishRail,313BrookingsInstitution,77,325,374Brown,Gordon,12BrusselsGroup,340–45,349,354,361,364,366,381,385,391Buchheit,Lee,377–8,380,383Buiter,Willem,222,254,255,257Bulgaria,49,175bullying,311Bundesbank,79,93,94,439Bundestag,Berlin,25,239,240,346,414,431,438,441Burke,Edmund,351Byrnes,James,429ByzantineandChristianMuseum,Athens,85

Cairo,Egypt,16Cameron,David,123Can’tPayWon’tPay(Fo),339capitalcontrols,111–12,121,252,254–6,322,350,370,433,451Carrefour,255CatherineII,EmpressandAutocratofAlltheRussias,50CaymanIslands,174CentralBankofGreece,seeBankofGreeceCentralIntelligenceAgency(CIA),164CentreforEconomicandPlanningResearch,162Chamberlain,Neville,114

Champs-Elysées,Paris,181Chania,Crete,351–2Channel4News,172ChathamHouseRule,97–8Chatzis,Yiorgos,9Chile,212China,74,138,212,237,294,313–21,335,346–7,433Chios,Greece,442Chouliarakis,George,4592015 appointed to Council of Economic Advisers, 118; meeting withDijsselbloem, 165; prepares DSA, 176; first Brussels Eurogroup, 233,236, 239, 243–5; consultation with troika, 251; talks with Costello inBrussels; redrafting of reforms list, 282, 283–4, 287, 292; Eurogroupteleconference,290;loanextensionlettercrisis,293,295–6;facesfiringfrom Council of Economic Advisers, 296–304, 307; dismissed fromWorking Group, 307, 333, 344; meeting with Wieser, 326; works onconcessions to troika, 329; dismissed from Working Group meeting,333–4;BrusselsGroupmeetings,342;refuses tovisitWashington,373;reinstated to Working Group, 391, 394, 422, 459; concedes to troikabudget,393;decisiontodefaultonIMF,396;meetingwithSchäuble,407,409; war of the models, 416–20; Panaritis appointed representative toIMF, 425; drafting of SLA, 425; summoned to seminar by troika, 428;worksonSLA,431,432,435,460;seventhBrusselsEurogroup,435–6;eighthBrusselsEurogroup,437,440;bailoutreferendumproposed,443–4;meetswithWieserandCostello,444;Juncker ’snon-paper,453

Christensen,Lars,198ChristianDemocraticUnionofGermany,134,207,212,217,219Christianity,20,71,146Christoforakos,Michael,215–17Christoulas,Dimitris,9,150Churchill,Winston,89,114Citigroup,222,254,257CityofLondon,11,25,36,48,171,194–6,202,204,309cleaners,154,233–4Cleese,John,125closureofbanks,66BlackSunday(2015),453

andCyprusbailout(2013),78–9,91–2,168andEurogroup,168,213,240,242,243,249andGreekbailoutreferendum(2015),446,448–53andGreekgeneralelections(2015),84–5,91–7,102,106–7,110–11,124,139,141

andIrishbailout(2010),110,222andjunkcollateralwaiver,168,201,205,306andtroikanegotiations(2015),253–4,274,290,356,370,380,381,433andwaterboarding,306

CNN(CableNewsNetwork),157Cœuré,Benoît2015meetswithVaroufakis in Paris, 171, 185–7;meetingwithDraghi inFrankfurt, 200, 204; Eurogroup Riga meeting, 384; first BrusselsEurogroup, 232; fourth Brussels Eurogroup, 332, 334; Eurogroupteleconference, 344; FrankfurtGroup established, 349; plans for troikamovetoParis,380–82;discussesbankclosureswithVaroufakis,382–3;RigaEurogroup,384,389;LuxembourgEurogroup,430

cognitivedissonance,475Cohen,Daniel,121ColdWar,16,347ColumbiaUniversity,123,157CommercialBankofGreece,69communism,15,17,59,86,108,141,145competitiveness,36–7,212,268–9,408ConfederationofNorthGreekIndustries,175Constâncio,Vítor,452constructiveambiguity,274constructivedisobedience,60,485Corinthia,16corporatetax,100,416corruption,23,48,49,54,172–6,215–17,369Cosco,138,313–19CosmosClub,376Costello,Declan,3082015meetingwithVaroufakis,165;consultationwithSyriza,252;draftingof Syriza reform list, 283–7, 292, 297, 300; BrusselsGroupmeetings,

340,342;WorkingGroupteleconference,344–5;ninthBrusselsmeeting,444

CouncilforSystemicStability,449–50CouncilofEconomicAdvisers,69,4242015Chouliarakisappointedpresident,118;meetingwithtroika,165;DSAdrawnup,176;consultationwithtroika,251;draftingofreformlist,284;Chouliarakis faces firing, 300–304, 307; Chouliarakis refusesWashington visit, 373; war of themodels, 416–17; bailout referendum,452

CréditAgricole,255creditcards,38,41,96,136,187,272,311Crete,Greece,10,78,351–2,429Cyprus,78,79,91–2,110,120,168,254,382

DailyTelegraph,195,330Danis,Panayiotis,173,478debtrestructuring,7,38,58,183,322andbailout,first(2010),26,33,60,66,92,185andbailout,second(2012),38–41,44,45,74,92,185,425andbailout,third(2015),460,466,470–72andBrusselsGroup,340,342anddebtsustainabilityanalysis(DSA),176,221,226andEurogroup,167,252,291–2,298,321–2,327,329andEuropeanCentralBank(ECB),200,203,235,308,377andEuropeanCommission,183,283,340andEuropeanFinancialStabilityFacility(EFSF),185inFive-ProngedStrategy,65–8,77,80,100–102andFrance,33,183,185,186,188andgeneralelection(2015),113–15,140,385,395andGermany,33,41,60,66,74,76,113,178,268–70,310–11,378,432inIceland,121andInternationalMonetaryFund(IMF),74,235,224,235,308,332,361,363,379

andJuncker,452–3,453N+1Plan,372–3non-paper(2015),177–9,195,201,203–4,212,218–19

and Organisation for Economic Co-operation and Development (OECD),229–31

inPlanforGreece,403,406,414,425,426inPoland,379PretendDebtRestructuring,75,76andreformslist(2015),283ofSMPbonds, 114, 186, 203–5, 249, 256, 268, 270, 290, 322, 324, 373,448,452,468,470

inStaffLevelAgreement(SLA),425–8,437swaps,7,114–15,121,178,184,186,200,212,221,334,403,406,414andtroikabudget(2015),393andUnitedKingdom,192,195,199

debtsustainabilityanalysis(DSA),176,221,226Delors,Jacques,262democracy,225–6,237–8,483–5DemocraticParty,373derivatives,10,25,30,31Dervish,Kemal,325DeutscheBank,25,112,123,171,194,210developmentbank,67,101–2,201DiEM25(DemocracyinEuropeMovement),484–5dignity,10,42,89,321Dijsselbloem,Jeroen,135,182,186,188,202,212–13,2562015 meets with Varoufakis, 155–6, 164–71, 188, 289–90; first BrusselsEurogroup, 231–3, 235–6, 238–41, 243–4, 246–8, 282; meeting withSyriza MPs, 249–50; draft communiqué negotiations, 259–61; secondBrussels Eurogroup, 261–2; 20th February agreement, 272–3, 275–6,278,283,288,326;Eurogroupteleconference,287–9;preparesletterforGreekloanextension,293;campaignsforChouliarakis’sreinstatementtoEurogroup Working Group, 307; Syriza demands implementation ofreforms, 324; Varoufakis makes €1.2 billion reserve request, 327–8;fourth Brussels Eurogroup, 334–6; demands troika return to Athens,339–40; Eurogroup Riga meeting, 384, 385, 387, 460; demandsdismissalofVaroufakis,391;ChouliarakisreinstatedtoWorkingGroup,391, 422; Syriza concedes to troika budget, 393; LuxembourgEurogroup, 431; seventh Brussels Eurogroup, 435; eighth BrusselsEurogroup,437,438,441,442,443;ninthBrusselsEurogroup,445

Dimbleby,David,33‘DirtyWarforEurope’sIntegrityandSoul,The’(Varoufakis),480divideandrule,292,306–8,342Dombrovskis,Valdis,232,288–9Donne,John,483double-speak,289drachma,58–9,75,451,456Dragasakis,Yannis,145,4592012 general elections; Varoufakis prepares Five-Pronged Strategy, 64;announcementofSyrizaeconomicpolicies,68

2013VaroufakispresentsenhancedFive-ProngedStrategy,78,812014ECBannouncesbanonIOUs;meetingsonstrategy,84;rumoursaboutrelations with bankers, 85–6, –6, 87, 161; Thessaloniki Programmeannounced, 90; meeting on ECB, 90–95; Varoufakis outlines parallelpayments plan, 96–7;Varoufakis offered financeminister position, 99–105,139

2015 Council of Economic Advisers appointments, 118, 251; Varoufakisassembles financeministry team,117;bankingconnectionsdiscussedbySagiasandVaroufakis,139;Koutsoukosappointedfinanceministrychiefof staff, 161; jurisdiction over banks moved to deputy prime minister,176; Varoufakis’ non-paper on debt restructuring, 178; meeting withGurría, 230; Eurogroup meeting, 233, 236, 238–9, 244–5, 247, 333;meeting onMerkel, 248; consultationwith troika in Brussels, 251;warcabinet atMaximos, 269–71; loan extension letter crisis, 295, 296, 297;Chouliarakis faces firing,301;meetingwithWieser,326;visitsBeijing,319; IMF default called off, 358–9;Chouliarakis reinstated toWorkingGroup, 391; decision to default on IMF, 396; Panaritis appointedrepresentative to IMF, 424–5; drafting of SLA, 425–6; seventhBrusselsEurogroup;rowwithTsakalotos,435–6;eighthBrusselsEurogroup,437;bailoutreferendumproposed,443–4;warcabinetonbankclosures,448–9;CouncilforSystemicStabilityconvened,450;bailoutreferendum,452;Juncker ’s non-paper, 453; suggests dismissal of Varoufakis, 469; thirdbailoutagreement,471–2

Draghi,Mario,1,22012 Greek T-bill limit increased, 311; Grexit taken off table; Merkel-Samarasmeeting,74,135;launchofbondbuyingplan,79,93

2013Cyprusbailout,79,110

2014 European Court of Justice investigates bond buying, 79, 93;speculationonGreekbankshutdown,84–5,93–5

2015 Greek general elections, 110, 112, 114, 131; Greek T-bill limitdecreased,311–12,318,319; launchofQEprogramme,92–5;bankruninGreece,138;meetingwithVaroufakisinFrankfurt,171,200–206,211;withdrawalofGreekjunkcollateralwaiver,201–4,207–8;firstBrusselsEurogroup, 232, 243, 249; consultation with Syriza, 256; Juncker ’scommuniqué,259;20thFebruaryagreement,273,275–8;Syrizasubmitsreformslist,281,285;Eurogroupteleconference,289;mediabattlewithSyriza, 324; fourth Brussels Eurogroup, 330, 332–4; Brussels Groupestablished,340;FrankfurtGroupestablished,349;GreecethreatensIMFdefault, 358, 365, 368, 370, 371, 374, 378, 379; talkswithVaroufakis,377; Eurogroup Riga meeting, 385–6; Luxembourg Eurogroup, 430;sixthBrusselsEurogroup,434–5;eighthBrusselsEurogroup,437,438,439, 441; ninth Brussels Eurogroup, 447; Greek bailout referendum;bankclosures,452,456,458,474

Dublin,Ireland,52Dunkirkevacuation(1940),473

EarthInstitute,157EastGermany(1949–90),212EconomicandFinancialAffairsCouncil(Ecofin),194,387EconomicCrimeFightingUnit(ECFU),218Economist,The,280Ecuador,482Egypt,16,134elections2008localelections,562009generalelections,56,692012generalelections,44,45,59,62–4,66,68,70–722014Europeanparliamentaryelections,72,76,77,842015generalelections,6,17–18,20,38,84,88,91,98,104–16,117–48

electricity,126,196Eliot,ThomasStearns,124,177,390Ellsberg,Dan,458emergency liquidity assistance (ELA), 84, 138–9, 201, 208, 255, 370, 381,434,446

Endgame(Beckett),402EndingtheGreekCrisis,414ERT,38–40,83,131,420–21EssexUniversity,161Eurogroup,40,80–82,98,104,186,1992012secondGreekbailout,64,73,74;PretendDebtRestructuring,752013Cyprusbailout,79,1682014extensionofsecondbailoutagreement,1062015DijsselbloemmeetswithVaroufakis,155–6,164–71,213;Sapinmeetswith Varoufakis, 187–91; withdrawal of Greek junk collateral waiver,201–3, 207–8, 306; firstBrusselsmeeting, 221–3, 226–7, 229, 231–47;draftcommuniquénegotiations,257–61;secondBrusselsmeeting,261–5;Syriza sends extension request, 271; 20th February agreement, 272–80,321, 347; Syriza submits reform list, 281–7; teleconference on Greekreforms, 287–92; Chouliarakis dismissed from Working Group, 307,333;Syrizademandsimplementationofreforms,324;WiesermeetswithSyriza, 326; fourth Brussels meeting, 329–30, 331–6; Working Groupteleconference, 343–5; Riga meeting, 383–9, 395, 423, 460; fifthBrussels meeting, 406, 407; Luxembourg meeting, 430–32; sixthBrussels meeting, 434; seventh Brussels meeting, 435; eighth Brusselsmeeting,437–43,472;ninthBrusselsmeeting,445–7

EurogroupWorkingGroup,118,135,165,231,282,293,308,3272012secondGreekbailout,163,368,295,327,3682015ChouliarakisreplacedbyTheocarakis,307,333,344;teleconference,343–5;Chouliarakisreinstated,391,394,422

EuropeanCentralBank(ECB),191998foundation,242000establishmentofeurozone,24,292010 first Greek bailout, 19, 20, 186; launch of SMP, 93, 113; Irelandpressuredintoacceptingbailout,110,222

2012 Plan Z drawn up, 105, 135, 158; SMP loans exempted fromGreekhaircut, 113, 186; Greek T-bill limit increased, 187, 311; Greek loanpayment, 72–3; Merkel-Samaras meeting, 74; Draghi launches bondbuyingplan,79,93,135,168

2013Cyprusbailout,78–9,91–2,3822014EuropeanCourtofJusticeinvestigatesbondbuying,93;guaranteeofGreekgovernmentbonds,75,76,83;IOUbanannounced,84;speculation

onGreekbankshutdown,84–5,91–7,102,106–72015Greekgeneralelections,110–16,136–8,168,191;GreekT-bill limitdecreased,311–12,318,319;launchofQEprogramme,92–5,188,204;Dijsselbloem meets with Varoufakis, 171, 183; Cœuré meets withVaroufakis, 185–7; ASI statement on bailouts, 198; meeting withVaroufakis in Frankfurt, 200–206; withdrawal of Greek junk collateralwaiver,168,201–4,207–9,222,306;firstBrusselsEurogroup,232,234,241, 245; consultationwithSyriza, 251–6; Juncker ’s communiqué, 259;20thFebruaryagreement,272–80;Syrizasubmits reformlist,281,285,286; Eurogroup teleconference, 287–92; return to Athens refused, 323;media battle with Syriza, 324; fourth Brussels Eurogroup, 330, 332–5;Brussels Group established, 340; technical team visits Athens, 340–45;FrankfurtGroupestablished,349;GreecethreatensIMFdefault,358–61,365,368,370–71,374,377–9,381–3;RigaEurogroup,383–8,395;fifthBrussels Eurogroup, 406–12; Luxembourg Eurogroup, 430–32; sixthBrussels Eurogroup, 434–5; seventh Brussels Eurogroup, 435; eighthBrussels Eurogroup, 437–43; ninth Brussels Eurogroup, 445–7; BlackSunday,455–6,474;Greekbailoutreferendum,468,470

2016 German Constitutional Court investigates bond buying, 79; warningagainstBrexit,22

EuropeanCommission(EC),26,62,214,226,3082010firstGreekbailout,first(2010),19–20,38,532013Cyprusbailout,1202015 Costello meets with Varoufakis, 165, 170; Moscovici meets withVaroufakis, 182–3; first Brussels Eurogroup, 231–47; consultationwithSyriza, 250–56; Juncker ’s communiqué, 257–62, 264–5, 272; secondBrusselsEurogroup,262,264–5,268;20thFebruaryagreement,272–80;submissionofGreekreformslist,278,281,285;CostelloredraftsGreekreforms list, 282, 283–4, 287, 292; Eurogroup teleconference, 287–92;returntoAthensrefused,323;fourthBrusselsEurogroup,330;BrusselsGroupestablished,340; technical teamvisitsAthens,340–45;FrankfurtGroup established, 349; Moscovici meets Varoufakis in Washington,381–2;RigaEurogroup,383–8,395;fifthBrusselsEurogroup,406–12;Luxembourg Eurogroup, 430–32; sixth Brussels Eurogroup, 434–5;seventh Brussels Eurogroup, 435; eighth Brussels Eurogroup, 437–43;ninthBrusselsEurogroup,445–7

EuropeanCouncil,248,383

EuropeanCourtofJustice,93EuropeanFinancialStabilityFacility(EFSF),185,272,338,440EuropeanInvestmentBank(EIB),68,188,234,266EuropeanMonetarySystem,123EuropeanParliament,72,76,83–4EuropeanStabilityMechanism(ESM),204,338,439,462EuropeanUnion(EU),14Evans-Pritchard,Ambrose,195evictions,102,282,284Exarcheia,Athens,397–400expansionarycontraction,35

FairandAccurateCreditTransactionsAct(FACTA),151fakenews,2fascism,17,43,63,76FederalReserve,12,24,29,36,209,348feminism,17,154,479financialcrisis(2008),11,12,13,23–6,28,30,124,375,376,402,481FinancialCrisisInquiryCommission,376financialderivatives,10,25,30FinancialTimes,171,192,198,343,412,430Finanzbank,25Finland,27,232,241,244firesales,46,163,183,196,201,234,285,313Five-ProngedStrategy,A(Varoufakis),61–8,78–82,83,85,88,93,95,100Flabouraris,Alekos,455–6Flassbeck,Heiner,83Florence,Italy,90Fo,Dario,339Ford,Henry,239foreigninvestment,313Foster,Norman,25FoundationsofEconomics(Varoufakis),57Foxconn,315France,21,22,60,95,134,168,180–912000creationofeurozone,292008globalfinancialcrisis,23,28,31,48

2009bankingcrisis,23–5,312010firstGreekbailout,26–8,31,33–4,37,41,1092011plansforsecondGreekbailout,41,522015 ECB launches QE, 93; Dijsselbloem meets with Varoufakis, 171;Varoufakismakesvisit,171,172,177,180–91;Eurogroupmeeting,236,237,239,242;HollandevisitsKievandMoscow,248;plansfortroikatomove to Paris, 381; Varoufakis makes visit, 404; Greek bailoutreferendum,453–4

FrankfurtGroup,349–50free-marketcapitalism,28,36,37FSB(Federal’nayasluzhbabezopasnosti),303Fujimori,Alberto,119

Gabriel,Sigmar,206,217–20,324,429,453Galbraith,JamesKenneth,81,157,158,188,3482012VaroufakismovestoAustin,61–22013NewYorkTimes op-ed on Syriza, 78; supportsERT inThessaloniki,83,131

2015 Greek general elections, 123–4, 130–31, 139; calls Varoufakis atMinistryofFinance,158;SanderswritestoYellen,209;movestoAthenstoassistVaroufakis,221,224; consultationwith troika inBrussels,251,253,254;mediabattlewithDraghi,324;CosmosClubdinner,376;meetswith Buchheit, 377; works on Plan for Greece, 403;Ending the GreekCrisispresentedtoSchäuble,414;discussesreferendumwithVaroufakis,464

Galbraith,JohnKenneth,32gambling,172,174–5,402,422,479gametheory,222–3,429gas,129Gazprom,129GDP-indexedbonds,121GeneralMotors,45GenesisofBailoutGreece,The(Varoufakis),108–9Germany,452008 global financial crisis, 23, 25, 28, 33, 48, 134;Merkel’s ‘Swabianhousewife’speech,25

2009bankbailout,25,31;requestforsecondbankbailout,25–6

2010firstGreekbailout,20,21,26–8,33–4,37,41,48,49,66,1092011secondGreekbailoutplanned,41;Merkel-Samarasmeeting,74–5,44;secondbailoutagreement,52

2012secondGreekbailout;Greekgeneralelections,58,62,63,67,68,70;Schäuble rejectsLagarde’splanforGreekdebt restructuring,74;Grexittakenofftable;Merkel-Samarasmeeting,135;SchäublepromisesGreekdebtrestructuring,75–6

2013introductionofminimumwage,1342014EuropeanCourtofJusticeinvestigatesECBbondbuying,932015 Varoufakis visits Athens embassy, 133–4; Varoufakis makes visit,200–220;Eurogroupmeeting,236–45;MerkelvisitsKievandMoscow,248;troikaconsultationwithSyriza,253;Schäubleproposescompromiseto Syriza, 269; 20th February agreement, 272–80; Eurogroupteleconference, 287–92; Merkel sendsWieser to Athens, 326; SchäublemeetswithVaroufakis;suggestsGrexitinevitable,337–9,361,364,365,369, 373; scuttling of Greece-China deal, 321, 354; Schäuble visitsWashington, 374, 379, 381; Schäuble’s Grexit proposal, 123, 407–13,442; Varoufakis makes visit, 429; Luxembourg Eurogroup, 431; sixthBrussels Eurogroup, 434–5; eighth Brussels Eurogroup, 438–43; ninthBrusselsEurogroup, 443;Greek bailout referendum, 452–3, 458; thirdGreekbailout,7,21

2016 inauguration of DiEM25, 484–5; German Constitutional CourtinvestigatesECBbondbuying,79

Gibraltar,314Glezos,Manolis,281,282,290global financial crisis (2008), 11, 12, 13, 23–6, 28, 30, 124, 375, 376, 402,481

GlobalMinotaur,The(Varoufakis),28Goebbels,Joseph,353Goethe,JohannWolfgangvon,214golddeposits,378GoldenDawn,43,63,76,141,157,159,215,223GoldmanSachs,240Göring,Hermann,215GrandeBretagneHotel,Athens,230GreatDepression(1929–39),125,128,229,484GreatModeration,13,48

GreaterAthensconstituency,104–5,143‘Greedisgreat’,11GreekCivilWar(1946–9),15,347Greekcoupd’état(1967),181,465GreekNationalTheatre,Athens,272GreekRevolution(1821),351,374GreekSpring(2015),1,305,474,475,479–80,482,483,484GreekSuccessStory,74–7,83,114Greek-covery,128,161GreenhamCommonPeaceCamp(1981–2000),154Grexitandbailout,first(2010),33,109andbailout,third(2015),123,452,474andEurogroup,168–9andAFive-ProngedStrategy,79,81,82,83andgeneralelections(2012),57–60,67,74–5,135andgeneralelections(2015),87,94–5,98,101–3,108–9,111,145andGreekSuccessStory,74andIMFdefaultthreat(2015),361,364,365,373,374,377,378,386,407–13

andItaly,409andLeftPlatform,83,145,285,451,455–6PlanX(Syriza),105,158,373,457–8PlanZ(ECB),105,135,158andSchäuble,123,131,338–9,346,350,361,364–5,373,386,395,405,407–13,422–3,442

andSpain,405,409andtroikanegotiations(2015),123,168–9,195,229,256,337–9

Guindos,Luisde,232,236,240,275,276,405,430Gurría,Ángel,229–31,430

Hadrian’sGate,Athens,177haircutsandbailout,second(2012),26,41,46,52,65,74,113ofpublicdebt,114,178,188,269,474ofSMPbonds,79,94,102,113–16,205,249,256,270–71,280,290,322–4,373,448,452,468,470

HappyDays(Beckett),272HarvardUniversity,7Hayek,Friedrichvon,328healthcare,128hedgefunds,36Hegel,GeorgWilhelmFriedrich,214HellenicFinancialStabilityFund(HFSF),46–7,163,295,327,368,371,439–40,481

HellenicGamingCommission,175,422Herakleion,Crete,429HerodTheatre,Athens,177HighNoonnarrative,155,165,222HiltonHotel,Athens,341,343HIV(humanimmunodeficiencyvirus),128Holland,Stuart,57,81,188Hollande,François,60,171,182,187,248,426,452,453–4homelessness,17–18,22,50,80,133,143,284,323,464,476–7Homer,121,309Honey,IShrunktheKids,451Hoyer,Werner,266HumanitarianCrisisBill(2015),324–5,345,367humanitariancrisis,37,49,80,97,228,241–2,249,264–5,282–4,375,403Hyundai,179

Iceland,121identitycards,96Iliad(Homer),121IndependentGreeks,141–2,144,146,329–30,348,436,469India,74,212Indignadosmovement,42Indonesia,27industrialproduction,128insidersandoutsiders,8–15,22insolvency,30,37institutions,212–13,308,337interestrates,30InternationalMonetaryFund(IMF),2,54,96,308

1990adjustmentprograminPolandbegins,3791995Argentinabecomesreliantonloans,331996loantoRussia,1581997Asianfinancialcrisis,1582009Frenchbankingcrisis,24,292010firstGreekbailout,19–20,26–7,29,38,41,46,55,157,184,1972011preparationsforsecondGreekbailout,38,41,44,46,582012Greekgeneralelections,59,60,63,64,65,66;Greekloanpayment,72;LagardepressuredonGreekdebtrestructuring,74,131

2013 speculation on Grexit, 81; Greek banks’ recapitalization labelledinadequate,131–2

2014leakingofGreekdebtstatistics,130;Samarasappliesforextensionofsecondbailoutagreement,106

2015 Greek general elections, 112, 113, 136; Sanders’ letter on Greece,156–7, 158–9;DijsselbloemmeetswithVaroufakis, 171, 183;Thomsenmeets with Varoufakis, 183–5, 224; Varoufakis meets with USambassador, 224; LagardemeetswithVaroufakis, 20–22, 36, 133, 231;firstBrusselsEurogroup,232,234–5,245;consultationwithSyriza,251–6;Juncker ’scommuniqué,259;Syrizasendsextensionrequest,271;20thFebruaryagreement,272,275;Syrizasubmitsreformlist,281,285,286;Eurogroupteleconference,287–92;returntoAthensrefused,323;fourthBrusselsEurogroup,330,331–2,333,334;technicalteamvisitsAthens,340–45; FrankfurtGroup established, 349;Greek loan payments, 318–19,327,337,353–4;Greekprimarybudgetdeficitclaim,353;LagardemeetswithVaroufakisonGreekdefault,356–71,374,457;meetingswithVaroufakis in Washington, 378, 380; Riga Eurogroup, 383–8, 395;Syriza decides to default, 396, 406; fifth Brussels Eurogroup, 406–12;war of the models, 418–19; Greek loan payment deferred, 428–9;Luxembourg Eurogroup, 430–32; sixth Brussels Eurogroup, 434–5;seventh Brussels Eurogroup, 435; eighth Brussels Eurogroup, 437–43;ninthBrusselsEurogroup, 445–7;Greekbailout referendum,452; thirdGreekbailoutagreement,7,11,14,97

investmentbank,283,285Ioannou,Yannis,402Iran,346Irelandausterity,132,222

bailout(2010),110,168,222andEurogroup,165,168,232,237,274andEuropeanCentralBank(ECB),75,79,110,222,252andEuropeanFinancialStabilityFacility(EFSF),185andglobalfinancialcrisis(2008),26andGreekbailout(2010),27

Itistimetoopentheblackboxes!,10Italy,90,139,171,199–200,337,404austerity,132andEurogroup,232,404andEuropeanCentralBank(ECB),75,78,79,93globalfinancialcrisis(2008),24,25labourmarketreforms,199–200

Japan,29,74,113JohnsHopkinsUniversity,164Joplin,Janice,438journalism,seemediaJuncker,Jean-Claude,26,135,257–8,260,262,349,452–3junkcollateral,168,201–4,207–9,222,273,306

Kafetsi,Anna,420–21Kafouros,Wassily2014warnsVaroufakisofDragasakis’sbankingconnections,85–6,87,1612015ChouliarakisappointedCouncilofEconomicAdviserspresident,118;generalelections,144;hiredbyVaroufakisasminder,162;meetingsoncorruption, 172–3, 175–6; first Eurogroup, 233; loan extension lettercrisis, 294–5; Tsipras concedes to troika budget, 394; newVAT policylaunched,419;bailoutreferendum,452,465

Kalogeropoulou,Anna,161Kammenos,Panos,141–2,144,329–30,348,436,469Kant,Immanuel,214,223Kazantzakis,Nikos,438Kennedy,JohnFitzgerald,480Keynes,JohnMaynard,153,364Kim,Glenn,120–22

2015 enlisted by Varoufakis; general elections, 120–22, 137, 140; ECBwithdrawswaiver,208–9;firstEurogroup,221;consultationwithtroika,251–2,254;negotiationswithCosco,314;BrusselsGroupmeetings,342;works on debt swap proposals, 426;meetingwithWieser andCostello,444

Kissinger,Henry,274,308Konstantopoulou,Zoe,223–4Kos,Greece,437,442Koutsoukos,George,161,172–3,175,293,294–5Krimpas,Georgos,68–9Krugman,Paul,58,222

LabourParty,1,57Lafazanis,Panayiotis,145,455–6Lagarde,Christine,1,2,3252009Frenchbankingcrisis,24,292010firstGreekbailout,27,292012proposalforGreekdebtrestructuring,74,752015Sanders’letteronGreece,157,158,224;meetswithVaroufakis,20–22,29,36,133,231;Eurogroupmeeting,232,241,242,244;Juncker ’scommuniqué, 259; Schäuble proposes compromise to Syriza, 269; 20thFebruaryagreement,272,275,278;Syrizasubmitsreformlist,281,285;Eurogroupteleconference,289;BrusselsGroupproposal,340;technicalteam visits Athens, 341; Frankfurt Group established, 349; meets withVaroufakisonGreekdefault,356–71,374,429,457;Greekloanpaymentdeferred, 429; Luxembourg Eurogroup, 430–32; eighth BrusselsEurogroup,437,439,441;Sanders’letteronGreekbailoutreferendum,452

2016warningagainstBrexit,22Laius,KingofThebes,3Lambros,17–18,22,50,80,133,143,284,323,476–7Lamont,Norman,162,430,4602012debatewithVaroufakisinMelbourne,35–62015Greek general elections, 122–3;Varoufakis visitsLondon, 171, 192,196; comments on 20th February agreement, 280; helps with Plan forGreece,396,403,406;Greekbailoutreferendum,467

landtax,76

Latvia,182,232,288,372,383Lautenschläger,Sabine,200,204Lazard,121–2,221,226,251,254,342,406leatherjacket,181,192,194LeeKuanYew,237LeftPlatform,108,195,279,297–8,342,469andGrexit,83,145,285,451,455–6

LehmanBrothers,30Lenin,Vladimir,162Lesbos,Greece,437,442Lew,Jack,14,157,224–5,325,353,376,378liberalism,480,482libertarianism,36,37,198,362Lipton,David,119,224,324,377,379–80,383Lithuania,232,237LondonDebtAgreement(1953),169Luxembourg,26Lygeros,Stavros,459LyndonB.JohnsonSchoolofPublicAffairs6–7,61

Macbeth(Shakespeare),2,3,23,29Macron,Emmanuel,181,191,242,274,276,404,453–4Madoff,Bernard,184Major,John,35,162Malaysia,74,113Malta,232,440ManchesterUniversity,118manufacturing,128Mardas,Dimitris,118Marsh,David,97,192,196MarshallPlan,229Marx,Karl,27Mason,Paul,172Masuch,Klaus,252MaximosMansion,Athens,45,122Mayer,Thomas,112,123,396,403Mazzucato,Mariana,403

McKinsey,181mediaandbailoutreferendum(2015),461–2,464,475–6andbanks,55,369blackout(2013),82–3,420ERT,38–40,83,131,420–21HighNoonnarrative,155,165,222OperationTruthReversal(2015),310andparallelpaymentssystem,98,473andpowernetworks,12propaganda,286,353,368,373,386–8

MegaronMusicHall,Athens,108Melbourne,Victoria,35MemorandumofUnderstanding(MoU),143,228–9,3452012secondbailoutagreement,228–9,424–52015firstBrusselsEurogroup,236,239,240,246;warcabinetatMaximos,266; 20th February agreement, 272–3, 275, 278–9, 281–3, 285, 360;Eurogroup teleconference, 288–92, 298–9, 303, 326; fourth BrusselsEurogroup, 329; annotation of disputed points, 348, 362; Greek IMFdefault threat, 360, 362, 379–80; Chouliarakis reinstated to WorkingGroup,391;PlanforGreece,406;SchäublemeetswithVaroufakis,407–9,413–15;Panaritisappointed representative to IMF,424–5;draftingofSLA, 425;LuxembourgEurogroup, 431; third bailout agreement, 478–80,482

Mercedes-Benz,165,305Merkel,Angela,7,59,207,345–50,3642008‘Swabianhousewife’speech,252009Germanbankbailout,25;requestforsecondbankbailout,25–62010firstGreekbailout,27,60,662011Greekdebthaircutplanned,41;meetswithSamaras,442012 discusses debt-sharing with Monti, 61; Greek general elections, 68;Grexittakenofftable;meetingwithSamaras,74–6;Draghilaunchesbondbuyingplan,79

2013introductionofminimumwageinGermany,1342014speculationonGreekbankshutdown,92–52015Greekgeneralelections,113,131,133,178;visitsKievandMoscow,248; orders Dijsselbloem to reach agreement with Syriza, 250; troika

consultationwithSyriza, 253; 20thFebruary agreement, 274, 275, 325,347; sendsWieser toAthens, 326, 328–9; FrankfurtGroup established,348–50,389;GreekIMFdefaultthreat,354,364,373,377–9,383;talkswith Tsipras, 383, 388–9, 460; Schäuble’s Grexit proposal, 410, 412,413,442;draftingofSLA,426;Varoufakis calls for ‘SpeechofHope’,429; eighth Brussels Eurogroup, 435; ninth Brussels Eurogroup, 443;Greekbailoutreferendum,452,453,458

MerkelBoost,74–6Merkouri,Melina,177Mexico,230MI5,303miners’strike(1984–5),43minimumwage,127,128,134,234‘MinisterNoMore’,471MinistryofCulture,421MinistryofForeignAffairs,145–6Mises,Ludwigvon,328moderation,154–6ModestProposalforResolvingtheEuroCrisis,57,60,81,85,124,188,218Moghadam,Reza,197Monnet,Jean,190MontyPython,125MorganStanley,197Moscovici,Pierre,135,268,285,289,3082015meetswithVaroufakisinParis,171,182–3;firstBrusselsEurogroup,232, 242, 244; Juncker ’s communiqué, 258–62; second BrusselsEurogroup,262,264–5,268;submissionofGreekreformslist,278,281,285; Eurogroup teleconference, 289; fourth Brussels Eurogroup, 335;meets with Varoufakis, 340; Frankfurt Group established, 349; meetsVaroufakis in Washington, 381–2; Eurogroup Riga meeting, 384–5;meetswithVaroufakisinParis,404;LuxembourgEurogroup,431;sixthBrusselsEurogroup,434

Mussolini,Benito,139Mykonos,Greece,218

N+1Plan,372–3NationalConfederationofIndustries,60

NationalGallery,Athens,151NationalGardens,Athens,150,476nationalincome,19,28,34,80,100,102,124–8,132–3,392–3nationallottery,129,174–5,422,479NationalMuseumfortheContemporaryArts(EMST),420–21NationalSecurityCouncil(NSC),397nationaltraitor,29,473nationalism,1,43,142,215,218,267,482NazismGoldenDawn,43,63,76,141,157,159,215,223NaziGermany(1933–45),17,129,154,170,215,223,281,353

neoliberalism,28,198,419,424Netherlands,28,135,155,480NewAcropolisMuseum,Athens,177,326NewDemocracy,38–9,45,59–60,62–3,69,71,141,220,227,469NewYorkTimes,77–8,222,228,247,257,441NewYorker,451Nietzsche,Friedrich,457non-papers,136,177–9,195,201–4,212,226,238–9,254,330,453non-performingloans,53,54,102,201,234,253Noonan,Michael,232,336Norway,392Nottinghamshire,England,43

Obama,Barack,62,157,158,224–5,325,353,372,374–6,378,433OccupyWallStreet(2011),36Odyssey(Homer),309Oedipus,2,3OfficialMonetaryandFinancialInstitutionsForum,97,192OlympicGames,462OPAP,174–5OperationOffload(2010–12),27–8OperationRestoreCompetitiveness(2015),36OperationTruthReversal(2015),310OrganisationforEconomicCo-operationandDevelopment(OECD),22,199,229–31,234,430

Orwell,George,289,461,475,480

Osborne,George,34–5,36,123,171,192–5,198,211,266Othello(Shakespeare),480Otto,KingofGreece,42OttomanEmpire(1299–1923),351

Padoan,PierCarlo,171,199–200,211,232,337,404PalaioPhaliro,Athens,464Panama,174Panariti,Elena,7,119–20,122,221,251,254,342,379,417,424Papademos,Lucas,45Papadopoulos,Alekos,118Papandreou,George2009generalelections;takesoffice,31,56,692010Greecedeclaredbankrupt,31–2;firstbailout,33,41,109,1192011secondbailoutagreement,41–4,51;resignation,44–5,922012generalelections,622013defamationsuitagainstKammenos,142

Pappas,Nikos,173,332,4602012meetswithVaroufakis,56–60;generalelections;VaroufakispreparesFive-ProngedStrategy,62–4;announcementofSyrizaeconomicpolicies,68

2013 Tsipras’s speech at Brookings Institution, 77; Cyprus bank closures,78;VaroufakispresentsenhancedFive-ProngedStrategy,80–82;‘Cantheeurozonebesaved?’conference,83

2014Europeanparliamentaryelection,72,76,83–4;ECBannouncesbanonIOUs;meetingsonstrategy,84,85;ThessalonikiProgrammeannounced,88;meeting atTsipras’s apartment onECB, 90–95;Varoufakis outlinesparallel payments plan, 96–7; Varoufakis offered finance ministerposition,100–105,139;Samarasappliesforextensionofsecondbailoutagreement,106

2015 Varoufakis visits German embassy, 134; Asmussen makes contact,134, 136; Varoufakis’s non-paper on debt restructuring, 178; firstBrussels Eurogroup, 243; meeting on Merkel, 248; meeting withDijsselbloem,249;consultationwith troika,256; returns toAthens,266;warcabinetatMaximos,270–71;loanextensionlettercrisis,294;fourthBrussels Eurogroup, 336; troika technical team visits Athens, 343;Frankfurt Group established, 349; Dijsselbloem demands dismissal of

Varoufakis, 391; Chouliarakis reinstated to Working Group, 391;decisiontodefaultonIMF,396;announcementsonERTandEMST,420–21;Panariti appointed representative to IMF,425;draftingofSLA,426;callsforremovalofVaroufakis,429;seventhBrusselsEurogroup,435;eighth Brussels Eurogroup, 437; bailout referendum proposed, 443;bailoutreferendum,452

parallelcurrencies,112,410,452parallelpaymentssystem2014VaroufakisoutlinesplantoSyriza,95–82015 general elections, 112, 115, 160; troika negotiations, 256, 270, 280,291,306,322,373,395,403,434;bailout referendum,448,452,456,458,460;media‘secretGrexitplot’narrative,98,473

ParliamentHouse,Athens,42,78,150,156,223–9,429,450–51,459parsimony,152–4PASOK,31,39,45,59–60,62–3,69,118,141,219–20,227,469Paulson,John,76Peneloperuse,309–10,342pensions,127andATMs,450,452andbailout,second(2012),41,46,52,66,80andbailout,third(2015),478andCoscodeal,317anddebtrepayments,140,160,186,212,234,265,269,322,327,339anddemographics,341,343inFive-ProngedStrategy,66,80andIMFdefaultthreat(2015),354,360,362,368–9,462andinvestmentbank,283,285andparallelcurrency,112andparallelpaymentssystem,96,100,102solidaritybenefit,436

perpetualbonds,114,186,203–4,268Peru,119petrol,175pharmacies,367Pigasse,Matthieu,121Pinochet,Augusto,212Piraeus,Greece,138,218,313–19

Plaka,Athens,464PlanforGreece,380,383,395,406,427PlanX,105,158,373,457–8PlanZ,105,135,158Podemos,1,275,405Poland,158,379PolicyFrameworkforGreece,A,406,414ports,138,313–19Portugalausterity,132andEurogroup,168,232,274andEuropeanCentralBank(ECB),75andEuropeanFinancialStabilityFacility(EFSF),185globalfinancialcrisis(2008),24,26andGreekbailout(2010),27

Potami,141–2,469powernetworks,11–12Power,Samantha,224Praet,Peter,200,204PragueSpring(1968),305,483Presbyterianism,37PretendDebtRestructuring,75privatizationandbailout,second(2012),46–7,163andCityofLondon,195–6,204andCosco,138,313–19andEuropeanCentralBank(ECB),204firesales,46,163,183,196,201,234,285,313inFive-ProngedStrategy,100,102andInternationalMonetaryFund(IMF),184inMemorandumofUnderstanding(MoU),228,234,263,282,284–5,290,306

andOPAP,174–5ofports,138,313–19ofrailways,313–15

propertyvalues,74Psyrri,Athens,51,56,64,390

PublicPowerCorporation,126Putin,Vladimir,2,129,248,347–8

quantitativeeasing,92–3,188,204QuestionTime,33–4

railways,313–15Rakintzis,Leandros,175Reagan,Ronald,481realestate,74–6,129–30recessions,30,124refugees,480Regling,Klaus,338–9,360,362,474Renzi,Mateo,199,200,248,452Reuters,387Rhodes,Greece,437RichardIII(Shakespeare),459RigaEurogroup,372,383–8,395,423River,The(ToPotami),141–2,469Romapeople,56Romania,49Rome,Italy,199–200Rommel,Erwin,171Rotterdam,Netherlands,314Roubatis,Yannis,164,192,206,341,350,422,423,467Roumeliotis,Takis,357,358–9,371,424Rousseau,Jean-Jacques,183,188,189,271Russia,2,129,158,248,346–8

Sachs,Jeffrey,123,226,250,266,272,3952015callsVaroufakisatMinistryofFinance,157–8;meetswithVaroufakisinLondon,197;lobbiesforextensionofGreekdebtdeadline,224;helpsSyrizawithDSA,226;preparationsforsecondBrusselsEurogroup,254,255, 256; Schäuble proposes compromise, 268–9; 20th Februaryagreement, 281, 292; meets with Lipton and Thomsen, 324; fourthBrussels Eurogroup, 330, 331–3, 360; meets with Varoufakis inWashington,379,380;discussesIMFdefaultwithVaroufakis,396;works

onPlanforGreece,395,403,406;draftingofSLA,425;BlackSunday,455

Sagias,Spyros,138–92015 general elections, 138–9, 144–6;war cabinet atMaximos, 267, 269,270;extensionrequestsenttoEurogroup,271;loanextensionlettercrisis,293–9; discussion on firing of Chouliarakis, 301; negotiations withCosco,316,317,319;draftsbillontransferpricing,329;troikatechnicalteam visits Athens, 341, 342; prepares case for IMF default, 356, 360;defaultcalledoff,358–9;decisiontodefaultonIMF,396;announcementsonERTandEMST,420–21;PanaritiappointedrepresentativetoIMF,425;draftingofSLA,425–7,431,432,435,460;seventhBrusselsEurogroup,435; bailout referendum proposed, 443; Juncker ’s non-paper, 453;bailoutreferendum,467

Salamis,Greece,317Samaras,Antonis,2422011makescontactwithVaroufakis,38–9,44–5;meetingwithMerkel,442012 general elections; takes office, 62, 63, 72, 82, 92, 125, 187, 311;meetingwithMerkel,74–5,135;secondbailout,130,365

2013pactwithGoldenDawnconsidered,762014 ECB backs government bonds, 76, 77; European parliamentaryelection, 72, 76; Schäuble drops support, 77, 84, 130; StournarasappointedBankofGreece governor, 72, 77, 84, 302;Syriza announcesThessaloniki Programme, 88; popularity plummets in polls, 91;announces early election, 105; applies for extension of second bailoutagreement,106–7,138

2015generalelection,161,166,299,393Samos,Greece,442Sanders,Bernard,156–7,158–9,209,224,452Santorini,Greece,218Sapin,Michel2015 meets with Varoufakis in Paris, 181, 187–91, 207, 211, 217; firstBrusselsEurogroup,232,236–7,242;plansfortroikatomovetoParis,381–2,415;RigaEurogroup,385;meetswithVaroufakis inParis,404;Luxembourg Eurogroup, 431; ninth Brussels Eurogroup, 445–6; BlackSunday,454

Sarkozy,Nicolas,24,27,41SaronicGulf,87,129

SavingsandLoansscam,53,55Schäuble,Wolfgang,1,2,40,92,104,112,123,144,189,308,3462008globalfinancialcrisis,134–52012 rejects Lagarde’s plan for Greek debt restructuring, 74; promisesStournarasdebtrestructuring,75–6

2014dropssupportforSamarasgovernment,77,84,130;Padoanpressuredintolabourmarketreforms,199–200

2015 Greek general election, 92, 131; meets with Varoufakis, 206, 207,209–17;firstBrusselsEurogroup,232,235,236–45,248,289;Juncker ’scommuniqué, 259; proposes compromise toSyriza, 268; 20thFebruaryagreement, 274–80, 292, 326; Eurogroup teleconference, 287–9; fourthBrussels Eurogroup, 335; meets with Varoufakis; suggests Grexitinevitable,337–9,361,364,365,369,373;FrankfurtGroupestablished,349–50; visitsWashington, 374, 379, 381; plans for troika tomove toParis, 381, 415, 484; Eurogroup Riga meeting, 385, 386; Grexitproposal, 123, 407–13; Varoufakis presents Ending the Greek Crisis,413–16;meetswithVaroufakis,429;LuxembourgEurogroup,431;sixthBrussels Eurogroup, 434–5; eighth Brussels Eurogroup, 438–43; thirdbailoutagreement,482

Schroeder,Gerhard,83Schwan,Gesine,429,432Scotland,37,57Scott,Walter,73Seattle,Washington,61SecondWorldWar(1939–45),17,129,139,154,170,215,223,281,463BattleofCrete(1941),352Dunkirkevacuation(1940),473

SecuritiesMarketProgramme(SMP),93–4,103,269haircutexemption(2012),113,186launchof(2010),93,113profitonbonds,136–7,235,332,364redemption,94,311,434,439restructuring, 114, 186, 203–5, 249, 256, 268, 270, 290, 322, 324, 373,448,452,468

Seferis,George,484Selmayr,Martin,349Shakespeare,William,2,3,21,23,29,459,480

Shanghai,China,315ShipofStone,87–8,101shipyards,315shorting,71–2Siatista,Greece,9Siemens,215–17SilkRoad,314,319Silvers,Damon,373Sinclair,Upton,32Singapore,174,237,392Slovakia,27,232,237,305,386Slovenia,27,232,237,386,431,440Smith,Adam,177SocialDemocraticPartyofAustria,135SocialDemocraticPartyofGermany,134,206–8,217,219–20,429,432socialism,28Socrates,103–4Sophocles,2Soros,George,70–72,428SouthEastAsiancrisis(1997–98),158SouthSeaBubble,114SovietUnion(1922–91),145,229,245,347Spahn,Jens,478Spain,405austerity,34,132globalfinancialcrisis(2008),24,26andEurogroup,168,232,236,237,240,274,275andEuropeanCentralBank(ECB),75,78,79,93andEuropeanFinancialStabilityFacility(EFSF),185Indignadosmovement,42Podemos,1,275,405

Sparta,223,462SpeculativeBubble,75,76SpeechofHope(1946),429Spiegel,Der,412StPaul’sSchool,London,194StaffLevelAgreement(SLA),425–7,431–2,435,436,437,438,441,460

StarTrek,416StateLawCouncil,299Stathakis,George,78,81–4,144,230,297,301,391,424,443,470Steinbeck,John,124Stergiotis,Antonis,175,479Stiglitz,Joseph,158Stoneship,87–8,101Stournaras,Yannis,68–75,119,2432000appointedCEOofCommercialBankofGreece,692009generalelections,692010appointeddirectorofNationalConfederationofIndustriesthinktank,69–70

2012 appointedminister of finance, 72, 73, 104;meetswithVaroufakis atAcropolis, 70–71; accuses Varoufakis of bond shorting, 71–2; Lagardeproposesdebtrestructuring,74;outofcourtsettlementwithSiemens,216;speculativebubble,75;Schäublepromisesdebtrestructuring,75

2014 saleofECB-backedbonds, 83; appointedBankofGreecegovernor,72,77,84,302;announcementonliquidity,106–7,137–9,187,191,201

2015 annual speech to Bank of Greece shareholders, 294; loan extensionletter crisis, 295; Chouliarakis faces firing from Council of EconomicAdvisers,302–4;announcesplan topayIMF,406;Council forSystemicStabilityconvened,450;BlackSunday,456

Stratou,Danae2008Tsipras’mayoralcampaign,562009generalelection,692011 Syntagma Square protests, 42–3; threat made against son, 51, 60;movestoUnitedStates,61

2012YanismeetswithTsiprasandPappas,59;blackboxesinstallation,10,13;triptoMelbourne,35

2013supportsERTinThessaloniki,832014 triptoStoneship,88;ThessalonikiProgrammeannounced,90;Yanisofferedfinanceministerposition,103,104,279,preparestomovebacktoAthens,105

2015 general election campaign, 117; Asmussen makes contact, 137;meetingwithSagias,138;theRiverconsideredascoalitionpartner,141;pollingday,144;callsYanisatMinistryofFinance,156;discusseslifeinAustin with Yanis, 172; calls Yanis about leather jacket, 194; discusses

Eurogroup meeting with Yanis, 243; returns to Athens, 266; watchesHappy Days at Greek National Theatre, 272; dinner with Chineseambassador,294,315;meetingwithWieser,326,328;GreekRevolutionDay parade, 351; starts video interviewswith Yanis, 353; DijsselbloemdemandsYanis’sdismissal,391;Yanisconsidersresignation,394;videointerviewwithYanis, 396; confrontationwith youth in Exarcheia, 397–400; dinner with Olga, 432; Yanis’s ‘Honey, I shut the banks!’ remark,451;norallyatSyntagmaSquare,462–3;bailoutreferendum,467,471;Yanis’s‘MinisterNoMore’video,471;Yanisabusedbybusinessman,476

2016discussesTsipras’s turnwithfilmdirector,350;YaniscampaignsforremaininBritain,22

Stratou,Esmeralda,177Strauss-Kahn,Dominic,24,26subservience,154–6SuezCanal,314suicides,9,10Summers,Lawrence‘Larry’,6–15,23,119,123,266–8,353,376,396,403,406

superblackboxes,10,12,13,14supermarkets,172,175surplusnations,128SussexUniversity,57Swedishnationalanthem,309,342,431Swisscheese,163,300Switzerland,174SyntagmaSquare,Athens,9,18,62,150,177,223–5,2452011protests,42–4,47–50,62,83,1502015bailoutreferendum,462–3,465–7

‘systemic’,138

T-bills,73,136,187,272,274,311–12,318,440Tagmatarchis,Labis,420–21taxarrearsinstalmentsmeasure,367–8andausterity,34,72,126–7andbailout,first(2010),27–9,32,37,114,186andbailout,second(2012),46,47,52,53,59,65,70,114,368

andbankownership,65–7,80,101andbankshutdowns,66andbankruptcy,36corporatetax,100,416anddebtrepayments,167evasion, 37, 49, 159, 163, 172–5, 198, 211, 218–20, 253, 323, 324, 402,416,479

fueltax,175landtax,76loweringofrates,21,60,100,102,416andparallelpaymentssystem,95–8,102,160andSMPbonds,186andSpeculativeBubble,75TaxOffice,47,95,126–7,145,163,211,367–8,403,416–20VAT(value-addedtax),100,175,218,265,403,416–20,437warofthemodels,416–20

Thatcher,Margaret,28,162,198,481Theocarakis,Nicholas,68–9,119,120,3952015offeredCouncilofEconomicAdvisersposition,301–2;appointed toWorking Group, 307; meeting with Wieser, 326; fourth BrusselsEurogroup, 333; Brussels Group meetings, 340, 342; Working Groupteleconference, 343–5; Eurogroup Riga meeting, 384; dismissed fromWorkingGroup, 391, 394, 422, 459;meetingwithSchäuble, 336, 407,409

Theodorakis,Mikis,281,282,290Theseus,12–13ThessalonikiProgramme,88–91,99,103Thessaloniki,Greece,83,88,131Tholoniat,Luc,349Thomas,Dylan,143Thomsen,Poul,197,269,325,339,340,345,3492015meetswithVaroufakis in Paris, 171, 183–5, 224, 362; firstBrusselsEurogroup, 232, 242; return to Athens refused, 323–4; fourth BrusselsEurogroup, 331–3; Working Group teleconference, 344; FrankfurtGroupestablished,349;meetingwithVaroufakisondefault,359,362–71,374;RigaEurogroup,384,385,395;warofthemodels,418–19

2016Wikileaksreleaserecording,483

TINA(ThereIsNoAlternative),480‘toobigtofail’,138tourism,37,218,362,437,442tradeunions,38,43,83,196,253,269,283,317–18,373,377transferpricing,329TreasuryFrance,185Greece,73,118,136,160,187,274,311–12,440UnitedKingdom,34,114UnitedStates,7,14,119,151,157,223,224,325,376,378,388

triangleofsin,55,60,67,171,306,368–9,371Trichet,Jean-Claude,113Trumka,Richard,373Trump,Donald,1,480Tsakalotos,Euclid,459–612013VaroufakispresentsenhancedFive-ProngedStrategy,78,812014 ECB announces ban on IOUs; meetings on strategy, 84, 85;ThessalonikiProgrammeannounced,90

2015 replaced by Lafazanis in cabinet, 144–5; appointed to Ministry ofForeignAffairs, 145–6; trip to Europe planned, 172;Varoufakis’s non-paperondebtrestructuring,178;triptoParis,180,183,187,191;triptoLondon,192–4,196–7;triptoGermany,200,204,210,213,217;sworninto parliament, 223; consultation with troika in Brussels, 251–4; 20thFebruary agreement, 275, 276; Chouliarakis faces firing, 300; meetingwithWieser,326,328;cabinetmeetingonIMFdefault,35;Chouliarakisreinstated to Working Group, 391; Tsipras concedes to troika budget,460;decisiontodefaultonIMF,396;PanaritiappointedrepresentativetoIMF,424;draftingofSLA,426;eurozonesummit,435;seventhBrusselsEurogroup; rowwithDragasakis, 435–6;meetswithEuropeanCouncil,436; eighth Brussels Eurogroup, 437, 440, 442; bailout referendumproposed, 443; ninth Brussels Eurogroup, 445–6; war cabinet on bankclosures,448–9;bailout referendum,458,470; thirdbailoutagreement,471–2;MPscondemnVaroufakis,475;voteonthirdbailout,478

Tsipras,Alexis2012 meetings with Varoufakis, 56–60; general elections; VaroufakispreparesFive-ProngedStrategy,62–8;announcementofSyrizaeconomicpolicies,68

2013 speech at Brookings Institution, 77; Cyprus bank closures, 78;Varoufakis presents enhanced Five-Pronged Strategy, 80, 81; ‘Can theeurozonebesaved?’conference,83

2014 ECB announces ban on IOUs; meetings on strategy, 84, 85; GreektranslationofAModestProposalpresented,85;meetswithVaroufakisatStoneship, 87–8, 101; Thessaloniki Programme announced, 88–90;discussion on ECB, 90–95; Varoufakis outlines parallel payments plan,96–7; Varoufakis offered finance minister position, 98–105, 139;Samarasappliesforsecondbailoutextension,106

2015Varoufakis assembles financeministry team,117; threatenedbybankowner, 124; Varoufakis visits German embassy, 134; Asmussen makescontact,136;Sagiasjoinsteam,139;dealstruckwithIndependentGreeks,141–2, 144; Tsakalotos replaced by Lafazanis in cabinet, 144–5;Tsakalotosappointed toMinistryofForeignAffairs,145–6;moves intoMaximos,147;speakswithObama,157;Varoufakis’snon-paperondebtrestructuring,178–9;ECBwithdrawsjunkcollateralwaiver,208;meetingwith Gurría, 230; first Brussels Eurogroup, 233, 243, 245–6, 264;meeting on Merkel, 248–9; meetings with Dijsselbloem, 249–50;consultationwith troika, 256; Juncker ’s communiqué, 257–8; returns toAthens,266;warcabinetatMaximos,269–71;20thFebruaryagreement,276, 277;Eurogroup teleconference, 292–3; loan extension letter crisis,294,296–300;Chouliarakisfacesfiring,300–304,307;mediabattlewithtroika,324;speakswithMerkel,326;Chouliarakisworksonconcessionstotroika,329;fourthBrusselsEurogroup,330,336;speakswithMerkel,348;EurogroupWorkingGroup teleconference,344;parallelpaymentsplan outlined at cabinetmeeting, 97; FrankfurtGroup established, 348–50,389;GreekRevolutionDayparade,352;IMFprimarybudgetdeficitclaim,353;ChineseT-Billauction,321;cabinetmeetingonIMFdefault,354–6; default called off, 357–9, 366; Varoufakis returns fromWashington,383; talkswithMerkel,383,388–9;Dijsselbloemdemandsdismissal of Varoufakis, 384, 391; Chouliarakis reinstated to WorkingGroup,391,422,459;concedestotroikabudget,392–5,460;decisiontodefaultonIMF,396,406;Schäuble’sGrexitproposal,410–11;newVATpolicy introduced,419;Panariti appointed representative to IMF,424–5;drafting of SLA, 425–7; discusses surrender with Varoufakis, 432–3;eurozone summit, 435; seventhBrusselsEurogroup, 435–6;meetswithEuropean Council, 436; eighth Brussels Eurogroup, 437; referendum

proposed, 443–4;ChouliarakismeetswithWieser andCostello, 444–5;war cabinet onbank closures, 448; Juncker ’s non-paper, 452–3;Frenchsolution falls through, 453–4; Black Sunday, 455; Varoufakis presentsPlan X, 457–8; bailout referendum, 464–70; preparations for thirdbailout, 471–4; MPs condemn Varoufakis, 475; vote on third bailout,478–9

Tsipras,Betty,88,91Turkey,437,442Tusk,Donald,435Tyson,Mike,336Tzanakopoulos,Dimitris,266,269,468

Ukraine,248,325,428Ulysses,280unemployment,125,127,128,362,481UnitedKingdomausterity,33–6,132,193BankofEngland,22,35,193BlackWednesday(1992),123‘boomandbust’,12,48Brexit,1,22–3,480,484–5BritishRail,313CityofLondon,11,25,36,48,171,194–6,202,204,309Dunkirkevacuation(1940),473globalfinancialcrisis(2008),25,28,35,48GreatDepression(1929–39),125,128GreenhamCommonPeaceCamp(1981–2000),154LondonDebtAgreement(1953),169miners’strike(1984–5),43recessions,124Treasury,34,114WinterofDiscontent(1978–9),162

UnitedNations(UN),224UnitedStatesAmericanFederationofLabor,373bankruptocracy,28CentralIntelligenceAgency(CIA),164

DemocraticParty,373derivatives,25,30,31FairandAccurateCreditTransactionsAct(FACTA),151FederalReserve,12,24,29,36,209,348FinancialCrisisInquiryCommission,376globalfinancialcrisis(2008),25,28–9,30,31,48,375,376GreatModeration,13,48andInternationalMonetaryFund(IMF),113,157,158–9MarshallPlan,229NationalSecurityCouncil(NSC),397OccupyWallStreet(2011),36SavingsandLoansscam,53,55Senate,157SpeechofHope(1946),429Treasury,7,14,119,151,157,223,224,325,376,378,388WallStreet,11,25,28–9,30,31,33,36,48,256,309,348,376

UniversityofAthens,7,15,17,68–9,71,78,118,120,301UniversityofCrete,78UniversityofEastAnglia,351UniversityofSydney,68UniversityofTexas,7,61,77,83,357

Valavani,Nadia,324ValveCorporation,61Varoufakis,Anna,15Varoufakis,Eleni,17Varoufakis,Xenia,178,473Varoufakis,Yiorgos,15–17VAT(value-addedtax),100,175,218,265,403,416–20,437Vermont,UnitedStates,157VietnamWar(1955–75),481Volksbühne,Berlin,484

waiver(junkcollateral),168,201–4,207–9,222,273,306WallStreetJournal,257,343,367WallStreet,11,25,28–9,30,31,33,36,48,256,309,348,376warofthemodels,416–20

WashingtonConsensus,119,158WasteLand,The(Eliot),390waterboarding,306,318,370,481Weidmann,Jens,93welfarestate,29,32,88,96,127,212,228,362,481Wi-Fi,152,156Wieser,Friedrichvon,328Wieser,Thomas,248,308,340,4812012 Plan Z drawn up, 158; Working Group takes control of Greek taxoffice,163

2015makescontactwithSyriza,135–7;firstBrusselsEurogroup,232,238,244; loan extension letter crisis, 293–8, 300; Working Groupteleconference, 307; meets with Syriza in Athens, 326–8; Chouliarakisdismissed from Brussels Eurogroup, 333–4; Working Groupteleconference,344;ChouliarakisvisitsBrussels,373;RigaEurogroup,385;ChouliarakisreinstatedtoWorkingGroup,391;Syrizaconcedestotroika budget, 393; drafting of SLA, 426, 431; eighth BrusselsEurogroup, 437;meetswithChouliarakis andKim, 444; ninthBrusselsEurogroup,445,447

Wikileaks,13Wilde,Oscar,225–6WinterofDiscontent(1978–9),162Wolf,Martin,171,192WorldBank,22,119,229,339,404

xenophobia,1,142,218,480,482

YamahaXJR,356Yellen,Janet,209,224,256Yeltsin,Boris,158

Zakaria,Fareed,157Zara,181Zettelmeyer,Jeromin,206–8,217,219,432zombiebanks,55

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