A critical review of the critical reviews of the book ’Adults in the Room’ by Yanis Varoufakis

12 February by Eric Toussaint

The book Adults in the Room [1] by Yanis Varoufakis has given rise to some very interesting criticism from Adam Tooze in The New York Review of Books (“A Modern Greek Tragedy”), J.W. Mason in the Boston Review (“Austerity by Design”), Pavlos Roufos in The Brooklyn Rail (“Inside the Disenchanted World of Left Keynesianism”) and Helena Sheehan in Jacobin (“Closed Rooms and Class War”), among others. The author has also published a critique of this important book in the form of a series of commentaries published on the blog of the publishing house Verso. Adam Tooze referred to it in his critical overview of reviews of the book (“Europe’s Political Economy: Reading Reviews of Varoufakis’s Adults in the Room”) and Yanis Varoufakis himself responded on his blog to a series of critiques including mine. These exchanges brought out several arguments which merit discussion. That is why I have written this article “A critical review of the critical reviews of Yanis Varoufakis’s Adults in the Room.” I should add that I was strongly encouraged to contribute to the discussion by Sebastian Budgen of Verso. I take this opportunity to thank him.

As Adam Tooze writes in his indispensable overview of the critiques, the debate around Yanis Varoufakis’s account relates to Europe’s political economy, and in particular to the question of how to break away from the neoliberal policies that have dominated the history of the “Old World” for decades, and what strategy to adopt to do it.

I will refer to Mason’s and Tooze’s argumentation. (based on Mason’s text and the two by Tooze) and give my point of view. Tooze, like Mason, takes an approach that is both positive and critical of Yanis Varoufakis’s book and of his actions. He writes: “Both Mason’s and my own reviews offer sympathetic criticism.” In his first piece, Tooze begins by describing the context in which Syriza came to power, the hopes that they inspired on the Left and the disappointment created by the policies actually conducted and which led to the capitulation of July 2015. Tooze, along with Mason, feels that Adults in the Room is indispensable to a better understanding of how the European Union and the Eurozone operate and the reasons why the government led by Alexis Tsipras did not succeed in breaking away from austerity.

Referring to the strategy followed by Tsipras, Tooze writes that the government, in order to recover real freedom of action and to slacken the discipline imposed by the Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html
, needed to obtain a reduction of Greece’s debt. He writes: “It was on this front that Varoufakis’s battle was fought and lost.”

The fight for debt reduction implied a confrontation with the public creditors

Tooze points out that the fight for debt reduction implied a confrontation with the public creditors who held 85% of Greece’s debt in 2015, and not with the private creditors. He recalls that the Troika, beginning with the Memorandum of Understanding (MoU) of 2010, had taken over from the creditor banks (large private German, French, Dutch and Belgian ones) by lending the Greek government the funds to repay these banks. That means the Troika in fact was not coming to Greece’s aid, but rather aiding the Northern European banks. I agree with this explanation, which Varoufakis also shares and which was stressed by the Truth Committee on the Greek Public Debt in the first two chapters of its June 2015 report. Let me add that the credits granted in the context of the Memoranda have also gone to recapitalize the private Greek banks for the benefit of big financial capital in Greece. This bailout of the big shareholders of the Greek banks also safeguarded the interests of the big private banks of Northern Europe, which were exposed to risk from the Greek banking sector since it had borrowed capital from them. I’ve written a specific study of this question entitled “Banks are responsible for the crisis in Greece”.

Tooze devotes three paragraphs to my critique of Varoufakis’s book. I reproduce them in toto here:

“Criticism from the left of a very different kind is offered by the debt campaigner Eric Toussaint. The Verso website has published a multi-part series of articles that dissect Varoufakis’s ambiguous relationship to Syriza. As Adults in the Room makes clear, Varoufakis was at odds with many of the basic positions of the Syriza movement and he did his best to turn the party away from its Thessaloniki program of September 2014. As Toussaint puts it:

‘Varoufakis explains how he gradually convinced Tsipras, Pappas, and Dragasakis not to follow the orientation adopted by Syriza in 2012, then in 2014. He explains that along with them, he worked out a new orientation that was not discussed within Syriza and was different from the one Syriza ran on during the January 2015 campaign. And that orientation was to lead, at best, to failure, and at worst to capitulation.’

From left to right: Yanis Dragasakis, Alexis Tsipras, Nikos Pappas

Toussaint offers an account from the perspective of the Syriza left-wing of the way in which Varoufakis did not just espouse a rationalist Keynesian perspective, but in doing so subverted the militant energy of Greece’s left government and shifted the balance of expertise in the government towards those who were willing to work with the Troika.

Whether one finds them sympathetic or not, Toussaint’s essays deepen one’s understanding of the Greek political scene in which Varoufakis and Tsipras operated.”

In these three paragraphs, Tooze correctly sums up a part of the criticism I expressed in the series devoted to Varoufakis’s book. I’d like to say one thing about this passage in Tooze: “Toussaint offers an account from the perspective of the Syriza left-wing...” My perspective is that of an anti-capitalist and internationalist who has forged links of collaboration and discussion with activists both to the left of Syriza and with other organizations and political activists of the radical Left. My perspective is also that of someone who participated in the events that are described and analyzed by Varoufakis since 2010, in particular as co-ordinator of the work of the Truth Committee on Greek Public Debt in 2015.

I would like to add the following to the summary Tooze makes.

[Varoufakis’] Behaviour and the politico-economic orientation he defended contributed to the disaster

From Varoufakis’s demonstration, we can clearly see that his behaviour and the politico-economic orientation he defended contributed to the disaster. Yanis Varoufakis clearly claims to have played a major role in working out the strategy adopted by a handful of Syriza leaders behind the backs of the rank and file and the party’s organs before their victory in the January 2015 election. This closed circle of leaders was headed by the trio of Alexis Tsipras, Yanis Dragasakis and Nikkos Pappas. It is striking to note that this trio, whom Varoufakis constantly mentions in his book, is still at the controls in 2019: Tsipras is Prime Minister and Minister of Foreign Affairs, Dragasakis is Deputy Prime Minister and Minister of the Economy and Development [2] and Pappas is Minister of Digital Policy, Telecommunications and Media. [3]

Varoufakis does not plead guilty. According to him, had Tsipras actually taken the orientation he proposed and which Tsipras had agreed to late in 2014, the result would not have been a defeat for the Greek people. Yet, contrary to the conviction Varoufakis expresses, an attentive reading of his book leads to the conclusion that he contributed to that defeat.

The Alexis Tsipras - Yanis Dragasakis - Nikkos Pappas triumvirate had chosen Varoufakis to play a predetermined role. Varoufakis’s profile corresponded to the casting defined by Tsipras and Pappas: an academic economist, brilliant, and a good communicator who can use both provocation and conciliation with a smile, and with a perfect command of English. In addition, Varoufakis was a free electron, without influence inside Syriza, of which he was not a member. Tsipras felt that if need be he could revoke Varoufakis’s appointment without causing a major disturbance within the party. Alexis Tsipras decided to operate in a small group behind the back of his own party rather than implement the political orientation that had been decided on collectively within Syriza and approved democratically by Greece’s people. Appointing Yanis Varoufakis Finance Minister and recommending that he not become a member of Syriza reveals a technocratic approach to governance in which Varoufakis would not be responsible either to Syriza or to Greek voters, but only to Alexis Tsipras and his small circle. It is true that, as Varoufakis writes, Tsipras made a concession in agreeing to his being fielded by Syriza as a candidate in the January 2015 election, but Varoufakis did not actively assume his office as a member of parliament during the time he was Minister. It is clear that this absence of popular participation and failure to take a democratic approach to determining the political orientation was not compatible with a Leftist government’s need to rely on popular mobilisation to ensure application of the radical political program on which it had been elected. I have explained in several articles and interviews that Tsipras made a shift to the right after the June 2012 election. He decided to avoid confrontation with the main adversaries of the Greek people – Greek big capital, and in particular the major shareholders of the private banks; the European policymakers; and the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

. This shift was not debated within Syriza because Tsipras knew that he had little chance of convincing his own party to adopt such a change in orientation. Varoufakis approved this bureaucratic behaviour by accepting these conditions.

Starting with its betrayal of the results of the referendum of 5 July 2015 and the adoption of the third Memorandum of Understanding in July-August 2015, Syriza has seen a large number of its rank and file, elected officials and cadres leave and has turned into a part of the apparatus of the State that serves the purpose of maintaining the existing capitalist order.

It’s important to re-examine the strategy adopted by Tsipras’s government from its inception, when Varoufakis was Finance Minister and was the main public figure in the negotiations between the Greek authorities and the European leaders.

What were the European policymakers after in conducting a masquerade of negotiations with Varoufakis and Tsipras?

According to Tooze, who agrees with Mason on this point, during the initial months Varoufakis did not understand why the European policymakers refused every reasonable proposal he made in order to save the Eurozone and enable Greece to escape from the prison of debt. Tooze and Mason stress that despite the repeated refusals of discussion by the European leaders, in particular Wolfgang Schäuble, the Finance Minister of the German government, and Jeroen Dijsselbloem, the Dutch Minister of Finance who chaired the Eurogroup, Varoufakis bent over backwards making moderate proposals and demonstrating his readiness to make concessions.

Varoufakis did not understand the European leaders’ main goal

Tooze and Mason are right in saying that during the negotiations Varoufakis did not understand that the European leaders’ main goal was to take their attack on the social advances that had been made in Greece even farther. That goal is clear when seen within the perspective of class struggle. Varoufakis explains in his book that the European policymakers and the IMF insisted on requiring that Greece implement measures that were doomed to failure because they did not want to recognize the errors the Troika had made in 2010-2012. As Tooze and Mason point out, that was the main reason Varoufakis attributes. The following quote from Varoufakis is found in both Tooze’s and Mason’s articles: “‘The sole reason that the IMF and EU were asphyxiating us [was] because they did not have what it took to confess the error’ of the earlier bailout.”

If, for example, Varoufakis and the circle of leaders around Tsipras had taken seriously the message Schäuble tried to send and which his Italian counterpart had already passed on to Varoufakis when he was in Rome in early February 2015, [4] they would have understood that Varoufakis’s proposal of debt exchanges had no chance of convincing the German or other Eurozone governments, for whom increasing competitiveness (for the benefit of the major private export-oriented corporations) is the primary goal. The central issue for them is to reduce wages, retirement pensions, and social coverage, undermine the security of work contracts, limit the right to strike, reduce social expenditure, privatize, and so on everywhere in Europe.

Schäuble and Varoufakis

Varoufakis recognizes that Schäuble was not interested in his proposals regarding debt. On the other hand, at their first meeting, Angela Merkel’s Finance Minister stressed “[...] his theory that the ‘overgenerous’ European social model was no longer sustainable and had to be ditched. Comparing the costs to Europe of maintaining welfare states with the situation in places like India and China, where no social safety net exists at all, he argued that Europe was losing competitiveness and would stagnate unless social benefits were curtailed en masse. It was as if he was telling me that a start had to be made somewhere and that that somewhere might as well be Greece.” Varoufakis describes the issues in terms of a debate between advocates of different theories, whereas for Schäuble there was nothing theoretical about it – it was to take concrete form in the continuing onslaught of counter-reforms imposed in the context of the first and second Memoranda of Understanding. Varoufakis reveals his ignorance of realities in Germany, where the neoliberal offensive had shifted into high gear in the early 2000s thanks to the social-democrat chancellor Schröder, [5] before Greece’s turn came to be subjected to shock therapy. And indeed Mason writes: “For German conservatives such as Schäuble, Greece is indeed just somewhere to make a start; the real target is the larger and stronger welfare states of Europe—and ultimately their own working class.” In other words, Schaüble and other conservative leaders wanted the government and the people of Greece to be defeated in order to make it easier to attack the social progress that has been made in other, larger countries, including forcing further regression on Germany’s working class.

The German government and most other governments in the Eurozone needed to keep Greece in the death-grip of debt to force the continued application of their model

If Varoufakis’s “modest proposal” had been accepted, it would have enabled the Greek government to ease the strait-jacket of debt. And in fact the German government and most (if not all) other governments in the Eurozone needed to keep Greece in the death-grip of debt in order to force the continued application of their model and move toward the goals they had set for themselves. They ardently wished for the failure of Syriza’s project in order to demonstrate to the populations of the other countries that it is useless to entrust government to political formations who want to break with austerity and the neoliberal model.

In sum, what the European policymakers wanted above all was to avoid putting a solution into practice that would have freed Greece from the burden of debt repayment and in so doing reduce the Troika’s power of coercion over the country’s authorities. Therefore, all Varoufakis’s proposals aimed at negotiating toward the goal of emancipating Greece (or any other country) even slightly from the burden of repaying debt and from the further dismantling of social advances were doomed to fail. Mason underlines the fact that “Varoufakis’s main activity during his months in office seems to be putting together detailed ‘non-papers’ (the EU’s suggestive term for unofficial proposals) on possible resolutions, which the other side simply ignores.” Mason cites Varoufakis’s own words to support that critique: “On the assumption that good ideas encourage fruitful dialogue and can break an impasse, my team and I worked very hard to put forward proposals based on... sound economic analysis. Once these had been tested on some of the highest authorities in their fields... I would take them to Greece’s creditors. Then I would sit back and observe a landscape of blank stares.... Their responses, when they came, took no account of anything I had said. I might as well have been singing the Swedish national anthem.”

Then Mason drives his point home: “Curiously, no matter how often it is repeated, this experience doesn’t lead him to question his assumption that good ideas are what matter. Even when Schäuble tells him bluntly in a one-on-one meeting that ‘I am not going to negotiate with you,’ Varoufakis goes on gamely trying to make a deal. Right to his last days in office, he is offering new proposals, all vetted by the highest authorities.” It needs to be pointed out that Varoufakis, in his book and in his responses to various critiques, makes contradictory statements. As Pavlos Roufos notes, Varoufakis writes: “not for a moment did I believe, back in January 2015, that the unquestionable logic and obvious moderation of my proposals would win our creditors over.”

But if he really was convinced of that, there is no excuse for Varoufakis’s repeated public announcements, up until June 2015, that the Greek government and the creditors (European creditors and the IMF) were about to reach an agreement – without ever explaining the pressure the creditors were putting on Greece, without ever mentioning the blackmail, without ever being explicit about the proposals Greece was making. That behaviour is not acceptable. In short, if he was aware that the moderation he was demonstrating could never convince his negotiating partners, he should simply not have remained at the negotiating table. He should have put into practice what he had said before the members of the Greek Parliament in early February: “If you cannot imagine walking out of a negotiation, you should never enter it. If you cannot fathom the idea of an impasse you might as well confine yourself to the role of a supplicant who implores the despot to grant him several privileges but who accepts in the final analysis whatever the despot grants” (Varoufakis, p. 220).

Varoufakis adds a new argument in his response to the various critiques of his book: he says that he made a series of “reasonable” proposals in order to win over international public opinion to the Greek government’s cause. But that argument does not hold up, and the fact that he makes it in retrospect is surely because Varoufakis realizes that the reasoning he defended in his book, published in 2017, also does not hold up. Because by agreeing to take part in secret negotiations, by not making the issues of those negotiations public (in the agora), he did not give public opinion an opportunity to understand the proposals he was defending, whereas those proposals were being targeted by a systematic smear campaign. In addition, they were either unrealistic (debt sharing, for example) or simply unacceptable from the point of view of defending the interests of the Greek people, because they consisted – for example – in extending privatizations or placing the burden of the campaign against tax evasion on small taxpayers while wealthy ones (and in particular the ones who had engaged in massive tax evasion by taking capital out of the country) would receive amnesty and pay a tax rate of only 15%. [6] It’s important to go back and look at Varoufakis’s proposals to the Troika in order to see exactly what they entailed. [7]

How to read my critique of Varoufakis’s book

The series of articles I devoted to Varoufakis’s book Adults in the Room is meant as a guide for readers of the Left who are not satisfied with the dominant narrative put forward by the mainstream media and the governments of the Troika – and who are not satisfied by the former Greek Finance Minister’s version either. In counterpoint to Varoufakis’s narrative, I point out events that he keeps silent about and I express an opinion that differs from his as to what should have been done and what he in fact did. My narrative is not a substitute for his, but should be read in parallel.

It’s essential to take the time to analyze the policies put in practice by Varoufakis and the Tsipras government, because it was the first government of the radical Left to be elected in Europe in the 21st century. Understanding that government’s weaknesses and learning from the way it handled the problems it faced are vitally important if there is to be any chance of avoiding another fiasco.

The main point of our critique of the policies followed by Greece’s government in 2015 is not to determine the respective responsibilities of Tsipras or Varoufakis as individuals. What is fundamental is to conduct an analysis of the politico-economic orientation that was put into practice in order to determine the causes of its failure, to see what could have been attempted in its place and to draw conclusions as to what a government of the radical Left can do in a country in the periphery of the Eurozone.

Consult the articles of the series Yanis Varoufakis’s Account of the Greek Crisis: a Self-Incrimination

Part 1. Yanis Varoufakis’s Account of the Greek Crisis: a Self-Incrimination — Part One: Proposals Doomed to Fail
Part 2. Varoufakis’s questionable account of the origins of the Greek crisis and his surprising relations with the political class
Part 3. How Tsípras, with Varoufakis’s aid, turned his back on Syriza’s platform
Part 4. Varoufakis Surrounded Himself with Defenders of the Establishment
Part 5. The Varoufakis-Tsipras Line was Doomed to Fail from the Word ‘Go’
Part 6. Varoufakis-Tsipras move towards the disastrous agreement with the Eurogroup of 20 February 2015
Part 7. The first capitulation of Tsipras and Varoufakis at the end of February 2015
Part 8. Varoufakis’s secret negotiations and his disappointments with China, Obama and the IMF

Varoufakis’s proposals to the European leaders prior to the agreement of 20 February

The proposals Varoufakis made as principal negotiator with the Troika were extremely moderate

To contribute to and complement Tooze’s and Mason’s arguments in their respective reviews, I would say that it’s important to point out that in contrast to the caricatural image of him pushed by the dominant media and by the governments of the creditor countries, the proposals Varoufakis made as principal negotiator with the Troika were actually extremely moderate. He himself writes: “As I had remarked to the City’s financiers the previous day, it was a measure of the depth of the euro crisis that it took a radical left-wing government to table mainstream liberal proposals for its solution.” [8]

Varoufakis goes into these proposals in detail in the book. Tooze, Mason and Roufos do not stress this point, but it is a very important one. I want to underscore the fact that these proposals were very clearly regressive compared to the Thessaloniki Programme, which constituted the mandate Syriza had been given by the Greek people in the election of 25 January 2015. [9] Several of Varoufakis’s key proposals were even clearly in contradiction with the Programme. [10]

Syriza had not asked voters to give them a mandate to exit the Eurozone, but the Tsipras government had a very clear mandate to take action to erase the bulk of the national debt. While it was therefore fundamental for them to give priority to that goal, Varoufakis and the inner circle around Tsipras decided to abandon it immediately after Syriza formed its government.

Demonstration in support of the government, Athens, 5 February 2015 (Photo Louisa Gouliamaki. AFP)

According to his own account, when he took over as Finance Minister Varoufakis reassured his opposite numbers that the Greek government would not request a reduction of the debt stock Debt stock The total amount of debt , which put him in contradiction with the Programme, which stated explicitly:

“We immediately demand a popular verdict and a negotiation mandate that can “write-off the greater part of the public debt’s nominal value and ensure its viability.”

Instead he proposed that debt held by the Troika in various forms should be turned into longer-term debt, enabling the government to reduce the share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the budget devoted to annual repayments. He said on several occasions that he was not asking for a write-down of the debt. [11] For example, he writes that at his very first meeting with Schaüble, on 5 February 2015, he had told him that: “First, I was not asking for a debt write-down, and I made clear that the overall utility of my debt-swap proposals would benefit Germany as well as Greece.” [12]

He never requested a moratorium on repayment of the debt, which, once again, is in contradiction with the Thessaloniki Programme, which calls for: [...] a significant grace period (‘moratorium’) in debt servicing to save funds for growth.” This moratorium was essential for the viability of the experiment that was Tsipras’s initial government, because the amounts scheduled for repayment in 2015 were enormous. As a matter of fact Varoufakis says that he announced to the president of the Eurogroup at their first meeting on 30 January in Athens that: “the government’s debt repayments in 2015 alone amounted to 45 per cent of all the taxes it hoped to collect.” [13]

Varoufakis explains in Adults in the Room that he had made a secret agreement with Alexis Tsipras and two other Syriza leaders which went against Syriza’s official position: “[...] Syriza’s position on public debt had been nothing more than a crude demand for an unqualified write-down. With half the party still demanding a unilateral haircut of most of the debt, most not even privy to the idea of a debt swap, and with only a tenuous, verbal covenant binding the leadership trio to my strategy [...]” [14]

In adopting that position, Varoufakis was going against the will of the voters who had voted for Syriza on the strength of the commitments Tsipras had made during the campaign, and also against the beliefs of the majority of Syriza’s leaders and members.

Further, Varoufakis proposed that the Troika recast a part of the then current Memorandum of Understanding by extending it and adapting certain of its measures. Here again, the pre-election Programme explicitly said the opposite: “We assume responsibility and are accordingly committed to the Greek people for a National Reconstruction Plan that will replace the Memorandum as early as our first days in power, before and regardless of the negotiation outcome.”

In contradiction of this commitment on Syriza’s part, as he says in his book, he repeatedly told the European leaders that 70% of the measures called for by the Memorandum of Understanding were acceptable. He adds that certain measures that were still to be applied were positive, but that 30% of the Memorandum needed to be replaced by other measures having a neutral effect on the budget – that is, that the new measures, and in particular those that would be implemented on order to deal with the humanitarian crisis, would not increase the deficit projected by the Samaras government, being offset by additional revenues or reductions in expenditures in certain areas.

Varoufakis also said that the government he represented would not call into question the privatizations that had been conducted since 2010 and that moreover, certain additional privatizations were quite conceivable provided that the sale price was high enough and that the purchasers would honour the employees’ rights.

He carefully avoided mentioning to his negotiating partners the part of Syriza’s Programme that implied that the Greek State would take over control of Greece’s private banks, since after all it was their majority shareholder. Yet the Thessaloniki Programme was quite clear about that: “With a Syriza government, the public sector will regain its control over the Hellenic Financial Stability Fund (HFSF) and it will have rights over recapitalized banks.” Varoufakis himself recognizes that he never discussed this absolutely central issue because he felt he “had no choice” but to accept having his ministry’s jurisdiction over the banks taken away. [15] It needs to be known that in 2015 the Greek State, via the Hellenic Financial Stability Fund, was the majority shareholder in the country’s four largest banks, which accounted for more than 85% of the Greek banking sector. The problem is that because of policies pursued by preceding governments, its shares had no real weight in the banks’ decisions since they did not entitle the government to voting rights. The Parliament, in conformity with the commitments made by Syriza, needed to turn the so-called preferential shares held by the public authorities (which do not grant voting rights) into ordinary shares entitling them to vote. Then, in a perfectly normal and legal way, the State would have been able to exercise it responsibilities and find a solution to the banking crisis.

Varoufakis, on several occasions at the start of his term of office, had said that the Troika had no democratic legitimacy and that the Greek government would not collaborate with them. But reading his book, you quickly realize that in practice, he had accepted the Troika remaining in place. It had only disappeared in the official discourse. The only concession the Troika made consisted in agreeing to the pretence that it no longer existed. In reality it continued to operate, palpably and implacably. Varoufakis shows that it was present at all the key stages of negotiation and decision-making. He never denounced its remaining in place because that would have implied officially recognizing that his positive attitude towards the agreement of 20 February was mere posturing.

But before we discuss that fateful agreement of 20 February, it’s important to explain the strategy adopted from the start by the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

to destabilize Tsipras’s government and to show the inappropriateness of Varoufakis’s reactions.

The ECB’s decision on 4 February 2015 and Varoufakis’ response as told by himself

A couple of hours after meeting Varoufakis on 4 February, Mario Draghi announced that the Board of Directors of the ECB would probably decide, during that same afternoon, to cut off access to liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. for Greek banks. As Varoufakis says “It was an explicit, calculated act of aggression.” [16]

So less than ten days after the 25 January 2015 elections, on 4 February, the ECB decided to immediately increase pressure on the Tsipras government through extreme measures. It was more than moral pressure or blackmail, it was a downright aggression, as underlined by Varoufakis in the quoted passage (see box: The ECB, financing of the banks, and the consequences of the decision made on 4 February 2015).

The ECB, financing of the banks, and the consequences of the decision made on 4 February 2015

The ECB provides liquidities to the banks in the Eurozone. To gain access, the banks (whether public or private) must deposit financial securities Financial securities Financial securities include equity securities issued by companies in the form of shares (shares, holdings, investment certificates, etc.), debt securities, excluding commercial instruments and savings certificates (bonds and similar securities), and holdings or shares in Undertakings for Collective Investment in Transferable Securities (UCITS). as guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). . These are called “collateral Collateral Transferable assets or a guarantee serving as security against the repayment of a loan, should the borrower default. .” The collateral may be of different types, such as, among others, public debt securities or securities on private corporations. The ECB may consider that the instruments that are deposited are doubtful, either because they lack sufficient guarantees or are low quality. In this case it may block access to further funds. This in turn results in doubt and a possible “run” on the banks.

The only way out for the banks in difficulty is to get emergency liquidities from the national central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
. This is a costly solution. Should the national central banks do this they must demand a high-risk interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rate. Moreover the available amounts are limited and evolve weekly. When this happens the national central bank’s directors meet each Friday to fix the amounts to be made available for the week to come, after analysis of their situation. Again, the ECB must agree and may limit the volume of liquidities to be made available.

The negative consequences of the decision made on 4 February 2015 were immediate. First, the Greek banks were forced to pay higher rates to have access to liquidities, which weakened their positions. Second, short-term financing for the Greek State became much more difficult. This meant that the liquidities granted by the ECB were used to purchase short-term (less than one year) Greek treasury bills. This permitted the Greek government to keep going (Eurozone governments cannot borrow from their own central banks). As the ECB was limiting liquidities for Greek banks, the latter borrowed fewer securities and required a higher yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. , which added to the burden of the Greek government’s public debt. Thus by limiting Greek banks’ liquidities and increasing the cost at which they could find funds, the ECB made it even more difficult for the Greek Treasury to borrow from Greek banks.

Private banks receive cash with which they buy government securities for profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . Then they deposit these securities as collateral with the central bank in order to obtain liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. (credit) that they use to buy more public securities. (Greek banks are granting less and less credit to the private sector and the share of non-performing loans in their credit portfolio is increasing – it reaches a rate of 45% in 2015. So they are lending more and more to the State because it is safer than lending to the private sector). If the central bank limits access to liquidity, banks buy fewer securities and demand a higher yield, which increases the cost of borrowing for the government.

On one hand, private foreign funding was impossible or difficult to find, and on the other, the ECB let it be known that it would not cede to Greece the profits that it had made on its debt bonds as promised (€2 billion should have been paid in 2015). This also was a purely political decision. Indeed in 2014 the ECB had made some payments of profits to the Samaras government even though it was behind in implementing the second Memorandum. Even before Tsipras’ election victory was known, emissaries of the Eurogroup and the ECB made it known that the promised €2 billion would not be paid. (See below.)

Finally, since the ECB considered that public securities had lost value because of the deterioration of the situation of both the banks and the State, it announced that the situation had worsened, leading to increased withdrawals and further restrictions on the State’s access to funds.

There is further proof of the aggressive political nature of the ECB’s decision to cut off liquidities to Greek banks. As we have said, the ECB may consider that a country’s banks are of such high risk that they should not receive further liquidities and a rescue plan should be applied to them, for example, by injecting fresh capital (which had been done in the context of the successive Memoranda). The problem for the ECB is that in June 2014 all the Greek banks had passed the European banking authority EBA
European Banking Authority
The body charged with supervising the European banking system and, along with two other authorities, the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), form part of the European System of Financial Supervision.

EBA : https://www.esma.europa.eu/
stress test. It was clear that the result had been overvalued in order to justify the ECB helping Greek banks during the period of the Samaras government, who had just lost the European elections to Syriza. What is certain is that the banks were in a very bad way, in 2009 as in 2014 and in 2015. However, the ECB pretended surprise in discovering the real situation just days after the election of Tsipras. This was all purely political manoeuvring.

On the morning of 4 February, how did Varoufakis, who describes the decision of the ECB to restrict normal access to liquidities to Greek banks as a premeditated act of aggression, react to this news? Very moderately! Unbelievable!

While the ECB was waging war against Greece and using force to humiliate its government, while the ECB’s action towards countries of the European periphery is thoroughly negative, this is what Varoufakis, according to his own account, said to Mario Draghi: “I began my reply by expressing my great and genuine respect for the manner in which Draghi had striven from the first day of his presidency to do whatever it took to save the euro while adhering as far as possible to his bank’s charter and rules. This skilful balancing act was what had bought Europe’s politicians the time they needed to get their act together, address the crisis properly, and thus alleviate the impossible circumstances in which the ECB had found itself: responsible for saving the Eurozone’s failing economies while being prohibited from using the essential means – ones available to any normal central bank – of doing so. . . Alas, the politicians did not use the time you bought for us wisely, did they? You have done a fantastic job in keeping the Eurozone together as well as in keeping Greece in the euro, especially in the summer of 2012. What I am here to put to you today is that you continue to do this during the next few months, granting us politicians the time and monetary space necessary to strike a workable deal between Greece and the Eurogroup (…).” [17]

In the evening of 4 February, after receiving a phone call from Mario Draghi confirming that the granting of normal liquidity had ceased, Varoufakis published a press release which began as follows: “The ECB is basically trying to abide by its own rules, motivating both us and our partners to reach a political and technical agreement quickly, while keeping the Greek banks liquid.” [18] He himself characterizes his statement as follows: “packaging a shock as a non-event.” [19]

It has to be emphasized that Varoufakis told Tsipras he should not get rid of Yannis Stournaras, who had been Samaras’ finance minister before becoming governor of the Greek Central Bank: “Alexis had repeatedly told me and others that removing Stournaras was his top priority. Ironically I had advised moderation and tempered his animosity towards Stournaras, pointing out that the government could not remove the governor of the Bank of Greece without a major clash with the ECB’s executive council. (. . .) But in trying to contain Alexis’s fury towards Stournaras, I had created the impression among the Syriza leadership that I was soft on the Troika’s favourite son in Athens.” [20]

In the fifth instalment of my series on Adults in the Room I explained my view of how Varoufakis and the Greek government should have responded to the destabilizing and obstructing measures that had been used from the start by European leaders.

Every time Varoufakis and Tsipras seemed to stand up to creditors, people spontaneously demonstrated their solidarity

Clearly, every time Varoufakis and Tsipras seemed to stand up to creditors, people spontaneously demonstrated their solidarity. Varoufakis testifies to this himself. While he faced the Eurogroup in Brussels on 11 February 2015, “thousands of cheering people had gathered in Syntagma Square while I was holed up with the Eurogroup. They were dancing and waving banners proclaiming BANKRUPT BUT FREE and STOP AUSTERITY. Simultaneously, and even more touchingly, thousands of German demonstrators, led by the Blockupy movement, were encircling the ECB building in Frankfurt in solidarity with us.” [21] This shows the mobilization potential if in the following days Tsipras and Varoufakis had maintained their refusal of ultimatums, if they had suspended payment of the debt, if they had launched an audit of the debt with citizens’ participation, if they had set up a system of parallel payment, if they had used their voting rights in Greek banks and if they had decided on control on capital flows, if they had implemented a series of concrete and immediate measures to meet the humanitarian crisis and improve the living conditions of a majority of Greek people, those who had most badly been hit by the austerity resulting from Memoranda. The measures that should have been taken are developed below.

Assessing the 20 February 2015 agreement

Tooze explains that Varoufakis thought he had signed a good agreement on 20 February 2015. Like Mason, Tooze perceives this agreement as bad, and I agree. I even said it was the first capitulation. Yet in his book and in several public statements after 2015, Varoufakis claimed it was good.

In answer to a question raised by Patrick Saurin (CADTM) and Alexis Cukier (Ensemble! and EReNSEP network), he wrote on his blog in October 2016 “that the 20 February Eurogroup agreement was entirely consistent with DiEM25’s policy of ‘constructive disobedience’ and uniquely respectful of the mandate of the Greek electorate. The ‘constructive’ part was our willingness to negotiate in good faith.”

He adds that “it was right and proper that we did not nationalise the banks at the beginning, that we did not fire Mr Stournaras at the beginning, and that we signed the 20 February agreement.” [22]

Why the 20 February agreement was not only bad, but was actually the first capitulation

The disastrous agreement reached on 20 February 2015 and sanctioned on 24 February extended the second Memorandum of Agreement rejected by the Greek people for another four months. In it, Varoufakis undertook, in the name of the Tsipras government, to repay all creditors according to schedule (for a total amount of €7 billion between February and end of June 2015, including €5 billion to the IMF) and to develop new measures of austerity and privatization (see box below for the contents of the agreement).

The 20 February agreement had triggered a strongly negative response from Manólis Glézos, the archrepresentative of Resistance against Nazism and Syriza MEP since February 2015 as well as from the famous composer Míkis Theodorákis. In a public statement Manólis Glézos apologized to the Greek people for having encouraged them to vote for Syriza in January 2015 (see translated excerpts of his statement on Keep talking Greece, 22 February 2015). Zoe Konstantopoulou, the President of the Hellenic Parliament, also declared her opposition to the agreement. Her support for the cancellation of the debt and suspension of repayment had been very clear in her inauguration speech.

When on 20 February he committed the country to pay the debt in full according to a set schedule until 30 June 2015, Varoufakis agreed to a situation that was all the more unsustainable as creditors had decided not to make any remittance if the government did not completely adhere to the MoU, which was impossible. Even worse, shortly before the Eurogroup meeting on 20 February, its president, the member of the Dutch Labour party Jeroen Dijsselbloem, had told him that the outstanding €11 billion of the Hellenic Financial Stability Fund (HFSF) on which the Tsipras government relied to carry out part of its election promises had been transferred to Luxembourg instead of being placed at Greece’s disposal.

The amount of €7 billion that the government committed to pay over four months is to be compared with the estimated cost of all the humanitarian measures included in the Thessaloniki programme, i.e. €2 billion for the whole year 2015. In fact, because they repaid this debt, from my own estimate, the Tsipras government did not spend more than € 200 million in response to the humanitarian crisis from February to June 2015, which was grossly insufficient.

The Agreement Varoufakis signed with the Eurogroup on 20 February [23]


“The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday 23 February. The institutions [ECB, IMF and European Commission] will provide a first view [of] whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institution by the end of April” (p.273).


“The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely.

“The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement.”


“The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.” [24]

The 20 February 2015 agreement is the first official document in which Varoufakis and Tsipras relinquish the main tenets of the programme on which Syriza had been elected. In the following days Varoufakis and the Tsipras government yielded to all the creditors’ demands; these even drafted the details of austerity measures to be implemented so as to be able to repay the Greek debt, with Varoufakis only having to sign it.

Not only did Varoufakis sign an unacceptable agreement, but he soon went further, as he acknowledges himself. On the morning of Monday 23 February, Varoufakis consulted the War Cabinet (Alexis Tsipras’s inner circle) including, for once, Lafazanis, Minister of Productive Reconstruction, Environment and Energy and the leader of the Left Platform within Syriza: “The strongest opposition came from colleagues belonging or close to the Left Platform. From their perspective, our negotiations with the creditors were fundamentally ill-advised and the couching of my list in Troika-speak bordered on the treacherous.” (p. 285)

Finally, after further email consultation of the Troika representatives and having waited for their green light, it was a few minutes after the midnight deadline that Varoufakis officially sent his list to the Eurogroup as agreed. [25]

The following morning, Tuesday 24 February 2015, the media put it out that the delay was proof of Varoufakis’s incompetence. Varoufakis comments: “It was a charge I could not challenge without revealing that I had been negotiating secretly with Greece’s creditors before formally submitting the list.” [26]

A few hours later, the Greek press revealed the contents of the document Varoufakis had sent the Eurogroup, announcing that it had been drafted by Declan Costello of the European Commission, which in the main was true. Varoufakis acknowledges, “Hearing this I grabbed my laptop, opened the document containing my reform list, clicked on ‘File’ and then on ‘Properties’ to see that next to ‘Author’ it read ‘Costello Declan (ECFIN) [Economic and Financial Affairs]’ and just below under ‘Company’, two words that completed my humiliation, ‘European Commission’.” [27] [28]

I took my laptop, opened my list of reforms, clicked on “Folder” then “Properties”, and next to “Author” I read “Costello Declan (ECFIN)” Source : https://twitter.com/YanniKouts/status/570212150381301760/photo/1

See illustration: https://twitter.com/YanniKouts/status/570212150381301760/photo/1

Eventually on 27 February Varoufakis sealed his capitulation. He agreed to the Troika’s demand: the 20 February agreement is not a substitute for the MoU. He signed a letter written by EU leaders and sent it to them.

Varoufakis writes: “Accepting the creditors’ words in full and without any emendation in a request of this nature was pure poison: it would suggest that we had not wrung the extension from them on our terms, but that the Troika had chosen to impose it on theirs.” [29]

Varoufakis was aware of the extreme gravity of the decision to be made. Signing the template letter meant that the current memorandum was extended along terms dictated by the Troika.

He acknowledges that the letter was so outrageous that Tsipras considered it unthinkable to sign it and inform parliament. Varoufakis then suggested he should do the dirty work: “In that case, Alexis... I shall take sole responsibility. I’ll sign the bloody letter without parliamentary approval, send it to the creditors and turn the page.” [30] Varoufakis reports that in the early hours of 27 February, “I signed the formal letter of request and, with revulsion in my stomach, had it sent to the creditors. It was a thing of darkness. And I had acknowledged it as mine.” [31]

In an article http://www.cadtm.org/The-first-capitulation-of-Tsipras Tooze couldn’t have read since it was published after he wrote his two texts, I had explained in great detail Varoufakis’ disastrous decisions during those woeful days at the end of February: the content of the 20 February agreement, the even worse commitment in the 27 February letter, which had been drafted by creditors, retaining Chouliarakis in his post (despite of the nefarious role he played, as I described in another article http://www.cadtm.org/Varoufakis-Surrounded-Himself-with ). That was the first capitulation in truth.

In his narrative Varoufakis conceals the extent of the opposition to this agreement

Morever, in his narrative Varoufakis conceals the extent of the opposition to this agreement within the Syriza parliamentary group and leadership. [32] When it happened I was in Athens where I had had several meetings with various government ministers [33] as well as with the President of the Greek Parliament, Zoe Konstantopoulou, who commented on the launching of the audit committee on the debt and on our discussions about the inacceptable content of the 20 February agreement in a text published in July 2017. Varoufakis minimizes the opposition met by the 20 February agreement as this enables him to underplay his own responsibility.

Concerning Varoufakis’ dissuasion measures

In his book Varoufakis constantly refers to the measures he claims to have proposed to Tsipras to oppose the ill will of the European leaders. Because none of them were ever applied nor communicated to either Syriza or the public whilst he was Minister, we have only Varoufakis’ affirmations on which to ponder. In an exclusive interview that Tsipras accorded to The Guardian in July 2017 he described Varoufakis’ propositions as “so vague, it wasn’t worth talking about”.

Varoufakis, on the other hand, claims that the dissuasion measures he mentions in the book had been accepted by the Tsipras inner circle in November 2014 and it was on this basis that he accepted the portfolio of Minister of Finance in January 2015. Tooze rightly gives greater importance to a unilateral write-down of Greek bonds, whereas Mason is more interested in the parallel payments system.

To understand what this is about, I will return to Varoufakis’s explanation, then summarize Tooze’s and Masons’s positions.

Varoufakis explains it like this: “The more likely scenario, however, was that the extension was a tactical ploy: by delaying any outcome they were simply waiting for the depletion of both our current popularity and our small liquidity reserves so that by the time the extension expired in June they could be sure of our exhausted government’s total capitulation”. [34]

Varoufakis claims that he obtained an agreement from Tsipras’ inner circle (called the ’War Cabinet’) to “request (an) extension while at the same time signalling to the Troika that any attempt to wear us down through a tightening of the liquidity noose would be met with a refusal to make the forth-coming repayments to the IMF; that any effort to push us back into the straightjacket of its failed programme or to deny us debt restructuring would be met with a cessation of negotiations; and any threat of closing down our banks and imposing capital controls would be met with unilateral haircuts of the ECB’s SMP bonds, with the activation of the parallel payments system and with changes to the law governing the Central Bank of Greece in a manner that restored parliament’s sovereignty over it.”

The trouble is that this threat was never, not even in whispers, ever mentioned to the Troika. Neither was it ever made public. Varoufakis admits that. As for putting it into practice, as we shall see later, Tsipras and the majority of his cabinet were firmly against it and Varoufakis went along with them to the bitter end in July 2015. It was all very hush-hush, the rest of the government and the Syriza directorate were never informed and the Greek people were kept in total ignorance.

Varoufakis wrote: “the worst strategy would be to request an extension, get it, but then fail to signal our readiness to trigger these measures if our creditors were to stray from the spirit of the interim agreement. Were we to make that error, I argued, they would drag us through the mud over the period of the extension and then, at the moment of our greatest weakness, around the end of June, slaughter us.” [35] Well, this is exactly what happened. With Tsipras’ agreement, Varoufakis requested the extension to the Memorandum without showing the slightest determination to take action and the creditors dragged them through the mud until final capitulation.

For Varoufakis, measures as strong as Greek bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. write-downs or parallel payment systems are weapons of dissuasion

Mason explains that for Varoufakis, measures as strong as Greek bond write-downs or parallel payment systems are weapons of deterrent power. In other words, weapons that should not be used. Varoufakis believed that the threat of such measures would be sufficient to make the European leaders cede. Of course threats must be backed by actions.

Here Mason points out one of Varoufakis’ inconsistencies: “Game theorist that he is, Varoufakis must know that the bargaining power of the weak depends on their exit options.”

While Tooze insists on bond write-downs as an arm against the creditors, Mason puts the emphasis on creating a parallel payments system. “If an alternative payments system could allow purchases to be made, workers to get paid, and businesses to buy needed inputs even with the country’s private banks shut down, then the ECB would be largely defanged. With the creditors’ threat to bring economic life to a halt removed from the game, Greece could return to the bargaining table in a much stronger position. And in the worst case, if the creditors still refused to accept anything but the existing package, the parallel payments system would become the basis for a new currency, allowing a gradual transition out of the euro instead of a wrenching leap … The greatest strength of the political establishment in Europe—as of political establishments everywhere—is the perception that their rule is an unchangeable fact, that there is no alternative. The sight of Greece still standing—businesses running, people working and paying bills, public services functioning—after the ECB had done its worst would severely damage this aura of inevitability.”

It was fundamental for the Tsipras government to take back control of the Central Bank

Mason also considered that it was fundamental for the Tsipras government to take back control of the Central Bank. I agree with this.

What is more, Mason believes that Varoufakis was wrong to refuse to introduce controls on the movements of capital. He quotes Varoufakis saying “capital controls would be detrimental to the EU member States’ common interests and for that reason alone we had to oppose them”. Mason rightly says “Here and elsewhere, he comes across as a committed European—an honourable stance but perhaps not the best fit for the position he occupied.” He adds that some countries, including Greece should be “first to de-integrate—to reassert their sovereignty and reject the free movement of money and goods that have defined the European project in favour of a model in which economic ties are managed in the service of a national programme of development.” I agree with this also.

Tooze insists that a unilateral write-down of Greek bonds to the nominal value of €30 billion was an essential measure that should have been taken.

These bonds dating from 2010-2011 were still under Greek jurisdiction. The ECB had purchased them at 70% of their nominal value and demanded reimbursement at 100%, on top of the highly lucrative interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
it was cashing in on. [36] Equivalent bonds held by Greek public pension funds Pension Fund
Pension Funds
Pension funds: investment funds that manage capitalized retirement schemes, they are funded by the employees of one or several companies paying-into the scheme which, often, is also partially funded by the employers. The objective is to pay the pensions of the employees that take part in the scheme. They manage very big amounts of money that are usually invested on the stock markets or financial markets.
had had a ’haircut’ of 53% in March 2012 but the ECB had refused to accept that the same haircut be applied to the bonds in its possession. The Greek government had not only the moral right, but quite simply the right to write-down or repudiate these bonds. This proposition by Varoufakis was quite correct; the trouble is he never took this action while he was minister. He just folded under the pressure.

Varoufakis accepted concession after concession and never made public his disagreements, nor his alternative proposals, until the day after the second capitulation on 13 July 2015

Mason rightly remarks that “Even after the ’No’ vote, preparing the alternative payments system is only one of four priorities for his staff; number one is developing yet another offer for the creditors to reject. When he assures Alexis Tsipras, then the Prime Minister of Greece, that Merkel will ’100%’ accept his new proposal if she is rational, one wants to reach through the page and shake him and say, ’Yanis, haven’t you been reading your own book?’”

Other critical points treated by Tooze: approaches made to China, Russia and the US

Tooze rightly mentions the unfruitful contacts the Tsipras government made with China, Russia and the US and his remarks are largely correct. "Seeking an escape from the claustrophobia of the EU, the Syriza government went beyond it. The old left wing of the party looked to Russia. Varoufakis, with an eye to the shifting balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. in the twenty-first-century economy, sought to make a deal with the Chinese. But from Moscow and Beijing, Greece received the same answer: you must come to terms with Germany. The same message came from Washington. Varoufakis leant toward Britain and the US. … When Syriza took office, Obama made sympathetic comments. But when Germany made its position clear, the US pulled back. As one American official told Varoufakis, Washington would not meddle. Greece belonged in Germany’s ’sphere of influence.’” I would add that Varoufakis explains in Chapter 11 that he wrapped up a purchase agreement for the port of Piraeus by the Chinese corporation Cisco offering an option on the Greek railways to assure Europe-wide distribution of imported merchandise and add a link to the Silk Road project. This didn’t work out. Varoufakis had hoped to convince the Chinese government, in March 2015, to purchase Greek Government treasury bills to a value of several billion Euros. The product of which he hoped to use to pay IMF instalments. To Varoufakis’ great disappointment the Chinese leaders did not keep their promises; they purchased only one hundred million Euros on each of two occasions. The offers Varoufakis made to the Chinese were very contentious: borrow from China to pay the IMF! Abandon control over Greece’s railways! That would certainly not have benefited the Greek people or helped them retain some measure of sovereignty.

Mason and Tooze’s weak points and what they fail to mention

Mason and Tooze forget that a solution to the banking crisis (much more than just having access to liquidities) was essential. The programme on which Syriza was elected clearly included taking complete control of the banks and creating a development bank.

Varoufakis opposed the Syriza programme

As we have seen, Varoufakis opposed the Syriza programme. He recounts that when he accepted Tsipras’s offer, in November 2014, to be Minister of Finance should Syriza win the election he proposed that “banks be placed under the management of the EU”. Varoufakis continues “I knew this was an extraordinarily challenging proposal for a left wing party that tended if anything towards nationalizing the banking sector”. [37] By suggesting to Tsipras that he should transfer all the shares held by the Greek government to the EU, Varoufakis was taking yet another tragic step towards Greece’s loss of sovereignty.

It is very surprising that Mason and Tooze say nothing about this. This may be because, once Varoufakis became Finance Minister, Tsipras and Dragasakis, the Deputy Prime Minister, quickly relieved him of his authority over the banks. [38] This silence is not justified. It is impossible to apply measures contrary to the Troika wishes and the Memoranda without strong measures concerning the banks. The decision by Tsipras and Dragasakis not to implement the programme they had been elected on clearly indicated that they had no intention of bothering the interests of the Greek banks’ big shareholders, who had nevertheless caused the dramatic situation the banks were in. Varoufakis was aware of this and accepted to conform to this attitude. Mason and Tooze do not mention another weakness in Varoufakis’ and Tsipras’ position: their acceptance of the protocol of secret diplomacy rather than calling on the population for support. This was a decisive factor in the capitulation.

(CC - Flickr - Des Byrne)

Neither do Mason and Tooze mention the initiative taken to audit the Greek debt that was launched by Zoe Konstantopoulou, the President of the Greek Parliament, with the support, albeit unenthusiastic, of Alexis Tsipras. This initiative, the likes of which had never before been seen in Europe, was widely supported by the Greek population, but Varoufakis took no part in it. It is not mentioned once in Varoufakis’ book (and Zoe Konstantopoulou is mentioned only once) although he was present at the opening ceremony on 4 April 2015 (see: “4 April 2015: a landmark in the search for the truth about the Greek debt”). Although he claims to have supported the Truth Committee on Public Debt, in reality he did nothing at all. He did not believe in it, he was convinced that questioning the legality or the legitimacy of the debt would be of no use. Already, in 2011 he had refused to support the citizens’ debt initiative. [39] I was reminded of this by the Deputy Minister of Finances Nadia Valavani at a meeting on 13 February 2015.

Varoufakis shows a serious lack of knowledge of the history of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. conflicts, of cases of cancelling or repudiating debt, the lessons of political strategy to be learned and the interest of a strong legal basis or unilateral sovereign acts when facing off creditors. Debt repayments should have been suspended as of February 2015 to avoid emptying the State coffers to the profit of the IMF. The IMF was the single public beneficiary of Greek government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. repayments between February and June 2015. The Greek government could very well have divided the creditors by announcing a suspension of IMF payments only.

It should also be noted that Tooze commits an error of appreciation when speaking of Tsipras’ capitulation on 12 July 2015: “As Tsipras correctly judged, the majority of the Greek population did not want to risk a rupture”. On what does Tooze base his two claims that the majority of the Greek population did not want to risk breaking away, and that Tsipras was right to take this fact into account? Another interpretation is justified: the majority of the Greek population, who voted “no” on 5 July, were quite prepared to refuse a new Memorandum and were fully aware of the possible consequences and the risks of rupture that might follow. Tsipras had not foreseen that. It must be remembered that the referendum took place in the context of ECB reprisals, entirely cutting off liquidities to Greece, and the Greek banks were closed. Both the European leaders and the Greek “yes” campaigners hammered the idea that a “no” vote would result in Greece being ejected from the Eurozone. In the days before the referendum, Tsipras was convinced that the “yes” vote would win the majority (even though he called for a “no” vote himself) and would legitimise his coming capitulation. Varoufakis was probably convinced the “yes” would win although he was not ready to capitulate. [40]

Within 24 hours of the “no” victory, Tsipras met with the three “yes” parties who had lost the referendum in order to concoct with them a new proposal that would resemble closely what the electorate had just rejected. Tsipras continued his “negotiate at any price” policy and betrayed the public’s choice by not respecting the result of the referendum (see).

Athens, Monday 29 June 2015

Tooze and Mason do not ask what alliances Varoufakis could have forged in order to resist the nefarious direction Tsipras had taken. If Varoufakis had really wanted to make the Greek government unilaterally decide on a write-down on the Greek bonds held by the ECB, create a parallel payments system, suspend debt repayments to the IMF, he should have sought alliances with favourable tendencies within Syriza, the Government and the Parliament. Instead, between January and early July he made no effort whatsoever to bring about the convergence of forces that opposed Tsipras’ continual retreats. He was an accomplice to all the concessions.

Varoufakis’ aversion for Panagiotis Lafazanis, leader of the Left Platform within Syriza and a key Government figure, is clearly visible. Varoufakis writes “[Alexis had] appointed Panayiotis Lafanzanis to the ministry [...]. This was terrible”. He goes on, “With Lafanzanis in one of the key ministries, and with Euclid [Tsakalotos, who eventually replaced Varoufakis as Finance Minister] – who agreed with our covenant – outside the cabinet, my negotiation strategy was in jeopardy”. [41] Varoufakis did not seek alliance with the Speaker of the Hellenic Parliament, for example, in order to take measures to write down the value of the ECB’s Greek bonds. If he had really wanted to take this measure he would have had to pass an Act of Parliament. Varoufakis remained in the cosy little circle around Tsipras.

The measures that the Tsipras government should have taken from the beginning and at least from 5 February 2015

I maintain, as do others, that a very different orientation from the one adopted by Varoufakis and the small circle around Tsipras should have been taken. To apply the Thessaloniki Programme, the Tsipras government should have taken the following initiatives and measures:

- make public the government’s five or ten priorities in the negotiations, in particular as regards debt, while very clearly denouncing the illegitimate nature of the debts whose repayment the Troika was demanding;

- establish contacts with the social movements and – in the name of the government or of Syriza – urge the creation of solidarity committees in as many countries as possible, in parallel with the negotiations with the creditors, in order to develop a broad solidarity movement;

- strengthen the demands for reparations from Germany for the Nazi occupation of Greece during WW2;

- refuse to engage in secret diplomacy and so show up the creditors’ coercive posture and disrespect for democratic principles;

- develop international channels of communication in order to get past the gate-keeping of the dominant media;

- use the provisions of European Regulation 472 regarding auditing of debts, launch the audit with citizen participation and suspend debt repayments beginning with the debt to the IMF (the only creditor who was to be paid during the first months of the Tsipras government up to the end of June 2015) and pass legislation to unilaterally devalue Greek bonds held by the ECB by up to 90% or bluntly repudiate them:

- put an end to the Memorandum of Understanding in conformity with the commitment made to the Greek people at the time of the 25 January election;

- establish control of movements of capital;

- adopt a law on banks to ensure that the public authorities have oversight over them and put them to good public use favourable to the economic development of the country;

- implement a parallel/complementary payment system;

- adopt a law cancelling private debts to the State, for example for debts of less than €3,000. Such a measure would have immediately improved the situation of 3.3 million taxpayers (including 357,000 SMEs) who owed less than €3,000 (including penalties); [42]

- radically reduce VAT on basic goods and services;

- roll back the cuts in retirement pensions and the minimum legal wage;

- implement the emergency plan to ease the humanitarian crisis as called for in the Thessaloniki Programme;

- prepare for new reprisals by the European authorities, and therefore for a possible exit from the Eurozone.

If these measures had been taken a different outcome would certainly have been possible.


The numerous comments aroused by Yanis Varoufakis’s book, Adults in the Room, reflect the significance for the peoples of Europe, of the experience of the Tsipras government in which Varoufakis played an important role. This book has the suspense and intrigue of a good novel, rounded off with a good dose of betrayal. The great interest of the former Greek Finance Minister’s memoirs is that he tells his version of events which influenced and continue to influence the international situation, not only in Europe but beyond, by the profound disappointment caused by the Tsipras capitulation.

As Varoufakis says himself, he continually sought to reorient Syriza’s policies, an attitude which pleased the Tsipras, Pappas and Dragasakis trio. This turnaround was also contrary to the will of the people who had elected the political organization to office on the basis of strong commitments.

His testimony reveals how, through important moments between 2012 and the elections that took place on 25 January 2015, decisions were made behind Syriza’s back that transgressed elementary democratic principles. After the Syriza-Anel government was formed it was more than just the will of the Syriza base that was not respected, it was the will of the Greek people who had brought the Tsipras government to power on the basis of a radical program put forward during the campaign. From the beginning of the negotiations with the European leaders, Tsipras and Varoufakis showed their lack of real determination to end the Memoranda, debt, privatizations and the power of the banks, to increase pensions and wages, among other essential measures.

Varoufakis claims a central role, and he did indeed have significant influence over the policies adopted by the Tsipras-Pappas-Dragasakis trio who used him as a trump card for five months up to the 5 July referendum. After which, they got rid of him by withdrawing his ministerial portfolio, leading him to resign.

Varoufakis never publicly mentioned his disagreement while he was Minister. He accepted secret diplomacy. He never called on Greek public support or international solidarity. He never had the courage to resign before 6 July, even though he had his letter of resignation always in his pocket, regularly updated.

Nevertheless, to give credit where credit’s due, Varoufakis was one of the Syriza MPs who, during the night of 15/16 July voted against the capitulation signed by Tsipras in Brussels on 13 July. [43] Varoufakis went on to take part in the European Initiative for a Plan B, to create DIEM 25 and to write his book which is essential to understanding the events which shook Europe in the first half of 2015. Of course, I do not accept the explanations that he gives but his insight is irreplaceable and should be taken seriously. Varoufakis continues to be politically active and preaches a perspective of consensual reform of the European Union and the Eurozone that do not take into account the lessons of 2015.

Acknowledgements: The author wishes to thank Alexis Cukier, Stathis Kouvelakis, Nathan Legrand, Brigitte Ponet, Claude Quémar and Patrick Saurin for their advice and suggestions.

The author takes full responsibility for any errors that may have slipped into this work.

Further remarks and analysis of Varoufakis’ replies to comments about his book are to come: https://www.yanisvaroufakis.eu/2018/03/07/was-defeat-inevitable-a-review-of-adam-toozes-meta-review-of-adults-in-the-room-1/

Translated from the French by Snake Arbusto, Vicki Briault Manus, Mike Krolikowski, Christine Pagnoulle of the CADTM


[1Yanis Varoufakis, Adults in the Room: My Battle with Europe’s Deep Establishment, The Bodley Head, London, 2017. Quotes are from the Vintage hardback edition (ISBN: 9781847924452).

[2Prior to January 2015, none of the Syriza leaders had ever held a high government position; the only one ever to have been a minister, for a few months in 1989, was... Dragasakis. The government was a coalition between the Rightist New Democracy party and the Communist Party (KKE), of which Dragasakis was a member at the time. Dragasakis was clearly opposed to anything that would go against the interests of the private Greek banks, and was also against the audit of the debt and suspension of repayments. He was favourable to remaining in the Eurozone. Dragasakis had had ties to bankers for many years. He himself had been a board member of a medium-sized commercial bank. In a way he served as the bridge between Tsipras and the bankers. Syriza was a new group whose political leaders had relatively little involvement in the spheres of the State – unlike the PASOK, for example, whose history is linked to the Republic and management of State affairs.

[3These functions correspond to the composition of the Greek government as it was after it was re-organized in 14 January 2019 following the departure of several ministers of the Independent Greeks (ANEL).

[4During his visit to Rome Varoufakis met with Italy’s Finance Minister, who told him he had succeeded in pacifying the German government, and in particular Schaüble, by adopting a reform of the labour code despite social protest. “That turned out to be ‘labour market reform’ – code for weakening workers’ rights, allowing companies to fire them more easily with little or no compensation and to hire people on lower pay with fewer protections. Once Pier Carlo had passed appropriate legislation through Italy’s parliament, at significant political cost to the Renzi government, the German finance minister went easy on him. ‘Why don’t you try something similar?’ he suggested. ‘I’ll think about it,’ I replied. ‘But thanks for the tip.’” Yanis Varoufakis, Adults in the Room: My Battle with Europe’s Deep Establishment, The Bodley Head, London, 2017, Chapter 7, p. 200.

[5I analyzed the offensive against the working class in general and in Germany in particular, especially the anti-social “reforms” adopted under social-democrat chancellor Schröder in “The greatest offensive against European social rights since the Second World War,” http://www.cadtm.org/The-greatest-offensive-against, published 12 January 2013.

[6Varoufakis presents the tax amnesty proposal as follows: “I would announce that for the next fortnight a new portal would be open on the ministry’s website on which anyone could register any previously undeclared income for the period 2000–14. Only 15 per cent of this sum would be required in tax arrears, payable via web banking or debit card. In return for payment, the taxpayer would receive an electronic receipt guaranteeing immunity from prosecution for previous non-disclosure” Varoufakis, op.cit., Chapter 6, p. 169

[7I reviewed the proposals Varoufakis presents in his book in this article: http://www.cadtm.org/The-Varoufakis-Tsipras-Line-was. In the passage that follows, due to lack of space, I discuss only the main proposals.

[8Y. Varoufakis, op.cit., Chapter 7, p. 198.

[9Roufos is radically opposed to the Thessaloniki Programme and to Syriza, but is fairly forgiving where Varoufakis is concerned.

[11Varoufakis’s major proposal regarding debt restructuring, as he says himself, was in continuity with his piece entitled “Modest Proposal for Resolving the Euro Crisis” (https://www.yanisvaroufakis.eu/modest-proposal/). Putting this proposal into practice – that is, pooling the public debts of the Eurozone – would have involved a joint decision by the governments of the Zone to ease public finances and abandon austerity policies.

[12Y. Varoufakis, op.cit., Chapter 7, p. 211. In the same passage, Varoufakis also explains that he told Schaüble: “I had a better idea: why didn’t he appoint the general secretary of my ministry’s tax office?” (…) “My proposal was as follows: he would choose a German tax administrator of unimpeachable credentials and spotless reputation to be appointed immediately and to be fully accountable to the both of us, and if she or he required additional support from his ministry, that was fine by me.”

[13Y. Varoufakis, op. cit., Chapter 6, p. 167.

[14Y. Varoufakis, op.cit., Chapter 6, p. 178.

[15Y. Varoufakis, op.cit., Chapter 6, p. 176.

[16Y. Varoufakis, op.cit., Chapter 7, p. 201.

[17Y. Varoufakis, op.cit., Chapter 7, p. 201.

[18Y. Varoufakis, op.cit., Chapter 7, p. 209.

[19Y. Varoufakis, op.cit., Chapter 7, p. 208.

[20Y. Varoufakis, op.cit., Chapter 10, p. 301-302.

[21Y. Varoufakis, op.cit., Chapter 10, p. 245. We had more evidence of popular support for the Tsipras government when the 5 July referendum was decided at the end of June 2015.

[23The original English text can be accessed at http://blog.12pm.gr/post/eurogroup-statement-on-greece.aspx

[24The 20 February agreement also said, “Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF [European Fund for Financial Stability] programme and the transfer of the 2014 SMP [Security Markets Programme] profits. Both are again subject to approval by the Eurogroup.” Those two conditional promises were vain, as Varoufakis acknowledges in his book, since Dijsselbloem had told him shortly before the meeting that the outstanding instalment from the European Financial Stability Facility programme (EFSF) related to the Hellenic Financial Stability Fund (HFSF), an instalment that amounted to €11 billion. Similarly Varoufakis knew that Greece would not be entitled to claim the € 2 billion of profits accumulated by the ECB and Eurozone banks in 2014 in the context of the Security Market Programme. He writes that he had been told about this even before the elections by Jörg Asmussen (an advisor to the SPD board, a member of the great coalition led by Angela Merkel in Germany) and by Thomas Wieser (an Austrian social democrat who played and still plays a key part in the Eurogroup). See Yanis Varoufakis, chapter 5, p. 136. The 20 February agreement clearly stating that the money would not be paid without the approval of the IMF, the ECB and the European Commission represented by the Eurogroup (i.e. the Troika renamed “institutions”) amounted to saying it might be paid if the Tsipras government completely capitulated, as was the case on 13 July 2015. I say ‘might’ because even after Tsipras had capitulated the two above mentioned amounts still were not paid to the Greek Treasury.

[26Y. Varoufakis, op.cit., Chapter 10, p. 286.

[27Y. Varoufakis, op.cit., Chapter 10, p. 287.

[28See also Zero Hedge, “The Reason Why The Eurogroup Rushed To Approve The Greek Reform Package?”, published on 24 February 2015, https://www.zerohedge.com/news/2015-02-24/stunning-reason-why-eurogroup-rushed-approve-greek-reform-package

[29Y. Varoufakis, op.cit., Chapter 10, p. 296.

[30Y. Varoufakis, op.cit., Chapter 10, p. 298.

[31Y. Varoufakis, op.cit., Chapter 10, p. 300.

[32At the meeting of Syriza MPs, about a third were opposed to the 20 February agreement. Among these were the President of the Hellenic Parliament, Zoe Konstantopoulou, and all the ministers and deputy ministers of the Left Platform (P. Lafazanis, N. Chountis, D. Stratoulis, C. Ysichos) as well as Nadia Valavani, Deputy Minister of Finance, and Thodoris Dritsas, Alternate Minister for Shipping and the Aegean. Later, when a vote was held at the meeting of the Central Committee on 28 February and 1st March 2015, 41% of Central Committee members opposed the agreement of 20 February.

[33The ministers and alternate ministers with whom I had meetings in February 2015 are George Katrougalos (who stayed on in the second Tsipras government), Nadia Valavani (who was Alternate Minister of Finance and responsible for, among other things, the implementation of the programme for reduction of debt for households suffering from tax indebtedness ; in July 2015 she opposed capitulation), Rania Antonopoulos (Alternate Minister for Combating Unemployment, responsible for a vast programme of job creation as laid out by the Thessaloniki Programme), Costas Isichos (Alternate Minister of Defence; like Valavani, he opposed capitulation in July 2015), Nicolaos Chountis (Alternate Minister of European Affairs, who also opposed capitulation and then became an MEP for the party Popular Unity which left Syriza in August 2015). Note that in the first Tsipras government, there were only six ministers, the remaining members of the government being considered alternate ministers. I account for these meetings in http://www.cadtm.org/The-first-capitulation-of-Tsipras

[34Y.Varoufakis, op.cit., Chapter 9, p.270.

[35Y.Varoufakis, op.cit., Chapter 9, p.270.

[36I have published several articles on the subject, see for example from 2017: http://www.cadtm.org/ECB-s-odious-profits-on-the-backs . Part of Chapters 2 and 3 of the Report of the Truth Committee on Greek Public Debt (June 2015) whose work I coordinated also deal with the topic: http://www.cadtm.org/Preliminary-Report-of-the-Truth

[37Y. Varoufakis, op.cit., Chapter 4, p.101.

[38In his book, Varoufakis explains how he realised on 30 January that Dragasakis and Tsipras had decided to divest him of all responsibility regarding banks. He writes: “The last item on our agenda that night (when Varoufakis had a meeting with his advisors) was Greece’s banks. I asked for ideas on how to approach the impending confrontation when I put my proposal for ‘europeanizing’ them to the EU. Wassily interrupted me in typical fashion: ‘The horses have bolted, Yani,’ he said, showing me a decree that had arrived that evening from the deputy prime minister’s office, fully authorized by the cabinet secretary. It stipulated that jurisdiction over all matters pertaining to the banks had been moved from the Ministry of Finance to the office of the deputy prime minister. ‘Don’t tell me I didn’t tell you so,’ said Wassily. ‘Dragasakis has taken his banker friends under his wing to protect them from the likes of you.’ Though I feared that Wassily might be right, I still had no choice but to give Dragasakis the benefit of the doubt.” Y. Varoufakis, op.cit., Chapter 6, p. 176.

[39Varoufakis defended his refusal to support the initiative of a ctizens’ audit of Greek debt in a text in Greek: ΣχόλιαΓιάνης Βαρουφάκης Debtocracy : Γιατί δεν συνυπέγραψα http://www.protagon.gr/?i=protagon.el.article&id=6245 , published on 11 April 2011. In this long letter, Y. Varoufakis explains why he does not support the creation of a citizens’ debt audit committee. He declares that if Greece were to suspend debt repayments, it would have to leave the Eurozone and would find itself back in the Stone Age. Varoufakis writes that, furthermore, the people who took the intitiative were very nice and their intentions were good and that he agrees with the principle of an audit, but that in Greece’s circumstances at the time, it was not the right moment.

[41Y. Varoufakis, op.cit., Chapter 5, p. 145.

[43See Varoufakis: “Why I voted NO”, https://www.yanisvaroufakis.eu/2015/07/21/why-i-voted-no-translated-by-thepressproject-international/. This text published by Varoufakis a few days after the parliamentary vote expresses once again all his contradictory positions.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.




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