Committee for the Abolition of Illegitimate Debt

 Varoufakis’s choice of advisers

In the book, Varoufakis describes his team of direct advisers and the ones he called in from farther afield. The choices made in putting the team together were fatally flawed. The thinking that influenced them partly explains the failure that was ahead. It was not the determining factor, but it played a role.

In appointing the alternate minister of finance in charge of treasury supervision, a vitally important position, Varoufakis tells us that he consulted Alekos Papadopoulos, who had been finance minister in the 1990s and was a Pasok member. Varoufakis explains that he had worked with Papadopoulos in writing the economic platform presented by George Papandreou in the 2004 election, won by the conservative New Democracy party. Syriza, who were running in an election for the first time, won six seats with 3.3 per cent of the vote. Karamanlis’s New Democracy had 45.4 per cent of the vote and Pasok, led by Papandreou, had 40.5 per cent.

Varoufakis writes:

“While Alekos remained an opponent of Syriza, he was personally supportive and promised to come up with a name. The same night he texted me the name of Dimitris Mardas.” [Yanis Varoufakis, Adults in the Room: My Battle with Europe’s Deep Establishment, London: The Bodley Head, 2017, CH. 5, P. 118]

Varoufakis contacted Mardas directly and offered him the position of alternate minister of finance.

What Varoufakis does not say is that on 17 January 2015, eight days before Syriza’s election victory, Mardas had published a particularly aggressive article against Syriza MP Rachel Makri under the title “Rachel Makri vs. Kim Jong Un and Amin Dada.” The article ended with the very eloquent question (underlined by it author) “Are these the people we want to be governing us?” Ten days later Mardas, thanks to Varoufakis, had become alternate finance minister. Varoufakis explains in Adults that after one month as minister, he realized that he had made the wrong choice. Note that Mardas, who supported the capitulation in July of 2015, was elected Syriza MP in September 2015. Papadopoulos also backed the third Memorandum of Understanding of July 2015. [1]

Varoufakis explains that the second choice he had to make involved who would be president of the Council of Economic Advisers. He realized that the position had been filled on his behalf by the vice–prime minister, Dragasakis. The latter had chosen George Chouliarakis, an economist who had taught at the University of Manchester before being seconded to the 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 of Greece. Chouliarakis played a damaging role from the start of Varoufakis’s tenure, and yet Varoufakis kept him in place to the end. His name will come up several times in the narrative of events leading to the disaster on July 2015.

Then Varoufakis added Elena Panaritis to his team, because she was familiar with the language and modus operandi of 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 . Panaritis, as a Pasok MP, had voted in favour of the first Memorandum of Understanding in 2010. Before that, she had worked in Washington, mostly at the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

–where, Varoufakis tells us, she built up an excellent network of connections with the Washington-based institutions. That included former US treasury secretary Larry Summers, whom she introduced to Varoufakis. Panaritis, in the 1990s, worked for the World Bank in Peru, where she collaborated with the corrupt and dictatorial neoliberal regime of Alberto Fujimori. As Varoufakis tells it,

… when I met her again a few days before the election I did not hesitate for a moment to ask her to join my team, for there is no better person to fight the devil than one who has served him and, through that experience, become his sworn enemy. [» CH. 5, P. 120]

Later events would show that not only had she not become his sworn enemy, she continued to collaborate with him.

From the start, Panaritis’s appointment as economic adviser to the finance minister provoked reactions from Syriza members, and Alexis Tsipras tried to convince Varoufakis to get rid of her. But he eventually became quite comfortable with her. Later, in May 2015, when Varoufakis, with Tsipras’s approval, had Panaritis appointed Greece’s representative to 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.

http://imf.org , there was so much resistance within Syriza and in the parliament that she finally gave up the post on 1 June 2015. [2]

Varoufakis also appointed Glenn Kim, a specialist in financial markets and in particular the sovereign debt Sovereign debt Government debts or debts guaranteed by the government. market, to his team. In 2012, Kim had taken part in the restructuring of Greece’s debt as a consultant to the German authorities. When Varoufakis got in touch with Kim, he told him he was working as a consultant for the government of Iceland, helping end the capital controls that had been in force since 2008. That was quite acceptable to Varoufakis, who–wrongly–wanted at all costs to avoid resorting to controls on movements of capital, when in fact he would have done well to learn from the positive results the measure had produced in Iceland.

Varoufakis writes:

A cynic might say that professionals like Glenn were in it for the money and for their own career purposes. Possibly. But having people such as Glenn on my side, who knew where all the skeletons were buried, was a priceless weapon . [» CH. 5, P. 121]

We should point out that Glenn Kim continued to advise Tsipras after the capitulation of July 2015. [3]

Varoufakis also seems proud of having accepted the services of the Lazard bank and its director, Frenchman Matthieu Pigasse. [4] In exchange for tens of millions of euros in commissions, Banque Lazard had collaborated in the Troika’s restructuring of Greece’s debt in 2012. According to Varoufakis, Matthieu Pigasse and Daniel Cohen (a professor at the École Normale Supérieure in Paris and an adviser to Lazard) [5]

…won me over with a frank account of their complicity, an equally frank apology and an offer to help get Greece back on its feet by providing their considerable services pro bono. With these illustrious defectors on our side, our technical strength was bolstered no end. [» CH. 5, P. 122]

Among the members of the international team Varoufakis brought in was James Galbraith, who provided constant support and spent several periods in Athens during the first six months of 2015. Among the people Varoufakis mentions as having worked closely with him, Galbraith is the only one worthy of trust, even if he did go along with the far too conciliatory attitude taken towards the creditors. James Galbraith is an American neo-Keynesian economist, close to the Democratic Party and familiar with international politics. In 2009, he was in close contact with the George Papandreou government. Galbraith worked mainly on a Plan B, in great secrecy. He tells the story himself in his book Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe, [6] cited in Chapter Three. Of all the team members Varoufakis mentions, Galbraith is the only one of whom it can be said that he could actually provide constructive aid to the Greek authorities. Daniel Munevar, a collaborator of Galbraith, actively supported Varoufakis in the negotiations with the creditors beginning in March 2015, but Varoufakis does not mention his name. [7]

Varoufakis prefers to talk about the foreign personalities who are directly connected to the establishment: “Besides Norman [Lamont], my overseas supporters included Columbia University economist Jeff Sachs, who played a central role as adviser and advocate, the aforementioned Thomas Mayer of Deutsche Bank fame, Larry Summers and Jamie Galbraith….” [» CH. 5, P. 123]
–in other words, with the exception of Galbraith, exactly the type of personalities with whom alliances should not have been made if a solution favourable to the people of Greece was to be promoted.

 Larry Summers, Jeffrey Sachs and others who were incompatible with Syriza’s platform

There are certain stains on the career of Lawrence “Larry” Summers that by rights should be indelible and should have ruled out any collaboration with the former US treasury secretary. Yet Varoufakis systematically favoured that collaboration and expresses satisfaction with it. He declares in the introduction to his book that “Things were proceeding better than I had hoped, with broad agreement on everything that mattered. It was no mean feat to secure the support of the formidable Larry Summers …” [» INTRODUCTION, P. 7] Certain major stages of Summers’s past career deserve to be discussed.

In December 1991, while chief economist of the World Bank, Summers wrote in an internal memo:

The under-populated countries of Africa are largely under-polluted. Their air quality is unnecessarily good compared to Los Angeles or Mexico (…) There needs to be greater migration of pollutant industries towards the least developed countries Least Developed Countries
LDC A notion defined by the UN on the following criteria: low per capita income, poor human resources and little diversification in the economy. The list includes 49 countries at present, the most recent addition being Senegal in July 2000. 30 years ago there were only 25 LDC. (…) and greater concern about a factor increasing the risk of prostate cancer in a country where people live long enough to get the disease, than in a country where 200 children per thousand die before the age of five. [8]

He even went so far as to add, still in 1991:

There are no limits on the planet’s capacity for absorption likely to hold us back in the foreseeable future. The danger of an apocalypse due to global warming or anything else is non-existent… The idea that we should place limits on growth because of natural limitations is a serious error… [9]

Later, having become undersecretary of the US treasury under Clinton in 1995, Summers used all his influence with his mentor, then treasury secretary Robert Rubin, to push the repeal of the law separating commercial banks from investment banks in 1999 and its replacement by a law that was dictated by the bankers. [10]

In 1998, with Alan Greenspan, executive director of the Federal Reserve FED
Federal Reserve Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/ Bank, and Robert Rubin, Summers had also succeeded in convincing the Commodity Futures Trading Commission CFTC
Commodity Futures Trading Commission The Commodity Futures Trading Commission is a US regulatory authority that supervises the US futures market.

CFTC website : http://www.cftc.gov/About/index.htm (CFTC) to remove all controls on the over-the-counter (OTC OTC
Over-the-Counter market An over-the-counter or off-exchange market is an unregulated market on which transactions are made directly between the seller and the purchaser, as opposed to a so-called organized or regulated market where there is a regulatory authority, such as a stock exchange. ) derivatives Derivatives A family of financial products that includes mainly options, futures, swaps and their combinations, all related to other assets (shares, bonds, raw materials and commodities, interest rates, indices, etc.) from which they are by nature inseparable—options on shares, futures contracts on an index, etc. Their value depends on and is derived from (thus the name) that of these other assets. There are derivatives involving a firm commitment (currency futures, interest-rate or exchange swaps) and derivatives involving a conditional commitment (options, warrants, etc.). market. The door was then wide open for the acceleration of the banking and financial deregulation that led to the crisis in 2007–2008 in the US and its repercussions on Greece in 2009–2010.

We should add that in 2000, as secretary of the treasury, Summers pressured the president of the World Bank, James Wolfensohn, to remove Joseph Stiglitz, who had succeeded him as chief economist and who was highly critical of the neoliberal policies Summers and Rubin were putting into practice all over the planet, wherever financial fires were breaking out. After the arrival of the Republican president George W. Bush he continued his career, becoming president of Harvard University in 2001. But he put himself in a particularly uncomfortable position in February 2005 when he provoked the ire of the academic community following a discussion at the National Bureau of Economic Research (NBER).  [11] Questioned about the reasons why few women hold high positions in science and engineering, he said that women intrinsically have an inferior aptitude for the sciences compared to men, ruling out social and family origin and discrimination as possible explanations. The result was a huge controversy, [12] both within and outside the university. Summers apologized, but pressure from a majority of professors and students of Harvard forced him to resign in 2006.

In 2009, Summers became a member of president-elect Barack Obama’s transition team and served as director of the National Economic Council. In September 2010, Summers left Obama’s team and resumed his career at Harvard, but continued to play a backstage role in politics in Washington and elsewhere. Varoufakis tells how he asked Elena Panaritis to put him in touch with Summers in 2015 in order to gain influence with Obama and the IMF.

Varoufakis asked Jeffrey Sachs, also a specialist in dealing influence in the back rooms of Washington, to collaborate closely, which Sachs agreed to do, travelling to Athens, Brussels, London, and Washington several times in 2015 to reinforce Varoufakis’s team. Sachs, like Lawrence Summers, is linked to the US Democratic Party and is presented by the dominant media as being favourable to a “soft” solution to debt crises, taking the interests of the poor into account. [13] Yet Sachs has been an adviser to neoliberal governments that have applied “shock therapy” policies in their countries: Bolivia (1985), Poland (1989) and Russia (1991). In her book The Shock Doctrine: The Rise of Disaster Capitalism, [14] Naomi Klein makes an implacable denouncement of Jeffrey Sachs and the policies he recommended in collaboration with the IMF, the World Bank and the local ruling classes.

Varoufakis also mentions the unfailing support he received from Lord Norman Lamont, who had been chancellor of the exchequer in the Conservative government of John Major between 1990 and 1993:

My friendship with true-blue Tory and Eurosceptic Lord Lamont of Lerwick, the chancellor who had ensured that Britain dropped out of the European Monetary System, thus guaranteeing that the UK would not join the euro, was at odds with my image as a loony-left extremist.

Varoufakis makes much of the importance of his collaboration with Norman Lamont: “Throughout my 162 days in office Norman proved a pillar of strength, advising me on the final draft of my reform, debt and fiscal proposals to the EU and the IMF.” [» CH. 5, P. 123]

Among the other foreign experts Varoufakis called on and who took part in working out the proposals he made to the creditors were Willem Buiter, who joined the Citigroup bank in 2010 as chief economist, and Thomas Mayer, ex-chief economist of Deutsche Bank.

According to Varoufakis’s narrative, these individuals played more than a trivial role. Referring to the nth plan he proposed to the creditors in May 2015, he writes:

By the time I landed in Athens, the Plan of Greece had been finalized. Jeff Sachs had beautifully edited the draft I had sent him a couple of days before; Norman Lamont had added some important vignettes; the people from Lazard had refined the debt-swap proposal, and Larry Summers had provided his endorsement. [» CH. 15, P. 406]

Sachs, Lamont, Pigasse and Summers are anything but allies of the people.

 Spyros Sagias, another defender of the established order who was close to Tsipras and Varoufakis

Varoufakis explains that he had a close relationship with Spyros Sagias, who became legal adviser to Prime Minister Tsipras and whom he had met a few days before the elections. Tsipras’s choice of Sagias says a great deal about his priorities in choosing his entourage as head of government. He wanted, as much as possible, to secure the services of individuals who could build bridges with the establishment, with corporate leaders, and with the creditors. Sagias had advised the government of the Socialist Simitis in the 1990s at a time when it was undertaking a major program of privatizations. [15]

Varoufakis describes Sagias as follows:

Sagias was not a politician but, as he introduced himself half-jokingly, a systemic lawyer. … There was hardly a large-scale business deal involving private interests and the public sector that Sagias and his successful practice had not been involved in: privatizations, large-scale construction projects, mergers, all were within his ambit. He had even provided legal counsel to Cosco, the Chinese conglomerate that had acquired part of the port of Piraeus and was eager to take over the whole of it, a privatization that Syriza vehemently opposed.

He adds: “I decided I liked Sagias. He knew that he was tainted by decades of consorting with the oligarchy and did not care to hide it …” [» CH. 5, P. 139]

Sagias, as Varoufakis shows later in the book, supported the successive choices that led to the final capitulation.

We should add that under the first Tsipras government, he also assisted Cosco in acquiring the parts of the port of Piraeus that the Chinese company still did not own. [16] As a matter of fact it was Sagias’s law firm that had drawn up the first agreement with Cosco in 2008. After leaving his position as cabinet secretary, Sagias returned to actively running his commercial law firm, [17] serving as official counsel to major foreign interests and promoting further privatizations. In 2016 he represented the Emir of Qatar, who wished to acquire the Greek island of Oxeia in the Zakynthos region, which is part of a Natura nature protection area. Sagias also counselled Cosco in 2016–2017 during a dispute with workers at the port of Piraeus when an early retirement (or disguised firing) plan for more than a hundred workers nearing retirement age was being concocted.