Committee for the Abolition of Illegitimate Debt

Varoufakis’s narrative is lively and piquant. Through it, we see how choices were made behind Syriza’s back at very important stages, without regard for basic democratic principles.

To hear Varoufakis tell it, he played a central role, and he did in fact exert influence on the line the Tsipras–Pappas–Dragasakis trio adopted. It’s also certain that Tsipras and Pappas, outside of Syriza, sought to create fairly close relations with certain individuals and institutions in order to gradually move the policies put into practice farther and farther away from the positions Syriza had championed. Varoufakis is not the only person they contacted, but at a given point Tsipras and Pappas felt that he was the right man to negotiate with the European institutions 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.

http://imf.org .

 Varoufakis’s initial contacts with Tsipras and Pappas

Varoufakis describes his first meeting with Alexis Tsipras and Nikos Pappas in early 2011. Pappas had set up a meeting at a small hotel and restaurant near Syriza’s office.

When I walked into the hotel, he and Pappas were already at a table, ordering lunch. Alexis’s voice was warm, his smile unaffected, his handshake that of a potential friend. Pappas had wilder eyes, a high-pitched voice. … From the outset it was evident that Pappas had the young prince’s ear, guiding, restraining and spurring him on…[ Yanis Varoufakis, Adults in the Room: My Battle with Europe’s Deep Establishment, London: The Bodley Head, 2017. CH. 3, P. 56]

Varoufakis explains that Tsipras was undecided about what attitude to adopt regarding a possible exit from the Eurozone:

Even in 2011 Syriza was torn by internal disagreements over whether the party should or shouldn’t make Grexit (Greece’s departure from the Eurozone, though not necessarily from the EU) its official policy. As we talked, Alexis’s attitude to the question struck me as cavalier and immature. His focus was more on keeping control of the feuding wings of his party than on clarifying in his own mind what the right policy should be. Judging by the meaningful looks coming from Pappas, it was clear that he thought so too and was hoping I would help shift his leader away from casual experimentation with the idea of Grexit.

 

I did my best to impress upon Alexis that turning Grexit into an objective would be as large a mistake as failing to prepare for it. I also criticized Syriza for making silly promises such as that, if elected, the bailout agreement with the EU and the IMF [1] would be unilaterally torn up. [ CH. 3, P. 57]

Tsipras asked Varoufakis what he thought of the idea of threatening the European policymakers with Greece leaving the Eurozone should they refuse to reconsider the policies in the Memoranda. Varoufakis answered that he would avoid exiting the Eurozone since it was possible to negotiate a favourable solution for Greece, and in particular a new restructuring of its debt. Tsipras replied that famous economists like Paul Krugman were saying that Greece would be better off without the euro. Varoufakis continues his narrative:

I agreed that we would be better off if we had never entered the Eurozone but hastened to add that it was one thing to have stayed out of the euro and quite another to leave it. … To try to shake him out of his lazy thinking, I outlined what I expected to happen immediately if Grexit were announced. Unlike Argentina, a country that had severed its currency’s ties to the dollar, Greece did not have its own notes and coins in circulation. [ CH. 3, P. 58]

To convince him, Varoufakis reminds Tsipras that: “… creating a currency takes months.” [ CH. 3, P. 59]

In reality this argument, used many times by Varoufakis and other opponents of an exit from the euro, does not hold up. A new currency could have been adopted by using banknotes denominated in euros, but bearing an overprint. The banks’ automatic teller machines could have delivered these specially overprinted euro bills. Economist James K. Galbraith explained the idea in a letter to his friend Varoufakis in July 2015. [2]

Varoufakis continues:

Pappas was nodding enthusiastically, but Alexis seemed elsewhere. When I pushed him to explain his silence, his reply confirmed that he was preoccupied with the goings-on within Syriza rather than engaging properly with the issue at hand. I was unimpressed.

[ CH. 3, P. 59]

When Varoufakis returns home, his partner, Danae, asks him how the meeting went and he replies: “He is a very agreeable person but I do not think he has what it takes.”

 Varoufakis, the debt audit and suspension of payment

In his narrative of the events of 2011, Varoufakis never once mentions the citizen debt audit initiative, in which he refused to participate.

The CADTM’s views regarding the necessity of an audit of the debt began to be recognized in Greece starting from 2010. Several interviews were published in the Greek press. For example, the Greek magazine Epikaira published a long interview with me, for the CADTM, and Leonidas Vatikiotis, [3] a journalist and far-left activist. During it I explained the causes behind the explosion of public debt and how Ecuador’s creating an audit commission and suspending debt payments could be a source of inspiration for Greece. In conclusion, I was asked “What should Greece do?” and I answered:

An Audit Commission involving prestigious and experienced people should be formed immediately. My advice is clear: Open the books of account! … Proceed in the utmost transparency and in the presence of trade unions and citizens’ associations and discover which part of the debt is illegal and odious as per the international terminology. Denounce it!  [4]

Economist Costas Lapavitsas [5] also wrote several articles actively defending the need to establish an audit committee that circulated widely in Greece. In one of them he wrote:

The international audit commission could serve as a catalyst and contribute to the transparency that is needed. Such an international commission, made up of experts in auditing public finances, economists, labour organisers and representatives of social movements, will have to be totally independent of political parties. It will have to have support from many organisations, which will make it possible to mobilise very broad social strata. This is how the popular participation necessary to deal with the question of the debt will begin to become a reality. [6]

On January 9, 2011, the Greek daily Ethnos tis Kyriakis, which ranked third in terms of circulation at that time, published an interview with me under the title: “It is not logical to repay debts that are illegitimate. The people of Europe also should audit their creditors.” [7] The daily explained: “The Committee’s work in Ecuador has recently been mentioned in the Greek Parliament by Sofia Sakorafa.” In December 2010, MP Sofia Sakorafa, who broke with Pasok when the party agreed to the 2010 Memorandum, said in a speech in the Hellenic Parliament that a debt audit commission, inspired by Ecuador’s example, was necessary. The parliament rejected her proposal.

Costas Lapavitsas, who was living and teaching in London and whose positions were gaining a following in Greece, consulted me concerning the content of an international appeal to support the formation of an audit commission. At the same time, Giorgos Mitralias of CADTM Greece contacted Leonidas Vatikiotis, who was at the forefront in promoting the creation of such a commission. After that, we began seeking support from people who could help us spread the word and also enhance the credibility of the initiative. I undertook to collect as many signatures as possible from international personalities supporting the establishment of an audit committee. I had known many of them for years. They included Noam Chomsky, with whom I had been in touch on the debt issue since 1998, Jean Ziegler, then UN special rapporteur on the right to food, Tariq Ali and many economists.

In my quest for collecting signatures I was refused only once, by the North American economist James Galbraith. I had been conversing productively with him for several years during conferences on financial globalization. I later discovered a partial explanation for his refusal when Varoufakis publicly explained, in 2011, why he refused to endorse the call for the audit committee’s formation. [8] He says that Galbraith had contacted him, asking if he should sign the appeal, and that he advised Galbraith not to. Varoufakis’s refusal accounts for his indifference towards the Truth Commission on the Greek Debt when he became finance minister in Alexis Tsipras’s first government in 2015. [9] In a long public letter published in spring 2011, Varoufakis justified his refusal to support the creation of the citizen debt audit committee (ELE in Greek). He wrote that if Greece defaulted, it would have to leave the Eurozone, following which it would abruptly find itself in the Stone Age. Varoufakis also explained that the people who had taken this initiative were nice and well-meaning and that in principle he supported the audit, but that in Greece’s current circumstances the audit was not appropriate. In this letter, Varoufakis also expresses his critical opinion of the documentary Debtocracy. [10]

In March 2011 the Greek debt audit committee (ELE) was launched; it was the result of a convergence–at the cost of major efforts–of individuals who had hardly known one another, if at all, a few weeks or months earlier. Its creation was spurred on by the extent of the crisis in Greece.

The documentary Debtocracy, which aired beginning in April 2011 and in which Hugo Arias (an Ecuadorian economist who was a major force in the audit commission created in 2007 by President Rafael Correa) and myself appear at length, focused broad attention on the proposal for a citizens’ debt audit and the need to cancel the illegitimate and odious part of the debt. During the spring of 2011, more than 1.5 million people in Greece downloaded Debtocracy in six weeks.

Among the Greek personalities who signed the call for an audit in 2011 were: Euclid Tsakalotos (who replaced Yanis Varoufakis as finance minister of the Tsipras government in early July 2015 and kept that ministerial post until the 2019 elections); Panagiotis Lafazanis (one of the main leaders of the Left Platform within Syriza, minister of energy in the Tsipras government between January and 16 July 2015 and leader until the 2019 elections of Popular Unity, founded in August 2015 by the group who left Syriza in opposition to the third Memorandum of Understanding); Nadia Valavani (also a Left Platform member, alternate minister of finance from 27 January to 15 July, 2015, also a member of Popular Unity); Sofia Sakorafa (who was elected Syriza MEP in May 2014, who sat as an independent between September 2015 and the European elections of May 2019 because of her opposition to the capitulation by the Tsipras government, and who was then elected on Varoufakis’s MeRa25 list in July 2019); Georgios Katrougalos (alternate minister of interior and administrative reconstruction between January 2015 and July 2015, then minister of labour and social solidarity beginning in August 2015 and again under the second government formed by Alexis Tsipras, then from November 2016 alternate minister for foreign affairs); and Notis Maria (elected MEP in May 2014 on the list of the sovereignist right-wing party ANEL and sitting as an independent since January 2015).

Neither does Varoufakis mention the international conference held in Athens in March 2011 by Synaspismos (the main component of Syriza, chaired by Alexis Tsipras) and the Party of the European Left, even though he himself participated in it. Speakers at this conference included Tsipras, Oskar Lafontaine (former German finance minister and a founder of the Left party Die Linke), Pierre Laurent (leader of the French Communist Party and the Party of the European Left), Mariana Mortagua from the Left Bloc in Portugal, Euclid Tsakalotos, Yannis Dragazakis, myself and several other guests.

My presentation at the conference focused on the causes of the crisis and the vital importance of a drastic debt reduction through cancellation following a debt audit with citizen participation. [11]

There were 600 to 700 participants and the Nikos Poulanzas Institute published several speeches including those of Tsipras, Varoufakis, and myself in a book in English called The Political Economy of Public Debt and Austerity in the EU. [12] I mention this conference to show that at the time it was quite an obvious choice to include a presentation on the need for an audit of the debt; yet Varoufakis totally excludes the subject both in the positions he has defended and in his narrative of the events of 2011.

The international conference supporting the citizens’ audit of Greece’s debt was held in Athens in May 2011 and was a resounding success, with nearly 3,000 people attending over three days. The CADTM was one of the organizations convening that conference. I coordinated the first panel discussion, whose prominent participants were Nadia Valavani [13] (who later became deputy minister of finance in the first Tsipras Government) and Leonidas Vatikiotis. The CADTM helped the Greek organizers and the other non-Greek movements with the task of convincing a significant number of European organizations to support the conference and to collectively adopt a declaration that remains just as valid today. (see Box: Declaration from the Athens Conference on Debt and Austerity, p. 65)

During a discussion between Varoufakis and myself on 9 November 2016 in Athens, [14] I asked him why he had not supported the citizen debt audit initiative beginning in 2011. He answered that the initiative was not a good one since it called the legitimacy and legality of the debt into question. According to him, there was no reason to question the legality or legitimacy of Greece’s debt.

Varoufakis adopted the position of a short-sighted economist who can see debt only in terms of financial sustainability and access to sources of financing. Above all, his position reveals a failing shared by social democrats and reformists as a class: a refusal to accept the idea of sanctions against the clear violations of rights committed by states and private banks, which amounts to recognizing the impunity of capital and of its representatives, regardless of the nature and the gravity of their transgressions. He completely failed to understand the importance of the citizen audit. Whereas in the book he stresses the importance of the occupation movement that gathered in Greece’s public squares in June–July 2011, he did not notice the enthusiasm citizens were expressing for the idea of a citizen debt audit during that powerful movement.

So in fact, I was an eyewitness to Varoufakis’s refusal to support the citizen audit in 2011 and I saw how he was able to convince James Galbraith not to sign the international call we had launched along with Costas Lapavitsas. After an attentive reading of Varoufakis’s book, I am convinced that he intervened actively to convince Tsipras, at least from May–June 2012, to abandon his support for the demands for a debt audit and for suspension of repayment of the debt while the audit was conducted.

Within the leadership of Syriza and among Alexis Tsipras’s economic advisors, several key people were also opposed to the debt audit and suspension of payment. Yannis Dragasakis, one of the people in charge of economic matters for Syriza (and who became deputy prime minister in the first and second Tsipras governments) was ill-disposed towards it, and had said so to Giorgos Mitralias when the latter had tried to convince him in 2010 to support the idea of creating an audit commission. Giorgos Stathakis, a member of the team of economists close to Tsipras, had declared to the press in 2013 that there was no need to raise the question of odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. in Greece’s case, since the odious 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. accounted for no more than 5 per cent of total debt. Stathakis was minister of economy in the first Tsipras government and for one year in the second, before he became minister for energy and environment in September 2016.

 Varoufakis opposes Syriza’s platform in May-June 2012

In late 2011 Varoufakis was again contacted by Pappas and they held another meeting.

At our second meeting and in the meetings that followed I was pleasantly surprised: Alexis seemed transformed. Gone was the complacency, the fixation on Syriza’s internal affairs and the casual attitude towards Grexit. He had clearly done his homework … . [» CH. 3, P. 60]

After setting the scene for this second meeting, Varoufakis sums up his position:

My preference was for Syriza to present voters with a basic, progressive, Europeanist, logically coherent, non-populist programme as a foundation on which to build an image of a credible future government, one capable of negotiating the country’s escape plan with the EU and the IMF. … When I read the economic policy segment of Syriza’s 2012 electoral manifesto, my irritation was such that I stopped after a few pages. [» CH. 3, P. 62]

What was it in Syriza’s platform for the 6 May 2012 elections that so irritated Varoufakis?
Syriza’s programme, containing some forty points, was clearly radical. The first point had to do with debt and was articulated as follows: “Audit of the public debt and renegotiation of 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. due and suspension of payments until the economy has revived and growth and employment return.”

Among other measures, alongside a series of emergency measures to be taken due to the humanitarian crisis, we underline:

Raise income tax to 75 per cent for all incomes over 500,000 euros; Increase taxes on big companies; Abolition of financial privileges for the Church and the shipbuilding industry; Cut drastically military expenditures; Raise minimum salary to the pre-cut level, 750 euros per month; Use buildings of the government, banks and the Church for the homeless.; Nationalisation of banks; Nationalisation of ex-public (service & utilities) companies in strategic sectors for the growth of the country…; [measures to restore and improve workers’ rights]; Constitutional reforms to guarantee separation of Church and State; hold referendums on treaties and other accords with Europe; abolish privileges for MPs; lift immunity from prosecution for ministers and authorise courts to take action against members of the government; take measures to protect refugees and migrants; increase funding for public health up to the average European level (the European average is 6 per cent of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. ; in Greece 3 per cent); Elimination of payments by citizens for national health services; Nationalisation of private hospitals. Elimination of participation in the national public-health system by the private sector; Withdrawal of Greek troops from Afghanistan and the Balkans; Abolition of military cooperation with Israel. Support for creation of a Palestinian state with the 1967 borders; Negotiation of a stable accord with Turkey; [and last but not least]: Closure of all foreign bases in Greece and withdrawal from NATO NATO
North Atlantic Treaty Organization NATO ensures US military protection for the Europeans in case of aggression, but above all it gives the USA supremacy over the Western Bloc. Western European countries agreed to place their armed forces within a defence system under US command, and thus recognize the preponderance of the USA. NATO was founded in 1949 in Washington, but became less prominent after the end of the Cold War. In 2002, it had 19 members: Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the UK, the USA, to which were added Greece and Turkey in 1952, the Federal Republic of Germany in 1955 (replaced by Unified Germany in 1990), Spain in 1982, Hungary, Poland and the Czech Republic in 1999. . [15]

With this programme, Syriza, who added the watchword “No sacrifices for the euro,” saw its election results multiplied by four between 2009 and May 2012, from 4 per cent to 16 per cent.

Syriza’s 2012 programme is very interesting and useful to read. It contains the principal measures that indeed need to be put into practice.

Nevertheless there are weak points:

Firstly, there is no hierarchy of the 40 points; but such a programme should state what a government will do first (say in the first 100 or 200 days). Also, the programme is not presented in operational terms. Yet it is important to present a roadmap specifying exactly how the government plans on attaining the goals it has set itself. In the present case, it was important to present a Plan A and a Plan B. Plan A is the first one to be applied and Plan B is a back-up solution should obstacles prevent the implementation of Plan A. For example: Plan A calls for a significant reduction of debt by striking an amicable agreement with the creditors (this is what the Thessaloniki Programme adopted in 2014 proposed–see below). If the country’s creditors refuse to accept a radical reduction of the debt, the broad outlines must be given of what the government would do as its Plan B (suspend repayment of the debt, conduct an audit of the debt with citizen participation, take targeted debt repudiation measures–see below).

Then, the need for constitutional reforms is mentioned, but without saying whether a general election is to be called to elect a constituent assembly. However it was very important to say exactly how these constitutional reforms were to be carried out. Finding a qualified majority within the Parliament as it is currently constituted is not at all the same thing as initiating a process involving the entire society by convening a constituent assembly.

The results of the elections held on May 2012 in Greece were such that no party or coalition of parties could form a government. That led to new elections in June 2012. Between the two elections, Tsipras put forward five concrete proposals for beginning negotiations with the parties opposed to 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 (except Golden Dawn, which was excluded, though also opposed to the Memorandum of Understanding):

1. Abolition of all anti-social measures (including the reductions of wages and retirement pensions);
2. Abolition of all measures that reduced workers’ rights as regards protection and negotiation;
3. Immediate abolition of parliamentary immunity and reform of the election system;
4. An audit of the Greek banks;
5. Creation of an international debt audit committee combined with suspension of repayment of the debt until the end of the committee’s work.

In the June 2012 elections, Syriza received 26.5 per cent of the vote with this radical orientation, which went against Varoufakis.

 Despite the disagreement, Varoufakis continues his collaboration

Between the elections, Varoufakis was again contacted by Pappas and a new meeting took place with Tsipras. Pappas told him, “Do you realize that, if we win, you will be handling our negotiations with the EU and the IMF?” [» CH. 3, P. 64]

Pappas asked Varoufakis to prepare a document explaining the broad outlines of the best negotiation strategy should Syriza win the elections to be held three weeks later, on 17 June. Varoufakis set to work that same evening and developed the idea that the capital of the Greek banks must be taken over by the EU.

As Varoufakis puts it, this would amount to

… turning Europe’s taxpayers into the owners of the Greek banks so that they were no longer the de facto liability of the Greek state but were backed instead by the European people, and by having the EU institutions run them on their behalf. This was the only way confidence in the banks could be restored. [» CH. 3, P. 64]

As indicated in Chapter One, in proposing that the shares in the country’s banks owned by the Greek state be transferred to the EU, Varoufakis was making an additional and dramatic step towards Greece’s complete surrendering of sovereignty. According to Varoufakis, the move would facilitate restructuring the public debt.

He added a second proposal:

Second, any repayments of the Greek state’s debt to the EU and the IMF arising from its two bailouts should be conditional on the country’s recovery first reaching a certain momentum. This was the only way the national economy could be given a chance to revive. [» CH. 3, P. 65]

It is important to point out that for Varoufakis the suspension of repayment of the debt we referred to earlier was part of the negotiations. But that suspension had to be authorized by the creditors and must not constitute a unilateral sovereign act.

“Are you advising me to call for the Greek banks to be given to foreigners? How can I sell this idea to Syriza?”

“Yes, this is precisely what you must do,” …

Alexis got it. But that did not mean he liked it. Particularly as Syriza’s central committee was naturally drawn to the idea of nationalizing the banks. [» CH. 3, P. 66]

Nevertheless Tsipras objected that :

… without any influence over the commercial banks operating in Greece, he argued, it would be impossible for a government to implement an industry policy or a development and reconstruction plan. He just couldn’t see the Syriza central committee swallowing it. [» CH. 3, P. 67]

Varoufakis, seeing that Tsipras “had a point,” responded:

As true internationalists, as progressive Europeanists, we would be taking bankrupt banks away from corrupt Greek privateers and handing them over to Europe’s common people, to the same European citizenry injecting their money into those banks. [» CH. 3, P. 67]

The contacts Varoufakis describes took place after the general election held on 6 May 2012. Since it was impossible to form a government, a new general election was called for 17 June 2012. Varoufakis explains that when he learned about Tsipras’s speech of 24 May detailing Syriza’s economic policies, he realized that there was a gulf between what was being proposed and what could concretely be implemented in the Eurozone. “Within an hour I had dispatched a long scathing email to both Alexis and Pappas which highlighted the numerous logical flaws in what they had just promised voters …” [» CH. 3, P. 68]

My contribution to Varoufakis’s narrative is based on the direct contact I had with Tsipras in October 2012. In the space of a few months, the commitment to conducting an audit of the debt and suspending repayment pending its findings gradually disappeared from the discourse of Alexis Tsipras and the other Syriza leaders. This was done discreetly and the fifth measure proposed by Tsipras in May 2012 (see above) was replaced by a proposal to hold a European conference to reduce Greece’s debt.

An October 2012 interview with Tsipras confirmed my suspicion that he was backing down. Two days earlier, the Wall Street Journal had published the secret notes of an IMF meeting of May 9, 2010 that made it clear that a dozen IMF directors (out of a total 24) had opposed the Memorandum on the grounds that it was a bailout plan for the French and German banks rather than aid for Greece. [16] I told Tsipras and his economic adviser: “That is a solid reason for you to go against the IMF. If the IMF evidently knew that its programme would fail and the debt would not be sustainable, there is enough evidence for us to wage war against the illegitimacy and illegality of the debt.” Tsipras replied, “But listen … the IMF keeps its distance from the European Commission.” I could see clearly that he had his eye on the IMF as a possible ally of Syriza in case the latter formed a government.

I also told Tsipras that I had noticed that he was no longer talking about the five proposals he had advanced as being priorities after the May 2012 election and that the question of the audit was no longer being stressed. He answered without conviction that he was maintaining these five proposals and that there was nothing to worry about.

The next day, October 6, 2012, Tsipras and I spoke publicly in front of 3,000 people at the first Syriza youth festival. I realised that he did not appreciate my emphasis on the need for a radical outlook on a European scale. [17]

I am convinced that it was after the May–June 2012 election that Tsipras and Pappas really made the choice to make Varoufakis part of a government. Until then, they met with him and get his ideas and then reflected on how to emancipate themselves from the decisions Syriza had made collectively.

From then on, Varoufakis began collaborating more closely with Tsipras. In May 2013, in Athens, Varoufakis met with Tsipras’s team of economists:

As well as Pappas and Dragasakis, the shadow finance minister, it included two other Syriza members of parliament whom I knew and liked well: Euclid Tsakalotos, a dear colleague at the University of Athens, and George Stathakis, an economics professor from the University of Crete. [» CH. 3, P. 78]

He submitted to them the proposed program Tsipras had asked him to write:

The mood in the room was ebullient, which confirmed that my earlier efforts to dissuade Alexis from turning Grexit into an objective, or from using it as a threat, had not been wasted. While I lost a great many friends on the broader Left and within Syriza, who never forgave me for my role in expunging Grexit from Syriza’s policy objectives, Alexis’s inner economic sanctum was evidently keen to pursue a viable solution within the eurozone. [» CH. 3, P. 70]

Varoufakis insists that Grexit must be avoided and says nothing concerning the question of continuing to repay the debt, nor of the audit of that debt. Yet whether or not debt repayment should be continued was the central issue that absolutely needed to be addressed.

 A new “London Conference”?

I’d like to relate another personal experience concerning the second working meeting I had with Alexis Tsipras. It took place in Athens in late October 2013 in his office as member of the Greek parliament. One of Tsipras’s planned initiatives was to convene a major international conference on debt reduction in Athens in March 2014. Urged by Sofia Sakorafa, Syriza MP since 2012, Tsipras met me again in October 2013 and asked me to help with the preparations for such a conference by convincing a number of international personalities to accept the invitation. I had compiled a list of participants and discussed it with Tsipras, Sofia Sakorafa, Kostas Bitsanis (Sofia’s husband) and Dimitri Vitsas, general secretary of Syriza at that time. I proposed to invite the following personalities to the conference: Rafael Correa, Diego Borja (former director of Ecuador’s 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 ), Joseph Stiglitz, James Galbraith, Noam Chomsky, Susan George, David Graeber and Naomi Klein, as well as the members of Ecuador’s debt audit commission. The latter had worked with me in 2007 and 2008. I noticed that among the names on my list, that of Rafael Correa did not interest him at all. On the contrary, he wanted the former president of Brazil, Lula, and the president of Argentina, Cristina Fernandez. Ecuador was too radical for him, and of course he wanted Joseph Stiglitz and James Galbraith, which was justified. But his plan was not to launch an audit committee; it was to convene the various member countries of the EU at a European conference on debt, similar to the London Agreement of 1953, where the victors of World War II considerably reduced West Germany’s debt and offered liberal repayment terms. I told him that it would never happen. As the leader of Syriza, it was perfectly legitimate for him to propose that as Plan A, but it was absurd to think that Draghi, Hollande, Merkel, and Rajoy would agree. I told him that he needed a Plan B which would include an audit committee. I also said it to the Greek media. Here is an excerpt from an interview with me that the Journal of Editors, which is close to Syriza, published in October 2014. The journalist asked me what I thought of the European Debt Conference proposed by Alexis Tsipras, based on the London conference of 1953, and I said,

Although this request is legitimate… it will not be possible to bring the governments of the main European economies and the EU institutions to the table on this agenda. The experience of the last ten years has shown that unilateral sovereign acts can get results. The creditors that reclaim the payment of an illegitimate debt and impose violent measures that attack fundamental human rights, including economic and social rights, must be refused. I think that Greece has strong arguments for forming a government that would have popular support for working in this direction. Such a popular leftist government could establish a debt audit committee that would include a large popular democratic participation. This audit committee would unilaterally suspend repayments and finally repudiate the part of the debt that it identifies as illegal and/or odious. [18]

Finally, Alexis Tsipras asked me collaborate with him and Pierre Laurent (president of the Party of the European Left at that time) towards preparing for a European conference where debt would be one of the issues. It was to be held in March 2014 in Athens. This never materialized because during a meeting held in December 2013 in Madrid, the Party of the European Left had decided to hold a conference in Brussels, instead of Athens, during spring 2014.

This Brussels conference had very little impact. Alexis Tsipras, Pierre Laurent, and Gabi Zimmer (member of Die Linke, Germany, and president of the parliamentary group GUE / NGL in the European parliament) were present, among others. I participated as speaker in a panel along with Euclid Tsakalotos, who would become finance minister for Alexis Tsipras from July 2015. [19] I realized straightaway that Tsakalotos did not at all support a Plan B on debt, banking, and taxation. His plan was to negotiate with the European institutions at all costs in order to obtain a reduction of austerity without resorting to default and an audit of the debt. During this conference I again argued for a Plan B that needed to include a debt audit and suspension of debt payment. So, the discussion on the need for a Plan B did not start in 2015; it clearly goes back to 2013–2014. The leadership hub around Tsipras decided not to lay the groundwork for a Plan B and has stuck to Plan A, which is an impracticable one.

 Further discussions with Tsipras’s team in 2014

“That June, back in Greece once more for the summer, I met Alexis and his economics team to warn them about a new threat.” [» CH. 3, P. 84] Varoufakis explains that he warned them about the action 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.

https://www.ecb.europa.eu/ecb/html/index.en.html was planning to take from early 2015: shutting off the flow of cash to the banks in certain countries of the Eurozone and making only emergency liquidity assistance Emergency Liquidity Assistance
ELA Emergency funds loaned to the private banks by the Eurozone central banks. available to them. Greece was one target of these measures.

A couple of days afterwards, Alexis, Pappas and I met again.

“Do you realize,” asked Pappas, “that no one else but you can oversee the implementation of the negotiating strategy you are proposing? Are you ready to do this?”

Varoufakis continues:

A week later, Wassily Kafouros, a dear friend from my undergraduate years in England, added to my misgivings. He asked me if I was the only person not to know that Dragasakis was extremely close to the bankers. I said I didn’t believe him. “Where is your evidence, Wassily?” I demanded.

“Evidence I do not have,” he admitted, “but it is commonly known that he has made it his business, even back in his communist party days, to keep the bankers close.”

I assumed the accusation was false… [» CH. 3, P. 85–6]

Varoufakis’s misunderstanding of Syriza and its leaders is clear here. Dragasakis had in fact had ties to bankers for years. He had been a board member of an average-sized commercial bank. He was a kind of bridge between Tsipras and the bankers. Syriza was a new formation, and therefore its political leaders had relatively few connections with the spheres of the state–unlike Pasok, for example, whose history is linked to the Republic and to management of state affairs. Whereas before January 2015, none of Syriza’s leaders had ever held a national position, and the only one who had been a minister at a given time, for a few months in 1989, was… Dragasakis (he was vice-minister of the economy until April 2009). The government he served in was a coalition between the right-wing New Democracy, Pasok and the Synapismos coalition (which included, from 1989 to 1991, the Greek Communist Party [KKE], of whose central committee Dragasakis was a member at the time). Dragasakis was clearly opposed to any measure that would be against the interests of the private Greek banks, [20] and was also opposed to an audit of the debt and suspension of payment. He was favourable to remaining in the Eurozone.

In August 2014, Varoufakis finally shared his doubts regarding Dragasakis.

“Alexi,” I said, trying to sound as nonchalant as I could, “I hear Dragasakis is too close to bankers. And, generally, that he may be going along with our escape plans while in reality he is working to maintain the status quo.”

 

He did not answer right away. Instead he looked towards the Peloponnese in the distance, before turning back to me. “No, I do not think so. He is OK.”

 

I did not know what to make of his brevity. Did he harbour doubts too but on 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. trusted in his senior comrade’s probity or was he dismissing my question? To this day I do not know the answer. What I do know is that he kept insisting I had no choice: when the moment came, I had to play a leading role in the negotiations. [» CH. 4, P. 87]

Varoufakis confirmed that Tsipras could count on him, but on one condition: that he take part in developing Syriza’s economic programme before the election. Tsipras accepted.

 Varoufakis: against the Thessaloniki Programme of September 2014

A month later, back in Austin, I heard on the news that Alexis had delivered a major speech in Thessaloniki outlining Syriza’s economic platform. Gobsmacked, I got hold of the text and read it. A wave of nausea and indignation permeated my gut. [» CH. 4, P. 88]

Varoufakis made a public statement harshly criticizing the program and fully expected it to put an end to his collaboration with Tsipras.

But in a dramatic turn of events, Pappas telephoned him, “sounding chipper and as if nothing had happened” and proposed another meeting. Varoufakis expressed astonishment and Pappas answered:

“It changes nothing,” he retorted light-heartedly. “You will get to shape the actual economic programme. The Thessaloniki Programme was a rallying call for our troops. That’s all.”… There is party policy and there is government policy. You will author the latter and leave the former to us.” [» CH. 4, P. 90]

Under those conditions Varoufakis agreed to continue the collaboration, and eventually agreed to become minister of finance. He explains that the following exchange took place during the meeting during which he agreed:

“As you know,” I said, “I have serious reservations about the Thessaloniki Programme. Indeed I have very little respect for it. …”

Predictably, Pappas jumped in at this point to restate his insistence that the Thessaloniki Programme was not binding for me.

“You are not even a member of Syriza,” he pointed out.

“But would I not be expected to join if I am to become your finance minister?” I asked.

Alexis interjected with a studied response: “No, under no circumstances. I don’t want you to become a member of Syriza. You need to remain unburdened by our party’s tortuous collective decision-making.” [» CH. 4, P. 99]

Varoufakis was a free agent, 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. Varoufakis’s profile corresponded to the casting defined by Tsipras and Pappas: an academic economist, brilliant, and a good communicator who could use both provocation and conciliation with a smile, and with a perfect command of English.

Alexis Tsipras decided to operate in a small group, out of sight of his own party, rather than implement policies that had been decided on collectively within Syriza and approved democratically by the people of Greece. Appointing 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 the Greek voters, but only to Tsipras and his small circle. It is clear that this absence of popular participation and failure to take a democratic approach to setting the political orientation was not compatible with the popular mobilization a government of the Left needs to rely on to ensure application of the radical political program on which it has been elected. A review of events between 2011 and late 2014 is indispensable for understanding what happened subsequent to Syriza’s election victory in January 2015.