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Mediapart Sat 29 Oct 2016 29/10/2016 Latest edition

'We underestimated their power': Greek government insider lifts the lid on five months of 'humiliation' and 'blackmail'

July 8, 2015 | By christian salmon

In this interview with Mediapart, a senior advisor to the Greek government, who has been at the heart of the past five months of negotiations between Athens and its international creditors, reveals the details of what resembles a game of liar’s dice over the fate of a nation that has been brought to its economic and social knees. His account gives a rare and disturbing insight into the process which has led up to this week’s make-or-break deadline for reaching a bailout deal between Greece and international lenders, without which the country faces crashing out of the euro and complete bankruptcy. He describes the extraordinary bullying of Greece’s radical-left government by the creditors, including Eurogroup president Jeroen Dijsselbloem’s direct threat to cause the collapse of the Hellenic banks if it failed to sign-up to a drastic austerity programme. “We went into a war thinking we had the same weapons as them”, he says. “We underestimated their power”.

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A senior member of Greece’s negotiating team with its European creditors agreed to a meeting last week in Athens with Mediapart special correspondent Christian Salmon. Speaking on condition that his name is withheld, he detailed the history of the protracted and bitter negotiations between the radical-left Syriza government, elected in January, and international lenders for the provision of a new bailout for the debt-ridden country.

The almost two-hour interview in English took place just days before last Sunday’s referendum on the latest drastic austerity-driven bailout terms offered by the creditors, and opposed by Prime Minister Alexis Tsipras, and which were finally rejected by 61.3% of Greek voters.

While the ministerial advisor slams the stance of the international creditors, who he accuses of leading a strategy of deliberate suffocation of Greece’s finances and economy, he is also critical of some of the decisions taken by Athens. His account also throws light on the personal tensions surrounding the talks led by former Greek finance minister Yanis Varoufakis, who resigned from his post on Monday deploring “a certain preference by some Eurogroup participants, and assorted ‘partners’, for my ‘absence’ from its meetings”.

The advisor cites threats proffered to Varoufakis by Eurogroup president Jeroen Dijsselbloem, warning he would sink Greece's banks unless the Tsipras government bowed to the harsh deal on offer, and by German finance minister Wolfgang Schäuble, who he says demanded: "How much money do you want to leave the euro?"

The interview follows below and over the following three pages presented in a continuous series of extracts (editor’s notes appear in italics within hard brackets):



From early on I disagreed that it was only a negotiation - we give this, you give that, you come closer. Because what happened was they had some negotiations, some details about fiscal policy, about conditions, et cetera. So, through these discussions it was the government that was coming, coming - coming close to the Troika, without them making any move towards us, and never discussing the debt: debt restructuring, debt sustainability, and also, you know, financing. We are going to get some new financing, is the ECB [editor's note: European Central Bank] going to lift all these caps, all these restrictions, these limits on how much the banks can borrow, the state can borrow from the banks? Because we can't borrow.

We used to. Up until February, we could still issue treasury bills. Short-term, three-month fixed bonds, mostly one-year. But this government was never allowed to do that because it was finished. No more treasury bills […] You see, the problem with treasury bills, [is that] it is the Greek banks who buy it. And the ECB said: “No more treasury bills”. So the state could not borrow from the banks.

So, from March, April onwards, we started economizing from the state, pulling together all the cash reserves from different branches, agencies, local authorities, things like that, in order to manage to pay the IMF [International Monetary Fund]. We paid once, we paid twice, and [we had] to pay wages as well. We paid wages from earnings, from tax receipts. But it's not enough to pay the IMF. We have a problem with the primary surplus, we couldn't pay the IMF, so we had to scrape around.

So basically this has created a domestic shortage of liquidity, liquidity in cash. Banks, export companies, good companies, could not borrow, people could not pay back their debts, they couldn't get any extensions to their credits and basically the credit system started to disintegrate, to not function. Of course, the banks themselves had some security reserves, but when they reached the point they said the banks can't even borrow even from the ELA [Emergency Liquidity Assistance fund] at all, they had to shut down, because they would deplete their reserves.

[...] Companies who do not pay their employees through bank accounts cannot pay cash to the employees - and there are many. Also they say "look, we don't have any revenues so I give you 500 euros instead of 800 euros and we'll see what happens after the banks reopen". So we have a situation which is escalating into a chain reaction […] like having a heart attack. A heart attack if you view cash liquidity as the blood of the economy. On the weekend when the ECB stopped, we had the heart attack. Now we are having its after effects. Different organs are getting numb. Some stop working, others are trying but they don't have enough blood.

On former finance minister Yanis Varoufakis:

 © Reuters. © Reuters.

People are asking why he is supposed to be so unpopular with the Eurogroup and the people in power, why they don't like him. And a lot of people say they don't like him because he appears to be lecturing them, because of being arrogant. He thinks this is an academic issue, an economic issue or a technical issue. But what I think is that all these people - especially people in politics, in power, the Eurogroup, fellow ministers - they have seen a phenomenon that is much more different than anything they have encountered in their circle, from those elected, in the normal process of politics.

Because you have a man that has his own style of dressing, he is very self-confident, at the same time he is very friendly, very open, very honest. You know, you ask him a question and he doesn't spin around, he doesn't change the subject, and so this creates difficulty, both to the politician and the journalist, [to] the media. These are two things that show that Varoufakis doesn't fit, but on the other hand he is a celebrity and he creates clashing emotions. You hate him or you love him.

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