Tag Archives: Alexis Tsipras

Varoufakis reveals cloak and dagger ‘Plan B’ for Greece, awaits treason charges

Former Greek finance minister Yanis Varoufakis claims he was authorised by Alexis Tsipras to look into a parallel payment system

A secret cell at the Greek finance ministry hacked into government computers and drew up elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the “flick of a button” .

The revelations have caused a political storm in Greece and confirm just how close the country came to drastic measures before premier Alexis Tsipras gave in to demands from Europe’s creditor powers, acknowledging that his own cabinet would not support such a dangerous confrontation.

Yanis Varoufakis, the former finance minister , told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum.

The transcripts were leaked to the Greek newspaper Kathimerini. The telephone call took place a week after he stepped down as finance minister.

“The prime minister, before we won the election in January, had given me the green light to come up with a Plan B. And I assembled a very able team, a small team as it had to be because that had to be kept completely under wraps for obvious reasons,” he said.

Mr Varoufakis recruited a technology specialist from Columbia University to help handle the logistics. Faced with a wall of obstacles, the expert broke into the software systems of the tax office – then under the control of the EU-IMF ‘Troika’ – in order to obtain the reserve accounts and file numbers of every taxpayer.

“We decided to hack into my ministry’s own software programme,” he said.

The revelations were made to a group of sovereign wealth funds, pension funds, and life insurers – many from Asia – hosted as part of a “Greek day” on July 16 by the Official Monetary and Financial Institutions Forum (OMFIF).

Mr Varoufakis told the Telegraph that the quotes were accurate but some reports in the Greek press had been twisted, making it look as if he had been plotting a return to the drachma from the start.

“The context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history,” he said.

Yanis Varoufakis (right), Greece’s former finance minister, with Prime Minister Alexis Tsipras

“It totally distorts my purpose for wanting parallel liquidity. I have always been completely against dismantling the euro because we never know what dark forces that might unleash in Europe,” he said.

The goal of the computer hacking was to enable the finance ministry to make digital transfers at “the touch of a button”. The payments would be ‘IOUs’ based on an experiment by California after the Lehman banking crisis.

A parallel banking system of this kind would allow the government to create euro liquidity and circumvent what Syriza called “financial strangulation” by the ECB.

“This was very well developed. Very soon we could have extended it, using apps on smartphones, and it could become a functioning parallel system. Of course this would be euro denominated but at the drop of a hat it could be converted to a new drachma,” he said.

AFP PHOTO / LOUISA GOULIAMAKI

Mr Varoufakis claimed the cloak and dagger methods were necessary since the Troika had taken charge of the public revenue office within the finance ministry. “It’s like the Inland Revenue in the UK being controlled by Brussels. I am sure as you are hearing these words your hair is standing on end,” he said in the leaked transcripts.

Mr Varoufakis said any request for permission would have tipped off the Troika immediately that he was planning a counter-attack. He was ready to activate the mechanism the moment he received a “green light” from the prime minister, but the permission never came.

AFP PHOTO / Angelos Tzortzinis

“I always told Tsipras that it will not be plain sailing but this is the price you have to pay for liberty,” he told the Telegraph .

“But when the time came he realised that it was just too difficult. I don’t know when he reached that decision. I only learned explicitly on the night of the referendum, and that is why I offered to resign,” he said. Mr Varoufakis wanted to seize on the momentum of a landslide victory in the vote but was overruled.

He insisted that his purpose had always been to go on the legal and financial offensive within the eurozone – placing Greece’s eurozone creditors in a position where they would be acting outside EU treaty law if they forced Grexit – but nevertheless suggested Syriza did have a mandate to contemplate more radical steps if all else failed.

“I think the Greek people had authorised us to pursue energetically and vigorously that negotiation to the point of saying that if we can’t have a viable agreement, then we should consider getting out,” he said in the tape.

“[German finance minister Wolfgang] Schauble believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes that for that political union to work without federation, without the legitimacy that a properly elected federal parliament can render, can bestow upon an executive, it will have to be done in a very disciplinary way.

“And he said explicitly to me that a Grexit is going to equip him with sufficient terrorising power in order to impose upon the French that which Paris has been resisting: a degree of transfer of budget-making powers from Paris to Brussels.”

Mr Varoufakis told the Telegraph that Mr Schauble had made up his mind that Greece must be ejected from the euro, and is merely biding his time, knowing that the latest bail-out plan is doomed to failure.

“Everybody knows the International Monetary Fund does not want to take part in a new programme but Schauble is insisting that it does as a condition for new loans. I have a strong suspicion that there will be no deal on August 20,” he said.

He said the EU authorities may have to dip further into the European Commission’s stabilisation fund (EFSM), drawing Britain deeper into the controversy since it is a contributor.

By the end of the year it will be clear that tax revenues are falling badly short of targets – he said – and the Greek public ratio will be shooting up towards 210pc of GDP.

“Schauble will then say it is yet another failure. He is just stringing us along. He has not given up his plan to push Greece out of the euro,” he said.

Advertisements

These 3 headlines from today’s Greek press give you an idea of just how devastating the crisis has been

Let’s take a break from the blow-by-blow coverage of negotiations between Greek prime minister Alexis Tsipras and his creditors at the EU and the IMF.

Presented without further comment, are three headlines from today’s news as published by Ekathimerini, a local service that publishes in English.

Blame who you want for the debt crisis, but here’s the human cost.

Those kids didn’t run up that debt:

Yep. They’re running out of food in some places:

The number of small and medium-sized business in Greece has dropped by 27% since 2008.

Greek debt crisis: Goldman Sachs could be sued for helping hide debts when it joined euro

Goldman Sachs faces the prospect of potential legal action from Greece over the complex financial deals in 2001 that many blame for its subsequent debt crisis.

A leading adviser to debt-riven countries has offered to help Athens recover some of the vast profits made by the investment bank.

The Independent has learnt that a former Goldman banker, who has advised indebted governments on recovering losses made from complex transactions with banks, has written to the Greek government to advise that it has a chance of clawing back some of the hundreds of millions of dollars it paid Goldman to secure its position in the single currency.

The development came as Greece edged towards a last-minute deal with its creditors which will keep it from crashing out of the single currency.

The deal is based on fresh economic reform proposals submitted by Athens which bear a striking similarity to the creditors’ offer rejected by the Greek people in a referendum last Sunday – sparking claims that Prime Minister Alexis Tsipras has effectively executed a huge U-turn in order to avoid a catastrophic “Grexit”.

Greece managed to keep within the strict Maastricht rules for eurozone membership largely because of complex financial deals created by the investment bank which critics say disguised the extent of the country’s outstanding debts.

Goldman Sachs Manhattan headquarters
Goldman Sachs Manhattan headquarters

Goldman Sachs is said to have made as much as $500m from the transactions known as “swaps”. It denies that figure but declines to say what the correct one is.

The banker who stitched it together, Oxford-educated Antigone Loudiadis, was reportedly paid up to $12m in the year of the deal.

Now Jaber George Jabbour, who formerly designed swaps at Goldman, has told the Greek government in a formal letter that it could “right historical wrongs as part of [its] plan to reduce Greece’s debt”.

Mr Jabbour successfully assisted Portugal in renegotiating complex trades naively done with London banks during the financial crisis.

His work helped trigger a parliamentary inquiry and cost many senior officials and politicians their jobs. It also triggered major compensation payments by banks to the Portuguese taxpayer.

Pensioners stand outside a closed branch of the Greek National bank in Thessaloniki on June 29, 2015
Pensioners stand outside a closed branch of the Greek National bank in Thessaloniki on June 29, 2015

Mr Jabbour, who now runs Ethos Capital Advisors, has also helped expose other cases including allegations against Goldman Sachs and Société Générale over their dealings with Libya relating to financial transactions that left the country’s taxpayers billions of dollars out of pocket. Both banks deny wrongdoing.

Antigone (Addy) Loudiadis
Antigone (Addy) Loudiadis

Based on publicly available information, he believes the size of the profit Goldman made on the transactions was unreasonable. Scrutiny and analysis of the documents and email exchanges could give Greece grounds to seek compensation and assess if the deals were executed for the sole purpose of concealing the country’s debts.

Greece’s membership of the euro gave it access to billions of easy credit which it was then incapable of paying back, leading to its current crisis. Lenders took its euro membership as a stamp of creditworthiness, but the true state of its economy was far less healthy.

Under Ms Loudiadis’s guidance, Goldman swapped debt issued by Greece in dollars and yen for euros which were priced at a historical exchange rate that made the debt look smaller than it actually was. The swaps reportedly made about 2 per cent of Greece’s debt disappear from its national accounts.

The size and structure of the deal enabled the bank to charge a far bigger fee than is usual in swap transactions, and Goldman persuaded Greece not to test the transaction with competitors to ensure it was getting good value for money.

Countdown to Grexit deadline day

EU leaders have given Greece until the end of the weekend to reach an agreement with its creditors or face crashing out of the euro.

Athens formally submitted a request for a new three-year bailout to the eurozone’s €500bn bailout fund on Wednesday, the first of many steps it has to complete before eurozone and EU leaders gather in Brussels on Sunday to decide its fate.

Here are the other deadlines it has to meet to salvage its place in the single currency and avert the biggest crisis in the EU’s history.

In their letter to the bailout fund, known as the European Stability Mechanism, Greek authorities vowed to “set out in detail its proposals for a comprehensive and specific reform agenda” by Thursday.

These are the “prior actions” that so bedevilled the bailout talks before Alexis Tsipras, the Greek prime minister, walked away from the negotiating table and called a referendum on the creditors’ proposal last month.

Eurozone leaders have warned that these new prior actions must be more comprehensive than those negotiated only two weeks ago — for an obvious reason. The previous bailout talks were over a single, final €7.2bn tranche in Greece’s old bailout.

These reforms will be part of a new, multiyear programme — the kind of thing that is normally negotiated over a period of weeks, if not months.

Under the treaty governing the ESM — Greece’s two previous bailouts were granted before the bailout fund even existed — the European Commission “in liaison with the ECB” must evaluate any request for aid before it goes to national capitals for consideration. With time running out, that evaluation must occur in just 24 hours, on Friday.

Angela Merkel, the German chancellor, went out of her way on Tuesday to highlight the issues the commission must consider in its evaluation — including whether there is a “risk to the financial stability of the euro area as a whole”, a line Berlin insisted on during the debate over the ESM treaty. Germany has long argued that bailouts should only be forthcoming if the entire eurozone is threatened.

In many ways, this is a more critical day than Sunday’s summit. Under the ESM treaty, it is the ESM’s board of governors — the eurozone’s 19 finance ministers — who decide whether formal negotiations should begin. Under the timetable agreed by eurozone leaders on Tuesday night, eurozone finance ministers will meet on Saturday to make this very determination.

If the board of governors decide there is enough in the Greek proposal to start talks, they then task the trio of bailout monitors — the European Commission, ECB and “whenever possible” the IMF — to start talks over a new “memorandum of understanding”, a politically poisonous phrase in Greece that has come to stand for the tough austerity measures the country has lived under for the last five years.

If eurozone finance ministers agree to start bailout talks, Sunday’s summit of EU leaders may not even be needed, according to eurozone officials.

After all, despite Mr Tsipras’ repeated insistence that a “political agreement” was needed at the highest levels, almost all bailout decisions are delegated to finance ministers.

But if no deal is struck on Saturday, leaders from all 28 EU countries have been summoned to Brussels to sort out the mess on Sunday.

According to EU officials, one of the most important things they will be asked to decide on is a humanitarian relief programme for Greece, something that may be needed amid rising shortages of medicines and, potentially, food and fuel.

This day will look very different depending on whether Grexit has been avoided or not. If a deal gets the green light from finance ministers on Saturday, there are several countries — including Germany, Finland and the Netherlands — which still need parliamentary approval before such permission is officially granted.

This has always been a concern in Germany, where Ms Merkel’s own Christian Democratic bloc has grown increasingly restive.

The Bundestag, which is currently on a month-long July recess, will have to be called back into session on Monday, to vote on any agreement. If no deal is agreed at the weekend, Monday’s focus instead turns to the ECB.

With the prospect of a major Greek government default and bankruptcy imminent, the central bank’s governing council will in all likelihood be convened to withdraw the €89bn in emergency loans currently keeping Greek banks alive. Grexit would ensue.

Greece and all of Europe are in uncharted waters

alex tsipras angela merkel
German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras during Tsipras’ first official trip to Germany in March

Greece has voted “No” to its international creditors’ bailout proposal, supporting the left-wing Syriza Government in a high-stakes referendum.

The Sunday poll, in which Greece voted “No” to its international creditors’ bailout proposal, showed a clear rejection of creditor terms: 61% voted “No,” and just under 39% voted “Yes.” What this result will mean politically, however, is a rather more open question.

One reason has to do with the main actors of the German elite who seem to have presented a conflicted and confused response to the result.

For instance, the German Vice Chancellor Sigmar Gabriel told the Tagesspiegel newspaper that “the Greek Government is leading the Greeks on a path of bitter sacrifice and hopelessness.”

Yet Germany’s hardline finance minister, Wolfgang Schaeuble, stated rather surprisingly that Greece could exit the eurozone “temporarily.”

Similar cautious remarks were also reiterated by the German foreign minister Frank Walter Steinmeier, who stated in Tagesspiegel am Sonntag that a Grexit would be a “disastrous signal to countries outside the European Union.”

Angela Merkel on her part made no public statements, yet her awareness of the negative geopolitical consequences of a Grexit is well-known.

The Chancellor is also aware of the fact that a Grexit will end the dream that eurozone membership is irrevocable. But again, how Germany’s leadership especially Angela Merkel will respond is still a puzzle, despite the Chancellor’s track record on managing the passing of unpopular legislation.

This last point is especially relevant in case Greece requires a new bailout.

But there is another reason behind the uncertainty. If Greece exits the euro, it will most likely be what the Economist Intelligence Unit calls a “de facto” exit as opposed to a de jure exit.

A de facto exit means that a “No” vote would increase the likelihood of Greece defaulting on the ECB on July 20th.

Greece would then be cut off from the ECB’s ELA program, default on private creditors, and issue a parallel currency which will circulate alongside the euro.

With an increasing need to print domestic scrip, Greece will have exited the monetary union, at least in de facto terms.

Such a scenario can be reversed, since it is up to the Greek government to set a conversion rate between the euro and the scrip and re-denominate contracts. Consequently, whether Greece will be in or out of the euro will be an open question.

Yet the uncertainty does not end here. Even if a de facto exit occurs, Greece would continue to be legally (de jure) a member of EMU, and may face significant uncertainty over its status.

This is due to the fact that the nation could use treaty provisions to argue that it was illegally forced out of the euro by its peers, while its peers could accuse Greece of violating treaty provisions by issuing a parallel currency.

Consequently, the legal debate will be protracted and its outcome will be highly uncertain, to say the least.

In conclusion, if there is one concept that sums up the road ahead for Greece and Europe it is that of uncertainty. The latter is even more true due to the current polarized nature of Greek politics.

Such polarization will embolden the radical voices within Syriza to harden their stance towards Tsipras, and by consequence his stance towards the creditors.

Greek finance minister Yanis Varoufakis resigns despite referendum no vote

The Greek finance minister Yanis Varoufakis has resigned in the wake of the country’s resounding no vote rejecting the eurozone’s austerity terms.

Writing on his blog on Monday morning he said that he would be standing down immediately after pressure from Greece’s European partners.

“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings,” he wrote.

The prime minister Alexis Tsipras judged this to be “potentially helpful to him in reaching an agreement. For this reason I am leaving the ministry of finance today”.

He added: “The referendum of 5 July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

“Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25 June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

“I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum. And I shall wear the creditors’ loathing with pride.

He also praised the “superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning”.

Greece heads for decisive No vote — Now What?

Alexis Tsipras, Greece's prime minister, exits a polling booth after filling in his voting card in the national referendum in Athens, Greece, on Sunday, July 5, 2015. Greeks are heading to the polls Sunday, evenly split on a referendum to chart a new course in their five-year economic crisis. Photographer: Chris Ratcliffe/Bloomberg *** Local Caption *** Alexis Tsipras
Alexis Tsipras, Greece’s prime minister, exits a polling booth after filling in his voting card in the national referendum in Athens, Greece, on Sunday, July 5, 2015. Greeks are heading to the polls Sunday, evenly split on a referendum to chart a new course in their five-year economic crisis.

Greece’s leftwing government was set for a decisive victory in Sunday’s referendum as voters backed its call to reject a compromise with international creditors, raising serious doubts about the country’s ability to remain inside the eurozone.

With 70 per cent of votes counted, the No camp had won 61.5 per cent and was leading in every region of the country. If confirmed, it will prove a remarkable political exploit by Greek prime minister Alexis Tsipras.

But it is also likely to plunge Greece deeper into turmoil as it tries to prevent the collapse of a financial system that is rapidly running out of cash.

“As of tomorrow, with this brave ‘No’ vote, we will call on our partners to find common ground,” said Yannis Varoufakis, Greek finance minister.

greece

But the response from Berlin was scathing. Sigmar Gabriel, deputy German chancellor, said Mr Tsipras had “torn down the last bridges on which Greece and Europe could have moved towards a compromise”.

“With the rejection of the rules of the euro zone … negotiations about a programme worth billions are barely conceivable,” he told Tagesspiegel newspaper.

“This could mark the point of no return. Greece and the euro have now entered totally uncharted waters,” said Mujtaba Rahman, head of European analysis at the risk consultancy Eurasia Group.

Greece has defaulted on a €1.6bn loan repayment to the International Monetary Fund, becoming the first advanced economy to do so in the institution’s 71-year history

Greek banks are fast running out of cash. The Greek central bank requested further emergency loans for lenders and its governor Yannis Stournaras was due to call European Central Bank president Mario Draghi later on Sunday.

The Greek central bank also called in executives from the lenders to discuss a possible reduction in the daily cash withdrawal limit from €60 to €20.

The ECB governing council is scheduled to hold a conference call on Monday afternoon to decide on more support for Greece’s financial system. The ECB may also choose to step up purchases of eurozone government debt under its quantitative easing programme if markets react badly to the Greek result.

Earlier on Sunday, Mr Tsipras fought through a crowd of at least 100 camera crews packed into a school in central Athens to cast his vote. Addressing the scrum of reporters afterwards, Mr Tsipras said his country had the right to determine its own “destiny” in Europe.

“No one can ignore the will of the people to live, to live with determination, to take their destiny into their own hands,” he said, looking relaxed and smiling in an open-necked white shirt with his sleeves rolled up.

Members of the leftwing Syriza-led government tried to reassure voters on Friday, claiming that banks would reopen by Tuesday regardless of the outcome of the referendum.

But a No vote could mean that negotiations with creditors, which were suspended by Mr Tsipras’s decision to hold the referendum, may not be resumed immediately, if at all.

“A No vote would be a very, very difficult result for Europe,” said Carsten Schneider, budget spokesman for Germany’s Social Democrats. “I don’t know how we can find common ground again.”

French president François Hollande and German chancellor Angela Merkel will hold talks in Paris on Monday evening to discuss their response to the Greek vote.

Emmanuel Macron, French economy minister, said that whatever the outcome of the referendum, talks needed to resume between the debt-laden country and its creditors.

“Even if there is a No vote, our responsibility will be to avoid a Versailles treaty of the eurozone,” Mr Macron said at a conference in Aix-en-Provence, referring to the tough conditions imposed on Germany after it lost the first world war. “If the No wins, it would be a historic mistake to crush the Greek people.”

Even a Yes vote raises many uncertainties, especially if Mr Tsipras remains in office. Many eurozone policy makers now distrust him and doubt whether he would agree to make concessions on tax increases and pension cuts that could split the Syriza party.

Even if there are limits to how much support the ECB can give to the Greek banking system, Benoît Coeuré, a member of its executive board, said it stood ready to do more to support the bloc.

Greek Prime Minister Alexis Tsipras delivers a speech at an anti-austerity rally in Syntagma Square in Athens, Greece, July 3, 2015. Tsipras, elected in January on a promise to end six years of austerity, extolled a packed Syntagma square in central Athens to spurn the tough terms of an aid deal offered by international creditors to keep the country afloat. REUTERS/Alkis Konstantinidis - RTX1IY3E

“If we are needed to do more [to support the eurozone], we will do it,” he told the same conference. “There should be no doubt about that.”

The ECB is expected to front-load asset purchases undertaken as part of its QE should events in Greece drive up yields on the bonds of other eurozone member states.

Jean-Claude Trichet, former ECB president, who was also at the gathering, said there was a real risk of financial contagion, even if it was “relatively small”.

“The probability of a catastrophe for the Greek people is high” in the event of a No vote, Mr Trichet told the Financial Times. A Greek exit could also lead to geopolitical risk with Greece situated in an unstable part of the world, he warned.

Additional reporting by Anne-Sylvaine Chassany and Michael Stothard in Aix-en-Provence, Claire Jones in Frankfurt and Stefan Wagstyl in Berlin