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Yannis Varoufakis scrutinises his failure

13 September 2015 / 17:09:35  GRReporter
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In an article for Kathimerini, the former finance minister trashes the government for having neglected him, and the creditors - for having espoused Greece's capitulation as their single purpose.

The coming elections are a result of our failure in the field of negotiations, which led to a rift in the ruling party. The public are seeking to hear from those of us who were there an answer to the question:

"Why did you fail?"

Now is not the time for a thorough evaluation. But it is worth the effort to make a summary of: 1. The goal we set for ourselves, 2. The means that we chose to achieve it, and 3. The mistakes we made while using the tools to achieve the goal.

Our goal. In our manifesto, I had said: "The goal is to replace the memoranda, which perpetuate the debt crisis and the recession, with a new Contract between Greece and Europe based on a "therapeutic" sequence: first, a specific form of debt restructuring, then low primary budget surpluses (maximum 2% of GDP), and finally, profound reforms (which are associated with high productivity)."

Our means. Our desire to make concessions (e.g. privatisation) was one such tool as well as our willingness to part with the troika if it insisted on the failed programme.

What did the breakup mean for us? It did not involve the threat of exiting the Eurozone! Rather, it implied three responses to the aggressive actions of the creditors:

a. delayed payments to the IMF – if the creditors drenched the country's liquidity during the negotiations.

b. rescheduling to the future the repayment on the bonds held by the European Central Bank in the framework of the SMP  if the ECB insisted on bank closures.

c. putting in place a parallel system for payments (see my article in the Financial Times of 28 July) – if the creditors delayed the contract to make us surrender.

Our mistakes. We who participated in the negotiations, gave them our best shot. Yet we will never find out whether our final failure was a foregone conclusion, as our mistakes were crucial.

Here are the key ones among them:

1. Eurogroup's decision of 20 February replaced the memorandum with a list of reforms that Greece had put forward. But during a conference call on 24 February, Moscovici, Draghi and Lagarde violated the letter and spirit of this decision and insisted that it did not revoke the commitments of the memorandum. My own objections were not enough. It was a mistake that despite their step back, I signed the request for an extension of the credit agreement.

2. In early March the ECB breached its (spoken) promise to return liquidity to the levels of February following the extension of the agreement. In parallel, throughout March the troika rejected the progressive implementation of reforms by wasting time and demanding full retreat on our part. In April, I was twice authorized to tell the IMF that we would not transfer the instalments on our debt. Both times, despite my objections, it was ultimately decided to make the transfers. (When David challenges Goliath and then backs down, his credibility evaporates).

3. At the end of April, our country conceded, without my knowledge, to yet another austerity regimen, with 3.5% as a medium-term target primary budget surplus. And when I asked "Why?", the answer was: "We trade the surplus off for debt restructuring." My answer was: "Accepting such a large surplus is tantamount to accepting that your debt is sustainable, why then should they give you debt restructuring? And if you back down on the issues of austerity and debt, why should they give you anything at all?

4. The international media claimed that we had no recovery plan for the Greek economy - a plan of our own, a robust anti-memorandum plan. With the help of people from several ministries, we put one together in the Ministry of Finance. We penned the final text together with Jeff Sachs, with some contribution from US and UK former finance ministers Larry Summers and Norman Lamont. However, the government decided that the troika was going to perceive this anti-memorandum as casus belli and forced me to present it as a provisional ministry of finance plan, which has no government backing. A golden opportunity was lost to highlight the difference between a prudent, moderate and credible plan for Greece and the troika's obstinacy on its dead-end programme.

5. In June it became clear that the string of unreasonable concessions on our side incessantly yields new unacceptable demands. Our capitulation had become the sole purpose of the creditors who were now sure that we would not resort to any retaliatory measures. Although we had agreed that we must be ready to continue our hard-headed negotiations even with closed banks and accordingly set in motion the above-mentioned plans B and C (what was the referendum for if we did not?), when the Eurogroup and the ECB closed the banks for real, the government decided to act based on "mutual consent".

No one knows if there would be a worthy agreement without our errors. But it is certain that we have no right to look into the eyes of 62% of the Greek people, who trusted us with a "NO", and tell these people that we could not have managed any better.

Tags: Yannis Varoufakis minister of finance mistakes analysis
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