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Varoufakis reveals his secret plans: Parallel currency IOUs, Grexit, Drachma

Former Finance Minister Yanis Varoufakis had a plan: once the ECB forced Greece’s banks to close, he could act unilaterally and 1. issue IOUs 2. apply a ‘haircut’ to the Greek bonds issued to the ECB in 2012, 3. reducing Greece’s debt and 4. seize control of the Bank of Greece from the ECB.

But the Prime Minister and some of the other members of Tsipras’s inner cabinet did not share Varoufakis’ view. After the Referendum, the PM and his close aidees held a secret voting about Varoufakis remain in the government. With 4:2 votes the decision was taken: the “star” FinMin had to get on his motorbike and go. And so he did.

Speaking to UK’s NEW STATESMAN, Yianis Varoufakis opened his heart and talked about the secret plans he was forging behind the backs of the Greek people who in their large majority oppose Grexit for whatever the reason.

“But Varoufakis thought that he still had some leverage: once the ECB forced Greece’s banks to close, he could act unilaterally.

He said he spent the past month warning the Greek cabinet that the ECB would close Greece’s banks to force a deal. When they did, he was prepared to do three things: issue euro-denominated IOUs; apply a “haircut” to the bonds Greek issued to the ECB in 2012, reducing Greece’s debt; and seize control of the Bank of Greece from the ECB.

Varoufakis was confident that Greece could not be expelled by the Eurogroup; there is no legal provision for such a move. But only by making Grexit possible could Greece win a better deal. And Varoufakis thought the referendum offered Syriza the mandate they needed to strike with such bold moves – or at least to announce them.

He hinted at this plan on the eve of the referendum, and reports later suggested this was what cost him his job. He offered a clearer explanation.

As the crowds were celebrating on Sunday night in Syntagma Square, Syriza’s six-strong inner cabinet held a critical vote. By four votes to two, Varoufakis failed to win support for his plan, and couldn’t convince Tsipras. He had wanted to enact his “triptych” of measures earlier in the week, when the ECB first forced Greek banks to shut. Sunday night was his final attempt. When he lost his departure was inevitable.”

In another section of the interview Varoufakis admits that had been contemplating about a Grexit from the very beginning. He had set a small team making exercises on the paper, playing with parallel currencies and viruses. He had been thinking of Grexit from the first day he assumed office, he said.

“He [Tsipras] wasn’t clear back then what his views were, on the drachma versus the euro, on the causes of the crises, and I had very, well shall I say, ‘set views’ on what was going on. A dialogue begun … I believe that I helped shape his views of what should be done.”

And yet Tsipras diverged from him at the last. He understands why. Varoufakis could not guarantee that a Grexit would work. After Syriza took power in January, a small team had, “in theory, on paper,” been thinking through how it might. But he said that, “I’m not sure we would manage it, because managing the collapse of a monetary union takes a great deal of expertise, and I’m not sure we have it here in Greece without the help of outsiders.” More years of austerity lie ahead, but he knows Tsipras has an obligation to “not let this country become a failed state”.

Full Q&A transcript here

Interesting enough, in the week before the Referendum To Potami MP Haris Theoharis had claimed in the Parliament and in several television channels that  “Greek Treasury and Government officials were working out a plan to return to Drachma.”

Now it turns out that Theoharis was right, yet partially right. Because Tsipras did not support his FinMin’s Drachma plan, neither Varoufakis was able to proceed with the real life implementation of the plan because of “lack of expertise.” There was never a thoroughly worked out Drachma – Plan B. Just Games and Theories.

Anyway, Varoufakis told the NewStatesman, that he was relieved to leave the government.

We, too. Bye, Yanis.

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41 comments

  1. One small question : why couldn’t he do it when the banks were open ? or at least, why were no IOUs prepared ?
    I suppose (I am not an expert) that change of currency is easier with open banks. Many countries changed or even resigned currency, and banks stayed functioning – the only nasty consequence could be a brutal devaluation… But honestly speaking, both Russia and Argentina after bankruptcy, devaluation and debt reduction started to grow very quickly. Maybe if unemployment became near 3 or 5 % and growth started again, devaluation would not be so bad ? (only imported commodities and commodities with strong imported components would become more expensive)
    What is strange for me is : why did they wait ? I think there were two good ways : taking the compromise like it was early or Grexit early. Why did they wait?

  2. Cool last sentence!

    • Blaming Varoufakis for the ills of the eurozone is just childish. I am of the opinion that Greece should leave the euro, but it has to be cleverly managed and done at a time that suits Greeks, not one that the Germans provoke for their own interests.

      • I think nobody reasonable can blame Varoufakis for all ills of the Eurozone. Euro was not created by Varoufakis, and the decision of Greece to take euro was not Varoufakis’ decision.
        But I think the negotiations were not particularly successful. And even with your opinion, still my question : why didn’t they prepare it on time ?

        • I think the truth is that (a) Tsipras never had a serious plan B, and was always committed to the eurozone and the EU (even if Varoufakis had a not-very-detailed plan B to quit the euro); and (b) the Germans’ plan A was for some time to expel Greece from the eurozone, despite this not being possible legally or politically.

          The paradox is how the Greeks have tried over the last 6 months to observe the law and rules of the EU; while the Germans have worked systematically to undermine the law and rules of the EU, to benefit themselves. The mistake has been to observe national stereotypes (actually propagated and propagandised by the Germans) that the Greeks are lazy and law-breaking whereas the Germans are hard-working and law-abiding.
          Throughout the whole eurozone crisis, its politicians have refused to deal with economic realities. They still do, and the stupid Lagarde in particular understands nothing outside crude politics. This is an issue of power and control over Europe: Greece just doesn’t count, and varoufakis made the error of thinking that logical argument would make a difference. It doesn’t: we are talking about organized crime.

  3. Yeah, blame it all on Varoufakis Grexit plans. It’s a great bailout deal Tsipras brought home today.

    • Giaourti Giaourtaki

      What great bailout? They gave him a Heckler and Koch to shoot himself but when he was back in Athens it was so hot that the gun wrecked just like the other “Made in Germoney” crap they have to bribe with billions to get it sold.

  4. The truth is that Varufakis is the the only one to come out of this fiasco with his integrity and honour intact.
    Reduced austerity and membership of the German dominated currency was always incompatible.
    Events to come will prove him right. We have not heard the last of him.

    • keeptalkinggreece

      oh we hear of him every day – still

    • Varoufakis played a lead role in the fiasco of the negotiations (or lack thereof) over the past 6 months. I am wondering whether he was critical for Tsipras’s disastrous decision to call the referendum 2 weeks ago. And now we are learning that secretly he has been planning a Grexit while Tsipras was claiming that “staying in the euro is a given”.

      Yes, Varoufakis is witty and cocky, I’ll give you that. It would be great to have him post his opinion on this site. However, there is a long way between that and having his integrity and honor intact.

      • He didn’t “secretly planned a grexit”. He had a contingency plan just in case. I’m ready to bet that the Germans had a lot more than 5 persons working on a more detailed grexit plan for a longer time – and all while claiming that the ultimate goal is the “integrity of the eurozone”. Double standard much?

        • I dare say both governments would be careless/neglect their duty if they hadnt had at least a few people thinking this through

        • This article (and the history of the past months) indicate Varoufakis had more than just a contingency plan. In early May, for example, he stated that the Greek government is ready to “take it down to the wire”. When it got there (June 30 was the second bailout program was expiration date and the IMF payment was due), he wanted to take a unilateral step further. What is that step if the fallout with Tsipras was due to the fact that “Varoufakis could not guarantee that a Grexit would work”?

          I understand why Varoufakis wanted to make the move. If the tool you have in the game of chicken is to threaten your opponent with a Grexit (as he thought, a mutually guaranteed destruction along the lines of the Cold War standoff), you need to be ready to use that tool. If not, you lose that game (as the last 24 hours showed). However, it is a very dangerous game, particularly when you risk the livelihood of a lot of other people.

  5. Giaourti Giaourtaki

    Do let leaders decide is not democracy, to be voted by under 25% is like in the US and anti-capitalism needs no currency.
    The only thing with Drachma is that it would be at least a legal constitutional currency and not illegal state-less like the fake money that they fill into ATMs, but as this is the 21st century normal people – esp poor – don’t need money if they think it over, get organized, regional, streetwise and abolish the state in the end, the latter will happen even faster with more “tax-evasion” and “black labour”.

  6. The only option for Greece was to leave the Euro, default on the debt and use the drachma and euros for a period of time.
    Greece will take decades to recover now that large parts of the world is now in recession, china, South America and the US if we got the real statistics.
    The fear of losing the euro deposits and the euro purchasing power was stronger than taking the risk of a fresh beginning, like us in Ireland we are all vassal states now. Extend and pretend till it all collapses.
    Soviet Russia would not hold light to the EU.

  7. ederlezi -gyongyvirag

    This “agreement” means that Greece had lost its last chance.
    Still now, Greece was a debt colony, but now it will become a colony, because you will send almost everything, which has big value in your country. Greece will sell sell its port, airports, railways and other ( beaches and whole islands?). Just because of that fucking euro.
    Greeks dont have to go work to other countries, they will be slaves in their homeland. But their payments will be paid in euro. EURO above all! Congratulations for that compromise, mr Tzipras. (I suggest he sould re-name his party (radical left???) and his child (Ernesto????)

    • Giaourti Giaourtaki

      Tourists in solidarity should plan on boycotting German run airports like Athens and make Frankfurt know that they plan for the future to boycott the airports of Thessaloniki, Korfu, Mykonos, Rhodes, Skiathos, Crete and Santorin, as this are some of the so called “regional” Airports for 1,23 billion, they get 20 million people land there yearly and call it “regional”, guess this trick made the price sink. The Greek state will face enormous 30 million rent per year of this as this will not by paid forward but year on year for 40 years. “Fraport” is the name of this capitalist parasites and they run some airports.

      • look to the winter period, the most of them have a 5 time a day flied.

        • Giaourti Giaourtaki

          This will change when they also take the health-sector and fly their pensioners in and in the end they will also build ice-rinks with Greeks playing hockey for their amusement

  8. “Tsipras apparently allowed himself to be convinced, some time ago, that euro exit was completely impossible. It appears that Syriza didn’t even do any contingency planning for a parallel currency (I hope to find out that this is wrong). This left him in a hopeless bargaining position. I’m even hearing from people who should know that Ambrose Evans-Pritchard is right, that he hoped to lose the referendum, to give an excuse for capitulation.”
    Mr Krugman
    Wow , he thinks like me about Greek position (no contingency planning, so bargaining position was hopeless)… So still maybe it was not a good strategy…

  9. “And then the referendum happened, and the referendum gave us an amazing boost, one that would have justified this type of energetic response [his plan] against the ECB, but then that very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan].

    Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.”

    I found that very interesting. Isn’t Varoufakis saying here what a lot of people where thinking when they woke op on Monday morning? Isn’t he saying that Tzipras took the NO of the people and reversed it completely overnight?

  10. “Yianis Varoufakis opened his heart and talked about the secret plans he was forging behind the backs of the Greek people who in their large majority oppose Grexit for whatever the reason.”

    Thats just an assumption or did you made a referendum over this question? And please dont answer with opionen polls.
    One thing we knwo for shure is, that the people in greek are against more austerity! 61,3 %

  11. There is an interesting article on the Aletho Nwes website titled –
    The Problem of Greece is not Only a Tragedy: It is a lie. by John Pilger.
    The EU problems have nothing to do with Varoufakis, only that he recomended that Greece default & bla, bla, bla, because when they were handed the opportunity they seemed to forget it all.
    Varoufakis is gone – what might have happened is not relevant.
    What I am wondering is this;
    Is it only Greece that is having problems with the EU power brokers ?
    The other member countries are happy & have settled in comfortably with the draconian austerity & the asset stripping of their respective nations ?
    OR
    Is the media not reporting the discontent & protests of the popultions of the other EU member countries … & deliberately.
    I cannot for the life of me believe that the problems are just with Greece.

    • Depends who you ask I suppose. In the beginning very few Greeks objected to the notion of austerity and the “rescue effort” from the Eurogroup. It was only after years of suffering through one of it’s worst economic recessions and an endless wave of political promises by their elected leaders and the members of the eurogroup that, that attitude started to change.

      As for your question specifically, yes, so far only Greece ever really mustered a sufficient public support to openly pick a fight with the lenders. That does not mean of course that there aren’t people in any country that don’t like it, but they are way fewer than in Greece and Greece seems to be the only country that has these troubles.

      As for the reasons well, I named a few, but I am sure you can come up with some of them on your own.

      • Giaourti Giaourtaki

        What? Fantasies? All didn’t happen or mommy told you so? Millions of people in tens of panhellenic 24/48 hour strikes and in the squares all over Greece and occupying hundreds of town-halls, schools, universities and headquarters of sellout unions that tried to control the movement and refused to call for a real General Strike were founding a movement that later got stolen by renaming it into “occupy”, not to mention the streetfights and molotov parties against the MAT-terminators and the chemical warfare with expired CS-gas from Bavaria…
        That was “in the beginning”, it ended on 12/2/12 – Syriza is may be the result of the exhausting movement.
        And for the other countries Mr Davis is damn right it’s not getting reported, and in Spain and Italy it also gets massive criminalized with up to 15 years imprisonment for militant protesters. The statistics of unemployment gets stabilized by migration, so in reality it still keeps rising.

        • You want to assert that the general level of disapproval of the Greek people displayed in the last couple of months is on the same level as it was in the beginning? That is an interesting claim to be sure.

          I think you are blowing the level of “silenced” reports out of proportion, yes there are people protesting, so? How many? What % of the population are actively on the street? Exactly not enough that their government, or any other government would care.

          Sorry but that is reality, you either mobilize the masses or your position will not be regarded as legitimate, regardless of you liking that or not.

          • Giaourti Giaourtaki

            What? I’ve said it was over in 2012, people are tired and just like most other movements just disappear, have a break or whatever, years without money can be exhausting, no? But I guess people who didn’t knew until a few weeks that Greeks don’t have social welfare now being told that the pensions are devious misused therefore won’t appreciate a revolt. And now the German hate-media waits that refugees starve to death on Lesbos to get another joker.

          • keeptalkinggreece

            one of the reasons the indignant movement broke apart is that they could not agree among themselves and wasted lots of time in endless theoretical discussions

          • Giaourti Giaourtaki

            While discussing others went back to the neighbourhoods, free clinics and other grass-roots networks wouldn’t exist like this today but in the end language schools for “illegals”,legal and medical help existed in free-spaces already since years before.

          • keeptalkinggreece

            that’s true too

  12. Varoufakis was the one responsible for the strategy that led Greece to disaster.
    He gambled that europe would not let Greece out of the EU and would accept greek conditions of debt relief.

    “Greek Crisis: Finance minister warns euro could unravel if Athens leaves single currency
    Greece’s finance minister has warned that if Greece defaults on its £1.1 bn (€1.6 bn) bill to the International Monetary Fund next month, the collapse of the eurozone could follow.”.

    end of quote.

    But europe was prepared for it and did not yeld.

    Since Greece did not want to leave euro in the first place…, Greece was framed since its more powerfull weapon- leave euro – was not a gun but a fork.

    Secretly..,I think Varoufakis was prepared for such contingency and his plan was to leave the euro..,but tsipras did not agree so Greece had no option but to yeld to europe conditions in order to remain in the euro , since europe had all the cards and greece none.

    Bad Greece Strategy.

    • keeptalkingsense

      “Trying to pin the blame for the austerity negotiation end result on Yanis Varoufakis is …” CHANGE YOUR NICK coz misleading with the Blog’s name or YOU’RE BANNED.

  13. This is not a coup, but just another step in a process of plundering of Greece by the banksters. I wonder when the Greeks will wake up to the fact that there is no way out of this ‘crisis’ other than to default and go back to drachma. If the Greeks don’t boot out Tsipras for selling them out just one week after such a convincing referendum for a ‘no’ to further deals with the banksters, they will get even harsher austerity, until the next iteration of this process, until finally they ‘get it’. And no, it’s not Germany that is behind all of this, but the international banksters.

  14. It’s pity Varoufakis hadn’t discussed his end game to Tsipras at the begining. If it was apparent to Y V that closing the banks would the sanction the institutions would adopt to force submission, then they could of had more discussions on what they should do. Did Tsipras plan to capitulate if faced with banks collapse?
    If they couldn’t agree the end game then there wasn’t much point in starting negotiating in the first place.

    As it is we are where we are and stuck with more austerity than expected at the outset. The clock can’t be turned back and Greece should now proceed with honouring the agreements (made under duress).
    In democracies governments change and I am sure that problems like Greeces will occur in other EZ states unless the foundation of the €uro isn’t ammended.

    I believe what goes around comes around.
    It is just a matter of time.

  15. very good plan for Greece.
    very dangerous plan for BB (Brussels-Berlin)

  16. What the recent events in Greece clearly shows:

    1) No way out of austerity inside Euro Zone
    2) ECB with enough power to overrule any elected national body.
    3) No sovereign nations in Europe anymore: just creditor and deptor nations (the colonies)
    4) tough economic and financial arguments are seldom used, smashing parliaments is all that matters. We are ruled by imperial laws.

    Precious lessons for everyone. I’m grateful to the Syriza government and to all the Greek people for teaching me.

    For sure any healthy development from here requires much more than the effort of an unsupported Finance minister.

  17. At least this Varoufakis has a fighting Strategy!This would be much better for the Greek people, its government and Syriza.
    When you start getting scared in a middle of a fight and start crying for forgiveness the bullies will just keep coming at you even stronger and humiliate you more.
    Unfortunately that was Tsipras choice,he choose fear over courage and now he and the Greek people will pay dearly for that. Unless there is some resistance to this.

  18. Giannis Thoukydidis

    Peter,
    Ever had a dinner date with a Greek? 45 minutes is about the norm and there is never an apology.Why should we – the pleasure of our eventual company will more than compensate.
    Come to that ever been a European Finance Minister waiting for a proposal or flying to Brussels for a meeting that had nothing to discuss?
    Rule One – no rules. Rule 2 – Never try to organise a piss-up in an ouzo distillery.

  19. Keep talking greece. You seem to be totally in favour of promoting the enslavement of the Greek people. VAROUVAKIS is the best thing that has happened to Greece in a loooong time. Obviously you play the MSM game. I honestly though you were different, so sad…..

    • keeptalkinggreece

      why don;t you take Varouf to make his experiment in your country? I’m sure it has debts too, as all countries do have. first solid plan , then let people decide on it.