Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges
telegraph.co.uk
telegraph.co.uk
Yes - in common with most central banks it is supposed to be independent. However It ... acts as a treasurer and fiscal agent for the Greek government[1] and is partially owned by the Greek government (35%)
The finance Minister of Greece has no authority to order the BoG around re: fiscal policy, nor has he any right to seize its money.
AFAIK, this is incorrect. The government orders that bank with regard to fiscal actions (that's what the "fiscal agent" role means.) Monetary policy is another thing.
That 57% owned by the HFSF? That's the Hellenic Financial Stability Fund[1], the management of which is controlled by the Greek government[2].
[1] https://en.wikipedia.org/wiki/Hellenic_Financial_Stability_F...
[2] https://en.wikipedia.org/wiki/Hellenic_Financial_Stability_F...
This seems approximately akin to, say, Ted Cruz being elected next year, another financial crisis happening shortly thereafter, and Cruz (a) arresting Janet Yellen (b) seizing control of the Federal Reserve and (c) switching us from the dollar back to Continentals.
In such circumstances, I can well imagine a radical politician getting elected and taking drastic measures.
FDR winning election and taking the country off the gold standard is a not incomparable situation from American history.
What makes todays reports bombshells isn't the idea that Tsipras (more accurately, the Syriza Left Platform) had a Plan B involving the drachma. Approximately everyone who reported on the Greece/EU showdown noted that Plan B would somehow involve the restoration of the drachma.
The bombshell is that they had a plan to do it by fiat, extrajudicially, in the process seizing 10-15Bn EU from the Greek treasury in the hope that they could parcel the money --- which wasn't properly theirs --- to keep the government running during the transition.
The reports suggest Left Platform, Varoufakis, and Tsipras were planning on rewriting the entire Greek financial system, without any consultation with the Greek people beyond the agreement of the Left Platform faction.
If they had gone ahead with this plan, Syriza would be isolated from everyone --- the Greek people, who would instantly lose the majority of their assets in the euro/drachma haircut, and every lender in the world that might help soften the landing.
That's why the Left Platform leadership had to talk about arresting their own central banker. They'd have been executing a financial coup and rewriting the rules of their economy without consultation with anyone else inside Greece. They'd have been deciding by themselves not just to exit the Eurozone, but to do so abruptly and without the cooperation or assistance of the ECB.
This isn't just about Greece severing ties with the Eurozone; it's about how they would have done it.
Edit
Here's a Greek expat trying to lay out what an orderly transition from Eurozone membership to a drachma economy would look like:
http://pavlos.geekhost.org/2015/07/05/what-grexit-looks-like...
Your link simplifies to an extreme, hand-waving away all the difficult parts of implementing the plan (e.g. how to keep the banks open, how to keep the government functioning, what the response would be of the IMF and ECB, how to prevent capital from immediately fleeing en masse, whether Greece actually has capacity to print and distribute drachmas, etc.). Its suggested approach might or might not work out, but it definitely would not be any kind of smooth ride.
Perhaps he was just overly optimistic in the wake of the referendum No vote. His prediction – “it’s likely the institutions will seek a quick compromise to avoid serious damage to themselves and the Euro” – turned out to be fairly inaccurate. Instead they refused to compromise and in fact made even stronger demands than they had before.
He seems remarkably sanguine about the whole thing. He seems to think Greece only imports iPhones and other luxuries. In reality they import about a third of their food, they import electricity, oil, virtually all medicines. He mentions those are "cheap" but that's because the pharma industry was treating them as a charity case for the last six months.
Where I do agree is that Greece cannot radically increase exports simply by switching to their own currency and printing a lot of it. People aren't going to suddenly double their consumption of cheese if Greece halves their prices.
[0] http://yanisvaroufakis.eu/2014/02/15/bitcoin-a-flawed-curren...
Treason would be to defect from Greece to the IMF or ECB or Germany with information to sink Greece and eliminate any kind of negotiating power that they might have.
It would have been the ultimate power grab by Syriza, going against all laws and democracy.
Just because Syriza got a majority in the elections doesn't mean the rule of law has been suspended.
Where did you see that? I didn't see that talked about anywhere. I literally did a ctrl-f in the article for "arrest" and it didn't show up anywhere.
> Grabbing your central bank's reserves without any involvement of parliament
Yeah that might be weirder. Was Varoufakis supposed to turn the prime minister in the second he suggested it? Start proceedings to impeach him?
I get that there are lawful orders and unlawful orders. How do you tell which is which? Especially given that Greece's creditors are talking about some serious financial consequences.
If the US had only UK owned banks, and the UK government was pressuring the banks to all be closed so as to choke the US via the banking system there's an argument to be made that the US government has not only the right but the duty to take things over.
I'm not saying it would be popular, and it might not be strictly legal. But I'm not sure that the UN authorizes financial terrorism either. The whole thing is pretty crazy to think about. It shouldn't be surprising that people were contemplating crazy solutions to crazy problems.
http://hugo-dixon.com/2015/07/26/wild-plan-b/
This is so batshit crazy my jaw is hanging open.
I view Varoufakis's plan as a trump card to play against the Troika. The Troika believe that - in the end - the Greeks would always roll over and give in to their proposals.
Varoufakis plan was to be able to say "you didn't count on this crazy plan* and be able to present something that was undoubtedly crazy, but just credible enough to make the Troika think that the Greeks might try it.
Sometimes acting crazy is the best strategy. To quote:
it turns out that the best strategy if you get to play the game only once is to make the most credible attempt possible in pretending to be a Hawk while actually being a Dove. When you are in one of the cars heading for each other, growl, scream, throw bottles out he window, swerve and then come back onto the road again. In short give the impression that you are mad and unpredictable, and definitely capable of doing mad things like not swerving under any circumstances. Do not signal that you may compromise, even though you know you will.
[1] http://karlstrobl.com/2015/05/28/varoufakis-and-game-theory/
Besides the fact the Troika controlling the data of the finance ministry, the tax files, with no access to the current legal authority, you should also consider the likely possibility of a military coup to get rid of Syriza.
The trumped up language by the germans and their press made it very likely to prepare such a step. This didn't come forward yet. But given the history I call it very likely. Until the referendum backed them up.
And of course the Troika also had their plan B developed in secret, a similar group of 5, getting rid of Greece in the eurozone, despite it was against the EU rules. This was in the news last month. But they never offered Greece assistance to leave the Eurozone. Schaeuble at least talked publicly about it, and was punished for it.
In the grexit scenario raiding their assets is the best thing to do. But the more interesting question is if the military (with support by the Troika) would have taken over. Exciting times.
And then the people on the other side of the table said: "Excellent, go on!"
Not only did the Troika believe that in the end the Greek government would "roll over and give in to their proposals": many EU governments and officials actually preferred the alternative.
The negotiations of the past weeks have shown that not only Greece was bluffing about leaving the Euro, but that other countries would be more than happy to let them leave.
> Just because Syriza got a majority in the elections doesn't mean the rule of law has been suspended.
This is excactly the problem. And it's not a little problem.
I guess that's politics, damned if you do, damned if you don't. Couple days ago, Tsipras was criticized for not having plan B.
Personally, I am not a big fan of central bank independence, as a concept. There is always some dependence, because institutions are staffed and constructed by humans, and I think proclaiming independence is a bit muddy in democracy. If Tsipras took control over Greek Central Bank, it would still have greater democratic legitimacy than the control Eurozone leaders have over ECB (the fact they have some I think can be seen from the fact that ECB didn't provide liquidity to Greece before the referendum - really independent CB in a monetary union would have to do that anyway and let the politicians face the consequences).
(I am really torn here, because, even though I wish Eurozone to succeed, sadly, the existence of EZ and ECB was not established in a democratic process, as it should.)
The idea that a parliamentary decision would have been better than one from the cabinet because the legitimating chain would've been slightly shorter sounds like a rather esoteric reason to judge their actions on.
But as opponents this is a great opportunity. They'll get crushed, I guess.
http://www.ft.com/intl/cms/s/0/2a0a1d94-3201-11e5-8873-775ba...
(The headline is "Syriza’s covert plot during crisis talks to return to drachma" if you want to Google it because of the registration wall).
And they call it "plot", where it was a normal grexit plan. It was very similar to the EU troika "plot"/plan for their grexit scenario, throwing them out of the Eurozone. And the Troika actually performed parts of their "evil" plan. Draghi illegally stopped ECB support to blackmail them. Did FT report this as such?
This kind of narrow "crush anything that isn't neoliberal capitalism" paranoia is going to make the the crunch even more painful when disemployment really comes into play.
http://www.ft.com/cms/s/0/d44a92c0-3454-11e5-bdbb-35e55cbae1...
To me it appears that Varoufakis is the Bobby Fischer of economics at the moment[1]. Of course he had a plan to keep the Greek economy (somewhat) alive if Grexit occurred. It would astonish me if some details of the plan hadn't been leaked to the EU - the Greeks would want them to know about it.
Varoufakis's resignation/sacking was beautifully timed to setup the idea that the Greeks would make some concessions, but couldn't be pushed much further.
And the purpose of this latest thing isn't to protect Varoufakis against treason charges, it it to drive a bigger wedge between Germany and France before August 20.
(As an aside, Varoufakis used to be Valve's staff economist, and he's a published game theorist. He's pretty good a playing slight differences in motivations against each other)
Closing all banks for the largest part of a month sinks your economy at a faster pace than any austerity ever could. The country was on the path to recovery since last year but this summer has caused another implosion in economic activity similar to a devaluation - all without getting the eventual side benefits of an actual Grexit.
It may be Schäuble's game plan, I cannot know about it, but telling all about it to Varoufakis? That's akin to James Bond's opponents always disclosing their secret master plan just before they think they're going to kill Bond. Real world doesn't work like that.
I simply find it implausible. Why should Schäuble admit to all that openly in a discussion with him? What good would it do?
Nothing: if it ever came out (and Varoufakis has constantly been talking to the press), France will be alienated and his alleged goal will be even farther away.
It simply does not add up.
To that i am pointing out that Schäuble has in the past said and done many things that were entirely unreasonable, even if some may have been meant well.
I think Varoufakis does not oppose the integration plan. He is just against sacrificing the greeks to achieve that goal. In that context it would be plausible for Schäuble to say that. Schäuble could be trying to convince Varoufakis that it is the only/best way to break the french. Assuming the french already know this it changes nothing if anyone knows he said that. What is weird to me is that Varoufakis seems to be in the know about a lot of things and if Schäuble said that to him it means he respects him. On the other hand he has planns to spear head a revolution against the monetary powers that be. Also i think this plan b is not a surprise at all to anyone, given that Varoufakis was very open about it. People involved knew that a national currency plan b would involve a coup, and in his blog he talked about the cryptocurrency and the whole thing ages ago.
The payments would be 'IOUs' based on an experiment by California after the Lehman crisis.
Indicating that precedents set in the US are being used for entire economies - pretty interesting.