Monday, July 27, 2015

More Varoufakis: "Plan B"

Former Greek Finance Minister Yanis Varoufakis is still causing consternation in the eurozone a Member of the Greek Parliament.

There was some melodramatic rending of garments and gnashing of teeth over a recording of Varoufakis on July 16 (Peter Spiegel, Varoufakis unplugged: the London call transcript FT Brussels Blog 07/27/2015; emphasis in FT transcript):

That would have created a parallel banking system while the banks were shut as a result of the ECB’s aggressive action, to give us some breathing space. This was very well developed and I think it would have made a very big difference, because very soon we could have extended it using apps on smart phones. It would become a functioning and functional parallel system. Then of course this would be euro denominated, but at a drop of a hat, it could be converted to a new drachma.

Now let me tell you, and I thank this is a quite fascinating story, what difficulties I faced. The general secretariat of public revenues, within my ministry, is controlled fully and directly by the troika. It was not under control of my ministry, of [unclear] ministry, it was controlled by Brussels. The general secretary is appointed, effectively, through a process that troika-controlled and the whole mechanism within. It’s like Inland Revenue in the United Kingdom being controlled by Brussels. I am sure as you’re hearing these words, your hair is standing up. Ok. So problem number one.

The general secretariat of information systems, on the other hand, was controlled by me as minister. I appointed a good friend of mine, a childhood friend of mine, who had become a professor of IT at Columbia University in the States, and so on, I put him there because I trusted him to develop the system. At some point, a week or so after we moved into the ministry, he calls me up and says to me: “You know what, I control the machines, I control the hardware. I don’t control the software.” The software belongs to the troika-controlled general secretariat for public revenues.

What do we do? So we had a meeting, just the two of us, nobody else knew. He said: “Listen, if I ask for permission from them to start implementing this programme then the troika will immediately know we are designing a parallel system.” Well, I said, “That won’t do, we don’t want to reveal our hand at this stage.” So I authorised him, and you can’t tell anyone that, this is totally between us, to hack ...
Despite the fainting-couch routine from Varoufakis' critics, this is pretty straightforward. (Peter Spiegel and Kerin Hope, Yanis Varoufakis defends ‘Plan B’ tax hack Financial Times 07/27/2015) There is no reason I can see to think the hack was actually done, since Prime Minister Alexis Tsipras didn't give Varoufakis the go-ahead for the additional preparations for a new national currency that would have required the hack:

So, we decided to hack into my minister’s own software programme in order to be able to bring it all, to just copy, just copy the codes of the tax systems’ website onto a large computer in his office, so he can work out how to design and implement this parallel payment system. We were ready to get the green light from the prime minister when the banks closed in order to move into the general secretariat of public revenues, which was not controlled by us but is controlled by Brussels, and to plug this laptop in and to energise the system.

I’m trying to convey to you the kind of institutional problems that we had, and institutional impediments to carrying out an independent policy for ameliorating the affects of having our banks being closed down by the ECB. [emphasis in FT transcript]
And even if they had done the hack, if it was a necessary move to set up a new currency in the face of ECB strangling their national financial system to force them into compliance with Angela Merkel's draconian austerity program, what's the problem?

And from what Varoufakis says, maybe François Hollande has been putting up more resistance to Merkel behind the scenes than I was aware of:

The French are terrified. They’re terrified because they know if they’re going to shrink their budget deficit to the levels that Berlin demands the Parisian government will certainly fall. There is no way that they can politically handle the kinds of austerity which is demanded of them by Berlin. And when I say by Berlin, I mean by Berlin, I don’t mean Brussels. I mean Berlin.

So they are trying to buy time. This is what they’ve been doing now, as you know, for a couple of years. They’ve been trying to buy time in terms of an extension of the time period during which they will have to reduce their deficit to below 3.5 per cent, 3 per cent, the Maastricht criteria in the Stability and Growth Pact.

At the very same time, Wolfgang Schäuble has a plan .... This is one of the very sweet moments in one’s life when one does not have to theorise, because all I did was to convey the plan as Dr Schäuble described it to me. The way he described it to me is very simple. He believes the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes 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 disciplinarian way. He said explicitly to me that a Grexit, a Greek exit, is going to equip him with sufficient bargaining power, with sufficient terrorising power in order to impose upon the French that which Paris is resisting. What is that? A degree of transfer of budget-making powers from Paris to Brussels. [emphasis in FT transcript]
Varoufakis' parliamentary office put out this statement, which he put on his blog (07/27/2015):

During the Greek government’s negotiations with the Eurogroup, Minister Varoufakis oversaw a Working Group with a remit to prepare contingency plans against the creditors’ efforts to undermine the Greek government and in view of forces at work within the Eurozone to have Greece expelled from the euro. The Working Group was convened by the Minister, at the behest of the Prime Minister, and was coordinated by Professor James K. Galbraith. (Click here for a statement on the matter by Professor Galbraith).

It is worth noting that, prior to Mr Varoufakis’ comfirmation of the existence of the said Working Group, the Minister was criticized widely for having neglected to make such contingency plans. The Bank of Greece, the ECB, treasuries of EU member-states, banks, international organisations etc. had all drawn up such plans since 2012. Greece’s Ministry of Finance would have been remiss had it made no attempt to draw up contingency plans.

Ever since Mr Varoufakis announced the existence of the Working Group, the media have indulged in far-fetched articles that damage the quality of public debate. The Ministry of Finance’s Working Group worked exclusively within the framework of government policy and its recommendations were always aimed at serving the public interest, at respecting the laws of the land, and at keeping the country in the Eurozone.

Regarding the recent article by “Kathimerini” newspaper entitled “Plan B involving highjacking and hacking”, Kathimerini’s failure to contact Mr Varoufakis for comment and its reporter’s erroneous references to “highjacking tax file numbers of all taxpayers” sowed confusion and contributed to the media-induced disinformation. The article refers to the Ministry’s project as described by Minister Varoufakis in his 6th July farewell speech during the handover ceremony in the Ministry of Finance. In that speech Mr Varoufakis clearly stated: “The General Secretariat of Information Systems had begun investigating means by which Taxisnet (Nb. the Ministry’s Tax Web Interface) could become something more than it currently is, to become a payments system for third parties, a system that improves efficiency and minimises the arrears of the state to citizens and vice versa.” That project was not part of the Working Group’s remit, was presented in full by Minister Varoufakis to Cabinet, and should, in Minister Varoufakis’ view, be implemented independently of the negotiations with Greece’s creditors, as it will contribute considerable efficiency gains in transactions between the state and taxpayers as well as between taxpayers.

In conclusion, during the five months of negotiations that gripped Europe and changed the debate throughout the Continent, the Ministry of Finance did everything possible to serve the public interest against many odds. The current media campaign to besmirch these efforts will fail to dent the legacy of a crucial five month struggle for democracy and common sense. [emphasis in original]
The Jamie Galbraith statement to which he links is also at Varoufakis' blog (07/27/2015):

I spent five months from early February through early July in close association with the Greek Finance Minister, Yanis Varoufakis, and was part of the Working Group that did contingency planning for potential attempts to asphyxiate the Greek government, including aggressive moves to force the country out of the euro. Since a great deal of public confusion has now arisen over this effort, the following should be stated:(1) At no time was the Working Group engaged in advocating exit or any policy choice. The job was strictly to study the operational issues that would arise if Greece were forced to issue scrip or if it were forced out of the euro.

(2) The group operated under the axiom that the government was fully committed to negotiating within the euro, and took extreme precautions not to jeopardize that commitment by allowing any hint of our work to reach the outside world. There were no leaks whatever, until the existence of the group was disclosed by the former Finance Minister himself, in response to criticism that his ministry had made no contingency plans when it was known that forces within the Eurozone were planning the forced exit of Greece.

(3) The existence of preliminary plans could not play any role in the Greek negotiating position, since their circulation (before there was a need to implement them) would have destabilized government policy.

(4) Apart from one late, inconclusive telephone conversation between MP Costas Lapavitsas and myself, we had no coordination with the Left Platform and our Working Group’s ideas had little in common with theirs.

(5) Our work ended for practical purposes in early May, with a long memorandum outlining major issues and scenaria that we studied.

(6) My work in this area was unpaid and unofficial, based on my friendship with Yanis Varoufakis and on my respect for the cause of the Greek people. [my emphasis]

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