Via the Telegraph UK: ‘Former Greek finance minister Yanis Varoufakis claims he was authorised by Alexis Tsipras to look into a parallel payment system’ by Ambrose Evans-Pritchard
(I’m going to reproduce the entire article in case you’ve already used up your six free articles and have hit the paywall; h/t juliania for the graphic.)
“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.
“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.
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.
“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.”
Via Naked Capitalism: ‘Comparison of Greek and English Version of Kathimerini Scoop on Varoufakis Parallel Currency Plan’, Lambert Strether
It includes this translation of a bit of the recording by NC contributor Andrew Dittmer by email:
“Starting last December, the former Finance Minister Yanis Varoufakis, with the authorization of Alexis Tsipras, had undertaken to work out a detailed Plan B; Varoufakis aimed to create a parallel banking system “that would be, yes, denominated in Euros, but that could be converted into a new drachma in a
single night.” An extremely interesting conversation [of Varoufakis] with investors and managers of international hedge funds took place on July 16, coordinated by Baron Norman Lamont, a well-known British Conservative politician and former Finance Minister under Prime Minister John Major, within the framework of an international forum on analyses [i.e. on global economic prospects?]. At the beginning of the discussion, Mr. Varoufakis was clearly informed that “this conversation is being recorded.” Despite this fact, the former Finance Minister describes in great detail his alternative plan [i.e. his plan B], which entailed having tax registration numbers (AFMs) be intercepted [i.e. hacked] by a childhood friend of his, whom [Varoufakis] had appointed into the ministry in order to get around Mr. Sabbaïdou, as well as an electronic attack (hacking) directed at the web page of the General Secretariat of Public Revenues. When after a plea [on his part for discretion] the participants assure him that nothing he has shared in the discussion will leak out, he responds, laughing, “And if something did, I would say it wasn’t true,
I would deny it.”
‘Trusting a bunch of hedge fund guys to keep his deep dark secrets, on which the fate of Greece may depend…, he’d added. Indeed.
Yikes, fallout: ‘Greece rocked by reports of secret plan to raid banks for drachma return; Opposition demands answers after covert proposals attributed to Yanis Varoufakis and fellow ex-minister highlight deep split in Syriza party’, the Guardian
From greekreporter.com: ‘Varoufakis Admits Plan B Involving Hacking’ Five short paragraphs, and zero comments?
Also from greekreporter.com: ‘Moody’s: Uninsured Depositors Compromised by Greece’s New Legislation’
“Ratings agency Moody’s said on Monday that uninsured depositors in Greek banks are in danger of losing some of their money in case of a bank’s insolvency.
Moody’s noted that the changes in the EU Bank Recovery and Resolution Directive, which was legislated in Greek Parliament last week, established new guidelines for the cases of bank insolvency. One of these is a haircut option for uninsured deposits exceeding 100,000 euros.
The ratings agency warned that uninsured depositors and bondholders are compromised by the new law as it limits the use of state funds to save banks as well as by distributing the cost of insolvency to all types of uninsured deposits, including bondholders.
Under the new legislation, the government has a number of options when it comes to lending institutions that become insolvent. It could decide that the bank must be sold, a bridge institution could be created and assets could be disjointed based on whether they are good or bad.
After January 1, 2016, the Greek government can also choose to bail-in deposits of more than 100,000 euros.
Moody’s also noted that non-performing loans will account for 40% of total loans in 2015-2016. Non-performing loans accounted for 35% by the end of 2014. This increase will further compromise the capital sufficiency of Greek banks, which scored a 12.8% ratio of common equity in Tier 1 capital ratio.”
Not.good.news. for savers, if it’s so. There have been conflicting opinions as to whether or not even the insured deposits have the capital to back-stop them at this point.
From TRNN: ‘If Syriza Ruptures, Will Greece’s Left Unite to Oppose Austerity? Dr. Panagiotis Sotiris, Member of Antarsya, talks to Dimitri Lascaris about Syriza’s failure to implement its anti-austerity program and the political options that are now available to the left in Greece’ – July 27, 2015
added: (the transcript is up now.)
