Europe Should Learn to Let Go
Elect far-left politicians to run a country and they will still plot a revolution. That, apparently, is what ministers from the Syriza bloc were doing while negotiations with creditors were taking place. Though none of the crazy things they planned came to pass, Greece's radicals may someday be tempted to carry out a Syriza-style "Plan B." Euro-zone officials need to prepare for this eventuality and work out an exit procedure -- one that might still be needed.
Panagiotis Lafazanis, who served as energy minister until Prime Minister Alexis Tsipras fired him for refusing to support the latest Greek bailout plan, revealed one such plot from July 14, during a meeting of the Left Platform, Syriza's extreme wing. His alleged idea was to end all talks with the creditors, arrest central bank governor Yannis Stournaras -- a well-known Grexit opponent -- and seize the national mint, where the country's cash reserves are kept. The money -- 22 billion euros ($24.4 billion), Lafazanis figured -- would be used to pay wages and pensions while the government printed and distributed drachmas.
The plan, of course, was ridiculous (and worthy of parodies such as this one). If the government raided the mint, the European Central Bank would probably declare the euros kept there counterfeit, and even if it somehow failed to do that, the money -- there was actually much less of it in the vaults than Lafazanis thought -- wouldn't last long enough to allow an organized reintroduction of the drachma.
Lafazanis admitted in an interview published on Sunday that he had called on the government to raid central-bank reserves in defiance of the ECB, but he denied proposing that Stournaras be arrested, calling those accusations "old-fashioned anti-Communism." He is unashamed about the mint part: That, he said, was "for the Greek economy and Greek people to survive."
Another, more sophisticated Plan B originated with the former finance minister, Yanis Varoufakis. On Sunday, the Greek newspaper Kathimerini published what it said was a transcript of Varoufakis's July 16 phone call with a former U.K. finance minister, Norman Lamont, in which Varoufakis described a scheme to use Greek's tax identification numbers to set up a parallel payment system that the government would run if banks were forced to close.
The system supposedly would have enabled people to send and receive money using their tax accounts. To develop the system, Varoufakis needed access to the tax identification numbers, but, according to the article, he couldn't get it without alerting the top tax official -- technically his subordinate, but in practice an appointee approved by the creditors. Kathimerini quoted Varoufakis saying he asked a friend at Columbia University to hack the Greek tax authority to obtain the numbers:
"So I authorized him -- and you can't tell anyone that, this is totally between us…"
Norman Lamont interrupts: "There are certainly others listening but they will not tell it to their friends."
Varoufakis (laughing): "I know. I know they are. And even if they do I will deny I said it, so we decided to hack into my ministry's own software program in order to be able break it up to just copy, just to copy the code of the tax systems website onto a large computer in his office so that he can work out how to design and implement this parallel payment system."
When the story broke, Varoufakis did issue a denial of sorts, tweeting: "So, I was going to 'hijack' Greek citizens' tax file numbers? Impressed by my defamers' imagination." Kathimerini did use the word "hijack" to describe Varoufakis's plan, but it never attributed that word to Varoufakis. The hacking episode -- which, if it took place, involved massive theft of Greeks' personal data and their transfer to a U.S. individual's computer -- wasn't mentioned in the tweet.
Apparently aware that the denial didn't quite work, Varoufakis today admitted that he tried to turn the tax agency's web interface into a payment system, while denying that it was part of any euro-exit Plan B. The system, Varoufakis's statement said, should be implemented anyway, regardless of progress in Greece's negotiations with creditors. "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 statement said. "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."
The statement, however, did not directly deny the hacking episode. Nor did it make clear why a country that has banks needs a parallel payment system.
Even if Lafazanis and Varoufakis were not planning raids and arrests or committing cybercrime against their own government, the acknowledged part of their plan was unorthodox, to put it mildly. Greeks could have woken up one morning to find they were being paid in banknotes disavowed by the ECB and forced to make payments outside the banking system -- a whole country of financial outlaws. I can see why Prime Minister Alexis Tsipras chose to make another deal with the creditors rather than go through with a half-baked Bolshevik revolution for which his government had no mandate. It's also understandable why neither Lafazanis nor Varoufakis has a government job now.
Still, keeping the euro may not be Greece's best option, and it's far from certain that the country will work out, much less execute, an effective medium-term reform program acceptable to the creditors. Greece may again find itself thinking about a euro exit, a default and a devaluation. It may happen to other countries, too. It's understandable that Europe wants to treat such situations as impossible for political reasons, but they can't be ruled out for economic ones.
The ECB and the euro-zone governments should design an orderly exit process that members could activate as a last resort -- an algorithm including the printing and distribution of a national currency, all the necessary notifications, the treatment of euro balances in the currency bloc's payment system, and perhaps financial aid to make a smooth exit possible. Yes, that amounts to creating a door that will tempt many a potential renegade, but that's better than having eager revolutionaries devise harebrained schemes. The European Union can't allow even the remote possibility of having such DIY experiments sprung on the citizens of a member country.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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