

Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges - k-mcgrady
http://www.telegraph.co.uk/finance/economics/11764018/Varoufakis-reveals-cloak-and-dagger-Plan-B-for-Greece-awaits-treason-charges.html

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JacobAldridge
Frankly, I would think it irresponsible if the Greek government did not have a
Plan B in place - be it parallel payments or a return to the Drachma. If
(when?) it becomes necessary to do so, such a plan would need to be
implemented with haste - they won't have the luxury of telling the markets
"we'll be doing this in 3 months, once we work out the details".

~~~
tptacek
Plan B in this case case seems to have been for the currently dominant
political party to seize the Greek treasury, arrest the leader of the Greek
central bank, and use their access to design by fiat, without parliament, a
whole new financial system for the country.

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.

~~~
jacobolus
Except to complete the analogy, add 5+ years of great depression with no end
in sight (huge foreign debt, GDP in the dumps, 25% unemployment, etc.), the
previous political leadership completely discredited after going back on their
campaign promises and driving the country into the ground, and undemocratic
foreign institutions dictating policy demanding we keep the country in
permanent misery.

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.

~~~
tptacek
I think there's a distinction that needs to be drawn between the need for some
drastic measure to decouple the Greek economy from it's disastrous management
by the Troika and the methods used to accomplish it.

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.

~~~
jacobolus
What’s your alternative suggestion? I haven’t seen any plausible proposal for
a way Greece could have gotten off the Euro on short notice without the ECB
throwing a tantrum and a complete meltdown as a result. _Which is probably why
they decided not to do it,_ and are now stuck in permanent miserable limbo.

~~~
tptacek
Again: the issue is not Grexit and return of the drachma. That's a realistic,
if incredibly painful, option. The issue is doing it abruptly, by fiat, at the
behest of a faction of Syriza.

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...](http://pavlos.geekhost.org/2015/07/05/what-grexit-looks-like/)

~~~
jacobolus
What makes you think they’d get any kind of cooperation or assistance from the
ECB? They’ve gotten nothing but overt hostility from the ECB for 6 months.

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.

~~~
mike_hearn
If by "overt hostility" you mean "lots of money" then sure ...

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msandford
I can't see how that's in any way treasonous. Treason is going against your
country. Investigating an alternative monetary system -- at the request of the
prime minister -- hardly seems like treason. Especially if you're the finance
minister. Keeping it a secret doesn't make it treason either.

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.

~~~
Tomte
No? Grabbing your central bank's reserves _without any involvement of
parliament_ and preparing to arrest its chief without any legal justification
sounds fine to you?

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.

~~~
tptacek
People should stop downvoting this comment. He's not making this up. Hugo
Dixon has been covering this drama, and his summary is much better than
Telegram's:

[http://hugo-dixon.com/2015/07/26/wild-plan-b/](http://hugo-
dixon.com/2015/07/26/wild-plan-b/)

This is so batshit crazy my jaw is hanging open.

~~~
nl
The scheme to arrest the Bank of Greece governor & raiding national mint was
separate to the Varoufakis' plan, and to try to combine the two is a huge
mistake. That plan was just dumb, while the Varoufakis plan was crazy and or
subtle.

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/](http://karlstrobl.com/2015/05/28/varoufakis-and-game-theory/)

~~~
rurban
I don't see that as crazy. The national bank is still led by a member of the
old cast, who is hostile to Syriza.

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.

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asgard1024
It's sad to see them (Varoufakis/Tsipras) being crucified for this.
Ironically, it was the Eurozone "leadership" that used threat of Grexit in
negotiations, by not accepting any compromise. It only shows they have the
"punish someone" mentality, at the cost of Eurozone's future.

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.

~~~
tptacek
It's not that they had a Plan B, but what that plan was. Their Plan B was
essentially a coup, instrumented through the financial system.

~~~
asgard1024
I am genuinely curious - what would be a correct Plan B? I am not sure how
could you have a Grexit without it being a coup.

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.)

~~~
Tomte
Easy: let parliament vote for Grexit.

~~~
fwn
That's not practical. The plans would've been leaked and people would've tried
to take advantage of it.

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.

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tptacek
Here's FT's (much better) reporting:

[http://www.ft.com/intl/cms/s/0/2a0a1d94-3201-11e5-8873-775ba...](http://www.ft.com/intl/cms/s/0/2a0a1d94-3201-11e5-8873-775ba7c2ea3d.html#axzz3h3txW2p8)

(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).

~~~
rurban
"Much better" is very questionable in this context. It's a aggressive right-
winger view point, which again does everything to denounce Syriza as left-wing
radicals and supporters, which is explicitly against Syriza's own point of
view. Which is a center-left EU-friendly party, holding up to Keynesian
principles.

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?

~~~
Zigurd
Indeed one thing I find shocking is the assumption, even among very smart
people, that Syriza is too far left. Too left for what? They are reacting as
if it were a Soviet-aligned Communist party with a plan to cancel elections.

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.

~~~
tptacek
Well, part of their plan was to raise 10-20bn from Russia to prop up their
economy, and the whole plan was extralegal, so I'm not sure that's too far off
the mark.

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nl
I wish there was a really good source for analysis on the Greek situation that
ignored value judgements of what "should" happen.

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)

[1] [http://genius.com/3889915](http://genius.com/3889915)

~~~
MagnumOpus
If this summer's negotiations were a deliberate chess move, they are akin to
manoeuvring yourself into a Fool's Mate.

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.

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BenjiBG
This is how absolutistic ruling starts. Most often from crisis and always with
the excuse to do good for the country. I agree to some comments here that they
needed a plan B, but you can't overstep your even as prime minister or finance
minister given authority. Kim Jong-un states that he's just protecting his
people from the evil rest of the world.

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templl
The people orchestraiting the integration of the eurozone want a greek crisis.
They need the greek crisis in order to gain political support for the next
phase which is fiscal integration. They will generate fear and disorder and
then the people would be willing to agree upon the fiscal integration of
europe. Varoufakis knows this very well, to quote from the article: "And he
(German finance minister Wolfgang Schauble) 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." Varoufakis

~~~
Tomte
_If_ you believe Varoufakis.

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.

~~~
Mithaldu
You're making the assumption that Schäuble is a reasonable man, which he's
proven amply not to be.

~~~
Tomte
Character assassination won't make you look any better.

~~~
Mithaldu
Your point is: The things Varoufakis claims Schäuble said and did would not
have been said or done by a reasonable person.

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.

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sgdesign
A currency-independent parallel banking system that uses smartphone apps
sounds like a very cool thing, actually. It almost makes me wish that we had a
chance to see it implemented.

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AndrewKemendo
I think the most interesting part was this:

 _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.

~~~
Lazare
Keep in mind, Greece is a lot smaller than California. :)

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throwitup
V for Varoufakis

[https://www.youtube.com/watch?v=Afl9WFGJE0M](https://www.youtube.com/watch?v=Afl9WFGJE0M)

