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Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

telegraph.co.uk

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Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#21

Post by nl »

BenjiBG wrote: post #11
JacobAldridge wrote: post #2

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".

I agree that they wouldn't have the time to tell the markets or other countries. But Tsipras and Varoufakis didn't even tell the Greek Government. And hacking a bank is still illegal.

It's not "a" bank, it was the (government controlled) Bank of Greece. Varoufakis - as finance minster - had responsibility for that, which arguably makes what he ordered not actually illegal (because the records would have been transferred between two areas under his control within the government).

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#22

Post by 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.

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#23

Post by Lazare »

AndrewKemendo wrote: post #22

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.

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

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#24

Post by tptacek »

jacobolus wrote: post #20
tptacek wrote: post #14

Earlier quoted context omitted.

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 Ja…

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 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.

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#25

Post by jacobolus »

tptacek wrote: post #24
jacobolus wrote: post #20

Earlier quoted context omitted.

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 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 not…

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.

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#26

Post by tptacek »

jacobolus wrote: post #25
tptacek wrote: post #24

Earlier quoted context omitted.

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 not…

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.

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...

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#27

Post by jacobolus »

tptacek wrote: post #26
jacobolus wrote: post #25

Earlier quoted context omitted.

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.

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 sof…

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.

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#28

Post by Tomte »

nl wrote: post #21
BenjiBG wrote: post #11

Earlier quoted context omitted.

I agree that they wouldn't have the time to tell the markets or other countries. But Tsipras and Varoufakis didn't even tell the Greek Government. And hacking a bank is still illegal.

It's not "a" bank, it was the (government controlled) Bank of Greece. Varoufakis - as finance minster - had responsibility for that, which arguably makes what he ordered not actually illegal (because the records would have been transferred between two areas under his control within the government).

As all central banks in the Eurozone, the Bank of Greece is not government-controlled, but independant.

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#29

Post by asgard1024 »

tptacek wrote: post #17
asgard1024 wrote: post #16

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.

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.

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.)

Re: Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

#30

Post by nl »

Tomte wrote: post #28
nl wrote: post #21

Earlier quoted context omitted.

It's not "a" bank, it was the (government controlled) Bank of Greece. Varoufakis - as finance minster - had responsibility for that, which arguably makes what he ordered not actually illegal (because the records would have been transferred between two areas under his control within the government).

As all central banks in the Eurozone, the Bank of Greece is not government-controlled, but independant.

That simplifies the actual situation.

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%)

[1] https://en.wikipedia.org/wiki/Bank_of_Greece

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