Earlier this morning, Yanis Varoufakis, the Greek Finance Minister gave a 28-minute long phone interview to the mainstream Greek radio station, REAL FM. The person conducting the interview is no other than Nikos Hatzinikolaou, a prominent journalist who is the face of the station [he also owns it], and has turned into sort-of-a media mogul during the years of the crisis. The interview is extremely juicy, for many reasons. First and foremost, it gives a good indication of the rhetoric employed by the Greek government at this moment, domestically. As you will see, the rhetoric (even) of Varoufakis – who is supposedly a moderate within the party – is a tad bit more heightened than in his appearances on international media. Secondly, it gives a very clear idea of what the Greek government intends to do (and what it intends not to do) in the short-term (i.e. the four-month extension period of the loan agreement), as well as the medium- to long-term (i.e. what happens after June).
I will resist my temptation to comment on this amazing piece of rhetorical eloquence by Yanis. Instead, I will highlight in red those parts of the interview that I feel are the most important and actually give a good idea to foreign readers about (a) how exactly the Greek government sees this four-month extension, (b) how it interprets the role of the TIFKAT (The Institutions Formerly Known As Troika), (c) how it perceives the way in which it negotiated, (d) what it asserts it has achieved through the Eurogroup negotiations, and (e) how (and if!) it intends to fulfill its obligations vis-a-vis TIFKAT.
The audio file of the interview can be found here (in Greek). You can find my translation of the interview below.
Hatzinikolaou: What is your plan, Mr. Minister? After the 4-month period, what is to come? Where are we going? I am asking you because, yesterday, the opposition accused you of not taking a credit line with the goal of exiting the Memorandum of Understanding (MoU), but that you are leading the country to a third Memorandum.
Varoufakis: Mr. Hatzinikolaou, we all know very well that the reason why New Democracy (ND) is not the government right now is because it made a major mistake before 8, 9 or 10 months. When it announced the exit from the MoU, on the basis of a groundless conviction that in 2015 Greece would be able to get 10-11bn euros from the markets, while at the same time having succeeded in creating a real recovery.
If this could have happened, the plan of ND could have been accomplished. The Greek people, with its wisdom, decided that this “success story” (as it was called, if you remember) had failed from the moment it was effectively announced. The Greek economy continues to be shrinking – as it was in the end of 2014, regardless of what the previous government used to think. Our nominal GDP was decreasing, and there was absolutely no possibility for achieving this “success story.”
The current government wants to say things with their name. I will explain it to you in very simple terms, Mr. Hatzinikolaou. As long as our debt is what it is, as long as Greece was bounded within this iron cage of primary surpluses that were impossible to achieve without killing whatever is left in the private sector, and as long we have a negative sign in investments (essentially, real investments), it was impossible to achieve this exit.
What we are trying to do – and have succeeded in doing so; it was a huge success, I’d say – is to create a four-month bridge during which we achieve the following:
First, the cancelation of the recessional measures and the implementation of a transitional program we ourselves have made, one the Greek society will be able to withstand. This will help us negotiate during this four-month period a new contract between us and our partners with the goal of solving this system of three equations with three unknowns.
Hatzinikolaou: Thus, we are talking about a new Memorandum? When you are talking about a new contract with our partners, this means a new Memorandum.
Varoufakis: Mr. Hatzinikolaou, the good news…
Hatzinikolaou: We are afraid of the words, but the essence is exactly that.
Varoufakis: OK. Let us be careful with the words. What does the Memorandum mean? Let me tell you what it means for me.
Hatzinikolaou: “Memorandum of Understanding” [In English, laughing].
Varoufakis: And what was this “Memorandum of Understanding”? Let me remind you of what it comprises. It comprises of the logic of the continuous domestic [or internal] devaluation, of the huge primary surpluses in an economy that does not have a real credit system, where investments are negative, and at the same time where we have a series of measures that empower this recession.
This is the MoU. It is the automation, the a-politicization, and the subjection to the crisis.
Hatzinikolaou: Mr. Minister, there was this e-mail that you sent yesterday to the ‘institutions’ …and, I would also like you to explain the difference between the ‘institutions’ and what was formerly the TROIKA, because we see the same people to be representing the new setup, so I assume that there must be a qualitative difference in the way we communicate with them. Would you actually want to begin answering that, and I’ll ask you later about the e-mail.
Varoufakis: I will tell you both about the e-mail and the TROIKA.
Hatzinikolaou: My fundamental question about the e-mail is whether or not it entails layoffs in the public sector (which the e-mail sent by former Minister of Finance Hardouvelis did include), if it entails pension reductions (again, the e-mail of Hardouvelis did contain cuts in supplementary pensions), if it entails wage reductions.
Varoufakis: I will answer to all these questions, since these are very specific questions, and it is best that we speak forthrightly. My answer to all of these questions is NO, in NO WAY.
This is the big difference. Hardouvelis’s e-mail contained all of the things you just mentioned. Even an increase in the VAT tax in the Greek islands. The cancelation of the recessionary measures is something we achieved these days after, essentially, vetoing them in two Eurogroups. In the third Eurogroup, there was an agreement, or if you want a Moratorium.
Their side will not impose those measures. Hardouvelis’s e-mail is repealed. And this is the great success.
Hatzinikolaou: What are you going to do with the VAT tax?
Varoufakis: The VAT tax is not going to be increased in the Greek islands. This is very clear. These four months are four months during which we have agreed upon a Moratorium.
Hatzinikolaou: Will there be an increase in any other kind of VAT tax? As a weighted average, will the VAT tax be increased in the country?
Varoufakis: Look. We have to look into it, and I will tell you. Some small change in one of the determinants of the VAT tax – which will neither involve the borderland, nor books, the press, and of course, the islands of the Aegean – might be decided upon. We do not commit to anything.
Hatzinikolaou: What about the ENFIA tax [the new single property tax]?
Varoufakis: Please allow me not to get into very specific measures.
Hatzinikolaou: No, I am asking you only about the ENFIA tax, because the cancelation of ENFIA and its substitution with a tax on large property is a pre-electoral pledge of the new government.
Varoufakis: There is not a chance that ENFIA will not be changed. ENFIA is an outrageous tax.
Hatzinikolaou: Will ENFIA change this year, or starting next year?
Varoufakis: Starting 2015. Now, if this will happen during the 1st quarter of the year, this is something that I do not know yet.
But let me answer to your questions. Hardouvelis’s e-mail was a recital of submitting to recessionary measures. These recessionary measures are abolished within the next four months.
We have also committed towards our partners that we will not take any unilateral actions that might have as a result the encumbrance of the budget, the financial instability, or any kind of negative results in the possibilities of an economic recovery.
Now let me answer you about the issue of the TROIKA.
Hatzinikolaou: Yes, this is very important. Tell me Mr. Minister, do we only have a new ‘naming’? The opposition is saying that we simply have a new name. We have re-named TROIKA as the ‘institutions,’ but they remain the same.
Varoufakis: In absolutely no case. Look, we have to make a very crucial distinction. There is the ECB, there is the European Commission, and there is the IMF. Greece is a member of all those institutions. In the IMF, actually, we have the privilege of being members since 1944 and the Bretton-Woods time.
Obviously, since we owe to all three of these institutions, our relationship with them will continue – but not only because we owe them, but also because we are members of these institutions. The ECB is our central bank. The EC is the government of Europe, in quotation marks. Obviously, we will continue our cooperation with them.
What I call the TROIKA – and I think the entirety of the Greek people with me – is not these institutions. What we call TROIKA is the staff of the big technocrat employees, who like a team – or, like a gang in the eyes of the Greek people, if you want – were coming to Athens, were going in the Ministries, and essentially imposed a recessionary program that was catastrophic for the Greek economy, the middle class, the economic recovery, and even the possibility of repaying the debt to our partners. This is no more.
For a team of those technocrats to be coming – while they do not even have the authorization to discuss with us the essence of the program that was imposed on us – this is all finished. What we have achieved, Mr. Hatzinikolaou, with our very vigorous stance in the past few weeks is the following.
There is today a schism in what was previously the TROIKA. There is the Commission – and this is my take on the matter – that has decided that it will play the role of the monitoring of the Greek crisis.
Hatzinikolaou: So, you are telling me that the government will be talking institutionally with these bodies, and these three institutions will be talking with our own corresponding technical groups? Employees will be talking with employees, and politicians with politicians? Is this the meaning [behind the change]?
Varoufakis: And even besides that, something more important. We will be talking with the European Commission. The EC can coordinate with the ECB if it wants, and with the IMF.
Hatzinikolaou: You know why I am asking? Because the people see you speaking with the exact same people. We have seen the exact same institutions in your negotiations as well.
Varoufakis: You are totally right. But do not forget that in a negotiation about how to change the TROIKA, one must also talk with the TROIKA itself. This was the last time that such a discussion will happen with all three of us together. But it was necessary.
You know, Mr. Hatzinikolaou, I have mentioned it in the Hellenic Parliament and in many interviews: the decision of the government was not the rupture. The decision of the government was the negotiation, so as to come to a new agreement and to the beginning of a new procedure.
From now on, there is no TROIKA. There is no Memorandum as it is with the specific MoU and the e-mail of Mr. Hardouvelis, if you want, which has entered the dustbin of history. The recessionary measures have been canceled, and now…
Hatzinikolaou: When are we going back to the markets? This is the question…
Varoufakis: I will refer you to the previous discussion we just had. We will get back to the markets when Greece will have solved the system of three equations with three unknowns, which are: investments, primary surplus, and debt restructuring.
Hatzinikolaou: So this is when the Memorandum is over, when you will have succeeded in those three things?
Varoufakis: No, no! The Memorandum is finished, Mr. Hatzinikolaou!
Hatzinikolaou: You know what I mean: this is when we will stop having this harsh monitoring that we now have.
Varoufakis: Look, you are right on that. But the Memorandum is finished! Because you know what the Memorandum is? It is a series of conditionalities and criteria that needed to be fulfilled. These criteria are now over!
Hatzinikolaou: Mr. Minister, do you know what the three things upon which you will be judged are? And upon which there is great concern by the citizens? It is the debt, where the word “cut-off” has been “cut-off” by the political vocabulary of SYRIZA in the past 2 weeks; it is the Thessaloniki Program, where there is great concern on whether you will be able to implement it (for instance, in terms of some of the measures that interested a lot the citizens, we now hear that they will now be pushed on a 4-year timeframe, i.e. minimum wage will enter a 4-year timeframe); and it is the primary surpluses, which if they remain at 3% or 4.5%, even the herrings will cry for us, since not even 1 euro will remain for social policy. I think that these are the three important things.
Varoufakis: Ok let me reply to all of them. Let me take them in order. And then let me add another criterion upon which I think the Greek people will judge us.
In terms of the primary surpluses, I think that we have already achieved our goal. We have already agreed, clearly, that…
Hatzinikolaou: For this year, only, though…
Varoufakis: No! It’s not like that! Ok, first and foremost, the agreement we made is simply for the next four months. Within this framework of the agreement, a primary surplus at 3% that would have been catastrophic and murderous for the Greek economy, is out of the picture. We now talk about a primary surplus that is in line with the current economic circumstances, something that will be decided by us, together with our partners, but primarily by us. This is a great conquest.
In terms of the next years, we have a commitment that in the next few years… This cooperation with the IMF – you know, the IMF has a very progressive stance on the matter – our primary surplus cannot be above 1.5%. And in the meantime, in order to ensure that the percentage of the debt in terms of the percentage of the GDP in 2020 will be at 120%, the discussion over debt restructuring will have to begin very swiftly.
You know, they have asked me to stop talking about cancelation of the debt, but talk instead of its restructuring. You, too, have said that we should not be playing with words. The restructuring of the debt is exactly that – a debt reduction.
Now, in terms of the Thessaloniki program…
Hatzinikolaou: Of course, when the previous government was talking about the prolongation, the decrease of the interest rates, you were saying that these things were palliatives [or half measures?].
Varoufakis: Of course, and we were right. I am not talking about prolongation. I am talking about SWAPS of the debt that will effectively decrease it to a very big extent.
Hatzinikolaou: Does the other side [i.e. your partners] agree upon this procedure?
Varoufakis: Look, what we have achieved here, and you will understand its importance, is that there is no longer ‘one side’ in this issue – there are many sides. The fact that we no longer have this unified group against Greece, where the discussion about the debt was prohibited, and we now have a side that has broken down in many different sides – some of which are very open to our proposals – this by itself is a great success.
Our goal for the next four months is the negotiation. When the group that is confronting you is no longer unified, there are higher chances that the [type of] negotiation you want to do will eventually succeed.
Now, about the Thessaloniki program…
Hatzinikolaou: Thessaloniki, this is crucial… And I also have many messages coming in about the auctioning of first homes.
Varoufakis: Look, in terms of that, we have already declared to our partners and the ‘institutions’ that there is no chance that such house auctions will happen within the next four months. After June, all are open in the framework of the negotiations.
But our coalition government will not let the families that are currently suffering in the hotpot of the crisis to be thrown to the streets. This is one of our commitments, and if you see the way in which we wrote that document that was sent [to the ‘institutions’] it speaks clearly of avoiding such auctions.
We would much have liked to put the word ‘Moratorium’ in it, but you know, ‘creative ambiguity’ in such documents is very important and helps our goal.
But let’s go to the topic of the ‘Thessaloniki program.’ And let me add another issue that I believe is a criterion upon which we will be judged.
First and foremost, the ‘Thessaloniki program’ is really a four-year program. What we have achieved now is four months of stability – as you see, the banking sector has already begun stabilizing –, four months of negotiations, and four months during which we will legislate based on the echelons of the ‘Thessaloniki program,’ but in a reasonable way. Not even you, I hope, would want to follow a path of confrontation with our partners just for the sake of confronting them.
Now, as it pertains to the completion of the ‘Thessaloniki program’ echelon that has to do with the restarting of the economy, Mr. Hatzinikolaou, I will be very clear with you: we have achieved the cancelation of the recessionary measures of the Hardouvelis’s e-mail, but we have not yet achieved the guarantee of the resources for funding the growth-related measures. This is the part on which we begin working starting today, both domestically, and in the framework of negotiations [with our international partners].
The ‘Thessaloniki program’ is an actual commitment in a four-year horizon.
Hatzinikolaou: What about the [payments with] 100 installments, that Mrs. Valavani had announced last week? Will they happen, or not?
Varoufakis: The 100 installments will happen, but please allow me to say that we have not yet had the time to discuss this further – as you understand, with this ongoing negotiation we are always running these days. But, now we have the opportunity to dive deeper into this.
There are some very interesting ideas from organizations such as the OECD –which as you know is our partner now, and an essential succor in our reforming attempt – in ways that this draft bill can become even smarter. Our announcements will follow in the next 1-2 weeks regarding this issue.
But allow me to add another thing, for which I personally am in agony, and I think that all of us do. In the text that we send to the Commission, we refer specifically in the way that we intend to hit on corruption and legislate – but not only legislate, but also avoid – tax evasion and tax avoidance. I think that this is where we are going to be judged very heavily in the next few months.
Our biggest bet… I don’t know if you have noticed, but I refuse to give [specific] quantitative goals, because as I mentioned in an interview yesterday, hitting hard on tax evasion and tax avoidance is more like an archaeological venture.
Hatzinikolaou: It is an issue on which we have heard many times promises by former Greek governments…
Varoufakis: Exactly. This is how it went: in the past 50 years, when there was a hole in the budget governments said: “we are going to close it by hitting on tax evasion.” We won’t do that. But, it is one of our commitments – a commitment both to us, and to the Greek people – that the unjust system of taxation [is ended]…
Hatzinikolaou: As long as this does not lead to a situation where those that have always been paying and are consistent, are led to pay again. This is what happens most of the time.
Varoufakis: Exactly. This is our bet. And this is something that you did not include in the list, but I do now. I think that the Greek people will fundamentally judge us based on this – for those that are always paying not having to pay again, and for those that have never paid, and ostentatiously show their wealth without contributing towards the public goods of this country, to finally do so.
Hatzinikolaou: Will the 4-month extension be ratified in the parliament?
Varoufakis: You know, I am not a legal scholar. Not long ago, I was sitting next to the President of the Hellenic Parliament [Zoe Konstantopoulou]. I will ask her, and get back to you. I am sure that this is a process that is foreseen, but I do not know.
Hatzinikolaou: I am asking you because today I read in some newspapers certain scenarios that involve a legislative decree, which if it is to happen would not be good, since you have criticized heavily the former government for similar practices.
Varoufakis: You mean an act of legislative decree? No, away from us such things!!!
Hatzinikolaou: I certainly hope so. What about the privatizations, do all of them proceed as I understand? Those privatizations that have been initiated by the former government, do these continue?
Varoufakis: Look, what we have announced – if you read carefully our text, you will see a creative ambiguity in it – those that have been ‘completed-completed’ are obviously completed. It is the law of the state. There is a continuity in state affairs. Nobody expected, and we certainly did not intend, to offend a process that has already been completed.
In terms of those privatizations that are ongoing, as we said – did you read what we said? – the law will be implemented. The law gives the ability to the Greek government both to change the terms of the process, but also to check on the legality of such process.
But, in order to avoid speaking with riddles, our position is very simple: the sellout of the family silverware [i.e. Greek state assets] in humiliating prices, and in a way that does not provide growth-momentum for the economy, needs to stop.
Our goal is to bring in private capital. Our goal is the real collaboration between the private and the public sector. Our goal is the large concessions, which will bring in capital – and this is the growth-related dimension – but while the Greek state safeguards its interests. The Greek public sector must be involved in such efforts, and be involved with shares given to it, if you want. Perhaps with minority shareholding rights, so an inflow of revenues can be ensured in the following years.
Our goal is for the public property to be developed, and to essentially be promoted and be used as collateral in a new attempt to create a growth-bank, such as ESPA, so as to ensure that there will be an inflow of revenues in the next few years. Because, Mr. Hatzinikolaou, how else will we finance, in the medium and long term, the pension funds that have been so heavily damaged by the PSI and the crisis?
These are our goals in terms of the privatizations.
Hatzinikolaou: Now, in order to close, and leave something for our [upcoming] interview next Monday, many friends ask me what will happen with the 12,000euros tax-free mark, and since when will it begin to be enacted. Beginning next year? Will it be applicable for incomes in 2015, or not?
Varoufakis: What is unacceptable is that this tax exemption is not happening right now. The tax exemption will gradually begin to be implemented. When exactly will that happen, please allow us to decide when we have a holistic view of how the negotiation will continue after June…
Hatzinikolaou: The line was cut, and we couldn’t hear your answer about the 12,000euros. Did you say that you will decide upon this after the negotiation is finished in June?
Varoufakis: No. Let me repeat. The rhythm in which we will begin to approach the tax-exemption of [those that make less than] 12,000euros – something that will happen during 2015 – will be decided in combination with our total scheduling of the budgetary issues, the everyday fiscal situation, and the framework of the negotiation that will decide on the plan of the budgetary policy and the general pro-growth policy after June.
Hatzinikolaou: As I understand it, it goes back in time; since the initial pledge of SYRIZA was that the 2015 incomes would have the tax-free of the 12,000euros.
Varoufakis: The Minister of Finance is a member of the government, but he is not a member of SYRIZA [speaking of himself].
Hatzinikolaou: This, of course, doesn’t mean that you are not bounded by the pre-electoral pledges given by the party.
Varoufakis: These pledges were four-year pledges. And do not forget that we have a situation in Greece, right now, where for the first time in the history of Europe the government was elected, and the next day after the election we experienced an asphyxiating attack towards us – an attack that was pre-decided.
Hatzinikolaou: Is the scenario of ‘sudden death’ that I heard from the Irish Minister, true?
Varoufakis: I will not use such heavy phrases, but…
Hatzinikolaou: It was mentioned by the Irish Minister of Finance.
Varoufakis: No. What I can tell you is that my sources, and the high-end sources of the Commission…
Hatzinikolaou: Something is wrong with your microphone…
Varoufakis: I don’t think so. I do not want to use heavy phrases. Now we are moving forward, but since you refer to this fact or scenario, my sources from the Commission (very high-end sources) tell me that the Commission wanted for our new government to be given a timeframe of at least 6-months, in order to walk in its own legs and begin negotiations with them.
It was the former government that insisted – and quite intensely for that matter – for the two-month extension, so that right when we got elected, and having already begun the de-stabilization of the banking system by creating a climate of insecurity to depositors, to find our government with its back on the wall by the first day. And this is something that did happen, Mr. Hatzinikolaou. The fact that we managed to surpass it today, and at the same time managed to cancel Hardouvelis’s e-mail, is a very big success. Of course, it doesn’t mean anything. It simply means that we can now sit down and work.
Hatzinikolaou: In your e-mail, however, I cannot see how the financial vacuum of this four-month period will be covered.
Varoufakis: You don’t see it, because it doesn’t exist. The goal of this reformist program is very simple: it was for the extension of the loan agreement to pass by the parliaments without the Memorandum. Because this was the necessary condition in order to move in the next step, which is the financial gap, and the one after, which is the negotiation for the growth of Greece. This is how we move, Mr. Hatzinikolaou, step by step. The first step has been successfully completed. We now move to the second and third one.
Hatzinikolaou: Final question for today. How did you interpret the reaction of Manolis Glezos? Does it concern you? Manolis Glezos has apologized to the voters of SYRIZA, because he too helped create the illusion that something will change after the elections.
Varoufakis: You know very well, Mr. Hatzinikolaou, the love and respect that we all have in the Left, but also generally, for Manolis Glezos. I am completely certain that if we were given the chance to talk with Manolis Glezos over a coffee and explain to him what we have achieved, and given that he was not isolated in Brussels, he would not have made this announcement.
I also believe that when we are finally given this opportunity to talk with Mr. Glezos, he will understand the great success that we just had. A success that puts an end to the automated austerity in Europe. It is a great contribution for the entirety of Europe. It does not mean that we have won the war, but it means that the axiom which wants austerity to be automated in Europe and the discussion in the Eurogroup to be a-political – we succeeded in changing all this.
I am sure that Mr. Glezos would be very proud of this, were we given the chance to explain it to him in person.
Correction: I had mistakenly written 2010, rather than 2020, as the target year for the goal of having the debt/GDP ratio at 120%. It is now corrected.