When I assumed my duties as Deputy Prime Minister and Finance Minister on 16 June 2011, the first adjustment programme of the Greek economy had proved to be inadequate and what was urgently needed was a second programme entailing a much larger loan, along with a bold reduction and radical restructuring of the Greek public debt, in order to render it sustainable in the long term.
I met Wolfgang Schäuble just two days later, at the Eurogroup meeting in Luxembourg. On the first days of July (6.7.2011), our first, decisive bilateral meeting took place in Berlin, attended by one partner from each side, Jörg Asmussen and George Zanias. There we agreed on the framework within which we would operate, so that the Eurogroup and the European Council could decide on the second programme and, above all, so that the Eurozone would follow the logic behind haircuts and restructuring of the public debt of its member states, contrary to the provisions of primary EU law (TFEU) and the fundamental assumptions of our institutional partners.
The Berlin Agreement, as I describe in detail in my book “Versions of War 2009-2022” (Ekdoches Polemou-Patakis Publishers, 2022), was fully respected, despite difficulties and setbacks. In the meantime, tension arose in September 2011, when the Troika insisted on additional fiscal measures in the footsteps of the first programme, unrelated to the second programme and the debt haircut. In the meantime, we had a dramatic meeting in Wrocław, Poland (16.9.2011) when he directly raised the issue of a (supposedly temporary) Grexit, but Schauble accepted my immediate negative reply to that. In the meantime, Mario Draghi, with whom I had previously met and agreed in Washington on the sidelines of the IMF session (24.9.2011), assumed his new duties as president of the ECB. In the meantime, we had the decision of the European Council (27.10.2011) on the second programme and the PSI and immediately afterwards, the announcement of the referendum by G. Papandreou and the decisive meeting in Cannes (2.11.2011). In the meantime, L. Papadimos’ government was formed with the participation of PASOK, ND and, initially, LAOS. Mostly however, it was countless meetings, discussions and negotiations that took place in the meantime. We arrived to the second programme and the full agreement on the restructuring of the Greek public debt (12.2.2012), which was carried out (8.3.2012) exactly as planned though.
This was followed by the 2012 elections, when a radically different political landscape came into view; the ND – PASOK – DIMAR coalition government, the Samaras – Venizelos government, the great adventure of the first half of 2015 and the referendum, and finally the SYRIZA – ANEL government’s adoption of the policy of the period 2010-2015, with the PSI / OSI and the restructuring of the debt under the additional conditions of the third programme, including the so-called super- primary surplus.
Behind this whole series of events, we find the figure of Wolfgang Schäuble. Along with that of Jean-Claude Juncker obviously. The stance of the European leaders and especially that of Angela Merkel was absolutely decisive. However, Schäuble actually held the key to the final decisions, since he influenced the Eurogroup “mainstream”. From a certain point onwards he was interested in two main things: the commitment of the Greek political forces and primarily of the governments that they would stand firm on what had been agreed, despite the enormous political cost and that the regulations that were necessary for debt restructuring would be introduced in Greek legislation, in particular the collective action clause (CAC) with retroactive effect.
This is very briefly the sequence of events. Nevertheless, there are also intentions that are constantly being judged without the guarantees of a fair trial. Was Schäuble’s first choice a Greece that would achieve its fiscal and structural adjustment with strong financial assistance from its institutional partners and remain a member of the Eurozone, after having paid huge democratic and social costs or a Greece that would abandon the euro and achieve fiscal adjustment and increase its competitiveness through successive devaluations of the drachma, having the option of monetary financing of its public spending at the cost of disorderly default and the drastic reduction of the standard of living?
I was his counterpart in the darkest and most difficult phase of the crisis. The two of us concluded the Berlin Agreement, which was implemented in the end, or more precisely is still being implemented today and leads up to 2032, when the grace period on debt maturities expires – a key component of the restructuring and sustainability of public debt through the drastic reduction of annual servicing costs and the continuous and generous involvement of our institutional partners (i.e. through the dynamics of Official Sector Involvement/OSI which is permanent and much larger than that of Private Sector Involvement/PSI). In the now infamous discussion we had in Wrocław, he bluntly put forward the proposal of a “temporary” Grexit. The way he described it in an interview with journalist G. Pappas for the Ta Nea newspaper (22-24.7.2022) is characteristic: “I remember Venizelos very well, he made every effort for Greece. From early on I told him, though: Basically, you have two options, either you entrust the responsibility of decisions to others, or you leave the euro for a period of time and we will help you. Venizelos rejected both options for respectable reasons. The price Greece had to pay was high, though.”
The Grexit option would cause a chain of consequences that the Eurozone would likely not be able to cope with and certainly such a drastic and extreme option was not within the powers of the German finance minister, even that was Schäuble. This talk and rumour could undermine the whole plan of debt restructuring and the gradual return to markets and the «normality». My immediate rejective reaction was necessary. The consequences for Greece would be dramatic, but also unpredictable for the Eurozone itself. Obviously, Schäuble wanted to get Greece’s commitment to stick to the programme. This was achieved in the end through the long road and the narrow gate of the first half of 2015 and overall in the harshest way possible, with increased social and democratic cost.
Wolfgang Schäuble was a prisoner of many negative stereotypes about Greece and the Greeks and he undoubtedly expressed the pedagogical/punitive perception of the adjustment programmes and loans to Greece. Despite this, he defended all the relevant agreements before the difficult and politically intrusive German Federal Constitutional Court (BVerfG) and ultimately stood firmly within the framework we agreed. Without his -not friendly, but clear- stance, we would not have succeeded in the major task of restructuring the Greek public debt. His views overestimated the powers of fiscal discipline and underestimated the risks to European liberal democracy. However, history is not ultimately written the way someone wanted from the start, but in a much more complex and contradictory way.
So let us think of Wolfgang Schäuble as a “mirror” that reflected our collective face and the way we perceive our own history at a crucial time.
*Evangelos Venizelos is a former Deputy Prime Minister and Minister of Finance