Eurozone

As much as Greece wants to forget the dystopian times of the recent crisis, the foreign protagonists of that time regularly bring back those dramatic moments, with mostly autobiographical narratives.

The door to the time capsule is opened this time by the former head of the International Financial Institute IIF, Charles Dallara. With the book “Euroshock – How the largest debt restructuring in history helped to save Greece and preserve the Eurozone”, which was presented last week at an event of the Hellenic Banking Union, he describes, among other things, the battles to reduce the deficits and of course for the PSI bond swap program at the end of 2011..

The retrospective is long, since it includes his government George Papandreou even his Alexis Tsipras. The main conclusions reached by the former head of the International Finance Institute IIF Charles Dallara is that Greece has paid a huge price for its mistakes, while the burden should be shared throughout the eurozone.

Under the coordination of the President of the Board of Directors of EET, professor Mr. Gikas Hardouvelis, the debate was attended by, apart from the author himself, the former Prime Minister Mr. Loukas Papademos and the professor and former Deputy Prime Minister Mr. Evangelos Venizelos, who they experienced closely the long political and economic process for the successful conclusion of the PSI.

The President of EET highlighted in his introductory statement the key points of the project, but also the decisive contribution of the author himself, who was inspired, coordinated and implemented this decisive scheme to reduce the Greek debt. He also highlighted the unique combination that the author achieved in the book, highlighting the long cultural course of the country, its natural wealth and its dynamics, but also the prominent political and economic personalities throughout time.

The event was attended by the Governor of the Bank of Greece, Mr. Yannis Stournaras, the Deputy Governor, Ms. Christina Papakonstantinou, the Secretary General of the Financial Sector and Private Debt Management, Ms. Theoni Alambasis, the former Governor of the Bank of Greece, Mr. Nikolaos Garganas and the Banks’ Managements members of EET (CEOs and Presidents, members of the Executive Committee and Human Resources of EET, journalists and other guests).

Here are excerpts from Charles Dallara’s book:

A Flemish philosopher

It was past midnight on October 25-26, 2011. We were in a small, drab, dimly lit conference room in the basement of the Justus Lipsius building in Brussels, the headquarters of the Council of the European Union. A supposedly modern functional building, it was built in the early 1990s by a team of architects, engineers and construction companies from across Europe.

I certainly felt that I was dealing with a rather uncomfortable situation that night, but I would probably have the same feeling in any other building, having to deal with a similar situation on that “gloomy” night.

The topic of discussion was Greece – getting off the hook from the accumulated public debt while stabilizing an increasingly fragile Eurozone. Lipsius was a 16th-century Flemish philosopher widely known for his attempt to combine Stoicism with Christianity. Somehow, I doubted that his views would resonate with the Greek people that night. Greece had suffered enough, with its economy shrinking by 5% in 2010 and unemployment at 20%. But the difficulties were unfortunately just beginning.

The European “phalanx”

We were confronted that evening by what seemed like a “phalanx” of high-ranking international and European officials. This scenario may have worked for the ancient Greeks, gathering “heavily armed” soldiers in “tight” formation to overcome the enemy. But it wasn’t working that night for Europe or Greece. Greece certainly did not proceed with the confidence of its ancestors in the battle of Marathon that took place in 490 BC. After 2.5 millennia Greece was isolated. How; Never; It was a question I thought about often as I was faced with Greece’s difficult economic situation in 2011.

The “silver patrician”

Negotiations that night had broken down. As it seemed from the headlines of the Press at that time, the international markets had reached a breaking point, but the representatives of Greece and its counterparts from the rest of the Eurozone member states did not have a “mandate” to find a solution.

With only a sandwich and a coffee at my disposal during the night, my patience – and that of my three colleagues – was about to run out. I was accompanied that evening by by Jean Lemierre of BNP Paribas and Mr. Hung Tran and Miki Hatzimichael of the Institute of International Finance (IIF). Jean was Senior Advisor to the Chairman of BNP Paribas, one of the largest European banks. He was an experienced executive who had taken part in several international and European negotiations and had reached the rank of Director General of the French Ministry of Finance.

From this position he subsequently became President of the European Bank for Reconstruction and Development (EBRD). He knew everyone involved in the European financial system, the strengths and weaknesses of the European institutions and the challenges of each national government. All of these were extremely valuable during the negotiations. His presence gave instant credibility in many “official circles” even when our counterparts did not like our position. A graduate of the best French schools in France, he had the air of a “silver patrician,” but at heart he was a civil servant.

The “reluctant queen”

As we sat in the conference room of the office of the President of the European Council Herman van Rompuy in the morning hours of 26 October 2011, I noticed that there was no table. I had become accustomed to negotiating at various kinds of tables, dark, floating, and imposing, regardless of whether they were in Washington, Paris, Rome, Brussels, or Athens. Somehow I “lost” the table, but nevertheless I was comfortable in my armchair. For a moment I thought we might have a civilized conversation in which I hoped there would be an alignment of views without extreme situations. I was, after all, rather tired, as was Jean, when we saw the Chancellor Merkel to nod to the President Sarkozy to start the conversation…

[…] Over the years I had met several heads of state and/or national government, some more impressive than others. So did Jean, who as President of the EBRD had met with every head of state and/or national government. One of the most memorable for me was Margaret Thatcherwho already made his intentions and purpose clear from the moment he entered the meeting room…

[…] But this meeting in Brussels with two heads of state of the European Union, the President of the European Council and countless other officials seemed different. Not only was the future of a sovereign state at stake – Jean and I knew this all too well – but also the future of the Eurozone itself.

In any case, one person led the debate: German Chancellor Angela Merkel with French President Nicolas Sarkozy at her side. If Europe had a royal court, Merkel would be the (reluctant) queen. Despite her prominent position, she didn’t seem to feel the need to radiate authority. Other heads of state and/or national government take drastic action during a crisis; Merkel reacted with caution, deliberation and a “feeling of fatigue” that suggested she wished she was elsewhere. She never expected to lead Germany and now she was being asked to lead all of Europe? And shield it from the effects of the biggest crisis in two generations?

The Sarkozy outburst

The passage with Nicolas Sarkozy’s explosion during the dramatic October negotiations on the Greek debt is also characteristic: “If you do not accept our positions, in four hours when the markets open in Asia, I will destroy you and the banks you represent and bury them all in the papers.” The room froze.