ATHENS: The Greek government and its international creditors began work on a mammoth new bailout on Monday overshadowed by revelations that Greece’s ex-finance minister Yanis Varoufakis had been secretly planning for a parallel system of liquidity.

As the European Commission confirmed that technical talks on Greece’s third bailout had started in Athens, the embattled leftist government was put on the defensive by Varoufakis’s claim to have “hacked” into his own ministry weeks earlier to create duplicate files for millions of Greek taxpayers.

In a conversation with a group of London-based investors after he resigned his post on July 6, Varoufakis claimed Prime Minister Alexis Tsipras had “given the green light” for a Plan B before coming to power in January, according to a recording released on Monday.

The goal, the maverick economist said, was to create a “functioning parallel system” of liquidity in case the European Central Bank cut off support to Greece’s banks, as indeed it did after talks with the hard-left government on new austerity reforms broke down in June.

Varoufakis said a five-man team under his orders had hacked into the finance ministry and obtained access to the tax file numbers of Greek taxpayers in order to create duplicate accounts.

The subterfuge, he explained, was necessary to avoid alerting Greece’s EU-IMF creditors who “fully” control the Greek state’s revenue mechanism.

The operation was designed to enable the ministry and also taxpayers to make digital transfers without having to use the banks, which as it turned out, had to be shut down for three weeks this month to avert a run on deposits.

“Of course this would be euro denominated but at the drop of a hat it could be converted to a new drachma,” Varoufakis said.

“The work was more or less complete,” he added.

The Kathimerini daily first broke the story over the weekend, and the recording of Varoufakis’s remarks was released on Monday by the Official Monetary and Financial Institutions Forum which has organised the conference call.

The news touched off a political storm in Athens, with opposition parties demanding an official explanation from the government and threatening to put Varoufakis on trial.

During five months in office, the self-styled ‘erratic Marxist’ had exasperated fellow European finance ministers with diatribes during marathon talks on Greece’s new reforms package.

‘Two-faced games’: On Monday, one of them — Slovakia’s hawkish Peter Kazimir — noted that the plan merely confirmed how “unpredictable” Varoufakis was.

“We need to make sure that such two-faced ‘games’ will be avoided when debating and drafting the third bailout package for Greece,” Kazimir said in a tweet.

Technical teams from the EU, the European Central Bank and the International Monetary Fund returned to Athens to assess the state of the economy, and discuss a new bailout of up to 86 billion euros ($94bn) over three years to prevent Greece from defaulting on its huge debts.

Tsipras’s government this month has pushed through parliament two reform bills tied to the bailout that triggered a major mutiny in his Syriza party.

Published in Dawn, July 28th, 2015

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