Surreptitious Greek exit not so secret after Varoufakis slip

 Yanis Varoufakis divulged the details on how Greece could sneak out of the euro “without telling anyone.”

With a plan to secretly append a new bank account to each citizen or company’s tax number, Greek officials wargamed the creation of a parallel system, according to the former finance minister. Varoufakis’ resignation, 10 days before he made the comments on a call with investors on July 16, leaves open the question of whether the contingency plans have been torn up or just shelved.

Since then, Greece has managed to win some reprieve from the threat of default by agreeing to austerity measures with creditors that the former minister opposed. That said, with Prime Minister Alexis Tsipras’ parliamentary majority dwindling, stalling implementation could herald the return of euro-exit talk before long.

“The job was strictly to study the operational issues that would arise if Greece were forced to issue scrip or if it were forced out of the euro,” James K. Galbraith, a professor at the University of Texas and a member of the finance ministry’s contingency plan, said in a statement. “At no time was the Working Group engaged in advocating exit or any policy choice.”

New talks

The system was designed to be euro denominated “but at the drop of a hat it could be converted to a new drachma,” Varoufakis said.

Greece’s banking system is effectively frozen and the government hasn’t yet said when emergency limits will be lifted. Deposits held by businesses and households fell to 122 billion euros in June, the lowest since 2003, the Bank of Greece said on Monday.

Technical experts from the European Central Bank, the International Monetary Fund and the European Commission are slated to begin talks with their counterparts Tuesday on policies that Greece must implement over the next three years, in return for loans of as much as 86 billion euros ($94 billion).

“More reforms are expected as part of the statement from the Greek authorities to allow for a swift disbursement of the European Stability Mechanism and also this is what is being discussed right now,” EU Commission spokeswoman Mina Andreeva said on Monday. Greece has already complied with all of its prior commitments, the Greek finance ministry told reporters today in an e-mail.

A spokeswoman for the Greek government wasn’t immediately available to comment on the Varoufakis telephone recording.

Authorized plan

Varoufakis spoke on a conference call organized by the Official Monetary and Financial Institutions Forum. The London- based body released a recording of the call on Monday, after Greek newspaper Kathimerini reported its contents.

“We were planning to create, surreptitiously, reserve accounts attached to every tax file number, without telling anyone, just to have this system in a function under wraps,” Varoufakis said in the recording. He added that the group’s work was authorized by Tsipras, although had never been ordered to be put into action.

A statement released by Varoufakis’ parliamentary office Monday said the ministry “would have been remiss” if it hadn’t had contingency plans in place. The statement said that the tax- number plans mentioned by the former minister on the call were “not part of the working group’s remit.”

Greek banks remain under capital controls four weeks after Tsipras called a referendum on a bailout plan offered by the European Union. After voters delivered a resounding “no” vote to the economic conditions attached, Tsipras went on to agree to a plan on similar terms under pressure of financial collapse.

“We were ready to get the green light from the PM when the banks closed in order to move,” Varoufakis said.

[Bloomberg]