Galbraith defends Plan X as responsible contingency scheme

American professor James Galbraith, whose revelations about the so-called Plan X of former Finance Minister Yanis Varoufakis, fuelled a political storm, has stressed in an article on Varoufakis's website that the plan was a contingency scheme to be activated in the event that Greece was pushed out of the Eurozone.

As Galbraith writes, Varoufakis asked him in March 2015 "if I would help with a delicate task." "This was the preparation of a preliminary plan – requested by the Prime Minister – for the contingency that Greece might be forced out of the euro."

"It was necessary to prepare for the worst. Together with a small group I worked for about six weeks on this plan, and submitted a memorandum – the “Plan X memorandum” – in the first days of May," Galbraith writes.

"Our work drew on the financial and legal expertise of our team, on the academic literature on currency transitions, on a small number of private conversations with trusted experts, and on our own knowledge of the Greek economic and social situation," he adds, noting that, "We hoped to provide an outline of measures that might have to be taken and of problems that would occur."

The team was "acutely aware of the difficulties that Greece would face if it were forced to leave the euro, and also of the dangers that would follow if our work became known," Galbraith writes. "For these reasons, we worked quietly, mostly away from Athens. The larger Greek government – outside or even within the finance ministry – was not involved."

The team attempted to prepare for a possible forced exit from the euro, Galbraith says. The issues they ranged from: "the legal relationship with the European Union, to the creation and management of a new central bank and the mechanics of providing reliable liquidity on short notice, to possible external support for the new currency, to the transformation of bank deposits and private debts, to such essentials as maintaining supplies of essentials including food, fuel and medicines."

"We could not know how Greek political and social forces would react," he writes. "It was not our mission to make recommendations, and we made none; we were preparing for a scenario that everyone hoped to avoid."

Ultimately, Prime Minister Alexis Tsipras "made his decision as everyone knows," Galbraith writes, noting that he left Greece on July 7 "with mixed emotions."

"On one side, I had wished for a better result for the Greek people, for a stronger boost from Greece’s friends, for a bit of flexibility from the creditors, which never appeared. On the other side, I felt content in having rendered service in a good cause. And in the confident judgment that my friend, the finance minister, Yanis Varoufakis, had carried out his responsibilities with distinction."