Reliving the euro’s most crucial moments with Peter Spiegel

BRUSSELS – We met at a restaurant near the Schuman roundabout in central Brussels. Peter Spiegel was already at the table, answering an e-mail on his cell phone, with the European Council building visible in the background. “You can’t imagine what’s going on in Greece with your reports,” I tell him. “I can’t believe it either,” said the author of three recent articles in the Financial Times titled “How the euro was saved” that have sent shock waves through Greece. “When I was writing them I thought they would be more important for Germany than for Greece,” he added.

The chief of the FT bureau in Brussels published the expose in a series of articles earlier this month. It sparked a range of reactions from within the inner circles of Greek politics as he revealed in great detail the events that unfolded on the sidelines of the G20 summit at Cannes in November 2011, when former Greek Prime Minister George Papandreou discussed with eurozone leaders his intention to hold a referendum on whether Athens should accept the second bailout deal it agreed with the troika. He also revealed how eurozone officials had been working on a secret “Plan Z” in the event that Greece left the single currency.

For Spiegel, the moment signaling a more systematic effort to deal with the crisis was German Chancellor Angela Merkel’s trip to Athens in October 2012. “The importance of that visit has not been appreciated as much as it ought to have in my opinion,” said Spiegel. “That was when the German chancellor decided that Greece would not leave the euro, despite [German Finance Minister Wolfgang] Schaeuble pushing her.”

For the American journalist, it became imperative to write about the events of one year “that changed Europe forever.” His research took him to Washington, New York, Paris, Frankfurt, Berlin, Brussels and, of course, to Athens. He interviewed more than 50 people involved in the developments. “The people in the buildings,” as he describes them. He started his narrative in Cannes in November 2011, ending with Merkel’s visit to Athens the following year. “The fiscal compact, the banking union – it all happened in that period,” he said.

According to the reports, the euro was seriously at risk twice: once during the Cannes meeting and once during the twin general elections in Greece in the summer of 2012.

“Yes, Greece always caused the problem, but Italy was too big to bail. Yes, they were concerned about Greece, but the debate about Greece was a debate about Italy,” he answered when I asked whether it all came down to Greece.

When Greeks were trying to elect a new government in the summer of 2012 Merkel was seriously considering the possibility of a Greek euro exit and “consulted everyone that summer,” Spiegel said. Her advisers were split into two camps: one arguing that a Greek exit would save the eurozone and the other arguing that this would be madness because it was impossible to estimate what such an exit would cost. The latter argument was defended by those who were her closest advisers at the time: ECB board member Joerg Asmussen, Bundesbank President Jens Weidmann and Swiss National Bank Chairman Philipp Hildebrand. According to Spiegel’s sources, when Merkel returned from her summer holidays, she had made up her mind and told her close associates she was abandoning the idea of a “Grexit.” “If you cannot tell me how much it would cost, I can’t do it,” she told them.

“For me it was always about Merkel,” said Spiegel. “How the German approach on the eurozone crisis changed during a year.”

When Spiegel came to Greece he was struck by the difference between how Papandreou and his then-Finance Minister Giorgos Papaconstantinou were perceived in Athens and Brussels.

“There was a perception in the troika in particular that in that first year the program was the most successful,” he said, adding that in Athens there was “vitriol for Papandreou and Papaconstantinou.”

“To me, this debate in Greece about who should be tougher on the memorandum misses the point,” he said. “The point is none of the leaders controlled it at that point. They [Papandreou, current PM Antonis Samaras and former Finance Minister and current Deputy PM Evangelos Venizelos] were all at the will of Berlin and Brussels. That’s why I think the debate in Greece over the story misses the point slightly. Limited control over their country is what I hope the story reveals,” the journalist said.

Asked whether there are any good guys or bad guys in the Greek narrative, Spiegel said that from Papandreou and Papaconstantinou to Samaras and his Finance Minister Yannis Stournaras, they all played an important role in putting Greece on the right path.

The country’s European partners made a lot of mistakes, Spiegel argued, citing Merkel and French President Nicolas Sarkozy’s decision in Deauville for the writedown on privately held Greek debt (PSI) and Schaeuble’s pushing for a Grexit leading to investment disappearing.

“Picking on a Greek politician and saying it’s all his fault seems unfair to me. The way the Greek crisis was dealt with after May 2010 was everyone’s fault before it was Greece’s fault,” said Spiegel.

Our discussion moves to the conspiracy theories that have abounded since the start of the Greek crisis after a Greek colleague calls Spiegel and asks him whether his article is part of an Anglo-American plan aimed at Greece.

“To me this is the euro crisis in basically two sentences: In May 2010 they bailed out Greece and said, ‘If you own Greek debt then you make 100 percent on it – no problem.’ Six months later in Deauville they said: ‘Oh, did I say 100 percent? It’s 100 percent for now but in 2013 we start haircuts.’ If I own bonds, I would say, ‘Sell, sell, sell.’ Six months later they say: ‘Oh, did I say 2013? I mean now and 20 percent losses from present levels.’ Then six months later they say: ‘Did I say 20 percent? I mean big horrible 50 percent cuts.’ So if I’m an investor, what do I think? You have lied to me four times,” he says. “And this is the Anglo-American conspiracy to kill the euro?”

The conversation turns to the G20 meeting at Cannes and what went on behind the scenes.

Were none of the European leaders aware of Papandreou’s intention to hold a referendum?

Everyone I talked to said they were totally shocked and that they heard it from the media. There were people who said, “Yeah, he mentioned it months ago but in theory maybe.” He may have had it in mind but it never came up during the whole PSI debate in Brussels.

How angry was Sarkozy with Papandreou?

It was his summit and, as it was made clear to me, it was his chance to be the great man on the world stage, presenting a fix for Europe. And Papandreou ruined it, so he was furious. I can’t say I blame him.

Did Merkel ever express support for Papandreou at that time?

Merkel was also surprised [by Papandreou’s announcement] but part of this Grexit discussion in Berlin was the economic consequences. “If Greece wants to go, we let it go, but how do we make that happen?” And that was something even the strongest Grexit advocates could not answer. That’s why she backed the referendum, and that was something Papandreou misread.

In that meeting there was a lot of back and forth. The main idea was that Papandreou and Venizelos wanted it to be on the conditionality [of the bailout] and Sarkozy and Merkel wanted it on in or out [of the eurozone]. That was the difference. If you go and listen to press conference in Cannes – I was there – Merkel says that. I think Papandreou slightly misremembers Merkel’s reaction because there is no person other than him who remembers it the way he does, that Merkel somehow backs him up. In my understanding, Sarkozy says: “This is the way it should be. Go back and make a decision.” And [Papandreou] leaves and does a press conference and when asked what the referendum is going to be about he says, “In or out.” We all wrote a story that night that Papandreou is going back to do a referendum. But in the meantime Venizelos decides not to. Venizelos was actively arguing on the language – noting to anyone that he was about to say no to a referendum. That’s why this gross intervention is incredible. Papandreou begins to deflate on his chair and Venizelos gets in and starts arguing about the language [of the referendum question], so everyone in the room thought that he was very actively involved to set what the referendum was on. And then six hours later he pulls the plug. What happened is always interesting to me.

Did Commission President Jose Manuel Barroso play any part in Venizelos’s decision?

Say whatever you want about Barroso, but his analysis was not wrong: If you had months of “Is Greece in or out?” it could have blown up the euro. He had a broader view of the crisis and his people at the Commission were always the greatest advocates against Grexit.

When was Lucas Papademos put forward as interim prime minister for Greece?

I think maybe people misread the piece, that it was Barosso’s idea, but it was not. The point I was trying to make is that there is a group of officials who are acceptable to Europe. The conspiracy theory that these outsiders pushed these guys out and forced them to accept Papademos and Mario Monti [in Italy] is wrong. But when the political forces in Greece were weighing who should be next, it had an impact.

When all is said and done, was Papandreou’s idea for a referendum wrong?

He had just agreed to a Greek default of historic proportions. For a year it was the most fought debate. You had [ECB chief Jean-Claude] Trichet going bananas going over that stuff. I have multiple officials saying that he was saying that it would be Armageddon. “As soon as you do PSI, it’s the end of the eurozone.” It was the biggest fight in the crisis. Finally, when this is agreed, hours later he does that [announces the referendum]. He was so focused on Greece that he forgot the big picture, but I don’t blame him for this.