Varoufakis 'parallel' currency ploy sparks uproar in Greece

GMT 14:43 2015 Monday ,27 July

Arab Today, arab today Varoufakis 'parallel' currency ploy sparks uproar in Greece

Yanis Varoufakis leaves the finance ministry on his motorcycle
Athens - AFP

Revelations by Greece's flamboyant former finance minister Yanis Varoufakis of secret plans for a parallel currency have sparked uproar in the country as the embattled leftist government on Monday began to rebuild tattered trust with its international creditors.

Kathimerini daily over the weekend reported that Varoufakis had revealed the plan to a group of London-based investors a few days after resigning his post on July 6.

On Monday, a recording of Varoufakis' remarks was released by the Official Monetary and Financial Institutions Forum.

In it, the maverick economist said Prime Minister Alexis Tsipras had "given the green light" for a Plan B before coming to power in January.

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

It came as 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 ($94 billion) to prevent Greece from defaulting on its huge debts.

The government has not yet officially commented on Varoufakis' claims, but junior finance minister Dimitris Mardas on Monday insisted the plan "was never part of economic policy."

Speaking to the Daily Telegraph, Varoufakis admitted that the quotes were accurate but denied that he had plotted to return to the drachma.

"It totally distorts my purpose for wanting parallel liquidity. I have always been completely against dismantling the euro because we never know what dark forces that might unleash in Europe," he said.

A close associate of Varoufakis who worked on the project, University of Texas professor James Galbraith, insisted that the team was "at no time engaged in advocating (euro) exit or any policy choice."

"The job was strictly to study the operational issues that would arise if Greece was to issue scrip or if were forced out of the euro," said Galbraith, son of the late prominent economist John Kenneth Galbraith.

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