Former Greek finance minister says plans for a parallel Greek payment system were essential.
Former finance minister Yanis Varoufakis has insisted he did nothing improper as part of a five-month clandestine project he ran as Greek finance minister that prepared for his country’s possible exit from the euro.
Varoufakis has a piece in the Financial Times on Tuesday, defending his plans to "hack" his own finance ministry and create a mirror payments system, which could be used in the event of a banking collapse or Grexit (Greek exit from the eurozone).
If had gone ahead, the plan would have allowed public sector salaries and pensions to be paid and possibly laid the groundwork for a return to the drachma.
Here's a snippet from the FT piece:
“Suppose, for example, Company A is owed €1m by the state and owes €30,000 to an employee plus another €500,000 to Company B, which provided it with goods and services. The employee and Company B also owe, respectively, €10,000 and €200,000 in taxes to the state. In this case the proposed system would allow for the immediate cancellation of at least €210,000 in arrears. Suddenly, an economy like Greece’s would acquire important degrees of freedom within the existing European Monetary Union.”
He adds that the plan would have eventually provided a "fiscally responsible increase in government liquidity and a quicker path back to the money markets to which governments, such as Greece’s had lost access."
Varoufakis described the project in a 25-minute teleconference with private investors at the Official Monetary and Financial Institutions Forum on July 16.
The Daily Telegraph reported that Varoufakis recruited a technology expert from New York City's Columbia University to access the software systems of the country's tax office and obtain reserve accounts and file numbers of every Greek taxpayer.
News of the secret "Plan B" caused a considerable stir among Greek politicians. The plan was denounced by Greek opposition parties, which in recent weeks have called for Varoufakis to be put on trial for treason.