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James K. Galbraith a member of the working group advising the former finance minister Varoufakis on ‘Plan B’ says there were great impositions imposed on the Greek government including certain procedures that removed control from the government and placed them in the hands of creditor institutions

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SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Real News Network. I’m Sharmini Peries coming to you from Baltimore. The Supreme Court prosecutor in Greece ordered parliament of Greece this week to examine a number of complaints against the former finance minister Yanis Varoufakis for preparing to exit from the euro. Some of these charges amounted to treason. But Prime Minister Alexis Tsipras this week backed his former finance minister, confirming that he authorized his former minister to draw up contingency plans in case the country was forced to leave the euro, calling it the obligation of a responsible government. Our next guest, James K. Galbraith, was a part of the working group assisting the former finance minister in deriving this plan, called Plan B. James K. Galbraith teaches at LBJ School of Public Affairs at the University of Texas, Austin. He’s the author of The End of Normal: The Great Crisis and the Future of Growth. James, thank you so much for joining us today. JAMES K. GALBRAITH, PROF. OF ECNOMICS, LBJ SCHOOL: My pleasure. PERIES: So James, let’s begin with what your role was in deriving Plan B. GALBRAITH: Well, I had to do background research and to assemble experiences of other countries and other situations, including some of the experiences in the United States during the depression, to basically to put together for the use of the Greek government of a list of problems, challenges that would have to be faced if Greece were forced against its will to exit the eurozone. This was contingency planning, it was precautionary. PERIES: And did it include a process to deal with printing the drachma, and reviving the mint? GALBRAITH: Well you know, if you have to completely go over to a new banknote you’re going to have a considerable time lag before it becomes available. So we were concerned, for example, with how you handle the need for cash liquidity during that intervening period. That was a substantial challenge, for example. PERIES: Okay. Could you expand on some of the intricacies of what Plan B looked like? GALBRAITH: That’s a discussion I think for another time, but there were a great many things that you would worry about. Fundamentally if you’re, have to transition currency you have a considerable cost of making that transition. The challenge is how to protect the most vulnerable people in society from those costs. How to protect, for example, retirees. How to protect people who are in need of healthcare. And after that immediate transition has passed there’s a question of how you manage the new currency, how you in particular control foreign exchange transactions and the exchange rate. PERIES: Let’s get to the, so the relationship with Europe and the Troika here. In this op-ed that Varoufakis penned in FT he complains, and I quote, there is a hideous restriction of national sovereignty imposed by the Troika. Here he is complaining about being denied access to departments of his own ministries which he says is pivotal in implementing innovative policies. So I guess the question is, who does collect the taxes and who has access to the tax system and tax collection data in Greece? GALBRAITH: We were not engaged in anything that was internal to the operations of the finance ministry. But there are issues in which the, in the dictat that was imposed on Greece in July, for example, there are further inroads on the sovereignty of the Greek state, the imposition of requirements that major offices, including the Statistical Office, be taken basically out of the control of Greek government and placed more or less directly in the hands of the creditor institutions. And that’s problematic. The most problematic thing of all along that line is the requirement in the terms that were dictated to Greece that new proposals to the parliament not even be made by the government unless they’ve been previously approved by the creditors. So that is in some sense a blatant, a flagrant violation of the basic principle of the European Union, which is that it’s built upon representative democracy. In that respect, and that’s a very important respect, the parliament in Greece is no longer even remotely a sovereign entity. PERIES: And James, in your experience of working in this area are you aware of any other such bodies like the IMF imposing these kinds of restrictions on sovereign nations and ministries? GALBRAITH: I don’t think it’s entirely unprecedented. But this is the most extreme case. It’s certainly possible for, governments yield parts of their authority all the time through the treaty mechanism. But for a parliament to be told, or for a government to be told that it cannot [leg] a proposal even for public comment unless it has previously been approved is I think well beyond the normal delegation of authority to multilateral bodies, for example. PERIES: Okay. And in addition, one of the controversies surrounding this issue is whether Prime Minister Alexis Tsipras knew about your workings with Finance Minister Varoufakis. And so the question here is, did the prime minister actually initially instruct the finance minister to drive a plan B? And if so, when did he do it? And if you could shed some light also on when he decided to draw back on this, that would be interesting. GALBRAITH: Well, I have no information in particular. We worked under the authority of the finance minister. And what I know is what, for example, Alexis Tsipras said in parliament yesterday, which is that yes indeed, this was something that he had authorized and which he felt was the obligation of a responsible government. That’s the way we felt about it. We were not involved in making Greek policy. We were not attempting to become involved in the policy process. We were simply trying to provide a body of information so that if it became necessary to consider these questions they could be considered reasonably quickly and in a well-informed way. PERIES: And James, finally, there seems to be some confusion between Plan B of the left platform and the Plan B you were involved in deriving. Could you tell us what the differences are? GALBRAITH: I was not familiar with the Left Platform’s proposals, except very vaguely and well after we had completed our work. So I don’t think there was a very close correspondence between what they had in mind and what we were suggesting. There may have been some overlap, but I couldn’t comment on that in detail. PERIES: And James, what’s next? Are you going to continue to assist the government of Alexis Tsipras? GALBRAITH: My connection, of course, was with Yanis Varoufakis. I remain very respectful and admiring of the Greek government. What is next I think will be up very much to the creditors who are in a state of disarray at the moment, with a very clear statement made yesterday by Christine Lagarde of the IMF, that the IMF was not prepared to participate in the financing of the proposed program under current conditions. And that is going to I think create a set of issues between the IMF and especially the German government which will have to be resolved by them. And if they can’t resolve it that will be on their responsibility and not the responsibility of the Greek government [at all]. So that is in some sense, that was the curtain raiser on the next round of this drama. And one which I’m pleased to say I will watch from a safe distance. PERIES: James, I’m wondering whether you can actually do a Part B, part two with us and discuss the current negotiations that are underway and this particular position that the IMF has now taken. GALBRAITH: I’d be happy to. PERIES: So do join us for part two with James K. Galbraith.


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James K. Galbraith teaches at the LBJ School of Public Affairs, The University of Texas at Austin. He is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of a renowned economist, the late John Kenneth Galbraith, he writes occasional commentary for many publications, including Mother Jones, The Texas Observer, The American Prospect, and The Nation. He directs the University of Texas Inequality Project, an informal research group based at the LBJ School, and is President this year of the Association for Evolutionary Economics.