You probably haven’t heard of Thomas Steffens or Carlo Monticelli.
Even if you’ve been following euro crisis summits for years the names probably don’t ring any bells. But if a deal is finally struck to keep Greece in the euro in the coming weeks, their fingerprints will be all over it.
That’s because Steffens and Monticelli are the lead negotiators for the German and Italian finance ministries respectively. Sherpas, as such people are known, are the men and women who make these international deals, whether in Brussels or Washington, a reality.
Sure, occasionally when a deal goes well or breaks down, it comes down to the finance ministers who hog the limelight in photocalls and press conferences before and after the big summits. But more often, it is actually the behind-the-scenes negotiations between these sherpas that determine whether a big international meeting will be a success or a failure.
The breakdown in talks between Greece and the rest of its Eurozone counterparts in Brussels this week was a case in point. In the days running up to Monday’s crunch meeting, there was plenty of behind-the-scenes activity: the negotiators gradually ironing out differences of opinion in carefully-worded statements. The differences in phraseology might not look like much to the untrained eye, but for the finance ministers who attend, they are the difference between success and failure.
For Yanis Varoufakis, Greece’s finance minister, success means a further loan from the European authorities without the same onerous conditions as its previous bailouts. And that was precisely what one of those early drafts seemed to offer. Crucially, the current programme was not mentioned once. The problem is, that draft came from the wrong people — it was drafted not by the eurogroup, the group of finance ministers who decide these things, but by the European Commission.
As it happens, the eurogroup’s own version of the communiqué, which, again, had been floating around for some time, was rather different. Though, again, it might have seemed indistinguishable to an outside observer, it stipulated that Greece should remain within “the current programme”. In other words, any extra money would come with precisely the same conditions.
It was this draft that triggered the breakdown in talks. A copy of the eurogroup communiqué found its way to the press room at the Justus Lipsus building and was all over Twitter, and over newspapers and television, minutes later. When eurogroup ministers heard what had happened, they were horrified; by that stage, there was no chance the talks would resume.
The episode underlines the importance of such documents to the negotiations. If Greece stays in or leaves the euro, it will, in the end, come down to a few key choices of words in documents like this. It will come down to those behind-the-scenes negotiators — the sherpas.
But while most countries — Germany, Italy, the UK and so on — have highly-experienced sherpas, their techniques honed over years of Brussels talks, Greece’s lead negotiator is a total beginner. George Chouliarakis is a highly-respected economics lecturer based in Manchester University. But neither he, nor any of the rest of the Greek team, have any real experience of Brussels negotiations.
The longer the talks have gone on, the more of a problem this has become. There are unwritten rules to these summits and meetings — among them that you never openly leak documents, you never use press conferences to try to play different countries off against each other, you avoid divulging the messy details of those behind-the-scenes drafting sessions. In the course of the past week or so, Greece has broken almost all of those rules.
Whether this is down to inexperience or strategy is unclear — though the likelihood is a bit of both. But as the end of the month nears — and with it the deadline for the extension of the existing bailout — the chances of a successful outcome diminish and the likelihood of a Greek default, or euro exit, increase. As a result, the mood here in Brussels is grim — more so than at any time since the middle of 2012. Some now think a Greek exit is becoming more likely than not — that Germany will finally be willing to let it go.
However, it is worth remembering that even the testiest economic negotiations can end in success. This is not the first time an inexperienced, incoherent bunch of financial negotiators have taken on some of the toughest sherpas in town. It is not the first time a monetary system has hung in the balance because one country refused to negotiate.
Strange as this might sound, almost the very same thing happened just over 70 years ago at the famous Bretton Woods conference. The 1944 summit was, like many of these euro meetings, set up to ensure the international monetary system would not break down — though this time around the objective was to create an international currency system following the war. The standard textbook version of the conference is that it was largely a two-way conversation between Britain and America, but the reality was far more colourful and chaotic.
For at Bretton Woods, there was one country which steadfastly refused to compromise. A country that almost made the conference end in failure. That country was not Greece but Russia (Greece was there — represented by Andreas Papandreou, future PM, and father to George, PM at the time of the 2010 bailout). Like their modern-day Greek counterparts, none of the Russian delegation had ever taken part in a conference like this before; they had no knowledge of the unwritten rules of such conferences.
Rather than following the prescribed guidelines, the Russians did everything their own way. They refused to back down on any of their red lines (mostly on what controlling stake they would have at the International Monetary Fund). They used nefarious means to attempt to persuade and turn their rivals, including espionage, and sending glamorous blonde “secretaries” to the rooms of difficult negotiators.
For a while, it looked as if those Russian demands would sink the conference. Hours from the final deadline, the whole thing seemed set to end in acrimony. But, at the last minute, Stepanov relented on some of his demands. The conference ended in success, and thus was born Bretton Woods — probably the most successful monetary agreement of all time. It’s worth reflecting on this because it underlines the fact that experience at these meetings is not the be all and end all.
As it happens, their inexperience may have done the Russians a favour. Because the Americans and British were so baffled by their behaviour, they acceded to a lot of their proposals. Russian telegrams, uncovered for the first time in my book, The Summit, detail how the Americans “railroaded our working so quickly and without any discussion, that the majority of the delegations that took part in the meeting of the Commission on the Monetary Fund were not aware of the substance of the change.”
In the Russians’ case, ignorance of the rules of negotiation proved a positive — though it made for some jittery moments towards the end of the conference. And their refusal to compromise on their demands caused much resentment among the other delegates.
“There is something morally impressive about such monumental selfishness,” wrote Lionel Robbins, one of the UK delegation. “But I cannot think it augurs well for the future of the world.”
The parallels with today are clear: one nation determined to renegotiate a monetary treaty, through unconventional means; other nations watching on in horror. In 1944 it ended well: every nation was able to return home from Bretton Woods declaring that they had got their way (though despite their successes, the Soviets eventually refused to sign up to the agreement, which proved incompatible with communism).
Post-war Europe was built on a bedrock of compromise — compromises hatched by anonymous technicians far from the glare of publicity. For the most part it has worked. But those negotiators are now facing one of their toughest tests yet.
Oh and in case you were wondering, Thomas Steffens is the fellow with glasses and a moustache standing behind the German finance minister in the big photo at the top. Keep an eye out for him in the future.
