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story.lead_photo.caption A pedestrian looks at a board where people can write their comments about Athens, the Greek capital, on Monday. - Photo by AP / Thanassis Stavrakis

FRANKFURT, Germany -- Greece's leftist government came under further pressure Monday after the release of a recording in which the former finance minister described a secret plan to leave the euro.

In a recording released Monday, Greece's former finance minister detailed a contingency plan to create an alternative banking system that could switch to a new currency. The system would be "euro-denominated, but at the drop of a hat it could be converted into a new drachma," the former finance minister, Yanis Varoufakis, said on the recording of a July 16 interview with an influential investment organization.

The preliminary "Plan B" was authorized by Prime Minister Alexis Tsipras, the leader of the Syriza party, Varoufakis said. But he added that Tsipras did not allow the final plan to be put into action.

Publication of the recording transcript, whose contents were reported by the Greek daily newspaper Kathimerini on Sunday, led some opposition members of Parliament to call for an investigation, putting more political pressure on Tsipras.

The country's creditors are arriving in Athens for talks on a new program intended to keep Greece in the eurozone. Greece needs to agree on the details of a new aid program before Aug. 20, when the country is scheduled to make a payment of 3.2 billion euros on bonds held by the European Central Bank. At the current exchange rate, 1 euro equals about $1.11.

But Tsipras is dealing with a revolt in his own party over conditions that other eurozone countries are demanding in return for 85 billion euros in new financing. Tsipras has been able to pass legislation demanded by creditors only with the help of opposition parties.

Now the government is facing a new controversy about a eurozone exit plan, creating uncertainty for this uneasy alliance.

On Monday, a group of 24 lawmakers from the main conservative opposition party, New Democracy, asked Tsipras to clarify whether he had been aware of the plan to create an alternative banking system. They also suggested that Varoufakis, who resigned earlier this month, should face investigation.

"At a very difficult time of negotiations between the Greek government with the euro partners and the International Monetary Fund, it's creating unnecessary instability," said Theodore Couloumbis, a professor emeritus in international relations at the University of Athens.

As the bailout negotiations have dragged on, the Greek government has never officially acknowledged making contingency plans for a eurozone exit. But the recording, which was published Monday by the Official Monetary and Financial Institutions Forum in London, showed that Varoufakis was deeply involved in closed-door discussions to prepare for such a possibility.

Varoufakis said that beginning in December he convened a team of five people who developed plans to create an alternative to the Greek banking system and ensure there was still a way for people to carry out transactions. The former finance minister, in a separate interview with Britain's New Statesman magazine earlier this month, said he energetically called for vouchers or a parallel currency to be prepared should the European Central Bank decide to shut down the nation's banks.

Assuming Greek banks would be closed, the contingency plan called for the government to set up an alternative electronic payment system by piggybacking on a system already used to collect tax revenue. As part of the preparations, a member of Varoufakis' team hacked into the tax authority's computer system to copy the software code; the head of the tax authority was considered close to European authorities in Brussels, and Varoufakis didn't want to alert her to the plan.

"That would have created a parallel banking system while the banks were shut," Varoufakis said on the recording about the plan.

It was unclear how far the hacking went. But the revelations of the plan raised potential legal and privacy issues because the tax system is a trove of confidential data.

On Monday, Varoufakis and the Greek government portrayed the work as a response to the possibility that country would be pushed out of the eurozone.

"Greece's Ministry of Finance would have been remiss had it made no attempt to draw up contingency plans," Varoufakis said in a statement on his blog.

"There was never any discussion by the government of any policy foreseeing an exit from the euro," an official in Tsipras' office said Monday. "The only thing there was was a study of the repercussions in the event of a Grexit," the official said, using common shorthand for a Greek exit from the eurozone.

Information for this article was contributed by Niki Kitsantonis, Liz Alderman and James Kanter of The New York Times.

A Section on 07/28/2015

Print Headline: Greece had secret 'Plan B' to dump euro for drachma


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