The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a “haircut” on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.
Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country’s finances in order.
But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.
His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.
“He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he – and a growing group – are convinced it will not pull Greece out the hole,” said a eurozone official.
It’s hard to blame them.
Wicked Germans? Not so fast, argues Richard North at EU Referendum:
…in a cross-party alliance, we see Klaus-Peter Willsch of the CDU saying: “We must stop the tragedy. Greece in the Euro zone is no prospect of economic recovery”, with Frank Schaeffler (FDP) warning that the protests might trigger a civil war.
It is then Veronika Bellmann (CDU) who says that everything the critics have predicted has occurred. She adds: “the ailing administration, the corrupt tax system and an unfit and unwilling political class are not a basis for structural reforms”. And now, she warns, this is beginning even “to shake the democratic nature of the country”.
What thus comes over is the very opposite of the legend we are being offered, with German politicians genuinely concerned at the fate of Greece, saying exactly the same things that British eurosceptics have been urging. Nor is this a question of throwing Greece to the wolves. CSU General Secretary Alexander Dobrindt, warns that: “We must prepare ourselves for the event that Greece does not implement the promised reforms”.
But, far from being the heartless “Nazi invader” intent on dominating the country, he says that there must be a “contingency plan” for when Greece “escapes” from the euro, with the preparation of “an EU-Marshall Plan for the redevelopment of Greece”.
All of this points to one inescapable conclusion: the Germans are the best friends the Greek people have right now. The people are being sold down the river by their own corrupt politicians, with the support (and instruction) of the EU commission and their “troika”, whose only concern is the integrity of the euro, irrespective of the pain it causes.
Meanwhile Reuters’s Felix Salmon looks at the European Central Bank’s latest maneuvers (technical stuff, but worth the read), but in his closing sections give the real flavor of where things now stand:
…expect things to get weird from here on out. We are entering a zone of probability distributions at this point, where actions stop having foreseeable consequences. No one’s really in charge, which doesn’t help. Greece has sophisticated and professional advisers, but Greece isn’t in control of its own destiny; the Troika is. And the various members of the Troika are no longer singing from the same songbook.
…The endgame is approaching; but the only thing we know for sure about it is that anybody who thinks they know how it’s going to play out is delusional.