The Gloves Come Off: Germany Says Grexit "Manageable" As Tsipras Demands Greek Debt Writeoff

Tyler Durden's picture

With just three weeks until the Greek snap elections on January 25 in which Tsipras' Syriza is virtually assured of victory (unless somehow G-Pap's "new and improved" political party manages to steal enough votes to prevent this, although one wonders what his political campaign will be: "vote for us because this time we know how to avoid a sovereign bankruptcy"), Germany takes yet another opportunity to remind the Greeks that it won't be blackmailed (spoiler: it will) into another year of funding the insolvent Greek state which in turn will pretend to engage in another year of "reforms" (spoiler: it won't). Recall it was on New Year's Eve when Merkel's chief advisor Michael Fuchs explicitly used the "blackmail" word saying:

"If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece," he said.


"The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro."

Today, concerned that Tsipras' ascent to power will mean precisely that, namely more "blackmail" by Greece of Germany and the Eurozone, as a Grexit opens the way for a collapse of the monetary union and a return to the Deutsche Mark which would cost Germany far more than continuing the annual charade of keeping Greece in the Euro, Spiegel is out with another piece saying "Bundesregierung hält Ausscheiden Griechenlands aus dem Euro für verkraftbar", or loosely translated, the Federal Government considers Greece's exit from the euro manageable.

In the article Spiegel says, per Bloomberg, that German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble, contrary to the German government's previous stance, consider a Greek exit from the euro area to be manageable because of progress made since height of sovereign debt crisis in 2012, Der Spiegel reports in e-mailed summary of article, citing unidentified people close to govt.

Risk of contagion is limited because Portugal and Ireland have addressed their fiscal issues and ESM is ready as rescue mechanism while security of large banks to be maintained through banking union.


European lawmakers don’t know how a country could leave the euro while remaining in the EU and would have to task legal experts with clarifying issue.


German govt considers Greek exit from euro area to be almost inevitable if opposition leader Alexis Tsipras leads the country’s next govt, ditches austerity measures and  stops servicing Greece’s debts.

Worse, a Grexit now would mean all hopes of ECB QE would be put on indefinite hiatus until the legal framework of not only funding sovereign deficits but also monetizing bonds from an imploding Eurozone is justified. It also means that peripheral bonds, which have priced in well over 100% of a European QE, would go bidless overnight, leading to market crashes across the continent, then to bank runs first across the periphery then the core, and ultimately lead to a full-blown European depression.

Reality aside, why is Spiegel going with this now? Simple: moments ago Tsipras made some headlines of his own, making it very clear just what will happen if and when his party wins the election in 3 weeks.


And in detail, from Bloomberg:

Syriza’s win in forthcoming Greek snap elections will pave way for progressive policy change in Europe against German Chancellor Merkel’s austerity, party leader Alexis Tsipras says according to e-mailed transcript of speech in Athens today, with Podemos in Spain, Sinn Fein in Ireland to follow. Syriza will guarantee bank deposits. [ZH: curious, just how would Syriza do that?]. "Syriza will put an end to social tragedy, nightmare of austerity."

  • Syriza not seeking nor planning to break with European partners, but to put end to economic and social absurdity of memoranda and austerity.
  • Syriza seeks within framework of EU and European institutions to achieve realistic deal on servicing debt, developing real economy
  • Syriza will conduct sincere, resolute negotiation on debt

As for the punchline, on one hand we have this:

  • Germany had most of nominal value of debt written off in 1953, same should be done for Greece in 2015

... and on the other:

  • Syriza wants quantitative easing by direct purchase of govt bonds by ECB

Alas Syriza does not get that one is incompatible with the other, and in fact a Greek debt write off means no more ECB QE as the ECB's balance sheet - a proud holder of tens of billions of insolvent Greek debt still marked to par - would become impaired, and thus crush any political capital Draghi may have left with the Germans and the Bundesbank.

That said, the consensus can certainly forget the ECB announcing public QE at its next monetary policy meeting on January 22, which will be followed just 3 days later by the Greek national elections. In fact, things in the coming weeks and months may get very ugly, fast depending on how things in Greece play out.

So after 3 years of kicking the can and pretending it is fixed, suddenly everything that is broken in the Eurozone threatens to float right back to the surface, leading to another showdown when photos such as this one become a daily occurrence.

The only question is whether this time anyone will believe the rhetorical "whatever it takes" threats uttered by the one central bank which for the past 4 years has proven it is utterly incapable of acting, instead chosing to talk each and every day, a strategy that has worked brilliantly, until now.

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Q-Q-Q's picture

When it's manageable it's a problem but under control, when they've lost control it's not a problem.

johngaltfla's picture

Translation: Germany has seized enough Greek land and assets to let the rest of the EU get screwed.

Looney's picture

On one hand, I am happy that Syriza is about to show the EU how “manageable” the Grexit will be.

On the other hand, Syriza is basically a communist party and just a few days ago ZH had a great article about Moldova, with communists at the helm.

On the third hand… ahhh, never mind… ;-)


Publicus's picture

We have the technolgy to print money and to write off debt.


We are the master of the universe.


The rightful owner of the world.

kaiserhoff's picture

There will be a Northern Euro, led by Germany and Holland, and adding Poland and the Czech Republic,

  and a Southern Euro, led by France, because they like to strut around like banty hens, probably including Ukraine.

Il est inévitable.   Get on with it already.

Looney's picture

They thought they’ve been kicking a regular can. They’re about to find out that the can is full of “Woop Ass”.  ;-)


NoDecaf's picture

Popcorn Bitchez!!

I'm ready. Let the show begin.

Anusocracy's picture

The only logical course is for Greece to form an economic union with Detroit.

Self-enslavement's picture

Interest is mathematically unpayable.

Tall Tom's picture

Not entirely true. If a default happens then the liquidity that the entity has borrowed still exists in the marketplace and will not be destroyed by the retirement of the principle borrowed..


Interest just guarantees that some will default. The Debt Paradigm is a receipe for someone's future failure. Of course the lending institution will acquire ownership of REAL ASSETS at bargain prices upon the debtor's liquidation of assets.


Then the cycle begins anew when the lender "sells" these assets to new borrowers.

Greyhat's picture

The problem is Greece tells the lenders to write down the debts without giving back real assets. :)

This means Greece would be a bad example for others and they can not let that happen...

knukles's picture

Long bread helmets

Everything is A-OK all right with the world, see....

lasvegaspersona's picture


I though I was going to watch an Astley music video...but I got Rickrolled...damn...

Manthong's picture

Heck, everything is cool as long as ISDA doesn’t consider 25 cents on the dollar to be a default and the IMF steps in with SDR swaps for Euros to save the ECB’s bacon like the Fed did in late 2011.

But things could get dicey if ITexit starts looking good to a bunch of Goldman Draghi’s countrymen.

COSMOS's picture

Ask yourself if the same scenario that happened in Ukraine now happened in Greece before the elections.  If there was a coup against the pro EU govt and the coup govt held elections.  Would John McCain and the CIA chief, and Biden all come down to visit and express support.

Sandmann's picture

If you exposed McCain to a strong electromagnetic field I bet those ICs they put in his head would go haywire and he would demand bombing runs along Penn Avenue and that China nuke Washington

messymerry's picture

How do you know about the ICs???  That's classified.  Watch for drones over your house and black SUVs on your lawn...

Tall Tom's picture

I am not writing about Greece.


I am writing about the Debt Based Fractional Banking System.


Currency is created when a Debt is incurred. Likewise Currency is destroyed when a debt is retired.


From the transscript of Chris Martenson's Crash Course,


"For now, I want you to understand that money is loaned into existence. Conversely, when loans are paid back, money ‘disappears.’




If the loan is NOT REPAID, as WHEN somebody DEFAULTS, then that CURRENCY does not disappear, does it? It remains in the Currency Supply.


The amount to pay the Interest is never created. That is true. I cannot agree more. 


Then where does the Interest come from? It comes from that pool of Currency, which is left in the Currency Supply. after someone else defaults.


The current paradigm has been designed so that DEFAULTS happen. The fact that the INTEREST is never created ENSURES that DEFAULTS WILL HAPPEN.


And yet I am junked for telling you the conclusion?


I cannot believe the IGNORANCE on this forum. You can be given simple, small and digestable tidbits of information. You can regurgitate them.


But then you cannot INFER from them just what in the hell is happening to you?


The currency is all a fiction. There is nothing real about it. It is just a ledger entry.


However the REAL Assets are just that....REAL.


It is because that the Interest was not created that the mechanism will ensure that defaults happen.


It is BY DESIGN so that Bankers can steal YOUR REAL ASSETS.


Most just report half of the story on those damned popular videos. They fail to see the picture.


But Chris Martenson's video series is actually good and exposes the mechanism and the UNDERLYING REASON...WHY. It is in the Crash Course.


If it does not sink in the first time then I'd suggest strongly that you listen to it, and READ the damned transcripts, until it does.

lasvegaspersona's picture

It is not currency at issue. It is the fact that the paper representing the loan was functioning as someone's wealth. The owner considered they had 'money'. Now that illusion is destroyed and the pool of 'money' is smaller. That can lead to an increased value assigned to the currency. This is called deflation  and fiat systems cannot survive in deflationary environments for long. Society will demand that debts are made easier to pay. Reversion to very hard money usually means revolution if the currency becomes so valuable that the economy cannot function. The idea that a few banks could own everything is not a realistic scenario. Guillotines were rolled out for far less.

Tall Tom's picture

When writing of Private Parties who traded Currency for that Note the fact remains that the Currency was spent into the Economy. That is true Capital, a true loan, and the Private Party does incur a Capital Loss as the Note becomes VALUELESS.


The Private Party does lose VALUE and it is most definitely deflationary on his Balance Sheet as the loss is made very real.


However it is different for a Fractional Reserve Bank as they gave up nothing which belonged to them in the first place.


First they had absolutely no capital to loan in the first place.


The loan which was originated created the Capital in the first place.


Now if you were a Private Party and could just print the cash needed to make the loan then you would suffer no loss upon a Default as you did not part with any of your own Capital in the first place, right? But if you did that then you'd be a guest for the extended stay at the Grey Hotel, with Bars in every room, and an roommate named Bubba to keep you cozy, warm, and...well...I digress.


But that is the difference between you and the Banks.


That is what QE was all about. It was to recapitalize the Banks after they suffered major losses after the Housing Meltdown of 2007-2008. That currency from the Defaulted Home Loans was not retired through repayment and, thus, we experienced some profound Price Inflation in necessities as a result. Furthermore the Federal Reserve absorbed the Default Home Loan paper through the last QE, the MBS buyout from the Fed.


Even today the pool of Currency from the massive Home Loan Defaults is still circulating, in the Currency Supply, as INTEREST RATES have been supressed and have not been allowed to rise in order to remove it.


While I detest Keynesian Economics, unfortunately, that is the current paradigm. Interest Rates were designed to be raised in order to drain excess liquidity from an overheated economy to stem the Inflationary Forces. This is taught in Econ 101. But they did not allow that to happen as the US Government would become insolvent due to its massive debt load.


We did have an expansionary inflation in our economy in the price for commodities and for necessities.


However the United States was "successful" in that we exported most of our inflation to China and, in turn, created massive bubble markets over there.


But now those bubbles are set to pop.


Defaults, as a result, will happen. Debt will not be retired according to the Keynesian Model.


Then the real Hyperinflationary fun begins.


Deflation always precedes a Hyperinflationary inferno.


Somehow I think that you already know this.


You wrote, "Reversion to very hard money usually means revolution if the currency becomes so valuable that the economy cannot function."


This is exactly what happened in Weimar Republic Germany. Cash was so scarce and valuable that people began to circulate promises to pay.


And, then,soon afterwards, the whole damned thing exploded.


Our path has not yet crystalized. It still can go hyperdeflationary as easily as it can go hyperinflationary. But go, and it will go, and that is the certainty...


BTW...The top 1% own more than 60% of Americans and the guillotines have not rolled yet.


As long as they are not hungry then they will not rise up.


But there is a drought in California and the USA has had famines in the past and is not immune to famine.


Remember that one of Herbert Hoover's 1928 Campaign promises was a "Chicken in every pot"? People were even hungry in the Roaring Twenties.


Nice chatting with you, Doc.

ThroxxOfVron's picture

"If the loan is NOT REPAID, as WHEN somebody DEFAULTS, then that CURRENCY does not disappear, does it? It remains in the Currency Supply.


The amount to pay the Interest is never created. That is true. I cannot agree more. 


Then where does the Interest come from? It comes from that pool of Currency, which is left in the Currency Supply. after someone else defaults.


The current paradigm has been designed so that DEFAULTS happen. The fact that the INTEREST is never created ENSURES that DEFAULTS WILL HAPPEN. "


You are 100% right, Tall Tom.

The INTEREST is NEVER created.  Defaults are a key FEATURE of the debt-based fiat currency system.

Denying defaults -aka crony-capitalist bailouts- place undue strain on Debtors within the system that would otherwise be more likely to remain solvent and pay down their debts.  

ZIRP is another device for starving existing Debtors of interest income with which to satisfy debt organcally.

Lore's picture

Greece is just a bit player.  Central Europe is in grave danger.  The Americans seem hellbent on pressuring Russia into dumping treasury holdings. The precedent thus set, a run will follow, leaving Central Europeans unable to pay their gas bill.  They have the power to pre-empt another bankster-driven war across their lands.  Will they? 

Eyeroller's picture

They're about to find out that the can they have been kicking is actually a boomerang.

MrButtoMcFarty's picture

France leading anything....I'd love to see that comedy...



kaiserhoff's picture

Why does Inspector Clouseau, leap to mind?

There are practical considerations.  Europe is hopelessly deficient in energy and local food supplies.

A North/South realignment would help address thoe problems in a realistic manner.


jm's picture

So what do you think will happen the to euro-north?  The Swiss franc comes to mind.  Pretty sure it will be a true reserve currency I'd like to hold.  Game over for business in the process. 


kaiserhoff's picture

Good point.  The transition could get fugly.

The Swiss like their independence, as do the Danes, but I could see one or both joining a new,"cleaner" Northern Euro.

Might include the Baltic Free States, who could use the help, and could handle it, or even Hungary.

Here's an odd angle.  This helps with Russia.  The Ruskies would be much less intimidated by a split Euro than they are now.  That could help on several fronts.

jm's picture

You know as much as I do, probably more.

Thinking not a lot of those countries would want to join a union with a rocket currency and would choose the south.  Hungary has the loosest central bank around and loves the freedom.

I'll leave my opinions on the coming Russian leadership change to other posts.

kaiserhoff's picture

Hungary has close ties with Austria, but they still have that Gypsy wild side.  You're probably right. 

I asked a German friend who vacationed there often, and he said they have nice chicks,  then he asked,

  how young do you like them?

Tao 4 the Show's picture

My guess would be the Swiss will keep their franc. If a new northern Euro shows up, they'll just peg to it and continue business as usual. The problem for the the Swiss, Germany, and the rest would be selling their stuff to the rest of Europe who is dealing with a crappy currency. So they lose market.

Right now, it seems to me the game is as follows: northern Europe supports the weaker guys who represent a big chunk of their market. This is fairly stupid on the surface, because why do you give money to your customers? But in typical devious fashion, the bailout money comes from taxes, so the net effect is just that the workers in Germany, etc., just become poorer while the financial players only benefit. Germans, you know, don't make much for their work. They are the horses pulling the carriage - just given enough grain to keep them going.

Haus-Targaryen's picture

I would like to point out a few things with the "myth" that a new NEURO would be the end of the German export machine. 

1) Annual German GDP growth from 1948 to 1999 (last year of a free floating DM) was 2.3% per annum.  Since the introduction of the EUR its been 0.8% per annum.  Now while exports and growth don'T directly go hand in hand -- in Germany -- there is a direct coorelation.  Thus, Germany has actually exported less, when compared to exports as a % of GDP now than in 1999 with the DM.  

2) Germany (as well as Austria and the Nethlerlands) have next to no natural resources.  They must import all raw materials, add their German "value added" engineering and re-export said stuff -- many times to the original countries of origin.  If a NEURO comes into existance (which is a German play on words, NEU = new while Nord Euro is what it would stand for -- its quite catchy) the cost of raw materials, and energy would fall through the floor here.  It would lead to additional consumer spending as the average person needs to spend less on their energy and gas bills and more on stupid shit that they don't need.  

3) Exports to the PIIGS+France have been cratering since 2010.  This is something that EVERY FINANCIAL NEWS SOURCE (except ZH) has ignored, especially in Germany.  The German media has to keep the myth going that if Germany leaves the EUR no one can buy a new Mercedes in Italy anymore.  I would venture to say this is not only wrong, but horribly misleading.  Right now in Spain for example, with unemployment at 30% people cannot afford a new Siemens washing machine, Bosch power drill -- muss less a pretty new 3 Series.  If the PIIGS+France can decouple and devalue these people who have been pushed out of the labor market (or are still "employed" but under-employed) will be able to afford these new fancy tid-bids.  

I say all this to say that a NEURO wouldn't be the end of German exports, but would be the reignition thereof.  The elities can never let this happen, as people would see quite quickly that they do not need them anymore and they lose their power.  (See Germany 1948-1999 the US from 1945-1973)  I think Germany intetionally inflicts this economic schorched earth policy on the South of Europe for one reason and one reason only -- skilled labor.  

Right now things are so shitty in the PIIGS+France many skilled laborers are packin up and heading to Germany where they can get jobs.  While the unskilled labor makes a B-line to France and the UK.  Its a socially, great gig the Germans have going for them at this point & time.  The German demographic hole is a massive culture-ending nation-bankrupting problem coming down the pipe for Germany like Japan is experiencing now.  (Germany isn't nearly that bad -- but they need 5-10 million more people) I think they are stretching this out to get as many skilled laborers from the PIIGS+France to move here.  This is just my tin foil hat having.  

Tao 4 the Show's picture

Interesting comments - thanks.

Just for clarity, I never said Germany would crater - just that they would lose some local market and this is almost certainly true.

The NEURO countries would gain some advantages, but I think also be in something of the state that Switzerland is in now. That is, they have to peg their currency and print as necessary to maintain the peg. The net result of printing is eventually (if not immediately) to rob the populace. Swiss people mostly just let the authorities handle the money issues and don't think much about the effects, but the result is a constant scramble for a buck. Everyone trying to rip each other off.

Haus-Targaryen's picture

I understand your point, but you are incorrect.  

At worst -- things would remain ca., the same, re; exports to the PIIGS, but this isn't likely.  

BMW sold more cars to Greece is 2000 than they do today. Same with Spain.   Ask yourself why. 

Tao 4 the Show's picture

Time will tell - the final and best judge of our speculations.

gatorengineer's picture

Hedgers, this is just Kabuki, come on, Diebolds got your back...  Narrow win for the good guys, Germany east between 80 and 120 billion euros and buys 18 months.  The issue isnt greece, if it were that simple it would have been over long ago, its the Italian banks holding greek paper...

Also keep in mind the IMF (Read US taxpayer, hasnt chimed in yet).

Analyse2's picture

Inspector CLOUSEAU ?

Sort of a cheap shot on France there. These kind of hateful comments and “good jokes” coming from “superior people” are usual in ZH, when it is about the French. 

But « Don't through stones at others if you live in a glass house » 

For instance, remember September 2001 and the «exceptional efficiency and foresight» of US Police, FBI, CIA, NSA, etc, etc ... How many american «Inspector CLOUSEAU» inside?  ... or were they Mr BEAN ?


Sub MOA's picture

Hey I like french women once ya hose em down soap em up and shave em they're not to bad ;)

GoldSilverBitcoinBug's picture

Fuck USA and NATO, time to leave USA imperialism: glad that De Gaulle send you two frigate to bring back our gold.

Socratic Dog's picture

Why would you think incompetence was involved in 9/11?

Extremely well organized, I'd say.  Not easy to drop three buildings in their footprints like that , and successfully blame some fella living in a cave halfway across the world, without our wonderful MSM investigative journalists smelling a rat.

ORI posted this link recently, it's fucking marvelous.

WillyGroper's picture

OMG that was funny!

Thanks SD & ORI

August's picture

Good to see that is maintaining its committment to truthiness.

Anasteus's picture

"There is no potential for political blackmail anymore."

Oh yes, there is. Tsipras is perhaps the first influential politician who fully grasped how the eu scam really works and how to exploit it effectively. Although, 'revenge' would perhaps be more appropriate term. In fact, Tsipras is just openly doing the same what all others are trying to do behind the scenes, to get ECB 'to work'. The new element on the scene is substantial write-off of Greek debt but that just confirms Tsipras rightfully understood that if 'money' can be created out of thin air it can also be annihilated back into thin air (at least in its debt form). At least, the law of conservation of mass would finally take effect.

Tsipras has all trump cards in his hands. He knows very well about Draghi's 'enormous political efforts invested into the EU project that EU opponents tend to underestimate' as well as 'whatever it takes' mantra. He equally well knows about the 'contagion', both financial and political should Greece leave the euro(zone). Needless to say, soon other countries would apply the precedent and follow Greece.

And how will Syriza guarantee bank deposits? Very easily, by issuing a law enforcement that explicitly forbids bail-in action. A EU counter-revenge would be imminent but Tsipras has its big ace, drachma... right at the bottom of the house of cards. Just to pull it out.

Enjoy the carte blanche, Alexis!

Barnaby's picture

Vichy turned the world more than once, please recall.

Bruno de Landevoisin's picture

Without the French, you would still be kissing the Queen's ass.................

Freddie's picture

Poland in the Nord Euro?  You are kidding right?  They want a war with Russia and are a zio stooge country like USA. 

Italy did not need the EU or Euro.  They should have stayed out.

Greece should go with Russia.  They are both Orthodox Christians and Russia will treat them better.

jm's picture

Everyone that disagrees with you and your worldview is a zionist.  Just a way to avoid engaging any different point of view in a meaningful way.

Carpenter1's picture

QE over
FED raising rates
Oil crash
Commodities crash
China cracking down on corruption
Russia and China solidifying partnership
Saudis making very clear statements
Germany making very clear statements

Something has changed, to be sure. The vagueness is over