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Schäuble Warns of “Sudden” Greek Default
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
The governments of Greece – new and old – screwed up. Other debt-sinner countries are able to borrow at near-zero or negative interest rates, simply taking money from investors with a promise to return it on a given day in the future if investors give it new money to do so. These investors, it must be said, had their brains washed by the ECB and other central banks in order to allow this to happen. But the governments of Greece somehow missed that gravy train.
Now, no one wants to lend Greece money at negative interest rates, least of all the Greeks themselves, who know their governments better than anyone else on the planet and have less trust in it than anyone else on the planet: they’re yanking their euros out of their banks even as the ECB is propping them up with fresh euros that ultimately belong to taxpayers elsewhere.
This weekend, representatives of the “institutions” – the unmentionable “Troika” – are trying the hash out a reform package with the new team from Greece that does not include Finance Minister Yanis Varoufakis, who’d been shoved aside. On Monday, the finance ministers of the Eurogroup will meet in Brussels.
Without an agreement on the implementation of the reforms, Greece won’t get the outstanding relief funds of €7.2 billion. And then what? The government has practically no funds left. Time is running out. Monday is it. The Big Day. Again.
“I don’t see that everything will be solved by then,” German Finance Minister Wolfgang Schäuble said in an interview in the Sunday edition of the Frankfurter Allgemeine Zeitung, one of Germany’s largest papers, throwing cold water on any hopes. He doubted that the Greek government even knew what exactly was going on in its finances.
“Such processes also have irrational elements,” Schäuble warned. “Experiences elsewhere in the world have shown that a country can suddenly slide into insolvency.”
On the principle that a country is slowly zigzagging down that path paved with lots of good intentions, false hopes, and lofty promises and, BAM, suddenly, it’s over. So maybe Monday? Or next month? He refused to nail down a specific point in time.
When asked if the German government has made preparations for such an eventuality, he said:
“There are issues that a prudent politician must not answer. Otherwise there will be misunderstandings. Jean Claude Juncker [President of the European Commission and former President of the Eurogroup] once said that sometimes you must play fast and loose with the truth. For me, these things are more complicated. Therefore, I rather say nothing at all.”
That’s a resounding “yes.” Germany is prepared. The financial markets have no doubts and refuse to get panicky. The German government is going to handle this just fine, they’re saying.
But in August 2013, during the run-up to the general elections in the fall, when the cost of the Greek bailouts to German taxpayers was one of the themes, Schäuble had this to say, thus playing fast and loose with the truth:
“One thing is certain: there won’t be a second debt cut for Athens.”
The first one having been the 70% haircut imposed “voluntarily” on private-sector bondholders in 2012. The second one would hit public institutions, such as the ECB and the bailout funds, and ultimately taxpayers in Germany and other countries.
The “one thing” that was certain in 2013 before the election is now out the window. A Greek default would almost certainly entail some kind of debt relief for Greece, hence a haircut for taxpayers in other countries. They just haven’t been told yet.
But Germany would “do everything to keep Greece under responsible conditions in the Eurozone,” he said. “It must not fall apart because of us.” On this issue, he and Chancellor Angela Merkel are in complete agreement, he said.
There have long been voices that confirmed that if Greece defaults, there could be a haircut for public bondholders in some form (swapping existing debt for zero-interest debt with a 1,000-year maturity?) while Greece remains in the Eurozone. That appears to be the direction the German government is heading.
And Schäuble defended his best buddy Varoufakis. Few people have managed to rise to such media adulation and then plunge from it as quickly as Varoufakis. Whatever he was trying to do, it didn’t work. Forget game theory. “We both are finance ministers and bear responsibility, so we work well together,” Schäuble said. “First, the media make Varoufakis into a superstar, now they’re writing him off. The one is as wrong as the other.”
With this immaculately-timed interview, the German government acknowledged that it’s ready for Greece’s insolvency and default, whenever it may come, including Monday, after having denied it for years, and that it would continue working with Greece to keep the Eurozone together. What’s sacred for the Merkel government is the Eurozone, not its taxpayers. They already got shafted.
But here is the thing: the Greeks could solve the crisis on their own, if they wanted to. Or do they know something that others don’t? Read… If Greeks Did This, the Terrible Crisis Would Be Over
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Sudden default is good, if the banks become subservient in the process.
It allows the healing to start.
Who cares? It's bedtime..
print vouchers with the promise to pay the bond holder from future olive oil sales. leverage the vouchers 100 to one and use the proceeds to print olive oil backed drachama. true growth of money supply backed by future growth, ha...
Double post.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Ernest Hemingway, The Sun Also Rises
I love that saying...
Greece has to get out of this quagmire they're in - declare yourself bankrupct/insolvent, unleash from the EU and maybe, just maybe all your Grecian gods will look favorably upon you.
The German government may be ready, but I bet a couple of highly leveraged German banks are not. Let's see how Buba deals with a German Lehman moment.
Has anybody done, "...annnnd it's gone." yet?
The collectivization of losses, all to be transferred to the back of the "taxpayer" which is basically all of us who are not part of the ruling elite.
The one thing that is sure, any "losses" will not be placed on the architects of this disaster.
"Whatever he [Varoufakis] was trying to do, it didn’t work."
My guess is that he thought his self-proclaimed epertise in Game Theory would enable him to slip one across his Europeans 'partners'.
Greek default? = Bullish stocks , smash is gold and gold shares.
greece should have said at the beginning we aint making no fucking debt payments. but all politicians are liars and have no backbone. they are full of shit fuck them and their corrupt pos country. fuck the banks fuck the fed and if i left anyone out i sincerely apologize
Does this mean Greece might default?
LoL!
In German the answer is "Jein"
Screwbli should have been confined to an assisted living retirement home 10 years ago.
And for good measure - https://www.youtube.com/watch?v=j2AvU2cfXRkeasure :
https://www.youtube.com/watch?v=I5QwKEwo4Bc
It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.
- Mark Twain.
http://thepeoplescube.com/peoples-blog/full-text-of-islamic-state-threat...
Starbucks is sipping a new urine coffee drink.
Lets face it, in the period 2010 to 2012 the ECB and all EU governments did their best to unload sovereign bond holdings of Club Med countries from their core private banks onto sick national banks and subsequent ECB involvement via sterilised "back door" bond buying.
It was then in that context, once this Merkozy doctrine had been put in place, that they accepted the reduced private sector haircut!
We don't much talk about that sleight of hand : The Merkozy doctrine forced Berlu of Italy, Zapatero of Spain, and Papandreou of Greece to download the French and German core banks of their club med debt by making their own banks more involved.
Then when Draghi came in and said in mid-2012 "we'll do what it takes" the ECB tap was opened wide in pseudo sterlised bond buying. Which allowed the BS to be built up and then built down by a trillion or so in the 2013/2014 period.
The feeling today is the EU markets esteem --as do the core banks-- that its time to do to Greece what was done to Cyprus. (On this point the ECB and IMF don't have the same line : IMF is more hardline as is Mutti/Schauble)
But the Yanks are AWFUL scared of that outcome as the 2015 Shale bubble has added to financial dystopia in USA !
Yellen's hints of the FED's ability of not being able to sustain balance in US bond markets WITHOUT increasing interest rates adds fuel to that fire as that would hurt the WS Stawk beanstalk to an extent UNKNOWN (as whispers Buffet).
I wish I was smart enough financially to understand your post.....and even though I fully don't, I still know you make more sense and logic than the fcktard "Troika" (what a stupid ghey Euro term btw) trying to solve a debt crisis with, ummm, more debt.....what fck faces.
Whatever, they should get it done before tourist season. No one wants to go to a country during a revolution, financial or political.
Scheuble is a bloody idiot, Greece has been sliding into bankruptcy ever since the Euro fanatics started screwing them.
How can it be "sudden" when it's been inevitable for years.
Next we will be hearing" who could have seen this coming".
Tomorrows (or pick a day) headlines: Greece Collapsed, Overnight.
Breaking News:-
"Sources within Athens media and finance told The Slog last night that Bank of Greece Governor Yannis Stournaras will be quitting his post today (Sunday). Alexis Tsipras will ask for his resignation in the light of documentary proof that the former New Democracy Finance Minister personally gave specific briefs to a top journalist about “putting the most negative spin possible on the news” about Greek finances".
https://hat4uk.wordpress.com/2015/05/10/greece-exclusive-tsipras-fires-b...
“How did you go bankrupt? Two ways. Gradually, then suddenly.”
- Ernest Hemingway
Sudden!?
We have seen it coming for years.
"He doubted that the Greek government even knew what exactly was going on in its finances."
You can bet that the GS Vampire Squid knew everything and acted on it to their and no one elses benefit.....
Please!
As sudden & as painful as possible for the Brussels Banskster Bandits!
from here it looks like Greece is running the EU
Greece has already defaulted.