Letting Greece Twist In The Wind

Wolf Richter   www.testosteronepit.com

With impeccable timing, it seeped to the surface that a group of ten experts at the German Finance Ministry is studying ways to deal with a Greek exit from the Eurozone. Though rumors about a “Plan-B” had been circulating for months, the leak provided details. A Finance Ministry spokesperson clarified helpfully on Friday, rather than denying it, that the group has been in existence for over a year. Impeccable timing because it happened as Greek Prime Minister Antonis Samaras was arriving in Berlin for his begging and charm expedition. German Chancellor Angela Merkel must have smiled. The heat was on.

They should be soul mates, Samaras and Merkel, both belonging to conservative parties. But during the prior government when he led the opposition, he fought tooth and nail against her sacrosanct structural reforms. So their schmooze on Friday must have been quite something. But at the press conference, she said, “I want Greece to remain part of the Eurozone.” And she knew of “no one in the governing parties who doesn’t want that.”

Yes, she said that! Despite the onslaught of politicians in her government who over the past months promoted Greece’s exit—even hours before the meeting, on ZDF’s morning TV show. Maybe Merkel didn’t watch it. “We cannot provide more money,” Volker Kauder, Chairman of her CDU/CSU parliamentary group, told Germans nationwide. And Greece’s exit, he added, would be “no problem for the euro.”

Nevertheless, she soldiered on: “Commitments must be kept.” And warned, “Words must be followed by deeds.” She was “deeply convinced” that the Samaras government would do “everything” to solve the problems, but any decision would have to wait “for the Troika report.”

Ah-ha. Inspectors the EU, the ECB, and the IMF will spend much of September combing through Greece with a fine-toothed comb to come up with a report, the big report, the one that would determine if Greece deserved more bailout billions. The report would be so big that every politician, even Merkel, could hide behind it. No one would want to be the one to kick Greece out. But the faceless Troika report issued by a triple-layered, non-democratic bureaucracy could take the heat [read.... Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods, No One Wants To Get Blamed For Kicking Greece Out].

She laced her speech with meaningless expressions of support but didn’t commit to anything. It was a good beginning, she said, but much work remained to be done—sounding like a broken record.

But she can’t change her tune easily. In a poll released on Friday, 72% of Germans were against giving Greece the third bailout package that would be required if Greece were given more time to implement its reforms; 67% were against giving Greece more time, and 61% thought Greece should return to the drachma. So a switcheroo would be costly for her.

“We’re a very proud people, and we don’t want to be dependent on borrowed money,” Samaras said when it was his turn. “We don’t want more money. We need time to breathe.” Then he lamented the “toxic declarations” by a “high-ranking politician”—a jab at vice-Chancellor Philipp Rösler, Volker Kauder, or any of the others. How could they publicly discuss that Greece would revert to the drachma? That’s why no one wanted to invest in Greece. It was rendering the privatization of state-owned enterprises impossible. Greece needed investment, not austerity, he said.

So Merkel grabbed his balls and yanked: She’d been reading the Greek tabloids..., she said—the papers that had been depicting her with Hitler mustache and Nazi uniform—as if to say, look, this is politics ... tit for tat. Then she jabbered about “two realities” in Germany and Greece that would have to be brought back together.

He deemed the discussion “especially constructive.” For Merkel, it was “intensive.” In other words, they hadn’t agreed on anything. Samaras packed up his bags empty-handed. Nothing would happen before the Troika report. And then Merkel could hide behind it. She has been on record from day one that she wanted Greece to remain in the Eurozone. No one could blame her. Greece would run out of money, default, and revert to the drachma on its own. And voters couldn’t blame her for throwing more of their money at Greece to keep it in the Eurozone another year or two. So maybe she’d hang on to power, something almost no head of state has been able to do in the debt crisis.

Yet, hope is once again gushing through the system that the debt crisis could be wished away by a nod from Merkel, a wink from the Bundesbank, or a click of the mouse at the ECB. But in Greece there has been an incident.... Euro Optimism Surges, A Greek Tax Revolt Flares Up: It’s Decision Time, Again.

And here is.... The Eurozone Crisis Between Euro-Morons And Zombie-Bankers by George Dorgan.