Greece wants to stay in the euro-zone. That’s clear. What is unclear, is whether it is fully willing and fully able to do what is requested from it. Germany’s finance minister said that he “will regret but respect any country that wants to leave the euro-zone”.
This passive-aggressive statement joins a long list of events that show how Germany and others are pushing Greece to declare bankruptcy. Here are more pieces of the puzzle that began 4 months ago and might culminate towards the end of March:
There is no hard evidence that Europe’s No. 1 economy has decided upon a default, but all of its recent actions point to this direction. The endless delays, extra requirements, statements and trial balloons point to this direction.
It all goes down to a lack of trust. The second Greek bailout was discussed in the infamous July 21 summit – a summit which also contained hope for a Greek Marshall Plan. The parties then made progress in the October 26 summit.
Trust was broken when the now former Greek PM Papandreou offered a referendum to approve the deal. Germany and France were furious and threatened to throw Greece out of the euro-zone for the first time in public.
Papandreou was replaced by an ex ECB banker and EU backed Papademos, but trust was never restored. A German draft discussed taking away some sovereignty from Greece. This idea was dismissed, but the Greek leaders were forced to sign a commitment to continue with austerity also after the elections.
German Finance Minister Wolfgang Schäuble was reluctant to throw more money at Greece, saying it is a bottomless pit. It’s important to remember that Schäuble is one of the most pro-European politicians in Germany. His boss, Chancellor Angela Merkel, said the she would never force Greece out.
This seems like a “good cop bad cop” game that is meant to pass the time.
The notion is backed by public opinion that doesn’t want to see more money sent to Greece and also by growing chorus of economists and politicians saying that now is a “better time to default”, after banks have been stabilized by the first LTRO. See comments about a second LTRO below.
To be fair, it’s not only Germany. French banks have stabilized and can absorb a shock. In addition, the reluctant attitude by the IMF also shows that it is on the same page.
Unconfirmed reports have floated, saying that Wall Street Bankers are planning on a Greek default on March 23rd.
The clock continues ticking.
This article is part of the special report about the Greek endgame. You can download it by joining the newsletter in the form below, which appears on any article on Forex Crunch.