24 hours to save the euro: Germany prepares for a 'temporary' Greek exit as euro project on the brink of collapse
Berlin plans for humanitarian aid for Greece during a five-year "euro break", after Athens is accused of destroying the trust of its partners
A demonstrator holds a placard reading "Tsipra, the people said no" during an anti-austerity rally in the northern Greek port city of Thessaloniki Photo: AP
By
Mehreen Khan
The German government has begun preparations for Greece to be ejected from the eurozone, as the European Union faces 24 hours to rescue the single currency project from the brink of collapse.
Nine hours of acrimonious talks on Saturday night, saw finance ministers fail reach an agreement with Greece over a new bail-out package, accusing Athens of destroying their trust. It leaves the future of the eurozone in tatters only 15 years after its inception.
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In a weekend billed as Europe’s last chance to save the monetary union, finance ministers will now reconvene on Saturday morning ahead of an EU leaders' summit later in the evening, to thrash out an agreement or decide to eject Greece from the eurozone.
Should no deal be forthcoming, the German government has made preparations to negotiate a temporary five-year euro exit, providing Greece with humanitarian aid and assistance while it makes the transition.
A plan drafted by Berlin's finance ministry, with the backing of Angela Merkel, laid out two stark options for Greece: either the government submits to drastic measures such as placing €50bn of its assets in a trust fund to pay off its debts, and have Brussels take over its public administration, or agree to a "time-out" solution where it would leave the eurozone.
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German vice-chancellor Sigmar Gabriel said they were Greece's only viable options, unless Athens could come up with better alternatives.
"Every possible proposal needs to be examined impartially" said Mr Gabriel, who is also Germany's socialist party leader.
Creditors' voiced their grave mistrust with Athens, a week after the Leftist government held a referendum in which it urged the Greek people to reject the bail-out conditions it has now signed up to.
A desperate Alexis Tsipras managed to secure parliamentary backing for a raft of spending cuts and tax rises to secure a new three-year rescue programme worth around €75bn-€100bn.
But finance ministers rounded on Mr Tsipras for offering to implement measures that he had previously dubbed "humiliating" and "blackmail" only seven days ago.
“We will certainly not be able to rely on promises,” said Germany's hardline finance minister, Wolfgang Schäuble.
“In recent months, during the last few hours, the trust has been destroyed in incomprehensible ways," he said.
"We are determined to not make calculations that everyone knows can’t be trusted. We will have exceptionally difficult negotiations. I don’t think we will reach an easy decision.”
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There is now open revolt among the eurozone's 19 member states, with a group of smaller creditor nations threatening to reject ratifying a new European rescue from the bloc's firefighting fund, the ESM.
Finland's parliament stands on the brink of withdrawing its negotiating mandate from the government, in a move which would force creditors to adopt an emergency voting procedure to pass a new rescue deal.
"It is still very difficult, but work is still in progress", said a dejected Jeroen Dijsselbloem, president of the eurozone's finance ministers after leaving Brussels at midnight on Saturday morning.
“There is a major issue of trust – can the Greek government be trusted to actually do what they are promising, to implement over the coming weeks, days and years?” questioned Mr Dijsselbloem.
“Even if it’s all good on paper, the question is whether it will get off the ground and will it happen?”
Peter Kazimir, the Slovakian finance minister and one of the harshest critics of European largesse to Greece, accused Mr Tsipras of “time travel”. He said that Greece’s proposed reforms would have been enough for the second programme, but added: “I’m afraid this is not enough for a third package.”
France remains Greece’s most powerful ally in the talks, having made frantic diplomatic efforts to convince smaller and poorer eurozone members that they should provide more money to rescue Greece. These efforts may now be in vain.
Michel Sapin, the French finance minister, commended the Greek government for taking a “brave” step towards compromise. “Now we need to have confidence again, to have certainty that decisions announced are decisions which are actually taken by the Greek government,” he said.
Mr Tsipras’s last gasp attempt to secure a deal has also split his Left-wing Syriza party. At least 17 of his own MPs voted against the plan or abstained when it came before parliament on Friday night.
The package was eventually passed with the support of the opposition, with 251 out of 300 MPs voting in favour.
Prominent Syriza members – including Yanis Varoufakis, the former finance minister, chose to abstain.
Mr Tsipras is now poised to embark on a major reshuffle of his cabinet as early as next week. Greece's paymasters want the government to enact legislation on labour market reform, tax hikes and pension cuts as early as next week and prove their commitment to stay in the euro.
The prime minister's main aim to ensure that his capitulation over austerity will be enough to secure
the cancellation of some of Greece’s €330bn public debt mountain.
The International Monetary Fund has recommended a bold program of debt forgiveness, placing it at odds with European creditors. Washington has been forced to step in to push the Europeans to agree to lower interest rates and prolong repayments on Greek debt into the middle of the century.
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So, looks like Greece's default was desired by many powers (This is speculation following the rule of cui bono, for the Doubting Thomases.):
- It was Germany's plan right from the beginning to have Greece default, so that Brussels could take over the control of Greece.
- It was US who wanted to take control of Greece, and a US bank, Goldman-Sachs, knowingly contrived with Greek officials to produce a fudged up evaluation of Greece's financial condition.
- The EU wanted Greece to default, and that is why, they pressurized the elected Greek PM to accept their hostile measures, and when the elected PM refused, he happened to resign and a replacement appointed in his place, who readily accepted the EU conditions. Who made the elected PM resign? This is anyone's guess.
- Right now, we have Germany versus USA going on, with France playing the middle ground, ready to swing in any direction.