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Schäuble’s plan for Grexit

14 May 2014 / 16:05:20  GRReporter
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A day after the publication in the British  Financial Times newspaper that revealed how close Greece was to exiting the eurozone in November 2011, US Treasury Secretary at the time Timothy Geithner (2009-2013), reveals that a year later, in July 2012, Germany’s Minister of Finance Wolfgang Schäuble insisted on Greece exiting the eurozone in order for it to serve the other countries as an example and to facilitate the development of a stronger Europe, at a time when a lot of people in Athens and in Europe still believed that Grexit was just a bluff.

The testimony is written down in the 580 pages of a book by Timothy Geithner, entitled Stress Test, which will be available on Amazon, USA, after Friday. He witnessed all underhand dealings related to the eurozone crisis and quite sincerely tried to help along with President Barack Obama. The latter spoke on the phone with Chancellor Angela Merkel many times, failing however to persuade her to change her mind, so that the debt crisis in Europe was tackled in an effective manner.

Timothy Geithner describes his meeting with Wolfgang Schäuble on 30 July 2012 in Sylt resort, North Sea, where they met because the US Treasury Secretary was anxious about the events and the lack of determination on the part of Europeans to deal with the crisis. Wolfgang Schäuble was reluctant to talk, although he gave answers and was involved in the dialogue with his US counterpart.

Schäuble and Geithner during the meeting in Sylt resort, 30 July 2012

Geithner writes, "He told me that there were many Europeans that thought "throwing" Greeks out of the eurozone was a possible and wanted strategy." The idea of the German Minister of Finance was that if Greece exited the eurozone, Germany could provide the assistance required by the monetary union as the German taxpayers would be less reticent about this than they were about the bailout to the Greeks.

As stated by Geithner, during their conversation Schäuble mentioned that Greece's exit from the eurozone would be so painful that it would frighten the other countries in Europe,  thus driving them to cede more of their sovereignty in return for a stronger banking and monetary union. "The argument was that if they let Greece drop out, this would facilitate the creation of a stronger Europe and a more reliable security wall", Geithner states, adding,

"I found his strategy frightening. Allowing Greece to exit the eurozone would cause a huge crisis of confidence, regardless of what Europeans would undertake to do afterwards. I did not fully understand why German voters who hated Greece’s rescue would feel better rescuing Spain, Portugal or any other country," writes Geithner, who, after meeting Schäuble, left the resort disappointed and displeased because of the fact that the debt crisis was not resolved once and for all.

On his way back to the USA, he stopped in Frankfurt, where he met with Mario Draghi, President of the European Central Bank. Draghi admitted to the US Treasury Secretary how bad the situation was and showed his awareness of the fact that the European Central Bank should find a solution. Timothy Geithner says that President Barack Obama himself and other senior members of the US government talked often with the Europeans, though some of them considered the US interest as an "intervention". They however challenged the Americans to show such interest. "They often asked us to intervene by talking with Merkel to persuade her to not be so stingy or with the Italians and Spaniards to be more responsible," says Geithner. The Treasury Secretary of the time then went to President Barack Obama in Washington and told him that he was deeply concerned. Obama replied, "Me too​​". As pointed out by Geithner, they both were concerned about the US economy.

In its publication the Financial Times points out that in 2011 in Cannes, Merkel was indecisive whereas Schäuble insisted that the Grexit plan, i.e. Greece's exit from the eurozone, "would bind more tightly the other 16 member states and would offer them a way out of the crisis"...
 
The Europeans wanted the US to help in overthrowing Berlusconi

In his book Timothy Geithner reveals something else, namely that during the G20 summit in Cannes in November 2011, the Europeans wanted the US to help ... overthrow Berlusconi’s government. "Senior European Union leaders proposed  in the autumn of 2011 that we support a specific plan so that Silvio Berlusconi could be persuaded to resign as prime minister," writes 52-year-old Geithner.

The former US Treasury Secretary reveals that during the G20 summit in Cannes, "the US was requested not to support lending to Italy by the International Monetary Fund until the fall of Berlusconi’s government."

"We immediately notified President Obama. Although a more capable government in Europe would have been useful we could not take part in such a machination", continues the former US Treasury Secretary, who remembers saying the following in connection with this issue: "We will keep our hands clean from Berlusconi’s blood." In the end, the Americans did not even have to help as the Italian Prime Minister resigned under the threat of state bankruptcy in November 2011, a few days after the summit in Cannes, thus opening the way for the assumption of office by technocrat Mario Monti.

Tags: EurozoneCrisisGrexitWolfgang SchaeubleTimothy Geithner
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