The mainstream media narrative - that Germany is ready and prepared for Grexit and that it is no longer a threat to financial stability - is all hype, according to German opposition finance minister Joachim Poss. As Bloomberg reports, all that is mostly posturing for an electorate tired of the aid and angst Greece has demanded since 2010.
Germany and Greece are heading into an emergency meeting with official creditors today with conflicting positions, setting the stage for a clash.
German Finance Minister Wolfgang Schaeuble rejected Greece’s call for a new debt accord, while Greece’s new Prime Minister Alexis Tsipras remained defiant, saying there is “no way back” for his government, and that he can’t condemn his people to more pain.
According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
It has been a busy few days for Germany. In the space of a week, they have warned Greece "there will be no blackmail," adding that a Greek exit from the euro was "manageable," only to hours later deny (clarify) these comments.
FRANKFURT, Germany (AP) — Talk of Greece crashing out of the euro is back. And the question of whether Europe can handle another crisis in Greece is heightening financial uncertainty for the currency union just as it is struggling to grow and create jobs. Some analysts and politicians say Greece 2.0 wouldn't be as rough on the eurozone as the original Greek crisis and default in 2010-2012.
A Greek exit from the euro area would have “incalculable” consequences and leave Germany facing the biggest loss on European financial aid extended to Greece, a lawmaker in Chancellor Angela Merkel’s coalition said.
“Europe can’t afford a Greek exit,” Joachim Poss, the Social Democratic Party’s deputy finance spokesman in the German parliament, said in a phone interview. Suggestions by allies of Merkel that the 19-nation currency bloc could weather Greece’s departure amount to “playing with fire at a fragile moment in the stability of the euro area,” he said.
With just three weeks until the Greek snap elections on January 25 in which Tsipras' Syriza is virtually assured of victory (unless somehow G-Pap's "new and improved" political party manages to steal enough votes to prevent this, although one wonders what his political campaign will be: "vote for us because this time we know how to avoid a sovereign bankruptcy"), Germany takes yet another opportunity to remin
There's an amusing pair of headlines back-to-back today on what a Greek exit from the Eurozone might mean. One view is catastrophic, the others is along the lines of no problem. Let's start with the catastrophe.Economic historian Barry Eichengreen says Greek Euro Exit Would be ‘Lehman Brothers Squared.
Via email I received an interesting set of facts from Barclays regarding banking exposures to Greece.
Greece: Euro area official sector exposures in excess of EUR290bn
Euro area official sector exposure