"Timothy Geithner reveals Schaeuble's plan to kick Greece out of the euro and 'terrify' the rest of Europe"
In his new book ‘Stress Test’ just released in the US, Timothy Geithner has revealed that in 2012 German Finance Minister Wolfgang Schaeuble had presented him with a plan to kick Greece out of the eurozone. This, he said, would appease German voters and terrify Europe.
“Germany will stand by you and the Greek people in the struggle to
contend with our shared challenges in Europe and the eurozone." So said
German Chancellor Angela Merkel to interim Prime Minister Lucas
Papademos in November 2011. However around the time the chancellor was
pledging solidarity, her Finance Minister was drawing up plans to kick
Greece out of the eurozone.
That has been revealed by
former US Treasury Secretary Timothy Geithner in his recently released
book ‘Stress Test’. According to Geithner who, together with the rest of
the Obama administration, had watched with alarm as the Europeans
appeared unable to contain the sovereign debt crisis triggered by one of
its smallest members, he met with Schaeuble on the island of Sylt in
the North Sea in July 2012.
Geithner states that during
the meeting Schaeble presented him with a plan to kick Greece out of the
eurozone. This, according to the German Finance Minister, would allow
Germany to provide the financial support necessary to the Eurozone as
the German people would no longer perceive the assistance as a bailout
of the corrupt and profligate Greeks. Furthermore, according to
Schauble’s logic, a Greek exit would scare the rest of Europe enough for
them to commit to providing sufficient financial assistance in order
prevent the system from collapsing.
Schaeuble told his US
counterpart that there were many in Europe who considered this
reasonable and even a desirable strategy. For his part Geithner called
the idea ‘frightening’ writing that he felt that it would create a
crisis of confidence that would be difficult to contain regardless of
how much money the Europeans subsequently pledged to shore up bankrupt
states. He adds that he could not see why the Germans would feel better
about bailing out Spain or Portugal than they would Greece.
In
the book Geithner also once again highlights the disagreement between
the Americans and Europeans in how the debt crisis should be handled at
its outset in 2010. While European lenders remained doggedly committed
to austerity and ‘rhetoric of the Old Testament’ Geithner writes he felt
that imposing aggressive austerity too soon in Greece would be
counterproductive as it would depress the economy and tax revenue,
ultimately increasing the deficit. However the Europeans were not
willing to listen to the advice provided by the Americans whom they
blamed for causing the crisis in the first place.
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