An alternative plan is already being worked on in Brussels, as the majority for the new austerity package is broiling
With a two-day general strike, Greece is once again protesting against the stricter austerity measures that are to be imposed on the country with the 2.0 emergency aid. The people are thus exerting pressure ahead of the debate and vote in the Athens parliament on Wednesday to reject the package, which in any case will only exacerbate the misery in the country. This is why Prime Minister Papandreou’s majority is seething. His Pasok party loses a slim majority of five votes because eight deputies are considered possible dissenters. In Brussels, therefore, alternative plans are being made to prepare the country for the threat of bankruptcy in the event of rejection.
It has always been claimed that the tighter austerity measures in Greece would be "without alternative". So declared EU Economic and Monetary Affairs Commissioner Olli Rehn as recently as Tuesday in Brussels: "The only way to avoid immediate bankruptcy is for the Greek parliament to approve the rescue package." A "Plan B" to avoid bankruptcy does not exist, he stressed: "I say this to those who speculate about other options, very clearly." He pretended that Europe could only help Athens if Greece helped itself, as if the country had a chance to get out of the deep recession with the austerity measures. But the experts’ criticism that the programs are too focused on austerity and not enough on growth is becoming stronger (Greece circus on new stage).
Rehn’s words were directed above all at Berlin. For earlier in an interview, Finance Minister Wolfgang Schauble had made noises about what would happen if the package was rejected in Athens. The government under Giorgos Papandreou was thus brought to the brink of collapse, just as the Socialists in Portugal and the Conservatives in Ireland had previously been. In these countries, too, the financial crisis was accompanied by a political crisis. If the tightened austerity package was rejected, Schauble said, the conditions set by the troika of the International Monetary Fund (IMF), the EU Commission and the European Central Bank (ECB) for the disbursement of the urgently needed fifth tranche of 12 billion euros from the first emergency aid package would no longer be met. But then, the IMF had always threatened, disbursement would be refused because the country’s financing was no longer secured for a year. The country would thus be directly threatened with insolvency.
Schauble has therefore already widely prepared the public via the Bild newspaper that despite everything, the country will not be allowed to slide into bankruptcy. He built up the horror scenario that the Greek bankruptcy would cause "the stability of the euro zone as a whole is in danger" is. He warned "severe consequences for world financial markets", if the austerity package fails. "We had to quickly ensure that the risk of contagion to the financial system and other euro countries was contained", he said, as billions are expected to go to Greece one way or another. " We are doing everything we can to prevent a crisis escalation in Europe, but at the same time we must be prepared for anything. That is our responsibility and that is what we are preparing for."
The Financial Times Deutschland (FTD) reported that the first step will be to buy time to bring the dissenters in the Panhellenic Socialist Movement (Pasok) back on track. Because it is assumed that up to eight of a total of 155 Pasok parliamentarians could vote with the opposition against Papandreou’s course. Three have already announced their definitive rejection in the face of the massive mobilization with which the unions are now paralyzing the country for 48 hours. Thus, the majority for austerity could already be gone if the deputies not only abstain, but vote with the opposition against the austerity plan in the 300-head parliament. Because it is becoming increasingly clear in the country that this crazy austerity course is destroying the country’s substance and sinking it into depression (If "Verruckte" govern in Europe). Savings have already been made there, which by German standards amount to a third of the federal budget.
However, it is unlikely that the FTD estimation is correct. If they were in fact trying to buy time, it would be a fatal strategy. The nervousness and uncertainty in the face of the imminent bankruptcy of Greece could lead to panic reactions and snowball effects that could even surpass the consequences of the Lehman bankruptcy. Those who, like Angela Merkel and Nicolas Sarkozy, are afraid that the rating agencies will assume a default in view of a voluntary and binding creditor participation, will not want to take this risk. So, if they haven’t gone completely crazy in Brussels, they will throw a Plan B on the table, which Schauble has already hinted at. Presumably, contrary to all threats, all the necessary billions will quickly fly to avoid bankruptcy.
Without Plan B, Spain would quickly be sucked into the maelstrom
Meanwhile, it was also necessary to try to delay the definitive departure of Spain, which was crashing anyway. The debate about Greece is strangulating the country even faster and bringing it ever closer to emergency aid. Spain is already paying interest rates as high as Portugal’s just three weeks before it went under the bailout umbrella. In the face of a possible "disorderly insolvency of Greece" insolvency of Greece, it would be a very futile undertaking to try to save the country from the bailout.
Spain even had to be granted emergency aid quickly at an affordable interest rate. Because in the time of trying in vain to save a country from the bailout once again, the interest rates for its government bonds were extremely increased. This was already the case in Greece, Ireland and Portugal. In Spain, too, a lot of money has been spent for many years on extreme interest charges that cannot be invested in education, investment and social programs. Thus, recovery in the future as in Greece became even more uncertain. It is already impossible to save the money for the rising interest burden even with tough austerity programs, as a Spanish bank chief recently calculated. (No agreement on emergency aid for Greece 2.0).
Had the "the right lessons from the crisis" As German Chancellor Angela Merkel explained after last weekend’s EU summit in Brussels, the rapid emergency aid for Spain was a consequence of taking the country out of the line of fire of speculative attacks. In this sense, one could interpret the summit decision that the temporary bailout fund (EFSF) will be expanded in such a way that the entire sum of 750 billion euros can in fact remain available. The sum is necessary to be able to absorb even the fourth-grown Euroland. The EU will try by all means to prevent the crisis from dragging down Belgium and Italy as well (Now Italy and Belgium are in its sights). At least with Italy, which has a mountain of debt of two trillion euros in front of it and whose economy is not getting on its feet even in the face of a permanent political crisis, all dams were broken. In Italy, a real time bomb is ticking for the euro and perhaps for Europe (The Italian time bomb is ticking louder).
However, a few figures make it clear that a Spanish crash would hit German and French creditors in particular, which is why the Paris-Berlin axis is pushing for a quick solution for Greece. The banks of both countries are known to be particularly involved in Spain. Although French institutions have withdrawn somewhat from the neighboring country in the past year, they still have 140 billion euros invested in Spanish government bonds, according to the Bank for International Settlements (BIS). German institutes have actually expanded their involvement in the country with the withdrawal from other crash countries. According to the BIS, they now hold bonds worth 180 billion euros, six times as much as they still have in Greece.
Somit ist klar, dass man mit allen Mitteln die Insolvenz von Griechenland abwenden wird. That is why, no matter what pretexts or scenarios are put forward, the billions for the next loan tranche of over 12 billion euros to Greece were allowed to remain and, in addition, the necessary 120 billion euros were also released on Sunday at the crisis meeting of the finance ministers in order to save Greece a few more years from the necessary debt cut. But only a "haircut" enable long-term stabilization.
If, in view of the possible disaster, Brussels does not manage to make a Copernican turnaround, similar to Merkel’s turnaround in nuclear policy, and private creditors are already involved in the necessary debt restructuring, the nervousness will continue for months and years to come. In a few months, it will again determine the situation when it comes to the sixth tranche of the first emergency aid package and the situation in Greece has deteriorated further due to the country’s aggressive austerity measures. Moreover, Ireland and Portugal are not expected to be able to return to the financial markets for financing any time soon. Emergency aid 2.0 are therefore also necessary for these two countries. Meanwhile, the nervousness will have driven up interest rates on Spanish bonds to such an extent that the country will also have to go under the bailout umbrella, as expected. Then it is no longer out of the question that the Italian time bomb will explode and kill the euro.