Euro leaders are starting to talk openly about contingency plans for a Greek default—a scenario that is looking ever more likely after the collapse of talks between finance ministers last Friday in Riga. The WSJ reports:
The idea, raised by ministers from Slovenia, Slovakia and Lithuania, was quickly rejected by Mr. Dijsselbloem, according to officials present at or briefed on the meeting. But their push into one of the remaining no-go areas after five years of debt crisis shows the extent to which many of the eurozone’s decision makers no longer believe a deal on new bailout aid for the government in Athens can be sealed before the old one expires at the end of June.“What my discussion was about is what we will do if…the new program will not be achieved in time for Greece to be able to finance itself and improve liquidity,” Slovenia’s Dusan Mramor said.
Amid a flurry of statements, German finance minister Wolfgang Schäuble’s remarks were the most blunt. Asked if such plans existed, he replied: “[I]f… any responsible politician were to answer this question with ‘Yes,’ we know what would happen. If he answered it with ‘No’…then we know that you won’t believe me.” Detailed German plans for returning Greece to the drachma were said to have been drafted as early as 2012, though current discussions are still considering how to keep Greece on the euro after a default.Keeping the euro would likely please Greece’s citizens, who overwhelmingly support making peace with the EU. According to new polling, 72 percent of respondents want the country to come to an agreement with its creditors and 73 percent think that Greece should stay in the Eurozone. Moreover, 50 percent said their government should compromise even if the EU plays hardball. Greeks, many of whom have been voting with their money (by steadily taking assets out of the country throughout this crisis), now appear to be making their unhappiness with Syriza’s negotiating failures clear.Perhaps Syriza PM Alexis Tsipras has gotten the message. After his finance minister was chewed out at the negotiations in Riga, there are rumblings on Twitter that the incoming “political” negotiating team represents a significant reshuffle. European markets appeared to be buoyed at the news this morning. But time is indeed short for the Greeks, and even with a new look team at the helm, it’s as hard as ever to predict how things will shake out in the end.