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FinMin Schaeuble suggests Greece should issue IOUs – Did he agree with Varoufakis, after all?

German Finance Minister Wolfgang Schaeuble suggested that Greece should issue IOUs in order to meet some of its domestic payment obligations. According to information of German daily Handelsblatt, Schaueble suggested the IOUs option during discussions with other euro zone finance ministers at the Eurogroup meeting yesterday, Monday.

Citing eurogroup participants, Handelsblatt reports:

– IOUs had been a topic of discussion again at a Eurogroup meeting on Monday.

– Schaeuble suggested the introduction of IOUs, in order to alleviate the financial problems in Athens. In this way, the state could pay wages, pensions and its bills – until Greece proceeds with implementation of ‘reforms’ and several billions from the creditors flow to Greece in the form of the third bailout package.

– With IOUs  the Greek government could come into position to still pay wages and pensions and bills to suppliers. The IOUs would be the substitute for the hard euro. The Greek state will issue such certificates on paper or in electronic form, a kind of government bond but without interest.

As the IOUs will significantly limit consumers’ liquidity, “traders and service providers will be obliged to accept IOU’s as payment in order to keep businesses and transactions going. However due to risks, the IOU’s will be worth less than the Euro.”

– the EURO FinMins are currently discussing various models and options on how to react to Greece’ financial emergency.  With the bridge loan of around twelve billion euros Greece should be given the opportunity to meet its acute financial needs and to support its banks. The euro zone finance ministers are expected to decide in a conference call on Wednesday about the bridge financing. (Handelsblatt.de translated summary by KTG)

So Schaeuble proposes a parallel currency exactly as ex FinMin Varoufakis did.

BTW: Who can Schaeuble propose a parallel currency that is not allowed by the Euro Treaties?

Did Schaeuble and Varoufakis agree with each other, after all? The problem with Varoufakis plan was that he wanted to proceed to the issue of IOUs and also ‘seize the Bank of Greece from the ECB’. Most obviously without the consent of the Eurozone even though this would mean “unilateral actions.” Furthermore, Schaeuble would never accept Varoufakis’ IOUs for the simple reason that he wanted Greece to come to the brink of the financial collapse. Why do you think the 5 months negotiations did not reach anything and that all Greek proposals were rejected by Schaeuble right away, even before the whole PDF was through?

As I recently said to several CDU/CSU guys: “We both agree that the Brussels agreement is bad. However our motives are very different” Many German CDU/CSU MPs – some below 100, according to German media – consider the Brussels agreement as “bad, because creditors will give more loans to Greece” and that Greece should exit the Eurozone right away.”

Many Greeks think also the agreement is bad because it will crush people with even stricter austerity and will crush the country with even more loans and state assets sold-off. What Germany’s arch-conservatives do not understand is the two bailout programs failed because they were implemented to real people and not statistical numbers on the papers.

And that large part of Greeks, employees, low- to middle-pensioners left without much savings and resources after 5 years of austerity are scared of additional hardship that will come from the transition period to Drachma. Unless the government has a solid and waterproof plan.

Of course, for those Greeks with enough resources, best parked in safe heavens abroad, transition will be much easier. No doubt about it.

KTG’s No Grexit, No Grexident. The IOUs are coming…!? from 28. March 2015.

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11 comments

  1. Schaeuble seemed to agree with Varoufakis that a Grexit combined with debt write-offs is a better choice for Greece. They have different paths in mind (Schaeuble talked about the Paris club, which is reserved for the most destitute developing countries). However, a Grexit constitutes a big unknown that is scary to most people — both inside and outside of Greece.

    “Many Greeks think also the agreement is bad because it will crush people with even stricter austerity and will crush the country with even more loans and state assets sold-off.”

    Let’s take them one at a time. The Greek economy minister George Stathakis just stated in a Bloomberg interview that the new agreement is less austere compared to the one before (as measured by the required primary surplus over the next 3-4 years). The problem is that the Greek economy deteriorated even more than that over the last 6 months, so the lower austerity targets might actually feel like more austerity to the population.

    As for the privatization: If done well, it does not “crush the country”. Just the opposite: It brings in fresh investments and expertise. It also frees the government from functions that others typically do better (managing commercial entities like railways, ports and airports) in order to do what nobody else can (like regulating the markets to ensure fair competition or retraining the unemployed for the jobs that are available). It also makes the privatized entities more sustainable and removes opportunities for clientelism and corruption.

    • Giaourti Giaourtaki

      Stathakis told this excuses Efimerida ton Syntakton, Bloomberg stole it.
      Greece as a hub for Chinese consumers luxury trash for the Uber-Europeans in the North, comes in Pireus, gets on “high-speed-fright-train” to Belgrad aso and Greece has nothing from this, if the workers refuse to slave on Chinese levels they get in others – illegal labour forces in COSCO area is uncontrollable, just like Chinese slave sweatshops in Italy!)
      Why will border islands now be exempted from the higher VAT? Who owns the hotels close to these islands on Turkish shores and who owns the airports in Greece? The same who will not pay tax in Greece and buy new airports and perfect train-networks and this is no investment at all. Investment would mean to let 300.000 people build wooden-frame wind-mills to get independent

  2. This is all BS from Dr Strangelove… In any confrontation and fight if you start to show weakness and fear you just take a bigger beating and the bullys just keep coming more and more.
    Since Tsipras instead of organizing the resistance after the overwhelming NO decided to go for total capitulation now he will just keep taking more and more punches.

    • What you are saying is that in the final analysis Tsipras was all mouth and no trousers.
      A strong leader would have walked away and worked to re build….which is not going to happen while clinging illogically to the Euro.

      • No, we know that Tsipras tried to walk out at 6 am, saying it was over, there would be no agreement. The European Commission intervened — because they could see the immediate collapse of the EU and all their jobs and pots of money disappearing.

        This is now the second time that Greece has taken a severe hit for the sake of Europe (and that’s excluding world war 2). Of course, it is possible that the Greek people will not tolerate the second onslaught, while the avaricious Germans count up “their money” earned off the backs of Greeks, Italians, Spanish, Portuguese and Irish.

        • He should have kept on walking. Why tear the country apart and endure perpetual recession for them. Varoufakis is right. This is nothing to do with economics. They never had any intention of negotiating a fair deal. They are all puppets of Germany. The EU is not a collaboration of equals. It is a dictatorship.

          • Giaourti Giaourtaki

            Support received Schäuble from German President Father Gauck, the supposedly tough stance of Germany towards Greece he defended in Ireland: “I do not share this criticism, such a BIG COUNTRY must also allow itself considerations for different solutions”
            And CDU leader Strobl: “The Greeks got long enough on our nerves”
            Iran doesn’t need its nukes any more and they have also cheap oil, Tsipras should ask for both

  3. Giaourti Giaourtaki

    What, who announces “Reichskassenschein”?
    Out came also more details of how the Berlin-Mafia thinks about their privatization racketeering. On the one hand they are always about that “Greece is living beyond her means” but now one can hear that it will make sense for investors to buy the waterworks and “adjust the water-prices to the normal European level”
    Funny to call extreme right-wing populists and former Junta-supporters arch criminals, I remember then Lafontaine was announced candidate for chancellorship Schäuble said it must be a joke cuz Lafontaine refused to sing the German national anthem.

  4. This time I would not be too suspicious. The banks are closed, capital controls are very strong and can stay some months, money can flow only after some laws are adopted in the parliament etc. I hope it would be IOUs in style of California : they were emitted and after some time – money was paid in usd, not in devalued usd. Big austerity and Grexit at the same time – that is too much.
    But of course it could be understood as further humiliation for some time.

    • Giaourti Giaourtaki

      Regarding Mr Doras of voria.gr inside Greece there is already a parallel currency, electronic money, only Eurobank limits to 10.000 and Pireusbank to 15.000

  5. “IOU’S as a solution to domestic payments” says Wolfgang Scheauble.
    IN FACT IT IS A GREAT IDEA
    BUT NOT IOU’S
    GREECE SHOULD RE-INTRODUCE THE DRACHMA AS THE DOMESTIC CURRENCY INSTEAD.
    AND ALSO OFFER THE DRACHMA IN BUSINESS & TRADE INTERNATIONALLY AS AN ALTERNITIVE AS WELL.
    LET THE MARKETS DECIDE WHICH CURRENCY THEY PREFER.
    IT IS QUITE VIABLE & LOGICAL & IT WOULD WORK VERY WELL.
    LIKE A BLACK MARKET CURRENCY DOES.
    As someone who understands & see if I am not correct.