Schaeuble re-chews “Grexit”, ex Greek FinMin reveals Grexit plan of 2011

“It is difficult for Greece to solve its economic problems without the tool of currency devaluation.” Thus spoke said German Finance Minister Wolfgang Schaeuble bringing back his all-time favorite topic, the Grexit.

Speaking at an event in Hamburg, the German finance minister said that back in 2011, he told  then Greek Finance Minister Evangelos Venizelos that he should consider Greece’s exit from the Eurozone for some years, in exchange for a “huge” help package.

According to Schaeuble, the Grexit would hit the country once so that Greek citizens would be spared the endless process of tough austerity measures.

Dr Schauble did not elaborate whether the Grexit would hit the Greek citizens on a sunny day like a tsunami and whether the strike would last one hour, one day, one month or one year. Everything is so easy when one contemplates surrounded by the fresh air of the Black Forrest and the superb wines of Kaiserstuhl.

What he also omitted to tell the German audience is that the ‘huge help package’ would be 50 billion euro in the form of another loan, in the company of tough austerity measures. The German FinMin brought back his beloved Grexit plan in July 2015 – you can read it here.

Ye, former Finance Minister Evangelos Venizelos briefed reporters on the details, terms & conditions of the 2011-Grexit plan of which Schaueble is apparently proud of, and why he rejected them.

1) Return to Drachma would trigger continuous devaluations of the national currency that would amount to 70%.

2) Strict capital controls and enforced converting euro deposits over 3,000 euro into devalued Drachma. “Such monetary change would also mean uncontrolled swelling of the public debt that is in euro as in relation to percentage of GDP, and the cost of servicing the debt,” Venizelos said.

3) Financial support:

1. in form of humanitarian assistance for food, fuel and medicines as Greece would be excluded from international trade.
2. in form of EU Structural Funds that Greece receives anyway as EU member.
3. in form of investment in the sense of easy acquisition of Greek national wealth by foreign funds or by Greek interests that would have capital in euro abroad.”

Comparing Schaeuble’s Grexit plan of 2011 and 2015 and the three Memoranda of Understanding of 2010, 2012 and 2015, one comes to the following findings:

-The enforced internal devaluation due to euro’s inability to be devalued is somewhere between 40% and 45%.

-Capital controls were not avoided

-The sale off of Greek national assets was not avoided.

-Investment is hardly possible due to the ongoing economic instability due to the annual changes in the taxation system. A sidenote: investors do not bring money from their own pockets, they mostly take loans by banks (Greek banks as well) in order to do that.

-the European Commission has deliberately halted the flow of EU Structural Funds to Greece since summer 2014 (PM conservative Samaras). Greece has a right to EUSFs as any other EU member state.

– EC President Juncker promised a humanitarian aid package for Greece (summer 2015) to tackle the humanitarian crisis. I have no idea if the money arrived or not.

What was avoided was the enforced converting for Greeks’ deposits into a devalued currency. This helped millions of Greeks to come through 6 years of economic crisis with high unemployment and recession.

So at the end of the day, with or without Schaeuble’s plan the balance is the same minus the deposits’ conversion.

“A, my name is Schaeuble and I’m always right!”

Greece lost the game the moment ex PM George Papandreou accepted all creditors’ conditions without any negotiations in 2010. the rest is a painful history and a lose-lose situation for Greece with no way out.