As ThePressProject reported in March, a memo in Hillary Clinton’s declassified emails reveals that the German government had been preparing for the possibility of the anti-austerity Syriza party being elected in Greece as early as May 2012. The memo, viewable through WikiLeaks’ Clinton email archive, illustrates the concern with which German Finance Minister Wolfgang Schäuble viewed the prospect of a Greek exit from the eurozone (a “Grexit”) ahead of the June 2012 legislative election. Questioning Syriza’s commitment to the euro, Schäuble laid out two contingency plans to manage the scenario, neither of which would be favorable for Germany.
According to the memo, Schäuble and “other financial officials in Berlin, London, and Brussels” increasingly viewed the elections as a “plebiscite on whether or not Greece wants to remain in the Euro-zone” despite Syriza’s insistence on keeping Greece in the eurozone if elected. Schäuble, seeking to avoid a Grexit at all costs, proposed that Greek voters should “bear the consequences of their actions” if they ever elected a Syriza-led government. This was because Germany’s two options in the event of a Grexit would consist of either a “European Redemption Pact,” which the Merkel administration had long vehemently opposed, or a drastic shrinkage of the eurozone to expel every member with a budget deficit.
The first option would entail taking all debts owed by eurozone members that exceeded 60 percent of GDP and transferring them into a redemption fund financed by joint bonds issued by the currency union as a whole. As former Greek Finance Minister Yanis Varoufakis points out, the plan would almost certainly have been rejected by Italy and Spain, who would have been forced to carry out austerity on the same scale as Greece for at least 20 years in order to meet target budget surpluses. Schäuble, viewing the proposal as the lesser of two evils, had warmed slightly to it and was attempting to persuade Merkel to consider it.
Shrinking the eurozone, on the other hand, would have courted similar controversy particularly from France, which would have been among the countries forced to revert to using its own currency. The memo notably describes French President François Hollande and German Chancellor Angela Merkel as having irreconcilably “divergent views on the roles of growth and austerity in resolving the crisis.” The only other possible outcome in Schäuble’s opinion was “a complete collapse of the currency union,” which would have been “unacceptable for Germany” given that a new deutsche mark would be much more valuable than the euro and severely undermine the competitiveness of German exports.
Two separate conclusions can be drawn from these revelations. One, as Varoufakis emphasizes, is that the Greek government wasted — and would go on to pay a hefty price for wasting — a perfect opportunity to push for debt restructuring and the reduction of budget surplus targets, knowing full well that Schäuble and other European financial officials would want to prevent a Grexit at all costs. Instead, Greece would go on to pass a seventh austerity package the following November to meet the terms of a previously agreed bailout worth €31.5 billion.
The other key implication is that the troika had long premeditated its efforts to coerce the Syriza-led government into submission. In fact, its blatant disregard for Greek democracy — or indeed any form of rational economic debate — only grew stronger as its officials began to regard Greece as a weak link whose removal, rather than creating a domino effect leading to its disintegration as other crisis-hit countries followed its example, would instead help to strengthen the currency union. Whereas Brussels and Berlin had been desperate to avoid a Grexit while the eurozone was on the brink of financial collapse in 2012, they were clearly convinced by the time Syriza was elected that the currency union could be better off without Greece. Schäuble, having vowed to make Greek voters “bear the consequences” for electing a Syriza-led government, duly delivered on his promise.