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Europe has a Financial Nuclear Option that Nullifies the Greek Blackmail

Politics / Eurozone Debt Crisis Jul 08, 2015 - 11:44 AM GMT

By: Atlantic_Perspective


Since the Syriza government took power a few months ago, Alexis Tsipras backed (or controlled) by Varoufakis, assumed a defiant position based on the assumption that “We owe Europe so much money that we´ve got you on our hands. If you (Europe) want to see some of that money back, we determine the rules”.

This is pure blackmail. But Europe has a much more powerful trump card up its sleeve.

As written before in The Atlantic Perspective, Greece can´t pay back all its debt and a write down is a mathematical must. You can find our specific proposals to solve the Greek crisis once and for all, in the following articles:

The definitive solution to the Greek crisis

Delusional Greeks commit mass Hara-Kiri (read the section titled “The card that was never played”)

But instead of using the sensible, logical and effective approach we propose, both the Greek government and the European leaders chose to adopt a confrontation policy, fuelled by ideology. Christine Lagarde wanted grown-ups on the table. That message should have been be directed to Europe too.

The ongoing negotiations are a farce

In a perfect world, both the Greeks and the Europeans would negotiate in good faith, trying to get a deal that serves the interests of both sides in a balanced manner. Unfortunately, neither side is negotiating in good faith.

The Germans are only concerned with not allowing a debt pardon precedent, while the Greeks just want the debt to go away and that´s it. Neither side is actually negotiating a sensible solution to the current situation.

The ongoing negotiations are not about the Greek situation at all. Greece is just a pawn in a much bigger game. Germany can´t let Greece off the hook, as that could result in a wave of leftist governments taking over Europe. The Spanish and Portuguese elections are just around the corner. Risky, risky...

The European Union can go on without Greece. But if Spain falls, then the domino effect begins and the European Union would quickly unravel. This is a not a good time to be Greek, or European for that matter.

Europe´s financial nuclear option

If and when Alexis Tsipras basically tries to bully Europe into accepting whatever nonsense he wants, Europe has basically two options:

1. Accept Tsipras proposal and take the risk of the far-left taking over Europe. Soon, most European countries would be Greece.

2. Saying “NO” to Greece and losing the money lent to Athens. Losing? Maybe not...

Europe has a financial nuclear option: printing back the Euros lent to Greece.

In case the negotiations reach a deadlock, Europe can tell Mr Tsipras: “You have zero leverage over us. Zero. What we lent you and “lost”, we can just print back. You are the weakest link, bye-bye”.

Of all the billions of Euros lent to Greece, surely a good portion came back to Europe in the form of Greek imports, investments, capital flight, etc. The European bureaucrats and the army of statisticians at Eurostat can determine how much that was. Whatever amount did stay in Greece, Europe can just print back. Greek debt problem solved. That´s the Atlantic Perspective.

Copyright © 2015 by The Atlantic Perspective.

The Atlantic Perspective is an opinion blog, aimed at explaining and providing solutions to some of the world´s most relevant issues.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


08 Jul 15, 18:52
Whose Nuclear Option? The Greek's? The IMF & ECB's?

Lest I'm mistaken, the Greeks happen to have a printing press that can print Euro notes, do they not? On that basis alone, I would say that the leverage is decidedly on the Greek side. Dare the IMF & ECB entertain that (nuclear) option?

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