The Default Line: THE INSIDE STORY OF PEOPLE, BANKS AND ENTIRE NATIONS ON THE EDGE by Faisal Islam
Authors: Faisal Islam
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embassies to distribute to holiday islands, and even for the evacuation of tourists from the Greek islands. German tourists pulled their holiday bookings.
In London, the Eurozone Contingency Committee sat at the Treasury, featuring Mervyn King, Adair Turner and cabinet ministers William Hague and Vince Cable, chaired by Chancellor George Osborne. ‘Throughout 2011–12 we were very worried about the Eurozone precipitating a UK financial banking crisis again: we created an emergency committee on Eurozone contingency planning, which for a while was meeting every other week, even every week.’
Strikingly, German politicians and leading members of the ECB popped up in the days after the inconclusive May election to say that a Grexit would be ‘manageable’, as it would ‘do more harm to Greeks than the Eurozone’. But the more Greece’s hard-left parties were attacked from abroad – and by the discredited mainstream parties in Athens – the more popular they became. In other European capitals officials believed that Syriza’s analysis was correct. A Greek exit would lead to uncontrolled contagion, and leave Chancellor Merkel with little option but to move immediately towards sharing Eurozone debts with a eurobond (see here ). Syriza were open about their plan to play chicken with Greece’s euro membership. If they had been miscalculating regarding Germany’s patience, Greece would have been de facto out of the euro rather quickly if Syriza had won the election re-run.
And what would exit have meant? All kinds of agony. First, Greece’s European bailout money would be cut. The government would be unable to pay pensions and salaries with euros, and would have to print an alternative currency or special IOUs pretty quickly. A government minister, Makis Voridis, pointed out that if the fiscal aid stopped, ‘It will almost be a necessity to go back to the drachma in order to be able to pay. So no one will force us out. But probably the Greek government, if there is one , will have to go back to the drachma… that is the danger.’ But many ordinary Greeks could scarcely believe that the pain could be any worse than being internally devalued. Haris Manolis from the steel factory says many more Greeks are willing to contemplate the return of their own currency: ‘Yes, the drachma, or whatever you want to call it. We survived 5,000 years with the drachma but in ten years in the euro we have problems, like we’re going to die.’ In contrast, his friend says that he wants to stay in the euro to protect stability. But when asked if he’d keep the euro even if there is no change to the EU austerity plan, he changes his mind.
Many in Greece were not prepared to wait for the dénouement of this drama, and began evacuating their euros before they could be converted into devalued drachmas. The Athens Airlifts of large bundles of euros restarted. All the time, a select band of Greek technocrats were well aware of how Greek social stability was dependent on the cash machines continuing to function. While the cash exodus got underway, the European Union and the Greek finance ministry had already started to make contingency plans for a managed euro exit, involving controls of capital and of borders.
The second election in June became a fight between hope and fear: hope that something would change Greece’s economic misfortunes, and fear of a return to the drachma. Outside some polling stations waited the curiously well-funded foot soldiers of Golden Dawn. Not all were steroid-enhanced skinheads. The ones I met were slightly avuncular, a bit racist and faintly dim. Others were rather sinister, and openly fascist. A student documentary maker, Konstantinos Georgousis, made a film called The Cleaners , following one aspirant Golden Dawn politician around. Migrants were subhuman, the candidate said on camera. ‘We are ready to open the ovens,’ he went on. ‘We will turn them into soap. We will make lamps from their skin.’
In London, the Eurozone Contingency Committee sat at the Treasury, featuring Mervyn King, Adair Turner and cabinet ministers William Hague and Vince Cable, chaired by Chancellor George Osborne. ‘Throughout 2011–12 we were very worried about the Eurozone precipitating a UK financial banking crisis again: we created an emergency committee on Eurozone contingency planning, which for a while was meeting every other week, even every week.’
Strikingly, German politicians and leading members of the ECB popped up in the days after the inconclusive May election to say that a Grexit would be ‘manageable’, as it would ‘do more harm to Greeks than the Eurozone’. But the more Greece’s hard-left parties were attacked from abroad – and by the discredited mainstream parties in Athens – the more popular they became. In other European capitals officials believed that Syriza’s analysis was correct. A Greek exit would lead to uncontrolled contagion, and leave Chancellor Merkel with little option but to move immediately towards sharing Eurozone debts with a eurobond (see here ). Syriza were open about their plan to play chicken with Greece’s euro membership. If they had been miscalculating regarding Germany’s patience, Greece would have been de facto out of the euro rather quickly if Syriza had won the election re-run.
And what would exit have meant? All kinds of agony. First, Greece’s European bailout money would be cut. The government would be unable to pay pensions and salaries with euros, and would have to print an alternative currency or special IOUs pretty quickly. A government minister, Makis Voridis, pointed out that if the fiscal aid stopped, ‘It will almost be a necessity to go back to the drachma in order to be able to pay. So no one will force us out. But probably the Greek government, if there is one , will have to go back to the drachma… that is the danger.’ But many ordinary Greeks could scarcely believe that the pain could be any worse than being internally devalued. Haris Manolis from the steel factory says many more Greeks are willing to contemplate the return of their own currency: ‘Yes, the drachma, or whatever you want to call it. We survived 5,000 years with the drachma but in ten years in the euro we have problems, like we’re going to die.’ In contrast, his friend says that he wants to stay in the euro to protect stability. But when asked if he’d keep the euro even if there is no change to the EU austerity plan, he changes his mind.
Many in Greece were not prepared to wait for the dénouement of this drama, and began evacuating their euros before they could be converted into devalued drachmas. The Athens Airlifts of large bundles of euros restarted. All the time, a select band of Greek technocrats were well aware of how Greek social stability was dependent on the cash machines continuing to function. While the cash exodus got underway, the European Union and the Greek finance ministry had already started to make contingency plans for a managed euro exit, involving controls of capital and of borders.
The second election in June became a fight between hope and fear: hope that something would change Greece’s economic misfortunes, and fear of a return to the drachma. Outside some polling stations waited the curiously well-funded foot soldiers of Golden Dawn. Not all were steroid-enhanced skinheads. The ones I met were slightly avuncular, a bit racist and faintly dim. Others were rather sinister, and openly fascist. A student documentary maker, Konstantinos Georgousis, made a film called The Cleaners , following one aspirant Golden Dawn politician around. Migrants were subhuman, the candidate said on camera. ‘We are ready to open the ovens,’ he went on. ‘We will turn them into soap. We will make lamps from their skin.’
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