July 27, 2015
In my most recent post, I asked whether the former Greek Finance Minister Yanis Varoufakis was really engaged in brinkmanship as we had all wondered? Or, had he calculated that Greek leverage would be at it’s greatest when there is nothing left to lose?
A must read story on the website of The Telegraph yesterday suggests that this guess was actually correct. Varoufakis was not driving fast towards the cliff, his plan involved driving straight over the cliff!
As I suggested in my post, that would seem to be a good use of a few months, because it would probably have forced a full renegotiation of Greek debt which would have included substantial write offs. It appears that Prime Minister Tsipras was unable to follow the plan towards it’s conclusion. Hence the reason for Varoufakis’ resignation.
As he mentioned in his first interview after leaving the negotiations, he did not think that Greece could be forced to leave the eurozone, so his plan seemed to be to insist on staying in but making Greek the financial situation so bad that writing off debt was a must-do.
Instead, by not following through, the Greek government has accepted a worse deal than it should have been able to agree to months ago and forced the banking system through the wringer for three weeks as well.
All the way means all the way.financialguy