Leaked transcripts of discussions of Tim Geithner, the former US treasury secretary, published in the FT’s Brussels blog reveal that EU leaders were obsessed with punishing Greece at the height of the Eurozone crisis in 2010.
The 100 pages of transcripts obtained by Peter Spiegel were of interviews Geithner gave to assistants preparing his book.Stress Test - in which he revealed that in 2012 German Finance Minister Wolfgang Schaeuble had presented him with a plan to kick Greece out of the eurozone. This, he said, would appease German voters and terrify Europe.
In the transcripts, Geithner recalls a meeting of a group of seven finance ministers in the remote Canadian town of Iqaluit – the first time he met his German counterpart Wolfgang Schäuble – held in February 2010:
“The Europeans came into that meeting basically saying: ‘We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them’”.
Geithner said he told them:
“You can put your foot on the neck of those guys if that’s what you want to do. But you’ve got to make sure that you send a countervailing signal of reassurance to Europe and the world that you’re going to hold the thing together and not let it go. [You’re] going to protect the rest of the place.”
“I just made very clear to them right then. You hear this blood-curdling moral hazardy stuff from them, and I said: “Well, that’s fine. If you want to be tough on them, that’s fine, but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece and that’s going to require, you’ve got to make sure you’re putting enough care and effort into building that capacity to make that commitment credible as you are to teaching the Greeks a lesson….”
He added that EU leaders were incensed with the Greeks who had embarrassed them because ‘they had lied to them’.
“They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and they were like: ‘Definitely get out the bats.’ They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fare that was in its early stages. There were a lot of dry tinders.”
This explains, according to the Zero Hedge, “why Greece now has all the leverage to do nothing and to demand infinite bailouts from Europe”.
Geithner served as US Secretary of the Treasury under Barack Obama from 2009 to 2013.