Secret German plans for Greece to go bankrupt

 By staff writers From: news.com.au February 20, 2012 4:01PM

Wall Street banks and the German finance ministry are secretly planning for Greece to go bankrupt. Picture: File Source: AP

GERMANY'S finance minister has bowed to pressure to keep Greece afloat despite secretly drawing up plans for the country's bankruptcy.

Wolfgang Schäuble today said Greece was "on the right path" as he publicly supported plans to shovel more money at Greek debts.

EU ministers are today expected to finalise a deal that would write off €100 billion of debt and provide a loan of €130 billion to Greece. Greece has already received a €110 billion rescue approved in May 2010.

Funds would only be approved if the Greek Parliament can push through severe austerity measures, slashing pensions, making it easier to fire staff and cutting the minimum wage by 22 per cent.

Those cuts have led to an increase in the Greek suicide rate, violent protests and rising homelessness.

The rumbling calls for Greece to face bankruptcy come amid fears that even this latest bailout will not be enough to stop the nation sinking further into debt.

Hence the secret plans for bankruptcy.

Officials say Greece’s public debt will still be 129 per cent of GDP in 2020.

Concern about continual bailouts has also reached Wall Street, with rumours circulating that banks are preparing for a “credit event” soon after March 20 - that’s financial jargon used by credit agencies to mean a default or, in even simpler terms, someone unable to pay their bills.

March 20 is the deadline for Greece to pay  €14.5bn to creditors.

Inside Germany there are deep divisions over whether to continue to support Greece.

Bavaria’s Finance Minister Markus Soder said the stability of euro as a world reserve currency was more important than Greece’s welfare.

"It would be better if Greece stepped out of the euro," he said.

Last week, Greek-language business news site  BankingNews.gr, claimed that “the actual position of Germany is that Greece should go bankrupt.”

Calls for Greece to default and leave the Euro have been fiercely attacked by both France and Britain.

French Premier François Fillon said it was "utterly irresponsible" to put the idea of a Greek default into play.

Britain’s Foreign Secretary, William Hague, said it would be a technical nightmare if Greece was forced out of EMU.

"They don’t have the old currency sitting in the vaults ready to distribute. It’s not straightforward to leave the euro. It was built without exits," he said.

But could the Greeks kick themselves out of the Euro?

It’s entirely possible. In April, Greece goes to the polls and there’s a chance the hard Left Syriza party could form government.

"If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma," said Theodoros Dritsas, a leading MP from the Syriza party.

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