Final Exam Crunch Time

The Showdown in Europe is now into final exam crunch time.

Greece’s Yanis Varoufakis heads for showdown talks with his fellow eurozone finance ministers on Wednesday afternoon, buoyed by a strong endorsement from parliament for the government’s hardline stance to renegotiate its bailout.

Alexis Tsipras, Greece’s prime minister, told MPs after they passed a vote of confidence in his legislative programme in the early hours of Wednesday that the government would not yield to demands from other European capitals over its aid programme “no matter how much” Wolfgang Schäuble, the German finance minister, demanded it.

“We are not negotiating the bailout; it was cancelled by its own failure,” he told parliament before winning the vote with the support of 162 votes in the 300-seat chamber.

“I want to assure you that there is no going back. Greece cannot return to the era of bailouts.”

On Tuesday Mr Schäuble appeared to dismiss the Greek government’s plans to seek a bridge loan, issue new short-term treasury bills and renegotiate some terms of the €172bn bailout out of hand, saying he expected Athens to live up to the terms of the existing deal before he would consider new proposals.

“We are not negotiating a new programme,” Mr Schäuble said. “We already have a programme.” Mr Schäuble added that if Greece did not want a new rescue programme “then that’s it”, though he did not elaborate.

Cancelled by Failure

Animosities and German arrogance are so high, the best thing for Greece to do is tell the rest of the eurozone, to “bleep off”.

That was my position years ago actually, but acceptance in Greece is now sufficient to allow just that to happen.

Thankfully, kick-the-can compromises are no longer acceptable to Greece.

Life After Eurozone

The fear for Germany should not be of Grexit per se, but rather a successful exit. If Greece can leave and be better off, then so can Italy, Spain, Portugal, and Ireland.

Let Germany and France have the euro. Amusingly, put on those terms, Germany would likely not want it either.

Meanwhile, the best thing to do for all involved is to relax, take a deep breath, and work out a plan as to what will happen when Greece defaults. If that means Grexit, then so be it. I suggest the world will not end.

For now, Greece says it cannot and will not pay back debt obligations. Germany says Greece will. Let’s see who is right.

Mike “Mish” Shedlock