"For around the last year, a 'Greece Task Force' appointed by German Finance Minister Wolfgang Schauble has been developing a possible exit resolution. Isolated from the rest of the German Finance Ministry, the group is working out models and scenarios on the potential consequences of a withdrawal, both for the rest of the euro zone and for Greece itself.
"The task force's most important conclusion is that a large share of Greece's debt is now held by public creditors, most notably the ECB. According to Finance Ministry officials, the Frankfurt-based monetary watchdogs hold between -- 30 billion and -- 35 billion in Greek government bonds.
"These holdings become dangerous if Greece stops servicing these debts because it is no longer receiving any money from the European bailout funds. This is why crisis experts in Berlin have dreamed up a particularly cunning solution for the problem. They don't want to completely cancel the tranches from the aid packages the Greeks are scheduled to receive. Instead, under their proposal, the country would have to do without the portion of the aid that was meant to flow into the government coffers to cover pensions, public sector wages and other expenses. But the billions that are earmarked to service the bonds held by the ECB would be paid into a special account, thereby averting problems at the central bank. In return, the ECB has already signaled its intention to resume its program to buy up the government bonds of other debt-ridden countries if they come under pressure following a Greek withdrawal from the euro.
"The mechanism essentially amounts to the European Financial Stability Facility (EFSF) paying for up to -- 35 billion of Greece's sovereign debt. The last bond held by the ECB matures in 2030." ("Time to Admit Defeat --Greece Can No Longer Delay Euro Zone Exit," Der Speigel)
So, a plan is in place to deal with Greece's exit from the eurozone. German policymakers have made every effort to protect themselves and to make sure that Greece does not become the next Lehman Brothers. Counterparties and bondholders have been compensated, the ECB is on "stand by" with emergency funding, and -- if need be -- the central bank will resume its sovereign bond purchases (QE) to keep yields within a sustainable range. There is even a plan to assist Greece in its transition back to the Drachma, although the details have not yet been released. All that's left, is for Greece to refuse to follow through on its bailout agreements -- which means a rejection of the structural adjustment program laid out in the reviled 43-page Memorandum of Understanding (MOU). The troika will use that as an excuse to cancel all future loans and to kick them out of the union.
This is what's in store for Greece, banishment; because it refused to cut payrolls and pensions deep enough, because it spent "too much" on life-saving drugs or failed to lift constraints on selling restricted baby food, or because it protected its state-owned enterprises, or didn't dismantle social security fast enough or crush its unions with sufficient gusto or auction off its national treasures to foreign capital according to plan. Now, after two straight years of penalties, pillaging and plunder, Greece will be removed from the EZ and left to fend for itself.
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