Greek Prime Minister Papademos intends to implement the existing exit strategy to save Greece from further austerity, imposed by the ECB/IMF as part of the bailout agreement.
Last week we broke the news that such a plan was and had been in existence, as confirmed by two unanimous sources close to Mr. Papademos.
What remained unknown was whether Greece would use the exit strategy as a negotiating tool to further its demands with the IIF or to get more concessions from Germany or whether the plan would be implemented to return Greece to its legacy currency and voluntarily step out of the Eurozone.
On Sunday evening we received confirmation from a previous senior aide to Mr. Trichet, ex-President of the ECB, that such a plan was drafted last year coinciding with Mr. Papandreou’s announcement of a national referendum.
The referendum was ultimately cancelled leading to Mr. Papandreou’s resignation and the plan was shelved, according to our source. The change made room for Mr. Papademos to step in and the plan was brought to the surface again to ensure the timely implementation for Greece to voluntarily withdraw from the Eurozone.
According to the same source, Mr. Trichet was also instrumental in ensuring the voluntary removal of Mr. Berlusconi to make room for Mr. Monti as the new Italian Prime Minister.
It is not a coincidence that the person who made it possible for Greece to join the monetary union would also be given the task to orchestrate an orderly exit.
What is remarkable is that what appeared to be an effort to save Greece from default or technical bankruptcy now appears to have been a smoke screen and a very expensive one as well.
This may not be good news for Greece since being isolated with a very weak legacy currency that is staring serious devaluation in the eye, not to mention economic weakness due to a lack of exports and very expensive imports, but there may be some good news for Germany and the remaining Eurozone members.
Spain and Italy will benefit firsthand since they will no longer be encumbered by the Greek financial turmoil.
This opens the door for Germany to lead a stronger and more stable Eurozone which will bring back the confidence in and strength of the euro as an important international currency.
The timing of Germany’s proposal to strip the Greek parliament from any and/or all financial, monetary and budget decisions, as reported by the Financial Times, is more proof that powers were at work behind the scenes long before the plan resurfaced.
It is not known at the time of writing exactly when the plan will be announced or when execution of such will take place, but it is expected to be on or around the planned March 1st meeting of the EU Finance Ministers.
Written by Nick Doms © 2012, all rights reserved.
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