Greek debt to Germany written off in exchange for Greece exiting the eurozon
Wednesday, 24 June 2015
The head of a leading think tank has proposed that the Greek debt to Germany is written off in exchange for Greece exiting the eurozone. The proposal by Hans-Olaf Henkel, who is also an MEP, come on the eve of a key summit in Brussels on Thursday where the Greek debt will be top of the agenda.
Henkel, who is vice president of New Direction, The Foundation for European Reform ,said, “The only hope for the Greek economy to recover is a euro exit combined with a debt write-off. Otherwise, the Greek society will remain trapped in a humanitarian crisis caused by the defence of the euro at all costs” he added.
“Nobody believes that Greece is able to repay its debts anyway, so let’s be honest and face the reality. It costs the German taxpayer nothing, as the money is gone anyway.” Reports say billions of euros have been withdrawn from Greek banks in the past week.
The summit on Thursday comes amid attempts to prevent Greece defaulting on a €1.6bn IMF loan repayment.
The European Commission, the IMF and the ECB are unwilling to unlock bailout funds until Greece agrees to reforms.
Henkel is a former CEO of IBM Europe, a former head of the German Federation of Industries (BDI). He makes his proposal in a letter to Wolfgang Schäuble, the German Minister of Finance, and Yanis Varoufakis, the Greek Finance Minister.
Henkel writes, “Due to the significance of the challenges facing the Greek government, I have resolved to address you personally. The Greek government is absolutely right in arguing both that austerity has had disastrous effects on Greece, and that debt write-off is necessary. The scale of damage to the social fabric of Greek society wrought by austerity has been vastly underreported in the Western media.
“As someone with a deep affinity for the cultural heritage of Greece, I find the state of economic misery in Athens – which I consider a humanitarian crisis – truly heart-breaking.”
Henkel , who is an MEP for the AfD party and Vice-Chair of the European Conservatives and Reformists Group, goes on,”The story of the collapse of the Greek economy is perhaps best told through the staggeringly high unemployment figures, which stand at 25% generally, and at twice as high levels among the youth. The sharp contraction in GDP and slumping industrial output continue to produce a great tragedy.”
He says that austerity as a means of restoring Greek competitiveness has been an “utter failure”, adding, “A debt write-off is a necessary option, and contrary to many of my compatriots, I believe that Greece must be offered a write-off of its debts to Germany.
“However, an escape for Greece from the trap of economic misery is only possible if light is thrown on the whole truth about the causes of Greek tragedy. This is especially true with regards to a full analysis of the devastating consequences of the euro for the Greek economy, which need to be recognized. The membership in the euro has turned out to be a trap for Greece. The euro has been too strong a currency for Greece and austerity was never the right answer.
“The only way for Greece to return to the road of recovery is leaving the euro. The desperately needed devaluation would follow, which would need to be coupled with a debt write-off, so that the Greek economy could have a new start. Thus, the economic conditions for necessary reforms would finally emerge.”
The letter concludes, “In consequence, I would like to propose that Greece should be offered a write-off to its debts to Germany, if the Greek government decides that it is time to break the vicious cycle created by the European Monetary Union, and leave the euro. Greek society has suffered unimaginably, and does not deserve to endure any pain more for the sake of a failed monetary union.”