Is Merkel Awaiting a Green Light for a Greek Default

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In the latest interview, German chancellor Angela Merkel said that a “Greek default would destroy faith in Europe”. Very strong words that repeat the stance that Germany objects a Greek default. 

But in the same interview, she provided an interesting hint that goes well with the talks about a preparation for a Greek default.

Speaking on German television with Guenther Jauch, Merkel also leaned on the IMF regarding Greece from a Reuters report about the interview:

As long as the IMF was convinced Greece’s debt was sustainable, then she supported that position, she said.

Using the logic proposed here, Merkel will change her mind if the IMF changes its mind. So if the IMF gives its OK for a default, Germany will go along.

And yes, the headline talks about a destruction of faith and also includes her detailing that if Greece defaults, “not a single person would put their money in Europe”.

Merkel recently shrugged off comments by the FDP minister Philipp Roesler about a Greek default “not being taboo” any more. The headlines continue the no-default stance, but hints about accepting it are now seen.

Well, this might already be in the works. Reports that came from the IMF meetings in Washington suggested that the IMF is working on plan in which Greece will default in 6 weeks (first week of November),.

This time frame will reportedly be used to get the safety net ready, for ringfencing European banks and other countries, such as the “too big to bail” Italy and France.

This quote by the head of Europe’s largest power sounds like the beginning of a preparation for the German public to a Greek default, a shift in policy that is long awaited.

What do you think?

Philipp Roesler

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

4 Comments

  1. Yep, I think you’re right Yohay. All the headline pieces fit together in that direction, makes sense. It’ll be a six week long frog-boiling event, in the classic sense. Should be interesting to watch.

    Who knows, maybe it will even make last month’s “waiting for US debt ceiling ratification” seem like a mild comedy by comparison. 🙂

  2. Thanks! I’ve seen this interview. Quite amusing! Merkel has to make really difficult choices…