Wolfgang Schaeuble, from Grexit to debt deal

One of the key figures of the 2009-2018 Greek debt crisis, Germany’s former finance minister Wolfgang Schaeuble, died on Tuesday. It is a development that appears almost symbolic in this country, as the deep wounds inflicted on its economy during that period, leading to a loss of a quarter of its output, have gradually started to heal.

A firm believer in austerity, Schaeuble was a controversial figure in Greece, regarded with contempt for siding with the International Monetary Fund, which he saw as the only institution capable of implementing the right policy mix of fiscal adjustment, over the European Commission, which he considered too lax. And that mix basically came down to internal devaluation, meaning a cheaper – and poorer – Greece.

The truth, of course, is that Schaeuble’s belief in austerity was not restricted to Greece but also applied to his own country. His comment two years ago that the Germans should deal with the impact of the energy crisis by wearing two sweaters is indicative.

But what remains etched in Greeks’ memories more deeply than anything is that Schaeuble twice recommended that the country should leave the eurozone, in 2011 and 2015. The German economist believed that Greece had no place in the common European currency bloc and, according to a lenient interpretation of his stance, was testing the political system’s ability to respond to its demands.

His first suggestion for Grexit was made on the sidelines of an informal meeting of EU finance ministers in Wroclaw, Poland, in September 2011. The incident has been described by Evangelos Venizelos in his book “Ekdoches Polemou 2009-2022” (“Versions of War” 2009-2022). In the second basement of the Monopol Hotel, sitting in the dim light of an empty bar that had been opened just for the occasion, Venizelos, then deputy prime minister, and George Zanias, one of Greece’s chief negotiators for the debt crisis, were shocked to hear Schaeuble say, “Let’s discuss the exit of Greece from the euro.” The German finance minister went on to outline what this would entail, describing a situation where the country’s banks would be closed, all trade would be halted, and essentials like food and medicine would be brought in by air. Venizelos responded with a categorical “No.” “We will not thrust democracy into a crisis; we will not impoverish our people,” he said.

Schaeuble returned to the Grexit idea in 2015, putting it outright in May to his Greek counterpart at the time, Yanis Varoufakis, and on the table of the EU finance ministers’ meeting in July, as then prime minister Alexis Tsipras was attempting to reverse the outcome of the public referendum on a new bailout, and Euclid Tsakalotos, freshly appointed to replace Varoufakis, promised a new program, effectively the third memorandum. During that tense, July 10 marathon session of the Eurogroup – described by its then president Jeroen Dijsselbloem in his book “The Euro Crisis: The Inside Story” – an email came in from the German Finance Ministry proposing that Greece should take a “time-out” from the eurozone in exchange for a debt write-off. The same memo also outlined a proposal for the creation of a fund that would be based outside Greece and beyond Athens’ control, containing assets worth 50 billion euros. German Chancellor Angela Merkel, however, expressed her desire to see Greece remain part of the euro family, and Grexit was narrowly averted.

Among Greek politicians and negotiators during those tough years, however, Schaeuble will also be remembered for his active role in regulating the Greek debt, a challenging task whose benefits are being felt to this day.