German Chancellor Angela Merkel has complained to President Barack Obama about the bugging of her mobile phone by America’s infamous National Security Agency. In fact, according to whistleblower Edward Snowden, the NSA has access to just about everyone’s emails and phone conversations.
We’ve been passed a transcript of a three-way conversation between Merkel, Mario Draghi, the head of the European Central Bank in Frankfurt and Christine Lagarde, head of the International Monetary Fund, who was in Washington at the time. The call took place in May 2012 when the Greek government was close to collapse over its plans for further drastic cuts in public spending before a new bail-out was agreed.
Merkel: What are we going to about Greece? German taxpayers are fed up with their attitude. We can’t keep bailing them out if they are not going to make sacrifices. If they won’t sack civil servants and cut their pensions, we should throw them out of the euro.
Draghi: Madame chancellor, with all due respect, we can’t just eject them from the euro because it could easily lead to the domino effect.
Merkel: What is a domino?
Draghi: It a piece of black plastic or ivory used in a game, it is oblong shaped and has white dots on one side. You stand them on their end, next to each other. If you push one over, the others will fall too. This is called a domino effect. Many wars start this way.
Lagarde: Madame chancellor, I think what Signor Draghi is saying is that if Greece leaves the euro, others may consider that the single currency is only for rich countries. Others like Spain and Portugal may also run into difficulties and the euro could collapse.
Merkel: Ah, so. We keep Greece in the euro but insist they cut their spending before they get more bail-out funds. Is that correct?
Draghi: The difficulty is that it’s hard to see what how they can reduce their spending much more. I am told that the government has run out of money to pay for imported medicines and that hospitals cannot pay their electricity bills. We may have to lend them more money so that they can repay the banks the interest on the loans they gave them in the first place.
Merkel: We have to do something. Tourists from Germany are being abused when they go on holiday in Greece. The Greeks seem to blame us for their problems yet we have gone out of our way to help them. Perhaps they could sell the Acropolis or the Palace of Knossos? That would raise some money, surely?
Lagarde: Yes. I know some hedge funds here in Washington that would buy these monuments and lease them back to the Greeks. There must be many more temples and palaces that could be sold in this way. We should ask their government to draw up a list. We have to stand shoulder to shoulder over Greece. Other countries must know that if they get into debt that the most important thing is saving the banks and the financial system. These are our priorities.
Draghi: Many European banks are still in some difficulties over the excessive debt on their balance sheets. Protecting them has to be top of our agenda.
Merkel: Agreed. So we will tell the Greek government to, how do you say, swallow the medicine because in the long run it will cure them! By the way, who do you think will win the European Champions League final in Moscow [between Bayern Munich and Chelsea]?
Draghi: It won’t be a Greek team!
Lagarde: Nor a French one!