Ten days that shook the euro; how Greece came to the brink

Sun Feb 22, 2015 1:10pm EST
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By Alastair Macdonald and Jan Strupczewski

BRUSSELS (Reuters) - The "rock star" took on the rock. And the rock won.

Germany's Wolfgang Schaeuble, the "immovable object" in the words of one economist, stopped Greece's charismatic new finance minister Yanis Varoufakis in his tracks, forcing Athens to extend a bailout program on Friday on terms its government was just elected to get out of.

It was not just German opposition. The new Greek found itself without a single firm ally among 18 euro zone peers in its drive to reverse austerity and renegotiate its debt pile.

The 10 days it took to strike a deal featured a shambolic round of U-turns, leaked drafts and personal slights while panicked savers withdrew money and pushed Greek banks close to failure, forcing Prime Minister Alexis Tsipras to step in over Varoufakis's head.

More than that, the confusion officials recounted from behind the scenes left mutual trust in such tatters that it casts doubt on whether the four-month bailout extension will lead to an agreement over how to keep Athens solvent.

So short had goodwill become that when Varoufakis sent a letter on Thursday requesting an extension to the bailout he had long resisted, in language that to non-lawyers sounded close to total capitulation, German negotiators quickly shot it down as a "Trojan horse", worded to wriggle out of conditions.

The principal actors played down personal animosities during the talks; Varoufakis took pains to apologize to Schaeuble for a Greek newspaper cartoon that depicted the 72-year-old former tax lawyer as a Nazi demanding to boil Greeks down for soap.

But a series of trips to Brussels to hear about the evils of austerity from the casually dressed left-wing academic blogger - "a bit of a rock star" in the words of Ireland's minister - stretched patience thin.   Continued...

Greek Finance Minister Yanis Varoufakis arrives at a news conference after an extraordinary euro zone Finance Ministers meeting (Eurogroup) in Brussels February 20, 2015.  REUTERS/Eric Vidal