European Finance Ministers Planned to “Crush” Greek Economy in Quest for Revenge

European finance ministers conspired to “crush” the Greek economy and punish Greece for overspending, according to leaked documents from former U.S. Secretary of Treasury Timothy Geithner.

The Financial Times, a London-based newspaper, in which Mr. Geithner describes a meeting of the Group of Seven (G7) in February 2010, republished the leaked documents. According to the documents, finance ministers from European countries entered the meeting and planned to punish Greece for overspending before the financial crisis of 2008.

European finance ministers conspired to “crush” the Greek economy and punish Greece for overspending, according to leaked documents from former U.S. Secretary of Treasury Timothy Geithner.

The Financial Times, a London-based newspaper, in which Mr. Geithner describes a meeting of the Group of Seven (G7) in February 2010, republished the leaked documents. According to the documents, finance ministers from European countries entered the meeting and planned to punish Greece for overspending before the financial crisis of 2008.

“We’re going to teach the Greeks a lesson. They are terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” Geithner describes the European ministers, adding that the finance ministers “wanted to take a bat to them [the Greeks]” for “borrowing all this money,” adding that the European ministers “were mad and angry.”

Medicine or Retribution?

Domestic anger that German politicians tried to punish Greek profligacy before 2008 has fueled part of the political resistance towards European economic integration in Greece. German politicians and bankers have insisted that austerity measures were necessary medicine to heal the Greek economy. Geithner’s leaked documents argue that European policymakers were more interest in retribution than in saving the Greeks.

In 2011, German banks owned over $22.7 billion in Greek sovereign debts, making Germany the second largest creditor to Greece. French banks were the largest creditor, with $56.7 billion in debts. A bailout of Greece, tersely decided, made upon on the condition that new austerity measures would reign in government spending. Germany has encouraged austerity become the norm for peripheral Eurozone nations, including Italy, Spain, and Portugal as well as Greece.

Since those austerity measures, Greek youth unemployment has risen by nearly half and Greek GDP growth has remained negative. Greek youth unemployment remains over 50%.

Growing frustration and anger towards both the European Central Bank and German policymakers in Greece have raised the possibility of Greece exiting the Eurozone. Former chief economist of Deutsche Bank Thomas Mayer said in an interview last week that Greece is likely to leave the Eurozone.  This will have a domino effect where peripheral European economies attack the common European currency.  Mayer believes Germany will also exit the euro.

“Gain Precious Time”

In 2010, Deutsche Bank CEO Josef Ackermann worked with German and French policymakers to recapitalize the Greek government through a bond-purchasing program. The bailout aimed to save Greece from a depression.

Speaking to Greek newspaper To Vima, Ackermann last month emphasized that German policymakers and his bank wanted to bail out Greece, but were unable to because of a backlash from German voters who opposed supporting the Greeks.

“The project was meant to gain precious time and to soften the sovereign debt crisis, not to prevent it altogether. Moreover, it involved the support of the German and French governments. After the bank bail-out still fresh in taxpayers’ minds and in view of upcoming important regional state elections the government in Berlin was unwilling to participate, though,” Ackerman said.

That bailout never happened, however, and Geithner’s leaked comments suggest that it was less due to voters’ interests and more a result of policymakers’ thirst for revenge.