Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

the Syriza government wanted to gain purchase on the debt negotiations, it needed a threat of its own that would restore the risk of financial contagion. Varoufakis believed that a wrinkle in the bailout agreement of 2012 combined with the mounting wave of nationalist resentment in Germany gave Greece the leverage it needed.30 On the books of the ECB were 30 billion euros in bonds purchased under Trichet’s SMP program. These were left untouched by the 2012 restructuring and they were under Greek law. If Greece unilaterally defaulted on those bonds, it would inflict severe losses on the ECB, highlighting the dangers involved in bond buying and more or less forcing the German right wing to reopen the question of the legality of QE. With QE’s legal foundation in question, confidence would crumble. The firewall would be down. The entire eurozone periphery would be in peril once more and the Eurogroup would have to take Greece’s demands seriously for fear of panic spreading through the markets.