The governments of Greece – new and old – screwed up. Other debt-sinner countries are able to borrow at near-zero or negative interest rates, simply taking money from investors with a promise to return it on a given day in the future if investors give it new money to do so. These investors, it must be said, had their brains washed by the ECB and other central banks in order to allow this to happen. But the governments of Greece somehow missed that gravy train.

Now, no one wants to lend Greece money at negative interest rates, least of all the Greeks themselves, who know their governments better than anyone else on the planet and have less trust in it than anyone else on the planet: they’re yanking their euros out of their banks even as the ECB is propping them up with fresh euros that ultimately belong to taxpayers elsewhere.

This weekend, representatives of the “institutions” – the unmentionable “Troika” – are trying the hash out a reform package with the new team from Greece that does not include Finance Minister Yanis Varoufakis, who’d been shoved aside. On Monday, the finance ministers of the Eurogroup will meet in Brussels.

Without an agreement on the implementation of the reforms, Greece won’t get the outstanding relief funds of €7.2 billion. And then what? The government has practically no funds left. Time is running out. Monday is it. The Big Day. Again.

“I don’t see that everything will be solved by then,” German Finance Minister Wolfgang Schäuble said in an interview in the Sunday edition of the Frankfurter Allgemeine Zeitung, one of Germany’s largest papers, throwing cold water on any hopes. He doubted that the Greek government even knew what exactly was going on in its finances.

“Such processes also have irrational elements,” Schäuble warned. “Experiences elsewhere in the world have shown that a country can suddenly slide into insolvency.”

On the principle that a country is slowly zigzagging down that path paved with lots of good intentions, false hopes, and lofty promises and, BAM, suddenly, it’s over. So maybe Monday? Or next month? He refused to nail down a specific point in time.

When asked if the German government has made preparations for such an eventuality, he said:

“There are issues that a prudent politician must not answer. Otherwise there will be misunderstandings. Jean Claude Juncker [President of the European Commission and former President of the Eurogroup] once said that sometimes you must play fast and loose with the truth. For me, these things are more complicated. Therefore, I rather say nothing at all.”

That’s a resounding “yes.” Germany is prepared. The financial markets have no doubts and refuse to get panicky. The German government is going to handle this just fine, they’re saying.

But in August 2013, during the run-up to the general elections in the fall, when the cost of the Greek bailouts to German taxpayers was one of the themes, Schäuble had this to say, thus playing fast and loose with the truth:

“One thing is certain: there won’t be a second debt cut for Athens.”

The first one having been the 70% haircut imposed “voluntarily” on private-sector bondholders in 2012. The second one would hit public institutions, such as the ECB and the bailout funds, and ultimately taxpayers in Germany and other countries.

The “one thing” that was certain in 2013 before the election is now out the window. A Greek default would almost certainly entail some kind of debt relief for Greece, hence a haircut for taxpayers in other countries. They just haven’t been told yet.

But Germany would “do everything to keep Greece under responsible conditions in the Eurozone,” he said. “It must not fall apart because of us.” On this issue, he and Chancellor Angela Merkel are in complete agreement, he said.

There have long been voices that confirmed that if Greece defaults, there could be a haircut for public bondholders in some form (swapping existing debt for zero-interest debt with a 1,000-year maturity?) while Greece remains in the Eurozone. That appears to be the direction the German government is heading.

And Schäuble defended his best buddy Varoufakis. Few people have managed to rise to such media adulation and then plunge from it as quickly as Varoufakis. Whatever he was trying to do, it didn’t work. Forget game theory. “We both are finance ministers and bear responsibility, so we work well together,” Schäuble said. “First, the media make Varoufakis into a superstar, now they’re writing him off. The one is as wrong as the other.”

With this immaculately-timed interview, the German government acknowledged that it’s ready for Greece’s insolvency and default, whenever it may come, including Monday, after having denied it for years, and that it would continue working with Greece to keep the Eurozone together. What’s sacred for the Merkel government is the Eurozone, not its taxpayers. They already got shafted.

But here is the thing: the Greeks could solve the crisis on their own, if they wanted to. Or do they know something that others don’t? Read…  If Greeks Did This, the Terrible Crisis Would Be Over

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.