Two thirds of Germans surveyed said they doubted Greece’s determination to make savings.
Germany is running out of patience with throwing money into the “bottomless pit” of Greece’s debt crisis and any lingering sympathy in Berlin is being undermined by anti-German slogans on the lips of politicians and austerity protesters in Athens. It should be noted however, that Germany and her investors has profited deeply from the euro at the expense of their Mediterranean neighbors.
Without the euro, Italy and Greece could have indulged their workers with higher and higher bonuses while sporadically devaluing their currencies and making their countries more competitive. The euro prevented that. The only benefits from the euro went to Germany, where a low performing periphery weakened the currency, which made German exports extremely attractive abroad. Like China, Germany’s competitive edge had currency manipulation at its heart.
While officially hailing the Greek parliament‘s approval of the savings package required for a new 130 billion-euro bailout, Berlin signaled this would not automatically mean more aid, as the feeling grew that Greece should not be saved at any cost.
With Finance Minister Wolfgang Schaeuble warning “Greek promises aren’t enough for us anymore”, and Economy Minister Philipp Roesler saying “fear of Day X (a Greek euro exit)” is fading, Germany seems to have tired of issuing threats that it would never follow through.
“Berlin threatens Greeks with end to aid,” read the front page of the Sueddeutsche Zeitung newspaper, while Die Welt wrote: “Schaeuble warns Greeks: no savings, no money.”
The sight of Greek anti-austerity protesters and politicians blaming Chancellor Angela Merkel for their plight provoked anger in the patriotic pages of Germany’s best-selling daily, Bild.
Greeks and other European recipients of aid to which Germany is the biggest single contributor “should put flowers outside our embassies and send the chancellor thank-you notes.”
“Instead the demonstrators insult their German helpers and liken our government to Nazis, which is intolerable,” it said.
Officially, Merkel’s government remains committed to enabling another aid package for Greece and doing what it can to avoid the first sovereign default in the euro zone.
“The chancellor knows her place in history is tied to Greece and she won’t want to be remembered as the one responsible for a default,” said a conservative lawmaker, asking not to be named.
But the MP said the Greek parliament’s approval of the unpopular savings plan, including a 22 percent cut in the minimum wage, did not arouse much interest in Berlin “because nobody really believes any more that Greece will deliver.”
Greece has an interesting history of sovereign defaults which began with Dionysius, the ruler of Syracuse in Greece during the fourth century B.C., who had an entertaining habit of stamping a two-drachma mark on one-drachma coins to pay off his debts. Around the same time, thirteen Greek city states defaulted on their loans from the Temple of Delos — the first recorded default in history. In the modern era too, Greece never enjoyed sound finances; it defaulted at least five times (1826, 1843, 1860, 1894 and 1932), and the messiest default in 1826 shut it out of international capital markets for 53 years. So, this is a country that is used to this sort of mess, and as I have stated several times in previous posts, Greece would be far better off by taking whatever it can get from Germany and the IMF/ECB and running. If they default on all of their debt, drop out of the euro and devalue their currency, Greece would be in wonderful shape and it would not have to implement any of these austerity measures that all of its citizenry hates.
‘NOT THE END OF THE WORLD’
While Merkel’s own Christian Democrats (CDU) remain largely on message with the chancellor and European Commission on the need to keep Greece in the euro, more eurosceptic allies from the Christian Social Union (CSU) and Roesler’s Free Democrats (FDP) are taking a more aggressive line with the Greeks.
“There can be no more concessions. Now only deeds count,” said the FDP Foreign Minister Guido Westerwelle while CSU leader Horst Seehofer spoke of German referendums on future bailouts – something Merkel’s spokesman Steffen Seibert ruled out.
Hans Michelbach, an MP on the budget committee in the Bundestag (lower house) which exerts some control over the bailout payments, said Athens should not be under any illusion that its parliament’s vote meant the release of fresh aid would be automatic.
“Even the best agreements are no use without an efficient administration. Unfortunately so far we don’t get the impression that the governments in Athens have really made a serious commitment,” said Michelbach, a CSU deputy.
Schaeuble reinforced this impression by telling lawmakers last Friday that even the latest Greek savings plan would not put the country on track to cut public debt to 120 percent of gross domestic product by 2020 – its chief condition for aid.
Such dogged insistence on strict terms for aid is one of the reasons Merkel has kept a lid on growing skepticism in Germany about how deserving Athens is of such largesse. In one recent opinion poll, two thirds of Germans surveyed said they doubted Greece’s determination to make savings.
For Erik Nielsen, global chief economist for Unicredit, an Italian bank, the chancellor’s unmatched success in preventing the rise of a major eurosceptic backlash is down to her heeding the “German public’s sensitivities to lending their tax money to a country that does not implement very many of its promises.”
But with her finance minister talking of Greek aid as “a bottomless pit” and growing incredulity about Athens meeting such conditions, Merkel must be worried about the Bundestag’s special session on the second Greek bailout due on February 27.
Merkel narrowly avoided disaster – for the euro and her own political fortunes – in September’s vote in the Bundestag on the current bailout mechanism (the European Financial Stability Mechanism). She cannot afford more lawmakers to start thinking like CDU MP Christian von Stetten, who told one paper: “A Greek exit from the euro zone would not be the end of the world.”