Greek Problems, German Concerns

Today is the day EU heads-of-government convene in Brussels for yet another summit. There will be an elephant in the room, a problem that needs to be handled – Greece, of course – but which some (mainly, but not only, Germany) don’t want to handle just now. So, bizarrely, the summit meeting itself will not have Greece on its agenda; rather, there will be a meeting called of all Eurozone heads of government (16 of them) just prior to the main summit event to address the Greek problem.

I learn this from the preparatory blogpost to the summit provided by the Economist’s “Charlegmagne” correspondent, and I have to admit that, here, that source (in English, of course) is the best provider of information and analysis that I have been able to find. Among other things, his main insight (as embodied in his column’s title, “Why Greece is not suffering enough yet”) that Greece will only be bailed out after it has been forced to suffer considerable economic pain – namely to set an example to other potential fiscal miscreants – is spot-on. And he also reports (although indirectly, from FT sources) the very valuable information of what Germany is demanding to help Greece: 1) Greece must first exhaust all other sources of finance from the markets; 2) It must then get as much as it can from the IMF; and 3) Then Germany will help, but will at the same time demand “tough new rules on debts and deficits that will impose more budgetary discipline than before, even if that involves changing the treaties.”

Yes, Charlemagne’s piece is very good, and much more informative even than an interview with the point-man in this crisis himself, namely German Finance Minister Wolfgang Schäuble, which we get here in the Frankfurter Allgemeine Zeitung. But that’s logical: Finance Ministers the world over, especially those with responsibility for big economies and/or major currencies, always have to live with the realization that anything they utter has the potential to violently move markets within seconds of its utterance. Still, the interview’s title is quite apt – “First the punishment, then the Fund” – and, in his bureaucratic way, Schäuble does illustrate the current German position well, starting with his ridiculous assertion (the very first thing he says in the interview) that “Greece has not gone looking for help.” That may be true in the strictest sense, but it’s also clear that Greece is looking for some additional show of support from European leaders at this summit in order to reassure markets and lower the interest rate the country is being asked to pay. Commission President José Manuel Barroso has a proposal to do just that, and Schäuble is asked whether Chancellor Merkel will support it; he simply avoids the question. One thing it is now clear that Merkel will support is the involvement of the IMF, something Schäuble himself has previously been on record as being against, to the point of proposing plans to create a Monetary Fund within the EU (something €S previously covered here) to deal with such problems itself. But Schäuble is wily, he can square this circle: IMF involvement would be OK, he admits, in fact experts from that institution are already on the scene (as I reported here). But it would be better to solve the problem within the family, so to speak, within Europe, so that the IMF should only be used in exceptional cases.

No Decision Til May, Please

Die Zeit also has its own guide out on the Greek controversy prior to the EU summit, written by Alexandra Endres and entitled (inevitably) The Greek tragedy. Again, the analysis you’ll find in that aforementioned Charlemagne column is superior, but Ms. Endres still makes some good, frank points about the situation, among which:

  • German officials basically want to avoid any decision for as long as possible in view of the serious unpopularity among their electorate of the idea of helping the Greeks out in any way. They’d at least like to avoid it through 9 May, which is when important regional elections take place in Nordrhein-Westfalen, the country’s most-populous state.
  • A powerful argument the Germans use for their reluctance to help out Greece is the national accounting chicanery the Greeks are known for, which among other things secured them an undeserved place in the Eurozone back in 2001 and was ongoing until very recently, when the Greek government belatedly announced a much-greater deficit than had been reported. (Indeed, there’s little more reason to have much confidence in Greek government accounts today.) Yet Ms. Endres makes the argument that the leaders in the other Eurozone countries were not fools, nor were the officials of Eurostat, the official EU statistical agency. Everyone more-or-less knew that the Greeks were fudging their books, so that now, when that has led to so much trouble, it’s not just the Greeks who are responsible for that.

Ms. Endres raises another crucial point, one that too often is neglected: provisions of the Maastricht Treaty which created the euro and the Eurozone make it difficult actually to help out financially a member-state that has gotten itself into trouble like Greece has. Indeed, they would seem to forbid that, meaning at the least that legalistic work-arounds have to be found. But some people are ready to take that Maastricht Treaty prohibition seriously, and even to go to court to have any aid to Greece declared illegal, should things come to that. For one, there is the group of four prominent Germans (they’re named in the article, but you’ve probably never heard of them, so I won’t name them here) already famous for having gone all the way to Germany’s Supreme Court in the 1990s to try to stop the introduction of the euro in Germany. So that is another heavy consideration that has to be weighing on the minds of Chancellor Merkel, Finance Minister Schäuble, and German officialdom generally as they try to deal with the Greek problem.

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