On Friday, after months of fending off speculators, Greece finally turned to its neighbors for help. Prime Minister George Papandreou formally requested a bailout program arranged by Athens' EU partners and the International Monetary Fund (IMF). The €45 billion ($60 billion) loan is meant to help the debt-ridden country cut its huge budget deficit, of 13.6 percent, without having to pay exorbitant interest rates.
Still, Volker Kauder, the CDU's floor leader in parliament, said that any financial support would have to be subject to strict conditions. "If the conditions are met, we'll do it," he told public broadcaster ARD on Monday. "The chancellor has always said the last resort would be when the stability of the euro is in danger."
"Germany will help if the equivalent conditions are fulfilled," Merkel said later on Monday, adding that it "should take a few days." The chancellor said that the emergency loan to Greece depended on Greece's making massive efforts of its own part to overcome its problems. "We need a positive development in Greece linked to further saving efforts," she said in Berlin. Likewise, she said that a precondition to the loan was an agreement between Athens and the IMF on a three-year program to clean up the country's finances.
IMF head Dominique Strauss-Kahn and European Central Bank (ECB) President Jean-Claude Trichet are due in Berlin on Wednesday to inform German politicians on progress made so far in the talks.
Disagreement within the Ruling Coalition
Meanwhile, the government in Berlin is seeking speedy parliamentary approval for the €8 billion that Germany would contribute to the loan. Finance Minister Wolfang Schäuble was meeting the leaders of the coalition's parliamentary blocs on Monday morning to discuss how to proceed with the necessary legislation.
Though the CDU and the FDP have agreed on a common stance toward the bailout, there is still some disagreement within the coalition, as the Christian Social Union (CSU), the CDU's Bavarian sister party, remains critical of the rescue package. CSU parliamentary floor leader Hans-Peter Friedrich has said his party would prefer to see Greece leave the euro zone and solve its problems by devaluing the drachma, its former national currency.
However, Merkel has rejected a debate about ejecting Greece from the euro zone. "It is about a quick reaction in favor of the euro's stability as a whole. Everything else is a distraction."
In Monday's newspapers, German commentators are divided over whether the country's taxpayers should be forking out for the debts of other European nations and whether it may be time to contemplate kicking Greece out of the euro zone.
The center-left Süddeutsche Zeitung writes:
"Greece is a relatively small economy. The Europeans now have the chance to learn -- from a case with limited dimensions -- just how to solve crises in the euro zone as well as prevent future ones."
"This crisis can be managed, but the situation could easily get out of control if there are doubts about the solvency of Portugal, Spain or even Italy. ... The over-indebtedness of countries is the central problem at the end of the great recession. So, the Greek question has to be solved in order to avoid a conflagration."
"There should be no more doubt that there will be EU aid for Greece. Whoever in Berlin thinks that the issue can be postponed until after the state elections in North Rhine-Westphalia (in early May) has to know that they are playing with fire. Every question mark about the Greece package pushes up the interest rates and, with it, the costs of financing the debt."
"The EU and, in particular, Germany have their own interests in seeing Papandreou succeed. By helping him, they help themselves. If Greece were to become bankrupt, the interest on borrowing in Spain, Ireland and elsewhere would become inflated, and the cracks in the euro zone would widen. This would, in turn, affect Germany, whose banks have invested their money in these countries and 70 percent of whose exports go to the euro zone … Anyone who is serious about the future of the euro and Europe should desist from going on about Greece's leaving the euro zone. Yes, Greece was not ready for the euro in 1999. But it is now a member, and all of the other members have to accept the consequences."
"From its inception, the euro zone has suffered from an inherent contradiction. The members gave up their sovereignty when it comes to monetary policy but not when it comes to financial policy. A replacement for a common financial policy was the Stability and Growth Pact. However, it has had a credibility problem that has now become obvious. Any country whose budget deficit gets out of control is faced with sanctions. But no one can seriously expect a country to pay fines when it is on the verge of bankruptcy."
"The current crisis is as much about Europe as about Greece. The reform of the Stability Pact is just as important as cleaning up Greece's finances. An early end of the euro would be devastating for everyone concerned. And there is no reason to be nostalgic about the German mark. The euro performed magnificently during the financial crisis and spared the Europeans difficult and destructive shifts on the currency exchange markets. But it is still a very young currency. The next few months will show if it will get the chance to grow up."
The financial daily Handelsblatt writes:
"The most important currency in a partnership is respect. There is no reason to withdraw our esteem from a Greece that has landed in trouble. The hostile language that politicians in the (German) government and opposition used this weekend is shameful."
"Of course Greece pulled the wool over our eyes with its statistics. … But that doesn't justify throwing it out of the monetary union. Even the thought is poisonous."
"If an out-of-proportion debt was enough for a parting of ways, then California would have to be thrown out of the United States, Saarland would have to leave the Federal Republic of Germany, and we would never have seen the reunification of Germany."
"The Greeks are our European brothers and sisters. We knew beforehand that they took liberties with their work ethic and public deficit. The Greeks are not Prussians. That is why we love them."
"The best thing about the Greek problem is that it is manageable. Greece only makes up 3 percent of the European economy. If the other 97 percent cannot solve the 3-percent problem in Greece, then that is to our discredit . A Greek failure would raise the question of how solid the rest of the euro zone is. The speculators on the financial markets would have a go at another southern European state."
"These days, you often hear that Europe should not be allowed to become a transfer union. But every community is a transfer union. … By their very nature, federations are mutual-assistance pacts."
"And our engagement in southern Europe is not free from self interest. German goods are transported along the roads that German taxpayers pay for. And data networks that we help finance are used for ordering from German companies. Greece is both a recipient of subventions and a good customer."
The Financial Times Deutschland writes:
"The Greek financial turbulence shows that monetary union -- the boldest economic step in the 53-year history of the European Union -- is far less solidly constructed than many politicians claimed when the euro was introduced in 1999."
"Furthermore, it is now doubtful how prepared euro-zone members are to sacrifice national sovereignty in favor of an integrated fiscal and economic policy -- even if some politicians emphasize the importance of giving up national competencies to European institutions in order to deal with the upheavals of coming years."
"From the standpoint of Brazil, China or the US, the Greek debt crisis is likely to appear to be symptomatic of a deeper European malaise marked by sinking growth rates, an aging population, rising unemployment, stagnant labor and trade markets, insufficient innovation by companies and an intolerably expensive social system."
"The image of an economic region that is facing irreversible decline irritates EU President Hermann Van Rompuy. He has made it his task to push forward structural reform in order to at least double the average growth rate in the bloc."
"As the EU bosses know, economic growth, democratic stability and a fascinating culture and lifestyle -- rather than military strength -- are the foundations of Europe's global influence. … To a certain extent, the euro was the high point of the use of the EU's 'soft power' in global politics."
"Still, the Greek crisis shows that it is not enough to leave monetary policy to the ECB. The states have to monitor each others' national financial policies more closely. And economic policy has to be much more closely coordinated."
The conservative Die Welt writes:
"In the end, Germany is going to transfer billions to Athens. There is no other choice in the face of pressure from its European partners and the financial markets."
"Nevertheless, it would be wrong to have any taboos. The suggestion from the CSU -- that Greece may have to leave the euro zone -- may have been described as 'totally crazy' by Green floor leader Jürgen Trittin. But does he have a solution for the Greek dilemma? In the long term, it won't be the emergency loan from the EU and the IMF. It will only secure the refinancing of the ailing Greece in the short term and will just lower its interest-rate burden by one or two percentage points."
"The massive pile of debts cannot be cleared by savings alone, and cuts to salaries and state spending that are too strict could increase the danger of causing a depression in Greece."
"The only option that remains is to devalue the currency -- and that means leaving the euro zone. This would allow the country to regain competitiveness for its goods and services -- an urgent precondition for paying off its debts."
"The only taboo should be simply leaving the taxpayers to deal with the losses."
The center-right Frankfurter Allgemeine Zeitung writes:
"Greece is insolvent, felled by a combination of over-indebtedness and economic weakness. The required debt relief will only happen if Greece's creditors, the holders of Greek state bonds, cough it up. … The politicians are still under the illusion that they can allow these creditors to get away scot-free and, instead, force European taxpayers to shove incalculable amounts of money into a Greek bottomless pit. That would be disastrous. … Greece doesn't need foreign tax money but, rather, an international debt conference."
"The creditors are responsible for the generous loans to Greece. They should have to bear the financial burden. Their warning about debt restructuring leading to a collapse of the financial system is just panic-mongering. Greece is too small for that. If some individual banks get into trouble, they can be closed down or stabilized by the state. That would be cheaper for the taxpayer than transfers to Greece. The opponents of debt restructuring warn of a domino effect that could spread to other southern European countries. That is theoretically possible, but not very likely -- and, once again, panic-mongering. It is with good reason that the financial markets have so far treated Greece as an exceptional case."
The left-leaning Die Tageszeitung writes:
"All of Europe paid for expansion of the bloc eastwards, and it was Germany that profited the most. It was able to extend its export market to the borders with Russia. It is similar when it comes to aid for Greece. All of Europe is contributing to the rescue plan -- and, once again, this will serve the economic interest of Germany above all others."
"Greece is just an outpost. If it was allowed to become insolvent, then Portugal and Spain would be next -- and other candidates would follow. In the case of a big crash … all the lovely export surpluses that Germany has accumulated over the decades would disappear. Every single saver would feel the affect of this gigantic destruction of wealth."
"So, everyone pays, so Germany can maintain its wealth. It doesn't get much cheaper than that."
-- Siobhán Dowling
http://www.spiegel.de/international/europe/0,1518,691255,00.html
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