Schäuble Visits Greece: Aid but No Haircut for Athens

By David Böcking and Georgios Christidis in Athens

Many Greeks blame German Finance Minister Wolfgang Schäuble for recent cutbacks. Zoom
DPA

Many Greeks blame German Finance Minister Wolfgang Schäuble for recent cutbacks.

German Finance Minister Wolfgang Schäuble pledged €100 million to help small and medium-sized business in Greece during his visit to Athens on Thursday. But he didn't bring what the country really wants: a new debt haircut.

It's a good day for pedestrians in Athens. Several streets in the Greek capital have been blocked off, leading to heavy traffic away from the center. Everyone knows the cause of the chaos. His name adorns the front pages of newspapers and escapes from the radio of a passing motor scooter: Schäuble.

When the German finance minister arrived in Athens on Thursday morning, security was tight. As a precaution, the police banned "all outdoor meetings and demonstrations" for the entire day. Schäuble, after all, is unpopular in Greece, with many in the country seeing him as the author of their austerity suffering. He is, in short, an unwelcome guest.

Yet only shortly after his arrival, Schäuble sought to improve the atmosphere, praising Greece's progress in combating the debt and economic crisis that has plagued the country for the last six years. Athens has made "great strides in consolidating its economy," he said at a press conference at the German-Greek Chamber of Industry and Commerce in Athens. The Greeks are facing hard times, said Schäuble, but there is no other way.

Schäuble meet with Stournaras on Thursday in Athens. Zoom
REUTERS

Schäuble meet with Stournaras on Thursday in Athens.

Schäuble called on Athens to continue the process of privatizating government-owned companies and expressed confidence that the economy will soon begin to grow again. "We are working side by side" toward that goal, he said, though added a warning that the euro crisis has still not been overcome.

Debt Haircut?

And, as any good guest, Schäuble also brought presents for his hosts, announcing that Germany would be participating in the formation of an investment fund in Greece. Berlin has signalled it would contribute €100 million to the half-billion euro fund aimed at providing affordable loans to small and medium-sized businesses in Greece -- a sector that is currently having trouble obtaining funding from Greek banks.

Still, Schäuble didn't bring along what Athens most wants -- a new debt haircut. Even before he boarded his plane for the Greek capital, Schäuble sought to lower hopes that he might reconsider his opposition to such a course of action. In a brief interview with German radio, the finance minister said that "nobody who understands the situation is talking about a further debt cut for private creditors."

As is often the case with Schäuble, the statement was not entirely straightforward. The discussion recently has been one focussing on debt reduction with the involvement of Greece's public creditors -- central banks holding Greek sovereign bonds, for examble -- not private creditors. Still, his comment was consistent with past statements in which he has excluded the possibility of a further debt cut.

Greece, however, has chosen to largely ignore such rhetoric. Earlier this month, Greek Economy Minister Kostis Hatzidakis told a German paper that he expects such a debt haircut in the near future. And on Thursday, Greek Finance Minister Yannis Stournaras appeared to echo that demand. "Once we have a balanced budget, a new approach will be open to us," Stournaras told SPIEGEL ONLINE on the sidelines of his meeting with Schäuble.

'We Who Are About to Die Salute You'

The Greek press varied in its reactions to the Schäuble visit. On the cover of left-wing newspaper Eleftherotypia on Thursday, an illustration shows the collapse of the Greek economy, triggered by the harsh austerity programs. "Mr. Schäuble, this is your doing: gross domestic product minus 20.5 percent; retail minus 18 percent; construction industry minus 67 percent," reads the headline. And unemployment has now exceeded 27 percent. The newspaper Avgi wrote: "Hail Schäuble, we who are about to die salute you." In contrast, the conservative press reported on Schäuble's visit more objectively. The business-friendly Kathimerini wrote, "Schäuble Brings an Investment Fund."

The Greek opposition has repeatedly attacked Schäuble in recent months. It's the German finance minister's first visit to Athens since the beginning of Greece's ongoing crisis. His short trip also included a meeting with Prime Minister Antonis Samaris on Thursday afternoon.

On Wednesday night the Greek parliament approved by a narrow majority a controversial austerity program. It includes the elimination of thousands of public-sector jobs by the end of 2014. There have been violent protests throughout the country against the newly approved program.

Correction: Through an earlier translation error of a quotation in this story, we erroneously suggested that Greece has a balanced budget. The mistake has been corrected.

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1. Help yes, but to write off depts will change nothing
Inglenda2 07/18/2013
Sorry, but I do not understand why anybody should give a credit to a nation which has no intention of repaying the loan. To say Greece will never be in a position to pay back its debts, is an indication that these credits are little more than camouflaged presents, given away by politicians, who are ignoring their responsibility to those whose money is involved and who end up paying the bill. Sixty years after Britain helped to free Europe from the Nazis, it was still paying back the debts it had occurred in the process. Nobody came along and said, just write off the amount you owe us! Germany too is still paying for the costs caused by two lost wars, nevertheless many countries still hold out their hands for more, whether with justified reasons or not. So why on earth shouldn’t Greece be made to pay for living too long and too good, at the cost of its European neighbours. I know of no other country, where full pensions could be claimed at the early age of 49, or where athletes are given the status of civil servants, in order to allow them to train at the cost of the taxpayer. Instead of blaming Germany, Europe and the Euro, the country should start cleaning itself up. At best starting from the top, rather than sacking off those who have always done a good day’s work for low rates of pay.
2. Schäuble cannot say the truth
csarichardo 07/19/2013
There are many options for how to deal with Greece. A debt reduction for every country in Europe would help every country in Europe ! Just print some Euros like the IMF prints SDRs ...based upon GDP !!? Germany should be really happy with that concept !! Like the USA is happy with the SDR allocations they get !!
3. Why is Germany still paying for Greece?
Manish Gupte, PhD 07/20/2013
Because it can get back it's money! Lower taxes will create employment and growth! Excess outsourcing and imports caused the problems! Negativity creates credit crisis as banks constantly anticipate bank runs. That makes financial crisis more complicated, so lending becomes less. So, business slows down. So, economy slows down and debt accumulates!
4. What is Austerity logic?
Manish Gupte, PhD 07/20/2013
What is good living? Working hard, paying taxes so all people are good, save, take no loan or pay back loan as soon as you can, live frugally (why harm environment). This Austerity logic. Actual good living: Work hard, spend on products made in the country (so not rely on taxes for Govt to help friends), take risks (and if that means debt, that is fine), live well (enjoy, so pay less taxes). Are the same people who created Austerity logic creating "Tax evasion logic" to drive away investors and entreprenuers?
5. How Austerity logic is flawed.
Manish Gupte, PhD 07/22/2013
Good living 1: Work hard, pay taxes, save, pay back debt immiediately. Good living 2: Work hard, spend on products made in country (that way create employment and wealth), pay less taxes (rely less on Govt), not be afraid of debt (if it enable growth). Austerity logic takes advantage of a naive person (Logic 1) and kill the economy..
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