Anxieties have reached a new high in Europe as uncertainty reigns over a potential Greek exit from the euro zone and new figures raise fears that the crisis may be affecting the German economy. German commentators on Friday review the currency union's options.
Time appears to be running out as fears of a Greek financial collapse continue to mount in Europe. Without a stable government capable of implementing promised reforms, the likelihood that Greece will be forced to leave the euro zone seems ever greater.
Greece's caretaker government is not in a position to implement critical reforms due to the upcoming new parliamentary election on June 17, German daily Süddeutsche Zeitung reported on Friday. The paper wrote that, according to information it had obtained, the "already lagging reform efforts by the government in Athens have practically ground to a halt recently." It cited the failure to privatize state assets as one example.
Additionally, many Greeks have apparently quit paying their taxes in fear of a possible Greek exit from the euro zone, the paper reported. The Greek Finance Ministry expects to collect 10 percent less tax revenue in the month of May due to the ongoing recession, which is now in its fifth year, according to the news agency Reuters.
Because of fears that the left-wing Syriza party, which has demanded that the EU lift austerity demands on Greece, may come to power after the election next month, euro zone member states are reportedly already developing contingency plans for the event that the country leaves the currency union soon after the vote. Still, the official line is that the euro zone wants to keep Greece in the fold.
Meanwhile Germany, up until now the most solid country in the euro zone and the currency union's biggest economy, appears to be running into trouble itself on fears of a Grexit, as the media has dubbed a possible Greek departure from the euro area. On Thursday, new figures revealed that the German manufacturing sector has been shrinking at the fastest rate in three years in May, and the service sector saw little growth in May. Also on Thursday, the leading Ifo Institute for Economic Research reported that German business sentiment had gone down in May for the first time in seven months.
To make matters worse, French President François Hollande challenged German Chancellor Angela Merkel's policies on Wednesday by proposing the implementation of controversial euro bonds, or jointly issued bonds, as the center of his growth agenda.
As the clouds darken on the euro-zone horizon, German editorialists examine the increasingly precarious efforts to keep financial disaster at bay.
Conservative daily Frankfurter Allgemeine Zeitung writes:
"From Athens comes the threat of a full-blown storm. If their repeated parliamentary election on June 17 -- the same day as the run-off for the French National Assembly -- fails to yield a viable majority, or if one of the parties that wants to reject the troika's 'diktat' gains a majority then Greece's exit from the euro-zone will be tangibly close. The fact that this is being so openly discussed is an attempt to make clear to Greek voters what is at stake. They can't have their cake and eat it too. Nor will the euro zone allow itself to be blackmailed by fears of possible turmoil in the financial world. But there is yet more behind this. Every country in the euro zone must understand that they can't fall into unlimited debt at the cost of others, and that the recovery of competitiveness is impossible without making sacrifices -- that means a drastic reduction in quality of life in some countries."
"The German government has also had to learn a lot in the last two years. After the elections in Greece and France, it became clear that austerity alone is not enough to solve the euro crisis."
Conservative daily Die Welt writes:
"French President François Hollande is suggesting that the euro-zone countries should collectively borrow money and take joint reponsibility for servicing their debt. That means that the countries who enjoy the trust of the markets will pay more (to borrow money) than they do today."
"Euro bonds erode any confidence that the causes of the crisis can ever be fixed. Athens will be allowed to continue with its mismanagement and rejection of reforms, making such behavior more palatable to other countries. Why should they carry out reforms? Why make the social system, labor market and state administration more secure for the future when money falls from the sky? Hollande hasn't given up on the dream of life in a hammock financed by German tax money. The use of tax revenue touches on the heart of the political system. The citizen trusts the political powers to which he or she gives his vote -- a vote which can also be taken away again. Therefore, the German government must not give in."
The Financial Times Deutschland writes:
"For two years, the chancellor has been trying to cure symptoms instead of correcting the deeper causes of the financial crisis. This can worsen an illness, and it will now have an effect on the Germans."
"It would be in our best interest to stop the downward spiral. That could be through growth programs for the countries in crisis, which would absorb the slumps in the real economy resulting from the financial turbulence. Or it could be through euro bonds, which is probably the only way to stop the fatal logic of financial markets in panic mode that are throwing one country after the next into crisis."
"The Germans still appear to be profiting from the crisis through absurdly low interest rates that only exist because other euro-zone countries are in crisis and everyone is fleeing to German bonds. But that won't last much longer, if the falling economic figures are any indication. If the chancellor isn't stopped soon, the German economy will also soon find itself in crisis."
The left-leaning Die Tageszeitung writes:
"The scenario that Greece could leave the euro is not new. The Europeans have been dealing with this option for two years now, ever since it became clear that there was no consensus in Greek society as to where we go from here. The only new thing now is our emotional state. In the past, nearly all observers thought it unlikely that Greece would leave the euro. Now, many do."
"However, this forecast overlooks a very difficult condition -- someone will have to eventually decide that Greece no longer belongs in the euro zone. But who would that be? The Greeks want to stay in the euro. That means the other euro-zone countries would have to decide they no longer want the Greeks. This is legally impossible, because of the EU treaties, and it's too difficult politically."
"Europe has a dilemma: To reintroduce the drachma in Greece, the country would need an effective government. But if there were such a government, Greece could remain in the euro."
The center-left Süddeutsche Zeitung writes:
"French President François Hollande continues to toy with the idea of euro bonds, the thing that Chancellor Angela Merkel detests, and not completely without reason -- they would violate the European treaties and go against the logic of incentive and consequences. This is the heart of her message, her deep conviction: There is no solution without sacrifices, no new Europe without new rules, no growth without the right structures."
"Merkel has tried to spread this message throughout the crisis. It has been accepted by most governments, which Hollande must have also realized at the summit meeting in Brussels on Wednesday night. (...) The critical upcoming election in Greece and the discord between Germany and France give the impression that the rescue path has been wrong so far, and that there was an alternative. But nothing confuses the markets more than uncertainty and strife."
The left-leaning Berliner Zeitung takes a look at the prospects for getting Merkel's pet project, the European fiscal pact, through the German parliament, where it will need opposition support to get passed:
"Not just abroad, but at home, the criticism of Chancellor Angela Merkel's austerity measures grows louder. It's not certain that the Bundestag and Bundesrat (the two houses of the German parliament) will approve the fiscal pact for more budgetary discipline before the summer break."
"Of course the opposition also wants to score points against the chancellor. If she fails to get her own fiscal pact through in her own country without delay, it doesn't exactly enhance her -- already damaged -- reputation internationally."
"Party tactical considerations therefore play a role. But the Social Democrats and the Greens can also give objective reasons for their resistance. There are now almost daily doubts about Merkel's European policy. (...) And so Germany is projecting a bizarre image of itself in Europe. Its euro-zone partners must quickly commit to strict deficit reduction due to pressure from Berlin. But Germany takes its time in implementing Merkel's fiscal pact. Embarrassing."
-- Kristen Allen
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