Irritation in Athens 'I Don't Accept Insults to My Country by Mr. Schäuble'
Europe may be losing patience with Greece, but politicians in Athens are also growing increasingly sensitive to criticism from abroad. Greek President Karolos Papoulias has now gone public with his frustration over pressure from Germany. On Wednesday night, he gave the German finance minister a tongue-lashing.
As the wrangling over a second aid package for Greece goes down to the wire, the tone between Berlin and Athens is growing ever-shriller.
Responding to Germany's firm position on Greece's debt crisis, President Karolos Papoulias verbally attacked German Finance Minister Wolfgang Schäuble on Wednesday night. "I don't accept insults to my country by Mr. Schäuble," a visibly angry Papoulias said. "I don't accept it as a Greek. Who is Mr. Schäuble to ridicule Greece? Who are the Dutch? Who are the Finns?" The 82-year-old head of state was speaking on Wednesday during a meal with the country's defense minister and leading military representatives.
"We always had the pride to defend not just our own freedom, not just our own country, but the freedom of all of Europe," said Papoulias, who as a young man fought against the Nazi occupiers in Greece. Later, he studied law in Munich and Cologne, and he speaks fluent German.
Resentment over the demands being made by Germany is also growing within the Greek population. German flags have been burned at recent protests, and newspapers have published photo montages depicting German Chancellor Angela Merkel in a Nazi uniform. And now politicians have gone public with their frustration. On Wednesday night, Greek Finance Minister Evangelos Venizelos also accused vaguely defined "forces in Europe" of trying to drive Greece out of the euro zone.
In recent days, Europe and Germany have increased pressure on Greece to commit to implementing austerity measures before a second European Union/International Monetary Fund bailout package is disbursed. On Wednesday, the German government said the release of the second aid package should be pegged to proof that the leading politicians in Athens can be relied upon to implement reforms. Germany and other northern European donor states, including the Netherlands and Finland, have also threatened to withhold aid until after Greek elections, scheduled for April.
In a radio interview given on Wednesday that appeared to trigger the hostile remarks in Athens, Schäuble seemed to be aiming his attacks at Greek conservatives. The New Democracy (ND) party, led by Antonis Samaras, has not been committed enough to taking the necessary steps to save the country from default, Schäuble told the German public radio station SWR. The finance minister added: "I am no longer certain that all the political parties in Greece are conscious of their responsibility for the difficult situation in their country." He also suggested that the Greek national election may need to be delayed.
Meanwhile, Italian Prime Minister Mario Monti has warned against dangerous rising tensions and "resentments" in the euro zone. "There are no good guys and bad guys," he said during an appearance in Strasbourg before the European Parliament. "We all need to feel jointly responsible."
A meeting of the Euro Group planned for Tuesday to discuss the current situation in Greece was cancelled at the last minute. Euro Group President Jean-Claude Juncker said one reason the meeting had been cancelled was that one of the party leaders in the government coalition in Athens had not yet signed a written obligation to implement the agreed-to austerity and reform measures. The measures were set as one of the conditions for Greece to obtain the billions in aid earmarked in the second bailout package. The politician Juncker was referring to, New Democracy leader Antonis Samaras, has since signed the pledge.
It is still possible that a deal will soon be reached. The Euro Group is planning to meet again this coming Monday. Juncker said Wednesday night that, after months of quarreling, the path may finally be cleared for the bailout package, which is worth at least 130 billion. Following consultations with euro-zone finance ministers, Juncker said he felt confident the group will be set to take "all the necessary decisions" on Monday.
Athens needs the aid in order to prevent a default. But it has also created a dilemma for the Greek government. On the one hand, it must introduce radical austerity measures in order to get its finances under control. At the same time, these savings programs are also strangling economic growth, and the country's economic prospects continue to deteriorate. Some economists are already forecasting that the slump will be twice as bad as the figures predicted by the troika. Composed of the European Commission, the International Monetary Fund (IMF) and the European Central Bank, the troika is responsible for assessing whether Athens has met the requirements for receiving its second bailout.
Forecast: 7.5 Percent Drop in GDP
Meanwhile, economists at Germany's DekaBank are predicting that Greece's gross domestic product will shrink by 7.5 percent in 2012, an even further fall than that seen in 2011 and 2010, according to a report in Thursday's edition of the Financial Times Deutschland newspaper.
At Berenberg Bank, also based in Germany, economists are predicting a GDP contraction of 5.5 percent in 2012. The troika, however, has estimated that the Greek economy will shrink by just 3 percent. "The troika has massively underestimated how dramatically budget consolidation has harmed the economy," Fabio Fois, an economist at Barclays Capital, told the newspaper.
In a separate development, rating agency Moody's announced Thursday it is considering downgrading the ratings of 17 global and 114 European financial institutions, a development analysts believe shows that the euro-zone crisis has spread to the global financial system.
In Germany, the agency said it might downgrade Deutsche Bank, the country's largest bank, by two notches. Moody's also placed a number of other top European banks under review, including Germany's Commerzbank, Britain's HSBC and the Royal Bank of Scotland, INF of the Netherlands, Spain's Santander and Italy's Unicredit. In France, BNP Paribas, Societe Generale, Credit Agricole and Natixis are among those under review.
Earlier this week, Moody's downgraded six euro-zone member countries, including Italy, Spain and Portugal. It also warned that France, Britain and Austria may lose the triple-A rating the agency has bestowed upon them up until now.
dsl -- with wires