The World From Berlin German Government 'Must Stop Using Greek Crisis for Campaign Fodder'
As the financial crisis in the euro zone worsens and the heads of the IMF and the ECB come to Berlin to persuade Germany to help Greece now, local commentators are calling for speed and decisiveness. As they see it, political jockeying before the May 9 election in North Rhine-Westphalia is no reason for German politicians to endanger the whole euro zone.
For the past six months, the Greek financial crisis has been intensifying on a weekly basis. But this week's downgrading of that country's credit worthiness by the Standard and Poor's ratings agency has triggered more heated public and political debate in Germany. The ratings agency also lowered Portuguese bonds two notches Tuesday, fueling fears that the crisis could spread to other euro-zone countries in financial straits, such as Spain and Italy.
In principle, Germany has already agreed to be part of any financial measures taken to assist Greece, acknowledging the fact that supporting the Greeks is essentially supporting the continued viability of the euro currency union. Greece urgently needs extra funds by the middle of May, when it is supposed to repay around 8.5 billion ($11.2 billion) in debt to investors.
Still, German Chancellor Angela Merkel wants assurances from Greece that it will do its part over the long term by putting its financial house in order with belt-tightening, better administration and more regulation. Likewise, she must sell the idea of providing German financial aid to Greece to her fellow citizens. But a large majority of Germans do not support it, and Merkel's Christian Democratic Union (CDU) party has an important state election coming up in North Rhine-Westphalia on May 9. This could see her ruling coalition -- an alliance between the CDU, its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party (FDP), also known collectively as the "black-and-yellow coalition" -- lose its majority in the Bundesrat, Germany's upper house of parliament.
German Government Criticized for Stalling
All of this has led to hesitation on the part of the German government to make a firm and public commitment to the Greek bailout package. In response to this hesitation, European Central Bank (ECB) President Jean-Claude Trichet and International Monetary Fund (IMF) chief Dominique Strauss-Kahn were in Berlin on Wednesday trying to persuade German politicians to stop dragging their feet on the issue and make a firm decision on whether it will agree to participate in the rescue plan devised by other euro-zone members and the IMF.
On Wednesday, commentators in German newspapers criticized the country's government for its hesitant attitude. They pointed out that the slow movement toward a Europe-wide solution and the consideration being given the state election was a large part of the reason why speculators had turned on both the euro and Greek bonds -- and made the situation worse. These commentators called for fast, decisive action, which they believe could prevent things from getting even worse in the euro zone, especially when another member state, Portugal, also looks to be in financial trouble.
The Financial Times Deutschland writes:
"Anyone listening to German politicians talking about the crisis in the euro zone must be feeling scared and anxious. There are admonishments, delays and a search for scapegoats -- all of which is miles from the economic reality of the situation. Neither the current administration nor its opponents seems to have recognized the seriousness of the situation."
"As Portugal becomes the next candidate for financial crisis, the Germans are still fighting about how to get the all-too-comfortable Greeks moving. And all of this is because of a state election whose relative importance pales in comparison to what is actually at stake: preventing the demise of the entire euro zone."
"True, the Portuguese and the Spaniards are in a better position than the Greeks, in that they can raise their own capital on the finance markets and their national debt is significantly smaller. However, yesterday's dramatic development in the bond markets gives rise to the fear that the Greek crisis will ignite a European wildfire of speculation."
"What is more important, though, is that that the euro nations move quickly and decisively to quell this growing blaze. This means that German politicians must finally stop misusing the Greek crisis as election campaign fodder. Instead, they must send the money set aside for Greece weeks ago to that country as quickly as possible. At the same time, the euro states must unite in declaring their decision to help Portugal, too, should that nation also fall into serious financial difficulties. A solidarity pact like this is really the only chance to stop the euro zone from falling apart -- and it will cost Germany a lot less than if the euro project actually fails."
Former German Finance Minister Hans Eichel (1999-2005), of the center-left Social Democratic Party (SPD), writes in the center-left Süddeutsche Zeitung:
"Should we Germans help Greece or not? That has been the subject of intense discussion over the past few days -- and with one eye obviously on the state elections in North Rhine-Westphalia. Unfortunately, the chancellor and the foreign minister have allowed these discussions to drag on: They have not done anything to negate the impression that Germany has other options. But the truth has always been this: We will help no matter what happens. For decades, we have helped whenever there has been the threat of a national bankruptcy and whenever the IMF has called upon us to help. And it is not only Germans helping; the citizens of all the countries belonging to the IMF have done the same."
"Germany is the second-biggest exporter in the world, and it will remain that way for some time to come. That is the foundation of this country's prosperity. Most of our income comes from the business we do with prosperous and emerging nations. That is why Germany has a vested interest in the ability of its trading partners to pay as well as in the development of emerging nations. But our help has limits, and it also depends on certain conditions. We help others so they can help themselves, and there are conclusions to be drawn from the Greek crisis that apply far further afield as well."
"First, the country in question must bring its tax revenues into line with international standards. For example, Greece allows itself a tax and contributions rate 10 percentage points below the European average. If Greece wants our help, it must reconfigure its tax system to match the European average."
"Second, Greece must thoroughly review all of its expenses. The administrative apparatus there is too expensive. And, third, Greece must make progress in the fight against what is apparently far-reaching corruption. So no matter whether the IMF or the EU -- or both -- now help Greece to help itself, Germany will be there, too."
"Furthermore, we need to take the necessary precautions to make sure that a crisis of these proportions does not repeat itself. The EU must apply the stipulations of the Stability and Growth Pact much more diligently than it have in the past. Tough sanctions don't help when we are in the middle of a catastrophe. Too much movement away from euro standards for fiscal and wage policies should be halted earlier on. And that will only happen when the European political and economic elites in all of the EU member nations learn to think, negotiate and organize in a European manner -- particularly within political parties, trade unions and employer associations. New contracts and procedures alone will not make this happen."
"Europe must stand together. In its entirety, the euro zone is still one of the largest economic powers in the world. If the member nations stood alone in the 21st century, they would have no chance against 1.3 billion Chinese, 1.1 billion Indians, the superpower that is the US and the developing Brazilian nation. The constitution makes it a German duty to build Europe up. We should move toward this goal!"
The left-leaning daily Die Tageszeitung writes:
"Will Greece decide the state elections in North Rhine-Westphalia? Should the black-and-yellow union lose its majority in the Bundesrat, Merkel and Westerwelle will truly have brought this debacle upon themselves. Berlin is playing for time. Just as it did when it came to the issue of ... the financial aid package for banks, it has put off making a decision on whether to support a teetering EU nation until 'after the elections.'"
"The German government's hesitation -- in the face of resistance from the French and the European Commission -- has seen Greece accruing an insane amount of interest. A clear vote from the EU indicating that Greece is definitely part of the currency union could have put the brakes on speculative action immediately."
"The Greek economy needs a real chance. The euro project robbed smaller nations of the possibility of having their own currencies and developed new export markets for Germany. To find an economic and social balance, the euro currency union needs economic administration. But Merkel is blocking this French suggestion, too."
Anton Brender, director of economic studies for Dexia Asset Management, a Belgian-French financial institution very active in public finance, writes in the business daily Handelsblatt:
"One of the lessons learned from the recent financial crisis was that the political reaction must be as swift as possible. Otherwise, a wave of speculation gathers strength, and it becomes harder and harder to dam that rising tide. The markets act in real time -- and politicians must do the same. Europe has shown itself unwilling to come up with the support mechanism that troubled nations need for one simple reason: to ensure that the monetary union does not also become a fiscal union."
"Everyone from the president of the European Commission to the head of the Eurogroup (eds. note: the gathering of the finance ministers from euro-zone countries), to the president of the ECB has philosophized on what should, could and would happen. Germany has played an important role in this dreadful, serialized novel. The chancellor has been torn between public opinions that indicate that nobody wants to pay 'for the Greeks to retire at the age of 57' and that a suit might be brought up before Germany's constitutional court if the country go to the aid of a euro-zone member. The duty of Germany to act in European interests and to go to the aid of Greece is another conflict for the chancellor."
"But instead of acting as an engine to find a solution for these problems, the German government has slammed on the brakes -- with a clear result. At the moment, preconditions for assistance to Greece remain unclear -- and the financial markets have taken note."
-- Cathrin Schaer