The World from Berlin German Banks 'Will Emerge Unscathed' from Greek Bailout

Germany's top banks may have pledged to help out with the Greek bailout, but they shouldn't expect a pay-off, warned Chancellor Merkel on Wednesday. Meanwhile, the German press is dismissive of their contribution, saying it is the taxpayers who are assuming all the risks.
Finance Minister Wolfgang Schäuble (r) and Deutsche Bank CEO Josef Ackermann (l).

Finance Minister Wolfgang Schäuble (r) and Deutsche Bank CEO Josef Ackermann (l).

Foto: Soeren Stache/ dpa

As German politicians prepare to approve Germany's massive share of the joint European Union-International Monetary Fund bailout for Greece, Chancellor Angela Merkel has told them that the eyes of Europe are upon them. "It's about nothing more or less than the future of Europe and, with it, the future of Germany in Europe," she told the German parliament, the Bundestag, on Wednesday.

The lawmakers are due to vote on the bill on Friday to enable Germany to extend a loan of €22.4 billion ($29 billion) to Greece, the biggest contribution to the €110 billion aid package  that is finally going ahead after Berlin gave up its opposition to the bailout.

The cabinet signed off on the bill on Monday after Greece agreed to harsh austerity measures  with the IMF. The German contribution will be made via the state-controlled KfW bank.

The bailout has been particularly unpopular  with German taxpayers and, on Tuesday, Finance Minister Wolfgang Schäuble held a meeting with the country's financial institutions to try to persuade them to share the pain. The summit saw the firms agree to keep open lines of credit to Greek banks and not to sell Greek bonds for the duration of the three-year bailout.

Schaüble told a press conference that the financial institutions had agreed to buy bonds issued by the KfW as a way to help finance the aid package. It is still not clear exactly which banks are contributing nor how much they plan to give. However, Deutsche Bank CEO Josef Ackermann, who has been leading the efforts to get the private sector to participate in the bailout, said insurers Allianz and Munich Re had responded positively. Governments in other euro-zone countries are also asking domestic banks to help out.

On Wednesday, Merkel greeted the banks' willingness to help with the Greek rescue plans. However, she warned the firms that they could not expect any kind of pay-off, such as a dropping of a proposed financial-transaction tax. "If so," she told parliament, "they have deceived themselves."

The German press on Wednesday is wary of the plans to involve the banks, and most commentators argue that the financial institutions are taking no great risk in doing so since the German state is guaranteeing the bonds.

The center-left Süddeutsche Zeitung writes:

"For the finance minister and his EU colleagues, this means that they may only have to contribute a part of the €110 billion. On the other hand, the banks won't have to incur any costs. Quite the opposite: The aid commitments could prove to be a lucrative business because they are buying high-interest bonds that the euro-zone governments are effectively guaranteeing. And the fact that Ackermann and his banking colleagues will maintain credit for the Greek banks in the end serves them more than anyone else: If they were to stop extending credit, German banks would have to write off a substantial part of their outstanding claims."

The center-right Frankfurter Allgemeine Zeitung writes:

"The Greek drama would be easier to bear if the German government finally stopped playing the public for fools. The hastily prepared agreement on a 'significant, positive contribution,' to aid for Greece by Finance Minister Schäuble and Deutsche Bank boss Ackermann insults the citizens' knowledge of economics. The banks will emerge unscathed as creditors and beneficiaries of high-return Greek government bonds as long as governments in the euro zone try to prevent a bankruptcy of Greece with the help of taxpayer guarantees."

"What the banks have agreed on with Schäuble doesn't even serve as a fig leaf. They declare their readiness to keep open the lines of credit to Greece 'wherever possible.' And they want to buy bonds issued by the state-controlled KfW -- and therefore guaranteed by the German government -- to help finance the billion-euro German bailout to the Greeks. It's a generous offer, and one that means that the banks can once again only win since there are no more secure bonds anywhere than these."

The mass-circulation tabloid Bild writes:

"German banks and insurance companies want to buy Greek and German bonds for a few billion euros and thereby make a 'significant contribution.' Hats off? Respect? Not at all! The banks are buying bonds, but the interest and the amortization are being guaranteed by German taxpayers. It doesn't get more secure than that."

"The financial institutions have also earned a great deal from the Greek roulette. As long as things were going well, they wanted a market economy -- and for the governments to keep out of things. But now that the party is over, no one wants to pay the bill."

"It has to be urgently clarified how the banks are to be made to do their duty. Either they waive Greece's debts, or they contribute through a levy to the rescue package."

The Financial Times Deutschland writes:

"The good news is that the banking summit at the Finance Ministry was a flop. If Wolfgang Schäuble or any other member of the government was trying to persuade German financial institutions to buy Greek bonds or to grant other loans to the country, they failed miserably. The only thing that Schäuble could take away from this PR meeting was that the institutions are committed to keeping open the existing lines of credit and bonds 'wherever possible' -- in other words, committed to nothing."

"The state has to leave these kinds of business decisions to the financial institutions themselves -- even those that the state has a stake in."

"That doesn't mean banks should be allowed to do anything they please. The state can and must make the rules -- and the financial crisis has shown the urgency of this. However, these regulations should only set the framework."

"The banks have to make decisions about their own business dealings -- and then also finally take the risks that go with them."

The conservative daily Die Welt writes:

"For Germany, this is a fateful week. The gigantic aid package that is now being implemented fundamentally changes the conditions within the euro zone. The farthest-reaching decision since the introduction of the euro is happening without public debate, which is just what the German government wants. The involvement of parliament is a pure farce."

"Finance Minister Schäuble has repeatedly stated that there is no alternative to providing Greece with aid. It is the only way to ensure the euro's stability, he says. …. Yet no one can seriously promise that the new money will prevent Greek insolvency or a restructuring of its debts. It is pure speculation that is being used to hoodwink citizens and invoke European solidarity as a way to purchase economic and political stability. If the Greeks still go bust after a few months, not only will the taxpayers' money be lost, but trust in politicians will also be permanently damaged."

-- Siobhán Dowling