Greek debt possible key to refugee solution, says German business chief

Greece’s debt problem could be key to resolving Europe’s refugee crisis, the head of Germany’s main business lobby has said.

Markus Kerber, chief executive of the Federation of German Industries, believes Greece should be given a better financial deal in return for beefing up controls on the flow of migrants into Europe.

“There are people in Europe who need a fiscal bailout and there is at least one country that needs a refugee bailout,” he told an event in Dublin hosted by employers’ group Ibec.

Greece, as the chief point of entry for migrants, did not have the economic strength to deal with the problem, nor had sufficient resources been allocated to Frontex, the EU’s border management agency, he said.

“If we don’t succeed in sealing off our external borders, I’m afraid more and more political forces seeking the end of Schengen [Europe’s free travel area] will prevail,” Dr Kerber added, noting the refugee issue had thrown the German government into crisis.

No country would suffer more from a breakdown of Schengen than Germany because of its heavy reliance on trade, he said, and so Germany would have to invest to protect it, and this would involve a deal with Greece.

Dr Kerber had been invited by Ibec to give a German business perspective on the current challenges facing Europe.

Brexit

In contrast to the current paralysis on the migrant crisis, he said Britain’s negotiations with Brussels ahead of its in-out referendum on EU membership had progressed “surprisingly smoothly”.

Nonetheless, the Brexit issue indicated that European authorities needed to be more open to the anxieties of non- euro zone members, he said.

This might be achieved by giving non-euro zone members seats on any future fiscal authority or even non-voting rights on the European Central Bank’s governing council.

He said the current crisis of confidence in European banking stocks had been created by the low interest rate environment, which had eroded bank profitability.

On Ireland's bailout and the perennial issue of burning bondholders, Dr Kerber said European authorities had been "wrong" not to allow Ireland impose losses on bank bondholders.

“If you own banking bond, you have to know that you run a certain risk,” he said.

Dr Kerber was strongly critical of Europe’s bank bailout policies, suggesting the US authorities had handled the situation better by demanding swift action and forcing mergers.

“The American banks are stronger than ever and they dominate world finance, and this could have happened to the European banks.”