Greek promises no longer enough as Germany wants it all put down on paper

Sat, Feb 11, 2012, 00:00

Frustration at perceived obfuscation has seen attitudes in Berlin harden towards Athens

FOR GERMANY, Greece has now entered the last chance saloon and been seated at the table nearest the door, with a clear view of the wall clock.

In Berlin’s corridors of power, officials describe attitudes towards Athens as “black” and burdened by a complete breakdown of trust. Finance minister Wolfgang Schäuble has dismissed the latest Greek announcement as falling short of a deal, with his officials calling it a “90 per cent solution”.

“We can still do this but there’s absolutely no buffer any more,” one senior government official said.

Yesterday morning chancellor Angela Merkel and Schäuble met Germany’s opposition leaders to explain the latest bump in the road to agreement on a second Greek bailout. In the private talks, Merkel said it was still possible to strike a deal with Greece, a scenario she described as a “path of least destruction”.

Germany is less worried about the direct economic effects of a Greek default, but the consequences of aftershocks elsewhere in the euro zone.

Merkel describes this risk as “a liability exposure that can no longer be mastered”.

Schäuble said the government was “still interested in a responsible solution” but that Athens had not yet delivered enough for a deal.

“This isn’t about tormenting the Greeks but bringing them back to a path where euro partners can live a comfortable life with each other,” he said, according to one participant in the meeting.

German officials say the latest offer from Greece could leave its debt levels six to eight percentage points above the agreed limit of 120 per cent of GDP – a limit which is itself very tightly calculated, Berlin thinks.

Frustration at the endless series of delayed meetings and perceived obfuscation has seen attitudes in Berlin harden towards Athens to a point where German officials no longer believe anything uttered by Greek politicians.

“Some Greek politicians still seem to believe that everyone has a problem – the IMF in Washington, Brussels, Berlin – just not themselves,” one high-ranking government official in Berlin said.

Germany has taken note of a revival of “Nazi Merkel” images in the Greek media, but politicians say they don’t feel singled out as a target of Greek ire. The frustration and erosion is, they say, common to all EU members.

One of the few consolations for other bailout countries, Ireland and Portugal, is that the ongoing drama in Athens is still perceived by German voters and politicians here as a Greek-specific drama.

“There is a belief here that politicians in Ireland and Portugal will deliver what they’ve agreed,” CDU finance spokesman Michael Meister said. “At the same time there’s a realisation that concessions to Greece would be seen as an incentive for not delivering on promised reforms which will undermine the troika strategy elsewhere.”

He conceded that Berlin’s strategy on Greece is influenced as much by German economic self-interest as a sense of European responsibility.

“We know we profit the most if the euro is held together and, the other way around, we will sustain the most damage if things don’t succeed on one or other fronts,” Meister added.

This thinking is reflected in an opinion poll out yesterday, although in the fast-moving Greek crisis, it is increasingly difficult to perceive whether polls are influencing German politics or vice versa.

Some 27 per cent of Germans believe Greek politicians are serious about implementing austerity measures, according to the ZDF public television poll, with two-thirds sceptical. On the other hand, 62 per cent say they expect a Greek failure to hurt the German economy.

An economic study released yesterday suggested Germany would face a €34 billion writedown in the case of a Greek default – €400 for each German citizen.

Germany stepped up its own brinkmanship yesterday, announcing February 27th as the date for a Bundestag vote on a second bailout for Greece.

The message to Athens is clear: without further concessions, there will be nothing for the German MPs to vote on. Even before Greece officially runs out of money in March, Germany wants everything down on paper – no more promises.