Since the Greek debt crisis broke out in 2009, Frau Fritz has been trying to do just enough to prevent Greece from defaulting, which could have set off some bad consequences for German banks and still could; to keep Greece in the eurozone; to avoid telling the German taxpayers that they were going to lose a lot of the money they've been loaning to Greece for the previous two purchases; and to insist on a brutal program of austerity that is crushing the Greek economy, impoverishing the Greek people and making the debt crisis unsolvable within the framework on which she's insisting.
And in doing so, she's been behaving with an arrogance and raw nationalism that every previous Chancellor of the Federal Republic had been careful to avoid.
Euronews provides a brief report on the latest drama, No agreement on Greek debt 11/21/2012:
As Wolfgang Münchau wrote last week, the period of being able to pretend to German voters that they aren't going to have to eat big public expenses to save the euro and handle the Greek debt issues is effectively over. But Frau Fritz is still trying to keep the game going. As Nicolai Kwasniewski explains, right now the European Central Bank (ECB) is basically keeping Greece afloat by buying Greek short-term debt. Greece is due another tranche of previously-committed aid to avoid debt default but Frau Fritz is currently blocking its distribution to Greece.
The official reason is that they need to do "further technical work on some elements of the package." The sticking point is that the IMF is insisting that the EU (i.e., Angie) recognize the reality that a large portion of the Greek debt has to be written off. Which means that Germany actually loses billions of dollars in their aide provided to Greece in the form of a loan. As Andreas Rinke and Lefteris Papadimas explain in Greece's lenders fail again to clinch debt deal Reuters 11/21/2012, referring to the meeting that just took place between eurozone finance ministers, the ECB and the IMF:
A document prepared for the Brussels meeting and seen by Reuters showed Greece's debt cannot be cut from 170 percent of GDP to 120 percent, the level deemed sustainable by the IMF, unless either euro zone member states write off a portion of their loans to Greece or the IMF extends its deadline by two years.Andy Dabilis reports in Eurozone Talks Break Down, No Aid for Greece Yet Greek Reporter 11/21/2012:
Germany and other EU states say writing down their loans would be illegal. The European Central Bank, a major holder of Greek bonds, has refused to take a "haircut" on its holdings.
Berlin contends a debt haircut would not tackle the roots of Greece's debt problems and would be unfair to other euro zone countries that have taken tough steps to improve their finances.
"It would cost money, it would be a fatal signal to Ireland, Portugal and possibly Spain, as they would immediately ask why they should accept difficult conditions and push through difficult measures ... and it would have consequences under budget law," Norbert Barthle, budget spokesman for Merkel's Christian Democrats said.
Without corrective measures, the Eurogroup document said, Greek debt would be 144 percent in 2020 and 133 percent in 2022.
Juncker said after a meeting a week ago that he wanted to extend the target date to reduce Greek debt by two years to 2022, but [IMF Director Christine] Lagarde insists the 2020 goal should stand. She is believed to favor euro zone member states taking a writedown.
After 12 hours of talks in Brussels between Eurozone finance chiefs and International Monetary Fund Managing Director Christine Lagarde failed to reach an agreement on how to manage Greece’s runaway debt and unlock a long-delayed $38.8 billion loan, Prime Minister Antonis Samaras said he would meet with the financial bloc's leader, Jean-Claude Juncker.John Psaropoulos elaborates in Greece Awaits Payout Decision The New Athenian 11/19/2012:
A dismayed Samaras, who had rammed through the Parliament an unpopular $17.45 billion spending cut and tax hike program demanded by lenders in return for more aid, headed for Brussels on Nov. 21, hours after the long talks failed, to prepare for a Nov. 22-23 meeting of European Union leaders and to talk to Juncker.
The decision to release the money was meant to have been taken at last Monday’s Eurogroup meeting. But that meeting was dominated by a dispute with the International Monetary Fund, which believes that Greece’s debt is not sustainable unless a large chunk of it is forgiven. Since banks and private sector lenders already forgave 107 billion euros last march, representing more than half of their Greek bond holdings, it is now incumbent on European governments to offer a discount, something the eurozone has been resisting.This scene with Greece gets uglier by the day. Frau Fritz forces the Greek government parties to fall on their swords politically and then kicks them in the teeth. (Kind of like the Republicans negotiating with Obama on the debt ceiling in 2011, come to think of it.)
Greece has taken a surprisingly soft stance on the restructuring of its debt. The IMF's insistence on official sector involvement was not grasped by the Greek side. Asked about it on Friday, Finance Minister Yannis Stournaras said "I don't have anything to say about that, thank you."
Reuters quotes ECB board member Joerg Asmussen as saying that the Eurogroup will not address the sustainability issue on Tuesday, leaving it to later meetings.
Europe is also consumed by larger concerns, namely a dispute between net contributors and net beneficiaries over the size of the next seven-year European budget. Fiscal hawks like Germany and the Netherlands want the roughly one trillion euro budget cut significantly. An emergency EU summit has been called for Thursday to resolve the dispute.
The German Social Democrats (SPD) have a pretty pitiful record in dealing with the euro crisis, usually reinforcing the neoliberal/austerity framework that Frau Fritz is using to wreck the economies of euro "periphery" countries like Greece, as Rinke and Papadimas describe:
Any options that cost the German taxpayer more money come with a heavy political price tag with elections less than a year away and would have to voted through by an increasingly restive Bundestag.That is seriously pitiful on the SPD's part. It's no wonder that for all her spectacular mismanagement of the euro crisis, she and her party still lead the SPD in the polls.
"If we get the impression we are being cheated, we won't come to the rescue anymore when you need our support," Social Democrat leader Peer Steinbrueck warned in a speech to the chamber just before Merkel took the podium.
Until now Merkel has been able to count on the support of parties like the SPD and Greens to help push through controversial bailout votes in the lower house.
Plus, Britain may be positioning itself to bolt from the EU altogether. (Jürgen Krönig, Warum Großbritannien die EU verlassen wird Die Zeit 21.11.2012) This in itself is a major failure of leadership on the part of Berlin, London and Paris. But there is a bright side. If the EU has a medium-term future, it will almost certainly have to be without Britain as a member. They are too little committed to the "European project" and too subservient to the US in foreign policy to be a full partner in the EU. The current point of open conflict is Tory Prime Minister David Cameron's push to limit the EU budget.
Tags: angela merkel, austerity economics, britain, david cameron, eu, euro, european union, greece