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This morning we wake up to news that – finally – Eurozone finance ministers have agreed to bail out Greece for the second time to the tune of €130 billion.
The “aid”, as it is referred to (making Greece sound like a third world country) is conditional on the European Commission having a presence on the ground to oversee that this money is spent in the right way and is not frittered away or mismanaged.
Greece was the first of three Eurozone countries to receive a bailout and is the first to receive two. Lucky them. But throwing money at problems rarely makes them go away, and it remains to be seen:
a) whether this €130 billion is enough to shore up Greece’s finance for the long-term, bearing in mind that 2011 saw the country’s economy shrink by 7%. To be clear – this is not a recession, this is a depression.
b) Whether the Greek electorate will tolerate being told what to do by outside officials, be they from the Commission or another Eurozone country. History teaches us that, in the wake of depression, the political world can get shaken up, and parties from both sides of the political spectrum gain ground. There could be trouble ahead.
c) Whether and to what extent the northern Eurozone population will tolerate granting hand-outs to their southern neighbours with little in return.
There are other fundamental questions too, notably the precedent this sets for the Eurozone and the EU at large.
If, as seems probable, the Eurozone will continue to shore up ailing economies for the foreseeable future, to what extent will this lead the Eurozone into full fiscal coordination, with budgets not just approved in Brussels but also drawn up.
This would seem to be in the Euro’s long-term interest, but where does this leave national governments and the notion of democratic representation?
And where does it leave non-Eurozone countries in the EU? Why on earth would they want such strict oversight and, indeed, governance of their budgets, when they are not even in the same currency?
Finally – and striking at the very core of the EU – why would the non-Eurozone countries decide to stay in a currency bloc which seems condemned to bail out Member States who have been shown to be persistently unreliable and irresponsible bedfellows?
The end of the affair? Why, this is just the beginning.
The reluctance of German Chancellor Angela Merkel to help Greece has tarnished the image of Germany and Germans in the country of Aristotle, Plato, and feta cheese.
The coverage given by the German press regarding the need for an EU rescue plan for Greece has not improved relations between the two Eurozone Member States -witness the front page of the German magazine Focus in February which showed the famous Venus di Milo making an obscene gesture.
According to a poll published on 25 March by the Kappa Research Institute which questioned Greek citizens about their views on Germany, only 28.8% replied positively, which is very low when compared to the 78.4% recorded five years ago for a similar poll.
The German low cost airline Air Berlin recently announced that the company had noted a significant drop in the number of reservations for Greece, and on this evidence it seems that the crisis has created a real gap between the two countries and their populations.
Let’s hope that the agreement on an EU plan to help Greece, reached yesterday at the European Summit, will serve to reconcile our Greek and German friends.
Germany appeared to take a decisive step back from her traditional post-war role as paymaster of Europe today when Chancellor Angela Merkel issued harsh words on the prospect of a European bailout for the crippled Greek economy.
During the government’s debate on the 2010 budget she warned against premature European action which might not actually solve Greece’s problems in the long term and could also actually weaken the Euro further, and stated that a rash show of solidarity was not the right solution.
In addition she expressed her support for Finance Minister Wolfgang Schäuble’s idea of putting together an agreement which would be able to exclude future persistent offenders from the Eurozone as a last resort. According to her, current provisions are not sufficient to deal with a situation where a Eurozone country is on the brink of insolvency. She believes a new agreement is crucial for future cooperation.
This reluctance to pay out to Greece seems at odds with Germany’s usual role as financial martyr to the EU cause. So is the Federal Republic’s long-term love affair with all things EU showing signs of fatigue?
Or is Angie merely trying to placate her public, who, during times of financial uncertainty at home, certainly don’t want to be dishing out the Euros to those abroad?!
Indeed, behind her stern stance towards a rapid rescue for Greece surely lies a genuine concern for and continued commitment to the success of the currency union.
Keine Panik, Germany hasn’t given up on us yet!
It was bound to happen sooner or later. The fact that it is Greece will surprise few, but the sheer extent of the deficit and debt – 12.7% and touching €300 billion respectively – will have come as a nasty shock to fellow eurozone members.
At last week’s Summit EU leaders raced to show solidarity with Greece but refused to be drawn on what exactly they would do. Is a bail-out plan on the cards? Will Greece be asked to leave the eurozone? Will Germany have to dig into its ever-sparser pockets?
Greece has been accused of fiddling the books for the last few years, which may or may not be true, but what has been conveniently ignored is the contradiction at the heart of the Euro. Whilst eurozone monetary policy is regulated en bloc from the cosy headquarters of the European Central Bank (ECB) in Frankfurt am Main – 2400km from Athens – fiscal policy remains the sole responsibility of individual Member States.
Inevitably then, Member States are in a position to rack up huge debts if they wish, but then cannot play around with interest rates to rectify the figure. No-one is saying that EU Member States outside the eurozone are sitting pretty, but at least the Bank of England can respond to the UK’s own needs in a time of crisis. Whilst Greece burns, other eurozone members are showing signs of recovery, but how should the ECB balance out this tricky equation?
Meanwhile, Greeks are out on the streets demanding a halt to planned government cuts. The political heat is rising day-by-day, but let it not be said that this is not of the eurozone’s own making.
Meanwhile, eyes are already turning anxiously towards Spain, Portugal, Italy, and even France. Who would want to join the single currency now?