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Berlin’s consistency on Greece’s rescue
Admission that more aid is needed is in line with policy
Wolfgang Schäuble, the German finance minister, may have set the cat among the pigeons by stating that Greece will need a third rescue programme next year. But the pigeons are mostly to be found among opposition politicians in Germany’s federal election campaign. Others know that Mr Schäuble’s words differ only marginally from earlier policy statements, and are entirely consistent with them. That they do not amount to a break in policy, however, does not mean they are insignificant.
Ever since the Bundestag’s vote on the second round of aid for Athens, Berlin has said a third may have to be considered, though without trumpeting it too loudly. Given the political decision taken last year to keep Greece within the euro, a more concrete commitment was a logical refinement of existing policy that was bound to come sooner or later. The second, just as important part of Mr Schäuble’s statement was to underline yet again that Germany is opposed to a writedown of Greece’s debt to official creditors. That, too, is fully in line with existing policy.
Both are also what the opposition Social Democrats will have to stand by should they be in government after the election. The SPD does not want to be the party to cut off Greece’s lifeline, nor to accept explicit losses on the loans Germany has extended. So there is little that Peer Steinbrück, SPD candidate for chancellor, can use Mr Schäuble’s remarks for, except to accuse him of underplaying the problems with Greece’s adjustment programme. Indeed, Mr Schäuble may just have calculated that the government has less to lose politically from talk of a third rescue than from an accusation that the government is not being square with the German people.
Beyond domestic electoral tactics the remarks – and the policy continuity they represent – illustrate well Berlin’s diplomatic game vis a vis Athens and the International Monetary Fund.
For the first time in four years of economic purgatory, Athens can reach for black ink to record some of its most challenging economic figures. It can boast a primary budget surplus so far this year and a positive current account since May. While Greek finances are far from fixed – and will not be sustainable until the economy returns to health – a signal from Berlin that Germans will continue to be there for the Greeks is surely welcome. So long, of course, as this commitment is balanced by a refusal to forgive the debt, which would lift any pressure for further reform in Greece at a stroke.
Mr Schäuble’s remarks also serve as a retort to the IMF’s increasingly vocal unhappiness with the Greek programme. The fund recently went public with its estimates that a new financing gap would need to be filled for Athens in the next few years, and that some of its debt would have to be forgiven to reach sustainability.
As the IMF – like the European Central Bank – is duty-bound to reject debt writedowns, the fund’s implication was that eurozone governments would have to shoulder the burden. Berlin’s answer is clear: the imminent funding gap will be filled one way or other – which also spares the fund being forced to leave the programme by its own rules. But a writedown is ruled out by Europe’s paymaster.
What does this mean for Greece? On the whole, it is a good sign. Germany’s decision not to abandon its southern neighbour is sticking – and will continue to stick past next month’s election, whatever it brings. No doubt more difficult demands will be placed on Athens; and its leaders’ feet again hauled to the fire when new funds become needed. Expect fudges, too: money may be found in inventive ways, or the debt burden lightened through maturity extensions, not nominal write-offs. This is consistent with past practice – a consistency that, albeit messy, is gradually making the threat of euro break-up recede.
(Financial Times)
Admission that more aid is needed is in line with policy
Wolfgang Schäuble, the German finance minister, may have set the cat among the pigeons by stating that Greece will need a third rescue programme next year. But the pigeons are mostly to be found among opposition politicians in Germany’s federal election campaign. Others know that Mr Schäuble’s words differ only marginally from earlier policy statements, and are entirely consistent with them. That they do not amount to a break in policy, however, does not mean they are insignificant.
Ever since the Bundestag’s vote on the second round of aid for Athens, Berlin has said a third may have to be considered, though without trumpeting it too loudly. Given the political decision taken last year to keep Greece within the euro, a more concrete commitment was a logical refinement of existing policy that was bound to come sooner or later. The second, just as important part of Mr Schäuble’s statement was to underline yet again that Germany is opposed to a writedown of Greece’s debt to official creditors. That, too, is fully in line with existing policy.
Both are also what the opposition Social Democrats will have to stand by should they be in government after the election. The SPD does not want to be the party to cut off Greece’s lifeline, nor to accept explicit losses on the loans Germany has extended. So there is little that Peer Steinbrück, SPD candidate for chancellor, can use Mr Schäuble’s remarks for, except to accuse him of underplaying the problems with Greece’s adjustment programme. Indeed, Mr Schäuble may just have calculated that the government has less to lose politically from talk of a third rescue than from an accusation that the government is not being square with the German people.
Beyond domestic electoral tactics the remarks – and the policy continuity they represent – illustrate well Berlin’s diplomatic game vis a vis Athens and the International Monetary Fund.
For the first time in four years of economic purgatory, Athens can reach for black ink to record some of its most challenging economic figures. It can boast a primary budget surplus so far this year and a positive current account since May. While Greek finances are far from fixed – and will not be sustainable until the economy returns to health – a signal from Berlin that Germans will continue to be there for the Greeks is surely welcome. So long, of course, as this commitment is balanced by a refusal to forgive the debt, which would lift any pressure for further reform in Greece at a stroke.
Mr Schäuble’s remarks also serve as a retort to the IMF’s increasingly vocal unhappiness with the Greek programme. The fund recently went public with its estimates that a new financing gap would need to be filled for Athens in the next few years, and that some of its debt would have to be forgiven to reach sustainability.
As the IMF – like the European Central Bank – is duty-bound to reject debt writedowns, the fund’s implication was that eurozone governments would have to shoulder the burden. Berlin’s answer is clear: the imminent funding gap will be filled one way or other – which also spares the fund being forced to leave the programme by its own rules. But a writedown is ruled out by Europe’s paymaster.
What does this mean for Greece? On the whole, it is a good sign. Germany’s decision not to abandon its southern neighbour is sticking – and will continue to stick past next month’s election, whatever it brings. No doubt more difficult demands will be placed on Athens; and its leaders’ feet again hauled to the fire when new funds become needed. Expect fudges, too: money may be found in inventive ways, or the debt burden lightened through maturity extensions, not nominal write-offs. This is consistent with past practice – a consistency that, albeit messy, is gradually making the threat of euro break-up recede.
(Financial Times)
