GERMAN STRATEGY:WHEN IT comes to Greece's woes, Berlin is hoping lightning will strike twice.
A year ago, the talk was also of bailouts but the country in question was Ireland. Berlin adopted a two-pronged strategy at the time: unofficial acknowledgement that Ireland would not be allowed to fail, combined with official expressions of confidence in Dublin’s appetite for austerity measures.
Germany hopes the strategy will pay off again and that euro-zone members – translation: Berlin – will not have to cough up for Greece to preserve euro-zone stability.
“Regardless of what happens to Greece now, the prospects are unappetising for Germany,” said Almut Möller, programme director of Berlin’s Alfred von Oppenheim Centre, a European think tank. “It’s a chillier world out there compared to a year ago.”
Last year’s speculation about Ireland made clear that the prospect of bailing out another euro-zone member would confirm many Germans’ worst fears about giving up the Deutschmark.
A year on, Germany’s debt is at record levels, unemployment is on the rise and German sympathy for their Greek cousins is limited. In particular, strikes in Athens over increasing the retirement age from 61 to 63 years has cut little ice with Germans, who have been told that, in future, they will have to work to 67 or even 69.
Despite real fears over the practical consequences of the current crisis, the discussion in Berlin about the political consequences has only just begun.
The debate got into gear yesterday with the first accusations about the rights and mostly wrongs of introducing the euro without full EU economic and political union.
“It was a mistake to accept Greece into the currency union in 2001,” said economics professor Renate Ohr of Göttingen University. “This mistake cannot be made good by keeping Greece in the currency union at all costs.”
But there is widespread acceptance among German economists and bankers that a bankrupt Greece would set off a domino effect through the euro zone that is in no one’s interests.
To prevent a speculation wave, Prof Hans-Werner Sinn of Munich’s Ifo Institute has called for International Monetary Fund-style conditions for any aid, even if the IMF is not called in.
This ties in with the thinking in Berlin where, as last year, finance ministry officials are preparing game plans in the hopes they never leave the drawer.
“It would be completely irresponsible not to be prepared,” said one leading government official.
If need be, Berlin could offer loans through the state-owned KfW bank. It would either buy into the next round of Greek sovereign debt in April or May, or guarantee loans of German third parties.
The strategy, though, is to make the conditions attached to external help as horrendous as possible – IMF oversight, for instance – to concentrate Greek minds on helping themselves.
Thus German chancellor Angela Merkel’s insistence yesterday in Brussels that Berlin’s support was not yet needed and, even if that changes, conditional: “Rules are rules and they have to be obeyed.”
The rule Berlin does not want breached – officially at least – is the Maastricht Treaty’s “no bailout” clause.
