17th Apr 2021

Germany underlines its European credentials in Greek bail-out debate

  • The German government has faced criticism over its level of willingness to help Greece (Photo: Malik_Braun)

The German government sought to uphold its European credentials on Monday (26 April), insisting that Berlin is committed to the preservation of eurozone stability.

At the same time however, Chancellor Angela Merkel and German finance minister Wolfgang Schauble were at pains to stress that any bilateral support for debt-ridden Greece would be made dependent on Athens outlining further austerity measures for the years to come.

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"We need a positive development in Greece together with further savings measures," Chancellor Angela Merkel told reporters in Berlin. "Germany will help if the appropriate conditions are met. Germany feels an enormous obligation towards the stability of the euro."

Greece's centre-left Pasok administration has outlined a series of spending cuts and tax increases in order to reduce the country's deficit by four percent this year, but Berlin wants to see a list of austerity measures to be taken in 2011 and 2012 before providing support.

"If Greece is ready to accept tough measures, not just in one year but over several years, then we have a good chance to secure the stability of the euro for us all," said Ms Merkel.

The sentiments were echoed by Mr Schauble, who urged German parliamentarians and opposition party chiefs to support aid to Greece, but only once detailed lending terms are agreed with EU and IMF officials under a three-year package.

"We hope that the negotiations with Greece can be brought to a conclusion by the weekend," the finance minister said, referring to the ongoing talks taking placing in Athens, adding that Germany should not forget its 20th century history.

The government of Europe's largest economy is set to provide the largest slice, around €8.4 billon, of the €30 billion euro area countries have committed to provide to Greece this year, should market financing become non-viable. The IMF has agreed to provide €10-15 billion in addition this year.

Polls suggest the measure is unpopular with a majority of German citizens, a fact that makes electioneering difficult in the country's populous North Rhine-Westphalia state, which is scheduled to hold regional elections on 9 May.

Commission and ECB officials are currently carrying out an assessment on whether to recommend that euro area states provide aid to Greece, following the country's formal application for support on Friday.

A EU official indicated on Monday that the decision will be based on "state refinancing needs" and "market developments". "There are a number of indicators, but in the end there is a judgement to be made," the official said.

Italian criticism

Earlier comments by Mr Schauble in Monday's edition of the mass-selling Bild newspaper, again calling for Greece to outline austerity measures for 2011 and 2012, provoked criticism from Italian foreign minister Franco Frattini.

"I am concerned by the intransigence Germany is showing," Mr Frattini told journalists as he arrived for talks in Luxembourg with his EU counterparts.

"This is not a rescue operation [of Greece], this is a consolidation of Europe's walls, the walls of the euro, it's a rescue for all of us," he said.

A perception of German foot-dragging also hit financial markets on Monday, with yields on 10-year Greek bonds approaching 10 percent, a new decade-high for the country.

There were also signs that the contagion appeared to spreading to other eurozone states, with Portuguese bond yields jumping to over five percent, also a new high for the country since it joined the euro currency.

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