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20th Aug 2022

'Provocative' Germany pushed Greece talks to the edge

  • Signs of fatigue after all-night, sometimes bitter talks (Photo: bru)

After 16 hours of negotiations, talks between euro leaders on Greece are still ongoing with Germany's tough stance throughout the weekend making the negotiations difficult and sometimes highly contentious.

"Humiliating a European partner after Greece has given up on just about everything is unthinkable”, Italy's prime minister Matteo Renzi was quoted as saying Sunday.

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"To Germany I say: enough is enough”.

On Sunday (12 July), it was Germany who insisted that the line "Greece should be offered a time-out from the euro area" be introduced into the draft statement which finance ministers prepared for eurozone leaders meeting later in the day.

Unless the Greek prime minister Alexis Tsipras complied with Germany’s requests for a bailout deal, a temporary Grexit would occur.

It was the first time the exclusion of a eurozone member was officially considered. It came from a founding member state, and currently the most powerful one.

It was only a theoretical threat, but a very symbolic one.


Broken taboo

It was very unlikely that such a decision could be taken by the euro summit, where unanimity is needed - France and Italy, in any case said they would not allow it.

"There is no temporary Grexit. It's either Greece in the euro or Greece outside the euro, but then it would be a Europe that goes backward”, French president Francois Hollande said before the summit began.

There is also no legal basis for a "time-out".

By introducing Grexit into the negotiations, Germany broke the taboo of the "irreversibility" of the euro membership, three years, almost, to the day since European Central Bank chief Mario Draghi said he would do "whatever it takes" to avoid a country leaving the eurozone.

Officials said that at Saturday's Eurogroup meeting, Draghi warned German finance minister Wolfgang Schaeuble of the consequences for Greece and the eurozone of his inflexibility.

Schaeuble reportedly replied: "I'm not stupid!", leading to the suspension of the meeting around midnight on Saturday evening.

The meeting "was extremely hard, even violent," a member state official said. He added that, at one point, the Greek finance minister, Euclid Tsakalotos, was witness to heated exchanges between pro- and anti-Grexit colleagues.

The "time-out" threat was just part of Germany's tactics, however.

The alternative to a temporary Grexit is a raft of conditions to restore "trust" between Greece and its eurozone partners.

€50 billion fund

Supported by other member states such as Finland, Slovakia, the Netherlands and Latvia, Germany insisted on measures designed to tighten control on Greek reforms and economic policies.

The Eurogroup draft for example, introduced "automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the [Greek] Fiscal Council and subject to prior approval of the institutions".

The negotiating document also said that "to improve programme implementation and monitoring", the Greek government would have "to consult and agree with the institutions on all draft legislation in relevant areas with adequate time before submitting it for public consultation or to parliament".

The most controversial measure required from Greece was the creation of a €50 billion fund where "valuable Greek assets shall be transferred … to be privatised over time and decrease debt."

"Such a fund would be managed by the Greek authorities under the supervision of the relevant European institutions”, the draft said.

This measure came directly from a paper prepared by the German finance ministry on 10 July.

Germany, followed by the Eurogroup, suggested the "external and independent fund" where Greek assets would be transferred be the Institution for Growth, based in Luxembourg.


Diplomatic and EU sources said this fund is Greek-owned.

But the Institution for Growth, established in 2014, is partly owned by KfW, a German government-owned bank specialised in public investment and development projects.

KfW's board of supervisory directors is chaired by the German finance minister and is comprised of federal and states ministers and MPs.

Greece and KfW each provided €100 million to finance the creation of the Institution for Growth.

The assets fund proposal was "an issue of sovereignty," admitted a eurozone member state official.

By putting forward demands that were never talked about in five months of negotiations, Germany was "being provocative," an EU official said.

#ThisIsACoup

In media and on social networks, Germany's demands for more control and the Grexit threat were seen as an attempt to punish Greece as well as an infringement of democracy.

This culminated Sunday evening when the hashtag #ThisIsACoup was the second top hashtag worldwide on Twitter, and the first in Germany and Greece.

"This Eurogroup list of demands is madness," wrote economy Nobel-prize winner Paul Krugman on his New York Times blog.

"The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for," wrote Krugman, a long-time critic of eurozone policies towards Greece.

Meanwhile, the English version of Germany's Der Spiegel Online retweeted an article published in April under the title: "The Fourth Reich, What Some Europeans See When They Look at Germany".

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