22nd Oct 2016


Why did Schaeuble break the Greek bailout taboo?

  • Greece will need at least €10bn more when the current bailout runs out, says Schaeuble (Photo:

The German election campaign had a rather dull start.

Mid-August, Chancellor Angela Merkel kicked off her tour through the country - with over 50 rallies to be held in different towns and cities by 22 September when Germans are to cast their vote.

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Stability, prosperity, a steady course. Taking her time to reflect on important decisions. "Germany is doing well," she said in her campaign video.

The reality of bailed out countries with their high unemployment, strikes and worsening recession was airbrushed out of Merkel's image as eurozone crisis manager.

Solid economic data, record-low unemployment and a budget surplus at home are giving her tailwind. At 60 percent popularity, Merkel should not even feel threatened by her Social-Democratic rival, Peer Steinbrueck, who is struggling to gain the confidence of voters after a series of blunders.

Steinbrueck's accusations - her hesitant decision-making in the euro-crisis, her failure to hold the Americans accountable for their massive spying - have so far failed to bring the Social-Democrats ahead of Merkel's Christian-Democrats.

Re-election seemed a shoo-in for Merkel. Even if it would end up in another grand coalition, as in 2005-2009, when Steinbrueck was Merkel's finance minister.

But then the unthinkable happened.

Also on the campaign trail last week, finance minister Wolfgang Schaeuble uttered the phrase: "There will have to be another programme for Greece."

What was thought to be a total taboo before 22 September suddenly was out there.

Merkel and government spokespeople later on said there was "nothing new" in Schaeuble's statement, since they had never ruled out the possibility of more money going to Greece given that the current bailout will not suffice to get the country back on track.

But the blunt statement created quite a storm, including among government members and allies.

Bavarian Conservative leader Horst Seehofer called Schaeuble's remarks "not very fortunate" and said it would send the wrong signals to Greece.

Liberal foreign minister Guido Westerwelle also warned against handing out "blank cheques," even though he said a third bailout - meanwhile estimated at €10 billion - cannot be ruled out.

And Steinbrueck seized the opportunity to put Merkel on the defensive, demanding clear figures of how much the overall euro-rescue will cost. Ex-chancellor Gerhard Schroeder, who stumps for Steinbrueck, accused Merkel of lying to the electorate.

Merkel herself has also taken on the blame game, saying Schroeder should not have allowed Greece to join the euro in the first place.

“Chancellor Schroeder accepted Greece in and weakened the Stability Pact and both decisions were fundamentally wrong, and one of the starting points for our current troubles,” she said Tuesday (27 August) in the northern-German town of Rendsburg.

A TV debate between Merkel and Steinbrueck planned for the 1 September has suddenly found its main topic.

Attack as best defense?

But insiders say the Schaeuble move was no accident.

Speaking to foreign correspondents in Berlin on Monday, the secretary-general of the CDU, Hermann Groehe, said the finance minister had to address this topic because rumours were already out there and hurting the campaign.

"The question if there will be another debt restructuring for Greece was already a topic three days before his statement. That is why it was necessary for the minister to take a stand," Groehe said.

He explained that by ruling out a fresh debt restructuring for Greece, Schaeuble had to give a credible answer to how Greece will get back on track.

"There was a brief stir, we were accused of hiding something. But it is better for this debate to happen four weeks before elections, because now we have time to give all the relevant quotes and information," the Conservative politician said.

Meanwhile, the debate is a boon for the anti-euro Alternative fuer Deutschland (AfD) - a recently founded party counting mostly disappointed CDU members advocating for a breakup of the eurozone.

"The euro-crisis has played a way too small role in the campaign so far, even though it is the biggest question for the future. In Merkel's summer interview with ZDF she wasn't even asked one question about it. At least Schaeuble got some attention to this topic," AfD frontman Bernd Lucke told reporters in Berlin on Monday.

His party wants Greece to leave the eurozone and in exchange to have its debt erased completely.

Schaeuble's reasoning that with a €10 billion bailout there will be no debt restructuring is flawed, Lucke said.

"We will need to have another debt restructuring. It will probably happen after the elections, at the expense of the German taxpayer," he said.

Polls put the AfD below the five-percent threshold needed to make it into the Parliament. But if the race heats up and the two camps are divided by only one-two percentage points, the AfD may get exactly those votes Merkel would have needed for another term as Chancellor.

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