Merkel faces growing dilemma over Greece

January 5, 2015 7:33 pm

Merkel faces growing dilemma over Greece

Stefan Wagstyl — Berlin / http://www.ft.com/intl/cms/s/0/760f0694-9500-11e4-b32c-00144feabdc0.html?siteedition=intl#axzz3O1RncjCn

Chancellor Angela Merkel’s conservative coalition partner on Monday warned the German government against meddling in the Greek elections, as debate intensified in Berlin about how to respond to the prospect of a new populist government in Athens.

Horst Seehofer, head of the Bavaria-based CSU, said on Monday that while it was right to attach conditions to aid for crisis-hit Greece “we should not behave as a schoolmaster in the Greek election campaign”.

Mr Seehofer’s intervention highlights the dilemma facing Ms Merkel as Greeks prepare to go to the polls this month in an election that could bring to power the hard-left Syriza party. Syriza is seeking a relaxation of austerity and a lightening of Greece’s debt load that would put the country at odds with its international creditors.

The chancellor wants Greece to remain in the eurozone, but does not want to grant debt relief or other concessions sought by Greeks for fear of burdening German taxpayers with the costs.

Der Spiegel magazine this weekend sparked a renewed debate in Germany with a report that the government was no longer committed to keeping Greece in the eurozone at any cost. According to the report, Berlin now calculated that the eurozone’s progress since the last crisis in 2012 in creating new bailout funds and crisis-prevention tools would allow Germany and its partners to abandon Greece, if a new government in Athens made unacceptable demands.

Steffen Seibert, Ms Merkel’s spokesman, on Monday became the latest government official to insist that there had been “no change” in German policy.

Strengthening the eurozone — with all its members, including Greece — remained government policy, he said. In an apparent acknowledgment of the concerns raised by Mr Seehofer, he added that eurozone policies were “not a bilateral matter for Germany and Greece to decide but an issue at the EU level”.

Earlier, Sigmar Gabriel, the deputy chancellor, became the most senior minister to speak on the issue saying in a newspaper interview: “The aim of the whole government, the EU and the government in Athens itself is to keep Greece in the eurozone . . . There were and are no contrary plans.”

Such declarations have not stopped other political leaders from warning Greece against leaving the euro or presenting its creditors with demands for a big debt cut.

Detlef Seif, parliamentary deputy spokesman on EU policy for Ms Merkel’s CDU-CSU bloc, told the FT: “The agreements [between Greece and its creditors] must be kept. European nations have helped Greece on the condition that they will get their money back.”

Michael Fuchs, the CDU’s parliamentary deputy leader, argued that the threat of a Greek exit no longer held the same danger for the rest of the eurozone because of the strengthening of the bloc’s financial institutions in recent years.

“I assume that what Greece had three or four years ago — namely the potential to blackmail us — is no longer present,” he told Bavarian radio.

Summing up the debate, Tagespiegel, the centre-left Berlin newspaper, said: “The spectre of a Grexit has, since the announcement of the [Greek] election, retreated. Or at least it has lost its horror. The government no longer denies that it can live with a Grexit scenario.”

German public opinion has been sharply critical of Greece throughout the crisis, one factor that has limited Ms Merkel’s room for manoeuvre in terms of easing conditions attached to the bailout or otherwise granting Athens relief.

Bild, the country’s largest selling tabloid, which often sets the tone of the popular debate, took a scolding tone on Monday as it compared Greece to a wayward footballer.

“What happens to a footballer who breaks the rules and does a crude foul?” it asked. “He leaves the pitch. He is sent off as a punishment. No question.

“What happens with a country that does not keep the rules or implements agreements only reluctantly? It receives broad support and billions of aid — as we have seen so far in the case of Greece.”

Should Syriza win and revoke Greece’s EU agreements, the German government will show Athens “the red card” and “hustle” it out of the euro, Bildt said.

One sign of support for Greece came from the opposition Green party. It called for solidarity with Athens and condemned talk of a possible Grexit. “I think this is an irresponsible discussion,” Simone Peter, the party chair, told German television. “We have here a mutually-supportive group. We must work on stabilising it.”.