Tough Greek deal likely to head off German backlash

BERLIN Tue Feb 21, 2012 11:48am EST

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BERLIN (Reuters) - The severity of conditions attached to Greece's 130-billion-euro bailout deal looked set to head off a parliamentary backlash over the package in Berlin but Germans are still concerned about Athens' long-term ability to meet the demands and repay loans.

Germany, the biggest euro zone contributor to the bailout, has taken a hard line in the tortuous negotiations with Greece, making Chancellor Angel Merkel a hate figure with some Greeks, with newspapers even printing montages of her in a Nazi uniform.

Facing public skepticism about another bailout, Germany, along with fellow hardliners Finland and the Netherlands, has come away with an agreement for stricter supervision of Greek reforms and a special escrow account for bailout funds.

That will make it easier for conservative Merkel to push the deal through parliament despite misgivings among lawmakers and voters, said economists.

"The Greek deal very much plays to the public in the northern European countries. Conditions for Greece are tough so that no other country will ever want to get into that position," said Christian Schulz, senior economist at Berenberg Bank.

"But what is not answered is if Greece will ever be able to repay the loan under these harsh conditions," he said.

Some members of the German public expressed sympathy for the plight of ordinary Greek people, while other Germans questioned the effectiveness of the deal in being a long-term cure for Athens' debt crisis.

The accord is probably stringent enough to secure Merkel a majority for the bill in the Bundestag lower house on February 27 without having to rely on opposition parties.

Straight-talking German Finance Minister Wolfgang Schaeuble, who only last week described Greece as a "bottomless pit," said he was confident the Bundestag lower house of parliament would pass the rescue package. Most experts agree with him.


Merkel's reluctance to sign up to the rescue package without what some are calling draconian conditions has seriously damaged relations between the countries and for some has revived memories of the Nazi occupation of Greece in World War Two.

But the chancellor has to keep her more skeptical coalition partners as well as voters on board. Prudent German taxpayers resent stumping up for the Greeks who, they think, have lived beyond their means for years.

One recent poll showed two thirds of Germans said they doubted Greece's determination to make savings.

However, on the streets of Berlin, Germans showed some solidarity with the Greek people.

"In times of crisis we all have to support each other, and I think it's Germany's responsibility to help Greece. If Greece can get everything under control then it should stay in the euro zone," said Sabrina Schmidt, 24, waiting for a train at a Berlin station.

Others, while sympathetic to Greece, were more skeptical about the effectiveness of the deal.

"We're in this together and if someone goes wrong then we all have to work it out," said Ralf Schaefer, 67.

"I hope the deal helps Greece, that's what's worrying me ... the terms are completely wrong -- all the money goes to the banks and it should go to help the people. The economy won't function if ordinary people can't buy anything," he said.

Some German commentators also focused on the nature of the bailout.

"The mistake isn't the size but the construction of the bailout package," wrote Der Spiegel weekly in a commentary in its online edition, adding Europe would probably end up pumping far more money into Greece in coming years.

"Greece should ... get the 130 billion euros. But the money should be paid in another form. Instead of rewarding financial speculators for their high-risk deals, the money should flow into the reconstruction of the Greek economy. A new Marshall Plan is needed, rather than a manic insistence on debt repayments."


Senior members of Merkel's Christian Democrats and the opposition welcomed the deal but stressed Greece had to implement the reforms it had signed up to.

Social Democrat budget spokesman Carsten Schneider said Germany had "wrung the most out (of the deal) that it could." He cautioned that it brought further risks for German taxpayers but argued a Greek collapse or euro zone exit would be more expensive still.

And although the bill is set to go through parliament, Merkel will face a rebellion.

Wolfgang Bosbach, a prominent CDU rebel, said Greece's problems had not been solved and he would not back the bill.

"I fear the second rescue package, including the partial debt forgiveness only buys time and there are big risks," Bosbach said.

"I don't think the second rescue package will be the last word. If things remain as they are, that no country may leave the euro zone under any circumstances, then it is only a question of time until Greece needs help again."

Frank Schaeffler, a member of Merkel's junior coalition partners, the Free Democrats (FDP), who have traditionally been more reluctant to sign off on bailouts and whose refrain has been "no blank checks," said the euro zone had merely won time.

"It is just as certain as 'amen' in church that there will be a third and even fourth Greek rescue," he said, adding Greece was starting to bear some resemblance to the German economy in Weimar Germany before Hitler's rise to power.

Dutch and Finnish parliaments are also expected to pass the bailout in the next two weeks.

(Additional reporting by Sarah Marsh, Alice Baghdjian, Erik Kirschbaum, Andreas Rinke Terhi Kinnunen in Helsinki, Gilbert Kreijger in Amsterdam, writing by Madeline Chambers, editing by Peter Millership)

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Comments (3)
The Greek people need to seriously stop whining! They work less than any other people in the European Union (Regardless of what their flawed statistics state) and they retire earlier than any other people around on a full pension.

The majority of the Greek people don’t even respect their country enough to pay their taxes! How can you protest the severity of the austerity measures if you don’t even pay your dues to your own government!?!?!

Feb 21, 2012 12:31pm EST  --  Report as abuse
Motherof12 wrote:
The problem of Greece, and therefore of the European Union, is insoluble. The Greeks are incapable of doing what they promise. Few nations are.

Thus every possible exit is a doorway to disaster. The most that governments can do is hasten or delay the inevitable.

Feb 21, 2012 1:05pm EST  --  Report as abuse
@Motherof12: Good argument. Considering Mr. Schauble’s comments during the previous weeks and all of the chatter within Germany, it is very likely that some of the driving countries are simply buying additional time in order to shore up any possible financial concerns once (not if) Greece declares bankruptcy. The fact that the IMF has demanded an escrow account for the bailout funds is reason enough to stipulate that they want full control of all monies since they are already planning to let Greece fail once the initial $14 billion are due next month; after this bond payment, Europe will surely let Greece depart since they have done their due diligence and have built up all necessary financial accounts to deal with a Greek default.

Feb 21, 2012 4:25pm EST  --  Report as abuse
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