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Greece, the euro and the Nazis

Gavin Hewitt | 14:15 UK time, Friday, 26 February 2010

Greek euro coinsYou can often tell the level of strain someone is under when they lash out in a surprise verbal attack.

It is true, too, with countries. This week the Greek Deputy Prime Minister, Theodoros Pangalos, turned on the Germans. Greece had never been adequately compensated for the crimes of Nazi Germany, he said. "They took away the Greek gold that was at the Bank of Greece," he went on. "They took away the Greek money and never gave it back."

What prompted the outburst was German criticism that Greece had been irresponsible with its finances and had faked its accounts. The mood in Germany is hard-set against helping out or bailing out the Greeks.

Mr Pangalos, remembering the Nazi occupation, told the Germans: "they shouldn't complain so much about stealing..."

It is not necessarily the best approach to win support and, not surprisingly, the Germans are furious. Otmar Issing, a former German European Bank executive, said bluntly: "The crisis is made in Greece - it is a result of bad policy." Hans-Werner Sinn, head of the Ifo Institute, echoed the views of many Germans when he said "Greece should never have entered the eurozone".

Even the Greek Prime Minister, George Papandreou, weighed in: "The issue of German World War Two reparations has not been finally settled. We have never given up on our claims." However, he said, he would not raise the issue with the Germans during the current crisis - which begs the question of why his deputy put it in the mix in the first place.

Mr Papandreou was surely right when he went on to say, however, that if we put reparations on the agenda "it would be very easy for people with bad faith to interpret this as a sign of weakness again and that we are looking for an alibi to shirk our responsibilities."

But the mood between the two countries has soured. Greece's oldest consumer group has called for a boycott of German products and stores. They object to a German magazine where the Venus de Milo statue is portrayed as giving the finger to the Greeks which it calls "the cheats in the euro family". The Greeks are offended and the German ambassador was summoned to see the Speaker of the Greek parliament.

The Greeks do not like the tough line being taken by Berlin over a potential bail-out. Yesterday some German banks decided against buying Greek bonds. There is a sense that we may be nearing a decisive moment over whether Greece can raise money to finance its deficit. This week officials from the EU, the European Central Bank and the IMF have been in Athens. Their conclusion is that Greece is likely to fail to meet its targets for reducing the deficit with the austerity measures it has introduced so far.

Today there was a tone of desperation to Papandreou's appeal to the Greek people: "Will we let the country go bankrupt or will we react?" he said. "Will we let the speculators strangle us, or will we take our fate in our hands?"

Next week he will go and visit Angela Merkel. She, of course, will say she supports the stability of the euro, but it is becoming harder for her to persuade the German people that they should use their money to help the Greeks.

Increasingly Germany is becoming the key to the eurozone crisis. It has done well out of the euro. Some countries would now like Berlin to increase its domestic demand, to enable other weaker countries to export to Germany and so kick-start their economies. But Germany will be very reluctant to loosen the tight spending and wage discipline that has served it so well. Politically it is a hard sell to compromise a cautious, responsible economy to help out those who have fudged the books.


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