German leaders dismiss call for Greek euro exit

 
Chancellor Angela Merkel in TV interview in Berlin, 26 Aug 12 Mrs Merkel says the eurozone is in a "very decisive phase" in the crisis

Germany's centre-right government has criticised a leading conservative politician for suggesting that Greece will have to leave the eurozone.

Foreign Minister Guido Westerwelle said "bullying" of Greece must stop.

And in a TV interview Chancellor Angela Merkel said "everyone should weigh their words very carefully".

Earlier, Christian Social Union general secretary Alexander Dobrindt, an ally of Mrs Merkel, said he expected Greece to leave the eurozone in 2013.

He said he saw "no way round" a Greek exit. He also called the European Central Bank (ECB) chief Mario Draghi "Europe's currency forger".

His party, a junior coalition partner of Mrs Merkel's Christian Democrats (CDU), is preparing for an election in Bavaria and Germany's general elections next year.

Last week Mrs Merkel reiterated that she wanted Greece to stay in the eurozone. And on Sunday she told German ARD television that "we are in a very decisive phase in combating the euro debt crisis".

Greece is under pressure to speed up far-reaching reforms, including privatisation and civil service job cuts, in order to continue receiving instalments of its 130bn-euro (£103bn; $163bn) international bailout.

It is the second massive bailout agreed for Greece since the 2008 debt crisis shook the global economy and German politicians have made it clear they will not stomach a third.

Dispute over ECB role

Mr Westerwelle warned that remarks like Mr Dobrindt's could harm Germany's reputation as the eurozone tackles the debt crisis.

Comments by the head of Germany's Bundesbank, Jens Weidmann, also signalled divisions at the top over the ECB's handling of the crisis.

Greece discussions timetable

  • Early September: Troika staff go back to Greece
  • 14-15 September: Gathering of European finance ministers in Cyprus
  • Troika's review of progress to be published by the end of September
  • 8-9 October: Finance ministers attend two days of meetings in Luxembourg

In early August Mr Draghi announced plans for the ECB to buy the bonds of countries like Italy and Spain, whose borrowing costs have reached levels widely regarded as unsustainable.

He is expected to give details after a 6 September meeting of the ECB's governing council.

But Mr Weidmann, one of 17 eurozone central bank chiefs involved in ECB policy, said the plans risked making central bank financing "addictive like a drug" for struggling eurozone governments.

He warned that it was "close to state financing via the printing press" and could be a violation of EU rules preventing government-to-government subsidies.

Traditionally the ECB has been reluctant to undertake large-scale bond-buying because it is seen as inflationary, and the ECB's priority is to keep inflation under control.

But during the eurozone crisis the ECB has been buying up sovereign debt to help ease the market pressure on struggling, debt-laden eurozone countries.

At the weekend the German and French governments indicated that Greece's plea for a two-year "breathing space" in meeting its bailout obligations was unacceptable.

Eurozone leaders are waiting for a crucial report on Greece's finances, due in late September. It will be delivered by the troika supervising Greece's fulfilment of the bailout conditions - the ECB, International Monetary Fund (IMF) and European Commission.

Greece's continued access to the bailout lifeline depends on a favourable report from the troika.

Athens is trying to finalise a package of 11.5bn euros of spending cuts over the next two years.

 

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  • rate this
    0

    Comment number 79.

    @72 more like the natural evolution of human society into larger economic and political blocks. as is evidenced throughtout human history.

  • rate this
    0

    Comment number 78.

    @71 The bond purchases are matched with sales on the secondary markets, so no, these acts are not flooding markets with money nor are they inflationary.

    Second, flooding with money is at best counter debt-deflationary at the moment, and without credit creation by commercial banks the money volume is probably contracting.

  • rate this
    +1

    Comment number 77.

    Mutti Merkel does not have the answers to the Euro crisis. There is no exit option in the Euro contract so we are in unknown territory with Greece's potential exit. Merkel refuses to budge on the timescale for Greece's reforms although the debts did not appear overnight and will not be repaid overnight either. But Merkel grew up under a totalitarian regime (the DDR) and only understands force.

  • rate this
    -18

    Comment number 76.

    The Euro is just going through a tough patch at the moment and it's disappointing to see so many people give up on it. The Euro is a revolutionary idea and teething problems such as these are to be expected.

  • rate this
    +2

    Comment number 75.

    33. mccj14 - Alex Salmond great fan of euro, but now wants to keep the £!
    =

    Yes, & if Scotland leaves the £ zone, but uses £'s anyway, economy of Scotland will have to accept interest rates set for England, & if the £ rises or falls due to decisions by English & Welsh MP’s, Alex Salmund has no say!

    He won’t call a referendum.

    He will keep taking his 6 figure salary on the status quo!

  • rate this
    +2

    Comment number 74.

    Greece has slashed budget deficit, excluding debt servicing, to 3.07B euros. This is considerably less than the target of 4.53B set by troika. Nevertheless, Greece’s debt levels continue, to rise DUE TO GROWING INTEREST CHARGES (that benefit whom?). In March and June alone, Greek Govt debt increased by 23.2B to over 300B euros.

  • rate this
    -1

    Comment number 73.

    Connected to #49 & #60

    Stage 3 Work out a deal with SOME of the euro partners how these euros will be split up between them !

    Stage 4 This will make the EZ and the euro strong again by collecting back the euros to the "strong" economies while bringing the debt down !

    T.B.C. 600sec later !

  • rate this
    0

    Comment number 72.

    34. beammeup "what has been the biggest blessing of the European Union?"

    The original idea in 1950 was to unify the weapons-making capability of France and Germany (i.e. coal and steel) so that they couldn't invade each other any more. Before 1950, they did so once per generation. In that respect, the ECSC was a resounding success.

    So how did it morph into the EU? Greed for power.

  • rate this
    +1

    Comment number 71.

    The consequences can be fatal. With its bond purchases, the ECB is flooding the markets with money. If it doesn't claw back the money elsewhere, it continues to inflate the money supply. Experience and theory have shown that the injection of funds into the markets could eventually lead to rising prices -- in other words inflation, which central bankers are required by law to prevent.(Der SPIEGEL)

  • rate this
    +1

    Comment number 70.

    chief Mario Draghi "Europe's currency forger". - would this herr Dobrindt have said the same if that chief was German, Finnish, Dutch or French?

    First the Franco-German Axis wanted to wait till the troika report but now they say the 2 year plea is unacceptable? More conflicting views from the same lot and then they cry about more instability to their currency....

  • rate this
    +3

    Comment number 69.

    @62
    Wrong!
    The EU existed well before this madness of monetary union. In fact the rest of Europe (non-euro countries) are happy without it. Germany loves it because countries like Greece and Ireland devalue the currency and make its exports cheaper. As for European disintigration just because we go back to a time before the euro is nonsense. People are fed up with Directives from the EU as it is.

  • rate this
    +2

    Comment number 68.

    @58 you can ask why and postualte if onlys all you want. the fact is this is what has happened and we are going to deal with it.

    @59 the uk is more of a unitary state than a federal state but the point is valid.

    @62 the way DC goes about things sidelined backwater is more likley.

    @66 the eu is like the banks in the city of london?

  • rate this
    -3

    Comment number 67.

    36.BluesBerry

    Just compare the QE from ECB and FED. 3% ECB / 18% FED.So ECB still have a lot of fire-power left on the printing press.
    Or with oil-imports.Passing a law that EZ countries pay there oil in Euro for instance.Will cost something at the beginning
    but is good in the long run.

  • rate this
    +2

    Comment number 66.

    The EU is a laughing stock and bullies. It suppresses people to their own lust and greed. I feel sorry for the continental countries to be treated in this way. Let them all go back to their old currencies and stop all this sadness. we used to barter and get different exchange rates in the same road, not now. I`ts immoral and disgusting.

  • rate this
    +8

    Comment number 65.

    Germany is on the horns of a dilemma. Continue to throw billions into the black hole of the struggling countries, knowing it will never be repaid, or accept the inevitable and let the Euro founder, making Germany's exports less attractive on world markets due to the fact that whatever currency Germany retains will soar in value on the currency exchanges.

  • rate this
    +2

    Comment number 64.

    Despite the many failings and pseudo tory policies of "New" Labour, the one thing we must be extremely thankful to Gordon Brown for is his foresight in keeping us out of the Euro. If Cameron wants to win the next election a sure fire winner would be to get back our sovereignty by getting us out of the EU.

  • rate this
    +15

    Comment number 63.

    I wonder how the Greek people are coping with this crisis? We seem to hear, comparatively little about the hardships being endured by Greek families, apart from an occasional rumour of malnourished children passing out at school from hunger. I'd have thought these were stories worthy of some press attention

  • rate this
    +1

    Comment number 62.

    The UK has to choose between two ultimate scenarios: a) The Eurozone breaks up and regresses into competing nations (eg: Yugoslavia) b) Europe becomes a Federal Europe.

    a) raises historical and ethnic dangers

    b) The UK needs to decide if it wants a position in the governance and development of Federal Europe, if to take a throne on the podium, or just become a sidelined backwater.

  • rate this
    +1

    Comment number 61.

    it realy does not matter what merkel wants
    trying to cut defecit ratios with falling GDP and falling tax revenues
    is a disaster for Greece
    this disaster is not a special case
    it just a question of degree
    Germany will not escape the eurowide double dip recession
    caused by euro govts trying to reduce defecits
    reduce fiscal stimulus
    when private sector needs to reduce it's debts
    masochism

  • rate this
    0

    Comment number 60.

    Connected to #49

    Stage 1 Puss hard on the people with Austerity measures to make them want to leave the euro !
    Everything's has to happen with the peoples agreement - Blame it on the people !

    Stage 2 Offer them to buy out there euros for 1/2 or 1/5 or 1/10th of the entry value ! And give them all the benefits of the EZ ( just to calm them down )
    T.B.C. 600sec later

 

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