Greece: Merkel's euro headache returns

German Chancellor Angela Merkel speaks at a youth union convention in Rostock, 5 October  It will be Angela Merkel's first visit since the bailouts

The moment will be watched closely. On Tuesday the German Chancellor, Angela Merkel, will visit Athens. It will be her first visit to Greece since the crisis erupted nearly three years ago.

She is regarded by many Greeks as the author of austerity. She is held responsible for demanding that Greece make swingeing cuts in exchange for the two bailouts it has received. The German flag has been burnt at demonstrations and one paper has dressed Angela Merkel in a Nazi uniform.

The visit will spark protests. The Prime Minister, Antonis Samaras, says "we will receive her as befits the leader of a great power and friendly country".

The unions see it differently. They have called demonstrations against what they call the "neo-liberal policies of Mrs Merkel and the EU's core leadership". The radical leftist party Syriza is planning a rally against the visit. A right-wing party intends to go to the German embassy to protest the "transformation of our country into a German protectorate".

The meeting is a gamble. If there is chaos it will only underline for the German public that Greece is a lost cause. Angela Merkel, however, is making a calculation. She is signalling that she wants Greece to stay in the eurozone. She has silenced German politicians who in early summer were saying a Greek exit held no fears for them.

"This is symbolically very important," says Carsten Brzeski, senior European economist at ING. "It points clearly to the fact that Merkel is not going to drop Greece, even though things are not going well for them."

Talks between the Greek goverment and the so-called troika - debt inspectors from the EU, IMF and ECB - are continuing. Greece has to find 13bn euros (£10.5bn; $17bn) in savings to qualify for a 31bn loan.

The Greek finance minister says "there are differences that have not been settled". Without the loan Greece will run out of money by the end of November.

Today the troika will be in Luxembourg for the meeting of eurozone finance ministers. They will deliver an update. The crucial decisions lie ahead, probably later in October. Chancellor Merkel's instinct is for a fudge. But here's the problem. Greece's public debt is 346bn euros, 179% of GDP. It is heading into the sixth year of recession. There is no way it can reach the targets set for it.

Sooner or later the big questions will have to be answered. Does Greece need a further restructuring of its debt as the IMF is hinting, or even a third bailout?

In the meantime the Greek prime minister is warning that conditions in Greece are similar to those in the Weimar Republic in Germany in the 1930s. Plenty for Chancellor Merkel to think about.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 30.

    Alex @ 23

    I dont need to know the intricacies of Greek politics.
    At the election there was a party which effectively said "No" to the euro - Syriza (spelling).
    The people of greece voted for the other parties (enough so that those other parties could form a government).
    Its that simple, thats democracy.
    And now you expect sympathy? Pull the other one. Its got bells on.

  • rate this

    Comment number 29.

    @24 Bucky
    Well, it didn't survive all that well! Roman Empire, Byzantium, Visigoths, Ottoman Empire, imposed Bavarian monarchy, dictatorships... Still here today, but at a great cost! Perhaps people are afraid of having to pay such costs again

  • rate this

    Comment number 28.

    German chancler's visit ti Greece after the Greek prime minister's declaration "Democracy & the Greek social structure are in danger" looks to be more a responce to Germany's uneasiness about the future of Euro than the Greek's future. Greece's default financially may cost 4% of Europes GDP to Europeans but its political impact and possible loss of credability of Euro would be much greater.

  • rate this

    Comment number 27.

    #19 AT

    "did so on the understanding there would be renegotiations. "

    -- what is that for an argument (and logic) ?

    Greeks ´think up´a fairy tale (or two) -- and European tax-payers must accept it as reality ?

    -- and if they don´t -- they are to blame ?

  • Comment number 26.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 25.

    19. AlexTigers
    18. BuckyOHare

    Refer to mes. 20.
    Greeks were the ONLY European people that wanted OUT of the EEC and the EU up to the early 90s, when the EEC-originated debts and the increased geopolitical insecurity in the Eastern Mediterranean region and Balkans told them to ''better stay in a geopolitical group like EU'' than be alone in the storm.

    It was never financial, don't you get it?

  • rate this

    Comment number 24.

    Danaos @ 20

    Correct me if I'm wrong but Greece survived for a few thousand years before the EU came along. To say that Greeks were scared of what would happen to Greece without the EU is just a cop out.
    Anyway, it would be time to see if all the defence spending was worth crippling your country for eh?

  • rate this

    Comment number 23.

    @18 Bucky Obviously you know all about Greek politics. Obviously you know that there is currently a coalition govt, formed by 2 parties that were historically enemies, whose voters did not expect or wish to unite, plus a 3rd party that promised one thing and delivered another. Not to mention the undemocratic 50-seat bonus, plus territorial MP lists. Did Greece really vote for this govt???

  • rate this

    Comment number 22.

    @10. Angela
    Look up "Europe" and "European" before making such statements, maybe you weren't paying much attention at school, who knows...

  • rate this

    Comment number 21.

    #16 xenon

    "PPS: 'They protest against the hand that feeds them' You mean the loans you borrow at 1% and lend at 5%!

    --the rate should be 20 % .

    ´Greece to auction 1 bln euros of T-bills on Oct. 9`

    "Monthly T-bill sales are Greece's sole remaining source of market funding. Greek banks buy the bulk of them to deposit them as collateral to draw liquidity from the European Central Bank."

  • rate this

    Comment number 20.

    13. austriacus

    Ok, but WHY Greeks vote to stay in eurozone? Because they fear otherwise the state risks exist from EU... and it is not the fear of exiting and bankrupting. It is the fear of ''what can happen to Greece'' in case Greece exits. And we are not talking about finance here. We stay in because going out implies instant geomilitary attack by our ''friends and allies''. Business as usual.

  • rate this

    Comment number 19.

    @austriacus no13
    There has been no referendum asking Greeks to vote for against the eurozone, so we don't know really what the majority want. I do know that the majority of people I talk to here are against the euro, and that those who voted ND did so on the understanding there would be renegotiations. They are sorely disappointed now!

  • rate this

    Comment number 18.

    Starting to lose patience with Greece now.

    Stop complaining, you had a chance to vote against Merkel and the EU and the Euro earlier in the year and bottled it.

    If your too scared sail the river on your own you HAVE to pay the ferryman.

    You were too scared to run your own country and now have to pay the cost.


  • rate this

    Comment number 17.

    Angela will keep giving German taxpayers' money to German banks. Doing this directly will not be popular, so they call it "Greece" to make people angry at Greece instead of at the banks. For some it works, but more and more people are noticing what is really going on.

  • rate this

    Comment number 16.

    @Angela:Your comment is so biased, that is hardly worth any serious reply. Unless you meant: ' Greeks are not NORTH Europeans. I am one and I know'. Well, that would be obvious then...
    PS: I wonder why you are still using the word 'Europe' - it is a Greek one and might cause you further allergy
    PPS: 'They protest against the hand that feeds them' You mean the loans you borrow at 1% and lend at 5%!

  • rate this

    Comment number 15.

    #12 Danaos

    --Greece was a 3rd world country with massive inflation before the EEC. The Drachma was ´monopoly´ currency.

    --the agricultural subsidies and other billions raised the standard of living tremendously --but also the corruption and the ´free lunch´ mentality at all levels of society.

    -- The facts support my arguments --and will, well into the future.

    --Greece cannot change !

  • rate this

    Comment number 14.

    10. Angela

    You are projecting ''protestant ethics'' reminding those who
    rose on piracy, slavery, exploitation and genocide calling themselves ''pious'', ''hardworking'' and ''ethical'' and pointing the finger to others

    Greeks are orthodox, not protestant and are not into ''blame games''. They state the facts that your protestant ethos refuses to accept as being perceived by you as unflattering

  • rate this

    Comment number 13.

    As long as in polls the Greek majority vote for staying within the eurozone, Your argument lacks power

  • rate this

    Comment number 12.

    4. quietoaktree

    10 years in EEC, in 1989, Greece debt from a 10-20% debt/GDP resulted in 110%, resulting from EEC market policies and the (non)free-packets to PASOK party that DID NOT take Greece out of EEC as Greek voters voted it to do (i,e. serving EEC (and US) interests)

    In 2009 the whole crisis started ''because Greece had a debt ration to GDP at 110%).

    Financial crisis?
    Why not in 1989?

  • rate this

    Comment number 11.

    I don't think she'll be welcome.

    But then any politician that promotes simplistic slash and burn austerity policies without offering anything creative to generate growth deserves contempt.

    Listening Mr Cameron?


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