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
    0

    Comment number 70.

    @ 65 Xenologist
    That's the point, the larger the country the more debt it can afford due market confidence. The euro cannot work as it removes currency fluctuations and govts ability to affect interest rates, i.e. the cost of borrowing is pegged to that of the largest economy. And, with all repect, Greece will never have the GDP of Germany. If private borrowing can be curbed maybe it can work.

  • rate this
    +1

    Comment number 69.

    #55 xenon.

    "#48, quietoaktree: I meant that Greece has shown solidarity as an ally and a member of EU and NATO. "

    -- Please don´t step into that ´wasps nest´--we only have 400 chrs.!

    --Greece has been ´blackmailing´ both organizations since it joined them.

  • rate this
    0

    Comment number 68.

    blame the greeks all you want but the fact remains that the € has been around for well over a decade; most of the powers and institutions just coming into existence and being discussed now should have arisen at some point WAY before the crash. we're paying for mistakes we've all made the notion that you can frame it on a specific group of people is short sighted and neglects the bigger picture.

  • rate this
    +2

    Comment number 67.

    Xenologist,I think you will agree: No human is illegal.They might not have appropriate papers,one or the other state bureacracy demands but that is not at all surprising,.hey should be protected especially from thugs like the Golden Dawn.I saw no demos against that party.I saw greek army soldiers singing "we will kill albanians" at the national parade and the crowd applauded.

  • rate this
    0

    Comment number 66.

    It's pretty poor, turning up after 3 years absence. I assume that there will be some political grandstanding from her, to reinforce her domestic image. It speaks volumes about the relationaship, where the "Bittsteller" Greek govt have to travel to Berlin/Brussels to meet the Frau Merkel. This has been Merkel's attitude from the start and has caused much of the harm, I wonder what she's planning?

  • rate this
    0

    Comment number 65.

    #63, D. Bumstead: I do not disagree in principal, but markets are not something impersonal: big fish can manipulate it and play games (cf. Libor). Do you believe that markets woke up suddenly in 2009 and said: 'Well, let's stop lending money to the South because of Lehman Bros'. But the knew how cumbersome the Euro architecture was, so they got onto it...

  • rate this
    0

    Comment number 64.

    @60

    The greeks openly admit they have a problem and are trying to put things right, however the process becomes somewhat complicated when the entire world has you in it's gaze and is scrutinising every move you make.
    If the circumstances where reversed i doubt the Irish would be so quiet in their suffering.

  • rate this
    0

    Comment number 63.

    @62 It's about market confidence. Germany could borrow the money because the markets were and are confident that Germany can pay back the loans. The higher the interest rates fora certain country, the less confidence the markets have in the country's ability to pay. Hence higher rates for, say, Spain, Italy or Greece.

  • rate this
    +1

    Comment number 62.

    #61.Angela: '..the collapse did not come earlier, because we borrowed... with the Euro guarantee'.
    No, G borrowed money before the Euro (ca 100% debt to GDP ratio since ca 1990), but nothing had happened. Why?
    Nothing against immigrants in general;but no European country can get so many illegal immigrants who keep coming.Btw, there are ca 5-7 million Greeks abroad, but went *legally* in 100+ years

  • rate this
    -3

    Comment number 61.

    xenologist, the collapse did not come earlier, because we borrowed all these money with the Euro quarantee.
    "....thousands of immigrants from those countries...That's all we got in return..."
    Why is it bad to have immigrants from any country? there are about 40 million greek immigrants!
    Greeks are so corrupted that they abandon their kids instead of getting the responsibilty to feed them!!!

  • rate this
    +3

    Comment number 60.

    I have a lot more sympathy for Ireland than for Greece. The Irish openly admit that their problems are of their own makingand are quietly trying to sort things out. Greece, on the other hand, is blaming everybody for its current woes, except itself.
    Greece needs a reality check- and quickly.

  • rate this
    0

    Comment number 59.

    #52: If you had followed my advice you would know that 'Greek' (Hellen - but also Achaios, Danaos in Homer) is attested centuries before Alex. the Great (4th cent. BC). Other than that you insist..
    As for Neo-Nazis, they are NOT widely supported, yet. But if the mainstream political parties do not deliver and the radical Left, which you may support, does not give up polarization, then...passports!

  • rate this
    -2

    Comment number 58.

    A cynic could say the coming Mrss Merkel visit to Greece would resemble the famous Mr Gorbachev kissing visit to DDR, when Mr Honecker got a kiss and DDR went with the wind. Let's just pray this would not be like his Tiananmen Square visit.

  • rate this
    0

    Comment number 57.

    51. margaret howard
    ''So did ALL of us Europeans''

    For the record;
    90% of nations existing 1000 years ago in Europe DID NOT survive. Out of modern ethnic/national groups in Europe only Greeks, Bulgarians, Serbians and partially Russians existed nationally conscious prior to 1000 AD.

    Europeans mingled under wars and produced new nations following feudal lords rather than own ethnic sentiment.

  • rate this
    +4

    Comment number 56.

    @47 margaret, you are right. There are many people like I, greeks that feel lucky top speak greek and have this huge culture. BUT we want to live in the NOW and we do not want all these past loving, cussing greeks that believe are unique and the best just because they are greeks... that is BS. Many young people want to live in a modern uncorrupted society with tolerant and polite people.

  • rate this
    0

    Comment number 55.

    #48, quietoaktree: I meant that Greece has shown solidarity as an ally and a member of EU and NATO. Have you ever heard yourself that Greece got something in return for loan waivers from Afghanistan, Iraq, etc? Greece has no oil companies, you know. Unless you meant the tens of thousands of immigrants from those countries...That's all we got in return since 'proper Europeans' play the fool here..

  • rate this
    -1

    Comment number 54.

    47. margaret howard
    10 Angela
    ''Completely true but you will be accused of Greek hatred.''

    She loves Greek men though but it is not reciprocal - big issue!

    ''Our friend at *7 even believes Greece should be at the centre...I suppose.''

    You suppose.

    ''ruined their own country through their rampant corruption.''

    EU funded corruption.

    ''Without our help they would sink''

    Help that s(t)inks

  • rate this
    0

    Comment number 53.

    Ahh, Greece..The story that 'Just Keeps Giving'.
    I feel sorry for the average Greek Pensioner and the long-term unemployed.When Families are giving-up their kids because they cannot afford to feed them,something is drastically wrong.It looks like getting shafted by the Political Elite who are both incompetent and corrupt, is a world-wide problem.The EU's credability is gone, they dither too much.

  • rate this
    0

    Comment number 52.

    dear #45 I suggest you follow your own advice and use google or wiki Everything is online. and you can find also teh sources. I am completely accurate.
    The Nazi party is widely supported. Examble: they openly distribute foodetc in main squares but only to greeks, they kick foreigners out. Tolerated by thepolice and public alike.Immigrants,gays,minorities in GR are ridiculed and attacked.

  • rate this
    -1

    Comment number 51.

    24 Bucky

    "Correct me if I'm wrong but Greece survived for a few thousand years before the EU came along."

    So did ALL of us Europeans and in the process created the best that exists in the modern world today.

    Literature, painting, sculpture, freedom of expression. We experimented with ways of government that are copied throughout the world today.

 

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