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.

 
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  • rate this
    0

    Comment number 90.

    @77
    This just shows a lack of understanding, you mean you applauded your local council/UK govt losing money deposited in Icelandic banks? A default, I suppose that's what the UK govt should do too? This is not the Greeks being unwilling, it's their being unable to cut. Or would you like to live under Greeks conditions? Look at the USA, they keep on acruing debt or should they mend their ways too?

  • rate this
    +3

    Comment number 89.

    The Greeks don't need to demonstrate against Merkel. She has already decided that Greece will receive the next bailout package of 31 billion- not for altruistic reasons but because she doesn't want to run the risk of destroying the "work" of Kohl, her political mentor and boss. Kohl's ultimate goal was the single European superstate and Merkel will continue to pursue that goal.

  • rate this
    0

    Comment number 88.

    #82.Danaos: there is no point speaking to 'quickoaktree'. He obviously has something at Greece which he left ca 40 years ago for good (well, that is what he once said here, but I am not much sure that he is Greek). Let him say whatever he likes. People who read and write comments here, can judge for themselves. I am only replying to proper posts, no matter if I disagree with them.

  • rate this
    +1

    Comment number 87.

    #79 Crystal

    " and perhaps the entire Greek gold reserves Germany stole from Greece in the war." ?

    http://www.bankofgreece.gr/Pages/en/Bank/History/historicalreview.aspx

    During the World War II, the Governor of the Bank followed the Greek Government into exile. The Bank' s gold reserves were transferred first to South Africa and then to London.

    --maybe London has them ?

    --call Cameron !

  • rate this
    0

    Comment number 86.

    81. quietoaktree

    If 16.5 million tourists all arrived in Greece to remain there for over one year then I can guarantee that Greece wouldn't be able to accommodate them. Basically your point is completely illogical. Hopefully this isn't the best you've got.

  • rate this
    0

    Comment number 85.

    @76 Anarchist_Communism
    I think yours is a very simplistic view. Ask a citizen in any country (except greece) and they definitely don't want to swap with Greeks. As said, the Germans hate being reminded of a similar fate that befell their "nation" at the end of the 1920s. In Germany the debate is already back to front, i.e. Germans have been convinced that Greece already has loads of German money!

  • rate this
    +1

    Comment number 84.

    #77.margaret howard: I am confused: you have more sympathy for Ireland (I have too, but not more/less) that is paying for banks, but also admiration for Iceland which refused to pay for banks (not judging this, but sounds controversial).
    Finally, Central Bank of Ireland (recent report): austerity measures in Greece are 3 times as harsh as in Portugal/Ireland. Did you say something about Stoicism?

  • rate this
    0

    Comment number 83.

    @78 Financial markets played profit games before the euro was even thought of so it should hardly come as a surprise that they still do. The euro simply gives them greater oportunities than ever before- something the euro supposedly would make impossible, but didn't. If anything, the euro made them even more profitable as we now see. Time to get rid of this worthless currency.

  • rate this
    +6

    Comment number 82.

    81. quietoaktree
    " But Greece cannot accommodate 100.000+ new immigrants every year "
    ''--But 16.5 million tourists ?''

    Do us the favour and take all these new ''immigrants'' (i.e. illegal immigrants invading the coutnry, 99% sunni muslims, 50% illiterate young men, often armed) and host them in YOUR locality.

    Then speak.

  • rate this
    +1

    Comment number 81.

    #73 xenon

    " But Greece cannot accommodate 100.000+ new immigrants every year "

    --But 16.5 million tourists ?

  • rate this
    +4

    Comment number 80.

    I have many Greek friends and have done business in that country. Those open-minded enough to accept the truth will tell you that the Greeks THEMSELVES chose to live beyond their means, evade taxes, and reduce their productivity like latter-day Lotus Eaters. And now they blame the Germans for wanting guarantees they'll get their bail-out funds back?! Homer would be ashamed. Accept responsibility!

  • rate this
    0

    Comment number 79.

    Don't forget to take your purse Angela!
    Oh, and perhaps the entire Greek gold reserves Germany stole from Greece in the war.
    Oh, and perhaps the loans you forced Greece to give you at the same time.
    In fact Angela, even with the money Greece has had off you already, you still owe them a little bit more!

  • rate this
    0

    Comment number 78.

    #72, Angela: Greek identity came to the forefront during Greek-Persian Wars (490-479 BC). Olympic games helped too, but it was common language (dialects), religion & culture that united.
    #71, D Bumstead: I agree that markets are no charity institutions and play profit games allowed by the Euro architecture which brought together N. and S. European economies
    #69: Really? Sorry, not worth any reply

  • rate this
    -2

    Comment number 77.

    60 Bumstead

    "I have a lot more sympathy for Ireland than for Greece. they admit their problems are of their own making"

    My sentiment entirely. Iceland too took it on the shin when they were bankrupted and are now recovering.

    Japan endured many catastrophies in recent years but carried on with stoicism.

    Stoicism is of Greek origin but they don't seem to practise it anymore.

  • rate this
    0

    Comment number 76.

    If the Neo-Nazi party eventually are supported by the Greek mainstream, it will be the fault of the Greek people alone. Xenologist conveniently forgets that Greek immigrants to the US at the turn of the 20th century were topping crime figures (due mainly to their marginalisation from society and the economy) and suffered horrendous racist abuse from the side of the U.S citizens.

  • rate this
    0

    Comment number 75.

    European leaders: Austerity will cure the debt and generate growth!

    Reality: Austerity will lead to reduced tax revenue, reduced government investment, and reduced growth in all sectors.

    Difference: Several neurons short of a brain for many in power it seems.

  • rate this
    0

    Comment number 74.

    Danaos has a point with respect to the problems in Greece being engineered in Brussels. That much is certainly true. Greece was only able, and encouraged, to borrow and spend such vast sums because, and only because, the primary beneficiaries of Greek public debt were the French and German economies.
    But that does not mean Greece is a loser while Germany is a winner. Germany is lost as well.

  • rate this
    +3

    Comment number 73.

    #67.Angela: I have sympathy for all humans & am 100% against racial attacks. But Greece cannot accommodate 100.000+ new immigrants every year -regardless of crisis- when it already has over 1 million. UN says that Greeks will be a minority by ca 2030 (cf. birthrate) if there is no stop. Sorry, this happens nowhere. Some will stay (over half a million have green cards), but some must go/stop coming

  • rate this
    +1

    Comment number 72.

    As for the greeks-Hellenes. First used around 776 Bc as a try to get national identity. Alexander succeded. Else we have Athenian democracy, Spartan fasismus, Minoan autocracy etc etc.
    I am afraid that we will see none of the greek culture during Merkel's visit but lots of the Vandal identity as usually.

  • rate this
    +1

    Comment number 71.

    @65 I don't think the markets raised interest rates because of Lehman's, but because they finally realized that assuming that all EZ countries deserved equal interest rates- as they had assumed for several years- was totally unrealistic.
    Financial markets are not charity institutions, if they see a chance to make money from EZ woes, they will seize it. Unfair? Perhaps- but hardly a surprise.

 

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