Late April 2010 and German anger over the Greek debt crisis intensified. There were calls for Greece to be thrown out of the euro zone.
Werner Langen, leading German Chancellor Angela Merkel’s Christian Democrat group in Europe’s parliament, warned that the rescue package being put together for Greece by European countries and the IMF could not solve the structural problems in the Greek economy.
Speaking to German paper Der Spiegel Langen suggested Greece should “leave the eurozone and become competitive again with the help of tough structural reforms”.
The idea of excluding Greece from the European currency was echoed by Hans-Peter Friedrich. Friedrich, a Bavarian Christian Democrat leader, said Greece “must seriously consider leaving the eurozone”.
The calls to exclude Greece underline German uncertainty about handling the Greek financial crisis. Earlier in the year there were German suggestions that Greece should hand over its beautiful islands and historic ruins to Germany in return for an economic bail out. When those ideas were scorned, Germany agreed to devise and aid package with the IMF. But then came calls to throw Greece out of the euro zone.
Underlying the twists and turns in the various German approaches to Greece is uncertainty that the Greek government can implement an austerity plan adequate to bring the country’s debt under eventual control. And underlying that uncertainly is the fact that the Greek numbers keep turning out to be worse than previously thought.
Along with France, Germany has told the Greeks that the nation must suffer a serious drop in living standards to earn the first €30 billion of promised European/IMF aid. German official Wolfgang Schäuble said Greece must fundamentally restructure its economy to qualify for the aid.
Germany’s main concern in the Greek saga is to protect the euro and utimately the German economy. Schäuble insists that Greece must cut public spending deeply in 2011 and 2012 if the already fragile euro is to be protected.
Christine Lagarde, speaking for France said that Greece had hidden the severe extent of its debt. “We will need stricter control mechanisms” she said “to make sure we don’t fall into a bottomless pit.
While the European governments are playing hard cop, the IMF appears to playing soft cop attempting to calm the anxious – and already somewhat riotous – Greek public. Dominique Strauss-Kahn, head of the IMF and a former French socialist Finance Minister, told the Greeks they can count on the IMF for help through the crisis.
Bizarrely, the architects of the single European currency put no provision in place for rescuing a euro zone member. It appears that although each member country currently has political independence, none of the euro’s inventors considered the possibility that different policies in different countries could lead to economic crisis in one, or several, countries. This means that European finance ministers and the European Commission need to figure out the terms and conditions of a bailout they had never even considered possible.