Sunday 24 September 2017

The Germans want Greeks out of Europe

EVEN if a temporary deal on the Greek bailout can be cobbled together over the weekend, it is clear that Germany and possibly France also want to shed the eurozone's weakest link and that a debt default by Greece, probably followed by its departure from the single currency, is now imminent.

Tomorrow's meeting of the Eurogroup of eurozone finance ministers is supposed to thrash out the final details of the second Greek bailout that was agreed in principle in July 2011. If all goes according to plan, the latest tranche of the €130bn bailout will be released to Greece. That will allow the country to repay €14bn of debts falling due next month and thus avoid bankruptcy.

It might be a good idea not to bet on everything going according to plan. In the seven months since the second bailout was agreed, the relationship between Greece and some of its European partners, particularly Germany, has grown toxic.

Germany, along with the Netherlands and Finland, appears to be convinced that Greece is dragging its feet on implementing the necessary economic and fiscal reforms, while the feeling that at least some countries want it out of the eurozone, no matter what it does, is gradually taking hold in Greece.

While French sources have been less strident in their criticisms of Greece, President Sarkozy is hardly likely to abandon his new best friend Angela Merkel in the run-up to next April's presidential elections. For France, a choice between Germany and Greece would be no choice at all.

For its part, Germany now seems to believe that the fallout from a Greek default and exit from the eurozone could be successfully contained.

Of course, that's what President Bush and his Treasury Secretary Hank Paulson believed when they let investment bank Lehman Brothers go bust in September 2008.

Would a German decision to throw Greece under the bus have similarly disastrous consequences?

Sunday Indo Business

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