Monday 11 December 2017

Bailout extension deal: Germany may have gone too far by rubbing salt in wounds

Greek Prime Minister Alexis Tsipras, right, and Finance Minister Yanis Varoufakis
Greek Prime Minister Alexis Tsipras, right, and Finance Minister Yanis Varoufakis "clearly overplayed their hands " (REUTERS/Alkis Konstantinidis)
German Finance Minister Wolfgang Schaeuble

Noah Barkin

The bailout extension deal looked like a total triumph for the Germans, who forced Alexis Tsipras, Greece's new leftist prime minister, to swallow virtually all of their demands.

But it was not a feel-good victory, nor one that bodes well for a single currency bloc struggling to emerge from a half-decade of financial and economic crisis.

Tsipras and his Finance Minister Yanis Varoufakis clearly overplayed their hands. Their pledge to roll back German-ordered austerity and keep Greece in the euro always looked unrealistic.

One of those promises would have to go, and with a solid majority of Greeks keen to stay in the currency bloc, it should have been clear which would crumble.

Still, it is hard to avoid the sense that Germany also may have gone too far.

Finance Minister Wolfgang Schäuble's public rejection of a Greek proposal surprised eurozone partners and Chancellor Angela Merkel. It was not Schäuble's objections to the draft which were problematic, but his decision to go public at such a sensitive point rather than do so behind closed doors.

That meant the Greeks could not climb down without a near-total loss of face. On Friday, once they had buckled, Mr Schäuble rubbed it in again, saying: "The Greeks will certainly have a difficult time explaining this deal to their voters."

Marcel Fratzscher, a leading German economist, said this was neither a good outcome for Greece nor for Germany and Europe.

"The Greek government will only be able to tackle difficult reforms in the coming months if it saves face and its credibility," wrote Fratzscher.

Irish Independent

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