Germany’s commissioner to the European Union says he expects a future aid package for Greece to amount to a little more than 10 billion euros (US$13.36 billion) — which is much smaller than the country’s existing two rescue deals.
Guenther Oettinger, the EU’s energy commissioner and a member of Chancellor Angela Merkel’s ruling conservative party, said Saturday the third aid package should cover the years 2014-2016.
In two bailout packages so far, Greece’s European partners and the International Monetary Fund have committed 240 billion euros (US$320 billion) in loans. This week, German Finance Minister Wolfgang Schaeuble said there will have to be another aid program after the current one expires next year.
Oettinger’s comments to weekly Welt am Sonntag came four weeks before Germany’s general elections on Sept. 22.
Rescuing Europe and holding the continent together will cost something – it will cost us Germans too
The blue and red posters of Germany’s Eurosceptic party proclaim that “The German spring will come in autumn.” But Berliners care little about the crisis in the euro. Stop a passer-by and you are more likely to hear worries about rising rents, or the difficulties of getting a well-paid job.
The euro crisis has played little part in a German federal election campaign dominated by domestic discontents. The eurosceptics Alternative fur Deutschland are fizzling at around 2% in the polls. Two-thirds of the public want to keep the single currency rather than return to the Deutschmark and 60% have a favourable view of the EU, according to the Pew Research Center. Germans have been unscathed by the soaring unemployment and sweeping public sector cuts of Spain or Greece.
But just last week, the euro crisis finally broke cover when Schauble, the finance minister, conceded in a speech to party supporters that Greece would need further aid, though he ruled out the need for another debt haircut.
Peer Steinbruck, Angela Merkel’s opposition challenger, seized on the remarks, urging the German chancellor to come clean with voters about the costs of another Greek rescue. In a newspaper interview, he said: “Rescuing Europe and holding the continent together will cost something – it will cost us Germans too.”
Bundesbank president Jens Weidmann warned against the “recklessness” of invoking a break-up of the single currency. His words were a reminder that preserving the euro is a vital national interest for Germany, both because of its exports to the rest of the eurozone and the exposure of its banks to eurozone debt. A euro exit would have “far-reaching consequences for our banks and companies”, Mr Weidmann said.
The Bundesbank chief’s intervention suggested that, while the euro crisis might have a walk-on part in next month’s election, it would never hold centre stage. Almut Moller of the German Council on Foreign Relations, a think tank, said: “Germany has invested so much in saving the euro because Germany benefits so much – it needs the euro for its economic model.”
The euro crisis has had a low profile in the election to date because Mrs Merkel has “no interest whatsoever in triggering it”, Ms Moller added. “She’s sailing on this huge wave of approval. Germans in general are not feeling the pinch of the crisis.”
The opposition’s attacks are blunted by the fact that they have voted in favour of bail-outs. The latest Forsa opinion poll, conducted between August 13 and 19 for Stern magazine and broadcaster RTL, puts Mrs Merkel’s Christian Democrats on 41pc and their current coalition partners, the Free Democrats, on 6% The opposition Social Democrats (SPD) polled at 22% and their allies the Greens were in third place with 13%. Votes drawn by smaller parties mean that Mrs Merkel could lead a governing coalition with as little as 45%, though there has been talk of her striking deals with the Greens or forging a “grand coalition” with the SPD.
The parties’ manifestos reveal differences on Europe. The SPD wants to transform the European Commission into a government that would be elected by and accountable to the European Parliament, alongside a second chamber to represent the governments of member states. Mrs Merkel has sounded more sceptical about rule from Brussels, favouring an approach that involves member states coordinating more closely with each other.
A jobs summit in Berlin this year and a decision by the German government to extend bilateral aid from its state-owned development bank to small businesses in Spain and Portugal may also signal a desire to move away from further federalism.
Germany has set the terms of Europe’s steps towards banking union. Last year, when European leaders agreed a single supervisory mechanism for banks, Berlin secured an exemption for small banks – an important domestic consideration given the central role played by regional state-controlled banks in Germany’s political and business life.
In July, the German government rejected EU proposals for a single authority to wind down failing banks, the second pillar of banking union, concerned that this would lead to shared responsibility for financial risks. By contrast, the SPD favours establishing a European resolution agency.
When it comes to the third pillar of banking union – a eurozone-wide deposit guarantee scheme – the harsh terms imposed on depositors in Cyprus vividly illustrated German politicians’ reluctance to make their countrymen liable for risks taken elsewhere in Europe. The CDU and the Free Democrats both rule out deposit insurance schemes in their manifestos.
Greece, as last week’s spat made clear, will be the first cloud on the horizon after the elections. Henning Klodt, head of the economic policy centre at Germany’s prestigious Kiel Institute, said that, contrary to the government’s assurances: “A debt haircut for Greece will be necessary after the elections. It is necessary not just because austerity measures are failing but because of the lack of a competitive economy in Greece. After the election, the CDU will present [voters with] the bill.”
Professor Klodt added: “The public doesn’t feel these shocks at present – but when there’s a debt haircut, the strain will be felt on the federal budget, when it comes to infrastructure spending [in Germany].”
Last week, German government sources played down the scale of a renewed aid programme for Greece. Aides briefed the Suddeutsche Zeitung that the country’s third aid programme would be significantly smaller than the first two.
Berlin has already softened its demands for fiscal rigour in the eurozone, making plain that it is willing to allow more time to cut deficits in exchange for economic reforms.
The CDU has a euro-sceptic wing, whose existence means that, even if Mrs Merkel’s party leads the next governing coalition, she is likely to need the SPD’s votes to secure Bundestag backing for future European rescues.
Germany’s elections could play an unexpected role in healing European divisions. After years of wage restraint and export success, which piled up a current account surplus of 7pc last year and helped fuel the credit boom of the eurozone’s periphery, these elections bring the prospect of a boost in German domestic demand.
Politicians of all stripes are promising more social spending. The Christian Democrats’ election manifesto promises to raise pensions, increase childcare benefits and improve Germany’s highways, financing the spending not through tax rises but the proceeds of increased growth. The opposition Social Democrats are calling for a statutory minimum wage – Germany does not set one at a national level – and an increase in the top rate of income tax to fund spending on education and infrastructure.
Whoever wins September’s German elections, increased wages and government spending are a likely outcome. The domestic discontents that drive this German election could help restore balance in the eurozone.
The Daily Telegraph, with files from The Associated Press