Greece’s Prime Minister George Papandreou arrived on Tuesday for crisis talks with German Chancellor Angela Merkel. The issue is Greece’s debt problem, which could quickly become Europe’s debt problem, and potentially America’s.
Papandreou pleaded the case for saving Greece in a speech before German business leaders, saying a rescue plan wouldn’t just keep Greece afloat.
“It is an investment in a different Greece, a Greece that is confronting problems that were overlooked for decades. And I can assure you that your investment in Greece will not keep us stuck in the past. It is an investment to move Greece into the future.”
Greece is still waiting for officials from the European Union, the International Monetary Fund and the European Central Bank to sign off on the next cash infusion, some 10 billion dollars. The lion’s share of that money would come from Germany.
Speaking at the same gathering in Berlin, German Chancellor Angela Merkel promised to give “all the assistance that is required.” But she made it clear that more debt won’t solve Greece’s problems.
“The idea that growth can only be achieved by accumulating new debts is the wrong idea,” Merkel said. “It is important that we leave the way of a union of debt, and build a union of stability.”
Many observers say the current plans on the table to stabilize Greece and stop economic contagion from spreading aren’t enough.
Moreover, any rescue plan without German backing isn’t really a rescue plan.
“I don’t think anyone is going to think anything is credible until the German government stands up and says we are ready to support all debt for all Eurozone members,” said Peter Spiegel, Brussels Bureau Chief of the Financial Times.
“What we’re hearing from Germany is they want to push countries, like Italy and Greece, very close to edge so they can get those budgets reformed, get the restructuring they feel needs to be done in these so-called profligate countries.”
Peter Morici, economics professor at the University of Maryland, noted that Germany has benefited greatly from adopting the Euro. It enjoys a trade surplus and low unemployment. He added that Germany should be helping the Greeks, but instead it’s giving them a hard time.
“They’re given lectures in Teutonic austerity and told to become more competitive,” Morici said. “Essentially, the Germans are saying buck-up and march through the great depression again.”
It’s true that the mood in Germany right now is not one of sympathy for the Greeks. An increasing number of Germans say they resent being thought of as “Europe’s ATM.”
Johan Van Overtveldt, author of the forthcoming book The End of the Euro, said all this puts Angela Merkel in a tight spot. Her European colleagues criticize her for not doing enough to help Greece. But at the same time, he said, her coalition government suffered defeats in last month’s regional elections, “which is an expression of the public sentiment that Germany is much too lax towards Greece and other countries which the Germans consider to be over-spending countries.”
Merkel’s leadership faces a test on Thursday, when the German Parliament votes on funding for Europe’s bailout fund.
It is expected to pass, but not necessarily with the support of everyone in Merkel’s own governing coalition.