In defense of the German cabinet’s decision to participate in an unprecedented effort to bail out fellow EU member state Greece, Chancellor Angela Merkel warned on Wednesday that the future of the European Union — “and the future of Germany within Europe” — is at stake in this crisis.
In spite of the multibillion euro rescue package pledged by the EU and the International Monetary Fund, Greece’s financial woes continue to cause concern with investors. The value of the euro has sharply decreased in recent days while protests in the Greek capital today shed further doubt upon the country’s chances at recovery.
Greek prime minister George Papandreou has announced severe austerity measures necessary in order to meet the requirements of the €110 billion bailout. He will have to get his country’s budget deficit down to the European maximum of 3 percent by 2014. Civil servants are expected to be hit especially hard, facing job loss, pension cuts and raised taxes. Thousands of public-sector workers took to the streets of Athens to protest against the plans. Three bystanders were killed in a fire bomb explosion. At least six people were arrested by riot police desperately trying to manage the situation.
Germany has been skeptical of helping Greece and wants tougher budget rules for eurozone members lest a similar crisis compel the more stable of European nations to come to another’s aid ever again. Chancellor Merkel faces increasing popular resentment against the euro at home and defeat in this weekend’s regional elections in the populous and industrial western state of North Rhine-Westphalia. Defeat will rob Germany’s ruling coalition of Christian Democrats and liberals of their majority in the upper house of parliament.
The chancellor knows that the euro has been good for Germany at the same time, despite its recent lack of popularity. Stable exchange rates have encouraged trade and growth while the German economy, ironically, profits from the financial disturbances in the south which makes the euro, and therefore, German exports, cheaper.