German chancellor Angela Merkel and her finance minister, Wolfgang Schäuble, disagree about how far the rest of the European Union should go to keep Greece in the euro, Der Spiegel reports.
Whereas Merkel, the leader of Europe’s largest economy and Greece’s biggest creditor, fears the economic as well as political repercussions of a Greek exit from the eurozone, Schäuble is reportedly convinced the scenario would actually leave the rest of the bloc better off.
Which of them is the more intransigent? Merkel, whose popularity serves as the backbone of the EU? Or Schäuble, for whom there is considerable good will among members of parliament, fed up as they are with having to approve one bailout package after another?
When the Bundestag last voted to extend financial aid to Greece, more than one hundred members insisted it was for the last time.
Rightwingers in the ruling Christian Democrat party have long been wary of the Greek bailouts which will end up costing €240 billion. Recent Greek demands for debt relief and attempts to weasel out of liberalizations and spending cuts the country previously committed to as a condition for aid have exhausted the patience of many Germans.
Even the Social Democratic Party leader, Economy Minister Sigmar Gabriel, urged the Greeks not to gamble on a European desire to keep them in the euro on Monday and issued a stark warning: “We will not let the exaggerated electoral pledges of a partly-communist government be paid for by German workers and their families.”
Schäuble has been similarly critical of the far-left Syriza party that came to power in Greece in January.
Immediately after taking office, Syriza canceled the privatization of Greece’s largest seaport and its public power utility. The new government budgeted €600 million in extra spending to finance a thirteenth month of pensions and proposed €6 billion in new taxes to pay for food stamps, rent subsidies and electricity for households that are unable to pay their bills.
Hardliners in Germany argue this is just the sort of generous welfare spending that got Greece into high debt in the first place and forced other euro states to come to its rescue in 2010.
The Greeks have not helped their case by demanding war reparations from Germany and threatening to seize German property in the country as compensation for World War II atrocities.
Although officials believe Europe is now better prepared to handle a Greek default and eurozone exit than it was five years ago, the political impact of a country leaving the single currency could still be profound. Merkel would not like to be remembered as the chancellor who let the European integration process go into reverse.
Greece is due to repay a €1.5 billion loan from the International Monetary Fund before the end of the month. Another €3.5 billion in bond redemptions is due in the middle of July.
Officials worry that if a deal isn’t struck this week, there will not be enough time left for European parliaments to enact the legislation needed to give Greece more financial support.