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| Divisions in Merkel's coalition over proposals for Greek economic reform | Divisions in Merkel's coalition over proposals for Greek economic reform |
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| Germany’s ruling coalition appears to be deeply split over Greece’s latest reform proposals ahead of a climactic meeting of EU leaders at the weekend. | Germany’s ruling coalition appears to be deeply split over Greece’s latest reform proposals ahead of a climactic meeting of EU leaders at the weekend. |
| While senior Social Democrats (SPD), the junior partners in Chancellor Angela Merkel’s government, welcomed the list of concessions from the Greek prime minister, Alexis Tsipras, members of her own conservative bloc were scathing about Greece’s position. | |
| As financial experts digested the plan from Athens, the joint chief executive of Berlin’s stock exchange, Artur Fischer, said that business leaders in Germany felt Greece had squandered its credibility, and that if Merkel agreed to a third bailout for Greece, she could also be signing up to the continuation of the crisis for years to come, thereby risking her chancellorship. | |
| “This is the toughest time in her chancellorship so far. Can she resist the voices of opposition within her own party to push through a third bailout in the Bundestag that most of them are against?” said Fischer. | “This is the toughest time in her chancellorship so far. Can she resist the voices of opposition within her own party to push through a third bailout in the Bundestag that most of them are against?” said Fischer. |
| Related: Eurozone crisis: Greek austerity plans meet warm but cautious response | Related: Eurozone crisis: Greek austerity plans meet warm but cautious response |
| “She is facing huge internal difficulties that have the potential to end her chancellorship. The trouble is, if we trust Greece again and go for a bailout, Merkel could find herself back in the same position again in six months’ time, and again a year’s time from now – and that would be extremely bad for her.” | |
| The decision to either push for a third bailout, a course that would set her against many within her own party, or let Greece leave the eurozone, which could greatly damage Europe’s image as well as her own legacy, will be Merkel’s biggest challenge. | The decision to either push for a third bailout, a course that would set her against many within her own party, or let Greece leave the eurozone, which could greatly damage Europe’s image as well as her own legacy, will be Merkel’s biggest challenge. |
| There was growing speculation late on Friday that the chancellor’s insistence on the involvement of the International Monetary Fund (IMF) in any future bailout might end up forcing the Grexit, which her finance minister, Wolfgang Schäuble, has been calling for for some time, but which she has resisted. | |
| The IMF is demanding a “haircut” – debt relief – or at the very least a debt restructuring in return for its participation. But Merkel has so far categorically ruled out such a scenario, and her own MPs would not forgive her if she made a U-turn on the issue. | |
| In the event that EU leaders back a third bailout package, the Bundestag – along with five other EU member countries – would have to vote, most likely early next week. Only after that, and in the event of a majority of parliamentarians being in favour, could talks on a new deal start. Estimates are that the entire process could take another couple of weeks. | In the event that EU leaders back a third bailout package, the Bundestag – along with five other EU member countries – would have to vote, most likely early next week. Only after that, and in the event of a majority of parliamentarians being in favour, could talks on a new deal start. Estimates are that the entire process could take another couple of weeks. |
| Related: Tsipras rattled his sabre until it was blunt – and for what? | Related: Tsipras rattled his sabre until it was blunt – and for what? |
| Axel Schäfer, a leading Social Democrat, reflected the views of many in his party when he said that, while it could have been produced long ago, the Greek reform list was to be welcomed. He said he hoped that creditors would consent to it, calling it an important development not least because “the government, as well as the most important opposition parties, have agreed on it”. | |
| A bailout package was necessary, he said. “That is to say, [Greece] needs new financial measures that can be paid back over a very, very long time frame”. | |
| He said that Merkel would find it easier to get the agreement of SPD politicians in any Bundestag vote than those within her own conservative bloc, but believed that the majority of the Bundestag would vote in favour of a third bailout. Among the dissenters in the ranks of Merkel’s conservative alliance, Hans-Peter Friedrich, a leading member of the Christian Social Union, said he did not trust the proposals. | |
| “Either the Greek government is tricking its own people, or us once again,” he told German radio. He delivered a harsh critique of the attitude of the EU commission president, Jean-Claude Juncker, on Greece, saying that “you could send him an old newspaper with a signature on it and then he would say: ‘great, great, great. That is a basis from which to work’.” He said that from an economic point of view, there was no way around cutting Greece loose from the eurozone. | |
| Friedrich added that the Greek crisis was being used to weaken the fiscal rules in Europe, and he believed the only reason that the French president, François Hollande, had backed the latest reform proposals was that: “The French socialists want to weaken the fiscal rules now, because they realise that they’re also not capable of implementing necessary reforms.” | |
| Related: Greek debt crisis: What's in the proposals from Athens? | Related: Greek debt crisis: What's in the proposals from Athens? |
| Deputy parliamentary floor leader for Merkel’s Christian Democratic Union, Ralph Brinkhaus, voiced his scepticism about the Greek government’s trustworthiness. “How credible is it what this government is delivering?” he asked. | |
| “On Sunday they were still having a campaign in which they damned everything that they’re now proposing ... the question is, therefore, will everything be implemented that’s decided on in parliament, or are these just empty promises?” | “On Sunday they were still having a campaign in which they damned everything that they’re now proposing ... the question is, therefore, will everything be implemented that’s decided on in parliament, or are these just empty promises?” |
| The German markets reacted positively to the news that a new deal was potentially in sight. But Alexander Lambsdorff, vice-president of the European parliament and a member of the German free market liberals the FDP, said that in his view the reforms were lacking in substance. | |
| “For example, there’s nothing in there about the role of the Orthodox church, which is after all the biggest landowner in Greece. There’s little about reform of the financial authorities and that is a very decisive question, because whether you set the corporate tax at 26% or 28% is in the end not nearly so important as whether you actually collect it. That is the problem. Several important things are missing in this programme.” | “For example, there’s nothing in there about the role of the Orthodox church, which is after all the biggest landowner in Greece. There’s little about reform of the financial authorities and that is a very decisive question, because whether you set the corporate tax at 26% or 28% is in the end not nearly so important as whether you actually collect it. That is the problem. Several important things are missing in this programme.” |
| Analysing the growing involvement of the US in the crisis, the tabloid Bild quoted a top German diplomat saying that there was little understanding over why Europe could not solve the problems of a country that has an economy similar to the size of Tennessee’s. “Viewed from Washington, it’s to do with continuing to feed a cute little animal with peanuts,” he told the paper. | Analysing the growing involvement of the US in the crisis, the tabloid Bild quoted a top German diplomat saying that there was little understanding over why Europe could not solve the problems of a country that has an economy similar to the size of Tennessee’s. “Viewed from Washington, it’s to do with continuing to feed a cute little animal with peanuts,” he told the paper. |
| Schäuble, who is in favour of a Grexit, implied that he had struggled to explain the complexity of the issue to his US counterpart, Jack Lew. He told an audience in Frankfurt: “I offered to my friend Jack Lew that we would take Puerto Rico into the eurozone, if the USA took Greece into the dollar union. He thought I was joking.” | |
| On Friday, Merkel’s spokesman, Steffen Seibert, said little about the Greek reform plans, but made it clear that Merkel would only be able to go to the German parliament with a third bailout package if she was persuaded that Greece was genuine about reforming its economy. | |
| Voices from smaller eastern European countries, which have implemented harsh reform programmes and where standards of living are much lower than in Greece, are increasingly voicing their disenchantment with the prospect of helping to bail out Greece. | Voices from smaller eastern European countries, which have implemented harsh reform programmes and where standards of living are much lower than in Greece, are increasingly voicing their disenchantment with the prospect of helping to bail out Greece. |
| Laimdota Straujuma, prime minister of Latvia, told German radio: “It will be very hard for me to persuade the parliament. And for the parliament it will be difficult to vote for it, because the average pension in Latvia is considerably less than in Greece, and if you were to ask the Latvians today whether they are willing to lend money to Greece, you can probably guess what their answer would be.” | Laimdota Straujuma, prime minister of Latvia, told German radio: “It will be very hard for me to persuade the parliament. And for the parliament it will be difficult to vote for it, because the average pension in Latvia is considerably less than in Greece, and if you were to ask the Latvians today whether they are willing to lend money to Greece, you can probably guess what their answer would be.” |