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Greece blames Berlin for Irish debt crisis

The Local · 15 Nov 2010, 15:47

Published: 15 Nov 2010 15:47 GMT+01:00

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Both Ireland and Portugal saw the cost of their debt shoot up last week amid fears they might be forced to seek bailouts or even default, as Germany pushed for private lenders to contribute to future rescue packages.

"Some have suggested, such as the German government, that markets and banks that financed nations with high debts, should be prepared to take the cost of a possible default," Papandreou told reporters in Paris.

"That created a spiral of higher interest rates for the countries which seem in a difficult position such as Ireland and Portugal," he added, even as Greece's own massive debt came under renewed pressure.

"This could be a self-fulfilling prophecy. It's like saying to someone: 'Since you have a difficulty, I will put an even higher burden on your back.' But this could break your back," he charged.

Portugal and Ireland are struggling with burgeoning public debt and deficit levels and as a result have had to pay ever higher returns to bond buyers in order to raise funds.

Finance ministers from the 16 members of the eurozone single currency bloc are due to meet in Brussels on Tuesday for scheduled talks that are expected to focus heavily on the situation in Ireland and other big debtors.

Ireland is under pressure from some quarters to accept European Union aid to help it through its bad patch without further destabilising the currency.

European leaders agreed at a summit last month to discuss in December the issue of a permanent mechanism to replace the €440-billion ($607-billion) European Financial Stability Fund that expires in 2013.

Berlin is pushing for a procedure to be drawn up in case a eurozone country goes bankrupt, insisting that bondholders should take their share of the costs rather than the public picking up the tab.

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While this future provision would not change the EU member's commitment to the existing crisis fund, Germany's position sent tremors through the bond markets, contributing to pressure on Ireland's bond yields.

For his part, Papandreou said the long-term debt problems of EU member states exist because of a "lack of democratic control" on financial markets, and called the campaign for tighter regulation a "battle for civilization."


The Local (news@thelocal.de)

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Your comments about this article

08:27 November 16, 2010 by wood artist
Nah, he's absolutely right. Germany IS the problem.

Germany has been (generally) very responsible, watching for signs of problems, keeping their own debts in order, and generally doing things right. They haven't attempted to borrow beyond their means, accepted reasonable growth rather than going for dramatic numbers that can't be sustained, etc. Germany has led the recovery, largely because they didn't get too close to the edge in the first place.

So, by comparison, those other countries that over-borrowed, or simply run enormous debts knowing full well that it can't be maintained over time, look bad. Shame on the Germans for making them look bad.

Clearly, the change that is needed is that Germans need to be more like everyone else so everyone else won't feel so bad.

NOTE: I wish the US could learn some lessons here too, but at least the US government isn't blaming Germany.

12:03 November 16, 2010 by cambiste
just reward to germany for thinking the euro could work without common financial policy

and for taking the best sunbeds!

glad uk hasn't joined
00:34 November 17, 2010 by vega78
One problem is that Germany is so efficient and productive and so unwilling to spend, that someone else must obviously spend/consume the wealth it is creating. This is the easiest thing to do for many people.

Merkel seems so proud of Germany, for exporting so many products all over the world. This means effectively to lend to someone else. But, forever? How will you be payed back?

I agree with the argument that much of the borrowing has been forced on greek people without their will, by Germany and other exporters (USA, France, etc.). That is, not only greek consumers buy imported goods with borrowed money.

At the same time when austerity measures are imposed and public spending is cut, the greek government is obliged to find the money (lended by IMF/EU as we know) to buy French frigates and German war aircrafts and submarines. I really don't understand how one would expect to get their money back. They (governments who lend Greece now) must have some other plans.

I am Greek, not rich, but anyone who doesn't owe a euro to the banks can be considered privileged. I have only borrowed once in my life, in order to buy my 100 sq.m. house, a loan which I have recently payed back in full after 16 years. But I understand the urge that other people have to spend money that is not their own. This is of course what lead to this problem.

I would add that I do not trust greek banks for my savings (even more after reading W. Schauble's recent ideas), so I have withdrawn them since April 2010. I don't know what will happen, but I am waiting very eagerly to see.

As for the actual topic of this article, I think prime minister Papandreou is correct and that Germany's suggestion might indeed bring some countries (with Greece first in line) closer to default. This is possibly Germany's intention.
17:09 November 18, 2010 by cambiste
well done Garry you have understood the plot exactly-this is an economic version of the Von Schlieffen plan.However its not worth capturing Ireland because the weather is so lousy
21:53 November 18, 2010 by declanw
Most irish people i know (i'm Irish) place no blame on Germany for our own mess. We are unfortunate to have had a currupt and incompetent government that made mistake after mistake. Its truly embarrising for us all.

1. first mistake was allowing house prices to get out of control. While this was partly caused by low interest rates gained by joining the euro, there is no reason the government couldnt have dampened down the market with taxes. Instead they gave massive tax breaks to their developer friends to further inflate the property bubble, offer tax credits for mortgage interest. This was not germanys fault.

2. Second mistake was not regulating the banks...how were they allowed to borrow and lend so much without any consideration of the risks!!

3. Third mistake was then guarenteeing the banks for all their debt.

When I think Ireland national debt was just over 25% a couple of years ago and they were running yearly budget surpluses..In the space of two years we have transferred all of our wealth to the private banks and now we are supposed to take another loan to further transfer to the banks.

Our uk friends are now telling us that our country will now be run by the germans...personally - and a lot of fellow irish people agree - I think we would prefer to have the country run by germany rather than our own bunch of incompent Politicians.
15:10 November 19, 2010 by KYRIAKOS
heil hitler
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