• Germany's news in English

Schäuble shares ECB's concerns on Greek debt

The Local · 26 May 2011, 10:49

Published: 26 May 2011 10:49 GMT+02:00

Facebook Twitter Google+ reddit

"It is true that in the European Union we have not yet explored all the scenarios to help Greece," Schäuble told German business daily Handelsblatt in an interview.

He also acknowledged that "budget discipline measures by themselves cannot resolve the problems" faced by Athens as it struggles with about €340 billion ($480 billion) in debt.

But the finance minister also echoed ECB warnings about risks that could be unleashed by changing terms in the repayment of that debt, narrowing public differences with the central bank that have alarmed analysts and markets.

Such a decision could cause financial turmoil in Greece and elsewhere if investors rushed to get their funds out of the country and feared similar moves in Ireland and Portugal, ECB officials and economists have warned.

Schäuble took care to support the ECB, after media reports highlighted the danger of a clash to investor confidence in the 17-nation eurozone.

"We have always been well-inspired to respect the independence" of the central bank, Schäuble stressed.

Barclays Capital economist Frank Engels said that remark suggested "that the German government would not want to risk an open conflict with the ECB."

Berenberg Bank chief economist Holger Schmieding warned last week that Berlin and the ECB were headed for "their most serious conflict yet.

"Resolving this conflict ought to be the top political priority in Europe in the next few weeks," he added.

Schäuble had previously floated the idea of a "soft" restructuring of Greece's debts, a notion that might involve an extension of the reimbursement period or a lowering of interest rates applied to it.

Markets fear that would lead sooner or later to a "hard" restructuring, under which a substantial part of the money Greece has borrowed would not be paid back.

An aid programme worth €110 billion set up by the EU, the International Monetary Fund and the ECB has forced Greece to adopt austerity measures that will likely curb short-term economic growth.

"There must be medium and long-term growth prospects," the German finance minister told Handelsblatt, including investments in solar energy and electric power networks.

The floating of such investment in Greece marked an advance from positions by EU leaders that have focused on privatisation of Greek state holdings and economic reforms.

But Schäuble and Chancellor Angela Merkel, who have expressed different positions on the issue of restructuring Greek debt in the past, appear to be reading from the same page now.

Merkel and other EU political leaders have argued in the past that banks must share in the effort of resolving debt crises in peripheral eurozone countries, rather than having taxpayers always foot the bill.

At present, however, she too opposes debt restructuring.

Story continues below…

The ECB is worried it could provoke a Greek bankruptcy that would plunge the eurozone into a grave crisis that would be far more expensive in the long run.

The central bank also holds some €45 billion in Greek debt and has lent money to Greek banks against much more in Greek-based collateral, and could thus suffer heavy losses if a restructuring took place.

"We thought it was time that the German government would speak with one voice and show more leadership in Europe on the matter," Barclays economist Engels said.

"We believe that today's interview by the finance minister is the first notable and important step in this direction."


The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
These are Germany's top ten universities
The new library of Freiburg University. Photo: Jörgens.mi / Wikimedia Commons

These are the best universities in all of Germany - at least according to one ranking.

Introducing Swabians - 'the Scots of Germany'
Photo: DPA

These Southern Germans have quite a reputation in the rest of the country.

Woman sues dentist over job rejection for headscarf
Photo: DPA

A dentist in Stuttgart is being taken to court by a woman whom he rejected for a job as his assistant on the basis that she wears a Muslim headscarf.

Isis suspect charged with scouting Berlin attack sites
Photo: DPA

German federal prosecutors said Thursday they had brought charges against a 19-year-old Syrian man accused of having scouted targets in Berlin for a potential attack by the Isis terror group.

Berlin Holocaust memorial could not be built now: creator
The Memorial to the Murdered Jews of Europe, in Berlin. Photo: DPA.

The architect of the Berlin Holocaust memorial has said that, if he tried to build the monument again today, it would not be possible due to rising xenophobia and anti-Semitism in Germany and the United States.

'Liberal' Germany stopping Europe's 'slide into barbarism'
Ian Kershaw. Photo: DPA

Europe is not slipping into the same dark tunnel of hate and nationalism that it did in the 1930s - mainly thanks to Germany - one of the continent's leading historians has said.

Eurowings strike to hit 40,000 passengers
Travelers impacted by the strike on Thursday wait at Cologne Bonn airport. Photo: DPA.

The day-long strike by a Eurowings cabin crew union is expected to impact some 40,000 passengers on Thursday as hundreds of flights have been cancelled.

Deutsche Bank reports surprise quarter billion profit
Photo: DPA

Troubled German lender Deutsche Bank reported Thursday a surprise €256-million profit in the third quarter, compared with a loss of more than six billion in the same period last year.

US 'warned Merkel' against Chinese takeover of tech firm
Aixtron HQ. Photo: DPA

The German government withdrew its approval for a Chinese firm to purchase Aixtron, which makes semiconductor equipment, after the US secret services raised security concerns, a German media report said Wednesday.

Long-vanished German car brand joins electric race
Photo: DPA

Cars bearing the stamp of once-defunct manufacturer Borgward will once again roll off an assembly line in north Germany from 2018, the firm said Wednesday.

10 German clichés that foreigners get very wrong
Sponsored Article
Last chance to vote absentee in the US elections
10 ways German completely messes up your English
Germany's 10 most weird and wonderful landmarks
10 things you never knew about socialist East Germany
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
jobs available
Toytown Germany
Germany's English-speaking crowd