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Germany warns of 'bottomless pit' in Greece

The Local · 15 Feb 2012, 12:05

Published: 15 Feb 2012 12:05 GMT+01:00

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"We want to do everything we can to help Greece ... we can help but we are not going to pour money into a bottomless pit," Wolfgang Schäuble told SWR radio.

"We have always said that all conditions must be fulfilled before we can take final decisions and that the time was pressing. I have doubts that all conditions have been fulfilled," added the minister.

He took aim at Greece's conservative Nea Demokratia party, which enjoys a huge lead in the polls ahead of elections expected in April. Their lead is "exactly the problem," Schäuble said.

"I am not certain that all political parties in Greece are aware of their responsibilities given the difficult situation in which their country finds itself," the minister said.

"When you look at the situation in domestic Greek politics ... the question is: who is going to guarantee that what we decide now will also be valid after the elections?" asked Schäuble.

Late Tuesday, Luxembourg Prime Minister Jean-Claude Juncker, who is head of the eurozone finance ministers, scrapped a planned meeting on more aid, opting for a conference call instead as Greece failed again to meet EU demands.

"I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme," Juncker said in a statement.

Further "technical work" needed to be done, Juncker added.

Story continues below…

Greece desperately needs the €230-billion ($303-billion) rescue package - €130 billion in fresh loans and a €100-billion write-down on privately-held bonds - to avoid defaulting on €14.5 billion in debt owed on March 20.


The Local (news@thelocal.de)

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Your comments about this article

12:22 February 15, 2012 by pepsionice
Money loaned to Greece, will never come back....it's a virtual guarantee. Based on comments I've seen in the German press.....Greece has just as many public government workers as Germany.....while Greece only has eleven million in population and Germany has eighty million. If you figure the pension and health care costs to this number of public workers....there is no way for Greece to survive this mess. I'll predict they get the loan.....flush it away by Xmas, and return for more cash. By spring of 2013.....they will be finally bankrupt, and dumped out of the EU. No one will take a Greek serious after that point.
14:11 February 15, 2012 by melcart
I guess Schäuble is trying to push Greece out of the eurozone, but will that solve the problem?

Schäuble has a degree in accounting and has been around in politics for a long time, but only moved to the Finance ministry relatively recently. Unfortunately, he seems to think a country can handle its finances just like a corporation. Macro economics tells us otherwise.

If country A has trade surplus with country B and country B has only trade deficits with all other countries, then where does country B get the money to buy the stuff it imports from A? It can only get the money by borrowing it from A. (This is basic macro economics. There can be no trade surpluses without corresponding capital deficits.)

So, if Germany wants to continue to run a trade surplus with Greece, then it is going to have to continue to loan (i.e., give) Greece the money it needs to buy the goods Germany wants to sell. Since the money Germany loans (gives) to Greece to buy products from German companies comes back to Germany, this looks like a round-about, back-door industrial subsidy. Surely there are more efficient ways to subsidize German industry?

The other alternative is that Germany buys enough goods from Greece to balance out the trade deficit, but current German government seems to think massive trade surpluses are an all round good thing and is not interested in increasing imports.

The larger problem of course is that Germany has a trade surplus not just with Greece, but with the entire eurozone. So, if the German Government does not look at ways of reducing the eurozone trade imbalances, then this crises is going to repeat itself over and over again...
14:16 February 15, 2012 by Bushdiver
Schäuble say Germany won't keep throwing money into a bottomless pit. I think they have been throwing money into that pit for some time now. Writing off some of the debt is no problem since they will never be able to repay any of the money anyway.

@pepsionice......You are right. They will get this loan but there is no way this loan will hold them until Xmas. They will be needing more money way before then.
14:40 February 15, 2012 by McM
For 'butter' or worse. One borrows at 2% and lends to the other poorer soul at 8% then acts indignant if the other cannot pay it back. Grounds for a divorce they bemoan as the pre nuptial arrangement was a wee tad fluffy and their partner has been spending beyond their means for many years. Sadly you are all in the same boat namely little Europe.

I am interested in hearing some real solutions that go beyond the blame game and don't leave too many solial wrecks in its wake. After the dust settles we may do well reflect on Germany's times of need when the world stepped in help rebuild it when it was not in a position to help itself.
15:39 February 15, 2012 by murka
An excellent insight, melcart.
18:41 February 15, 2012 by Costas
Today president of Greece questioned who is the "Schäuble" who rails and insult Greece in such a way, and who are the "Dutch" and who are the "Finlanders" insulting Greece.

personally don't mind who they are (although married to a Finnish), but what really cares for me and 11 million more Greeks is Germans to immediately pay their long outstanding debt to Greece from 2WW exceeding by now the 500 billion.
19:47 February 15, 2012 by Michel_Berlin

What for?

You would flush any reparation just only down the toilet as you did with any other money.

You ARE a bottomless pit!
20:21 February 15, 2012 by Costas
hi Michel

wl keep us at least for the nxt 20 years drinking ouzo and laying back on a beach in my island.

my Finnish babe agrees all the same, so why the heck Finnish president gets involved can't ustand. think shud make a protest letter.
20:51 February 15, 2012 by TheCrownPrince
@Costas - So sorry to disappoint you, but Germany ows Greece nothin'. There are several contracts and agreements settling all compensation issues after you have received money from Germany already in the oast. If you don't like that, you may take legal action, but the Italians lost some weeks ago in a comparable case at an international court. Or perhaps you mean the allegedly "stolen gold" from your Central Bank? Well, old fruit, the gold was taken to Crete before the Germans arrived in Athens, then taken to Alexandria, then to Pretoria and after the war handed back to the ... Greeks(!), yay.

@melcart - in my opinion it's not so much a matter of trade balances or trade surplusses, but a matter of not being able to run a country properly. If you don't earn much money, you simply have to cut your spending! The Greeks have made party for 10 years thanks to the low interest rates of the Euro, only with a feeble economy in their back. They just should have lived within their means, is all! Besides, they also can boast of totally rotten structures, a bloated, inefficient and corrupt administration, and their elites see tax evasion as a kind of national sport. So who really wonders. Even all the gods on the Olymp could not help Greece if Greece does not start to help herself!!!
21:28 February 15, 2012 by Costas

nice your try but see some facts.

a)Was clearly written that such decision was against the citizens(Italians) and not against the country.

b) as far it concerns Greece

Germany and Italy, in addition to charging Greece exorbitant sums as occupation expenses, obtained forcibly from Greece a loan (occupation loan) of $ 3.5 billion. Hitler himself had recognized the legal character of this loan and had given orders to start the process of its repayment. After the end of the war, at the Paris Conference of 1946 Greece was awarded $ 7.1 billion, out of $ 14.0 billion requested, for war reparations.

Italy repaid to Greece its share of the occupation loan, Italy and Bulgaria paid war reparations to Greece, and Germany paid war reparations to Poland in 1956 and to former Yugoslavia in 1971. Greece demanded from Germany payment of the occupation loan in 1945, 1946, 1947, 1964, 1965, 1966, 1974, 1987, and in 1995. However, Germany is consistently refusing to pay its obligations to Greece arising from the occupation loan and war reparations. In 1964, German chancellor Erhard pledged repayment of the loan after the reunification of Germany, which occurred in 1990.

Indicative of the current value of the German obligations to Greece are the following: using as interest rate the average interest rate of U.S. Treasury Bonds since 1944, which is about 6%, it is estimated that the current value of the occupation loan is $163.8 billion and that of the war reparations is $332 billion. The French economist and consultant to the French government Jacques Delpla stated on July 2, 2011, that Germany owes to Greece 575 billion euros from Second World War obligations (Les Echos, Saturday, July 2, 2011). The German economic historian Dr. Albrecht Ritschl warned Germany to take a more chaste approach in the euro crisis of 2008-2011, as it could face renewed and justified demands for WWII reparations (Der Spiegel, June 21, 2011, guardian.co.uk, June 21, 2011).

as far it concerns tax evasion and corruption my dear you are the last to talk about. German companies in Greece(not to mention other countries) had developed a school "how to develop political corruption and how to corrupt govermental officials". Your own court decisions prove that.

nonetheless I bet you, like it or not, we are going have our free ouzo for the next 20 years, and who knows by that time one out of our many Gods wl make make the miracle and get the oil popping out of the Aegean sea and start feeling like sheikhs.
22:06 February 15, 2012 by TheCrownPrince
@Costas - get used to it, there will be no more money. After Germany's surrender the allied powers granted Greece 10 billion dollars (Greece wanted to have 20 billion). At the Paris Reparation Conference in 1946, Greece was granted another share of 4,5 % of reparations, which was (admittedly) never paid out, due to the experiences after Versailles, when too much burden had crippled democracy in Germany. However, the Allies decided to postpone a final decision on that issue until a proper peace treaty would be made. This was done in 1990, when Germany was reunifed. Greece accepted the terms of that treaty, too (as a beneficiary among others) and thus accepted that no more reparations could be claimed. For good. That's it!

Independently from that, the Adenauer government has paid money to individual greeks in the 50's, and I suggest you also don't forget the billions of EU-money Greece has received since the 80's, and which came to a large part from Germany. By the way, what did you do with all that EU-money, which was meant to improve your infrastructure and economy? Obviously nothing.
01:00 February 16, 2012 by cptbill
Costas, the only thing we are good at is drinking Ouzo and blame others for our mistakes.

Now that we are out of money we have to blame Germany, EU, the rest of the world.

You know very well that even if were so lucky to become a rich country in the future, we wouldnt change our fantastic habits at all.

ps: i am Greek too btw.
05:33 February 16, 2012 by Runnerguy45
Germany is in a tough position. If they lend the money to the Greeks its gone. Plus other failing EU countries will want the same deal. Germany should say we cant afford it and walk away. Germany is the leader of Europe and sometimes being the leader isnt easy.
06:59 February 16, 2012 by Geoker
Germans, the reason you are growing , and everyone buys your products is because you are benefiting from the euro being weaker due to the "southern" coutnries holding it down. If it wasnt for that you would be too expensive. You get a direct benefit of this, Greece and others on the other hand get the opposite effect. Greece is not a factory, it is a tourist country, and they get the opposite end of the bargain, a higher value currency which directly impacts their main industry. Regardless of this you complain and want to punish them, and your politicians are rude and personal about the issue. I am disgusted at what I see in the media, it is racist rubbish. If you dont want them let them go, they will flourish after the euro handcuff is released from them. You on the other hand will not be able to sell your volkswagens at 20-30% higher price (which is where they should be) and people can drive reliable toyotas again.
09:49 February 16, 2012 by Costas

from all the facts only ouzo made sense to you. lamariniasi?

That¦#39;s their usual argument when want to rail Greece and you jumped in . how abt their corruptive slimy and rant behavior


nothing was done in 1990, as always honest Germany again refused pay the debt.

...some money were given to ¦quot;individuals¦quot; in the 50¦#39;s..., probably you mean bribes

As for the billions Germany paid through EU don¦#39;t forget to mention also the bribes paid to our corrupted politicians, and here is the reason we are deep down in the s... trying

to pay back your overcharged products(ziemens etc) and your faulty weaponry(submarines).
10:34 February 16, 2012 by TheCrownPrince
@Costas - You can refuse the facts as you like, there are no reparation claims left. Try to keep your fingers from your Ouzo and read some books and newspapers instead. So Greece can make demands until hell freezes over, nobody cares, least of all Germany. All those demands from Greece are made for domestic reasons anyway.

If you want money, earn it. If you want money from Germany, dream on...
12:06 February 16, 2012 by Wrench
That means we will have 2 botomless pits. Greece and Berlin!
12:06 February 16, 2012 by murka
@Geoker - one couldn't describe the essence of the issue better.

I wonder how many celebrations of new economic numbers with champagne etc. it will take for the wide masses to recognize this. Too politically incorrect for the mass media.

Instead, Mr Scheuble is talking on the local station as if there is no Internet and Greeks wouldn't hear it.
13:03 February 16, 2012 by ChrisRea
@ Geoker #14

So if Germany products benefit from a weak euro, I guess Greek tourism benefits from the same weak euro. Why do you think Greece has the opposite side of the bargain? What you say does not make sense economically. Are you just trying to blame others for Greece's own problems?
15:30 February 16, 2012 by tommy2shoes
The heads of the EU will evenually reduce the 27 EU countries to just 10 because of the financial issues....
17:12 February 16, 2012 by finanzdoktor
@melcart and murka: Your explanation is a bit too simplistic, since it only focuses on two countries, whereas foreign trade and finance is a much bigger (dare I say) monster. For instance, you fail to mention that all the other countries with trade surpluses with Greece, could also finance Greece by importing Greek-made goods and/or services. So, why dont they? Because like the Germans, they do not see much to import from Greece, other than olive oil and tourism.
22:08 February 16, 2012 by Geoker
@chrisrea, Germany benefits from a currency made relatively weaker by the membership of the weaker states, whereas the weaker states suffer due to the currency being made much stronger by the big industrial power of Germany. So whilst Germany makes alot of money from Global trade due to this, it is destroying the economy of the weaker states that are not industrial superpowers, like Germany. If the weaker states leave, the DM or whatever theGermans use as a currency will appreciate so much that, noone will be able to buy their products globally. If Greece goes to the Drachma the millions of Global tourists will flock back to Greece and their main industry (tourism) will boom. Unfortunantely there is no recognition of this effect, and the Europeans are instead destoroying what is left of the Greek economy. The racist idiocy of both sides is unsavoury also, but the politicians must appeal to the uneducated masses, and this is how they do it.
19:20 February 17, 2012 by koll
It is very normal for Nea Demokratia party lead in the polls, since the party succed to make greeks live Northern European standards by financial manipulation rather than working .

@Geoker, Germany had never wish weaker Euro, if she wish, germany would allow European Central Bank to print money so euro will devaluate.Weaker Drahma is not guarantee for greek tourism boom, recently greek officer admitted even weaker drama may not boom greek tourism due to cheapest alternatives in Turkey and Bulgaria.
00:33 February 18, 2012 by Logic Guy
Well, I do agree with Schauble. Although healthy EU neighbors truly desire to help Greece recover, they are however worthy of assurances. Logic would strongly suggest it's useless to loan money to a person, or nation, if they have no real means in which to pay it back.

Those austerity measures, in reality, are quite illogical. They will ultimately make things worse. Therefore, Greece must go through a "Unique Restructuring."

Surely there is a better way.
07:59 February 18, 2012 by storymann
Requiring strict austerity from Greece as the price of European support has lengthened and deepened their recessions. It has made their debts harder to pay off not easier.

When will Germany understand that not every country can emulate it. Austerity and bailouts based on stringent policies are not going to solve the problem, it is to late for this now.

Mrs Merkel seems to court the German sentiment that suffering is the only way out for these indebted nations.

Portugal before the the May bailout was about 110% debt to GDP ,now it is around 120% and this will continue to rise as the economy continues to shrink. As the draconian austerity measures set by Germany and France continue to be forced on these nations inorder for them to meet their debt obligations this will only further the crisis.

Plans by the ECB to add more money to the under financed fund is a step in the right direction But until they give up the idea that strict austerity is the way out of debt relief even pumping money into the fund will not be enough.

These economies need to grow and the leaders of these nations need to commit themselves to market reform.

The risk is enormous for the continuation of the EU.
20:14 May 18, 2012 by John Steed
it is curious how German memory shortens with time. Europe has bankrupted itself payingf for its reintegration, which it was noi supposed to, the Eastern German worker was the laziest, most inefficient in Europe at one point, and frankly the remainder of Europe is fed up wih being run by an East German who has about as much sense of elernentary economics as the ex Marxist boy scouts who have been put in place in EU institutions. The fundamental freedoms in the EU have been put into reverse, by Germany, who incidentally is now in a position to hand back the assets it stole in World War II. The UK paid back the war loan it took out to the US in 1995, having rendered the First World War debt perpetual, aznd morrtgaging the Empire into a commonwealth. We are gettingf a little fed up with this German self-righteous winging. Get back to work, that's what we have paid you for, and pay for Europe, as we have done.
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