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Italian PM: Germany to blame for EU debt

The Local · 28 Mar 2012, 10:16

Published: 28 Mar 2012 10:16 GMT+02:00

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On a visit to Tokyo, President Mario Monti announced that because the eurozone's two largest players –Germany and France - had not abided by fiscal rules, they had set a bad example for the rest of the continent.

"The story goes back to 2003 (and) the still almost infant life of the euro, when Germany and France that were too flexible concerning public deficits and debts," Monti said.

“Of course if the father and mother of the eurozone are violating the rules, you could not expect (countries such as) Greece to be compliant," he added.

The technocrat, who replaced billionaire media magnate Silvio Berlusconi in November as head of the EU's third largest economy, said that flouting rules that allowed for an annual budget deficit of no more than three percent of GDP was the issue.

He said despite recommendations from a meeting of ministers from European Union governments, France and Germany had escaped without punishment for going beyond the deficit limit.

The eurozone is now under pressure to increase its debt rescue fund, as the Organisation for Economic Co-operation and Development (OECD) announced on Tuesday that a financial safety net of at least €1.0 trillion was needed.

Eurozone finance ministers are meeting on Friday and Saturday in Copenhagen to decide whether to increase the EU safety net or not.

The OECD said the refinancing needs of vulnerable eurozone nations could top €1.0 trillion over the coming two years, on top of cash needed to recapitalise banks.

Story continues below…

Italy alone needs some €750 billion to finance its debt, while Spain requires around €370 billion over the next three years.


The Local (news@thelocal.de)

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Your comments about this article

10:45 March 28, 2012 by Berlin fuer alles
In fact it is the taxpayers of countries like Ireland and Portugal who are bailing German Banks out. For example if Ireland had burnt the bond holders and let their Anglo Irish Bank go under the German banks who had irresponsibly fueled their bad lending habits would have taken the burden. One less bad bank in Ireland now would be the result and another better run bank would have taken it's place.
11:00 March 28, 2012 by sambatyon
He is right, however what he doesn't take into account is that Germans are never too strict with Europe out of fear of being interpret as wanting to establish a new Reich.

That is the problem of Germany they have the power, but if they use it, they risk to freak out the whole bunch of europe.
11:05 March 28, 2012 by Peepopaapo
Yes, Mr. Monti, it's Germany's fault. If Mr. Schroeder (who was in charge at that particular time) jumps down a bridge he is also responsible for YOU jumping down the bridge? The Pi(i)gs simply used to live way beyond their means. Now blaming Germany for their own faults is cheap and shows us how impudent the gouvernors of the Pi(i)gs are. The Pi(i)gs could have had an "Agenda 2010", but instead of having one the wages rose about 30% although their ridiculous economies were never able to pay wages that high.

@ Berlin fuer alles: If Irish and Portugese tax payers (I guess you know how high the unemployment rate in Portugal is at the moment) would have to bail out German banks I would say: "Good night!",
11:10 March 28, 2012 by Berlin fuer alles
Peepopaapo. Read my comment fully. I said the Irish are bailing out their Anglo Irish Bank which was substantially owned by German Banks who provided the bad inflation fuelling habit that led to it's downfall. If they burnt the bond holders instead of bailing them out the Irish would not have need an IMF and EU bailout. The German banks would have had the headache instead.
11:17 March 28, 2012 by Peepopaapo
@ Berlin fuer alles:

"In fact it is the taxpayers of countries like Ireland and Portugal who are bailing German Banks out."

The ones who caused the financial crisis can not be found in Germany. As far as I know Goldman Sachs is not a German bank and Lehman brothers was also not a German bank.
11:23 March 28, 2012 by melcart
If Mr. Monti wants to look at historical causes, then he should examine the question of how Greece was allowed into the Euro zone in the first place.

At the time the decision was made, Greece had colluded with Goldman-Sachs to take a large chunk of Greece's debt off the books using an accounting trick. Both parties knew full well that this accounting trick would blow up after 10 years, and it did.

One would have to believe that the Finance Ministries in the EU were completely incompetent not too have noticed the trick. Either that or they pretended not to notice for reasons they would prefer not to discuss in public...
11:28 March 28, 2012 by Berlin fuer alles
@ Peep

But Deutsche Bank is German. :-) In any case, nationality of banks is not so simple. Bond holders coming from many large corporate backgrounds of which German banks are very much interwoven into the fabric of practically all.
11:46 March 28, 2012 by Peepopaapo
Yes, Deutsche Bank is German, well, let's come to the conclusion that the international financial market can be hold responsible.
11:53 March 28, 2012 by Berlin fuer alles
Yes, and let's also come to the conclusion that Germany is thebiggest EU player in this international financial market. What do minnows like Ireland, Portugal and Greece matter when it comes to the interest of big Germany industry.
11:54 March 28, 2012 by Eastard
Could it be a new Greek tradition in Italy to blame Germany for Italian failures...? If it were true then it should make Italy even more embarrassed for having no independent financial over site. If not true then it is just foolish finger pointing that changes absolutely nothing... I do hope at some point the European nations begin to attract mature politically informed leadership. Merkel is the closest to a true leader across the whole lot. She too the tough stance years ago that it was not OK to keep feeding the dishonest financial reporting being offered the EU... She was accused of causing the whole mess... I wonder where it would be if she had ignored it all..
12:16 March 28, 2012 by Peepopaapo
@ Berlin fuer alles: The bigger you are the more important you are and the more influental you are, that's true! =)

But once again: When I jump down a bridge and I know that I am likely to survive jumping down the bridge and you see me jumping down the bridge and you know that you are less likely to survive jumping down that bridge I'm not responsible for YOU jumping down the bridge, it was your very own decision. Italy, Greece and others were not forced by Germany to make debts - it was their very own decision.

Furthermore they could have followed Germany with its "Agenda 2010", but the simply didn't. While the wages in Germany rose between 5 and 7% in the last couple of years before the financial crisis, the wages in countries like Greece and Spain rose about 30%, but I wonder for what reason. When I compare the Greek and the Spanish economies with the Germany economy I simply can not see why they were able to rise their wages by 30% and that's certainly not Germany's fault.

But yes, the Euro actually has a lot of problems which were caused by all who used to design it and I hope that these problems will be fixed soon.
12:35 March 28, 2012 by Berlin fuer alles

The point again you are missing is that there was no choice but to jump when the biggest and dominant country jumps. It is not so simple to be described as jumping when someone else jumps. The EU is joint by currency, laws etc etc. Maybe you could describe it as Germany jumping knowing everyone was tied up with it but at the same time having disregard to whether or not it was good for every one else or not.

Also, the wage increase comparison is not so simple. Portugal and Greece have far lower overage incomes and inflation increased a lot faster due to the Euro. A 30% rise in wages in Spain amounts to less than 7% in Germany. A lot of factors were not considered and Germany acted recklessly towards it's other Euro neighbours and only in it's own interests.
12:55 March 28, 2012 by Peepopaapo
@ Peepopaapo: I disagree! =) As far as I know Greece, Italy and so on would have had the chance to say "no". Could you show me a law for instance which says that when Germany makes debts the other countries are also forced to make debts - I am convinced that you won't find anything like that.


2012 2,277 %

2011 2,140 %

2010 0,561 %

2009 1,040 %

2008 2,818 %

2007 1,780 %

2006 1,813 %

2005 1,638 %

2004 0,826 %

2003 1,254 %


2012 1,975 %

2011 3,589 %

2010 0,834 %

2009 0,660 %

2008 4,368 %

2007 2,412 %

2006 3,972 %

2005 3,301 %

2004 2,135 %

2003 3,843 %

As you can see inflation was not extremely higher than in Germany or at least not to the extend that would devour completely devour the rise of the wages.

Moreover it's only normal that every state looks towards its own interest. Spain, Greece, Ireland, Portugal and Italy do the same.

But I think we won't get together on that particular topic, nevertheless I do respect your opinion. =)
13:09 March 28, 2012 by freechoice
Why can't all European leaders come together and reset the counter to 0? The monetary system is made by man, surely man can start afresh again? Like what New Yorkers would say, Fuggetaboutit!
13:29 March 28, 2012 by Navigator_B
Germany was right to borrow more than the limit at that time in order to save itself from an even bigger recession. Its biggest responsibilty for causing the EU debt crisis does not come from exceeding the limit. It comes from the way that it provided the money for Greece and other countries to borrow. 

For every reckless borrower there has to be a reckless lender. In this case German banks took the earnings that Germans saved, and lent it on to countries that could not pay it back. Ordinary Germans had no way of knowing that their savings were being abused in this way, but their banks should have known and so should their government with all the financial experts that they employ.
13:50 March 28, 2012 by insight101

I wonder if you apply that same logic when it was German banks buying up mortgage packages from America, or German troops going to Afghanistan, or Germany signing ACTA, or the words from English spreading in your language, or McDonalds opening. Cuz most Germans I have talked with don't say we weren't forced to do those things...they blame the "evil Americans".
14:06 March 28, 2012 by Peepopaapo
@ insight101: I don't blame the "evil Americans" (as the idea of one nation being naturally more evil than another nation is nonsense in my opinion) for being responsible for the Bundeswehr being in Afghanistan or for being responsible for other things where the Germans (or the German parliament) actually had a chance to decide in a different way - it was the choice of the German parliament and if I had been part of the parliament and if I had the right to vote I would certainly have voted against sending German soldiers to Afghanistan. Only the Germans (or the German parliament) can be held responsible for sending soldiers to Afghanistan, not the U.S. Americans. So yes, I apply the same logic when it comes to German decisions.
14:47 March 28, 2012 by The-ex-pat
Rather an interesting article, conveniently forgetting very large contributing factor covering the financial problems of the Greek, Italian, Spanish and Portuguese national debt. That being, tax evasion that each of the a for mentioned countries practically condone by the inaction and corruption towards the subject of tax. Tax is for the neighbours to pay and not the landsman him/herself and most definitely does not cover politicians or large companies with loophole lawyers or plain refusals. Before you start to point the finger and blame everyone else, clean up your own act first.
16:23 March 28, 2012 by reallybigdog
Just another idiot politician who doesn't know the first thing about finance and has to resort to historical fear mongering.

Its also interesting that Germany sold off much of its debt to US banks prior to the crisis.

PS...He looks like a spoiled brat who just crapped his pants in that photo!!
16:24 March 28, 2012 by leuteleute
The Germans are saving as much as they can, what other think of us, you are poor, you cannot afford things like us,we have so much money because we can show the world how we spent it.Now they are bankcrupt because of living beyond their means.Then they are crying, you Germans you are the cause why we are bankrupt. We cannot afford education for our childrens,you have to support us.Let me take a break!
16:58 March 28, 2012 by jpl82
I can't speak for the other situations but as for the Irish one. It's fairly clear we're paying to keep international banks from losing money.

The Irish state was faily budget neutral in 2003- 2007 and surplus before then. They then took on 100 billion of debt from mainly 3 irish banks. They paid 20 billion straight from the pensions of irish state employees and organised this bailout of 80 billion at a rediculus 6-7 % interest rate.

Why would the country take over such a debt that has nothing to do with the taxpayers or their future etc per say.

Apparently a combination of lying from the banks, an pressure from the EU and US. The money is basicly owed to german and french banks with a bit over, however it's insured by a goldman sachs in the US. So in the case the Irish don't pay the germans get their money and goldman pay.

Somewhere along the line pressure was brought to bear at G8 andG20 meetings and it was decided that it would be best for everyone it the Irish government paid the bills of banks mostly baised there to save hassel for everyone.

Irish politions were either convinced, tricked, bought or bullied to agree. Hence a perfectly healty economy is sent down the shitter.
19:17 March 28, 2012 by smart2012
Sorry guys, but Monti did not blame anyone. He just gave a fact, which is true. Btw, number one biggest debt in Europe is owned by Germany....
19:33 March 28, 2012 by Berlin fuer alles
Fully agree with jp182. I am not from Ireland but looking in from outside, the Irish taxpayer got a very bad deal. Forced to bail out a toxic bank in order to screen the large bond holders from taking a hit which would have harmed the larger EURO zone economy. If they let these banks go under as any other failing business goes under then the Irish economy may well be in a far healthier state.
19:48 March 28, 2012 by Peepopaapo
@ smart2012: Sorry, but you are simply talking s**t. The debts of Greece, Italy, Portugal, France and the United Kingdom are higher than the debts of Germany.
20:20 March 28, 2012 by smart2012
@ peepopaapo. Share the numbers please (absolute value)
21:29 March 28, 2012 by Berlin fuer alles
Germany has higher debt as % of GDP than Italy, Greece and Spain. However, Portugal, UK and Ireland have higher. I do not think this is relevant though as countries like Norway, Sweden, Holland, Belgium and Hong Kong all have much higher debt as % of GDP also and they are not in debt crisis.

23:47 March 28, 2012 by smart2012
Thanks, still I would like to see total debt in absolute numbers
00:30 March 29, 2012 by neunElf
The amount of debt is not the issue, its the ability to service the debt obligation.

Yes Germany has large debts, but Germany is also very productive and can earn enough money to more than service and pay its debt obligations.
00:48 March 29, 2012 by smart2012
thanks neunElf, now we can talk. U are right, Germany has a higher production force than other EU countries, however I would not underestimate that in Q4 2011 Germany lost 0.2% in growth, and 2012 growth estimates are lowering down. I am just waiting to see AAA to become AA (like for FR in Jan). I love Europe, I just want to see all the countries working as partners (not as blamers) and addressing key issues ie growth (lets introduce some protectionism rules) and effective firewall (ECB printing Euros), then we will stop blaming each others :-)
09:36 March 29, 2012 by Peepopaapo
@ smart2012 and Berlin fuer alles:

Germany: 83,2% of GDP

Greece: 142,8% of GDP before the cut and about 120% of GDP after cut

Italy: 119% of GDP

Portugal: 93% of GDP

Ireland: 96,2 % of GDP

Spain: 70% of GDP
10:16 March 29, 2012 by smart2012
@ peepopaapo: I have asked for absolute numbers, not %, please
10:16 March 29, 2012 by Berlin fuer alles
Yes Peep. And as already argued it is Ireland for example who is being forced to bail out mainly German bond holders at the detriment of their ability to service their debt. If they had not been forced to take a bailout and had let their Anglo Irish Bank fail their bond yields would not have gone up and they would not have needed this bailout. Now they have austerity forced upon them so they can service their debt. It is a vicious downward cycle which could have been avoided if the free market rules had been applied and bad banks let fail and bond holders who lent to these bad banks took the hit instead.

A bit like backing a losing horse but when it loses the tax payer gives you your money back anyway.
11:48 March 29, 2012 by Peepopaapo
@ smart2012: To be honest I keep on wondering why you ask for absolute numbers, because absolute numbers are completely irrelevant. =) You have to measure the debts of a country by its GDP and these numbers were already given to you by me in post #30.

But I see that we do at least agree on one particular point. The German economy is more productive than the Italian, Spanish, Portugese and especially the Greek economy.

@ Berlin fuer alles - not only the Irish had to bail banks, but also the Germans. =)
13:54 March 29, 2012 by finanzdoktor
This is like an adult saying they should not be liable for the illegal act they were caught doing, because it was their parent's fault for not being better at raising them. Is Herr Monti suggesting that his country is not mature enough to make its own decisions, and thus should not be liable for those decisions, since it was the parent's fault?
14:27 March 29, 2012 by smart2012
@ Peepopaapo: i know why u do not want to give the absolute number, cause what i said in my original message is true (which u mistakenly said it is "s..."). I also disagree this is irrelevant, it is a number that has to be considered in the full picture (and btw in Germany the debt of single lands is not shown as part of the total German debt, which would make the % on GDP higher if included) - in north Germany the are struggling with the debts too, this is why they are proposing not to pay anymore for East Germany.

So again, u have the prejudice that everyone wants to criticize Germany, and this is not correct. Monti in his speach said something which is true so I did, but we did not say Germany is bad, we just gave a fact. Yes, Germany is the biggest country in EU and the one with highest production (in absolute number :-), am not sure the most efficient cost vs quality, otherwise big enterprises would not move out of Germany to go to Asia/LA/East EU/Turkey...), my key point is that in EU now we are spending our time blaming one country vs the other rather than solving issues, bearing in mind we are talking poor to poor, as the money are away from EU including Germany.... (except Montecarlo/Switzerland/Luxemburg), direction same areas listed above (Asia/LA/East EU/Turkey...)
15:00 March 29, 2012 by Peepopaapo
Dear smart2012,

I disagree - once again =) - the hight of debts in the German Bundeslaender is already contained in the hight of debts of the entire German federal state. By looking at the percentage of debts in relation to the GDP you have already a comprehensive overview of a country's debt in relation to its economic strenght.

Big enterprises (including German enteprises) are heading to the regions you mentioned above because of extremely low wages compared to the wages which can be found in Germany.

Best regards
16:13 March 29, 2012 by luckylongshot
So Goldman Sachs helps Greece to join the Euro by being less than totally honest about Greece's financial situation, Greece goes belly up triggering a dominoe effect in the euro zone and ex Goldman Sachser Monti blames ....Germany...what an idiot!
19:18 March 29, 2012 by Englishted
Back to the basic fact that he is correct France and Germany broke the rules .

They were not brought to book for it as they were and are too powerful within the E.U.

I agree with many of you that this is a red herring to use as a reason but none the less it is true.

But the people who are to blame for this crisis are still paying themselves waste wages and have not been charged with any crime I know of for corruption and greed on a massive scale.

We all know who I mean don't we.
18:17 March 30, 2012 by gtaglia
The debt problem has two major components:

1. Politicians buying support from everyone who can be bought, with borrowed money

2. The Euro and the ECB, which allows these insolvent regimes to borrow far more than anyone would loan them without the backing and implied guarantee of the EU

Germany certainly has a part in this and is doing the same things, to a lesser degree, but without the profligate spending of governments, trying to maintain themselves in power and the financial system that facilitates their borrowing, a limit would have been reached long ago and individual governments would have been forced to restrain their spending to a level they could pay for.
09:27 March 31, 2012 by freddy7
These economic failures have to occur to bring a change to the EU

The powers that exist want to introduce a single economic and political system

to the EU.

And ultimately a single ruler to control the EU
10:13 March 31, 2012 by HerLinder
HHave all the cerebral debated that you wish. in reading the eurinews I find this story and feel much concern for the average citizen. it is the corrupt power players who caused this mess,no matter where they live....the US, Germany, Italy, Greece. Corrupt governments should be overthrown, and soon. they have created a situation whereby many people can no longer afford to live while the wealthy, cheating, corrupt pigs take everything within reach. Soon enough, the masses will riot and will destroy the elites....
18:42 April 2, 2012 by Reader75
Really? Germany is to blame for the EU debt? Has the Italian prime minister ever been to Germany? The infrastructure in Germany is fantastic compared to many other countries in Europe - why? - because the Germans are tax paying fanatics. I was in southern Italy two years ago, the infrastructure there is terrible, roads were in terrible shape, potholes everywhere, no barriers to prevent vehicles from going over cliffs, buildings in disrepair, etc. My Italian uncle told me how many business owners have two sets of books, one for themselves and one for the tax man. Guess which book is used on which to base their taxes? My uncle told me that cheating on taxes is almost considered normal in Italy; in fact, if you don't cheat on your taxes, you're considered to be strange. And the tax man looks the other way because he's getting bribed under the table. I love Italy and my Italian relatives, but the Italians in general need to get their house in order before pointing fingers.
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