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Grexit 'no longer out of the question' for Merkel

AFP/The Local · 12 Jun 2015, 09:51

Published: 12 Jun 2015 09:51 GMT+02:00

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Mass-market tabloid Bild reported on Friday that Merkel has been “taking advice” over the last two days about the steps Germany will take if Greece goes bankrupt.

Under the headline, "Now Angela Merkel is planning for Grexit too," the tabloid reports that the chancellor has been discussing the possibility of writing off some of Athens' debts and introducing capital controls (blocks on moving or withdrawing money) on customers of Greek banks.

An anonymous diplomat told Bild “the Chancellor also knows now that we’ve run out of time.”

The latest meeting between the Greek government and its debtors was marked by a further deterioration of relations on Wednesday when the IMF pulled its negotiators out of the meeting.

Merkel is widely seen as Greece’s staunchest supporter in the German government. She has never publicly contemplated the possibility of a Greek exit from the eurozone.

But pressure has increased on the Chancellor as she faces growing dissent within conservative Christian Democratic Union (CDU) party over efforts to keep Greece in the eurozone after months of drawn-out, quarrelsome debt talks.

Merkel's long serving and loyal finance minister Wolfgang Schäuble appears to be losing patience with Greece, and analysts have noted a recent divergence in their approaches to resolving the crisis.

If and when a deal is finally clinched, the chancellor will, despite her popularity, have to invest much political capital to keep her conservatives on side, especially if an agreement requires the German parliament's approval, analysts say.

Popular at home for her eurozone crisis leadership and her tight grip on the public purse of Germany, Europe's effective paymaster, Merkel must also worry about the consequences a "Grexit" would have for the single currency union.

She struck an upbeat note heading into yet another crunch meeting with Greek Prime Minister Alexis Tspiras on Wednesday, saying "if there's a will, there's a way" and again stated her goal -- to keep Greece in the euro fold.

But the best the three-way Brussels meet with French President Francois Hollande could muster, at least publicly, was a declared accord that talks must, once more, be "intensified".

"The next futile Greek summit!" Bild fumed on Thursday, maintaining its tough line with Athens since the start of the crisis, as the country has struggled to reduce its towering debt mountain and avoid defaulting.

'Acting in concert'

Schäuble, Merkel's deeply pro-European right-hand man throughout the years-long battle to fix the eurozone, has remained unwavering on the need for Athens to stick to its commitments.

Observers say his uncompromising stance now contrasts with that of Merkel, the long-time austerity champion who has increasingly engaged directly with the hard-left Tspiras in the quest for a political solution.

Faced with reporters' questions on whether a rift has developed between Schäuble, the unbending trained lawyer, and Merkel, a pragmatic former scientist, his ministry has stressed that the two are "definitely acting in concert" on Greece.

"At the chancellery there's the idea you have to negotiate with Greece," political analyst Pawel Tokarski, of the German Institute for International and Security Affairs, told AFP.

"At the finance ministry there's increasingly less confidence of reaching an agreement," he added, saying Schäuble's bumpy relationship with his Greek counterpart, Yanis Varoufakis was a factor.

After four months of thorny cash-for-reforms negotiations between Athens and its creditors - aimed at releasing the badly-needed €7.2 billion final tranche of Greece's €240-billion bailout - Merkel must also contend with a rising chorus of backbench disenchantment.

"In Europe's decisions on the rescue of Greece, big sinful regulatory breaches were committed," said Christian von Stetten, a lawmaker from Merkel's Christian Democratic Union (CDU) party, according to Thursday's edition of Handelsblatt business daily.

"That can't go on like that."

'Uncomfortable position'

Given the overwhelming Bundestag majority of Merkel's left-right coalition, she would probably not suffer an outright defeat -- past bailouts have always sailed through.

But Merkel could face greater rebellion in the ranks than in previous ballots, as well as critical opposition from her traditionally more pro-Greece junior partners, the Social Democrats (SPD).

Now her direct involvement, alongside France's Hollande, in the talks which started out with telephone conferences with the anti-austerity Greek leadership, is "a political risk", Tokarski said.

"It's an uncomfortable position for her," he told AFP.

Other German lawmakers have taken to the pages of Bild to nix the idea of further aid for Greece.

"I will not and cannot approve permanent financing of a country that's unwilling to reform," Michael Frieser, of the CDU's Bavarian CSU sister party, told the newspaper.

The CDU's support base won't be content with "only a political solution which would allow Greece to evade its economic commitments", said Celine-Agathe Caro of the Konrad Adenauer Foundation, which is close to the CDU.

Handelsblatt drew a parallel between the revolt facing Merkel and that which Tspiras faces domestically.

But even a leading SPD lawmaker, Carsten Schneider, indicated Wednesday that he foresaw the three-term chancellor, who still rides high in public opinion polls, pulling through.

"I suppose in the end the conservatives will line up behind their chancellor," he said.

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AFP/The Local (news@thelocal.de)

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