July 28, 2015 | Rome, Italy | Sunny 30°C

No love lost

No love lost between Greek Prime Minister Alexei Tsipras and German Chancellor Angela Merkl.
By Vittorio Jucker
Published: 2015-07-23

t was extenuating, bitter and contentious, but the European Union has finally imposed some sort of ultimatum on Greece. The deal was dictated by Germany with the staunch support of several Northern European countries. In theory it provides Greece with some breathing room to endure its economic and financial crisis a while longer. But Greece's gigantic debt problem has only been postponed.

The issues plaguing the euro have not been resolved: the negotiators seemed mostly interested in grandstanding, putting their disagreements ahead of resolving them. The Greeks appealed to their lenders from a position of extreme weakness, but they seemed to have gained substantial backing from European public opinion. The Germans took on the role of severe negotiators, insisting on the moral and practical necessity of repayment.

Finance Minister Wolfgang Schaubel: mouthpiece of German hardliners.

Of course Greece has had serious financial problems before. The country has gone bankrupt several times, beginning in 1821, only months after it gained provisional independence from the Ottoman Empire. Nor was it the first time Greece had said OXI — "no" — to external pressure. In each case, it pulled through only after painful financial crises, devaluations and hyperinflation. Joining the EU and the euro meant was means to acquire protection and stability, which explains the country's attachment to the European currency.

As for the deal, the International Monetary Fund, one of the members of the so-called Troika handling the question of the Greek debt (EC, IMF and the European Central Bank), swiftly announced that Greece would never be in a position to repay its €290 billion international debt and that restructuring and partial cancellation were an absolute necessity. While Greece obtained a reprieve and funds to finance its future growth and recapitalize its moribund banking system, most observers seem to agree with the IMF that within a relatively short time, perhaps two years, the country would have to renegotiate a further bail-out.

But the impact of the agreement has wider repercussions. As economist Paul Krugman has observed, long-term divisions within the EU will have far reaching consequences. Germany handled its role as the lead negotiator in bullying fashion, in a reminder of its aggressive past that left the other euro members aghast. That France's president François Hollande and Italy's Prime Minister Matteo Renzi pushed unsuccessfully for a different, less punitive deal suggests that a rift has opened between their countries and Germany.

Italy's Matteo Renzi and France's François Hollande: new worries about Germany.

The Germans themselves appeared divided, the main and most visible role taken by Finance Minister Wolfgang Schaubel, acting as the mouthpiece of German hardliners in order to knock Chancellor Angela Merkel down a few pegs and to present himself as a possible successor.

One lesson from the affair is that the Germans are not ready to assume the hegemonic role in Europe they consider theirs. Their brutality in negotiations and unwillingness to compromise reminded many of Germany's 20th-century militaristic interventions. They also suggested a lack of diplomatic skills, long term vision and empathy. This in turn could easily create an anti-German backlash throughout the rest of EU. Germany's moralistic and hectoring approach seemed inappropriate at best, especially in times of ongoing economic recession.

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