EUROPEAN DIARY: Unlike elsewhere in the EU, fierce debate has raged in the Bundestag over the debt crisis
ENTER THE glassy Bundestag complex in Berlin and the place seems like any parliament in full swing. MPs scurry around, TV screens flash, visitors follow their minders. Listen in, however, and it’s clear the place is in a funk over the euro debt emergency.
Although government supporters dismiss complaints that chancellor Angela Merkel amplified the debacle in her reluctance to help Greece, the German debate on the debt crisis is unmatched in its ferocity. MPs are defensive, worried about public and “yellow press” hostility to rescue schemes, anxious to avoid infinite bailouts and fretful about Germany’s European role.
“We were not slow. I don’t really understand this criticism,” said Thomas Silberhorn, an MP from Bavaria’s Christian Social Union party, a government partner of Merkel’s Christian Democratic Union.
Far from Berlin magnifying the problem, he insisted the Bundestag couldn’t have debated the rescue any earlier and pins blame on Athens. “The problem became possibly worse because the necessary reforms had been undertaken so late by the Greek government.” Germany lent Greece €4.43 billion last week, the first in a series of loans that could yet amount to €22.4 billion.
On Friday, legislators sanctioned loan guarantees for €123 billion in a wider scheme for distressed euro countries. Depending on events, that might rise to €148 billion.
All other euro members are on the hook for billions in the battle to shore up the single currency, but the debate elsewhere hasn’t boiled over as in Germany. There was scarcely a tremor in Paris when France lent €3.33 billion to Greece and Italy lent €2.92 billion without fuss.
The fear in the Bundestag is that the floodgates are now open and that Germany, Europe’s paymaster, will be left with the lion’s share of the bill in an EU which becomes a “transfer union”. One day after Madrid sent €1.94 billion to Athens, for example, the talk in the Berlin was that Spain would be next up for special aid. “I heard this morning – maybe it’s just speculation – that Spain will be the next country which would seek help, not Portugal,” said Silberhorn. It may indeed be mere speculation, but interior minister Thomas de Maziere, a key Merkel ally, made it clear only hours later that Madrid was in focus: “Spain is potentially affected by the crisis.”
For various reasons, all of this plays on a deep sense that the financial security of the German middle classes is under threat from the prospect of prolonged bailout. Such sensitivities – seen as irrational to some – have their roots in the disastrous hyperinflation which took hold in the early 1920s. More relevant still, say locals, are the 2004 Hartz IV social security reforms, which drastically reduced welfare entitlements after the first year of unemployment.
Helping prodigal Greeks goes down very badly indeed in that light, even if Berlin stands to makes a profit on the loans. With the mass market tabloid Bild in daily uproar, Merkel has already lost her majority in the upper house of parliament. In a country addicted to the notion of fiscal probity, it is fearsome stuff.
“We must enforce the primacy of political action. We can’t simply channel more and more resources. We can’t,” said Klaus Berthal, an opposition Social Democrat MP.
This is the backdrop to Merkel’s campaign to recast the European fiscal rulebook in Germany’s image and a unilateral ban last week on “naked short-selling”, a form of speculative stock market dealing.
The ban sent shockwaves throughout Europe. On the opposition benches in Berlin, however, it was dismissed as a foil for domestic consumption.
“Merkel is under pressure in her own group,” said Kerstin Andreae, a Green MP. “It was more of a symbolic act.”
The German drive to set the agenda for economic reform means that a procedure for “orderly state insolvencies” is on the table in Brussels, albeit for the medium term.
Insolvency means sovereign default within the euro zone, something considered inconceivable only a few weeks ago. Although there is little desire among Merkel’s European colleagues to go down that road, Germany says this would create “incentives” for countries to pursue solid fiscal policy and for financial markets to lend responsibly.
Even though Merkel won parliamentary support for loan guarantee legislation, thoughts in her own administration have already turned to the endgame for errant euro countries.
“A member country of the euro zone which cannot be helped any longer would have no other option but to go out in its own interest,” said Silberhorn. The thinking here is that neither Germany nor its euro partners can give credit ad infinitum to governments that refuse to reform.
“There is a rather small window of opportunity to help . . . and this three years must be used to undertake the necessary decisions to reduce public debts. Otherwise, we could come into a situation in which nobody within the euro zone is able to give more money.” In Berlin, the argument runs deep.
