Euro Leaders Use Greek Departure to Stiffen Eurozone Compliance

by Nigel Bolton-Shaw on August 27, 2012

Germany appears to be winning the battle of EU planning. French leaders want a fully solidified bailout formula … but German officials want a closer EU union as soon as possible.

It may not be constitutional and it may be highly cynical, as EU leaders are on record for literally decades as saying a financial crisis would force a closer union, but reality indeed seems closer to fulfilling such predictions.

Greece is the proximate target of such forecasts. It does seem that the top people of the EU, specifically those within German power circles have decided that Greek expulsion shall serve as the catalyst for an EU political consolidation.

Greece is a small country and presumably its departure from the Euro and perhaps the EU now seems intended to be a galvanizing event that will turn the EU into a cohesive “United States of Europe,” or at least that’s the plan.

The risk is that Greece’s departure, if that is what is going to happen, will tear the EU asunder rather than providing the opportunity to create a closer union.

This is obviously the risk that informed investors will seek to quantify going forward when including Euro investments in their portfolios. These observations are borne out by continued statements by the German side that show an obvious willingness to take a line with Greek officials and public sentiment that is fairly inflexible.

Greek public sentiment is somewhat alienated from the EU and greatly alienated from any affection regarding German conduct. There is generally resentment regarding Germany stemming all the way back to World War II.

That modern German bureaucrats don’t seem to care is not merey evidence of German unfeelingness but a matter of deliberate policy. Greece is to be sacrificed it seems on the altar of Euro-solidarity.

This is why German officials continue to make the noises they do. We learn from AP just this past weekend that German Economy Minister Philipp Roesler has rejected a “timeout” for Greece to catch its collective breath regarding “austerity.”

Roesler made his statements to German public television after Greece’s Prime Minister Antonis Samaras visited Berlin to deliver the message regarding a “time out.”

Specifically, he asked German Chancellor Angela Merkel for “time to breathe” before Greece completes budget cuts and reforms regarding a €240 billion ($300 billion) bailout.

But according to the AP report, Roesler said, “What the Greeks have asked for, half a year or two years, that’s not doable … Time is always money.”

He reportedly emphasized that the circumstances regarding additional income for Greece had already been approved by all involved, including the Greeks.

Roesler runs the Free Democratic Party and recently rattled Greek officials with an observation that the idea of a Greece departure from the eurozone had ‘‘lost its horror,” according to AP.

Merkel has has done nothing of late to give Greek leaders the idea that her position is anymore flexible than Roesler’s. In fact, AP reports that Roesler’s position was reinforced by another Merkel official, German Finance Minister Wolfgang Schaeuble. He supposedly echoed Roesler by observing that more time equated to a  “new (bailout) program.”

Even French President Francois Hollande has taken the German side, reportedly advising Greek officials to illustrate additional fidelity to what has already been agreed on.

Both Merkel and Hollande are on record as saying further decisions on Greece will come after a September report by EU evaluators.

However, France and Germany’s positions are different in a larger way. France wants a full spectrum of bailout options put into place as soon as possible. Merkel wants a closer EU union before additional funds are solidified or dispersed.

German weekly Der Spiegel reported she is now pushing for European leaders to create a new legal framework for the EU beginning in December when there will be another EU “summit” … “The new treaty could include provisions such as giving the European Court of Justice in Luxembourg power to monitor the budgets of member states and punish those who exceed deficit limits,” according to AP.

Greece is being sacrificed on the altar of German political stability, or so it seems. Whether the Gods will smile on this calculated gamble is a story yet to be told.


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