Angela Merkel, known as “Mrs. Nein,” is back for a third term as German chancellor, which is good news for a Europe that needs a grown-up to keep telling it, “No!” Greece, in particular, needs to hear that message as it tries again to evade more of its debt obligations and wiggle out of restrictions on how much its government spends.
Merkel sailed to re-election with an impressive 41.5 percent of the vote last month. She is busy forming a coalition government, skillfully playing the Green party against the Social Democrats who are her most likely partner. She may need to compromise on some domestic issues, such as establishing a national minimum wage. But when it comes to the debtor nations of southern Europe that want their obligations wiped away, Merkel can count on the strong approval of her people when she says, you guessed it, “Nein.”
The latest country seeking relief at the expense of Germany and the other financially prudent European nations is Greece ― again. This would be the third bailout in a little more than three years for the Aegean nation. The International Monetary Fund is pressing Germany and other governments to forgive large amounts of the remaining debt that Greece piled up during a decade-long borrowing binge.
Under managing director Christine Lagarde, a former lawyer at Chicago-based Baker & McKenzie who took over in mid-2011, the IMF has backed off its insistence on austerity measures, saying the pain those measures caused was, er, painful. It is now pushing for a sharp reduction in the debt burden of Greece.
The IMF may have gone so far as to leak secret internal documents showing that its members recognized, accurately, that the first bailout of Greece in 2010 was mostly aimed at shoring up faltering European banks and the euro currency union. That deal, arranged by the IMF, European Union and European Central Bank, was intended to rescue Europe from disaster, not to fully restore the economy of a small country knocked flat by its own gross overspending.
Many of the IMF’s non-European members were skeptical, even angry, about bailout terms that they believed would be punitive to Greece and insufficient to rescue the country from insolvency, the documents show. Greece did indeed require a second bailout, which took effect in 2012. Greek debt was restructured at favorable interest rates and longer maturities. Private creditors took a severe hit: bondholders settled for as little as 26 cents of every dollar they were owed.
These revelations, disclosed by the Wall Street Journal, presumably are intended to bolster the IMF’s effort to shame the rest of Europe into accepting yet another costly “haircut” of Greek debt at the expense of taxpayers in Germany and other nations that hold those bonds. That would set a poor example for Spain and Italy, much larger economies that need to start living within their means, as well as for Ireland and Portugal, which made the deep cuts required in exchange for debt relief like Greece received.
Saying “no” is difficult because Greece has suffered terribly in spite of its two bailouts. Six years of recession have led to record levels of unemployment, business failures, pay cuts, pension reductions and other fiscal belt-tightening. A generation of young Greeks has been unable to start careers because opportunity has evaporated. Polling suggests that many Greek citizens place the blame for this disaster where it belongs: at the feet of their political leaders who used every available means to squander the country’s future through irresponsible borrowing and spending.
To an extent, Greece is starting to right itself. It projects that its long, long recession will end next year. Tourism, a vital industry, is staging a comeback. Its debt load, while very heavy, is at a low interest rate and a long maturity. Greece has seen fresh public sector strikes against maintaining the austerity measures it accepted in exchange for the previous bailouts. One Greek minister beseeched Germany to give it money with no strings attached: “We will give the money back to the Germans when we can.”
Merkel has not ruled out aid to Greece. Far from it. The Greeks still are part of the euro currency union, and their fellow members have a financial and political interest in keeping the eurozone intact. But there is no reason for Merkel to forgo repayment of money already lent.
After her election, Merkel let the Greeks know that she will not be writing any blank checks, no matter how sincere the promises to pay the money back some day. As Merkel put it: “We should not stop exercising pressure for the agreed reforms to be carried out.”
In other words, to those who want money for nothing: “Nein!”
Editorial
(Chicago Tribune)
(MCT Information Services)
