6 Jul 2015

Merkel’s dilemma: give in to Greece or stand firm against democracy

Angela Merkel, the German chancellor, was pictured arriving at her office this morning looking as if she had been doing ouzo shots all night long.

If she got any sleep at all, it was probably troubled by the sound of cheering and jeering echoing through Syntagma Square in Athens. Make no mistake, the no vote has been a resounding “nein” to Germany’s chancellor, who has been calling the shots on the Greek crisis ever since it erupted four years ago.

From the very beginning, Frau Merkel has been more concerned with her own Greco-sceptic electorate, German banks heavily exposed to Greece, and a Lutheran loathing for excessive indebtedness. Remember, the German word for debts is “Schulden”, from the word guilt (“Schuld”).

The calculation in Berlin had been that Tsipras had over-played his hand and would lose face, credibility and – so they hoped – power when the Greek people came to their senses, smelt the fear after a week of bank closures, and voted yes.

The opposite happened. The heart or gut prevailed over the head in a crisis that has become more and more about emotion and less about accounting principles. Angela Merkel now needs to decide whether to make good on a threat explicitly made by others like her finance minister, that a no vote would mean voting against the euro, or whether to get back to the haggling ring with the Greek prime minister.

This might be made a little easier by the departure of Finance Minister Varoufakis. But that’s probably not the way they see things in Berlin today. Angela Merkel wisely said last week that she would only resume talks after the vote.

This is her dilemma: if she gives in to more demands for less austerity from the Greek government, she will appear weak to her own electorate, the financial markets and, of course, interested parties watching from the sidelines like the Russians and the Chinese. Mutti will be seen to go mushy.

If she stands firm and gives no ground, she will be at loggerheads with the very principle of democracy. It is a Gordian knot (forgive yet another cliché from ancient mythology) pitting the principle of democracy against the power of creditors.

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