12 Feb 2015

EXCLUSIVE: How a German veto scuppered EU-Greece deal

For the second time in 24 hours, Greek negotiators at the EU summit in Brussels, believe that Germany has stymied an agreement over extending their stricken country’s debt facility.

A Greek government source said a form of words had been agreed as follows.

Negotiators had agreed “the possibility for reviewing technically, extending and successfully concluding the reviewed programme”.

The key word here is reviewed, because it signified that if Greece agreed to carry on with the programme originally imposed by the troika, that programme would be amended or altered.

Crucial for the Greek side, was an agreement that the review would still allow the Greek government to address its “humanitarian crisis”.

I understand that on both these issues, the review and the humanitarian crisis, the Greeks reached an agreement with eurozone negotiator Jeroen Djisselbloem, but that the form of words was then vetoed by German Finance Minister Wolfgang Schauble.

 

8 reader comments

  1. Andrew Dundas says:

    It’s worth reading the article by Jürgen Stark’s article in Today’s FT. He’s on the ECB’s board and contends that German is not to blame for the Eurozone’s (EZ) failings. I suspect he shares Wolfgang Schauble’s reservations about Greece.
    Not to blame?
    Oh really?!
    Wasn’t Germany represented when the Maastricht conditions for the Euro were agreed? If Germany was represented, Herr Stark & Schauble may recall no State was to be admitted to the EZ if their government deficit was greater than 60% of GDP. Nor were they to escape big fines if their government deficit ever exceeded 3% of GDP. Had those conditions been applied, Greece would have been steered away from the “humanitarian crisis” they now suffer, AND Germany would have been fined heavily for exceeding the 3% limit after it took-over the Eastern Lande.
    An excellent letter in the same FT from Robert Holland (of south London) describes how the UK kept its Empire in growth by NOT running the persistent trade surplus that Germany insists upon for itself.
    What Germany needs to do is relax, drop its VAT rate (or use some other fast acting stimulus) and excoriate its Union bosses for not pressing for higher wages. That’ll help the EZ escape the liquidity trap they’ve jumped into, and help convert their excessive savings into spending.
    Such an about turn by Germany would help all the Med States, and provide them with a growth background to radical reforms.
    Perhaps Cameron should join the talks and advocate that different approach? There’s a flight leaving for Frankfurt soon ….!

    1. Jack Hatzi says:

      You are correct BUT it was Greece that told a bald face lie about their finances to get into the euro. This is just as much fault with the EU for just accepting candidate countries their statistics. If the EU had adequate checks and balances in place they never would have allowed Greece to join. In Greece blame the socialist PASOK party who lied to the EU.

      1. Dan Allen says:

        Greece went in at 90-100% debt to GDP. It didn’t lie about it. It was on the books as that when it entered.

        The budget deficit was below 3%, closer to 1%.

        If you’d like sources, google these terms: “Dunbar” “Goldman” “Greece” and “risk”

        Also, “Malkoutzis” “Ten Greek Myths”

        There’s a reason this myth about Greek liars persists. One, it allows bankers to say, “We didn’t know, the taxpayers must make us whole.” And, two, the Greeks did lie about their budget deficit in 2008-2009.

      2. Andrew Dundas says:

        Hello Jack & Dan,
        You’re probably both correct. But there was deep controversy about whether Greece truly met the ‘Maastricht Treaty’ criteria before Greece adopted in 2001. It’s declared debt was well in excess of the upper limit of 60% of its GDP and its deficit measurements were ‘adjusted’ by a major US consultancy.
        Nor was Italy or the Belgium in compliance with those criteria either. In the case of Italy, there are still doubts about it’s official GDP declarations because so much of Italy’s commercial activities are ‘in the black economy’. As we know, Italy is struggling to comply and needs to change its ways of doing commerce.
        To make the Euro currency union work, there MUST be convergence of both economic & commercial policies & of economic statistics. There isn’t. And that’s why Greece is in so much turmoil. [Italy, Spain and Portugal are trying hard to comply – but the gap is far too wide for Greece to get there without special help].

        UK was not in conformity. Therefore, our previous government bravely declared (at that time) that the UK was ‘not ready’ to join that policy union. If only Greece had made the same honest decision …! If only the Euro-group had been honest too, and rejected the Greece application.

  2. George Balanchine says:

    Dear Mr. Mason,

    How are you so sure that Greece is giving way? They still reject austerity, no matter what else they’ve said, as far as I can tell. But since Germany will not accept any changes to the austerity program, unless the Tsipris completely caves in, how is a Greece exit from the Euro to be avoided?

    Sincerely,
    George Balanchine

  3. Philip Edwards says:

    The bankers are not interested in any “humanitarian crisis” that they caused in the first place.

    If they admit to it, they admit to being the gang of rotten-to-the-core corrupt scum they are.

    Their only interests are (a) gouging profits via their loan shark interest rates, and (b) ensuring they can exercise the political power this gives them.

    Why do else you think they created the IMF, the World Bank and the European Central Bank? So they could create a decent and fair society?

    Syriza were always going to find this an almost impossible task once they got right in the face of the guilty men. But it will be an entirely different story if there is enough political support and organised response from the rest of Europe. After which, you can bet you media trollopes wouldn’t be talking of “A European Spring” – you’d be too busy ranting about “chaos,” “irresponsibility,” “anarchy” and “excessive public spending,” all the usual Canary Wharf crap.

    Nothing new there, then.

  4. George irvin says:

    Paul

    You seem to be the ony person who really undrestands the political dangers of this game! Does Schuaeble, or Merkel? Unless there’s a deal soon, Greece will be forced out of the euro, Varoufakis will disappear, the hardliners wil take over, etc etc. Vital that you keep us aware of the real danger!

  5. Eduardo says:

    There is a 323 billion euro debt in Greece. If the greeks (or their government) think that it is going to be haircut because it is so huge, forget about it! European taxpayers covered it because their finance rating was trash!

    Part of their huge debt has been covered by European states, they have the responsibility to pay. Eurozone had the solidariety to not let Greece fall into complete caos. If they do not want to be made accountable for their debts, then it is time for them to leave Euro or being quicked out! But their debt will remain. Not adhering to the reforms required to raise government income will make things worse.

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