Germany’s Greek stance keeps everyone guessing

Published in Business Spectator (Melbourne), 18 June 2015

reichstagGood cop, bad cop: That is the game that the Greek government is playing. While Finance Minister Yanis Varoufakis keeps annoying his European counterparts with long monologues and provocative statements (when he is not busy giving interviews), Prime Minister Alexis Tsipras at least tries to present himself as a responsible leader willing to engage in dialogue, even if he rarely commits to anything.

We have become used to such Greek games by now. But Greece is by no means the only country with a confusing negotiation strategy. It is even harder to make sense of Germany’s position.

At least in Greece there is just a good cop and a bad cop. In Germany, there is a good cop, a bad cop, and an army of deputy sheriffs. Not even close observers of German politics can tell anymore which outcome the German government would really like to see in the Greek euro crisis. Does Germany work towards Grexit? Does it try to keep Greece in the eurozone? Or does it not care about the outcome as long as Berlin is not held responsible?

To start with Germany’s ‘bad cop’, we have to talk about Wolfgang Schäuble, the German finance minister. To call Schäuble an old hand of German politics would be an understatement. He has been a member of parliament since 1972, which makes him the longest-serving parliamentarian in modern German history. The 72 year old is also one of the last politicians socialised in the immediate post-War era for whom Europe’s integration was a matter close to the heart. This background makes his current role in the euro crisis somewhat ironic.

When the euro crisis started five years ago, it was Schäuble who believed that Europe should be able to deal with it on its own. Schäuble was against the involvement of the International Monetary Fund in Greece. Instead, at the time he suggested to establish a European version of the IMF so that Europe could get its house in order.

The IMF did get involved — against Schäuble’s wishes — only because German Chancellor Angela Merkel wanted to have the IMF on board. She feared that the European institutions could be too lenient on Greece. Merkel was worried that European rules could be bent in order to accommodate the Greek problem. That is why she wanted to have the IMF in Athens: as a strong counterweight.

Since these initial stages of the euro crisis, when Schäuble was against the IMF’s involvement and for European solutions, the German finance minister has changed. Today he sounds more hawkish than his chancellor when it comes to demanding reforms from Greece. Besides, within the German government it is Schäuble who now shows the greatest sympathies for the IMF’s principled stance.

Why the change of mind? We can only speculate, but the longer Schäuble has been responsible for the public purse, the more of a penny-pincher he has become. And just to avoid misunderstandings, that is meant to be a compliment. It is the role of every good finance minister to guard taxpayers’ money and not commit it lightly, least of all to hopeless causes such as Greece.

It is the erstwhile pro-European Schäuble who now talks tough on Europe. It is Schäuble who openly mocks his Greek counterpart Varoufakis at every opportunity. And it is also Schäuble who let it be known that a Greek exit from the eurozone should not be ruled out (and might even be a good option).

The great pro-European, pro-eurozone Wolfgang Schäuble relishes in his role as the German government’s bad cop on Greece.

Germany’s good cop, meanwhile, is played by Angela Merkel. Her initial stance was to rule out any bailout programs for Greece (way back in 2010) and then insist on harsh austerity measures under the supervision of the IMF. But Merkel’s political flexibility is legend and today it is her who shows the greatest degree of leniency towards Greece.

Unlike Schäuble, Merkel never had an emotional connection to the theme of European integration. Having grown up behind the Iron Curtain in East Germany, Merkel probably always had a more pragmatic relationship with the European Union than her West German parliamentary colleagues such as Schäuble.

It was pragmatic for Merkel to initially insist on strict austerity for Greece coupled with IMF supervision. Today, it is equally pragmatic for her to allow just enough compromise so that Greece can stay in the eurozone.

Merkel is afraid of two things. First, a Greece cut out of the eurozone might be a strategic problem if Russia or China gained influence in Athens. Second, Merkel does not want to be held responsible for a Greek eurozone exit since that could make her a figure of hatred in Europe.

The German government is thus strangely split on Greece. On the one hand, the arch-Europhile Schäuble is talking tough on Greece. On the other, the Euro-agnostic Merkel is doing her bit to keep the European integration project alive — if need be by giving Greece more time and an extra few billions.

Unsurprisingly, the German media have been speculating about disagreements between Merkel and Schäuble for months. Their relationship has never been easy. Merkel not only once took the party leadership from Schäuble as a result of a party donations scandal but, years ago, she also encouraged him to become Germany’s President — only to sideline him in a last-minute change of mind. Their latest confrontation on Greece is thus nothing new for the Merkel and Schäuble relationship.

With Schäuble and Merkel so obviously disunited on Greece, Germany’s position is unclear. It gets more complicated when taking into account their coalition partner. At least Schäuble and Merkel nominally belong to the same party. Merkel’s deputy and economic minister Sigmar Gabriel, meanwhile, is a social democrat. As such, he always had more sympathies for the left-leaning Greek government under Alexis Tsipras.

In recent weeks, however, Gabriel has changed his tune as well. Suddenly he sounded almost as frustrated as Schäuble. Gabriel’s change of mind infected other social democrats as well such as Martin Schulz, the president of the European Parliament.

With the exception of Merkel, the willingness to keep bailing out Greece is waning across the political spectrum in Germany. Merkel’s finance minister, her backbenchers and now even her social democratic coalition partner now all distance themselves from further compromise with Athens.

There is only one thing that unites all German politicians: They do not want to take the blame for whatever happens next. If Greece drops out of the eurozone, that will be fine — as long as it is clear that it was all Greece’s fault and had nothing to do with Germany.

At least on that all German politicians can agree.

More on Germany’s stance on Greece: An interview with ABC Radio National’s Breakfast programme (17 June 2015):