Greek euro exit seen as costly gamble by Germany’s Social Democrats
Greek opposition leader Alexis Tsipras won’t get German support for easing austerity, though Greece’s exit from the euro area would be costly for Germany, members of Chancellor Angela Merkel’s two main coalition parties said.
“Europe can’t afford a Greek exit,” Joachim Poss, the Social Democratic Party’s deputy finance spokesman in the German parliament, said in a phone interview. Suggestions by allies of Merkel that the 19-nation currency bloc could weather Greece’s departure amount to “playing with fire at a fragile moment in the stability of the euro area,” he said.
The warning from a senior member of Merkel’s coalition adds to debate about Greece’s future in the euro area as European leaders focus on the potential fallout from Greek elections in less than three weeks. With the opposition Syriza party leading in polls on a platform of ending the austerity imposed as a condition of Greece’s two bailouts, Prime Minister Antonis Samaras has said a Syriza victory would lead to default and the country’s exit from the euro.
Renewed speculation about the fate of the country that triggered Europe’s sovereign-debt crisis was fanned by a report in this week’s edition of Der Spiegel magazine that Merkel’s government is ready to accept a Greek exit, a development it said Berlin sees as inevitable and manageable if Syriza wins.
“We want to keep the Greeks in the euro, but that will only work under the agreed conditions,” Elmar Brok, a European Parliament member from Merkel’s Christian Democratic Union, said by phone. “We can’t let voters get the impression that impunity wins. This debate is about making it clear that Tsipras’s promises won’t work.”
German liabilities
Steffen Seibert, Merkel’s chief spokesman, told a news briefing in Berlin today that German policy of supporting Greece in return for economic reforms hasn’t changed.
“From the beginning, it’s been the policy of the German government and European partners to stabilize and strengthen the euro area — the euro area with all of its members, including Greece,” Seibert said.
The German government’s liability as part of international aid for Greece amounts to at least 77 billion euros ($92.1 billion), according to calculations by the Munich-based Ifo economic institute.
“Europe as a whole would pick up a very, very large bill and Germany the biggest part — let there be no mistake,” Poss said.
Fraying bonds among European Union nations and the success of anti-EU parties are the biggest risks facing investors in 2015, Eurasia Group said in a report today.
Tsipras ‘blackmail’
The flare-up of Greek turmoil has turned the focus back on Merkel, who steers the biggest country contributor to euro-area bailouts. Merkel, who hasn’t commented publicly on the looming election in Greece, plans to address a CDU meeting in the eastern German town of Neustrelitz at 4 p.m. local time today.
French President Francois Hollande said in a radio interview that it’s up to Greeks to stay in the euro or leave.
While Merkel has invested political capital in keeping the euro area whole, she has repeatedly cited improvements in Europe’s crisis defenses, including a permanent rescue fund and measures to shield banks.
“It’s blackmail for Tsipras to say that they won’t honor their commitments anymore,” Brok said. “That doesn’t work. The opportunities for blackmail aren’t as big as they were a few years ago.”
Still, “the outcome of a Greek exit would be incalculable economically and politically,” said Poss, whose party is Merkel’s junior coalition partner.
[Bloomberg]
