COMMENT

Greece’s decade-long relationship with Merkel

First section of three-part report investigates evolution of ties between Athens and Berlin and chancellor’s rise to center stage of Europe By Yannis Palaiologos

Last week, hopes of an honest compromise between Athens and its international creditors rested on a meeting between Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel on the sidelines of an emergency European Union summit on immigration. In her 10th year at the helm of Germany, the low-key East German physicist – with patience and persistence, skill in tactical maneuvering, and in-depth knowledge of the key European issues and the role of her country – has emerged as the uncontested protagonist of the European stage.

It is ironic that, to a great extent, Merkel owes her prominence to Greece. As she said in a speech in 2012 (mentioned in Alan Crawford and Tony Czuczka’s biography “Angela Merkel: A Chancellorship Forged in Crisis”), as a young woman she would spend her summers traveling all over that part of the Eastern bloc where she was allowed access. Her southbound trips usually ended in the Pirin Mountains in Bulgaria, from where she could see Greece, just a few kilometers away, and wished that one day she would be able to visit. If she sensed that one day she would come to the country as an honored guest, it is less likely she believed that she would be treated more or less like a conqueror.

Before the Greek crisis, the German chancellor had no strategic vision for Europe. After its outbreak, she had to cook up a basic recipe: austerity and structural reform as a means of adapting Europe to a globalized world, mechanisms for supporting indebted countries with strict conditionality and no option for debt mutualization, and the involvement of the International Monetary Fund. For many, this is an ineffective and unjust policy which places the lion’s share of the adjustment burden on the countries of Europe’s south, yet it has prevailed, becoming the action that determines every reaction.

Speaking with high-ranking officials in Greece and Germany, Kathimerini attempts to trace the evolution of bilateral relations in the Merkel era and how the chancellor emerged from the shadow of Helmut Kohl to step into the limelight of European developments.

The early years

Merkel and Costas Karamanlis knew each other as representatives in the European People’s Party, in which Merkel had represented Germany’s Christian Democratic Union (CDU) since 2000. Because of the alphabetical order in which the delegates were seated, Merkel (Germany) and Karamanlis (Greece) often sat next to each other and spoke at length in German, which the then-president of Greece’s New Democracy party knew well.

The period during which both were in power in their respective countries (2005-09) was not marked by any particular event that caused tension. Indeed, the Greek economy appeared at first – and quite deceptively as it later turned out – to be performing better than Germany’s. In 2005, when Merkel was elected, Greece’s gross domestic product was growing at a faster pace than Germany’s and the latter’s fiscal deficit was above the EU limit of 3 percent of GDP for the third year in a row, with unemployment surpassing 12.1 percent – the highest level since the end of World War II.

According to Karamanlis government sources, Greek-German cooperation was especially close during the drafting of the Lisbon Treaty (after the European Constitution foundered), while Berlin was also instrumental in helping Athens secure greater funding from the Third Community Support Framework. As a close associate of Karamanlis said about that time, then then-prime minister placed particular importance on Greece’s biggest foreign policy concerns in his meetings with foreign leaders – the EU’s eastern expansion, which Greece viewed with skepticism, Athens’s relations with Ankara, the Cyprus peace talks and the name dispute with the Former Yugoslav Republic of Macedonia being foremost among these.

On this latter issue, Berlin and Athens did not see eye to eye. Merkel, like the rest of the Western European leaders, gave precedence to the further expansion of the European Union and NATO and could not understand Greece’s position on the matter.

“It was not understood how a country like FYROM could pose a threat to Greek national security,” a German source close to the discussions said. Merkel expected Karamanlis to back down on the issue and there were signs of frustration in Berlin when this did not happen.

Another point of friction in bilateral relations was the issue of arms procurement and particularly Athens’s purchase of “fourth-generation” fighter jets. Berlin had been pressing Greece to buy German Eurofighters since Gerhard Schroeder was in power, with sources suggesting that Merkel’s predecessor even mentioned the issue in his congratulatory letter to Karamanlis when the Greek premier was elected. In all of the correspondence that followed between the two men, Karamanlis expressed Athens’s interest in the Eurofighters but without making any firm commitments. It should be noted that Greece was under similar pressure from France to buy its Rafale jets.

The Greek premier followed a similar strategy with Merkel when she succeeded Schroeder. Merkel raised the issue, “in a discreet way,” at all her meetings with Karamanlis, playing up the German jets’ assets. “When chancellors visit foreign countries, the issue of German companies in those countries is always on the agenda,” a Merkel associate said.

Karamanlis’s reluctance to commit possibly contributed to a stagnation in the relationship during his second term in office. A dinner he held in Merkel’s honor near his seaside home in Rafina, northeast of Athens, in July 2007, with a close circle of just seven or eight guests, was the closest they came during that time.

“They went out onto a small veranda overlooking the sea. There was a sense of intimacy; they even shared jokes,” remembers one of the guests.

Greece’s growing economic woes never came up between them. Even after the true dimensions of the country’s debt were revealed in October 2009 by then-Finance Minister Giorgos Papaconstantinou, the chancellor’s public reaction was cautious, with her saying that Greece’s problems had to be dealt with by the Greek government.

“It was a different time,” said one of Merkel’s close associates. “Back then we did not know when the Eurogroup would meet and we did not pay particular attention to the fiscal policies pursued by individual member-states on the domestic front.”

Going public

The first time that Merkel publicly expressed her concerns about Greece was during a function at the Chancellery in January 2010 (also mentioned in the Crawford-Czuczka biography). Media representatives at the event had been prohibited from publishing any part of the chancellor’s address yet it was her own press office that released her entire speech on the Chancellery’s website the following day. Merkel had said that Greece’s fiscal derailment could put a great deal of pressure on the eurozone and that the euro was facing troubled times.

A few days later, during the 2010 World Economic Forum in Davos, Switzerland, international concern for Greece turned to panic. Prime Minister George Papandreou held the first serious discussion on the issue as part of an informal European Council on Greece in Brussels just a few weeks later on February 10. Shortly before that, on February 2, Athens had announced a freeze on public sector wages and a tax hike, though this had done little to appease international markets. At the Brussels meeting, Merkel advised Papandreou to announce new measures – an indication that there was no real plan in place at the time to deal with the crisis.

The first official bilateral meeting between the two leaders took place on March 5, the same day that the Greek Parliament ratified a raft of painful austerity measures. Opinion in Germany had soured significantly toward Greece and the issue of whether the country should ever have been allowed into the eurozone became part of the public debate. Nevertheless, Athens was hoping for a clear commitment of economic support from the chancellor in the hope that this would placate the markets.

Papandreou’s visit to Berlin began with a half-hour meeting at the Chancellery, where the two leaders discussed what they would say at the press conference that was to follow. Merkel told Papandreou that she could not offer any specific commitments for constitutional reasons as well as because of constraints established by the Maastricht Treaty. She assured the Greek premier that the markets would understand the measures announced by Athens and reduce the pressure. Papandreou told Kathimerini that he half-jokingly responded to the chancellor that even despite being a socialist he understood the markets better than her as she had lived most of her life in East Germany. He warned her that her caution could prove detrimental.

The chancellor, however, was concerned of elections coming up in North Rhine-Westphalia, Germany’s most populous state, and underestimated Greece’s problem. German Finance Minister Wolfgang Schaeuble, in contrast, appeared more attuned to the risks and stressed the need for a rescue mechanism.

The rescue mechanism was eventually set up at the end of March and put into motion in April. Despite reactions from France, the European Central Bank and Schaeuble, Merkel insisted on the involvement of the IMF. In early May, shortly after the Greek bailout agreement was approved by the Eurogroup, Merkel lost the elections in North Rhine-Westphalia. Her role in managing the Greek – and by extension the European – crisis was simply just beginning.

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The second part of this three-part special report will be on the restructuring of the Greek debt, the meeting in Cannes and the Lucas Papademos administration.

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