When Prime Minister George Papandreou meets Chancellor Angela
Merkel on Friday in Berlin, much will be at stake. Considering what
has been taking place between both countries during the past two
weeks, fence mending and crisis management will form part of an
extensive bilateral agenda.
For weeks the government in Athens has been told – at times even
lectured – by various German representatives to get its house in
order – once and for all. If not, the underlying message suggested,
Athens would have to bear the consequences.
The visitor from Athens will bring a suitcase full of new measures
and initiatives aimed at confronting the fiscal and public debt crises
in Greece. These include sharp spending cuts, unprecedented
allowance reductions for public sector employees and tax increases,
in particular VAT.
However, Papandreou also arrives in Berlin with a suitcase
containing questions and expectations. More specifically, after
having tabled his deficit reduction program and adjusting it to the
demands of the European Commission, the European Central Bank
and the International Monetary Fund, he will also be seeking
something in return from his host in Berlin. Can Merkel deliver? And
if so, what could it be?
So far, the German chancellor has publicly and steadfastly refused to
entertain the idea of financial assistance for Greece. The
mainstream view in Germany against providing such assistance
argues that Greece systematically deceived its EU peers about the
true state of its finances and economic performance. The validity of
this argument falls short in one important respect. It forgets to take
into account that the first to have been deceived over many years
and who are now being called on to suffer the consequences are the
Greeks themselves. Prime Minister Papandreou could also point out
that it is easy – outside the country – to call for harsh spending cuts
and multi-year austerity measures, particularly when conveniently
ignoring the specific political conditions of a country and its
institutional geography. Put metaphorically, you can overload a boat
until it sinks. It has frequently been argued in the past weeks in
Germany that its taxpayers would never be prepared to pay for a
Greek bailout. When asked, citizens in Berlin, Frankfurt or Munich
would emphatically reject the idea. Whatever the merits of this
unproven assumption, it should be taken with a pinch of salt.
It is worth recalling that German taxpayers were never asked by any
governing authority if they would approve or reject the multi-billioneuro
bailout of the financial system in Germany in 2009.
Those taxpaying citizens are also witnessing how tax evasion is fast
becoming a growing German characteristic. Numerous CDs are
currently being offered to government authorities across Germany.
In exchange for cash, the CD owners claim to have detailed lists of
German citizens who have for many years systematically avoided
paying taxes in their home country, and instead “parked” their
resources in Switzerland, Luxembourg or Liechtenstein.
Whatever Chancellor Merkel has to offer to her distinguished guest
from Athens, it should include explicit acknowledgment of the
efforts undertaken by the Papandreou government and the painful
consequences this entails for large segments of Greek society. It is
time to focus on the real issues and keep a cool head. The urgency of
the situation and respect for Greece demand it.
* JENS BASTIAN IS SENIOR ECONOMIC RESEARCH FELLOW
FOR SOUTHEAST EUROPE AT THE HELLENIC FOUNDATION FOR
EUROPEAN & FOREIGN POLICY (ELIAMEP) IN ATHENS, GREECE.
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