BERLIN — As Greece teeters on the edge of the financial abyss, Germany stands accused of having exacerbated the crisis through mixed messages and indecision.
Europe's biggest economy and effective paymaster has not been able to reverse Greece's debt predicament over the past 18 months. Greece is now just a Parliamentary vote away from a debt default, which many in the markets say could be as disastrous for Europe as the demise of Lehman Brothers was for the global economy in 2008.
Critics have argued that German Chancellor Angela Merkel has been too preoccupied with shoring up support in Germany, where the cost of Europe's bailouts is proving unpopular, rather than leading the single currency bloc in a swift resolution of the crisis. The next general election in Germany is not due until the autumn of 2013 but Merkel has suffered a series of severe defeats in state elections over the past few months.
Germany has been criticized for also being too hasty airing initiatives that have stirred market anxieties and ultimately come to nothing.
Most recently, Finance Minister Wolfgang Schaeuble demanded that banks should take their share of the Greek pain, but that proposal was withdrawn following vociferous opposition from the likes of the European Central Bank and the French government. Now, any participation of private creditors in a second bailout expected to total around the size of Greece's first at around €110 billion, will be on a voluntary basis.
"The government has again and again drawn lines in the sand, with the participation of private creditors being the latest example, but those are messages oriented toward the domestic audience and the parliament, and then the lines get crossed anyway," said Jorgo Chatzimarkakis, a European Parliament lawmaker from the Free Democrats, Merkel's junior coalition partner.
Schaeuble's proposal put his government at loggerheads with Europe's other top policymakers and raised fears around the world that Greece would effectively default on its €340 billion ($484 billion) debt burden. Such a move would drag down Greek and European banks and put new pressure on other heavily indebted euro countries, such as Portugal and Ireland, which have also been bailed out. A greater fear would be if much-bigger Spain and Italy get dragged into the mire.
Luxembourg's Prime Minister Jean-Claude Juncker, who also chairs the meeting of the eurozone's 17 finance ministers, publicly vented his frustration with the deteriorating situation.
"Everything is becoming yet more expensive because we are including private creditors due to domestic political considerations in Germany," he told a German newspaper last week.
Since the Greek debt crisis exploded towards the end of 2009, the European response has been marked by bouts of indecision and procrastination, whether it be about the merits of bailouts themselves, the role of the private sector or on the issuance of so-called eurobonds.
Some argue that Germany was slow off the mark and its failure to lead from the front early on and back a comprehensive solution made the debt crisis worse than it should have been.
Ulrich Kater, chief economist of Germany's DekaBank in Frankfurt, said Germany's "very cautious approach" was due to the government being scared that "it could politically backfire if it handled the crisis with its checkbook."
Merkel has rejected suggestions that Germany has been unnecessarily cautious in resolving the crisis engulfing the currency now used by about 330 million Europeans.
"I have made clear — that wasn't hesitation, but a demand — that there can only be solidarity if on the other side the stability of Greece and (its) readiness to reform are proven," she said last month.
German opposition leader Frank-Walter Steinmeier has argued that the government's delaying tactics have not helped matters and resulted in Germany "drifting away from the leadership role to the fringes."
- Farm owners fined for refusing to host a...
- Romney casts Arkansas race as way to fight Obama
- US diplomats barred from ice bucket challenge
- Obama vows justice for killers of U.S....
- Twitter tries to block images of James Foley...
- A tough label to chew on: What does...
- Federal judge: Florida gay-marriage ban...
- Israeli airstrike kills 3 senior Hamas leaders
- Farm owners fined for refusing to host... 107
- 'Don't know' if Missouri teen shot with... 26
- Police, protesters collide again in... 25
- Obama vows justice for killers of U.S.... 25
- Texas Gov. Perry assembles high-powered... 23
- Obama heading back to DC in rare... 21
- Allow student loan bankruptcies,... 17
- Emerging solar plants scorch birds in... 14