Europe
4:05 pm
Tue June 19, 2012

Germany Resists Concessions To Greek Bailout Terms

Originally published on Tue June 19, 2012 7:18 pm

The party that won Greece's parliamentary elections on Sunday has accepted the tough conditions international lenders imposed to bail out the ailing nation. But there's been talk that the party wants to seek some concessions on the terms of the rescue package.

At the G-20 summit in Los Cabos, Mexico, German Chancellor Angela Merkel reiterated her tough line that bailout terms for Greece are not negotiable. After the summit, Merkel returns to a German electorate that is now fed up with a debt crisis that only seems to grow and worsen.

Binde Balle, a 71-year-old retired doctor from northern Germany, is typical of many in Germany who see Greek elections as only a minor victory in the effort to keep the eurozone from breaking apart. She says that the Greek problem is far from solved.

"The work is only just beginning," Balle says. "Now, Greece has to move: Taxes need to be collected, people need to get back to work, and there must be investment. This simply can't go on any longer. They've made the first step, but the problem is still very much there."

The G-20 report Tuesday included a pledge to consider concrete steps toward "a more integrated financial architecture" in Europe that would include common banking supervision. There are other proposals out there to slowly create a kind of fiscal United States of Europe.

Balle is behind that idea and voices her support with a sense of urgency that her chancellor is often criticized for lacking.

"I do not think there is a widespread willingness among Germans to give up sovereignty to Brussels," she says. "But if we want to keep the euro, then we have no choice other than to pursue economic and financial policies together as Europe. It's an urgent matter, and Germany will simply have to give up some of its sovereignty."

Need For Unification

Other European countries might also need to give up some sovereignty to Brussels, the capital of the European Union, though it seems Europe is still far away from convincing leaders to relinquish more control.

Talk of a tighter fiscal union will be part of a mini gathering of EU leaders in Rome on Friday, and a meeting of all the EU heads of state in Brussels next week. But economic integration involves complex issues, lengthy negotiations and perhaps treaty changes.

Former International Monetary Fund chief economist Ken Rogoff, who's now at Harvard, says it is vital that the upcoming gatherings show that leaders are making discernible progress and not just talking.

"I think they need to take a quantum leap over the next month or two towards unification if this isn't to blow up," Rogoff says. "They have to agree that they are going to take radical steps over the next 15 years."

Rogoff says they need to start with something like a banking union, euro bond or some other nascent fiscal union that gets things moving in the right direction.

German officials, however, are still resisting calls for shared euro bonds. They want incremental fiscal integration, but fixing those deep, structural problems that have hampered a solution to the debt crisis for nearly three years will take time and political will.

Matthias Matthijs, who teaches International Economic Relations at American University in Washington, says that's something Europe might not have.

"The low hanging fruit of integration is gone. Now we have to talk about redistribution, about guaranteeing each other's pensions [and] things like this," Matthijs says. "So then you have to have a political commitment to euro bonds down the line, to a real fiscal union. And are we politically ready for this in Europe? I just don't see it."

U.S. Impact

For Americans, the debt crisis in Europe may seem distant. But part of what's at stake is the extremely fragile U.S. economic recovery, says Jean Pisani-Ferry, director of the Brussels-based think tank Bruegel.

"What we've learned in 2008 [is] that the interdependence was much stronger than people believed earlier," Pisani-Ferry says. "We saw immediately the U.S. shock transmitted to Europe. The U.S. and European financial markets are so strongly integrated that the impacts are extremely strong."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

Now, European leaders return home from Mexico, where they're faced with painful choices as they try to save the eurozone. One challenge is Greece. The party that won the Greek elections this weekend accepts the tough conditions imposed by the country's bailout, but it wants to adjust the timetable for implementing austerity measures. Well, today, a European official in Brussels admitted that may be necessary. Still, Germany, Europe's most powerful economy, is expected to resist. NPR's Eric Westervelt reports from Berlin.

ERIC WESTERVELT, BYLINE: Chancellor Angela Merkel in Mexico reiterated her tough line that bailout terms for Greece are not negotiable. She returns home tonight to a German electorate that's fed up with a debt crisis that only seems to grow and worsen.

Binde Balle strolls with her husband down by Berlin's Spree River near the Bundestag. She's a 71-year-old retired doctor from northern Germany in town visiting her two adult sons. Her attitude is typical of many here who see Greek elections as only a minor victory in the effort to keep the eurozone from breaking apart.

BINDE BALLE: (Through Translator) The Greek problem is far from solved. The work is only just beginning. Now, Greece has to move. Taxes need to be collected. People need to get back to work. And there must be investment. This simply can't go on any longer. They've made the first step, but the problem is still very much there.

WESTERVELT: The G-20 communique today from Mexico included a pledge to consider concrete steps towards a more integrated financial architecture in Europe that would include common banking supervision. There are other proposals out there to slowly create a kind of fiscal United States of Europe. Binde Balle is behind that idea and voices her support with a sense of urgency that her chancellor is often criticized for lacking.

BALLE: (Through Translator) I do not think that there is a widespread willingness among Germans to give up autonomy to Brussels. But if we want to keep the euro, then we have no other choice other than to pursue economic and financial policies together as Europe. It's an urgent matter, and Germany will simply have to give up some of its sovereignty.

WESTERVELT: As will other European countries. And it seems Europe is still far away from convincing leaders to relinquish more control to Brussels. Talk of a tighter fiscal union will be part of a mini gathering of EU leaders in Rome on Friday and a meeting of all the EU heads of state in Brussels next week. But economic integration involves complex issues, lengthy negotiations and perhaps treaty changes.

Former IMF chief economist Ken Rogoff who's now at Harvard says it's vital the upcoming gathering show that leaders are making discernible progress and not just talking.

KEN ROGOFF: I think they need to take a quantum leap over the next month of two towards unification, if this isn't to blow up. They have to agree that they're going to take radical steps over the next 15 years, starting with something soon like a banking union, like a euro bond, something that's a nascent fiscal union that gets things moving in the right direction.

WESTERVELT: But German officials are still resisting calls for shared euro bonds. They want incremental fiscal integration. And fixing these deep, structural problems, which have hampered a solution to the debt crisis for nearly three years, will take time and political will that Europe may not have. That's the view of Matthias Matthijs who teachers International Economic Relations at American University in Washington, D.C.

MATTHIAS MATTHIJS: The low-hanging fruit of integration is gone. Right now, we have to talk about redistribution, about guaranteeing each other's pensions, things like this. So then you have to have a political commitment to euro bonds down the line, to a real fiscal union. And are we politically ready for this in Europe? I just don't see it. You don't even have to watch European soccer to see how much, you know, nation states are still at work.

WESTERVELT: For Americans, the debt crisis may seem distant. But part of what's at stake is the extremely fragile U.S. economic recovery, says Jean Pisani-Ferry, the director of the Brussels-based think tank Bruegel.

JEAN PISANI-FERRY: What we've learned in 2008, the interdependence was much stronger than people believed earlier. I mean, we saw immediately the U.S. shock transmitted to Europe. Europe and U.S. financial market are so strongly integrated that the impacts are extremely strong.

WESTERVELT: And the impact of financial calamity this time, he says, can easily work in reverse and quickly transmit to American shores. Eric Westervelt, NPR News, Berlin. Transcript provided by NPR, Copyright NPR.