Realpolitik Redux

It's Not the Economy, Stupid

Schäuble Steinmeier  Metodi Popow - 360-berlin de
Thinking outside the financial box: Mr. Steinmeier (l) and Mr. Schäuble (r).
  • Why it matters

    Why it matters

    If the E.U. pulls out of Greece, the country might move closer to Vladimir Putin’s Russia or turn into a springboard for Middle Eastern terrorists.

  • Facts

    Facts

    • The Greek government is in ongoing talks with lenders to try to unlock the remaining €7.2 billion in its current bailout fund.
    • It is due to make a payment of €750 million to the IMF on May 12.
    • Any new bailout after June would have to pass a vote in the German Bundestag.
  • Audio

    Audio

  • Pdf

As Germany’s foreign minister, saving the world is part of Frank-Walter Steinmeier’s job description. The Social Democrat had no problem routinely discussing the major issues in world politics at the G7 summit of top industrialized nations in Lübeck, Germany, in mid-April.

But when the discussion turned to Greece, Mr. Steinmeier became emotional. “Let’s not gossip so casually about the ‘Grexit’,” he shouted out. Europe has to solve its own problems, he added, and hold the bloc together; otherwise, the rest of the world will stop taking the European Union seriously.

Mr. Steinmeier’s outburst is a sign of the new tone in the heated German debate surrounding whether or not to continue supporting Athens, which has received €240 billion from international lenders since 2010.

It is no longer a question of economic deliberations. There is hardly a politician left in Berlin who still believes the debt-ridden country can make real progress in turning its economy around.

Moral considerations also don’t play much of a role any more; the obnoxious demeanor of the radical leftist Syriza government since coming to power in January has melted away any remaining sympathy for the Greeks.

Instead, it is a question of the big picture, of geopolitics – and the fear that while a Greek withdrawal from the euro zone might not cause the economic damage once feared, it could still do major harm to Europe in terms of foreign policy.

After all, the country on the edge of Europe is close to one of the world’s most explosive regions, full of energy sources and conflict. Islamic fundamentalists could use the region as a springboard to reach Europe. Greece also represents the southeast flank of NATO and its army has a strong reputation.

Only three European countries fulfill the NATO targets of spending more than 2 percent of GDP on defense each year. One of them is the essentially bankrupt Greece.

If Ms. Merkel wants to keep Athens in the euro zone, she has to convince her skeptical party friends in parliament which has a vote on any further bailouts.

For some time now, Mr. Steinmeier has been using those kinds of arguments to advocate for more patience with Athens. But suddenly he is also getting high-profile support. According to Berlin insiders, Chancellor Angela Merkel and her staff are increasingly also playing the geopolitical card.

It’s not just that Russian President Vladimir Putin’s roughshod behavior in the Ukraine crisis has reminded Ms. Merkel that hard-hitting geopolitics are in no way a relic of the 20th century. It’s also that the chancellor is constantly hearing from her most important international allies about just how important the Greeks are – especially since the Russians are making targeted advances toward Athens and raising the prospect of billion-euro gas deals.

U.S. President Barack Obama, for example, made sure to have his picture taken with Yanis Varoufakis when the controversial Greek finance minister recently visited Washington. The European Union’s foreign policy chief, Federica Mogherini, who has no responsibility for financial matters, has warned: “If one falls, the whole systems falls.”

And Donald Tusk, the European Council president, even compared the possible global ramifications of a Grexit with World War I, saying that was also the “result of misunderstandings, accidents and stupid phone calls.”

Greece NATO DPA
Greek forces on a NATO exercise. Source: DPA

 

But Ms. Merkel has also discovered that geopolitical arguments can have an impact domestically. If the leader of the Christian Democrats wants to keep Athens in the euro zone, she has to convince her skeptical party friends in the Bundestag, the lower house of parliament which has a vote on any further bailouts.

Ms. Merkel may have a tough time using economic considerations to win them over, but who in the Christian Democratic parliamentary party wants to be blamed for isolating Europe internationally?

Ms. Merkel can also simply argue that the world has changed. Three years ago there was a real danger of a Grexit, but at the time no one was worrying about the Russian president’s thirst for power or new terrorist organizations like Islamic State. Things have become a lot more unsettled in the E.U.’s neighborhood since then.

The German government could use geopolitical considerations to justify another Greek bailout at the end of June, when the country’s current aid program expires. It could also argue in favor of allowing Athens to delay repayments to the IMF. Even if Greece could not be kept in the euro zone, the geopolitical argument could be used to support costly transitional aid for Athens.

U.S. President Barack Obama (left) had his picture taken with Greek Finance Minister Yanis Varoufakis in Washington. Source: dpa
U.S. President Barack Obama (left) had his picture taken with Greek Finance Minister Yanis Varoufakis in Washington. Source: dpa
Barack Obama (left) with Yanis Varoufakis in Washington last month. Source: DPA

 

One of the most important supporters of Ms. Merkel’s new stance is her finance minister. Wolfgang Schäuble doesn’t just think in terms of numbers, he also thinks in terms of Europe and geostrategy.

Mr. Schäuble said two years ago, “We do not support people just for fun; we support and protect our common currency, our export opportunities and ultimately Europe’s position and prospects in the world and, by implication, Germany’s too.”

Mr. Schäuble’s wider thinking about the interests of the state contrasts with his officials’ narrow remit. They are instructed to put together bailout packages and strictly assess reform commitments. Many of them believe that Greece’s rehabilitation is a lost cause. If the officials in Berlin had their way, Athens would not get one more cent, all geopolitics aside.

If the officials in Berlin had their way, Athens would not get one more cent, all geopolitics aside.

The grumbling about Mr. Schäuble’s propensity for geostrategic concerns is getting louder in the hallways of the finance ministry. There is talk of a “NATO bonus” for Greece and excessive panic about a Russian-Greek axis.

Ultimately, Mr. Putin’s flirtation with Athens is not to be taken too seriously. “The Russians promise a lot and don’t follow through with much,” said one German official. Many a Russia observer feels the same way. “Greece could turn into a bottomless pit for an already financially stricken Russia,” said Fyodor Lukyanov, a foreign policy expert in Moscow. He does not expect Russia to use loans to prop up the ailing E.U. country.

These doubts are causing Mr. Schäuble to waiver somewhat on being so open to the geopolitical considerations. Publicly, the minister holds his fire on the topic of Greece’s future, and he has postponed a number of interviews. But in more private settings, the minister makes his point of view quite clear. One cannot pour “hundreds of billions of euros into a bottomless pit,” said Mr. Schäuble recently during a meeting of financial investors in New York.

 

This article first appeared in the business weekly WirtschaftsWoche. To contact the authors: politik@wiwo.de, christian.Ramthun@wiwo.de, silke.wettach@wiwo.de, florian.willershausen@wiwo.de

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!