Athens Again

Germany Fears Greek Drama

Tsipras Laif HB
Alexis Tspiras, the man the Germans fear.
  • Why it matters

    Why it matters

    Syriza wants a debt write-down for Greece. If it wins elections it could put Athens on a collision course with Germany, which is firmly against easing austerity and reforms.

  • Facts


    • Greece will hold early parliamentary elections in January, which are likely to be won by the leftist Syriza.
    • The IMF has suspended negotiations with Athens on its bailout program until a new government is in place.
    • Syriza wants a write-down of its debt, now 175 percent of GDP, something Germany firmly refuses.
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When Athens is in crisis, Berlin worries.

Greece faces snap elections as early as next month and it looks very much as if the leftist Syriza, which has rejected euro zone austerity policies, will come to power. If it does, there is a real risk of a Greek default and another wave of chaos in the euro zone.

The euro crisis, it seems, is back.

German finance minister, Wolfgang Schäuble, has already entered the debate, making it clear that Germany expects Greece to stick to its commitments.

“Any new government has to stick to the contractual agreements of its predecessors,” he warned. He added that while Germany would help the country “to help itself,” if the country stuck to its reform path, there was “no alternative” to structural change.

The Greek prime minister, Antonis Samaras, was constitutionally obliged to call new national elections after the government’s candidate for president, a largely ceremonial role, failed to be elected by parliament on Monday. Mr. Samaras had hoped to muster the 180 votes required but in the third round his candidate, Stavros Dimas, only got 168 votes.

This result will now trigger a general election.

Syriza, the umbrella group of various leftist factions and movements, has been ahead in the polls, although its lead on Mr. Samaras’ New Democracy party is narrowing. Still, it is expected to come out ahead and form a coalition with one or two smaller parties.

The party, led by the charismatic Alexis Tsipras, has vowed to renegotiate the country’s bailout agreement with the so-called troika of the European Union, the European Central Bank and the International Monetary Fund. It wants to see a write down of the country’s crippling debt, now around 175 percent of GDP, and an easing of austerity. Mr. Tsipras also wants to halt a privatization plan agreed between Athens and the troika.

After the announcement of the elections, Mr. Tsipras said that “austerity will be history.” The party has pledged to increase social spending in a bid to create jobs and growth. Unemployment levels have begun falling slightly but are still currently 25.7 percent, while youth unemployment is a staggering 49.3 percent.

However, any move away from the troika-mandated orthodoxy of savings and cost-cutting is likely to put the new Greek government on a collision course with international lenders, and Germany in particular.

The political developments in Greece have caused concern in Berlin. Germany, as Europe’s largest and richest country, has provided a large share of the €240 billion ($290 billion) in loans that Greece has received so far from the troika. The bailouts are unpopular in Germany, where the public mood is skeptical about giving taxpayers’ money to countries that are regarded as profligate and not doing enough to tighten their belts.

“A debt write-down is completely out of the question.”

Norbert Barthle, the CDU’s budget expert., CDU budget expert

“It is unbelievably annoying,” Ralph Brinkhaus, deputy floor leader for Chancellor Angela Merkel’s Christian Democrats, told Handelsblatt. “Now, regardless of who wins the elections, we will again lose a lot of time for the next reform steps.”

Carsten Schneider, deputy floor leader for the Social Democrats, Ms. Merkel’s junior coalition partners, said the new government in Athens would have to continue to cooperate with the troika. “Otherwise the country will soon be insolvent,” he warned.

Syriza’s calls for a renegotiation of its debt are likely to fall on deaf ears in Germany.

“A debt write-down is completely out of the question,” said Norbert Barthle, the CDU’s budget expert.

Greece had been due to exit the troika bailout at the end of the year but the program has been extended until the end of February, after which Mr. Samaras had been hoping to get an enhanced credit line to keep the country afloat.

It is unlikely to be able to return to the markets any time soon. Although 10-year bond yields had gone down to as low as 5.5 percent in September, the prospect of a Syriza government and possible default has pushed them up to 9.5 percent, the highest yield in 15 months.

The troika will now wait to see what happens in Athens and what sort of government emerges. Syriza has made efforts over the past two years, since the last election, to refine its image. It has tried to reassure European politicians, officials and investors that it will take no unilateral moves but rather seek a negotiated new agreement with lenders.

“A Greek tragedy would probably not develop into a systematic crisis for the whole euro zone.”

Holger Schmieding, Chief economist, Berenberg Bank

That could prove tricky. The International Monetary Fund said on Monday that it was suspending negotiations with Greece on any new program until after the elections. It emphasized, however, that Greece has no immediate financing needs.

However, if Greece was unable to reach a deal with its lenders, it could be cut off from funding and may well face default and even an exit from the euro zone, or Grexit.

The risks of contagion to the wider euro zone if Greece did end up defaulting have, however, diminished in recent years.

Particularly, the magic words of the ECB’s president Mario Draghi in 2012 that the ECB would do “whatever it takes” to keep the euro zone together, helped calm the crisis and halt the domino effect.

At the moment analysts see little sign of a panic on the markets in reaction to the Greek political crisis. Government bonds in Italy and Spain, much bigger economies than Greece, are at their lowest rate for years, with 10-year bond yields at 1.7 percent and 2 percent respectively. And in Portugal and Ireland, two other bailout countries, the reactions have also been muted.

According to Holger Schmieding, chief economist at Berenberg Bank, this is also thanks to the firewall that the European Union created with its bailout fund, the European Stability Mechanism, or ESM. “A Greek tragedy would probably not develop into a systematic crisis for the whole euro zone, especially now that Spain and Ireland have already survived the worst,” he told Handelsblatt.

“The danger that the crisis will spread to other euro zone countries is slight,” agreed Tullia Bucco, an analyst with Unicredit.

Nevertheless, the anti-austerity mood is shared in many other bailout countries. Podemos, the Spanish equivalent of Syriza, is topping opinion polls and with elections due there in 2015, the ramifications of a political crisis in Spain might be much more significant. Further euro currency turbulence might well be avoided but the scene could be set for a new political crisis in Europe.


Andrea Cünnen covers finance from Frankfurt, Jan Hildebrand is the deputy bureau chief in Berlin, Gerd Höhler is Handelsblatt’s Athens correspondent, Dietmar Neuerer is a political reporter in Berlin. Anke Rezmer and Siobhán Dowling also contributed to this article. To contact the authors:,,,

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