With Friends Like These

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Sabertooth or toothless tiger?
  • Why it matters

    Why it matters

    The third bailout for Greece faces a series of major obstacles that could still plunge the country into political turmoil, including today’s Greek parliament vote and a possible court challenge in Germany.

  • Facts


    • The German government may face a constitutional court challenge to the third bailout package.
    • Greece’s parliament will vote later today on whether to accept the terms of the third bailout package agreed by euro zone leaders on Monday.
    • Germany’s finance minister has defended a proposal floated over the weekend for Greece to temporarily leave the euro zone.
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Mention the name Wolfgang Schäuble in Greece, or the name Alexis Tsipras in Germany, and you’re likely to get an earful.

Mr. Schäuble, the conservative German finance minister has long been seen as the bogeyman in Greece for his hard-line stance in talks over a third financial bailout – all the more so since it emerged that he put the idea of “Grexit” on paper during an emergency summit over the weekend.

In Germany, it is the leftist Greek prime minister Mr. Tsipras who is viewed as the key culprit, an untrustworthy leader incapable of reforming the country’s struggling economy and unworthy of more money from German taxpayers.

No doubt both politicians feel the criticism is unjustified. To keep Greece in the euro, both men have had to swallow their own words. And both could also face revolts from more radical lawmakers that could succeed in breaking the fragile truce agreed on Monday.

This week, Mr. Schäuble was forced to defend the German government’s proposal of a five-year temporary Greek exit from the euro zone, which was rejected at Sunday’s summit of euro zone leaders and triggered a barrage of criticism abroad as well as domestically, even among members of the center-left Social Democrats, junior coalition partner to Chancellor Angela Merkel’s conservatives.

Mr. Schäuble complains that he has been singled out for something that wasn’t just his idea. The finance minister said he “didn’t make a proposal that wasn’t agreed within the government in form and content. That is why it makes little sense to use it afterwards for personal defamation.”

“There are many people, including in the federal government, who are quite convinced that in the interests of Greece and the Greek people what we wrote down would have been much the better solution.”

Wolfgang Schäuble, German Finance Minister

That was no doubt a swipe at Sigmar Gabriel, the SPD leader and deputy chancellor, who himself has been walking a fine line between acting tough on Greece and taking a softer line demanded by his party’s base. Mr. Gabriel said on Sunday that even though he had spoken to Mr. Schäuble and Ms. Merkel about the German negotiating strategy, Mr. Schäuble’s paper had not been agreed with him.

Mr. Schäuble said he was hardly alone in seeing the advantages of a temporary Grexit.

“There are many people, including in the federal government, who are quite convinced that in the interests of Greece and the Greek people what we wrote down would have been much the better solution,” he said when asked about the proposal.

With a deal now agreed to avert Grexit, and Greece being granted its third bailout package in five years, those even more conservative than Mr. Schäuble are set to make life difficult for the finance minister and his government.

The government is bracing itself for fresh legal challenges against its bailout policy at the Federal Constitutional Court, Germany’s supreme court.

Christoph Degenhart, a Leipzig-based constitutional law professor who filed lawsuits with the court when the European Stability Mechanism bailout fund was first created, as well as against the ECB’s bond-buying strategy, said the third bailout would be in breach of the ESM treaty.

He said that under ESM rules, bailout payments were contingent on being “indispensable” to preserve the financial stability of the euro zone.

“But if, as is constantly emphasized, a Grexit would by no means destabilize the euro currency area, the ESM aid isn’t indispensable,” Mr. Degenhart told Handelsblatt. “Yet another rule violation is being added to the long series of violations in the course of the bailout policy.”

It’s a view that has been expressed by many conservative economists and politicians in Germany. Some members of Ms. Merkel’s CDU party are also likely to use it as a reason to oppose a third bailout when it comes to a vote later this week in Germany’s lower parliament, the Bundestag, though the bill is still widely expected to pass.

Mr. Schäuble has indeed often stressed the euro zone could weather a Grexit. But while it is true that the market reaction to Greece’s struggles last week was muted, there are many in Europe that still doubt a Greek exit from the euro would be without consequences for its remaining 18 members.

The E.U. Commission and the ECB concluded in a study that, without ESM aid, the collapse of the Greek banking system would have negative consequences for the entire euro zone.

Schaeuble wanted poster dpa
The most-hated man in Athens? Wolfgang Schäuble for sure hasn’t many Greek fans left. Source: DPA


Meanwhile, in Greece, Prime Minister Alexis Tsipras faces mass demonstrations, strikes and a rebellion in his leftist Syriza party ahead of today’s decisive parliamentary vote on reforms and budget cuts that are a precondition for bailout talks even starting.

The creditors expect the parliament to pass a package of structural reforms including a value added tax, higher taxes on luxury goods, steps towards a sustainable pension system and stricter budget rules.

Euro zone leaders said these concrete steps are essential for rebuilding trust after successive Greek governments failed to honor their reform pledges.

It’s a particularly bitter pill for Mr. Tsipras, who was swept into power in January on a mandate to put a stop to five years of austerity, and who called the July 5 referendum that showed overwhelming opposition to the austerity terms of a previous deal that was less stringent than the new bailout package.

To keep Greece in the euro, Mr. Tsipras is going to have to break all his promises. Even the hated troika of officials from the IMF, ECB and EU Commission, which Mr. Tsipras wanted to banish from Athens for good, will be returning, with even greater powers of supervision and control.

Trade unions called a public sector strike for Wednesday. More worryingly for Mr Tsipras, the left wing of Syriza has categorically ruled out voting for the reforms.

The split in the party was already heralded early last Saturday morning when 32 Syriza lawmakers, including two ministers, refused to support the reform proposals he planned to take to the emergency Brussels summit.

Mr. Tsipras got the mandate only with the votes of the three pro-European opposition parties. He will need their help again today.

Mr. Tsipras had avoided a direct clash with Syriza’s left wing — but now he’s being forced into it. The number of rebels in his parliamentary group has risen to some 40, said party sources.

Energy Minister Panagiotis Lafazanis, a leading left-winger in Syriza, openly called on Mr. Tsipras to reject the bailout deal. Commentators now expect Mr. Tsipras will sack the two dissident cabinet ministers — Mr. Lafazanis and deputy social affairs minister, Dimitris Stratoulis.

Syriza’s right-wing coalition partner, the Independent Greeks, have also said they reject the bailout terms. But their leader, Defense Minister Panos Kammenos, has said his party wants to remain in government.

And he faces a strong opponent in Syriza’s parliamentary president, Zoi Konstantopoulou, who has been positioning herself as a rival to him within the party and who also rejects the austerity measures. She could try to obstruct the vote with procedural tactics during today’s parliamentary session.

Mr. Tsipras is likely to win Wednesday’s vote with opposition support. But it’s uncertain what will come after that. A minority government? A broad new coalition including the pro-European parties? New elections? The country looks more politically unstable than at any time since the start of the debt crisis.


Gerd Höhler is Handelsblatt’s Athens correspondent. Dietmar Neuerer covers domestic politics for Handelsblatt from Berlin. Donata Riedel covers economic policy for Handelsblatt. Christopher Cermak covers finance for Handelsblatt Global Edition. To contact the authors:;;;

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