Germany warms to IMF aid for Greece
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The German government has not excluded an International Monetary Fund programme being drawn up to help Greece weather its debt crisis, in spite of strong political opposition to any such move, according to high-level sources in Berlin.
This amounts to a major shift in government thinking. Although no final decision has been taken, legal advisers to Angela Merkel, the chancellor, are adamant that any other form of bail-out would be impossible in terms of the European Union’s Maastricht treaty and German constitutional law.
A decision to turn to the IMF would amount to a defeat for the German finance ministry and the Bundesbank, where officials have been fiercely opposed to such intervention within the eurozone for any purpose other than technical advice.
The Greek government has already said it would turn to the fund as a last resort, but both the European Central Bank and the European Commission have resisted any such move.
Speaking in Brussels on Thursday morning, George Papandreou, the Greek prime minister, told European lawmakers there needed to be a European solution to his country’s debt problems on the table, and that he would prefer this to IMF intervention, even though he insisted Greece did not need any money.
“I would prefer the European solution…as a European,” he added.
“We are not going to default,” he told a special committee of MEPs in the European parliament. “We are saying that we don’t need this money.”
Mr Papandreou said Greece’s austerity package already met IMF standards. “We are taking IMF measures ... We have talked to the IMF. They would have asked us for nothing more,” he said.
A senior German official said on Thursday the government in Berlin still believed that the debt-burdened government in Greece would be able to manage without external financial assistance.
Ms Merkel’s advisers have argued that any form of bail-out from within the eurozone would face a challenge at the German constitutional court in Karlsruhe. The court gave a green light in 1998 for German participation in the single currency, but only on the basis of strict observance of stability rules, with debt and deficit limits for participating countries, and no bail-outs allowed.
The German decision is critical to any common position by the eurozone states on some form of bail-out, because Berlin would inevitably be the largest contributor.
Finance officials have been working for weeks on technical alternatives, such as a co-ordinated series of bilateral deals, that might not flout a bail-out ban that is written into the stability and growth pact, which underpins the euro. But the chancellor’s advisers have consistently warned that the legal problems might prove insuperable.
The first indications of a shift in the German position came on Wednesday, when two members of the Bundestag separately suggested that Greece should turn to the IMF.
“We have to think about who has the instruments to push for Greece to restore its capital market access [if that were ultimately needed],” Michael Meister, deputy leader of Ms Merkel’s Christian Democratic Union group in the parliament, told Bloomberg news agency. “Nobody apart from the IMF has these instruments.”
Mr Meister’s group has hitherto been strongly opposed to the idea of any eurozone member turning to the IMF, but its members have also been adamant that there could be no bail-out for Athens. In the end they have been forced to make a choice between two incompatible goals.
Wolfgang Schäuble, the finance minister, has also made his opposition to IMF involvement clear, and admitted this week that technical work was continuing on an emergency rescue package, if that should be needed.
Throughout the debate over ways of helping Greece, the German chancellor has insisted that her fundamental position is how to preserve the stability of the euro. She has also been adamant that it was up to the Greek government to put its own house in order, with a drastic austerity programme, before any help could be considered
Support for IMF intervention has been growing within the eurozone, with Italy, the Netherlands and Finland all arguing in favour.
Resistance has come from monetary officials, including at the ECB, on the grounds that IMF conditionality would not merely bind Greece, because monetary policy is decided for all 16 members of the zone.
There has also been strong political resistance, particularly in Germany and France, to the idea that the US and other IMF members would in effect be called on to rescue a member of the eurozone, thus exposing the inability of the Europeans to resolve a financial crisis in their own back yard.
.
The German government has not excluded an International Monetary Fund programme being drawn up to help Greece weather its debt crisis, in spite of strong political opposition to any such move, according to high-level sources in Berlin.
This amounts to a major shift in government thinking. Although no final decision has been taken, legal advisers to Angela Merkel, the chancellor, are adamant that any other form of bail-out would be impossible in terms of the European Union’s Maastricht treaty and German constitutional law.
A decision to turn to the IMF would amount to a defeat for the German finance ministry and the Bundesbank, where officials have been fiercely opposed to such intervention within the eurozone for any purpose other than technical advice.
The Greek government has already said it would turn to the fund as a last resort, but both the European Central Bank and the European Commission have resisted any such move.
Speaking in Brussels on Thursday morning, George Papandreou, the Greek prime minister, told European lawmakers there needed to be a European solution to his country’s debt problems on the table, and that he would prefer this to IMF intervention, even though he insisted Greece did not need any money.
“I would prefer the European solution…as a European,” he added.
“We are not going to default,” he told a special committee of MEPs in the European parliament. “We are saying that we don’t need this money.”
Mr Papandreou said Greece’s austerity package already met IMF standards. “We are taking IMF measures ... We have talked to the IMF. They would have asked us for nothing more,” he said.
A senior German official said on Thursday the government in Berlin still believed that the debt-burdened government in Greece would be able to manage without external financial assistance.
Ms Merkel’s advisers have argued that any form of bail-out from within the eurozone would face a challenge at the German constitutional court in Karlsruhe. The court gave a green light in 1998 for German participation in the single currency, but only on the basis of strict observance of stability rules, with debt and deficit limits for participating countries, and no bail-outs allowed.
The German decision is critical to any common position by the eurozone states on some form of bail-out, because Berlin would inevitably be the largest contributor.
Finance officials have been working for weeks on technical alternatives, such as a co-ordinated series of bilateral deals, that might not flout a bail-out ban that is written into the stability and growth pact, which underpins the euro. But the chancellor’s advisers have consistently warned that the legal problems might prove insuperable.
The first indications of a shift in the German position came on Wednesday, when two members of the Bundestag separately suggested that Greece should turn to the IMF.
“We have to think about who has the instruments to push for Greece to restore its capital market access [if that were ultimately needed],” Michael Meister, deputy leader of Ms Merkel’s Christian Democratic Union group in the parliament, told Bloomberg news agency. “Nobody apart from the IMF has these instruments.”
Mr Meister’s group has hitherto been strongly opposed to the idea of any eurozone member turning to the IMF, but its members have also been adamant that there could be no bail-out for Athens. In the end they have been forced to make a choice between two incompatible goals.
Wolfgang Schäuble, the finance minister, has also made his opposition to IMF involvement clear, and admitted this week that technical work was continuing on an emergency rescue package, if that should be needed.
Throughout the debate over ways of helping Greece, the German chancellor has insisted that her fundamental position is how to preserve the stability of the euro. She has also been adamant that it was up to the Greek government to put its own house in order, with a drastic austerity programme, before any help could be considered
Support for IMF intervention has been growing within the eurozone, with Italy, the Netherlands and Finland all arguing in favour.
Resistance has come from monetary officials, including at the ECB, on the grounds that IMF conditionality would not merely bind Greece, because monetary policy is decided for all 16 members of the zone.
There has also been strong political resistance, particularly in Germany and France, to the idea that the US and other IMF members would in effect be called on to rescue a member of the eurozone, thus exposing the inability of the Europeans to resolve a financial crisis in their own back yard.
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