Video Transcript
Mark Fleming-Williams: Hello, my name is Mark Fleming-Williams, and today I’m joined by Adriano Bosoni via Skype from Germany. And we’re going to be talking about the ongoing Greek crisis. Since winning the Greek elections on January the 25th, the Greek finance minister and prime minister have been undergoing something of a charm offensive, touring Europe and taking in various European capitals. Adriano, the most recent meeting took place in Berlin between the German and the Greek finance ministers, and it’s probably safe to say it was a tense affair.
Adriano Bosoni: Yeah, it was a tense meeting because it was the meeting between not only the finance ministers of two nations but between two men with very different views, not only about the future of Greek debt but also about the future of Europe. On one side, we have a government that wants to secure fast economic growth, more public spending, even if it means breaking the European Union’s ceilings and limits, and even if it means breaking some contracts, most notably debts. And on the other side, we have a government that wants to protect the euro, wants to protect the sanctity of debts, wants to protect the institutional and financial framework of the European Union, and wants to keep wages low, wants to make sure that countries do not overspend. So these are two very, very different views that were bound to clash in Europe, and we see now that the clash has taken the shape of this confrontation between the Germans and the Greeks. But in addition to this ideological and political debate, the Greeks have more immediate concerns because they’re worried about the health of their financial sector.
Mark: Indeed. And that’s where the ECB comes in. It has the strongest control over the Greek fate as a result of the Greek banks’ reliance on it for financing. And we actually saw, the day before the [German Finance Minister Wolfgang] Schauble meeting, we saw [Greek Finance Minister Yanis] Varoufakis going to meet Mario Draghi, the president of the ECB. The meeting seemed to go well, but then later that evening the ECB took a decision which removed one lifeline from the Greek banks, shifting them over from taking financing directly from the ECB to the Greek central bank. This was a political move, by which I mean it was a move away from politics. The European Central Bank is designed, as a central bank, to be independent and impartial. And it’s been by its own admission much too political over the last five years through the crisis. This was a step of the European Central Bank saying, “This is a crisis for the politicians to deal with. We have a very straight deadline on February the 28th, so that is your deadline. Politicians, sort it out.”
Adriano: Yeah, and February 28th is a very important date for these negotiations because that’s the day when the Greek bailout expires. And that’s why the Greek government was very fast to send delegations to Italy and France. And this was a clever move because they were expecting to meet with friendly center-left governments that would be sympathetic with the Greek cause and would support Athens in its negotiations with Brussels and the IMF. The thing is, Italy and France have their own requests to make to Germany, are negotiating because of their own problems related to public spending and debts with the Germans. And they don’t want to irritate Berlin because of the situation in Greece. So all the Greeks got out of their meetings in Rome and in Paris was some sympathy and some superficial support, but they did not get the significant support they were expecting. So this leaves Greece relatively isolated.
Mark: OK, so the battlefield seems to be drawn up. On one side we have Greece with perhaps fewer allies than it was hoping for. On the other side we have Germany, which for now is supported by the rest of Europe it seems. You have the bazooka-wielding ECB, which is largely saying that they want to stay out of it. So you have this scale emerging with the Greeks on one side, the Germans on the other, and neither side wants to give too much. Adriano, how do you see this panning out?
Adriano: And this is a very important issue because the Greek crisis is directly linked to Germany’s conflicting needs. Germany needs on the one hand to protect the eurozone because Germany is an export-driven economy that needs the currency union to export. But at the same time, Germany needs to protect its own national wealth. The German government has been very successful with its rhetoric of protecting taxpayers’ money from countries in Southern Europe, so Germany cannot achieve both goals at the same time. And it has a menu of bad options. It could accept some debt relief for Greece, which would open the door for other countries making similar requests in the future, but it could accept Greece leaving the eurozone, which could open the door for other countries leaving the currency union as well, which would generate a very serious political crisis in Europe. So Germany has limited options and most of them are negative for Germany’s interests. As a result of that, a short-term agreement is likely. The Europeans will probably buy some time. This will not solve any of Europe’s problems, but it’s the most they can hope for in the current situation.
Mark: OK. Well, thank you very much for joining me today, Adriano. For more information please visit the Stratfor website.
“Conversation: Greece and Germany Draw Political Battle Lines“ is republished with permission of Stratfor.
Greece and Germany Draw Political Battle Lines
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Video Transcript
Mark Fleming-Williams: Hello, my name is Mark Fleming-Williams, and today I’m joined by Adriano Bosoni via Skype from Germany. And we’re going to be talking about the ongoing Greek crisis. Since winning the Greek elections on January the 25th, the Greek finance minister and prime minister have been undergoing something of a charm offensive, touring Europe and taking in various European capitals. Adriano, the most recent meeting took place in Berlin between the German and the Greek finance ministers, and it’s probably safe to say it was a tense affair.
Adriano Bosoni: Yeah, it was a tense meeting because it was the meeting between not only the finance ministers of two nations but between two men with very different views, not only about the future of Greek debt but also about the future of Europe. On one side, we have a government that wants to secure fast economic growth, more public spending, even if it means breaking the European Union’s ceilings and limits, and even if it means breaking some contracts, most notably debts. And on the other side, we have a government that wants to protect the euro, wants to protect the sanctity of debts, wants to protect the institutional and financial framework of the European Union, and wants to keep wages low, wants to make sure that countries do not overspend. So these are two very, very different views that were bound to clash in Europe, and we see now that the clash has taken the shape of this confrontation between the Germans and the Greeks. But in addition to this ideological and political debate, the Greeks have more immediate concerns because they’re worried about the health of their financial sector.
Mark: Indeed. And that’s where the ECB comes in. It has the strongest control over the Greek fate as a result of the Greek banks’ reliance on it for financing. And we actually saw, the day before the [German Finance Minister Wolfgang] Schauble meeting, we saw [Greek Finance Minister Yanis] Varoufakis going to meet Mario Draghi, the president of the ECB. The meeting seemed to go well, but then later that evening the ECB took a decision which removed one lifeline from the Greek banks, shifting them over from taking financing directly from the ECB to the Greek central bank. This was a political move, by which I mean it was a move away from politics. The European Central Bank is designed, as a central bank, to be independent and impartial. And it’s been by its own admission much too political over the last five years through the crisis. This was a step of the European Central Bank saying, “This is a crisis for the politicians to deal with. We have a very straight deadline on February the 28th, so that is your deadline. Politicians, sort it out.”
Adriano: Yeah, and February 28th is a very important date for these negotiations because that’s the day when the Greek bailout expires. And that’s why the Greek government was very fast to send delegations to Italy and France. And this was a clever move because they were expecting to meet with friendly center-left governments that would be sympathetic with the Greek cause and would support Athens in its negotiations with Brussels and the IMF. The thing is, Italy and France have their own requests to make to Germany, are negotiating because of their own problems related to public spending and debts with the Germans. And they don’t want to irritate Berlin because of the situation in Greece. So all the Greeks got out of their meetings in Rome and in Paris was some sympathy and some superficial support, but they did not get the significant support they were expecting. So this leaves Greece relatively isolated.
Mark: OK, so the battlefield seems to be drawn up. On one side we have Greece with perhaps fewer allies than it was hoping for. On the other side we have Germany, which for now is supported by the rest of Europe it seems. You have the bazooka-wielding ECB, which is largely saying that they want to stay out of it. So you have this scale emerging with the Greeks on one side, the Germans on the other, and neither side wants to give too much. Adriano, how do you see this panning out?
Adriano: And this is a very important issue because the Greek crisis is directly linked to Germany’s conflicting needs. Germany needs on the one hand to protect the eurozone because Germany is an export-driven economy that needs the currency union to export. But at the same time, Germany needs to protect its own national wealth. The German government has been very successful with its rhetoric of protecting taxpayers’ money from countries in Southern Europe, so Germany cannot achieve both goals at the same time. And it has a menu of bad options. It could accept some debt relief for Greece, which would open the door for other countries making similar requests in the future, but it could accept Greece leaving the eurozone, which could open the door for other countries leaving the currency union as well, which would generate a very serious political crisis in Europe. So Germany has limited options and most of them are negative for Germany’s interests. As a result of that, a short-term agreement is likely. The Europeans will probably buy some time. This will not solve any of Europe’s problems, but it’s the most they can hope for in the current situation.
Mark: OK. Well, thank you very much for joining me today, Adriano. For more information please visit the Stratfor website.
“Conversation: Greece and Germany Draw Political Battle Lines“ is republished with permission of Stratfor.
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