What now for the Eurozone? A look at Germany, Grexit and Cameron’s pursuit of EU reform

Nina Trentmann, UK Business Correspondent at Die Welt, takes a look at the EU and the Eurozone in the wake of the most recent Greek bailout. With key German political figures in disagreement about in which direction to move, what might this mean for David Cameron’s chances of successfully negotiating EU reform? 

During the last couple of months, I have been asked quite frequently: what does Germany think? About Greece, about another bailout, about the Euro? I found that funny at times, given that Germany is a country of more then 80 million people who often have contrasting views, especially on topics which have been debated as hotly as the Greek debt crisis.

Although there is now some sort of agreement between Greece and its international creditors – the country remains in the Eurozone, there will be more emergency funds from the European partners, the ECB is continuing to support Greek banks – it has become quite obvious that this is only a solution for a short period of time. This has been amplified in the rift between Chancellor Angela Merkel and her finance minister Wolfgang Schäuble who, despite coming from the same party, the Christian Democratic Union, are now openly disagreeing on how to proceed in general with the Euro and with Greece in particular.

Whereas Merkel seems to believe in more cuts, more financial aid and time, much more time, Schäuble has been willing to discuss the undiscussable: a potential exit from the Euro, at least for a certain period of time. Both politicians have strong support among Germans, although Merkel´s position has gained favour, as recent polls underline. According to a YouGov poll that was conducted in Germany in early July, 47 per cent of Germans support a Greek exit from the Euro. Contrary to previous polls where the Grexit-supporters reached an absolute majority, fewer Germans now want a Greek exit from the Euro. As the YouGov poll states, 37 per cent are in favour of Greece remaining a Eurozone member country. Besides that, the poll offers another interesting finding: in terms of how to deal with Greece’s debt obligations, Germans follow an uncompromising stance with 61 per cent of those polled stating that they want Greece to fulfill the initial bailout requirements.

Since the start of the Greek debt crisis, there have been strong voices in Germany condemning the rather soft approach that Merkel has been following for a long time. Some argue that one of the reasons for the continuing existence of the ‘problem’ is the fact that Merkel did not want a Greek exit from the Eurozone in 2010 – at a time where the pile of debt was smaller and the Greek economy was in better shape compared to today. The view in Germany is that even if the Greeks continue to slash costs and expenses, and even if they continue to receive support funds from other Eurozone members, this will be a persisting issue for the years to come.

To me as a business correspondent, it becomes ever more obvious that if Europe wants to ’fix’ the inherent problems with the Euro – such as sharing a common currency and a common credit rating without central control of revenues and expenditures – more steps towards fiscal union and towards ‘more’ Europe, rather than less, are needed.

However, neither the German government nor other European governments seem to be too keen on moving further in this direction. Interestingly enough, Germany’s finance minster Wolfgang Schäuble last weekend floated the idea of introducing a so-called ‘Euro tax’, knowing that neither his chancellor nor other leading Eurozone countries are actually willing to finance the currency by giving away parts of their tax revenues. The criticism that followed Schäuble’s proposal made it very clear that there is currently no substantial support from either the French or Italian governments for a redistribution of income at a Eurozone-wide level.

The consequences of this are quite obvious: although we need more rather than less integration in the Eurozone in order to make the Euro work properly, we will not get it, at least not in the foreseeable future. Merkel knows that her population is fed up with having to carry other countries’ financial burdens. In addition to that, she also wants to keep Britain inside the European Union which is why she has been signalling some support for Britain’s quest to reform the European Union and to continue working in a better, not an ‘ever closer’ union. It remains to be seen whether the Eurozone members will be willing to tackle some of the other core problems that the Euro currently suffers from, such as the question of how to exit the common currency. To this day, there is no legal framework for this, and it is likely that we will end up in a similar deadlock should another Euro-member find that it cannot sustain its membership of the currency union.

These issues have to be dealt with. If they continue to be ignored, the Euro will remain what it is today: a grand political ideal, a lot of wishful thinking and an imperfect currency union.


Nina Trentmann is the UK Business Correspondent for WELT N24 GmBH in London.


NoteThe views expressed in this post are those of the author, and not of the UCL European Institute, nor of UCL.

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