The End of Sovereignty (III)

German Week: Fateful Week

In Athens significant decisions are being expected in the next few days concerning the handling of the financial crisis. Because of two high level meetings this week between the Greek and German governments, the Greek media has been speaking of a "German week" and even of a "fateful week".[1] Just last Friday, the director of the Deutsche Bank, Josef Ackermann, was in Athens to discuss the crisis with Greek Prime Minister Giorgos Papandreou. The Deutsche Bank had already given the Greek government advice on the national debt in January.[2] Next Friday, Prime Minister Papandreou will be visiting the German chancellor in Berlin. The meeting with the German chancellor is considered highly significant.

An Example

The massive German pressure on Athens is not so much because German banks are at risk. At the end of September 2009, Greece owes German credit institutions US $43 billion. Experts consider the threat of this loss, due to national bankruptcy, to be bearable. This is only about 1.2 percent of the US $3.5 trillion in total German foreign credits.[3] Spain, for example, would constitute a much larger problem should it suffer financial bankruptcy. Spain owes German banks US $240 billion. Spain is the third candidate, after Greece and Portugal, for a dictate from Brussels to lower its budget deficits. Berlin's insistence, with the support of the EU, on Athens taking drastic austerity measures is supposed to serve as an example for Madrid to take similar steps and prevent Spanish debts from becoming larger (and thereby becoming a risk for German credits).

Low Wage Policy

But above all, the German/EU reduction dictate is supposed to solve a basic problem. Over the past few years, Germany has obtained significant advantages over its European rivals with its intransigent low wage policy allowing a drastic increase in exports - also at the expense of the southern European countries, whose foreign trade deficit with Germany has significantly risen. (german-foreign-policy.com reported.[4]) Greece's foreign trade deficit toward Germany, for example, rose from 5.3 billion Euros in 2006 to more than 6.3 billion Euros in 2008. To stop the spiral of Greek debts, "the glaring dichotomy in competitiveness" within the Eurozone must be counteracted, writes the SWP in Berlin. The imposition of a German model low wage policy, as is now being applied, will not be sufficient, predicts the SWP.[5] But the Berlin government's advisors do not agree on which supplementary measures should be undertaken.

National Bankruptcy

One recent proposal is to stimulate Greece's economy - and possibly also the other economies of the "weak nations" - with enhanced financial aid to Athens or supplementary imports. This may possibly have to be done with further restrictions to national sovereignty of the respective countries. The SWP demands that "it be discussed whether and how it could be possible to take drastic action more precociously on national fiscal policies."[6] Some of the government advisors are opposed to such a procedure. Some say that a rescue package for Greece, would, on a "medium and long-term" basis, lead to a weakening of the Euro, which must be prevented, under all circumstances. If Athens goes bankrupt, then it is sure that "the lesson will be brought home, that skyrocketing deficits in the Euro zone, cannot be fought by minting money. This will even strengthen the foreign value of the Euro."[7] Greece's bankruptcy would have "consequences probably just a bit more serious than, for example, the insolvency of the world's largest car manufacturer, General Motors in 2009." Preventing bankruptcy could prove to be the "more dangerous alternative."

Under Control

Athens can neither ignore the debate in Berlin about Greece's future nor the current German media campaign against Greece. Germany is not only the strongest EU power; it is also Greece's largest commodity supplier, as well as one of its largest foreign investors. There have been recurring protests in the Greek population against German domination, especially since Nazi terror in Greece has not been forgotten. When the German Telekom sought to buy into the Greek OTE Telecommunications Company in 2008, there was a strong strike wave, because the employees feared measures similar to those being now imposed, under German pressure, throughout Greece - loss of employment and cuts in wages. OTE, one of the largest enterprises in the country, is now 30 percent German owned.[8] Also because of the current Deutsche Bank's "counseling activities" with the government in Athens, the Greek media is warning of an increase of German domination and, above all, of a foreseeable "absolute German control over decisions and plans of the Greek Ministry of Finance."[9] This sort of control would be nothing more than the sequel to the vast limitations in national sovereignty that the EU, under Berlin's insistence, has now imposed on Greece in financial questions. (german-foreign-policy.com reported.[10])

[1] Prinzip Hoffnung; Der Tagesspiegel 01.03.2010
[2] Ackermann berät griechische Regierung; faz.net 26.01.2010
[3] Heribert Dieter: Die internationalen Finanzmärkte stellen die Eurozone auf die Probe; SWP-Aktuell 19, Februar 2010
[4] see also The End of Sovereignty (II) and Vor dem Sturm
[5], [6] Daniela Schwarzer: Griechenland enthüllt Schwäche der EWU; SWP-Aktuell 18, Februar 2010
[7] Heribert Dieter: Die internationalen Finanzmärkte stellen die Eurozone auf die Probe; SWP-Aktuell 19, Februar 2010
[8] see also Colonialist
[9] Prinzip Hoffnung; Der Tagesspiegel 01.03.2010
[10] see also The End of Sovereignty