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Portfolio > Economy & Markets

Merkel Battles Headwinds at Home Over Greece

By Marlene Y. Satter

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Chancellor Angela Merkel of Germany took to the airwaves over the weekend to try to quell ever-louder exitmongering talks among her political colleagues at home as they declared that Greece should depart the eurozone. At the same time, Germany’s insistence on a strict adherence to the conditions and calendar of Greece’s bailout package was undermined by Austria, whose chancellor said Athens should be granted more time to bring its economic situation under control.

Chancellor Angela Merkel of Germany (Photo: AP)Bloomberg reported Monday that Merkel (left) found herself calling for care from fellow German policymakers who insisted that Greece should be made to toe the line and perhaps forced to leave the eurozone by year end.

Alexander Dobrindt, general secretary of the governing Bavarian Christian Social Union (CSU), said in the German daily Bild that he expected Greece to depart the currency bloc in 2013. The remark had led Foreign Minister Guido Westerwelle to say in a Reuters report that “bullying” of eurozone members had to stop.

It also prompted Prime Minister Antonis Samaras of Greece to say that the “cacophony” of exit talk has made it far more difficult for Greece to honor the terms of its bailout as it has driven investors away from the country.

Samaras was quoted saying in the report that such “toxic statements, from wherever they come, can only do damage. Is there any businessman who will make an investment in euros to get it back in drachmas? The recovery of the economy is of critical importance if we are to achieve our goals.”

Jens Weidmann, head of the Bundesbank and a former economic advisor to Merkel, was another member of the “cacophony,” not only saying that bond buying by the European Central Bank (ECB), one much-discussed measure to fight the crisis, could violate rules that govern the institution and prevent it directly financing governments, but also likening financial assistance for Greece to addiction.

In the report he said of the former, “Such a policy is for me close to state financing via the printing press. In democracies, it is parliaments and not central banks that should decide on such a comprehensive pooling of risks.” Regarding the latter, he was quoted commenting, “We should not underestimate the risk that central bank financing can become addictive like a drug.”

Merkel has been doing damage control, trying to avoid an outright confrontation with Weidmann but saying in a broadcast interview on Sunday, “We are in a very decisive phase in combating the euro debt crisis. My plea is that everyone weigh their words very carefully.”

Meanwhile, Chancellor Werner Faymann of Austria said in an interview published Sunday in the newspaper Osterreich that as long as Greece sticks to its targets and other actions, it should be given more time to comply.

Reuters reported Sunday that Faymann said, “I see quite a good chance that we will arrive at an outcome with Greece that the Greeks stick to their agreements with the EU but in return get more time for the repayment. The most important thing is that the Greeks stick to the reforms and savings targets agreed with us. If that is guaranteed, I am in favor of a delay in the repayment.” He added that the delay could be two or three years.

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