The German government has long been accused by critics of profiting from Greece's debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany's finance ministry, which confirmed the number in response to a parliamentary query from the Green Party, according to a report by German daily Süddeutsche Zeitung.
The profits come from a range of programs, running into the hundreds of billions, that Germany and other euro-zone countries have backed to keep Greece's government and economy afloat since its massive debt crisis emerged in 2009. It includes, for example, a €393-million profit generated from a 2010 loan by the development bank KfW, which is owned by the German government.
The report also shows that Germany's central bank, the Bundesbank, has received profits from the Securities Market Program (SMP), a now-defunct government bond-buying plan initiated by the European Central Bank and run from 2010 to 2012. The ECB collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it bought through the SMP, according to the report. This year, the figure will be €901 million, which will again be redistributed to the euro zone's 19 member states. Since 2015, Germany has collected a total of €952 million in SMP profits.
The new revelations drew strong criticism from the Greens Party, in opposition. “The profits from collecting interest must be paid out to Greece. [Finance Minister] Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget,” Manuel Sarrazin, European Union expert for the Green Party in the parliament, told the Süddeutsche newspaper.
It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right. Sven-Christian Kindler, budget policy spokesperson, Green Party
Mr. Schäuble, a member of Chancellor Angela Merkel's conservative Christian Democrats, has been cannily keeping Germany's federal budget balanced over the past four years, taking on no new debt. Berlin's surplus amounted to €6.2 billion in 2016 alone. Critics complain that Greece's crisis has helped it achieve that goal.
“It might be legal for Germany to profit from the crisis in Greece, but from a moral and solidarity perspective, it is not right,” Sven-Christian Kindler, budget policy spokesperson for the Green Party, also told the paper.
Mr. Schäuble has said he is open to reducing Greece's interest burden but has resisted calls to end them completely. His finance ministry has argued that, with inflation, deferring interest payments would eventually end up costing Greece's creditors.
Euro zone governments, together with the International Monetary Fund, have so far participated in three bailout programs for Greece totaling more than €240 billion, with Germany bearing nearly 30 percent of the contributions (see graphic below). For the current program, run by the EU's permanent bailout fund called the European Stability Mechanism (ESM), Germany has provided €21.7 billion of the more than €80 billion in bailout funds earmarked for Athens, as well as put up a further €168 billion in guarantees. The ESM and its predecessor, a more temporary version called the European Financial Stability Facility (EFSF), own half of Greece’s total debt.
Germany has also profited from the role played by the European Central Bank, which bought government bonds from Greek banks in a bid to avoid the country tumbling out of the euro currency bloc. In 2015, the SMP profits earned from the previous year were supposed to be sent back to Greece, but then the beleaguered country required its third bailout. That locked the 2014 profits in a holding account.
Greece's third bailout package has remained controversial and repeatedly been in danger of collapse. Germany's consistently tough line has been a repeated source of chagrin for Greece and its allies. In June, the euro zone agreed to hand out another €8.5-billion tranche in promised aid, but the bailout package still does not include a plan for debt reduction, which the International Monetary Fund wanted in exchange for financially supporting of the bailout. Mr. Schäuble was the strongest voice against debt reduction, though he has also insisted on keeping the IMF on board. In the end, the IMF supported the bailout “in principle” as a result.
“If the creditors are not yet at that stage where they can agree on and respect our assumptions, if it takes them more time to get there, we can acknowledge that and give them a bit more time,” IMF Chief Christine Lagarde told Handelsblatt last month. “So, we can be in a program, but the disbursement will only take place once debt relief is clearly articulated by the creditors.”
The IMF’s forecasts insist that Greece’s debt levels are unsustainable, but the euro-zone bosses said the Greek economy should be able to generate large budget surpluses, enabling it to sustain its debt load.
The current Greek debt load is 180 percent of gross domestic product, according the IMF report, which Handelsblatt obtained in March. That same report looked at three scenarios that resulted in the debt either coming down to 49.1 percent of GDP, exploding to 226 percent of GDP, or somewhere in between by 2060.
Sabine Devins is an editor with Handelsblatt Global based in Berlin. To contact the author: [email protected].