Greek Deal Wolfgang Schäuble, Bad Cop

Greece, after a weekend deal to stave off its exit from the euro, is to send reform proposals to its lenders by the end of the day. The concessions were made to appease the German finance minister, Wolfgang Schäuble.
Wolfgang Schäuble in the Bundestag. He will need to get lawmakers on side over Greece.

Wolfgang Schäuble, Germany's Dr. No, will once more be called to exercise his powers of persuasion this week in the next act in Greece's euro drama.

Last Friday, the German finance minister convinced his euro zone counterparts in Brussels to hold the line against Athens, which had demanded lenders abandon key austerity measures in an extension of its financial aid.

Today, Mr. Schäuble will again have to convince Germany's ruling coalition, made up of his own Christian Democrats and the center-left Social Democrats, to buy into the agreement reached last week in Brussels.

The Greeks, after weeks of tough talking, succumbed to German-led pressure and agreed to apply for a four-month extension on its bailout program.

It is being regarded as a major climbdown for Greece’s new prime minister, Alexis Tsipras, and his radical left party, Syriza, which won elections on January 25 after campaigning against that very program.

Mr. Schäuble cancelled a meeting with British finance minister, George Osborne to remain in Berlin on Monday and campaign for approval of the deal within committees of the two German coalition partners.

On Sunday, members of his staff met at the finance ministry to assemble documents for the lawmakers. The German parliament, or Bundestag, will likely vote on Thursday or Friday on whether to extend the current aid program by another four months after it runs out on February 28.

That is contingent on euro-zone finance ministers and the troika of international lenders, the European Union, the European Central Bank and the International Monetary Fund, accepting a list of structural reforms that Athens is supposed to submit tonight to lenders.

Tsipras could have got Friday’s result at least 10 days earlier. Instead he unnecessarily destroyed trust that will now have to be carefully rebuilt. Günter Oettinger, European Union’s digital commissioner

The 19 finance ministers in the euro zone are to sign off on the reforms Monday or Tuesday in a telephone conference before the deal is ratified by the euro-zone member states. In six states, including Germany and Finland, that process involves a parliamentary vote.

The list should indicate which parts of the existing bailout program the government in Athens intends to stick with and which ones will be replaced with new reforms. Mr. Tsipras has said he wants to reverse previous measures such as wage and pension cuts, and public sector job cuts.

According to Bild newspaper, a draft list was already sent to Brussels on Sunday, and includes measures to increase tax revenue by some €7.4 billion by cracking down on the smuggling of gasoline and cigarettes, increasing taxation on the super rich and improving tax collection.

Friday’s agreement merely provides Greece with some breathing space.

The list will form the basis of talks on a new financial settlement to be agreed at the end of April. It is likely that Mr. Schäuble will be able to persuade the Bundestag to back the deal he won in Brussels.

After spending five years trying to rescue the euro, Mr. Schäuble is used to selling compromises to members of the Germanm parliament. But in this case he will hardly need to spin the outcome in Brussels to his favor.

The German government managed to have its way on all issues it considered important.

In a two-page agreement with euro countries signed last Friday, Athens agreed to successfully complete the bailout program and submit to monitoring by the hated troika, now renamed as the “institutions.”

Above all, Mr. Tsipras and his government promised not to unilaterally dial back reforms.

In addition, the payments to Greece will only be made "step by step," according to German officials. The aim is to keep pressure on Athens.

There are, after all, few illusions in Berlin. Officials expect Greece will continue to manoeuver in coming weeks and months to ease the reforms.

There is still deep irritation in Berlin at the confrontational approach Mr. Tsipras and his finance minister, Yanis Varoufakis, took after coming to power in January.

And that means there is all the more satisfaction that this approach did not succeed. Two weeks ago, Athens might have hoped for greater accommodation from its European lenders.

But Mr. Tsipras and Mr. Varoufakis overplayed their hand.

“Tsipras could have gotten Friday’s result at least 10 days earlier,” Günter Oettinger, the European Union’s digital commissioner and member of Ms. Merkel’s CDU told Handesblatt. “Instead he unnecessarily destroyed trust that will now have to be carefully rebuilt.”

Greek pro government protests.

 

The Greeks had initially said they would not deal with the troika at all, and campaigned to receive a bridging loan instead of continuing with the bailout program.

Athens has received €240 billion in loans from international lenders since 2010, as well as securing a separate debt write down with private creditors in 2012.

In the end, their European partners were willing to offer few concessions. For example, the Greek government will not be allowed to use about €10 billion, which had been earmarked for bank recapitalization, for its national budget instead.

Not surprisingly, officials in Berlin are pleased about the outcome of Friday's eurogroup meeting.

"This is a first, successful intermediate step, which enables the Greeks to regain trust," Steffen Kampeter, a senior official in the German finance ministry, told Handelsblatt. "The fundamental condition for this intermediate step was that the eurogroup be as unified toward Greece."

According to Mr. Oettinger, there was little room to offer the Greeks more. “If more concessions were given to Greece, then it would have been a breach in the dyke. It would no longer have been possible to continue with the austerity policies in Spain, Cyprus, Portugal and Ireland.”

The future of the euro shouldn't be the subject of tactical games. Reason prevailed in the end. Thomas Oppermann, SPD parliamentary floor leader

The fact that Mr. Schäuble seemed to get his way on Friday should win CDU and SPD support.

"It's good that an agreement with Greece was achieved," the Social Democrat parliamentary floor leader, Thomas Oppermann, told Handelsblatt. "The future of the euro shouldn't be the subject of tactical games. Reason prevailed in the end."

And now, he added, the important thing is that Greece quickly lived up to its part of the bargain.

Mr. Oppermann pledged that the Bundestag would "promptly review" the government's request for an extension of the bailout program.

There was also optimism within the CDU. Parliamentary leader Michael Fuchs told Handelsblatt he assumes that "the Bundestag will give the green light for an extension." Mr. Fuchs also noted that the outcome of the negotiations had been a great success for Mr. Schäuble.

According to Mr. Fuchs, it is now clear in writing that the Greek government can neither reverse approved reforms nor spend additional money.

Last week there had been deep concern Greece might be forced out of the euro zone.

The initial application for an extension to the bailout program was rejected by Mr. Schäuble as lacking in substance. Berlin wanted to see Greece make water-tight commitments to implement structural reforms.

In Greece, meanwhile, Mr. Tsipras sought to play down the notion that his government had been defeated in its efforts to dial back austerity.

 

Greece Greek has time to repay debt repayment schedule maturities loans-01

 

In a televised speech on Sunday, he said that Greece was "leaving austerity, the bailouts and the troika behind."

He insisted that Greece had won “the battle, if not the war.”

In Athens this weekend, there are largely feelings of relief that the country had for now avoided bankruptcy and an exit from the euro zone.

“Greece has turned a page,” sources close to the government told Handelsblatt. The opposition also voiced relief. “The worse has been avoided, and that is positive” said a source close to the center-right New Democracy party, the former incumbent party that Syriza defeated in January.

It remains to be seen how the Greek left wing will react. For now it is keeping silent but that could change.

It may also be difficult to keep on board the ultra-nationalist Independent Greeks, the smaller party in the Syriza-led Greek coalition, which had also firmly opposed austerity.

 

Jan Hildebrand and Klaus Stratmann report on politics from Berlin. Ruth Berschens in Brussels and Gerd Höhler in Athens, and Siobhán Dowling, an editor with Handelsblatt Global Edition in Berlin, also contributed to this piece. To contact the authors: [email protected], [email protected].