DAMNNNN...the Germans are being really harsh with Greece...
Most Germans want Greece thrown out of euroThe scale of public resistance throughout Europe to a potential Greek bail-out has become clear as it emerged that the majority of Germans think the Mediterranean nation should be thrown out of the euro if its problems deepen.
By Edmund Conway
Published: 9:58PM GMT 14 Feb 2010
Germany's Chancellor Angela Merkel (L), European Council President Herman Van Rompuy (back 2nd L), Greece's Prime Minister George Papandreou and France's President Nicolas Sarkozy (R) leave the EU Council
German Chancellor Angela Merkel, Greek Prime Minister George Papandreou and French President Nicolas Sarkozy Photo: Reuters
A poll for popular newspaper Bild am Sonntag found that 53pc of Germans wanted Greece to be expelled from the euro if necessary in the coming months. Two-thirds were adamantly against German money being put towards a bail-out of the troubled country, the paper also found.
The findings underline the dilemma faced by eurozone ministers, who last week pledged to support the country if necessary, but stopped short of unveiling an explicit bail-out. The euro fell to nine-month lows on Friday, and many expect further falls this week, as investors expressed disappointment that ministers had failed to set out a detailed plan of action to prevent the country from defaulting.
Having unveiled a budget deficit far in excess of expectations earlier this year, the Greek government has been struggling to raise money in capital markets, seeing the interest rates on its debt and the cost of insuring it against default increasing sharply. Some fear that the country will need some form of extraordinary assistance if it is to avoid defaulting on its debt.
But French proposals for a bail-out funded by some of the less stricken eurozone nations met with fierce resistance from the German Chancellor, Angela Merkel, at a European Council meeting in Brussels last Thursday. The German constitution has legal restrictions on any prospective bail-outs of other nations. However, it is the scale of public disapproval for such a move that is of particular concern to German politicians. The proposals have created fractures in the country's ruling coalition, with Mrs Merkel's coalition partners, the Free Democrats, aggressively resisting such a move. The party's Treasury spokesman Otto Fricke said: "Solving this problem cannot be about aid for Greece. If anything, it's about keeping any damage away from German taxpayers."
With such divisions clear to investors, fears are now growing about what the potential contagion effect for the rest of Europe would be in the event of some kind of Greek economic collapse. According to figures from the Bank for International Settlements, Britain has exposure to public and private sector debt in Portugal, Ireland, Italy, Greece and Spain worth around 16pc of gross domestic product – some £240bn, while Switzerland has an even greater exposure.
Lisa Hintz of Moody's said: "Make no mistake, a Greek default is another potential credit crisis in the making... it is not just the writedown of Greek debt; it is the mark-to-market of other sovereign debt.
"That would bankrupt the bulk of the European banking system, which is why it is unlikely to be allowed to happen."
European finance ministers, including Alistair Darling, meet for a summit today and are expected to provide further details of a possible support package for Greece. However, even by last night it was unclear as to whether they would commit to a bail-out. The statement issued by the EU after the summit last week said: "Euro area Member states will take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole", before adding: "The Greek government has not requested any financial support."
However, the Chancellor has insisted that even if there is a rescue, Britain will not be expected to contribute.
