The former ruling coalition in Germany has not entirely been able to keep the eurozone crisis under wraps in the election campaign. The new government will have a hard time communicating the truth.
Inadvertently or not, German Finance Minister Wolfgang Schäuble recently provided a taste of what will be in store for any post-election German government when it comes to handling, and above all, communicating the protracted eurozone debt crisis.
Being on the campaign trail in northern Germany, the minister made a passing remark to his audience which some said was like dropping a verbal bomb. He openly conceded that Greece would need yet another bailout despite the 210 billion euros ($277 billion) in loans already granted by international creditors to the debt-stricken southern European nation.
Chancellor Angela Merkel had surely hoped the euro area crisis or rather it's unresolved problems would not become a crucial election topic during what had already been one of the dullest campaigns in post-World War II German history, with the cards clearly stacked in her favor, at least judging by the polls.
True to nature, Merkel - while eventually agreeing with her finance minister - kept playing for time by saying Greece's additional financial needs would yet have to be calculated by inspectors monitoring the country's reform progress.
Athens in the focus of creditors
Whichever way you look at it, Greece will be on the agenda again in the fall, and Europe's largest creditor nation, will have to position itself clearly. With Athens' revenues from privatizing public assets falling way short of expectations, the country looks unlikely to get back on its feet without even more financial shots in the arm.
The nation remains the Achilles' heel of the 17-member euro area and has little chance of returning to capital markets to borrow money on its own for at least another year, with national debt standing at a staggering 160 percent of gross domestic product. Small wonder then that more and more experts have been calling for another straightforward debt relief scheme, also known as a haircut.
Having displayed their ability to cross many red lines in handling the crisis in the past, German leaders will most likely have to rethink their current outright objection to a debt haircut ,which this time around would call on public creditors and taxpayers to foot the largest part of the bill.
German liabilities set to rise
The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, is certain Germany will have to guarantee a lot more credit lines over the next couple of years to keep the eurozone from falling apart.
"Germany must be prepared to guarantee additional loans worth billions of euros," he said in a statement in Frankfurt.
Behind the scenes in Berlin, much effort is already being put into how to help Greece without having to communicate a debt haircut to citizens. One of the concepts floating around involves extending to 50 years Greek loans with a current duration of up to 30 years, while asking creditor nations to completely or at least largely waiving their interest claims. That would indeed reduce Greece's annual debt burden significantly.
And the German government would not have to talk about debt relief and would thus not expose itself to being called a liar by voters. Creditors, among them Germany's state-owned KfW development bank, would not be forced to write off some of their loans as they would be able to hold on to them right until the end of the longer term.
But Greece will remain a costly affair for a long time to come anyway, and there's a good chance Berlin will be presented with additional bills. There's already talk about Ireland needing fresh money after a 67.5-billion-euro bailout runs out at the end of this year. German politicians may have to agree to let Dublin tap the eurozone's new permanent rescue fund (ESM) for loans should capital markets raise doubts about Ireland's creditworthiness.
No lack of trouble spots
Aid commitments by the International Monetary Fund (IMF) and Europeans made vis-à-vis Portugal will last until mid-2014, but whether the country is really able to tap capital markets again so soon is yet unclear, making another bailout not really look like a totally remote option. And Cyprus too is still reeling from excessive debt and a considerable financing gap until 2016.
There's every reason to believe that the eurozone crisis will keep at least two more German governments busy, not just the one taking office this autumn, particularly with a view to the longer-term projects meant to prevent a repetition of such a crisis in the future.
It'll also be about conceding more national powers to Brussels to end up with a stronger European Union with binding financial rules and perhaps a pan-European finance minister with powers to intervene directly in national budgets.
German leaders will also have to prove they're serious about creating a genuine banking union in Europe. The first step is already made as the ECB will start supervising the bloc's most important lenders as of early next year.
So far, Merkel's Christian Democrats have opposed a centralized bank resolution plan, though, saying it would need an EU treaty amendment, but probably just because they do not want to transfer so much power to others when it comes to winding down a bank once considered to be crucial to monetary stability in the country.