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Time for a plan

April 28, 2010

At meetings in Berlin, German officials have said Athens needs more than the 45 billion euros already promised by the IMF and EU. This comes amid increasing fears the Greek debt crisis will spread throughout Europe.

Merkel looking into her handbag
Some aren't sure Germany can afford to help Greece outImage: AP

Officials on the sidelines of high-level meetings in Berlin on Wednesday said the 45 billion euros ($60 billion) already pledged by the International Monetary Fund and European Union will be insufficient to tackle Greece's mounting debt crisis.

Government sources told the German news agency dpa that Berlin had confirmed Greece's need for much more than the amount already pledged.

German Finance Minister Wolfgang Schaeuble
After initial hesitation, Schaeuble now insists that helping Greece is critical to EU stabilityImage: AP

EU countries have proposed a loan of up to 30 billion euros for Greece if it meets the strict conditions set by the lenders.

A finance ministry spokesman added that Germany would be ready to contribute its 8.4 billion-euro share of the aid package "within the next week," as it still required parliamentary approval.

Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble were meeting with European Central Bank head Jean-Claude Trichet, managing director of the International Monetary Fund Dominique Strauss-Kahn, president of the World Bank Robert Zoellick, head of the Organization for Economic Cooperation and Development Angel Gurria, and head of the United Nation's International Labour Organization Juan Somavia.

Though the talks focused mainly on solving the acute crisis in Greece, they were also expected to address the wider-ranging financial crisis.

hands holding euro coins
Greece is looking for help from its eurozone neighborsImage: AP

Last week Greece asked for emergency loans of 45 billion euros from the European Union and the IMF to pay for a looming May 19 deadline to pay back nine billion euros of its debts.

Both Strauss-Kahn and Trichet agree that Greece cannot be allowed to go bankrupt, with Trichet saying that a debt default by Greece or any other euro-zone country was "out of the question."

Helping Greece is unavoidable, the French daily La Tribune quoted Strauss-Kahn as saying. "I am not saying that if we help them it will be easy. It will be difficult. The Greeks have to be aware that sorting out their public accounts, after several years of reckless overspending, will be painful and difficult. But there is no other solution," he said.

Too much debt

German sentiment is widely against any bailout for Greece, and Chancellor Merkel has thus far sidestepped any direct promises of aid, instead demanding that Greece meet certain austerity conditions before help is offered.

Ulrich Blum, president of the Halle Institute for Economic Research, however, warned on German public radio that Greece may not ever be able to pay back its current debts.

OECD head Angel Gurria
Gurria says the international community should have moved on Greece months agoImage: picture-alliance/ dpa

"The markets have obviously come to the decision based on Greece's poor fundamentals that it can't pay back its debt on its own," he said. "The creditors have to realize that the entire debt of 200 billion euros is no longer recoverable."

Hans-Werner Sinn, president of the Munich-based Ifo Institute for Economic Research, also cautioned that Greece might not be able to maintain its belt-tightening. He said on German public radio that he understood Merkel's hesitation to help.

Once the money is made available to Athens, he said, "then you don't have any more leverage over Greece."

OECD boss Angel Gurria, on the other hand, is ready to act. "The question is not how much time we have but how much time has passed. Far too much time has gone by without action," he said. "We should have intervened two or three months ago. Since then the markets have deteriorated unnecessarily."

Keeping the voters happy

Opposition politicians contend that Merkel's dithering is a political move.

SPD leaders Sigmar Gabriel and Frank-Walter Steinmeier
The opposition accuses Merkel of pulling the wool over Germans' eyesImage: AP

"Merkel is pulling the wool over the Germans' eyes and lied to them," said Sigmar Gabriel, head of the Social Democrats, in an interview with the daily Koelner Stadt-Anzeiger. "She is only pretending to take a hard line with Greece but is negotiating in the background to provide billions."

The leader of the SPD's parliamentary group, Frank-Walter Steinmeier, told the Passauer Neue Presse newspaper that Merkel won't reveal her true plans until after a key state election in North Rhine-Westphalia.

That election is set to take place on May 9, just a day before the eurozone heads of state are now scheduled to meet in Brusssels.

Editor: Rob Turner