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No choice

Bernd Riegert / glbNovember 30, 2012

Germany's lower house has approved the latest installment of bailout funds for Greece. Concerns about how much the bailout is going to cost Europe are more than justified, writes DW's Bernd Riegert.

Skepticism as to the cost of the bailout is called for, says Riegert
Image: DW

This third installment of bailout aid, which is being fast-tracked through not only Germany's parliament, but several around Europe at the moment, won't be the last. Despite all the assurances being given by eurozone governments, financial experts are already aware that the further billions being made available to Greece won't solve the debt crisis.

No, the problem is instead being pushed further into the future. If you read the small print of the latest bailout, you'll see that German Finance Minister Wolfgang Schäuble doesn't rule out the possibility of further aid for Greece. The members of the Bundestag now have their eyes fastened on the bottomless pit of bailout funds that economists have been criticizing as such for some time now.

Both the governing and opposition factions of the German parliament voted to approve the bailout funds; this was not the result of solidarity with the rest of Europe or any sense of mercy. No, there just wasn't any alternative.

If we put the brakes on the Greek rescue now, it will cast the country into a messy and unruly bankruptcy, one that could have severe consequences for the eurozone and Europe. German Chancellor Angela Merkel's seal of approval brings her in line with European Central Bank President Mario Draghi; now she is essentially forced to continue on that line, even if nobody knows where it leads.

The price that comes along with this course of action is slowly making itself known. In the coming years, Germany alone will have to cough up around 3 billion euros in cash - not in guarantees, as it was up to this point. Europe's central banks have been instructed to abstain from any revenues based on interest, and governments have been told to extend their loans.

This will all lead to a shortfall the extent of which is seriously difficult to grasp. If we consider how pitilessly German parliamentarians have bickered over every cut in the budget debate at home, it is quite amazing how easily the Bundestag has let further billions flow to Greece. The suspicion that many MPs haven't really understood - or even read - the six-centimeter-thick slab of new regulations and laws that was presented to them just a few days ago, is not unjustified.

Schäuble and the rest of the eurozone members have veiled the fact that support for Greece is going to cost more than originally planned. Thus far, the rescue efforts have borne no fruit - and that despite a dramatic reduction in the quality of life for average Greeks.

Eurozone members have thus far balked at the notion of a debt consolidation, as it would make the cost of the Greek bailout immediately visible. Schäuble has instead opted for a strategy that will draw the costs of the bailout out over several years in the German budget. In the end, this could be more expensive than consolidating Greek debt. We should once and for all lay our cards on the table and relieve the Greeks of a part of their debts.

By the way, have Merkel and Schäuble forgotten the statements they made this summer, that Greece should "in no way" receive more money and more time to make reforms? Both of those promises have been broken, because the economic realities don't allow any other course of action.

Schäuble mentioned "structural reforms in Greece" during his parliamentary address on Friday. But for anyone familiar with the situation this is simply stupid; what cuts can the Greeks make now? The economy is shrinking further and fast, and Greece is currently producing nothing else than new debt. The turning point is 2014, say Athens and Berlin, but will the country really be able to reduce its debt of some 180 percent of GDP? Nobody knows.

The truth is - and this should be clear by now - if we want to keep Greece in the eurozone, we're going to have to pay a heavy price. And the taxpayers and future generations deserve to know just how much this solidarity with their fellow EU member state will cost.