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Quo vadis Greece?

Christoph Hasselbach / ai
August 23, 2012

Many Europeans have written off Greece as a hopeless case. But the country's prime minister is touring Europe to win support - and time - for Athens. Is Europe's patience wearing thin?

A Greek euro coin (Photo: Jens Büttner/dpa)
Image: picture-alliance/dpa

The summer break is coming to an end and Europe is still stuck in the midst of the euro crisis. Greece, in particular, will once again be dominating the headlines and political agendas in the days and weeks to come. On Wednesday, eurogroup chief Jean-Claude Juncker was in Athens for talks with Greek Prime Minister Antonis Samaras on the country's progress in tackling the crisis, which many observers describe as somewhat lacking.

But there's disagreement as to whether this is - as Samaras believes - to do with the harsh cuts stifling the economy or simply with a lack of effort on the side of the Greeks themselves. Samaras is eager to win Juncker's support for the international creditors to be somewhat more lenient with Athens. At least in the past, Juncker has shown some sympathy for Greece's difficulties.

Samaras tour of Europe

It is not Samaras' only appointment however. A somewhat more comfortable meeting will be next Saturday's talks with French President Francois Hollande in Paris. Hollande believes the crisis needs to be tackled by growth and is likely to be supportive of more help for Greece.

Greek Prime Minister Antonis Samaras(Photo: AP/Kostas Tsironis)
Samaras promises Athens can do the trick - but will more time for itImage: AP

Samaras' meeting with German Chancellor Angela Merkel on Thursday, on the other hand, is likely to be a lot more difficult. In an interview with the German mass circulation daily, Bild, Samaras already set the scene for the talks. He warned of social unrest and an unprecedented crisis of democracy in Greece, should his country not be granted "air to breathe;" that is, more time to implement austerity measures.

And he reminded Germans about their own past to add more weight to his argument: "In the end, it would be like the Weimar Republic," he said.

Berlin ready to compromise?

But Samaras is aware of the mood in Berlin and Germany in general. He explicitly did not ask for more money but only for more time. More time, in the end, also means more money, because that extra time will create financial shortfalls that will need to be bridged.

Several German politicians over the summer have been very harsh when discussing Greece. Vice Chancellor Philipp Rösler said the prospect of Greece leaving the eurozone had long lost its scare and Bavarian Finance Minister Markus Söder said an example should be made of Greece.

But, all in all, the mood in Berlin seems to have eased. Foreign Minister Guido Westerwelle has suggested that minor concessions seem to be possible. It seems that what's prevailing is the view that its not only about Greece but also about the euro as such, and that Germans would stand to lose out significantly should the single currency collapse.

Broadsides from Vienna and Helsinki

Germany is the most influential country in the bailout debate and should Samaras succeed in winning Merkel's sympathy, it would be a significant step forward for him. But, at the same time, some of the smaller eurozone members have stepped up their broadsides against Greece.

Michael Spindelegger (Photo: Yves Logghe/AP/dapd)
Austria's Spindelegger (right) says there should be way to throw Greece outImage: dapd

Austrian Foreign Minister Michael Spindelegger last week said that it should be possible to "throw a country out of the eurozone." His Finnish colleague Erkki Tuomioja said that the prospect of a collapse of the eurozone needed to be openly discussed.

He even went as far as to suggest that maybe the EU would work better after the end of the euro. Even if many such comments are later put into somewhat milder contexts, they do however show the extent of frustration with the situation in Greece.

Court decision pending

But there is no decision expected in the coming days as to whether Greece will get more time or whether the bailout money will dry up. Governments are waiting first for a September report from the troika of EU, European Central Bank and International Monetary Fund.

The crucial date, however, is September 12 when the German constitutional court is slated to hand down its ruling on the EU's permanent ESM bailout fund and the fiscal pact. It is expected that the court will give the green light for both of those projects. If not, the euro could soon be history, says German conservative parliamentarian Markus Ferber.

At an EU summit in October, the bloc's member states could decide to halt aid to Greece, or not. Often, though, such decisions are not dramatic either-or verdicts, but rather compromises with a bit of leeway open to interpretation.

The ECB to the rescue?

There is yet another player waiting in the wings to come in as the last or next to last savior to the euro. And it is a player that does not even answer to a parliament and practically has unlimited funds: the European Central Bank.

ECB logo (Photo: AP/Bernd Kammerer)
The ECB could buy up bonds but critics fear it would lead to inflationImage: dapd

Its president, Mario Draghi, said at the end of June that the bank was ready to use all means necessary to save the euro. This could mean buying up government bonds from countries in crisis.

Many German politicians have criticized this as driving up inflation and as a violation of the ECB's mandate. Others warn that as long as governments fail to act, the bank has little choice but to step in and help.

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