After two years of debt crisis with no end in sight in Greece, the Germans are starting to talk openly about a once taboo subject: the possibility their Greek partner may leave the euro zone.
Such a view would have been frowned upon just a few months ago. Back then, officials in Germany insisted cooperation between the euro zone members would prevail and Greece’s financial wounds would heal. But that belief changed after recent elections in Greece boosted the popularity of parties opposed to the painful austerity measures that Germans insist are required to solve the crisis.
A number of high-profile German politicians have since warned the Greeks might have to part ways with euroland if they don’t stick with the agreed terms of the European Union’s bailouts to Greece. The average German, as well, is growing weary: nearly three quarters of respondents in a recent survey said the Greeks should leave the euro. The popular German magazine Der Spiegel this week captured the German mood in its headline story: Acropolis, Adieu! Why Greece must leave the euro.
“The radical parties (in Greece) have become very strong, promising that one can stay in the euro zone while abandoning the austerity program,” said Benjamin Born, an economist at the Ifo Institute for Economic Research in Munich. “The German politicians were then forced to go public and to be more proactive.
Officials in the euro zone are preparing behind the scenes for the eventuality that Greece could leave the euro, according to reports. The Greek elections are one catalyst, but fears have also waned in recent months that the departure of that small country from the euro might spell disaster for the rest of euroland. Hence the big uptick in tough talk from German officials about a Grexit – the departure of Greece from the euro zone – during the past week.
“We want Greece to stay in the euro zone, but they also have to want it and meet their obligations,” German Finance Minister Wolfgang Schaeuble told German newspaper Rheinische Post last week. “We can’t force anyone.”
Mr. Schaeuble added that the euro zone has “learned a lot in the last two years and constructed protection mechanisms. The contagion threat for other countries in the euro zone has become smaller and the euro zone has become overall more resistant.”
Support for a partnership with Greece is slipping among the German public. A recent online survey of 1,000 Germans by Toluna and Thoering Heer & Partner revealed that 73 per cent of Germans believe Greece should leave the euro zone. Moreover, 60 per cent of the respondents viewed the recent elections in Greece, as well as France, as a real threat to the euro. (The poll also revealed that some 42 per cent of respondents thought Germany should abandon the euro.)
Misperceptions are helping to fuel that fatigue, according to Sebastian Dullien, a senior policy fellow at the European Council on Foreign Relations. The Germans have their own issues to fix, such as childcare and infrastructure, and believe those areas are suffering as billions are spent on Greece. But Mr. Dullien points out that the Germans have merely lent money to Greece.
Germans also feel that they are the targets of growing anger in southern Europe, with some protestors comparing current governing German officials to Nazis. Among this tension, Greece is losing its attractiveness as a holiday spot for Germans who used to flock to its beaches.
While the Germans may be fed up, Greece’s fate in the euro zone still lies in the hands of its citizens, Mr. Born says. The recent elections have so far failed to result in a coalition government, and new elections are expected in June. While a majority of Greeks want to stay in the euro, they are also vehemently opposed to the austerity measures that have caused so much distress: rising unemployment, suicides, and parents forced to give up their children to orphanages. If an anti-austerity coalition comes to power and refuses to comply with the bailout agreement, loans to Greece could dry up, the country could default and then find itself out of the euro zone.
Such a scenario would not be painless for the Germans. This weekend, the Frankfurter Allgemeine Zeitung published estimates that Greece’s departure from the euro could cost Germany some €80-billion. As well, experts believe that there is still a “huge risk” in the case of such an event: panic could spread to other troubled euro zone countries, triggering a run on the banks and more euro zone departures.
“You don’t want to try a crash test of your car…,” said Mr. Dullien. “The risk is bigger for the rest of Europe than for Greece.”