‘Moment of truth’: Greece meets with Germany

Preparing for battle: Angela Merkel and Alexis Tsipras before yesterday’s negotiations © PA

The Greek prime minister met the German chancellor in a crucial moment for Greece and its place within the eurozone. But should the struggling country just cut its losses and leave?

Greece is running out of money. Without a loan from its biggest creditor, Germany, it could go bankrupt within a month. So when the leaders of the two nations met in Berlin yesterday, the stakes could hardly have been higher.

German Chancellor Angela Merkel insists she will support no further lending unless Greece makes severe cuts to a public spending. Yet these are exactly the policies that the Greek prime minister Alexis Tsipras and his radical, leftist Syriza party have sworn to resist.

Greece has been on the brink of bankruptcy ever since 2010, when the enormous scale of its state debts came to light. A €240bn bailout deal was agreed, but there were strings attached: Europe’s wealthiest nations, along with international financial institutions like the European Central Bank, demanded that Greece introduce drastic tax hikes and spending cuts to stop its debts from spiralling even higher.

For five years, the Greek government complied. But this January voters demanded a change of track. Syriza swept to power on a promise to end austerity and renegotiate the terms of the bailout deal.

Tsipras insists he is not demanding money for nothing. He has agreed to some moderate cuts and proposed plans for a crackdown on corruption and tax avoidance. But for Greece’s creditors, this is not enough.

Tensions are running high. At one point Tsipras brought up World War Two, suggesting that Germany owes Greece reparations. In the run-up to yesterday’s meeting, members of each side in the dispute accused one another of ‘blackmail’.

Despite the underlying strains in the relationship, Tsipras and Merkel were cordial to one another yesterday. Yet experts saw little sign that a deal is close. ‘Money and time for Athens is running out,’ one journalist said. The possibility of Greece leaving the eurozone is looming larger every day. And not everybody would be sad to see it happen: a recent poll found that over half of Germans think it is time for Greece to leave.

Greece tightening

The consequences of a so-called ‘Grexit’ would be catastrophic for Greece. The new currency would plummet in value, making every Greek citizen dramatically poorer overnight; businesses would flee the country and living standards would get dramatically worse. Meanwhile, the eurozone itself would be tossed back into a period of turmoil and uncertainty. Surely, many say, such a scenario must be avoided at all costs.

But some people believe it is no longer a matter of choice: Greece and Germany are locked on opposite paths and these negotiations are merely delaying the inevitable. Greece may as well bite the bullet — there are some disagreements that simply can’t be resolved.

You Decide

  1. Should Greece leave the Eurozone?
  2. ‘No disagreement is so serious that a deal is completely out of reach.’ Do you agree?

Activities

  1. In pairs, play a game simulating negotiations. Each pair starts with 100 points and has to agree how to distribute them. One partner proposes a split, and the other either agrees or rejects, in which case neither partner gets anything. Compare your results as a class.
  2. Imagine you attended the press conference yesterday as a journalist. Write five questions you’d ask Tsipras and Merkel.

Some People Say...

“The euro is more than a currency.”

Angela Merkel

What do you think?

Q & A

How did things get so bad in Greece?
In 2012, Greece’s national debt was around €304bn. The Greece debt crisis came about for several reasons. Even before joining the Euro, the country was spending beyond its means and tax evasion compounded the government’s problem. The country’s debt increased until it got to a point where the government couldn’t repay its loans and was forced to ask for help.
What is Greece promising in its reforms?
The Greek government needs to implement reforms to satisfy its EU (European Union) creditors, while also keeping the promises it made to its supporters. Last month the government pledged reforms in order to receive its four-month bailout. Among many other points, it promised to combat tax evasion and corruption, and to deliver more efficient government.

Word Watch

Chancellor
Merkel is often seen as the EU’s de facto leader, Europe’s ‘mother’, and the ‘Queen of austerity’.
Creditors
A creditor is someone who has lent money to someone else (who is thus a debtor). In this case, it is the countries within the Eurozone that have lent money to Greece.
Reparations
Tsipras suggested that Germany should compensate Greece for Nazi occupation during the Second World War. The German government has refused to discuss the matter, insisting all funds were settled decades ago. Half of Germans are fed up with helping Greece, but this could be partly attributed to their view on debt. The German word for ‘debt’ — schuld — is the same word for ‘guilt’.
Cordial
Merkel said that the talks took place in ‘a spirit of loyal cooperation’, while Tsipras defended the German chancellor from her harshest critics and praised her as ‘a very positive person’.
Eurozone
The Eurozone consists of the EU member states that use the Euro as their sole currency.

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