Greek-German discord poses broader EU questions

Greece's famously atheist prime minister, Alexis Tsipras, on March 10 used a religious metaphor for the first time in his career.

Re-launching a dormant parliamentary committee into German war reparations, he said, "I've heard a lot of provocative statements from abroad in recent days, which puts me in mind of a famous quotation from the Sermon on the Mount - 'They see the blemish in their brother's eye, but not the log in their own eye.'"

He spelled out the relevance: "Just as we commit to seeing through our obligations, all parties are obliged to do the same. Morality cannot be a la carte." 

During the occupation of Greece, the Nazis extracted two loans from its central bank. Those loans, which some estimate to be worth 15bn euros today, have never been repaid and constitute Greece's strongest suit in the reparations debate.

There has indeed been a lot of sermonising directed at Greece since the January election, particularly from European leaders. Holding Germany to wartime reparations is perhaps the only opportunity Greece has to reciprocate; but it did not do so until well after a February 20 Eurogroup meeting, where it was railroaded into accepting a four-month extension of the bailout agreement, along with austerity commitments.

The present leftwing government had vowed not to carry on the policies of austerity. It asked its institutional creditors, instead, for a 'bridge' period of continued financing without austerity targets. The government would use this time to negotiate a post-2015 regime: Greece would repay its debt in full, but over, say, 30 years rather than 17. It would commit 1.5 percent of its GDP a year, rather than the hitherto agreed 3 percent, enabling it to finance an economic recovery and alleviate a humanitarian crisis at home.

Yet what the government came away with after three bruising conferences with Eurozone countries is a bridge of a different nature - not financing without austerity, but austerity without financing. Greece has until the end of April to show that it is serious about restarting the economy and repaying its debt. Until then, financial assistance is being withheld, but Greece still has to repay debt as it matures. For March alone, this means that some six billion euros in cash from pension funds, public companies and European infrastructure and farming subsidies have to be collected at the Bank of Greece to repay creditors. Needless to say, this further weakens the Greek economy in the short term.

Germany played a key role in this about-turn. On February 16, it sidelined the European Commission, which had been prepared to give Athens the benefit of the doubt, and effectively told Greece that it could either pick up where previous governments had left off, or jump off a cliff.

Tsipras' and Varoufakis' threat last weekend to hold a referendum or another election suggest the extent to which the Greek-German relationship has unravelled. It also suggests that Greek public opinion is being prepared for all eventualities. 

Much of this standoff has been political posturing. Greece's ruling Radical Left Coalition party, or Syriza, undoubtedly offended with its talk of upending the "dead-end austerity policies" Germany has godfathered in Europe's weaker economies. Greek finance minister Yanis Varoufakis has described austerity policy as a sweater that will unravel in Portugal, Spain and Italy if only the thread can be found in Greece.

But Germany's heavy-handed treatment of Greece has now added further political costs to keeping that sweater whole. Should the European Union's most dominant member effectively determine who gets to stay in the single currency and under what terms? Is it right for it to sideline the European executive and be seen to do so? Is the euro still pushing the European confederation towards federalism, or driving it apart? And how does one balance national sovereignty with regional solidarity in a period of righteous indignation on many sides?

These questions may not sit at the top of the agenda now. Attention is for the moment focused on whether Greece will default, causing a state of emergency in the Eurozone; but they will surely bedevil the Eurozone in years to come. France's National Front leader, Marine Le Pen, who leads both the president and the parliamentary majority in polls, is already advocating a voluntary departure from the euro.

For now, Greece's relationship with the rest of Europe has reverted to what we have been used to seeing in the past five years: technical teams of experts talking over points of policy and public expenditure. Sixty-nine percent of Greeks still want a compromise, according to a recent poll in the government-friendly EfSyn newspaper. But Syriza has pitted people power against the power of money. If anecdotal evidence is any guide, its humiliation has made the prospect of a Greek default a few notches more politically acceptable to Greeks.