On 11 August, after another round of talks lasting almost a day, Greece and its creditors reached an agreement on a new financial aid package. The result was a draft Memorandum of Understanding, including a detailed plan for reform, which Athens must implement in the next three years.
The optimistic scenario assumes the project will be finalized next week, with the first tranche of a new financial package arriving in Greece before 20 August, when Greece has to repay the European Central Bank some EUR 3.2 billion owing on previous loans. However, it’s not impossible that instead of an optimistic conclusion of the “Greek drama” yet another act will be played out.
As always, Germany has the final word in relation to aiding Greece but Berlin is clearly not in a hurry. Germany’s official position is quite simple: the outcome of the negotiations, of course, is positive, but the assistance program is designed for three years, involves the allocation of more than EUR 80 billion in financing, and requires careful study and discussion; the problem of the repayment due to the European Central Bank by 20 August can be resolved by means of a bridge loan. “Better thoroughly than hurriedly”, as Jens Spahn, German Deputy Finance Minister, wrote in his Twitter account on 5 August.
But it seems Germany is deliberately delaying the process, and that the main reason for the delay is the unresolved question of the IMF’s participation in the new aid package. The Germans have made it a precondition that the IMF’s participate by writing off part of the Greek debt. The IMF will not decide on this issue before October.
In principle, the EU could proceed without the IMF. However, in that scenario Germany would not only have to increase its stake in the aid package and lose the IMF in the role of a tough “overseer” for Greece, but would also run the risk of “losing face”, which is unacceptable for Berlin, which today seeks to reshape the European Union to its designs. Moreover, an attempt to put a new Greek aid package before the Bundestag, without first having received assurances from the IMF, risks splitting the ruling coalition – an outcome foreshadowed in July, when 60 members of the CDU / CSU (ie one fifth) voted against the government’s proposal in relation to the allocation of aid and the start of talks with Athens.
Writing off the debt is an even worse option for Germany, and not only because it would be contrary to EU agreements. An agreement to write off the debt would mean an actual transition to a “debt union”, the creation of which Berlin has resisted since the crisis began. That would result in Germany losing its main instrument of European policy and lead to a further process of reformatting the European Union, which completely goes against Germany’s script.
Therefore, from the German point of view, the optimal solution would be to postpone approval of the new aid package to autumn, when the IMF is ready to make a decision about its participation. Everything is leading up to this. The German Finance Ministry has already prepared a paper with a number of significant critical questions on the draft memorandum, chief among which is the issue of the IMF’s participation.
Certainly Berlin is now under intense pressure, as it was a month ago, not only from its EU partners, but also from the USA, for which the Greek question has crucial geopolitical implications. Conflicts between the German government and the Bundestag are inevitable. There is much at stake for Germany, and it seems that Finance Minister Wolfgang Schaeuble, the main protagonist of Germany “Greek drama”, is prepared to defend his vision of crisis resolution to the end, granting only tactical concessions.