German bailout fatigue carries new risks for Merkel

Wolfgang Bosbach is still an outlier in the German parliament, one of the few members of Chancellor Angela Merkel’s conservatives who openly defies her by speaking out against aid for Greece.

But he is far less isolated than he was back in 2011 when Merkel’s former chief of staff Ronald Pofalla reprimanded him for his defiance on eurozone bailouts with the stinging jibe: “I can’t stand the sight of your stupid face.”

These days, Bosbach, a straight-talking 63-year-old from the Rhineland, is more hero than villain in the eyes of many German conservatives, who have come around to his view that bailing out Greece is a waste of time and money.

Even Merkel’s own finance minister, Wolfgang Schaeuble, has made it clear that he is deeply sceptical about funneling further aid to Athens. For the chancellor, the Greece critics in her party have turned from an annoyance into a major headache.

On Tuesday, hours after eurozone leaders moved closer to a deal to rescue Greece from the brink of bankruptcy, Bosbach was among the first German officials to take to the airwaves to offer his verdict.

“Whoever believes this is the last chapter in this never-ending Greek saga will soon be taught a lesson,” he said.

Five years after the eurozone first agreed to rescue Greece, the mood in Germany is shifting, and like Bosbach, many here are now questioning the wisdom of keeping Athens on life support.

A poll for public broadcaster ZDF this month showed that a narrow majority of Germans — 51 percent — want Greece to leave the eurozone, up from just a third in January. Another survey for ARD television showed that just 22 percent fear a “Grexit” would have a negative impact on them personally.

On the streets of the German capital on Tuesday, as news spread that Greece could secure a deal to unlock frozen aid after all, the frustration was palpable.

“No way, no way, Germany shouldn’t pay any more because we’ve already paid far too much,” said Holger Mueller, a 57-year-old real estate agent. “If the German government caves in now we should vote them out of office.”

“The Greeks can just go,” added Edeltraut Schmidt, a 60-year-old hairdresser. “I didn’t always see it that way but now there doesn’t seem to be any way out of this except for them to leave the eurozone.”

Unworthy

The shift has a lot to do with defiant rhetoric from Athens. Greek Prime Minister Alexis Tsipras’s left-wing government has alienated Germans since coming to power in January on a promise to end the austerity measures imposed by Berlin and its partners in return for two bailouts totaling 240 billion euros.

Tsipras and his Syriza party are regularly portrayed in German newspapers like the mass-circulation Bild and the conservative Frankfurter Allgemeine Zeitung as a cabal of unreliable, ungrateful amateurs, unworthy of German solidarity.

The change in sentiment has much to do with the tone set by Merkel and her ministers, who during the standoff with Tsipras have made abundantly clear in public statements that Europe can survive just fine without Greece.

The tough rhetoric of popular political veteran Schaeuble has helped convince many Germans, including conservative lawmakers, that a Greek exit is an acceptable or even preferable solution, no matter how much it would cost. Some conservatives see a moral imperative to set an example with Greece in order to reinforce respect for Europe’s fiscal rules.

This shifting landscape will make it difficult for Merkel if she has to convince lawmakers next week to release the final billions of euros from Greece’s second bailout — a scenario which seems more likely following Monday’s summit.

No one doubts that she would get the parliamentary majority she needs. Support from her junior coalition partners, the Social Democrats (SPD), and the opposition Greens virtually guarantees that.

The real risk is what happens in her own party if, as Bosbach suggested on Tuesday, she is forced to return to the Bundestag later this year to win backing for a third bailout programme or further debt relief for Greece.

“For Merkel, it’s not just about getting a majority in parliament but about delivering an overwhelming majority from her own party,” said Marcel Fratzscher, head of the DIW economic institute in Berlin.

“She not only needs to make the case for releasing the remaining aid from Greece’s second bailout, but there’s a strong possibility that she will have to return and argue for a third programme and more debt relief. It will be very tough.”

The last time the German parliament voted on Greece was in February, when lawmakers approved a four-month extension of the current bailout.

Back then, a record 29 conservative rebels broke ranks, and another 109 signed statements making clear that they had voted for the extension with reservations. Together, that group makes up nearly half of Merkel’s conservative bloc in parliament.

Analyst Carsten Nickel of Teneo Intelligence, a political risk consultancy, estimated that up to 100 conservative lawmakers could rebel this time.

A key person to watch will be Schaeuble, who according to senior German officials has come around to the view that the eurozone may be better off without Greece.

While he is unlikely to break ranks with Merkel, any signs that he is less than enthusiastic about a deal could be taken by other conservative sceptics as a license to vote ‘no’.

“This Greek package will require previously unknown levels of political ownership from the German chancellor,” said Nickel. [Reuters]