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Eurozone crisis

'No one wants to needlessly pour fuel on the fire'

While European leaders seem pleased with Athens' willingness to save, the decision over whether to release the next installment of aid could reignite debate, according to Europe expert Heinz-Jürgen Axt.

DW: The new Greek government has only been in power for three months. It is a government that is entering new territory as it is supported by three coalition parties. How would you evaluate the parties' ability to cooperate?

Heinz Jürgen Axt,
Photo: Anna Maciol

Heinz Jürgen Axt

Heinz-Jürgen Axt: When it comes to cooperation, I can just barely recognize a basic agreement. Greece is under immense pressure from financial markets, interest rates are going higher and higher, the country cannot go to financial markers to refinance, and the euro-countries have to take action. This is the pressure that pushes the coalition together. But we are also seeing that one party or another has reservations about every point on the agenda. It is taking a very long time and we might not see Greece present a reform package to be approved by the Troika until sometime in October. At the moment I don't see it as a marriage of love, but a marriage for the sake of convenience.

A new austerity package is being put together and it calls for large cuts to the Greek budget. The left-wing opposition party, Syriza, promised to oppose it. Will there be protests on the streets of Greece again?

At the very least, that has to be considered. The biggest problem with the reform and austerity measures in Greece is that they are creating an increasing social imbalance. When it all began at the end of 2009, I had always argued that Georgios Papandreou's government back then had crafted acceptable austerity measures. At the moment, I do not see how the self-employed and the wealthy are taking part in Greece's efforts to save. The burden is carried predominantly by employees and the workers. They have to take part because of the wage and value-added taxes they pay. What's more, Greece is not energetically dealing with the problem of missing and inadequate taxation. The explanation is simple, just like the supply of jobs in the public sector: supporters of the two biggest parties are affected, and they shy away from that.

Since the summer break ended, there has been a somewhat friendlier tone towards Athens, including by the German government. Why do you think that is?

Basically, everyone is waiting: What will the Trokia put in their report which is due out in October? No one wants to needlessly pour fuel on the fire, which would in turn see the financial markets exert more pressure on Greece. Politicians themselves - even here in Germany - realize they can't ratchet up criticism of Greece. I think this is a form of awareness and the summer break may have been good for everyone involved. The summer break is over now, and at the beginning of October when the Trokia report is released, there will undoubtedly be controversy and necessary dialogue.

German Chancellor Angela Merkel in front of a Greek flag
Photo: Stephanie Pilick dpa

Merkel has taken a positive tone lately toward Greece

It's become clear that Greece will not meet all its obligations - Greece's Finance Minister Giannis Stournaras has already conceded that. Can will still expect the next installment to be paid and that Greece will get the delay it desires?

The politicians argue that the election, in May and June cost time and that they need to be given more time to make up for it. That might be a small concession as politicians take pains among themselves not to create domestic problems for their partners. The Trokia report will show that Greece has announced reforms, but because of internal resistance they haven't been satisfactorily implemented. Take the current government's motto that no public employees can be fired. That can't continue. When I know that one in seven Greek's is employed in the public sector while in Germany that number is one in 10, then something has to change. This kind of mentality cannot last in Greece. And of course the public sector has to be more efficient: it has to contribute toward Greek growth and not be hindered by bureaucracy.

In recent weeks, the European Central Bank made a decision not to limit bond purchases and the German Constitutional Court issued a decision regarding the European Stability Mechanism as a permanent bailout fund. Have we really come any further? Are these the measures needed to get Europe out of the crisis?

I would say so, but with some reservations. When the crisis began in October 2009, there was nothing in place to fight it. All the instruments needed to be created. Heads of state and government worked month after month on small projects. Now there is some degree of legal certainty. The European Stability Mechanism (ESM) has been established and accepted by the German Constitutional Court. Additionally, there is the fiscal pact that aims to limit debt. They are two very important measures. Of course, it all depends on everything being regulated. Look at the ECB's purchases in primary markets. What needs to be prevented is government bonds being bought by secondary markets, that is, the ECB should be buying Greek bonds, not private investors. In addition to that, the ECB's purchases need to be accompanied by conditions placed on them by the ESM. If that isn't considered, then we will have a great deal of controversy, not only in Germany, but in other European countries as well.

Political scientist and South-East European expert, Heinz-Jürgen Axt is a professor of European integration and European politics at the University of Duisburg-Essen and vice president of the South-East Europe Association.

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