Opposition to Aid Fierce in Germany and the Netherlands

The ongoing Greek debt saga continues to be closely watched by currency traders and investors. The drama has prompted a lot of speculation about the fate of the European Union and its multi national currency the euro. A recent meeting of EU finance ministers failed to offer any concrete solutions to the Greek crisis. The ministers told Greece to be ready to implement even more austerity measures by the next meeting of EU finance ministers on March 16th. Opposition to aid is fierce in some quarters most notable Germany and the Netherlands. Although German Chancellor Angela Merkel has made blunt public statements opposing aid to Greece Merkel’s coalition government has admitted privately that contingency plans are in place should Greece be unable to service its sovereign debt.

Greek Aid Could Pose Legal Problems For EU

One German economics professor who also opposes the euro has threatened to take legal action if Germany and other EU nations provide aid to Greece. Article 125 of the EU treaty states that the EU and member nations “shall not be liable for or assume the commitments of central governments … without prejudice to mutual financial guarantees for the joint execution of a specific project.”  Article 122 of the same treaty states that, “where a member state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”. Andrew Scott a member of Edinburgh University’s law faculty and an EU legal expert said, “The no-bailout clause does not stop the German government using taxpayers’ money to buy up Greek debt. But if you bail out Greece from within, the markets will never take seriously a risk premium for a debt-ridden member state again.” The EU faces a very serious dilemma.

Support For Aid

Many analysts familiar with Greece’s problem believe a bailout by the International Monetary Fund is the best solution. The European Investment Bank and the European Bank for Reconstruction and Development have also been cited as possible sources of aid for Greece. Despite popular opposition to aid for Greece in Germany most experts believe that if the integrity of the euro is threatened Germany would most likely act to save Greece and the euro. German Finance Minister Wolfgang Schaeuble favors aid to Greece if absolutely necessary. Any assistance for Greece is likely to include demands for additional and painful austerity measures on the part of the Athens government. In a statement Merkel stated, “The mistakes have to be dealt with at their roots. In the case of Greece, we need to do everything to support the Greek government, which of course has taken this path, in formulating a true consolidation program.” The Greek saga sounds like one big political and financial mess.

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