By David Marsh, Market Watch
Greece seems likely to be a big beneficiary of heated European rhetoric over the British referendum and the ousting of the Austrian chancellor in a dispute over the rise of far-right politicians. Attrition in the U.K. and Austria has greatly contributed to softening German policy on Greek debt over the past week.
In three of Europe’s prime theatres of psychological war — London, Vienna and Athens — the specter of Adolf Hitler is playing a role in helping shape events. Far from escaping its past, Europe is wallowing in it.
Boris Johnson, the mercurial former mayor of London and campaigner for British departure, enlisted the services of Germany’s 1933-45 Nazi leader in a weekend interview on how Europe had to resist centralizing tendencies. Just to show geographical even-handedness, he mentioned Napoleon too.
The Hitler comparisons provoked a predictable storm from Remain leaders. But it was in a sense a historical, if slightly hysterical, riposte to Prime Minister David Cameron’s enumeration, a few days earlier, of the battles of Trafalgar, Blenheim, Waterloo and two world wars to back his view that Britain had to stay in Europe.
In Austria, the hapless Werner Faymann quit after seven years as chancellor, the biggest political casualty yet of Europe’s refugee crisis that has led to a surge for the country’s far-right Freedom party, the leaders of which are routinely compared to Hitler.
A perennial element in the Greek fight to win concessions from creditors, led by Germany, is the memory of the country’s war-time rule by the Nazis. Occupation images are never far from the surface in Athens street demonstrators against allegedly German-inspired austerity.
Signs that Germany and other creditors are moving towards long-awaited Greek debt relief surfaced at last Monday’s euro finance ministers’ meetings. Amid renewed worries that Britain may leave the European Union after the June 23 poll, along with Faymann’s political demise, Germany wants to avoid further European turmoil during an acutely sensitive phase for European politics.
Berlin fears a British departure would open it to an unholy combination of protectionism and demands for German largesse from other European countries, particularly France and Italy. So the Germans are moving to meet the International Monetary Fund’s request for a further stretching out of Greece’s debts to the European Stability Fund, along with a cut in already-low interest rates.
Debt relief and an easing of draconian European demands for a Greek primary budget surplus (before debt service) of 3.5% of gross domestic product are a key condition for the IMF’s participation in the latest €86 billion Greek bailout.
A deal to extend outstanding credits by another five years and to limit interest rates to 2% up to 2050 seems likely when European finance ministers assemble again on May 24. This would secure Greek repayments of around €3.7 billion to the European Central Bank, the IMF and other creditors in July — and ensure that annual Greek debt service does not exceed 15% of GDP up to 2030, a key IMF condition. French President François Hollande has played a key background role in preparing the prospective agreement.
Wolfgang Schäuble, the German finance minister, appears to have concluded, sensibly, that compliance with Greek, French and IMF conditions is a lesser evil compared with further bad publicity about German intransigence.
Yet pushing the compromise through a fractious German Parliament will spark further outbursts from the antieuro, anti-immigration Alternative for Germany (AfD) party. History as well as economics will remain in the headlines — with Hitler a shadowy yet potent common denominator.
