Greece and Germany's he said/she said over debt crisis

Reporting from Berlin and Athens?

To hear many Germans tell it, Greece is a land blessed with sunshine but cursed with a lying, cheating government that routinely breaks its promises and expects others to pick up the pieces.

The rest of Europe has doled out billions of dollars in emergency loans to keep Greece afloat, but Athens, the Germans say, has consistently failed to deliver on pledges to slash its bloated bureaucracy, sell off state enterprises, go after tax evaders and overhaul its uncompetitive economy.

Yet ask Greeks what's happening to their country, and many respond with yowls of pain and anger ? directed in large part toward Germany. Berlin, they fume, is a tyrannical taskmaster whose only motivation now seems to be to inflict as much punishment as possible on a country whose economy has already been pushed into free fall.

"What more do they want from us?" said Sophia Sigri, a 70-year-old pensioner in Athens. "This crisis has gone way beyond numbers, fiscal policies and austerity measures. Our national dignity now is at stake. Do they want to rob us of that, too?"

The divergent views have become the backdrop against which Europe's long-running debt crisis, now in its third year, is playing out. And the fact that such attitudes appear to be hardening in Berlin and Athens, with animosity and distrust deepening on both sides, is complicating the search for a solution.

Finance ministers of the 17 Eurozone nations are scheduled to consult Wednesday in a conference call that investors hope will result in the provisional approval of a second bailout for Greece, worth about $170 billion. Without the rescue package, the country could slide into default by mid-March, with potentially disastrous consequences for the global economy.

But many in Athens believe that present conditions aren't much better.

Though acknowledging that their government has missed some of the tough financial targets set by international lenders, they say the repeated rounds of stiff austerity cuts have resulted in a spiraling recession during which homelessness, hunger and suicide rates have all gone up.

Public outrage boiled over this week into some of Athens' worst rioting since the start of the crisis in 2009, with dozens of buildings set afire and trashed by rock-throwing youths alongside a peaceful demonstration by thousands. Greek lawmakers swallowed hard and bowed anyway to the demands of their European partners, approving drastic cuts in wages and pensions and the elimination of 15,000 public-sector jobs this year alone, at a time when the unemployment rate already tops 20%.

German and other European officials welcomed the measures. But they warned that they are not enough for them to approve a second bailout Wednesday, insisting that Greece identify $430 million more in spending cuts and seal a deal with private investors on taking a loss on their holdings of Greek debt.

To those Germans who regard Greeks as mendacious, cavalier shirkers of duty, critics point to figures like those released Tuesday showing that, in the last quarter of 2011, Greece's economy contracted by a whopping 7% compared with the same period a year earlier.

Many Greeks have already made heavy sacrifices as the result of one governmental austerity measure after another. The citizens of any other developed country, they say, would surely erupt in anger as well if confronted with the same calamitous drop in their standard of living.

Anti-German rhetoric and images are now a staple in Greece, where politicians mutter darkly of German jackboots and protesters call Chancellor Angela Merkel a Nazi.

"You'd think they would show some compassion for the fact that we went gentle on them after World War II. But no, they want to punish us now," declared Fotis Stathatos, 56, an unemployed construction worker.

Germans bristle at such statements, even as they speak of the need to get even tougher on Greece. Athens is no longer a trustworthy partner but rather a huge sinkhole, many Germans say. They complain that Greek officials have happily accepted outside help while shrugging off solemn promises to lay off thousands of civil servants, privatize state assets and strengthen tax collection.

The lack of follow-through has prompted suggestions from Germany ? unwelcome in Greece ? that a European Union commissioner be given power over Athens' budget and that a separate escrow account be set up to earmark government funds for repaying debt and not for frivolous spending elsewhere.

"The only thing we require is that Greece stick to its commitments," Michael Georg Link, Germany's deputy foreign minister, said in an interview in his Berlin office. "Nobody was forced into the European Union, and we will force nobody out of the European Union or the Eurozone. But once you're in, you have to stick to the rules."

Link said that Italy, Spain and Portugal have also made commitments to difficult reforms.

"All these countries have gone a long way. They are struggling hard to reform themselves, with the support of the countries of the EU and with German solidarity, and we expect the same from Greece," he said.

But there is a growing sense that Germany is trying to separate Greece from other financially troubled Southern European nations, as a way to limit fallout and contagion from a potential default and Greek exit from the euro.

Merkel now insists that making private bondholders take a loss applies only to Greece as a "special case." Her economic minister, Philipp Roesler, said over the weekend that a Greek exit from using the euro was a "less scary" prospect than it once was.

And her finance minister, Wolfgang Schaeuble, was unwittingly caught on camera last week assuring his Portuguese counterpart that, once negotiations with Greece were out of the way, Berlin would look favorably on loosening the conditions of Lisbon's own bailout.

By reserving harder-nosed treatment for Athens, politicians in Berlin are acting in line with German public opinion, said Manfred Guellner, head of the polling institute Forsa. Asked whether Germany ought to help Italy, for example, a majority of Germans say yes. But they say no to more aid to Greece.

In Athens, residents stretched to the breaking point have grown tired of being repeatedly told to do more to atone for their financial sins. Further rage of the kind that broke out this week could await a country already teetering on the brink of economic ruin, some analysts warn.

"Greeks feel like they are being spanked for behaving badly. They're still feeling the pain of that," said Dimitris Mavros of the MRB polling company. "But once that beating stops or subsides ? then they may strike back."

henry.chu@latimes.com

Times staff writer Chu reported from Berlin and special correspondent Carassava from Athens.

Source: http://feedproxy.google.com/~r/latimes/news/nationworld/world/~3/lQqW_p4D94I/la-fg-germany-greece-disconnect-20120215,0,2921510.story

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