Eurozone members approve Portugal bailout, but Germany’s not happy about it

Stephen Beard May 17, 2011

Eurozone members approve Portugal bailout, but Germany’s not happy about it

Stephen Beard May 17, 2011

Kai Ryssdal: One will be forgiven a certain sense of deja vu all over again upon hearing the latest economic news from Europe. Top financial officials there have started talking openly about the odds that Greece is going to need a second bailout to stave off its creditors. That would be four bailouts total: Greece twice, Ireland, and Portugal just yesterday. Sovereign financial rescue packages are controversial at best — especially in the country that’s paying most of the freight.

Marketplace’s Stephen Beard reports now from Berlin.

Stephen Beard: With Europe’s deepest pockets, Germany will pay the largest single share of the bailout of Portugal. Not a prospect that appears to please these Germans, strolling through the center of Berlin.

Woman: Why do we always have to pay for the ones who can’t administrate their financial situation, like Greece and now Portugal?

Man 1: You know, we’ve heard so many stories about Greece, for instance. And we’re paying and paying and paying — just money thrown out the window.

Man 2: We are paying off the debts of Europe and I’m kinda not happy to see Germany stepping in all over in Europe.

In fact, Germany has profited from the bailouts. These are loans. Germany’s been able to borrow at 3 percent and then lend at double that rate to its stricken neighbors.

But, says Katynka Barysch of the Centre for European Reform, Germans are fretting that those loans might turn into something else.

Katynka Barysch: Since there is such a heated debate in Europe at the moment about Greece might have to restructure its debt, i.e. write it down, reduce it, then of course taxpayers in the countries that lent the money would be be liable.

German resentment at the prospect of picking up the tab is fueled by moral disapproval, says Marcus Walker. He’s the Berlin correspondent at the Wall Street Journal. Many Germans regard their heavily indebted southern partners as undisciplined and feckless, unlike themselves.

Marcus Walker: Germany has had a decade of painful economic reforms and budget cuts to get its own house in order and Germans believe that other countries haven’t made the effort and now other countries want Germans’ money.

But in all their indignation, the Germans are forgetting their own complicity in this crisis says commentator Heinz Schulte.

Heinz Schulte: The German banks were the drug dealers that were giving the drug of cheap credit to those who are now in the process of defaulting. How do you explain that to the Germans, that we are partly to be blamed for that?

German banks have lent several hundred billion dollars to other Eurozone governments. A rash of defaults could trigger a German banking crisis. Not a bad reason to bailout your neighbors. Not that you’ll hear much about that from the German government, says Katynka Barysch.

Barysch: There is one thing that is politically even less popular than bailing out the south Europeans and that’s bailing out the bankers.

Germany seems trapped in a loveless marriage with its backsliding southern partners. But, says Marcus Walker, there is little appetite for divorce. The Germans have done very well out of the euro. Pulling out, going back to the Deutsche Mark would be disastrous for Germany.

Walker: Its global exports would be jeopardized because any new German mark would immediately rise in value. And make German BMWs and machinery far more expensive all over the world.

The Germans may grumble — he says — but for now they have little choice but to keep the bailouts coming.

I’m Stephen Beard for Marketplace.

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