Europeans have struggled to speak with one voice since the start of the Greek debt crisis, but US Treasury Secretary Timothy Geithner’s criticism of the cacophony has brought the issue back into the spotlight.
Half a dozen stakeholders with different fears and concerns appear to have conflicting agendas in a crisis that has tested Europe’s single currency.
In Greece, the crisis erupted in October 2009 when the newly elected socialist government discovered doctored statistics hiding a much more colossal debt than previously thought.
Desperate for bankruptcy, Prime Minister George Papandreou last year obtained a line of credit of 110 billion euros (ê155 billion), to be released in three years, from the core countries of the eurozone and the IMF in exchange for budget cuts. and asset sales that were going to convince markets to be forgiving.
But that credit did not come easily from Germany. The electorate disapproved of an expensive lifeline for southern Europeans who many Germans view as financially undisciplined and incapable of making tough decisions.
Fearful of irritating voters, Chancellor Merkel vigorously resisted calls by European leaders to come to the rescue of Greece.
But at the last minute, Germany turned around and approved the bailout, after also securing IMF involvement, baffling markets and outside observers such as Secretary Geithner.
“I think it’s very difficult for people who invest in Europe … to understand what the ‘Europe’ strategy is when there are so many people talking,” Geithner said at a CFO Forum hosted by The Wall Street Journal on Wednesday.
“The simple rule of thumb of crisis management is that you want to have a simple, clear, and unified declarative strategy.”
More recently, in the debate over a second Greek bailout, Germany strongly disagreed with the European Central Bank, another key player in the bailout packages.
True to form, Germany demanded that private investors restructure their debt, a move that ratings agencies and world markets will almost certainly see as a default, an impossible outcome for the ECB.
The ECB, as the great protector of the euro, harshly faced German intransigence.
Other eurozone players such as France and Luxembourg backed the ECB, with leaders sometimes making their views bluntly known, unsettling markets accordingly.
Rating agencies, another player in the eurozone debt drama, will be watching closely how private investors participate. Anything resembling a restructuring will be given a default rating whose consequences could dangerously affect the global economy.
The markets, the great aggregator of global economic sentiment, have largely integrated the probability of a Greek default of some kind in the coming months or years.
But analysts fear that if it happens in a haphazard fashion, the crisis will prove contagious to other peripheral European nations such as Portugal, Ireland and even Spain and Italy.
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