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Germany warns of ‘bottomless pit’ in Greece

Germany's finance minister warned on Wednesday that Berlin was not prepared to pour money into what he termed a "bottomless pit" in Greece, after eurozone ministers put a new bailout for Athens on hold.

Published: 15 February 2012 12:05 CET

Germany warns of 'bottomless pit' in Greece

Photo: DPA

“We want to do everything we can to help Greece … we can help but we are not going to pour money into a bottomless pit,” Wolfgang Schäuble told SWR radio.

“We have always said that all conditions must be fulfilled before we can take final decisions and that the time was pressing. I have doubts that all conditions have been fulfilled,” added the minister.

He took aim at Greece’s conservative Nea Demokratia party, which enjoys a huge lead in the polls ahead of elections expected in April. Their lead is “exactly the problem,” Schäuble said.

“I am not certain that all political parties in Greece are aware of their responsibilities given the difficult situation in which their country finds itself,” the minister said.

“When you look at the situation in domestic Greek politics … the question is: who is going to guarantee that what we decide now will also be valid after the elections?” asked Schäuble.

Late Tuesday, Luxembourg Prime Minister Jean-Claude Juncker, who is head of the eurozone finance ministers, scrapped a planned meeting on more aid, opting for a conference call instead as Greece failed again to meet EU demands.

“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme,” Juncker said in a statement.

Further “technical work” needed to be done, Juncker added.

Greece desperately needs the €230-billion ($303-billion) rescue package – €130 billion in fresh loans and a €100-billion write-down on privately-held bonds – to avoid defaulting on €14.5 billion in debt owed on March 20.

AFP/mry

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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