Schaeuble Backs Greek Referendum to Break Bailout Impasse

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Absolutely Need a Plan B for Greece: Cluse

German Finance Minister Wolfgang Schaeuble favors a Greek referendum on the country’s euro membership as a way to break the months-long stalemate with Prime Minister Alexis Tsipras’s government.

“Greece can’t be thrown out of the euro,” Thomas Steffen, one of Schaeuble’s deputies, said during a panel discussion in Berlin. “The only thing remaining in the end would be if Greece said itself that it wants to leave the euro voluntarily.”

The German Finance Ministry is supporting the idea of a vote by Greek citizens to either accept the economic reforms being sought by creditors to receive a payout from the country’s bailout program or ultimately opt to leave the euro.

A referendum could bring the conflict to a head after months of inconclusive talks between Greece and its creditors that have exasperated Germany and other euro-area countries. Public support for economic reforms might lead Greece toward a deal, while rejection could set the country on a path to leaving the euro.

“If the Greek government thinks it should hold a referendum, it should hold a referendum,” Schaeuble told reporters in Brussels on Monday. “Maybe it would even be the right measure to let the Greek people decide whether they’re ready to accept what needs to be done.”

Not 2011

Schaeuble’s stance on a Greek plebiscite is a departure from Germany’s position in 2011. Back then, Prime Minister George Papandreou dropped his plan for a referendum after Chancellor Angela Merkel and French President Nicolas Sarkozy urged him not to hold the vote. A financial backstop for the euro region and policy changes in former crisis countries since then have made contagion risks “marginal,” Schaeuble has said.

Tsipras says he’s not considering leaving the currency bloc and is focused on getting the aid he needs to avoid a default, while Merkel says her “political goal” is to keep Greece in the euro. His government must still submit a comprehensive program of economic reforms, win approval from creditor institutions, secure the endorsement of euro-region finance ministers and then get past parliaments in Berlin and elsewhere before any payment will be made.

“The Greek government is increasingly facing the dilemma that it can’t deliver on its own election promises and this is something the German government of course is also aware of,” Tanja Boerzel, a political scientist at Berlin’s Free University, said by phone. “Then it’s easier to let the Greek people decide in the hope that they vote to stay in the euro.”

Past Deadline

A pro-reform vote would take away Tsipras’s “argument that they’ve promised something else” and that he has an anti-austerity mandate from his voters, Boerzel said by phone.

Tsipras has already passed an end-of-April deadline to submit his reform plan that was set in February when officials agreed to extend the 240 billion-euro ($270 billion) bailout program. While euro-area finance ministers welcomed the progress Greece has made toward qualifying for continued aid at a Monday meeting in Brussels, policy makers are still concerned he may not be prepared to swallow the necessary concessions.

The Greek cabinet has decided against “imminently” holding a referendum or snap elections, Interior Minister Nikos Voutsis said in an interview on Ant1 TV broadcast Wednesday. The Greek government has asked for an extra meeting of Eurogroup finance ministers to be held May 22, he said.

As negotiators work “day and night” to keep Greece in the euro and hold out the prospect of continued aid, Tsipras has no incentive to declare a voluntary exit, Steffen said at the event on May 7. “But if everything fails, if we can’t agree, what will the Greek people say at the end of the day?”

For more, read this QuickTake: Greece's Fiscal Odyssey

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