Demonstrators in Athens denounce their government’s recent economic austerity measures. Aris Messinis/AFP/Getty Images

German response to Greece's emergency is another humiliation in an increasingly nasty war between Europe's North and South

As Greek Prime Minister George Papandreou and German Chancellor Angela Merkel prepared for a crisis meeting in Berlin Friday, a retired bank clerk named Yannis Pannousakis and a dozen supporters blocked the entrance to a German electronics franchise in downtown Athens, handing out leaflets showing Ms. Merkel in an SS uniform.

Greece will ask for European assistance Friday to cover borrowing costs and avert a default that could threaten the stability of the euro, though Ms. Merkel and senior European Union officials have been increasingly unwilling to commit to a bailout. The Berlin meeting comes as Greece helped to reassure markets with the successful sale of a 10-year bond to raise €5-billion Thursday, a day after Mr. Papandreou imposed a drastic set of salary cuts, hiring and pension freezes and tax hikes to cut the deficit.

But for Mr. Pannousakis and many other people in the troubled countries along Europe's southern flank, the German response to Greece's emergency – especially its demands for the sort of cuts that northern countries have not had to endure – is another humiliation in an increasingly nasty war between Europe's North and South.

The latest source of rage was the front page of the Berlin tabloid, Bild, which Thursday carried the headline, “Sell your islands, you bankrupt Greeks – and the Acropolis too!” An article inside suggested that this sentiment had been uttered by two officials in Ms. Merkel's Christian Democratic Union party.

The protesters were even more offended by the cover of the German newsmagazine, Focus, which showed a statue of Aphrodite, her middle finger raised in an obscene gesture, beside the words, “Fraudsters within the European family.”

“They're saying we're all criminals, not just our leaders but every Greek. We have been named and shamed, we have been bashed and thrashed throughout this crisis,” the bearded pensioner said. “The European Union is supposed to represent a brotherhood, a collective response, but everyone has turned against those in the South.”

While the euro was meant to unify Europe's disparate economies into a self-supporting whole, the crisis has ended up creating a dangerous schism between the export-oriented economies of Western and Northern Europe and the more import-dependent ones in the Mediterranean and the Iberian peninsula, who lack the strong underlying economies to rebuild economic growth and pay off debt – even though their debts are only slightly higher than those in the larger economies.

Efforts at preventing Greece's debt crisis from spilling over into other countries and destroying market confidence in Southern European bonds and the euro itself have created ugly tension this week between Southern Europe and Germany.

German leaders and taxpayers have bristled at using taxpayer money to bail out countries they see as having bloated public sectors and unaffordable pension schemes. Greece's retirement age is 61, while Germany's is rising to 67; the Greek public sector employs 1.05 million people, almost a quarter of the labour force.

The countries that some economists call PIGS (Portugal, Italy, Greece and Spain) all face either higher deficits or greater debt burdens than other countries (Greece was unique in having both), with debt loads typically exceeding the size of the economy. Investors have driven the prices of their debt to dramatic levels, with Thursday's bond issue paying around 3 per cent more interest than the benchmark German bond.

Portugal, for its part, experienced its first one-day general strike over planned budget cuts Thursday (Greece will experience its third on March 16), and Spain's government is under pressure to cut its stimulus spending sooner.

These countries are under heavy pressure to slash spending from Germany, France and Britain – countries whose governments have decided to maintain high spending levels throughout 2010 to stimulate an economic recovery. Germany is subsidizing the pay of millions of workers to keep employment levels from falling, while Britain and France are using debt-fuelled spending to induce demand.

For Southern Europeans watching their pensions get slashed and their government services reduced, it all seems terribly unfair – and the economic anger has spilled out into symbolism-loaded political and cultural conflicts drawing on decades-old animosities.

“It's not just Greece – all of Southern Europe is under attack,” said Yiannis Michelakis, editor of the Athens newspaper Eleftheros Typos (Free Press). This week he put an image on his front page of the Brandenburg Gate topped with a cartoon swastika, not the sort of thing his paper is known for.

“It's no coincidence that they chose the acronym PIGS,” Mr. Michelakis said. “They wouldn't do that for their own countries. Because my country has found itself at the centre of a cyclone, everybody to the north has turned against it.”

It doesn't help that Greece suffered a brutal Nazi occupation during the 1940s, during which hundreds of thousands were starved to death or enslaved and the treasury was robbed of its gold – a debt that Greeks feel has not been fully repaid.

That history erupted into the economic debate last week when Greece's deputy prime minister Theodoros Pangalos declared in a BBC interview that the Germans were indebted to the Greeks for their Nazi crimes.

At the financial level, some of the anger has abated. Thursday's successful bond issue, which saw the bonds oversubscribed, was seen as a sign that markets no longer believe Greece will default, and a boost in the euro shows reduced fears of a wider Southern European crisis. But as the austerity programs and cutbacks spread along the Mediterranean, it seems likely that the symbolic battle will continue.

Source: The Globe and Mail.com, March 5 2010
By: Doug Saunders