Why is Germany so tough on Greece? Look back 25 years


Dirk Laabs in The Guardian:

It was 25 years ago, during the summer of 1990, that Schäuble led the West German delegation negotiating the terms of the unification with formerly communist East Germany. A doctor of law, he was West Germany’s interior minister and one of Chancellor Helmut Kohl’s closest advisers, the go-to guy whenever things got tricky.

The situation in the former GDR was not too dissimilar from that in Greece when Syriza swept to power: East Germans had just held their first free elections in history, only months after the Berlin Wall fell, and some of the delegates from East Berlin dreamed of a new political system, a “third way” between the west’s market economy and the east’s socialist system – while also having no idea how to pay the bills anymore.

The West Germans, on the other side of the table, had the momentum, the money and a plan: everything the state of East Germany owned was to be absorbed by the West German system and then quickly sold to private investors to recoup some of the money East Germany would need in the coming years. In other words: Schäuble and his team wanted collateral.

At that time almost every former communist company, shop or petrol station was owned by the Treuhand, or trust agency – an institution originally thought up by a handful of East German dissidents to stop state-run firms from being sold to West German banks and companies by corrupt communist cadres. The Treuhand’s mission: to turn all the big conglomerates, companies and tiny shops into private firms, so they could be part of a market economy.

Schäuble and his team didn’t care that the dissidents had planned to hand out shares of companies to the East Germans, issued by the Treuhand – a concept that incidentally led to the rise of the oligarchs in Russia. But they liked the idea of a trust fund because it operated outside the government: while technically overseen by the finance ministry, it was publicly perceived as an independent agency. Even before Germany merged into a single state in October 1990, the Treuhand was firmly in West German hands.

More here.