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The German government is likely to become more flexible to altering the terms of Greece’s second bailout to prevent a Greek exit from the euro currency, Clemens Fuest, a senior advisor to the German Finance Ministry and the future head of the Centre for European Economic Research (ZEW), said today in an interview with Business Insider.However, he qualified that moderation will only come after a new round of Greek parliamentary elections on June 17.
His statements raise doubts about threats from German Chancellor Angela Merkel and members of her government that there is no room to negotiate the terms of the Greek bailout deal.
“I absolutely don’t think that room for negotiation is zero,” Fuest told Business Insider, arguing Germans are not as resolute on this issue as they have made themselves out to be right now.
“I don’t think that the German government in particular will want to make concessions beforehand,” he qualified. “The reason is that mentally this message would be very difficult” for policymakers both domestically and in terms of forcing countries on a bailout program to make necessary economic reforms.
German leadership, as well as other EU leaders, have been attempting to convince Greek voters that the parliamentary vote will amount to a referendum on membership in the European Monetary Union.
Regardless of the fact that Germany will likely blink first in a game of chicken with Greek anti-bailout parties, Fuest told Business Insider that recent reports about German leadership softening towards measures like eurobonds or centralized deposit insurance for the banking sector are overblown.
“What is much more likely is that the outcome of [the push for eurobonds and stronger crisis averting measures] will be some more face-saving measures like project bonds” or support for new, mutually financed programs by the European Investment Bank, he said.
“I think that the situation is very serious really and rather fragile, but I don’t think the situation is serious enough for a radical shift in German government policy,” Fuest added. “This would require some kind of emergency situation,” like “a massive bank run in Spain.”
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