A Trojan Bailout? Examining Media Coverage of the Greek Debt Crisis
Eurozone countries formally approved Greece’s financial bailout in mid-March after weeks of negotiations. An integral part of the bailout deal was a bond swap in which 85 percent of Greek bondholders – among them French, German and British banks — agreed to a ‘haircut,’ or loss, of 75 percent of their original investment in Greek bonds.
The bond swap overnight cut 100 billion euros from Greece’s 368 billion euro debt burden, but the bailout — Greece’s second in since 2010 — had heavy strings attached. Greece had to agree to severe austerity measures over the coming years, and to having its financial affairs monitored by the ‘Troika’ of institutions that oversaw the negotiations—the European Central Bank, the European Commission, and the International Monetary Fund.
In the run-up to Greek elections May 5, ‘anti-bailout’ parties on the left and the right gained support from an electorate that is tired of austerity. If the new government reneges on the spending cut promises, however, it may not only undercut investor confidence in Greece, confidence in all the Eurozone may be at stake.
Media coverage in Greece, Germany and the United States reflected tempered relief that a default had been immediately averted, but little optimism beyond that. The media in each nation reflected it’s country preoccupation with revival of the Greek economy, the future of the European Union, the erosion of Greece’s sovereignty, or the social tensions caused by austerity. The framing of stories strongly differed depending on the national eyes of the beholder.
National Public Radio, The New York Times
Coverage by National Public Radio (NPR) and the New York Times assessed the global financial implications of Greece’s crisis, but also commented on the effects the invasive bailout terms would have on Greece’s political culture.
A report by Mark Memmott on NPR led with the phrase “Europe’s financial mess,” and said the bailout was necessary to “prevent a domino-like tumble of other ailing European nations and the unsettling repercussions that could have for the U.S. economy.”
When the bailout terms were being negotiated in February, the Financial Times obtained a leaked report compiled by financial analysts at the IMF and the European Commission. The report warned that austerity in Greece could lead to higher debt in the future and that it was very likely Greece would need “prolonged financial support.” NPR’s Jacob Goldstein analysed the report and concluded that Greece was likely on its way to needing another bailout—which would mean trouble for the rest of the Eurozone.
Nick Kitsantonis wrote in the Times that, far from being ‘saved’ by the bailout, Greece still faced huge challenges. He suspected a lack of legal mechanisms for implementing the necessary austerity measures. Cuts to public services had already sparked protests over the minimum wage decrease, and walk-outs by hospital staff over cuts to health services.
Also in the Times, Landon Thomas Jr’s analysis claimed that the structure of the bailout would make future help more difficult to pull off. “Next time,” he wrote, “and there is more than likely to be a next time,” it will be harder to get Greek bondholders, who are now mainly IMF holders rather than private ones, to accept a loss. This bailout merely exchanged Greece’s debt from private to public hands, favoring banks in the process.
Other coverage frames the bailout through its effect on Greece’s self-determination and the political tension resulting from the terms of the bailout. Reporting from Brussels for NPR, Eric Westervelt said that for the other EU states, “oversight” was a key condition to agreeing to bail out Greece. As a result, Greece would suffer a “loss of sovereignty and democratic control.”
Landon Thomas Jr agreed that the bailout conditions were an “unprecedented encroachment by the European Union into domestic affairs of a sovereign state.” In her analysis of the austerity measures, Rachel Donadio said Greece was experiencing a profound and distressing “dissolution of a democracy in plain sight” that would have far-reaching consequences for Democratic Europe. Sylia Poggioli in the Times reported that many Greeks were angry about the terms of financial monitoring: Greek protesters said the Troika’s presence in the country, and its right to take gold from the Bank of Greece, would effectively reduce their country to a “protectorate.”
Bild, Der Spiegel
While narratives in the US media are more likely to view Greece as just one element of a Euro-wide crisis, German commentary distances Greece, and certain other ‘Southern’ Eurozone members, from the geographical and financial core of the Eurozone. Coverage and analysis in the German media was heavy with soul-searching about the future of the EU and Germany’s leadership role. Germany saw itself as a leader on pushing through Greece’s bailout and, by proxy, a savior of the Eurozone.
There was some doubt about the bailout’s effectiveness, and discussion of Greece’s possible Eurozone exit. At the more extreme end, the leadership narrative fretted that it continues to fall to Germany to ‘save’ a fiscally irresponsible ‘Southern’ nation, and that it may have to do so again in the future.
Bild’s is an example of a more extreme narrative of fiscal irresponsibility. The largest selling daily in Germany, Bild is a self-consciously conservative organ with a tabloid feel. News updates on the Greek crisis often referred to the country with the shorthand nickname ‘Pleiteland’— ‘Pleite’ being a colloquial word for ‘broke’– rather than use the more neutral word for bankruptcy.
As a Greek bondholder, Bild had a literal stake in the matter and was very vocal about the reasons it was rejecting the bond swap. The paper bought 10,000 euros worth of Greek debt at a heavily discounted price of 4,815 in December 2011, but with the ‘haircut’ on its investment it would only get back 3000 euros. An editorial emphatically said “No!” to the bailout because, it claimed, the deal alone would not help Greece in the long run—what the country needed was a Eurozone exit. In the end, Bild was forced to take the hair cut because two thirds of bondholders agreed to the swap.
Bild was also concerned about the EU’s future. Former chancellor Helmut Kohl, Merkel’s political mentor, wrote a guest editorial urging Germany not to forget the Europe Project, warning against the return of “old ghosts.” Political unity and strength of the EU are paramount, he wrote.
German commentators from both sides of the political spectrum, including the Frankfurter Allegmeine and Die Welt, warned that Athens would be dependent on the EU for many years. Wolfgang Kaden in the Spiegel advocated a return to “Maastricht roots” when states had their own responsibilities. We must, he wrote, reinstate national autonomy — and responsibility — for determining financial policies and honoring treaties, so that there will be no more need for “evil Germans to crack the whip.”
“We have become the Americans of Europe,” Jens Fleischauer wrote in the Spiegel, in response to media reactions in Germany and Greece surrounding the bailout agreement.
Some German media lament that the ‘Southern’ nations are not grateful for their ‘help,’ he wrote, and that people came to secretly rely on the US as a global cop in the same way that Germany’s neighbors are now “expecting the Germans to save the euro.”
German Interior Minister Hans-Peter Friedrich told Der Spiegel that Greece should leave the Eurozone because it would be easier for Greece’s economy achieve the “necessary competitiveness” outside of the Eurozone. He did not advocate a forced exit, but argued instead for certain “exit incentives” that Greece “could not refuse.” Friedrich was one of the most significant voices in the anti-bailout faction when it was put to a vote in the Bundestag (German Parliament). Dissent from him and others on the issue prevented Merkel from achieving a symbolic majority vote on the bailout’s approval. This opposition to Merkel’s ambition to ‘save Greece to save the Euro’ has been interpreted by analysts as a clear sign of trouble in Germany’s grand coalition between Friedrich’s own Christian Social Union (CSU) and Merkel’s CDU (Christian Democratic Union).
While many other media outlets do not frame Greece as fiscal failure, there is consensus that the bailout merely bought some time. Even the more sympathetic coverage is somber. In the Spiegel, Christian Rickens wrote that there will be a “next wave” of the euro crisis and that the other Euro governments must make sure Greece remains an exception, not a harbinger. Germany, he reminded his readers, has also missed its spending cut targets and if there are further troubles, “everything will depend on Germany.”
Germany’s role in steering the bailout was instrumental, but its leadership style did not sit well with many Greeks. The invasive conditions of the bailout did not help matters. In the weeks leading up to the bailout’s final approval, the Greek media resurrected inflammatory old images of the Germans as Nazis. Cartoons showed Angela Merkel riding a tank into Greece. Horst Reichenbach, the European Commission’s Task Force leader, was pictured as a Wehrmacht officer, and taglines used puns on the “Reich” in his name.
Ugly Germans stereotypes aside, Greece’s coverage, unsurprisingly, is concerned with the practical effects of the bailout on the ground in Greece, and the fairness of the bailout structure. Two articles in I Katherrimini, an Athens-based daily newspaper, focused on the necessity of the second bailout being a result of the “failure” of the first one, in May 2010, which did not put enough emphasis on growth.
I Katherimini’s English edition also ran an editorial about Horst Reichenbach’s assessment of progress on 15 March, with the author twice using the word “accused:” that Reichenbach had seen some progress in the implementation of the austerity measures but accused Greece of not putting enough legislation into practice.
While some US media explored sovereignty issues and the German coverage was preoccupied with its own leadership, Greek coverage reflected the deepest concerns were about the practical results of austerity, especially the coming wage cuts and the fate of public services. The narrative following the official ‘success’ of the bailout was best summarized by “uncertainty” or as an editorial puts it, “relief, but tempered by” reports and details of austerity measures coming up. The bailout’s long-terms success is an ‘if’ that will depend on the implementation of the measures, but there is also a note of reassurance. Jean-Claude Juncker, President of the Eurogroup, was quoted insisting that Greece would not leave the Eurozone, and that there might be a third rescue package.
One point of agreement from German, US and Greek coverage is that there are grave doubts that the bailout will save Greece in the long term. A Nick Malkoutsis editorial claimed that the bailout had unfair terms. There was no “collective sigh of relief” because, looking closely, it was very unsatisfactory deal. He even called it a “Trojan horse.” The bailout will burden the taxpayer, with Greece having to plug the 100 billion euro savings in other ways—echoing some points made by Landon Thomas Jr’s in the New York Times.
Interestingly, Malkoutsis also wrote that negotiations were reached despite other EU leaders taking a backseat to Greece’s talks with banks and lawyers (which will come as a surprise if you read the German coverage of Merkel’s leadership). His bottom line is that the bailout will not have positive effects on the Greek economy.
In the week following the bailout agreement, Paul Krugman wrote in his op-ed, ‘What Ails Europe?’ that Europe as a whole appears to be sliding back into recession. But he says that two dominant narratives—Republican and German—are both wrong. The Republican narrative is that the EU is poor because it has done too much to help the poor, while the German narrative is that Greece is about the fiscal irresponsibility of Southern states. The “Hellenization of our economic discourse” is wrong. In truth, he argues, the issue is monetary. The euro created false confidence in private investors, flooding unsustainable amounts of capital into the region. Europe has tough choices ahead, but getting the Greek narrative wrong in the US will have far-reaching consequences for policies, pushing cruel austerity when that is not the right course of action at all.
Krugman is an economist and Nobel prize-winner, so perhaps it is not surprising that he was one of the few writers in the American media to offer broader economic context on austerity policy in general. The narrative of the Greek and EU crisis in most of the media has focused on the more immediately pragmatic question of whether Greece will be an exception, or just the first of many EU countries to fall into such a deep economic crisis.
But there is a second related question that has gone unasked: whether the pessimistic coverage itself might contribute to creating a self-fulfilling prophecy. After all, the fear that people in Greece would withdraw cash and investments from the country led people to do just that.
Alexa Van Sickle is a student at Columbia University Graduate School of Journalism. She can be reached on Twitter (@alexavsickle)