OUTRAGE: Pensioners shout slogans against the EU and the government during an anti-austerity march towards the EU offices in central Athens on Monday, a day before German Chancellor Angela Merkel visits Greece.  Picture: REUTERS
OUTRAGE: Pensioners shout slogans against the EU and the government during an anti-austerity march towards the EU offices in central Athens on Monday, a day before German Chancellor Angela Merkel visits Greece. Picture: REUTERS

SUDDENLY, in Berlin, Greece is back in fashion. For some time now Angela Merkel seemed to have airbrushed the Hellenic state off the map. She did not want to know. Now she does.

The German chancellor travels to Athens on Tuesday on a journey of political symbolism, all part of a bid to clinch victory in next year’s German elections.

The winning formula is this: be nice to Greece when you travel abroad and when you meet their representatives in Berlin. Be tough when you speak to the Bundestag or when you embark on the election trail.

Add a few extra embellishments, like the Greek problem was all the fault of her predecessor Gerhard Schröder who let them into the euro in 2001, and triumph in 12 months is more or less guaranteed.

Ms Merkel’s visit has little to do with securing Greece’s economic future. It is all to do with securing Ms Merkel’s political future. And the latter is looking much brighter than the former. The average German voter is irritated at the thought of dispatching more taxes or savings to feckless southerners, yet is desperate for the respect and goodwill to Germany that comes from public displays of magnanimity. When Ms Merkel flies to Athens, she is showing she is in charge, and she cares. These are things the voters expect a German leader to do. All the more so when the opposition Social Democrats have just announced their candidate to displace her in next year’s elections: the steely economic specialist Peer Steinbrück.

The precise and resolute former finance minister can (when he feels like it) convincingly out-talk the chancellor on economic matters. But Mr Steinbrück has yet to convince his party, let alone the electorate, he has a soul.

TV footage of the chancellor looking earnest on classical Hellenic territory, maybe a few photogenic ruins behind her for better effect, will compressively demonstrate that she and not Mr Steinbrück is capturing the moral and political high ground.

Then there is that little matter of German exports. Were it not for the dead weight of the Greeks, the Portuguese, the Spaniards, and so on, the euro would be valued at closer to $1.80, not $1.30.

Leave aside the issue of whether the low euro actually makes German consumers poorer and whether German savers will anyway have to pay for the whole expensive charade over time. The fact remains that the constant international drip-drip of bad news about the eurozone seems to be good for the still export-led German economy.

Ms Merkel’s message in Athens goes in two directions: austerity tinged with generosity.

Foreign observers wonder how the Germans can steadfastly maintain diametrically opposed arguments on Greece’s membership of monetary union. "Why don’t the Germans either decide to subsidise them for the next 15 years, or throw them out?" To put the question is to negate the truth that, for Germany, the project of European integration boils down to avoiding making decisions.

Led by the International Monetary Fund, which said last month that one departure from monetary union could trigger a "full-blown panic" that rips the euro apart, the world community has convinced Ms Merkel that Greece holds mankind’s future in its hands.

Allen & Overy, the UK law group, has spelled out Greece’s claw-like grip on Europe in a brilliant analysis. "Normally, the bankruptcy of a region forming part of a currency union is not fatal to that union.… But a break-up of a currency union can be driven by the bankruptcy of member states if the bankruptcy is so large that it threatens the value of the currency itself in the eyes of the rest of the world.

"In that situation, the bankruptcy puts pressures on other members to bail out the bankrupt."

Yet Greek Prime Minister Antonis Samaras, ruthlessly exploiting his position, is determined to look to the bright side. In an interview with the German business daily Handelsblatt, he declined to dwell on the past. Instead he asked for lower interest rates on the European Central Bank’s (ECB’s) holdings of Greek bonds and said, not for the first time, that the money runs out next month.

There are signs of diminishing stress. The Bundesbank’s claims on the ECB under the Target-2 system of intra-European monetary balances fell by about €60bn last month as a result of lower tensions in the wake of the ECB’s announcement of potential bond-buying.

In the wake of sharp recession-induced falls in imports, Greece and Spain both ran current account surpluses in July, the latter more important than the former, since it is the first time in 15 years that Spain has been in the black.

Yet monetary union remains an uncomfortable race against time. Undoubted achievements in the real economy are being outweighed by capital flight and social unrest. Ms Merkel’s Greek visit may give the impression that politicians are in charge of economics. Yet economic realities will catch up again soon.

David Marsh is co-chairman of the Official Monetary and Financial Institutions Forum