Think what you will about Wikileaks, but a just published U.S. Embassy report sheds important new light on Germany's stance in the face of the crisis in Greece. The report, which the U.S. Embassy in Berlin sent to Washington D.C., reveals a frightening cluelessness and serious misjudgment on the part of the German government, not to mentio a low level of political savvy.

The document records talks that U.S. Ambassador Philip D. Murphy and others at the embassy held with high-ranking government representatives and finance managers in Germany. A Harvard graduate, Murphy has an MBA from Wharton Business School and spent 23 years with Goldman Sachs, in Frankfurt, New York and Hong Kong. From 2003 to 2006 he was a senior director at the firm's New York headquarters.

All the information in Murphy‘s missive was gathered in the weeks around the February 2010 EU Summit, when the Greek debt crisis was becoming acute. The information points to the fact that Germany's government was by all appearances refusing to take the situation seriously, and failing to inform its citizens accordingly.

Before the summit meeting, the Greek situation was discussed back and forth within the German government, the U.S. diplomats wrote. However, although the writing was on the wall for the disaster that was looming, the government sought to avoid having to divulge the truth to its citizens for as long as possible.

Nobody liked the idea of telling German taxpayers, who were already worried about a record German deficit, that they were going to have to pick up the tab for the irresponsible behavior of another country, says the diplomatic report.

One staffer at the Ministry of Finance told embassy staffers that Germans were "disgusted" by the situation in Greece. So the German government was glad that at the EU Summit held on Feb. 11, 2010, no concrete measures to help Greece were agreed on.

U.S. diplomats reported that Chancellor Angela Merkel was visibly relieved that she didn't yet have to explain to Germans why their federal government had to increase debt to rescue the Greeks.

According to the Americans, Wolfgang Merz, a high-ranking employee of the Finance Ministry, evaluated the outcome of the summit meeting by saying that "a bailout now would carry too many downside risks," adding that bailing the Greeks out would create a precedent for EU countries like Spain and Portugal.

At the time, German experts were unable to imagine any intervention on the part of the International Monetary Fund (IMF). Karlheinz Bischofberger of the European Central Bank (ECB) told the Americans that it was more than unlikely that the IMF would be asked to bail Greece out. As subsequent events have shown, that was not the case.

Talk of Germany leaving the euro zone

While the U.S. diplomats listened patiently to the viewpoints of their German interlocutors, their analysis of what they were hearing showed a very different picture of the situation. They concluded that the German federal government, the ECB and private German economists were playing down the seriousness of the Greek situation and its effect on the stability of the euro.

Particularly remarkable are some of the comments attributed to Deutsche Bank's chief economist, Thomas Mayer. In talks with Ambassador Murphy he mentioned the possibility of Germany leaving the euro zone.

He was apparently basing his remarks on a 1990s decision taken by Germany's Constitutional Court, which ruled it would be possible for Germany to leave "if the currency union were to become an inflation zone" or the German taxpayer a "de facto rescuer."

Mayer suggested a "Chapter 11 for all euro zone states' whereby all countries in a precarious condition would come under trusteeship until such time as their house was in order. Mayer is reported as saying he regretted that this idea had not found any takers.

Things have changed since. After the last EU summit a number of signs pointed to the possibility of Greece being the first euro zone country to come under economic guardianship.

Read the original article in German

Photo - Office of George Papandreou