13th Jul 2020

France and Germany suggest account for Greek debt funds

  • 'I honestly can't understand how additional days will help,' says Merkel as Greek talks drag on. (Photo: Valentina Pop)

France and Germany on Monday called for the creation of a 'blocked' account for Greece to pay down its debt, another sign of waning trust in Greek politicians whose negotiations on more austerity measures have dragged on over several deadlines.

"We propose that the interest on Greek debt is placed in a blocked account that will also guarantee that the debts of our Greek friends will be paid," French President Nicolas Sarkozy said during a joint press conference with German Chancellor Angela Merkel in Paris.

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The German leader said she also backed the idea of having the interest payments earmarked to an 'extra account' so as to "make sure that Greece will steadily make this money available."

The Franco-German plan comes only weeks after a leaked paper from Berlin suggested Greece should be placed under the supervision of a special budget commissioner appointed by the eurozone governments, causing outrage in Athens and finding little support in other capitals.

The government in Athens is struggling to secure cross-party political support for the further spending cuts demanded by the 'troika' of EU commission, European Central Bank and International Monetary Fund officials to secure a €130bn bail-out the country desperately needs to pay back debt due in March.

But talks have dragged on beyond a 'D-Day' set for Sunday, as parties refuse to sign up to wage cuts and pension freezes ahead of parliamentary elections set to take place in April. They had hoped that EU governments would step up their contribution, as an extra funding gap of some €15bn has emerged since the bail-out was politically agreed in October last year.

Germany and the other three 'triple A' rated countries - the Netherlands, Luxembourg and Finland - met on Friday in Berlin and made it clear that Greece should not expect any extra help, but bridge the gap through more spending cuts.

On Monday, Merkel showed little sympathy for the delayed talks: "I honestly can't understand how additional days will help. I want to reaffirm, there can be no agreement if the Troika proposals are not implemented. Time is of the essence. A lot is at stake for the entire eurozone."

The European Commission was also extremely downbeat on Monday. Economic affairs spokesman Amadeu Altafaj Tardio said Greece is "already past deadline" and late on delivering the reforms attached to the first bail-out, contracted in 2010. "These are not fresh austerity measures, we are not asking for anything extra. These are all promises they have already made," Altafaj Tardio said.

He also indicated that Greece should be able to make further wage cuts pointing out that, when the 13th and 14th month salaries are taken into account, the country's minimum wage averaged €871 a month. Spain, which is not under an EU-IMF programme, has a minimum wage of €748 while bailed-out Portugal's is at €566.

One of the 'troika' measures the Papademos government reluctantly agreed to on Monday is slashing 15,000 jobs from the public sector.

But the deal still has to be sealed by all political parties on Tuesday, amid a general strike called by the major trade unions.

Finance minister Evangelos Venizelos on Monday night accused political leaders of navel gazing at a moment when "national unity" is needed instead of "conventional, outdated, party confrontation as if nothing has happened."

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