Tuesday

16th Aug 2022

France, US support Greece in debt battle

  • Schulz (l) to Tsipras: Tone down the anti-Merkel rhetoric (Photo: europarl.europa.eu)

Paris and Washington have expressed support for Athens’ attempts to renegotiate the terms of its bailout, as Germany comes under increasing pressure to reconsider its approach to austerity in the eurozone.

French finance minister Michel Sapin on Sunday (1 February) met the new Greek finance minister, Yanis Varoufakis, and reiterated that there is no question of annulling Greece's debt, but said a “delay” could be considered.

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"No, we will not annul. We can discuss. We can delay," he said on French TV Canal Plus after they spoke.

"That the government would like to discuss ways to reduce the weight of this debt and the reimbursement of this debt, that appears legitimate to me," he added.

US president Barack Obama also entered the debate by urging the eurozone to look at how the US returned to growth.

“Fiscal prudence is important. But what we’ve learnt in the US experience … is that the best way to reduce deficit and to return to fiscal soundness is to grow.

“You cannot keep on squeezing countries that are in the midst of depression,” he told CNN.

Varoufakis, for his part, said Greece is "not going to ask for any new loans" and that his government will seek a deal with international creditors "by end May".

This is based on the assumption that the European Central Bank (ECB) will keep emergency funding flowing - something the Frankfurt-based bank has not confirmed.

Currently, the ECB provides Greek banks with emergency cash because the country is considered to be compliant with bailout requirements.

But if Athens is in breach of those commitments, the ECB could pull the plug.

“There will be no surprises if we find out that a country is below that rating and there’s no longer a programme that that waiver disappears,” ECB vice president Vitor Constancio said on Saturday in Cambridge, UK.

Varoufakis' stop in Paris came before a tour by the new Greek prime minister, Alexis Tsipras, of Paris, Rome, and Brussels this week as he tries to assure European partners that Greece will stick to its commitments.

Tsipras and his government are trying to negotiate a deal on the exit from the bailout programme which should have ended in December, but which was extended until the end of February to wait for elections to take place.

European Parliament chief Martin Schulz - a German Social Democrat who has often criticised the austerity policies of chancellor Angela Merkel - told Die Welt that Tsipras should tone down his anti-Merkel rhetoric.

"Tsipras is well-advised if he ends his attacks on Angela Merkel. In the end it is also the German government who will have to help him. And it is not only the Germans who look sceptically at the developments in Athens, but the entire EU," the EU politician said.

Schulz, who visited Athens last week and met Tsipras, said that he didn't get the impression Tsipras had a clear idea of where he was heading.

"I was very clear: He has full support from Brussels if he is serious about fighting tax evasion and tax avoidance, and if he makes sure that not only little people are paying the price of austerity, but also the rich who took their money out of the country in the darkest hours of the crisis," Schulz said.

But he told Tsipras he would be wrong to think that "he can send the troika [of international lenders] back home and that the Europeans are still going to fund his election promises."

"That's why I advised him not to question the rules that have been agreed or to scrap them unilaterally," Schulz added.

Merkel herself told a German newspaper, Hamburger Abendblatt, that Greece already had its debt reduction in 2012, when private creditors agreed to slash billions off its burden.

"I do not envisage fresh debt cancellation," she said.

"The aim of our policy was and is that Greece remains permanently part of the euro community. Europe will continue to show its solidarity with Greece, as with other countries hard hit by the crisis, if these countries carry out reforms and cost-saving measures," she added.

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