Thursday

6th Oct 2022

Germany, France press Greece over austerity measures

  • Wolfgang Schauble, German finance minister (Photo: Bertelsmann Stiftung)

Germany and France have indicated that Greece must provide more details on the austerity measures to be taken in the coming years before eurozone states give their final approval on financial support.

The separate warnings from Berlin and Paris on Sunday (25 April) came despite pressure for a quick response to Greece's request for aid. On Friday, Athens was forced to call in a recently brokered €40-45 billion EU-IMF loan after fresh EU data showed the country's 2009 deficit figure to be higher than previously estimated, evoking a harsh response from financial markets.

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German finance minister Wolfgang Schauble said Greece must restructure its economy radically as an "unavoidable and absolute prerequisite" to aid approval.

"The fact that neither the EU nor the German Government has taken a decision means that the response can be positive as well as negative," Mr Schauble told the mass-selling Bild newspaper. "This depends entirely on whether Greece continues in the coming years with the strict savings course it has launched."

The European Commission has also indicated it supports Berlin's stance that Greece must come up with a detailed programme for cutting the budget next year, arguing it is a necessary measure to convince markets of the Greek government's resolve to improve public finances.

For her part, French finance minister Christine Lagarde said the EU would halt loan payments if there were any suspicion that Athens was not living up to its commitments. "We will need stricter control mechanisms to make sure we don't fall into a bottomless pit," she said.

Earlier this month eurozone finance ministers agreed to provide up to €30 billion in bilateral loans to Greece this year, to be charged at an interest rate of close to five percent, with a further €10 billion-15 billion to come from the IMF.

Germany is expected to be the biggest contributor, providing about €8.4 billion, followed by France on €6.3 billion. Figures for 2011 and 2012, as part of a three-year lending scheme, have yet to be agreed.

Germany

On Saturday, European Council President Herman Van Rompuy insisted eurozone nations were taking the necessary steps to be able to deliver "swift assistance" to their debt-laden partner Greece.

IMF managing director Dominique Strauss-Kahn also promised the fund would "move expeditiously," while US treasury secretary Timothy Geithner encouraged the lenders "to move quickly to put in place a package of strong reforms and substantial concrete financial support."

Greece' request for aid must now receive a positive assessment from the European Central Bank and the European Commission, before then being approved by euro area countries.

German Chancellor Angela Merkel has previously said that any support must only come as a last resort, once market financing had dried up. Ms Merkel is facing crucial regional elections on 9 May in the populous state of North Rhine-Westphalia, with polls suggesting bilateral support for Greece is unpopular with a majority of the country's voters.

The head of Ms Merkel's Christian Democrat group in the European Parliament, Werner Langen, said that an aid package was not a lasting solution to Greece' problems. Greece should perhaps "leave the eurozone and become competitive again with the help of tough structural reforms," he told Spiegel magazine.

Currently trailing in the polls, Germany's Liberal party has also been quick to attack the imminent support for Greece, criticising Mr Schauble for offering the "honey pot" too soon.

With any aid for Athens first needing parliamentary approval in Germany, as in several other euro area states, the country's political party chiefs are meeting on Monday to explore the possibility of an accelerated loan bill.

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