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02/12/2016

Germany presses new Greek leaders to maintain reforms

Elections

Germany presses new Greek leaders to maintain reforms

Plenary chamber in the Reichstag building, seat of the German Bundestag.

[Ralf Schulze/Flickr]

After the far-left Syriza party triumphed in the Greek elections this Sunday, Germany is still insisting on the country’s implementation of reforms, which were part of the conditions of the country’s bailout. Meanwhile German industry has warned the party’s leader, Alexis Tsipras, against changing course. EurActiv Germany reports.

“We want to wait for the government to form and the first clear positions over how it sees Greece’s further reform path and fulfillment of its agreements,” explained government spokesman Steffen Seibert on Monday (26 January) in Berlin.

But he said Germany would offer the future Greek leadership its cooperation.

Greece had made great efforts and achieved “remarkable” reform successes over the past few years, Seibert said. Now it is important that the new government take up measures for further economic recovery, he added.

“A part of that is Greece holding to its prior commitments and that the new government be tied in to the reform’s achievements,” the spokesman said.

Germany is responsible for close to €50 billion of the financial assistance to Greece. At a meeting of euro area finance ministers in Brussels yesterday (26 January), Germany’s Finance Minister Wolfgang Schäuble said nobody was forcing anything on Athens.

After the European Financial Stability Facility (EFSF), the International Monetary Fund (IMF) is Greece’s largest creditor. Athens is supposed to pay back almost €4 billion in debt within the first quarter – of which almost €3 billion is owed to the IMF. In addition, an agreement with the donor “Troika” has not yet been met regarding a further €7 billion in assistance from the second Greek bailout programme.

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But the German Finance Ministry indicated the possibility for an extension of ongoing European aid. “In principle, that is an option,” explained a ministry spokeswoman Marianne Kothé on Monday in Berlin.

Still, she said, this should be decided by the Eurogroup of eurozone finance ministers, which was expected to address the topic on Monday. And the Bundestag should also agree on it, the spokeswoman said.

“If Greece submits an application for extension, then that would be an option and could, of course, be discussed,” explained Kothé. Meanwhile, she said Germany’s opposition to a haircut, or debt restructuring, remains “unchanged”.

Economic Affairs Minister Sigmar Gabriel, who hails from the Social Democratic Party (SPD), said the efforts to reduce debt and rebuild Greece must continue. “And then our European and German assistance will also continue,” he pointed out.

There will be no efforts in the future without reciprocal efforts, SPD faction leader Thomas Oppermann told the Rheinische Post.

Bavarian Finance Minister Markus Söder, from the conservative Christian Social Union (CSU), called for a tough approach. “All further payouts depend upon whether Athens adheres to the necessary conditions,” Söder said.

Bernd Lucke, leader of the Eurosceptic Alternative for Germany (AfD), called on Greece to leave the eurozone. Debt restructuring is a must, Lucke argued, Syriza is right about that. The money is lost anyway, he said.

German industry warns new Greek government

Industry representatives in Germany have warned Greece’s next Prime Minister, Alexis Tsipras, of setting the wrong course for his country.

The director general of the Federation of German Industries (BDI) Markus Kerber explained on Monday that it would be “catastrophic” if reform developments were to stagnate after the election of Tsipras’ far-left alliance.

“The winner of the election, Alexis Tsipras, must not shake trust in Greece now,” Kerber said.

The Cologne Institute for Economic Research (IW) is calling on European politicians to – as a last resort – clearly define the legal process for Greece to leave the eurozone.

“The current lack of a legal regulation would force a disorganised exit and therefore particularly economically harmful,” warned IW director Michael Hüther. If a eurozone country rejects reforms, it was important absolutely no more bailout funds were sent to it, he said.

The IW recommended that the Troika regularly publish a reform compliance report, including an achievement rate. If this rate falls below a certain value, Hüther called for punitive measures to be adopted.

He said the ECB could, for example, decide to refuse Greek government bonds as collateral. The political level of the monetary union could also decide whether or not to cut off financial assistance to Greece altogether, Hüther said.

Background

Greece pulled out of a painful six-year recession in 2014 and has tapped bond markets twice after a four-year exile. But investors began to fear a return to the days of crisis as the presidential vote loomed.

On 8 December, eurozone ministers decided to grant Greece a two-month extension to its bailout, rather than settle for the six-month extension to which Athens had objected. This was a boost, giving the country just enough time to wrap up a delayed bailout review before it exits the programme for good.

Since last summer, polls have shown that an early election would bring the Syriza party to power. The radical left wing party was Greece's biggest winner in the 2014 European elections and triumphed in the national poll on Sunday (25 January).