Germany, ECB play hardball with Greece

Sat Jan 31, 2015 2:42pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Paul Carrel and Jussi Rosendahl

BERLIN/HELSINKI (Reuters) - German Chancellor Angela Merkel ruled out a debt writedown for Greece on Saturday, and a European Central Bank policymaker threatened to cut off funding to Greek banks if Athens does not agree to renew its bailout package.

The euro zone's paymaster and the ECB are both taking a tough line with Greece's new leftist government, whose leader swept to victory last Sunday promising that five years of austerity, "humiliation and suffering" were over.

Alexis Tsipras has also promised to renegotiate agreements with the European Commission, ECB and International Monetary Fund "troika" and write off much of Greece's 320 billion euro ($360 billion) debt, which at more than 175 percent of gross domestic product is the world's second-highest after Japan.

Merkel flatly rejected such a possibility.

"There was already a voluntary waiver by private creditors; Greece has already been exempt from billions by the banks. I don't see a further debt haircut," she told German daily Die Welt in an interview published in its Saturday edition.

"Europe will continue to show solidarity for Greece, as for other countries hit particularly hard by the crisis, if these countries undertake their own reforms and savings efforts," Merkel added in a thinly veiled threat to Athens.

Without the support of international lenders, Greece would soon find itself back in an acute financial crisis.

Unable to tap the markets because of sky-high borrowing costs, Athens has enough cash to meet its funding needs for the next couple of months. But it faces around 10 billion euros of debt repayments over the summer.   Continued...

 
Jeroen Dijsselbloem, (L) head of the euro zone finance ministers' group, and Greek Finance Minister Yanis Varoufakis shake hands after their common press conference at the ministry in Athens January 30, 2015.  REUTERS/Kostas Tsironis