German Chancellor Angela Merkel will travel to Athens for the first time since Europe’s financial crisis broke out
there three years ago, a sign she’s seeking to silence the debate on pushing Greece out of the euro.
Merkel’s visit to
the Greek capital Oct. 9 to meet with Prime Minister Antonis Samaras
underscores the shift in her stance since she held out the prospect last year
of Greece exiting the 17-nation currency regime.
“The meeting could
mark the turning point to the Greek crisis,” said Constantinos Zouzoulas, an
analyst at Axia Ventures Group, a brokerage in Athens. “This is a very
significant development for Greece ahead of crucial decisions by the euro zone for the country.”
Merkel’s demand
for budget cuts in return for bailout packages has stoked public resentment,
with the German chancellor depicted in some Greek media and on protestors’
placards wearing jackboots and an SS uniform because of her insistence on
austerity. While Samaras welcomed Merkel’s visit as a “very positive
development,” union walkouts and public protests were immediately called to
coincide with the event.
Two bailouts and
the biggest debt writeoff in history have so far failed to halt Greece’s slide
into a fifth year of recession, prompting Christine Lagarde, the International Monetary
Fund’s managing director, to signal last month that another writedown might
have to be considered.
Help Greece
“We want to help
Greece stabilize within the euro zone,” Steffen Seibert, Merkel’s chief
spokesman, told reporters in Berlin today as he announced the trip, saying that
is the main message Germany can give to Greece. “We
do this by contributing massively to the rescue programs Greece I and Greece
II.”
He said Merkel’s
trip to Athens, her first since July 2007, reciprocated a visit by Samaras to
Berlin in August this year. The full program for the trip has yet to be
completed, he said, describing the visit as “normal.”
Greece’s ability
to stabilize and stay in the euro “will only be possible if Greece makes great
efforts of its own,” Seibert said. “We see that under the Samaras government
there’s a strengthened reform effort and we want to support that.”
Merkel has
softened her tone on Greece since Samaras’s election earlier this year. He
managed to form a coalition after beating off a challenge by parties that
advocated tearing up the terms of Greece’s rescues and calling the bluff of the
so-called troika of international creditors -- the IMF, the European Central Bank and European Commission
-- at the risk of triggering global meltdown in financial markets.
ECB, IMF
ECB Executive
Board member Joerg Asmussen said Sept. 29 that Greece may need more outside aid
as growth fails to meet projections, joining the IMF in expressing doubt two
bailouts will suffice. That followed Lagarde’s comments that the level of Greek
debt would have “to be addressed.” Thus two of the three troika members have
publicly called for more help for Greece.
Members of
Merkel’s coalition have raised options for Greece that include front-loading
aid payments to help it over liquidity hurdles and lowering the interest rate or extending maturities
on loans.
A third option in
the form of a second debt writedown focusing on bonds held by public
institutions, notably the ECB, was ruled out by President Mario Draghi yesterday. European
policy makers aren’t considering a rescheduling of any Greek debt held by the
official sector official, a European official said separately today.
Weighing Words
Merkel has yet to
show her hand beyond slapping down lawmakers from her coalition who suggested
it was time for Greece to quit the euro, telling them to “weigh their words
very carefully.” Germany will stand behind the Greek government as it strives
to overhaul the economy, she said during Samaras’s Berlin visit.
“I want Greece to
stay in the euro zone and that’s what I’m working for,” Merkel said on Aug. 24,
adding that she is “deeply convinced” he will make every effort to solve
Greece’s problems. The goal of austerity measures is to help Greece reach “the
light at the end of the tunnel.”
That contrasts
with a threat she delivered in November 2011, when former Prime Minister George Papandreou proposed a referendum on
austerity measures. She said the ballot, subsequently rescinded, “will revolve
around nothing less than the question: does Greece want to stay in the euro,
yes or no.”
Samaras, who
formed a governing coalition with two rival parties after winning the country’s
second set of elections this year, is trying to convince Greece’s creditors
that his government has done enough to secure its next bailout payment.
A Real Partner
“The question in
German leadership circles is do we have a real partner,” said Alexander White,
European political analyst at JPMorgan Chase & Co. in London. “If they do, then they are
in for the long term.”
Samaras echoed
Merkel’s language on the need for a sign of hope for the Greek people,
comparing their struggle with economic hardship and political turmoil to the
conditions that led to the collapse of the Weimar Republic in post-World War I
Germany and ushered in the Nazi era.
His interview,
published today in German newspaper Handelsblatt, came hours before Independent
Greeks, the fourth- largest Greek parliamentary party, called a protest outside
the German Embassy in Athens during Merkel’s visit to reject her “transforming
Greece into a German protectorate.” A petition to be handed to the ambassador
will also call for World War II reparations, the party said an e-mailed
statement.
“Greek democracy
stands before what is perhaps its greatest challenge,” Samaras said in the
interview. If his government were to fall, “chaos awaits,” he said. “The people know this government is Greece’s last
chance.”
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