German finance minister Wolfgang Schauble has warned Greek leaders on a heavily guarded trip to Athens not to play with fire by pressing for fresh debt-relief, and brushed aside claims that Greece’s rescue package is falling apart, as noted in The Telegraph.
“Greece must stop lobbying for a second restructuring of its debt. We have to stick to what has been agreed. Anything else is not in the best interest of Greece,” he said, during a day of political clashes in the capital. “If you take guarantees and then you are discussing a haircut, you are a liar. You will destroy any confidence.”
Greek Economy Is Still In A Downward Spiral
The Greek economy is still in a downward spiral. The IMF has penciled in contraction of 4.2pc this year. Yet Greek think tank IOBE – which has been more accurate through this crisis – expects a fall of 5pc, and possibly 7pc.
Schauble said Greece’s only option is to stick to tough reforms and restore competition by slashing the budget. “There is no short-cut. We Germans know this. Ten years ago we were the sick man of Europe. We had to take a long and painful path to become the anchor of stability in Europe.”
Professor Yanis Varoufakis from Athens University said the comparison with Germany confuses two different situations, repeating the discredited narrative that Europe’s crisis stems from overspending by the south, rather than from misaligned cycles and excess capital flows.
“Germany was able to piggyback on a booming global economy when it did its homework 10 years ago. If it had tried today with the rest of the eurozone imploding, and the U.S. and China faltering, its reforms would have ended in ruin just like ours,” he said.
Mr Schauble Admits Greece May Need A Second Bail-out Package
Schauble admitted that Greece may ultimately need a second bail-out package as public debt spirals to 176pc of GDP this year, higher than when Greece first defaulted. The privatization plan intended to chip away at the debt has stalled. Russia’s Gazprom has pulled out of a deal to buy Depa, the Greek gas utility.
But Schauble insisted that talk of writing off loans from EMU bail-out funds or imposing losses on northern Eurozone taxpayers would have a devastating impact on support for Greece.
Greece Government Demands War Reparations From Germany
Alexis Tsipras, leader of the opposition Syriza party, called Schauble’s visit a sham that was intended to keep a lid on the crisis until after the German elections in September.
Tsipras pointedly called for a popular vote on whether to demand reparations from Germany for its wartime occupation, which led to the death of 300,000 Greeks and the seizure of Greek assets.
The government opened a secret inquiry into the case last year – a move seen as a ploy to give Athens a bargaining chip. The attempt to link the two issues has led to accusations of moral blackmail from politicians in Germany, and Schauble has said that reparations are “out of the question”.
The total demand may be as high as 162 billion euros equivalent of almost 80 percent of Greece’s current annual gross domestic product. Were Germany to pay the full amount, it would go a long way toward solving the debt problems faced by Athens. Berlin, however, has shown no willingness to revisit the question of reparations to Greece.