GERMAN CHANCELLOR Angela Merkel ramped up pressure yesterday on Greece over its austerity plan, even as doubts over the European Union/International Monetary Fund (IMF) rescue drove the beleaguered country’s financing costs to their highest level for more than a decade.
The hard line from Dr Merkel, who faces a difficult regional election in a fortnight, came as French finance minister Christine Lagarde said the parliamentary debates over the rescue in some European countries smacked of “posturing” for the sake of public opinion.
As EU economics commissioner Olli Rehn arrived in Berlin for key talks with German finance minister Wolfgang Schäuble, Dr Merkel told reporters that she will not release funds to Greece until the country’s government adopts a “sustainable, credible” plan to trim its deficit.
Saying a final decision on the aid plan may come in “a few days”, Dr Merkel made it clear she wants onerous cuts from Athens. “Germany will help when the corresponding conditions are fulfilled,” she said. “It must be negotiated in all calmness, level-headedness and decisiveness.”
Market concern about the viability of Athens’s efforts to stabilise what Greek prime minister George Papandreou has described as a “sinking ship” bore down on debt yesterday.
The premium over comparable German debt that investors charge to hold 10-year Greek debt rose by 0.76 of a percentage point to 6.35 percentage points yesterday, the highest since 1998.
With little overt sign of progress in talks on the austerity plan that will be tied to rescue loans, the value of the euro dropped 0.4 per cent against the dollar to $1.3326.
Warning that time was of the essence, Ms Lagarde said in New York that the possibility of a restructuring of Greek debt was “off the table”.
But a litany of dire warnings to Athens from Berlin reflects deep resistance to the rescue in the German public and within Dr Merkel’s coalition as she faces into a tough regional election on May 9th, a poll in which she risks losing the ability to legislate in Germany’s upper house of parliament.
Slow progress towards a rescue package – even after months of debate – comes as EU and IMF officials press Mr Papandreou for detailed proposals to pare back his deficit.
Mr Rehn’s talks with Mr Schäuble followed key discussions over Greece last weekend at the IMF’s spring meeting in Washington, an engagement the German minister was unable to attend for health reasons.
At the outset of the talks, Mr Rehn said the European Commission, the European Central Bank and the IMF hoped to complete review work on an aid plan for Greece by early May.
Before meeting Mr Rehn, Mr Schäuble briefed German parliamentary leaders on the legislation needed to facilitate the aid plan. He said German parliamentarians will act on the rescue package after the IMF completes talks on the terms of the assistance and was “optimistic” parliament would approve the aid.
Mr Papandreou faces the prospect of another round of strikes after the country’s biggest trade union, the General Confederation of Labour, said it will meet today to decide on a series of work stoppages in the near future.
In a statement, Greek finance minister George Papaconstantinou said it was wrong to believe that the IMF wanted different terms and conditions from the EU in talks on the aid plan. “There is a common approach,” he said.
“The common approach is simple: it is that Greece must over the next years reduce its deficits drastically, control its debt and proceed with all the structural adjustments so that we will have a more competitive economy.”
