Nov. 7 (Bloomberg) -- German Chancellor Angela Merkel and her finance minister kept up the pressure on Greece to deliver on its austerity package, saying that any new administration in Athens must carry out its budget-cutting commitments.
Merkel spoke with outgoing Greek Prime Minister George Papandreou by telephone today and thanked him for acting with “courage” to implement structural reforms, Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin.
Merkel and Papandreou “agreed that the priority task of the transitional government must be to ensure the complete implementation of all decisions taken in Brussels on Oct. 26-27,” Seibert said. Only then could early elections be held, he said. Papandreou “understood that Greece needs sweeping structural reforms and consistent savings efforts,” Seibert said. While painful for Greeks, “it is an unavoidable path.”
Merkel’s comments as relayed by her spokesman show that a new Greek government can expect just as much pressure from European leaders to hold to its commitments as its predecessor. Papandreou agreed yesterday to step down to allow the creation of a national unity government to secure outside financing and avert a collapse of the Greek economy.
Speaking in Tampere, Finland, German Finance Minister Wolfgang Schaeuble said that there’s been a fundamental shift in how financial markets view sovereign debt. Preventing contagion is a “tremendous challenge,” he said, calling for “bold” steps by European governments to address the problem.
All European Union members need to deliver on their obligations, Schaeuble said, warning that solidarity in the bloc “has its limits.” In that context, a restructuring of Greek debt as agreed in Brussels last month is no panacea without further Greek reform, he said.
“Whatever will happen, Greece has to stick to what was agreed,” Schaeuble said. “New government, no government, with new elections or with the referendum or not, Greek people -- as I said months ago in the German parliament -- they have to take the steps.”
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