German Chancellor Angela Merkel signaled that she’s willing to discuss a Greek request for more time to meet the terms of its international rescue, leaving the door open to potential concessions.
Merkel, responding to a reporter’s question in the Moldovan capital Chisinau today, declined to discuss the request publicly before meeting with Greek Prime Minister Antonis Samaras in Berlin on Aug. 24, saying she’d “have the opportunity to communicate directly” with him on the matter then.
“We won’t find solutions on Friday,” Merkel said, reiterating that leaders must await a report being drawn up by the so-called troika of Greece’s international creditors: the European Central Bank, the European Commission and the International Monetary Fund. “We will wait for the troika’s report and then we’ll take decisions,” she said.
Merkel’s comments suggest a thaw in relations between Germany and Greece after Greek publications drew Nazi-era comparisons with its treatment during the debt crisis and German newspaper Bild called for Greece to be expelled from the euro. German officials have said in recent days that concessions are possible for Greece so long as Samaras shows a willingness to meet the main targets set out in his country’s bailout program.
Greek 10-year bonds advanced today, pushing the yield on the securities to the lowest in more than three months. The rate declined 38 basis points to 23.81 percent, the least since May 10. That still compares with about 1.46 percent for equivalent German debt.
Samaras used an interview published today in Bild, Germany’s best-selling newspaper, to call for more time to carry out policy changes to address his country’s debt woes, saying that granting an extension “doesn’t necessarily mean more money.” Greece’s governing coalition favors an extension of its fiscal adjustment program by two years to 2016.
“All we want is a little more air to breathe to get the economy going and increase government revenue,” Samaras told Bild before a meeting in Athens with Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers. Juncker is also meeting with Greek Finance Minister Yannis Stournaras.
As well as granting more time, options for concessions to Greece include front-loading aid payments, lowering the interest rate or extending maturities on loans and pushing for a second debt writedown, this time focusing on bonds held by public institutions, notably the ECB.
Juncker said a decision on Greece won’t be made before October, he told RTL Television Luxembourg in an interview posted on the government’s website.
Samaras, seeking to persuade Europe’s policy makers to continue the aid payments needed to keep Greece in the euro, travels to Paris on Aug. 25 for talks with French President Francois Hollande. Hollande is due in Berlin tomorrow to meet with Merkel.
Hollande “will be watchful to make sure the integrity of the euro zone is maintained” in his talks with Merkel, French government spokeswoman Najat Vallaud-Belkacem told reporters in Paris today. “Greece must respect its engagements. At the same time, we must give it prospects for growth.”
Future of Europe
In the European Union, “it’s not just about economic questions, but about deeply political questions and thus also about the future of Europe as a whole,” Merkel said. “That’s the spirit with which I approach talks with the French president as well.” The euro hasn’t overcome “mistakes” made at its creation, she said. “So I’m tackling this in the knowledge that we have to succeed, that every partner has to meet its obligations.”
Samaras told Bild that his government is making progress carrying out “structural reforms” and selling state assets. Greece stands by its commitments even after the economy contracted by a fifth over the past three years, the standard of living dropped by a third, pensioners lost a fifth of their incomes and half the country’s youth is unemployed, he said.
Abandoning Greece now would increase uncertainty and the vulnerability of the other euro states and lead to dramatic consequences in financial markets, Samaras said, urging that the “spirit of the European Union” be preserved.
Germany, France and all other countries “must keep to their commitments in the European Union,” Merkel said. “And of course that’s also what we mean when we talk about Greece. What Europe needs to be taken seriously as a partner in the world is credibility.”