Merkel Says Greek Diplomatic Offensive Is Failing

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German Chancellor Angela Merkel

German Chancellor Angela Merkel

German Chancellor Angela Merkel indicated that a diplomatic offensive by newly elected Greek Prime Minister Alexis Tsipras to ease his nation’s bailout-aid requirements is failing to win over converts.

“I don’t think that the positions of the member states within the euro area with regard to Greece differ, at least in terms of substance,” Merkel told reporters in Berlin on Wednesday. Later in Paris, Tsipras was told by French President Francois Hollande that “respecting the rules is necessary for all, for France too, and it’s not always easy.”

While Tsipras has retreated from demands for a writedown of Greece’s debt, yielding to virtually unanimous opposition in the 19-member bloc, his pledge to increase spending threatens to collide with conditions of aid commitments totaling 240 billion euros ($275 billion).

Tsipras and his finance chief, Yanis Varoufakis, will have visited seven European cities between them this week after their Syriza party’s anti-austerity campaign swept them into office, upending Greece’s political establishment. Their demands for overhauling the terms of Greece’s bailout package have been met with resistance and alarm in Berlin and Brussels.

“We’re not a threat to Europe,” Tsipras said at the press conference with Hollande. “We’re proposing mutually acceptable, viable solutions on the debt question.”

Varoufakis met today with European Central Bank President Mario Draghi in Frankfurt, where he said he had “very fruitful” talks over the ECB’s support of the Greek banking system.

United Front

Calling himself “the finance minister of a bankrupt country,” Varoufakis sought support from counterparts in Paris, London and Rome before venturing into more hostile territory. He’ll sit down tomorrow with German Finance Minister Wolfgang Schaeuble in Berlin. Tsipras has encountered officials in Nicosia, Cyprus, Paris, Rome and Brussels.

Merkel said she’s “looking forward” to meeting Tsipras at a meeting of the European Union’s 28 members on Feb. 12 in Brussels and that she’s already spoken to Hollande and Italian Prime Minister Matteo Renzi regarding the euro area’s position on Greece.

Merkel’s Christian Democratic-led bloc in parliament has agreed not to give in to any “bad compromise” that “defacto adds up to a debt writedown,” Hans-Peter Friedrich, a deputy leader of the caucus, said in an interview today.

“Greece, not Germany, is under time pressure,” Friedrich said, citing the Greek government’s cash requirements following the end of the current round of bailout funding at the end of the month. Tsipras and Varoufakis “aren’t in a position to make demands, let alone try blackmailing tactics,” he said.

Making Pitch

German Finance Ministry spokesman Martin Jaeger ruled out Greece’s request for a debt conference as well as a writedown.

The International Monetary Fund, one of Greece’s creditors, said there’s been no discussion with the government in Athens on a change to its framework.

For now, Tsipras’s government rejects demands for further spending cuts and an oversight role for the so-called troika, an official said in an e-mail today.

While conceding that an overall writedown of about 315 billion euros ($360 billion) of debt -- about 170 percent of gross domestic product -- isn’t likely, Varoufakis told Germany’s Die Zeit newspaper that it’ll cost less to lighten Greece’s debt load now than to force compliance with conditions of its bailout.

Germany “will pay even more if we don’t solve the debt problem,” Varoufakis said. “Only then will we be able to pay back the money that was lent to us.”

Greece’s burden can be eased without scaling back its outstanding debt, Varoufakis said, repeating his call Monday for bonds linked to economic growth.

Selling Bills

Investor concern over renewed market convulsions were underscored by a slump in demand for Greek Treasury bills.

Greece sold 812.5 million euros of bills maturing on Aug. 7, with an average yield of 2.75 percent, the Athens-based Public Debt Management Agency said. The bid-to-cover ratio, which is a gauge of demand, fell to 1.3, the lowest since July 2006. Greece has 947 million euros of debt coming due on Feb. 6.

The benchmark Athens Stock Exchange retreated as much as 2.6 percent before rebounding and closing for the day up 0.9 percent. The yield on 10-year government bonds rose 28 basis points to 9.8 percent.

Varoufakis said he was encouraged after making his case to Draghi.

“We established an excellent line of communication that gives me a great encouragement for the future,” Varoufakis said at ECB headquarters in Frankfurt after the meeting. “I am now proceeding to Berlin where I am extremely eager to meet not with just the finance Minister but with the intellectual force behind the project of European monetary union, Mr. Schaeuble. I look forward to it.”

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