Greek Crisis Evasion to Fore as Merkel Hosts Hollande
Chancellor Angela Merkel hosts President Francois Hollande today as officials look for ways to stave off an immediate crisis after a report due next month from Greece’s international creditors on the health of its finances.
Options raised in Germany in recent days include front- loading aid payments to Greece to help it over liquidity hurdles; 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 European Central Bank.
With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. France sees the program targets set for Greece as too harsh given the state of its economy, a French government official said yesterday on condition of anonymity because the talks are private. Merkel and Hollande are due to give statements at 7 p.m. in Berlin.
“On balance we still take the view that they’ll keep Greece ticking over,” David Owen, chief European financial economist at Jefferies International Ltd. in London, said by phone. “If that does require giving it more time, so be it.”
German Finance Minister Wolfgang Schaeuble, speaking on SWR2 radio today, said that giving Greece more time to meet its obligations under its international aid program would mean more money and wouldn’t solve the country’s problems. At the same time, he said there has to be “understanding” for Greece’s predicament and that it’s clear the country lost time because of repeated elections.
“There’s absolutely no point in speculating,” he said, according to a transcript posted on the Finance Ministry website. “The Greek government has to find a way to resolve this with the representatives of the EU Commission, the European Central Bank and the International Monetary Fund.”
Greek Prime Minister Antonis Samaras is due to follow Hollande to Berlin tomorrow then travel on to Paris on Aug. 25, after he used an interview published yesterday in Germany’s best-selling Bild newspaper to call for more time -- “a little more air to breathe” -- to carry out policy changes to address his country’s debt woes. Granting an extension “doesn’t necessarily mean more money,” he told Bild.
Greek 10-year bond yields dropped to the lowest in more than three months yesterday as Merkel signaled she was willing to discuss his request, leaving the door open to concessions. The yield on Greece’s 2 percent bond due in February 2023 was little changed at 23.84 percent today after reaching 23.67 percent, the lowest since May 9.
The euro gained 0.1 percent to $1.2539 as of 1:11 p.m. in Berlin.
“We won’t find solutions on Friday,” Merkel said in the Moldovan capital Chisinau, reiterating that leaders must await a report on Greek progress being drawn up by the so-called troika of the ECB, the European Commission and the IMF.
Merkel’s comments, made on the same day she topped Forbes magazine’s list of the world’s most powerful women for the second year running, suggest a thaw in relations between Germany and Greece after Greek publications drew Nazi-era comparisons with its treatment during the debt crisis and Bild called for Greece to be expelled from the euro.
Her remarks also point to common ground with Hollande, who defeated her ally Nicolas Sarkozy in May elections on a platform of curbing Merkel’s austerity-first drive to combat the crisis.
German officials 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. French government spokeswoman Najat Vallaud-Belkacem said yesterday that “Greece must respect its engagements” while “at the same time, we must give it prospects for growth.”
“For once Hollande and Merkel are on the same page in swapping ideas how to keep Greece afloat even if they look at the problem differently,” Carsten Brzeski, an economist at ING Group in Brussels, said by phone. “The key to unlocking what Greece wants is Greece itself. Greece needs to help Merkel to help Greece, finally giving a credible signal that it means business with its problems.”
Greece’s governing coalition, grappling with a fifth year of recession and youth unemployment of about 50 percent, has said it favors an extension of its fiscal adjustment program by two years to 2016.
‘Turning the Page’
“Greece is turning the page, politically, economically and socially,” Samaras said yesterday at a joint press conference in Athens with Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers.
Samaras vowed to speed up structural reforms such as changes to labor markets and to sell state assets, as promised under the two rescue packages pledged to Greece.
He told French newspaper Le Monde in an interview published today that uninhabited Greek islands could be used to generate revenue, responding to a longstanding demand by some German lawmakers that Greece sell its islands.
“On condition that it doesn’t pose a national security problem, some of the isles could be used commercially,” Samaras was cited as saying. “It would not be a case of getting rid of the isles, but of transforming unused terrain into capital that can generate revenue, for a fair price.”
Juncker said that any lengthening of the adjustment period for Greece would depend on the findings of the troika mission. Speaking earlier on RTL Television Luxembourg, he said that no decisions would be made before October.
Greece is facing a “last chance,” Juncker said in Athens “The truth is that Greece, given the experiences of the last two years mainly, is suffering a kind of credibility crisis.”
The IMF estimates that Greece will need between 13 billion euros ($16.4 billion) and 14 billion euros of additional funds to cover its financing needs for 2015 and 2016, even without an extension to the time frame for its fiscal consolidation program, Greek newspaper Ta Nea reported, without citing anyone.
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