ECB hits out at Greek 'blackmail' claims as Merkel holds steady in debt demands

By Mehreen Khan 24 March 2015

Mario Draghi denies asphyxiating the cash-strapped government after Athens promises to meet reform deadline on Monday

Angela Merkel maintained Greece had to commit to a reform programme in return for vital bail-out cash Photo: 2015 Getty Images

The European Central Bank has hit back at claims it is “blackmailing” Greece over its protracted bail-out, as Athens has vowed to submit a crucial list of economic reforms to its creditors by next week.

Greek Prime Minister Alexis Tsipras is in Berlin for his first formal bilateral talks with Europe's largest creditor this week. At a meeting with counterpart Angela Merkel on Monday, Mr Tsipras promised to “avoid division and find a common solution” with his European partners after weeks of acrimonious mud-slinging between the two sides.

But in a letter sent to Ms Merkel and ECB chief Mario Draghi in anticipation of the talks, the Greek premier chastised the central bank for making it “impossible” for his government to meet its basic obligations to pay wages and pensions.

"I am urging you not to allow a small cash flow issue, and a certain ‘institutional inertia’, to turn into a large problem for Greece and for Europe,” wrote a pleading Mr Tsipras.

The ECB has tightened the squeeze on the Leftist government since it came to power in January.

Greek banks are being kept afloat through an expensive form of emergency assistance (ELA) after the ECB removed its ordinary lending operations to the country.

But Mr Draghi shot back at claims the institution was acting unilaterally, claiming any accusations of blackmail were “a bit rich when you look at our exposure to Greece.”

“We haven’t created any rule for Greece, rules were in place and they’ve been applied,” Mr Draghi told an audience of the European Parliament.

Total ECB funding for Greek banks has now topped €100bn, as the central bank has been progressively drip-feeding ELA to stricken lenders in small increments that have dissatisfied Athens.

Although they remain solvent for now, banks have suffered from accelerated capital flight as bail-out negotiations have frayed. An estimated €1.5bn is thought to have left the country in the last week alone.

The Greek government, whose procrastination on implementing reforms has isolated many of its fellow members states, estimates it could run out of money by the end of April if a vital €7.2bn in bail-out funds is not released.

But less than 12 hours after the talks in Berlin, Athens vowed to send a list of its planned measures to finance ministers by next week at the very latest, according to government spokesman Gabriel Sakellaridis.

A steadfast Mr Draghi reiterated that the collateral waiver on Greek sovereign bonds would also only be reinstated when the Leftist government had proven its commitment to raising revenues through privatisations and carrying out austerity measures.

Following a red carpet welcome in Berlin, the Mr Tsipras sought to rebuild trust with Europe's largest creditor nation.

He told reporters it was not his job to come to come cap in hand to “ask for money to pay next month's salaries from Germany - that is not the institutional process of the European Union.”

Mr Tsipras enjoyed a military-style greeting before Monday's talks

In a press conference dominated by talk of the validity of Nazi war reparations claims, Mr Tsipras dismissed threats to confiscate German property in Greece as compensation for the victims of the country's brutal Third Reich occupation.

However, he repeated that the question of Second World War reparations was a “moral and ethical” matter for his country.

"Today's democratic Germany has nothing to do with the Germany of the Third Reich that took such a toll of blood," insisted Mr Tsipras.

Chancellor Merkel reiterated her stance that any question of further compensation for events of 1941 remained firmly off the table.

Despite the regalia of the greeting, both leaders made little progress on securing Greece’s future in the bloc, with Ms Merkel insisting any questions about Greece’s cash-flow problems remained the purview of the Eurozone's finance ministers.

“Today we can only discuss, rather than make any promises. I cannot make promises on liquidity for Greece,” said the Chancellor.

Mr Tsipras met with the German foreign minister on Tuesday.

ECB hits out at Greek 'blackmail' claims as Merkel holds steady in debt demands - Telegraph