Greco-German relations reach breaking point as ECB warned to stop 'asphyxiating' Athens

By Mehreen Khan 12 March 2015

Both sides trade insults as Yanis Varoufakis chastises ECB and Germany accuses Leftist government of "squandering trust"

Trust between the indebted country and Europe's largest creditor nation reached a nadir after incendiary comments made by Prime Minister Alexis Tsipras earlier this week. Photo: ANA-MPA

Relations between Greece and its creditors reached breaking point on Thursday as the country's finance minister accused the European Central Bank of "asphyxiating" the cash-strapped economy.

In a series of traded insults, Yanis Varoufakis said the ECB, which has tightened the noose on the Leftist government, was "pursuing a policy that can be considered asphyxiating toward our government."

His comments came before Germany's Bundesbank chief Jens Weidmann said Athens had "squandered the trust" of its European partners.

As one of Greece's main three international creditors, the ECB has rebuffed Athens' requests to raise short-term debt to alleviate an impending funding crisis.

Greece, which has yet to be granted access to €7.2bn in bail-out funds, is scrambling to pay €1.2bn in loans to the IMF before the end of the month.

Athens has also been seeking a €2bn increase in emergency funding for its banks as deposit flight has accelerated over the past month. According to reports, the central bank decided to raise the ceiling by just €600m on Thursday.

Greek lenders have been increasingly reliant on the expensive emergency funds from Frankfurt after the ECB stopped its ordinary lending to the country. The country's Euro system funding reached a 13-month high of €104bn, in February according to the Bank of Greece.

But Mr Weidmann, who sits on the ECB's governing council, said the assistance had to be "temporary" and could only continue as long as Greek lenders remained solvent.

German central bank chief Jens Weidmann has been an ardent opponent of Greek debt relief

In a further sign of a rapid deterioration of relations between both parties, the Greek government submitted an official complaint against German finance minister Wolfgang Schaeuble for comments he made about his Greek counterpart.

WATCH: What would happen if Greece left the Euro?

Mr Schaeuble, who has insisted Greece must submit to Eurozone conditions over its bail-out, was quoted as saying Mr Varoufakis was "foolishly naive" in his communication with creditors.

"As a minister of a country that is our friend and our ally, he cannot personally insult a colleague", said Constantinos Koutras, a spokesman for the Greek finance ministry, who confirmed Athens had lodged a complaint from its ambassador in Berlin.

Germany's Wolfgang Schauble - the Eurozone's disciplinarian - has called on all members to respect the rules of the union

Trust between the indebted country and Europe's largest creditor nation reached a nadir after incendiary comments made by Prime Minister Alexis Tsipras earlier this week.

Mr Tsipras reiterated his government's demand that Germany pay back more than €160bn in Nazi war reparations and touted the possibility of seizing German assets as compensation for the country's Second World War occupation.

In another indication that Athens' belligerence was isolating its fellow member states, former Belgian president Guy Verhofstadt accused the Syriza leader of "fuelling hatred between Greeks and Germans."

Greco-German relations reach breaking point as ECB warned to stop 'asphyxiating' Athens - Telegraph