Ian Traynor Europe editor Tuesday 24 March 2015
Left-wing Greek leader makes call for damages at press conference with Angela Merkel as deadlock remains over bailout funds
Greece’s left-wing prime minister Alexis Tsipras stood beside German leader Angela Merkel and demanded war reparations over Nazi atrocities in Greece on Monday night, even as the two leaders sought to bury the hatchet following weeks of worsening friction and mud-slinging.
“It’s not a material matter, it’s a moral issue,” said Tsipras, unusually insisting on raising the “shadows of the past” at the heart of German power in the gleaming new chancellery in Berlin. It was believed to be the first time a foreign leader had gone to the capital of the reunified Germany to make such a demand.
Merkel was uncompromising, while appearing uncomfortable and irritated. “In the view of the German government, the issue of reparations is politically and legally closed,” she said.
While the two leaders clashed over the second world war, there was no sign of any meeting of minds on the substance of their dispute over Greece’s bailout and what Tsipras has to deliver to secure fresh funding and avoid state insolvency within weeks.
Two months after winning the election by promising to abolish “Merkelism” – the harsh austerity ordained by the Eurozone and other creditors in return for €240bn (£175bn) in bailout loans over the past five years – Tsipras held to the view that Greece’s crisis was not of his making. He delivered a lengthy diagnosis of what had gone wrong in the last five years, but had next to nothing to say about his own policies except vague references to fighting corruption. And when he raised the corruption issue, he singled out a German company, Siemens, because of its alleged activities in Greece.
A stony-faced Merkel reiterated what she had said in Brussels on Friday after a late-night session with Tsipras – that a 20 February agreement with the Eurozone extending Greece’s bailout until the end of June remained the yardstick. That agreement obliges Tsipras to deliver a persuasive menu of detailed fiscal and structural reforms which need to be vetted by the Eurozone before any further bailout funding can be released.
Asked if she had reached any agreements with Tsipras, Merkel avoided the question and stressed she was only one of 19 Eurozone national leaders.
Tsipras was believed to have told the German leader that Greece faced insolvency within weeks without the release of more funds, which are being held up because he has failed to produce a coherent policy package.
“The medium-term liquidity problem is well known,” he said. “We inherited it.”
While neither side wants Greece to leave the euro, the lack of agreement in Berlin signalled a digging in of hard-line positions on both sides that could result in a major negotiating failure.
Support for the Greek government remains strong at home, in inverse proportion to the lack of trust in Tsipras among his main creditors. A growing majority of Germans do not believe Greece will do what it must to stay in the euro and would prefer to see it leave. The Eurasia group risk consultancy on Monday raised its assessment of the chance of Greece having to quit the euro to 30%, up from a previous 20%.
“The prospects of a deal over Greece are diminishing, as Germany, the euro group and Greece continue to posture,” said Mujtaba Rahman, its Eurozone analyst. “The chances of capital controls, and ultimately, Greece’s exit from the euro, are also increasing. While Berlin still wants to keep Greece in the Eurozone, it can and will not be flexible regarding the conditions attached to more financial aid.”
Late on Thursday and into Friday morning last week, Tsipras met Merkel and the leaders of other key creditors on the fringes of an EU summit in Brussels. He told them that waiting until the end of April for the €7.2bn remaining to be tapped from the bailout would be too late for Greece. In letters to Berlin and other EU power centres a few days earlier, Tsipras also threatened to default on Greece’s debts without some relief from the Eurozone and the European Central Bank.
A unilateral default would press the button on Greece leaving the single currency.
Facing a cash flow crisis with large loans to repay and running out of funds to service them, Tsipras argued for agreement on a “political framework” with Merkel and other national leaders, bypassing the Eurozone technocrats and the euro group finance ministers.
Merkel is determined to avoid precisely this, pledging that there can be no further release of loans until the Greeks draw up a credible menu of fiscal and structural reforms and prove they are serious about acting on them. In his two months in office, Tsipras has signally failed to do this. His creditors think he is wasting everyone’s time.