August 23, 2012

Germany, France Discuss United Front Against Lenience for Greece

Hardliners hope plea for additional time will fall on deaf ears

Chancellor Angela Merkel of Germany and Prime Minister Francois Hollande of France in July. (Photo: AP) Chancellor Angela Merkel of Germany and Prime Minister Francois Hollande of France in July. (Photo: AP)

Even as Prime Minister Antonis Samaras of Greece prepared to launch his “charm offensive” against eurozone leaders to plead for more time for his country to meet goals set for its rescue, Germany and France were discussing a united front against allowing any more leeway in the rescue calendar.

Reuters reported Thursday that, despite Samaras’ attempt to win additional time for Greece to comply with conditions set by eurozone officials, Chancellor Angela Merkel of Germany and President Francois Hollande of France were discussing ways to send a firm message to Athens that it must adhere to its original conditions.

Of course those talks between Merkel and Hollande are complicated by the fact that the French president has been pressing Merkel and other austerity adherents in the eurozone to turn their focus toward growth instead as a means of combating the crisis. And the two do not enjoy the rapport Merkel had with Hollande’s predecessor, Nicolas Sarkozy.

Hollande was elected on a platform of advocating growth, while Merkel is being held to a firm position by party members at home who insist that no quarter should be given to a country they see as shirking its duty.

Still, Samaras is determined, too. In an interview that appeared in Germany’s Bild newspaper hours before the Greek prime minister met with eurozone chief Jean-Claude Juncker in Athens on Wednesday, Samaras said that if the eurozone gives Greece extra time to meet its obligations, that does not automatically translate into more money as well.

"All we want is a bit of 'air to breathe' to get the economy running and to increase state income. More time does not automatically mean more money," Samaras was quoted saying. He added, "Let me be very explicit: we demand no additional money. We stand by our commitments and by fulfilling all our requirements. We have to crank up growth because that decreases the financial gaps."

The hardliners in the eurozone are not receptive to Samaras' pleas. The Dutch finance minister, Jan Kees de Jager, was quoted saying in response to Samaras, "If it concerns delaying reforms and budget cuts, then it is not a good idea."

Finance Minister Wolfgang Schaeuble of Germany was also unreceptive, saying in the report, "More time is not a solution to the problems." And Merkel had talked tough on Wednesday as well; she was quoted saying that she was "going into these talks with the awareness that we have to achieve that every partner sticks to his commitments."

Still, Athens has few options and the eurozone may find that it is similarly pressed. The climate in France has changed since Sarkozy’s tenure, as indicated by the words of Prime Minister Jean-Marc Ayrault of France about Hollande’s visit to Merkel to discuss the situation. Ayrault was quoted saying, "It's not just about balancing budgets, although we must hold to that, it's also about growth."

Hollande has already managed to exert his influence beyond Paris and insert measures into the European fiscal pact that are pro-growth rather than pro-cuts. His influence has made hardliners wary. While there is little appetite to incur the costs that would be involved in pushing Greece from the eurozone, stalwart austerity champions in Berlin are warily watching Hollande’s behavior in France toward that country’s deficits as a harbinger of events in the broader eurozone.

A source in the Berlin government said in the report, "If Hollande gives up on his targets because of rising domestic political resistance, we can hardly expect more painful reforms from states like Italy or Spain."

And while Merkel and Hollande hope to present a united front to Greece, that may not be so easy if Germany does not bend. A Hollande aide said in the report that the French president "has always maintained it is indispensable for Greece to respect its commitments, while at the same time it should be given hope for growth."

There are signs of cracks in Germany as well, as some government officials seem to acknowledge the difficulty of the current conditions imposed on Greece.

Norbert Barthle, part of Merkel's center-right governing coalition in the German Parliament, was quoted saying, "With Greece, we cannot change the cornerstones of the aid package or tamper with the principle of conditionality. But I can imagine we could adapt certain things within that framework such as interest rates or maturities on credit, like we already did with the first package."

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