Germany wants new Greek rulers to ditch anti-austerity promises
(Reuters) – Germany wants Greece’s new left-wing government to go back on anti-austerity promises made in its first days in office and revert to economic policies its predecessors’ agreed with international lenders, a document showed on Wednesday.
Greece promptly rejected such calls.
The document, seen by Reuters, was prepared by Berlin for a meeting of senior euro zone finance officials on Thursday. The officials are to discuss the currency bloc’s response to Greek demands for an official debt write-off or restructuring, an end to budget cuts and a reversal of some recent unpopular measures.
The German document stressed that Athens must not roll back any of the cutbacks and reforms made so far in Greece’s efforts to improve bloated public finances and regain market trust.
“It is obvious that these suggestions will not be accepted by the Greek government. They are clashing with the recent mandate given by the Greek people and this not help with the growth perspective of Europe,” a Greek government official told Reuters.
The new government led by the far left Syriza party, elected on Jan. 25, is to formally unveil its program this weekend.
But ministers have already pledged publicly to raise the minimum wage, halt unpopular sales of national assets, rehire public sector workers fired without cause and reinstate a Christmas bonus for poor pensioners.
“The Eurogroup needs a clear and front-loaded commitment by Greece to ensure full implementation of key reform measures necessary to keep the program on track,” the German document said, referring to euro zone finance ministers.
“The aim is the perpetuation of the agreed reform agenda (no roll back of measures), covering major areas as the revenue administration, taxation, public financial management, privatization, public administration, health care, pensions, social welfare, education and the fight against corruption.”
The Syriza government is seeking to renegotiate the conditions for financial support from the euro zone and the International Monetary Fund to regain more independence in economic policy making and more margin to boost growth.
It also wants to end the monitoring of reforms by the Troika — inspectors from the European Commission, the IMF and the European Central Bank — whose quarterly visits have become synonymous for many Greeks with the loss of sovereignty.
The German document showed Berlin wants the Troika to remain in place.
It also calls on Greece to declare it would honor its debt repayment commitments towards the ECB, the IMF, the euro zone bailout fund EFSF as well as bilateral loans from euro zone countries extended to Greece under the first bailout program.
The Greek government should also accept the independence of the Greek central bank, the Hellenic Financial Stability Fund that is the capital backstop for Greek banks, as well as the tax and statistics authorities.
Berlin wants Greece to reach a primary budget surplus before interest payments of 3 percent of GDP in 2015 and 4.5 percent in 2016, and to close the remaining gap in the 2015 budget to reach the agreed target.
Germany also wants Athens to stick to an agreement to reduce general government employment by 150,000, implement pension reforms that establish a close link between contributions and benefits, keep the lowered minimum wage and make wider use of decentralized wage bargaining. Berlin calls for continued privatizations of ports, energy utilities and real estate in particular and fostering foreign direct investment with the aim of getting 2.2 billion euro in revenue in 2015.
“On the basis of the elements outlined above we are ready to further intensify our cooperation with Greece to foster growth and create new jobs. More needs to be and can be done – on a bilateral basis as well as in a European framework,” the document said. “The document from the German finance ministry…shows that the German government has formally entered into negotiations,” the Greek government official said. It was not clear what support the German position, which appeared to take no account of the political change in Greece, will have in the wider euro zone talks.