Athens' Trump Card

Euclid Tsipras AP
Euclid Tsakalotos and Prime Minister Tsipras.
  • Why it matters

    Why it matters

    Greece may take advantage of the refugee crisis to push for more lenient treatment from its creditors.

  • Facts


    • The first review of Greek economic reforms was to happen last October. It has not yet taken place.
    • A planned Greek pension reform will reduce the basic Greek pensions to €384 per month
    • 31 percent of all refugees currently arriving in Greece are children.
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This week was not the first time Euclid Tsakalotos, the Greek finance minister, has visited his German counterpart Wolfgang Schäuble in Berlin.

Mr. Tsakalotos was in the German capital this time last year, albeit an inconspicuous member of the entourage of Yanis Varoufakis, his flamboyant and controversial predecessor in office. Mr. Tsakalotos has since taken over the top job, replacing Ms. Varoufakis at the height of Greece’s drama last year, no doubt much to Mr. Schäuble’s delight.

It was Mr. Tsakalotos who helped steer the Mediterranean country away from the brink of an exit from the 19-nation euro zone, albeit in exchange for another round of tough austerity demands imposed by its neighbors, including Germany. Even a year ago, the powerful German minister had better relations with Mr. Tsakalotos than with Mr. Varoufakis.

Greek-German relations may have improved at a personal level since the height of the crisis last year, but the old problems remain. Greece, yet again, is lagging behind in implementing promised reforms. The first review of the third bailout program, totalling more than €86 billion in financial aid, was supposed to have taken place in October. But Athens has yet to implement many of the measures agreed in last summer’s hard-won deal.

And there’s another wrinkle now. Power relations have shifted in the six months since those all-night bailout talks. German Chancellor Angela Merkel now needs Greece’s help to solve the refugee crisis.

Greek-German relations may have improved at a personal level, but old problems remain.

Mr. Schäuble is not alone in his annoyance at the Greek foot-dragging. Diplomatic sources in Brussels emphasize that Greece again faces crucial, difficult moments in the reform process.

The two most important elements where Greece is lagging are pension reform and the establishment of the so-called “privatization fund,” which will manage the sale of Greek state assets. On pension reform, say E.U. diplomats, new Greek proposals have not yet been properly evaluated, and a final judgment cannot be made.

Members of evaluation teams from the country’s creditors, the European Union, the European Central Bank and the International Monetary Fund, seem skeptical. A complex pension reform plan sketched out by the Greeks this week is unlikely to bring in adequate new revenues, they said.

Mr. Schäuble has also had strong words on the matter with Mr. Tsakalotos. And for the German government, the privatization fund is also a crucial element of the deal: It was a key demand from German Chancellor Angela Merkel in the last-ditch bailout negotiations back in July.


Greece Heavy burden-01


From the German point of view, the refugee crisis hasn’t made negotiations around the bailout reform package any easier. The Greek government is already testing the waters, pushing to see how far they can go.

Recently, Athens suggested it did not want the International Monetary Fund to continue to be involved in the bailout. That would put it on a confrontation course with Germany, which has long demanded that the Washington-based emergency lender remain a key part of the bailout program.

The current IMF program for Greece ends in March. There have been rumors that Athens may soon skip another debt repayment to the fund. Last summer, a missed payment to the IMF was a key event in bringing the crisis to a head. To miss another would be seen an affront to the Washington-based organization, making it very difficult for it to release additional funds to the bailout.

The IMF has said it will lend no further money to Greece until the first bailout review has shown concrete progress on economic reform. The fund has repeatedly expressed doubts about the sustainability of Greece’s debt, even with the deal agreed last summer. This is another reason why Mr. Schäuble was pressing Mr. Tsakalotos to stick to the reform schedule.

If the IMF were to jump ship, the German government could again face considerable opposition from its own backbenchers, like it did last summer.

The International Monetary Fund worries the refugee crisis may lead European countries to be too lenient with Greece.

For its part, the IMF is worried the refugee crisis may lead European countries to be too lenient with Greece. One way or another, the review of the reform program will be further delayed, say sources in Brussels. There is no chance of it being discussed at meetings of the Eurogroup, a group of finance ministers from the 19-nation euro zone, scheduled for this week and in three weeks’ time.

By contrast, the refugee situation in Greece is as urgent as ever. The country, which neighbors Turkey and the Middle East, is a key part of the European Union’s external border.

Despite an E.U. agreement with Turkey to stem the flow of refugees, numbers crossing the frontier are undiminished. They are estimated at 3,000-4,000 people a day, around 11 times the numbers of one year ago. One difference in the refugee population, however, is the increased number of children. They are now estimated to make up 31 percent of all new arrivals. A total of 5,700 children arrived in the first 12 days of 2016.

Plans for the resettlement of refugees across the E.U. appear to be moribund. Last week, it was reported that a mere 272 refugees who had entered via Greece and Italy had been resettled elsewhere in the European Union so far. Theoretically, other E.U. states are supposed to take 160,000. With this now highly unlikely, Greece remains a key player in the crisis, as its government knows very well.


Ruth Berschens heads Handelsblatt’s Brussels office, leading coverage of European policy. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the authors:,

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