BAILOUT DRAMA

Greek President Calls on Schäuble to Back Debt Relief

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How about a little solidarity, Herr Schäuble? Picture source: Reuters

Greek President Prokopis Pavlopoulos is not happy with the emerging compromise between the euro-zone finance ministers and the International Monetary Fund. In fact, he is down-right irritated.

IMF chief Christine Lagarde, in an Handelsblatt interview last week, indicated that the fund would agree to participate in a third bailout program, but would refrain from kicking in funds until an agreement is reached on debt relief for Greece.

This compromise would clear the way for the euro zone to disburse the next tranche of bailout money and allow Greece to avoid default ahead of a looming €7.3-billion ($8.1-billion) payment due in July. The euro zone and the IMF are expected to back this solution at a meeting on Thursday.

German Finance Minister Wolfgang Schäuble has insisted on IMF participation in the bailout, but the fund and Mr. Schäuble disagree on the need for debt relief. Berlin is reluctant to support debt relief, a controversial issue in Germany, ahead of national elections in September.

Mr. Pavlopoulos, in interview with Handelsblatt, called on Mr. Schäuble to uphold the euro zone’s end of the bargain and support debt relief now that Greece has passed a raft of austerity measures.

Handelsblatt: Mr. President, the euro-zone finance ministers on Thursday will make a decision about the next bailout tranche of €7.3 billion, after Greece had to carry out painful reforms. After seven years and three bailout programs, do you see any chance for Greece to stand on its own two legs again?

Prokopis Pavlopoulos: I believe that this meeting of the finance ministers is a big chance for Greece and the euro zone to definitively overcome the crisis. To do that, our European partners must keep their promises. Greece has fulfilled its obligations and has passed the requested reforms. It is now time for the Europeans to keep their promises on debt relief.

Finance Minister Wolfgang Schäuble, above all, does not want to talk about debt relief.

Our friend Wolfgang Schäuble often emphasizes that the euro zone must abide by its rules. He is right. The eurogroup should, as promised, make debt relief more concrete. Pacta sunt servanda, agreements must be kept – that also applies here. I don’t believe Mr. Schäuble will violate his own intentions.

Why should he agree to debt relief before Germany’s federal elections, when this would not be decided anyways until next year based on need?

We also often hear the argument that the German government does not want to make such a decision before the election. The Germans are a great people who have shown solidarity with the Greek people. I cannot imagine that the elections would be an obstacle to a solution. A serious European like Wolfgang Schäuble will also make the decision before the election.

There’s hardly a politician in Greece who is more disliked than Wolfgang Schäuble. You are defending him and see him as a great European?

Yes, and that’s why I am convinced that in the eurogroup he will also do what’s right for Greece and the entire euro zone. It would be a shame if Wolfgang Schäuble was the only one who did not stick to the deal. That would not be worthy of a European leader. I cannot imagined that.

The Europeans have already extend the maturities on the loans and has reduced and deferred interest. The burden from the loans is low right now. Why do you insist on debt relief?

It’s not just Greece that insists on debt relief. The International Monetary Fund (IMF) has also demanded that debt sustainability be assured before it participates in the rescue program. Hence, it is a condition of the IMF. And beyond that, it is also of key importance that the European Central Bank classifies the state finances as sustainable, so that Greece can participate in its bond-buying program.

There are indications now of a compromise between the IMF and the Europeans: The fund will participate in the rescue program, but will not pay out any money until the debt question is clarified at a later date. Can you live with that?

That is really very irritating. It was Mr. Schäuble who insisted on IMF financial participation. And that’s the reason why we had to pass tough austerity measures to fulfill the conditions of the fund. And now suddenly, we hear that the IMF might only participate as a consultant. This isn’t consistent.

So does Greece reject the possible compromise between the IMF and the Europeans?
What’s important for us is that our partners guarantee the sustainability of Greece’s debt. Otherwise, the ECB cannot buy Greek bonds. And this would be a very important signal so that the investors can have trust in Greece and we can finally finance ourselves again.

In Berlin, you met with President Frank-Walter Steinmeier. Do you believe that Mr. Steinmeier or Chancellor Angela Merkel are more willing to compromise than Mr. Schäuble?

As I said, I am sure that Mr. Schäuble is aware of how significant he is as a European figure and he will act accordingly. Of course, he has also to consider the positions taken by Chancellor Angela Merkel and the coalition partners in the Social Democratic Party. Frank-Walter Steinmeier was very connected to Greece during his tenure as foreign minister, and his successor Sigmar Gabriel has also worked hard as has Chancellor Merkel. They have never viewed Greece as separate from Europe, but rather always in a European context. Because what happened in Greece, could also happen in France of Italy. That’s why it’s so important that we practice solidarity. That gives Europe strength.

Martin Greive is a correspondent for Handelsblatt based in Berlin. Jan Hildebrand is deputy leader of politics coverage in Berlin. To contact the authors: greive@handelsblatt.com, hildebrand@handelsblatt.com

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