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Germany: ‘silver lining’ in Greek debt turmoil

German Foreign Minister Guido Westerwelle said on a visit to Greece on Wednesday that he believed the country was beginning to see a "silver lining" in its debt turmoil and urged international creditors to recognize its achievements.

Germany: 'silver lining' in Greek debt turmoil
Photo: DPA

Westerwelle, holding talks with Greece’s reshuffled government ahead of an EU-IMF progress report which will determine whether it receives its next cash lifeline, dismissed talk that Athens would need a further debt writedown.

“My impression is that we for the first time are seeing a faint silver lining on the horizon,” he told reporters after talks with Evangelos Venizelos, who brokered a debt writedown last year and became foreign minister and deputy prime minister last month in a government shake-up.

“In politics, psychological momentum counts too and when the sky starts brightening and people start in again with doomsday scenarios and looking backward, then you miss out on that psychological momentum.”

Asked specifically about speculation Greece would not be able to cope with its mountain of debt, he said: “A further debt writedown is not on the agenda.”

Germany is the paymaster for the international bailouts for Greece but has triggered widespread anger in the debt-mired nation for an insistence on biting budget cuts in return for assistance.

Chancellor Angela Merkel faced mass protests during a visit to Athens last October.

Experts from the European Central Bank, the European Union, and the International Monetary Fund (IMF) are currently in Athens to review Greece’s progress in implementing deep reforms.

On the basis of their findings, a Eurogroup meeting in Brussels Monday will determine whether Greece can draw €6.3 billion ($8.2 billion) from its ongoing bailout.

The IMF is also scheduled to decide by the end of July whether to disburse its own scheduled contribution of €1.8 billion.

Since 2010, the EU and IMF have committed a total of €240 billion to the heavily indebted country.

Merkel said in an interview published Wednesday she believed Greece could service its enormous debt without any new imposed writedown.

And ECB executive board member Joerg Asmussen said that talk of new writedowns was “not helpful”, urging Athens instead to press on with reforms.

Last year, Greece erased nearly a third of its overall debt through an unprecedented writedown of more than €100 billion held by private creditors including banks and pension funds.

Nearly €30 billion of additional debt were subsequently recovered in a buyback achieved with bailout funds.

Westerwelle said he had intended his visit as a sign of Germany’s “solidarity and encouragement”.

“We Germans know the load you are bearing, what you are achieving and the deep valley you are crossing. But I can assure you that if you continue on this reform path, it can be the birth of a new economic upswing,” he said. “Greece can make it, I am sure of it.”

Venizelos said he appreciated Germany’s understanding that reforms meant hardship for average Greeks.

“The Greek people have made these sacrifices because in reality they want to fortify our national sovereignty and independence, they don’t want Greece to depend on either the markets or the essential help of our European partners,” he said.

On Thursday, Westerwelle will meet Prime Minister Antonis Samaras, who now leads with a wafer-thin, two-party majority after moderate leftist party Democratic Left quit the ruling coalition.

Merkel, who faces a general election in September, hosted a pan-European conference in Berlin on tackling critically high youth unemployment in stricken eurozone countries such as Spain, Portugal and Greece.

AFP/jcw

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COVID-19

Court turns down AfD-led challenge to Germany’s spending in pandemic

The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.

Court turns down AfD-led challenge to Germany's spending in pandemic

Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.

The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.

They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.

But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.

READ ALSO: Germany plans return to debt-limit rules in 2023

The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.

It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.

The judges, who ruled six to one against the challenges, did however express some reservations.

They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.

At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.

READ ALSO: Germany to fast-track disputed €200 billion energy fund

They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.

Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.

“The German court — once again — emphasised German limits for EU fiscal integration,” he said.

The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.

Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.

The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.

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