Dif­fer­ences re­main as Merkel and Tsipras try to mend fences

Financial Mirror (Cyprus) - - FRONT PAGE -

The vis­it­ing Greek Prime Min­is­ter and his Ger­man host seemed to try and calm the fric­tion cre­ated be­tween the two coun­tries when they met ion Ber­lin on Mon­day and ap­pealed to both sides to work for a bet­ter Euro­pean fu­ture.

De­spite warm words on Alexis Tsipras’ first of­fi­cial visit to Ber­lin, it was un­clear if he and Chan­cel­lor An­gela Merkel had nar­rowed their dif­fer­ences on eco­nomic re­forms that Athens must im­ple­ment to earn the ur­gently needed fresh cash from its cred­i­tors. Tsipras in­sisted he was not in Ger­many to solve Greece’s press­ing liq­uid­ity prob­lems, but to find com­mon ground to move for­ward in the eu­ro­zone.

He con­demned as an “un­just provo­ca­tion” a Ger­man mag­a­zine cover de­pict­ing Merkel amid Nazi of­fi­cers by the Acrop­o­lis in Athens. And in a re­buke to his own Jus­tice Min­is­ter, he said no one in Greece was con­sid­er­ing seiz­ing or auc­tion­ing off Ger­man prop­erty for war repa­ra­tions.

“Please, let’s leave th­ese shad­ows of the past be­hind us,” Tsipras said, stress­ing that the Euro­pean Union was a force for sta­bil­ity in a trou­bled re­gion.

Merkel said Ger­many con­sid­ered the is­sue of repa­ra­tions for the Nazi oc­cu­pa­tion in World War Two po­lit­i­cally and legally re­solved, but she was aware of how Greeks had suf­fered. She hinted that Ber­lin may in­crease a fund cre­ated last year for youth ex­changes, for which par­lia­ment has granted EUR 1 mln a year for three years.

She also said Ger­many con­sid­ered all Euro­pean states as equals and wanted good re­la­tions with all, in­clud­ing Greece.

The Chan­cel­lor made clear there could be no break­through to pro­vide fresh funds for Greece from their talks, since that was up to the 19-na­tion Eu­rogroup of eu­ro­zone fi­nance min­is­ters.

Ber­lin wanted Greece to re­store growth and over­come high un­em­ploy­ment, Merkel said, adding: “For that, you need struc­tural re­forms, a solid bud­get and a func­tion­ing ad­min­is­tra­tion.”

Tsipras promised eu­ro­zone lead­ers last week he would present a com­pre­hen­sive list of re­form pro­pos­als soon to un­lock aid, with­out which EU of­fi­cials say Greece may run out of money by late April.

Greece can choose its own re­forms to un­block the flow of loans from in­ter­na­tional cred­i­tors and stave off bank­ruptcy, but it will have a hard time avoid­ing pri­vati­sa­tions and a pen­sion re­form be­cause of their bud­get im­pact, Euro­pean of­fi­cials said.

Tsipras agreed last week that Athens would present within days a list of its own re­forms that must achieve sim­i­lar fis­cal re­sults to the mea­sures agreed by the pre­vi­ous con­ser­va­tiveled cabi­net.

Which re­forms to choose

is

po­lit­i­cally sen­si­tive,be­cause Tsipras’ Syriza party won a gen­eral elec­tion in Jan­uary on a plat­form of end­ing the poli­cies of its pre­de­ces­sors, in­clud­ing bud­get aus­ter­ity and mea­sures it re­gards as re­ces­sion­ary.

If the cred­i­tors agree that the sub­sti­tute plans will achieve an im­pact equiv­a­lent to the pre­vi­ously agreed mea­sures, Greece would get more loans from the eu­ro­zone and the IMF, avert­ing bank­ruptcy and a pos­si­ble euro exit.

The start­ing point for talks with the IMF, the Euro­pean Cen­tral Bank and the Euro­pean Com­mis­sion — “the in­sti­tu­tions” — is a long list agreed to by Tsipras’ pre­de­ces­sors. Greece will present its pro­posed pack­age of re­forms to its euro zone part­ners by next Mon­day in hopes they will re­lease much needed cash, its gov­ern­ment spokesman said on Tues­day.

“It will be done at the lat­est by Mon­day,” a gov­ern­ment spokesman told Mega TV.

Pri­vati­sa­tion is likely to be one of the ma­jor hur­dles, of­fi­cials said, be­cause it was due to con­trib­ute EUR 4 bln to the bud­get this year alone. The Tsipras gov­ern­ment does not want to sell state as­sets, although it has agreed in prin­ci­ple not to stop sales that had been ini­ti­ated al­ready.

A re­form of the pen­sion sys­tem is an­other stick­ing point, where the EU is con­cerned about early re­tire­ment priv­i­leges and the need to link benefits to the size of con­tri­bu­tions.

Un­der the agree­ment with the pre­vi­ous gov­ern­ment, Greece was due to pass a law merg­ing sup­ple­men­tary pen­sion funds. How­ever, the new gov­ern­ment is strongly re­sist­ing that be­cause it would en­tail a fur­ther cut in pen­sions for many Greeks.

The cred­i­tors also want changes in the VAT sys­tem to elim­i­nate a re­duced rate charged on Greek is­lands. They also want to dou­ble the VAT for ho­tels to 13%. Athens says that would hit tourism, its main rev­enue stream.

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