Greek Crisis Evasion to Fore as Merkel Hosts Hollande

Leaders seek common ground while awaiting troika report on Greek progress.

Chancellor Angela Merkel hosts President Francois Hollande today as officials look for ways to stave off an immediate crisis after a report due next month from Greece’s international creditors on the health of its finances.

Options raised in Germany in recent days include front- loading aid payments to Greece to help it over liquidity hurdles; lowering the interest rate or extending maturities on loans; and pushing for a second debt writedown, this time focusing on bonds held by public institutions, notably the European Central Bank.

With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. While Merkel publicly stresses meeting targets, France sees them as too harsh given the state of the Greek economy, a French government official said on condition of anonymity because the talks are private. Merkel and Hollande will give statements at 7 p.m. in Berlin.

“On balance we still take the view that they’ll keep Greece ticking over,” David Owen, chief European financial economist at Jefferies International Ltd. in London, said by phone. “If that does require giving it more time, so be it.”

Samaras Tour

Greek Prime Minister Antonis Samaras is due to follow Hollande to Berlin tomorrow then travel on to Paris on Aug. 25, after he used an interview published yesterday in Germany’s best-selling Bild newspaper to call for more time to carry out policy changes to address his country’s debt woes.

Granting an extension “doesn’t necessarily mean more money,” he told Bild. “All we want is a little more air to breathe to get the economy going and increase government revenue.”

Greek 10-year borrowing costs dropped to the lowest in more than three months yesterday as Merkel signaled she was willing to discuss his request, leaving the door open to concessions.

“We won’t find solutions on Friday,” Merkel said in the Moldovan capital Chisinau, reiterating that leaders must await a report on Greek progress being drawn up by the so-called troika of the European Central Bank, the European Commission and the International Monetary Fund. “We will wait for the troika’s report and then we’ll take decisions,” she told reporters.

Powerful Women

Merkel’s comments, made on the same day she topped Forbes magazine’s list of the world’s most powerful women for the second year running, suggest a thaw in relations between Germany and Greece after Greek publications drew Nazi-era comparisons with its treatment during the debt crisis and Bild called for Greece to be expelled from the euro.

Her remarks also point to common ground with Hollande, who defeated Nicolas Sarkozy in May elections on a platform of curbing Merkel’s austerity-first drive to combat the crisis.

German officials said in recent days that concessions are possible for Greece so long as Samaras shows a willingness to meet the main targets set out in his country’s bailout program. French government spokeswoman Najat Vallaud-Belkacem said yesterday that “Greece must respect its engagements” while “at the same time, we must give it prospects for growth.”

‘Same Page’

“For once Hollande and Merkel are on the same page in swapping ideas how to keep Greece afloat even if they look at the problem differently,” Carsten Brzeski, an economist at ING Group in Brussels, said by phone. “The key to unlocking what Greece wants is Greece itself. Greece needs to help Merkel to help Greece, finally giving a credible signal that it means business with its problems.”

Greece’s governing coalition, grappling with a fifth year of recession and youth unemployment of about 50 percent, has said it favors an extension of its fiscal adjustment program by two years to 2016.

“Greece is turning the page, politically, economically and socially,” Samaras said yesterday at a joint press conference in Athens with Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of euro-area finance ministers.

Juncker said that any lengthening of the adjustment period would depend on the findings of the troika mission. Speaking earlier on RTL Television Luxembourg, he said that no decisions would be made before October.

“The truth is that Greece, given the experiences of the last two years mainly, is suffering a kind of credibility crisis,” he said in the Greek capital.

Merkel said that credibility can be gained by Germany, France and Greece holding to their commitments, helping Europe “to be taken seriously as a partner in the world.”

In the European Union, “it’s not just about economic questions, but about deeply political questions and thus also about the future of Europe as a whole,” Merkel said in Moldova. “That’s the spirit with which I approach talks with the French president as well.”

 

Bloomberg News

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