Greece must implement painful reforms if it wants to stay in the eurozone, Germany’s finance minister warned yesterday.
The intervention from Wolfgang Schäuble came as eurozone finance ministers prepare today to discuss measures to ease Greek debt.
Athens is under pressure to show lenders that it has delivered on all of its agreed economic promises — a commitment it has so far failed to meet.
“Athens must finally implement the needed reforms,” Mr Schäuble warned. “If Greece wants to stay in the euro there is no way around it,” he told the Bild am Sonntag newspaper.
Greek debt is expected to peak at above 180 per cent of GDP this year. Making it more sustainable would increase the country’s chances of inclusion in the European Central Bank’s bond-buying programme — a step Athens wants to achieve by March — helping to unlock a long-awaited economic recovery.
Until then Greece needs to pass fiscal targets and unpopular reforms that international lenders hoped would have been completed by Monday, as part of a huge €240 billion bailout plan to keep the Greek economy from crashing.
The longer Athens delays in meeting commitments, the greater the chances that creditors will demand added austerity measures, including fresh pay and pension cuts.
Over the weekend, Greek finance ministry officials revealed that creditors were already considering imposing €4.2 billion in added budget cuts — a proposal that Greece has been quick to refuse, warning of a “social disaster”.
With Alexis Tsipras, the left-wing prime minister, facing a record 20-point dive in popularity and nine in ten Greeks disgruntled by his government, according to the latest polls, the finance ministry officials said that it would be “impossible for the administration to legislate any added austerity measure at present”.
Mr Tsipras came to power last year, promising to end six years of austerity that have wiped out more than 24 per cent of nationwide incomes, shut one in three businesses and left 1.2 million people jobless. Despite months of haggling with creditors, he caved into their demands, signing Greece up for even harsher reforms in exchange for a third €86 billion rescue fund, primarily funded by Germany.
With German elections looming, Angela Merkel’s conservative party faces an increasingly fractured landscape in which the far-right Alternative for Germany is gaining strength and resisting the eurozone’s policy of aiding the EU’s financially struggling member states.
“Failure to wrap up this fiscal review fast will prove hugely against Greece’s interest,” said Kostas Chrysogonos, an MEP for Greece’s ruling Syriza party.
“It will be so much harder to pin down an agreement on debt as Germany and several other European nations swing into election mode even in the coming months.”
The main obstacles to closing the so-called Athens review are unpopular labour reforms, including a collective bargaining agreement that would give private companies a freer hand in mass firings.
Athens is due to receive an additional €86 billion under a third rescue scheme but Germany and the International Monetary Fund are at odds over how and if to restructure Greece’s huge loans.
Mr Schäuble and other German officials are resisting a restructuring, except for minor tweaks. The EU and the IMF also disagree on Greece’s fiscal targets beyond 2018.