Greece: Merkel travels to eurozone fault line

[October 09, 2012]  ATHENS, Greece (AP) -- Amid draconian security measures, German Chancellor Angela Merkel arrived Tuesday for her first visit to Greece since the eurozone crisis began there three years ago. Her five-hour stop is seen by the Greek government as a historic boost for the country's future in Europe, but by protesters as a harbinger of more austerity and hardship.

More than 7,000 police were on hand in Athens, cordoning off parks and other sections of city to keep demonstrators away from the German leader, who will hold talks with conservative Prime Minister Antonis Samaras.

Even in unrestricted areas, officers were stopping people on the streets to check their bags and AP reporters saw more than 10 men being detained and led away, including one who shouted that he was an official with the main opposition radical left Syriza party.

Many of Europe's leading politicians have avoided official travel to Greece and the risk of a hostile reception, as the debt-saddled country struggled to keep up with commitments needed to guarantee rescue loan payments and long-term euro membership.

But Merkel, heading Europe's largest bailout contributor, accepted Samaras' invitation to Athens despite failure by his government so far to conclude a massive new austerity package.

Greece has depended on bailouts from Europe and the IMF since May 2010. To get the loans, it has implemented a series of deep budget cuts and tax hikes, while increasing retirement ages and facilitating private sector layoffs.

However, Athens must pass further austerity measures worth euro13.5 billion ($17.5 billion) over the next two years to qualify for its next rescue loan payment -- without which the government will run out of cash next month.

Greece's respected Kathimerini daily cautioned Tuesday that "no foreign leader should be afraid to come here."

"Extreme behavior, violence, and exaggerated comments by politicians on TV can achieve nothing to help the unemployed or pensioners and just place the country in a position where it looks bad whatever it does," an editorial said. "Today's visit is crucial and historic. Let us all treat it accordingly."

After months of tough rhetoric, the German chancellor may be preparing her own voters for a more tolerant approach toward Greece ahead of federal elections next year, according to Jason Manolopoulos, author of the 2011 book on Europe's financial crisis "Greece's Odious Debt."

"Given how some other members of the (eurozone) core -- Austria, Holland, Finland -- had made some very harsh comments ... I think it does send a message to Greece," Manolopoulos said of Merkel's visit.

"But I think it's also important, if not more important, for German domestic consumption."

Economist Martin Koehring, from the Economist Intelligence Unit, said Merkel wanted to underscore her commitment to keeping Greece in the 17-member eurozone, and make a gesture of support to Samaras' coalition government, in power since late June.

"Mrs. Merkel's visit is ... also likely to stress that, in addition to solidarity from its EU partners, the pressure to implement fiscal austerity and structural reforms will not be eased," he added.

In Athens, Merkel will meet with Samaras and President Karolos Papoulias, the largely ceremonial head of state, in adjacent buildings before flying back out of the country.

Stiff security measures include a ban on public gatherings outside the German Embassy and other parts of central Athens as well as within 100 meters (330 feet) of her motorcade route from the airport.

The new cutbacks are expected to further reduce pensions and salaries, while increasing the retirement age by two years, to 67. However, the government is strongly resisting creditors' demands for layoffs in the public sector, traditionally a valuable source of votes for Greek politicians.

Even with the belt-tightening, set to save euro7.8 billion ($10.1 billion) next year, it is unclear whether Greece will be able to handle its mountain of debt in coming years -- a key condition for the IMF to continuing its bailout financing.

Debt monitors from the EU, IMF and European Central Bank, known as the troika, will deliver a report within coming weeks on whether Greece should receive its next bailout payment, without which it will go bankrupt. Their assessment will depend on the new cutbacks, as well as the course of pledged reforms.

[Associated Press; By DEREK GATOPOULOS and NICHOLAS PAPHITIS]

Efty Katsareas in Athens contributed.

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