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 The euro zone's paymaster and the ECB are both taking a tough line
with Greece's new leftist government, whose leader swept to victory
last Sunday promising that five years of austerity, "humiliation and
suffering" were over.
Alexis Tsipras has also promised to renegotiate agreements with the
European Commission, ECB and International Monetary Fund "troika"
and write off much of Greece's 320 billion euro ($360 billion) debt,
which at more than 175 percent of gross domestic product is the
world's second-highest after Japan.
Merkel flatly rejected such a possibility.
"There was already a voluntary waiver by private creditors; Greece
has already been exempt from billions by the banks. I don't see a
further debt haircut," she told German daily Die Welt in an
interview published in its Saturday edition.
"Europe will continue to show solidarity for Greece, as for other
countries hit particularly hard by the crisis, if these countries
undertake their own reforms and savings efforts," Merkel added in a
thinly veiled threat to Athens.
Without the support of international lenders, Greece would soon find
itself back in an acute financial crisis.
Unable to tap the markets because of sky-high borrowing costs,
Athens has enough cash to meet its funding needs for the next couple
of months. But it faces around 10 billion euros of debt repayments
over the summer.
"I'M WAITING," MERKEL TELLS ATHENS
Greece's new government opened talks on its bailout with European
partners on Friday by refusing to extend the program or to cooperate
with the international inspectors overseeing it.
Separately, the French finance ministry said on Saturday that Greek
Finance Minister Yanis Varoufakis will meet with his French
counterpart Michel Sapin in Paris on Sunday and issue a statement
afterwards.
Europe's bailout program for Greece, part of a 240 billion euro
rescue package also involving the International Monetary Fund,
expires on Feb. 28. A failure to renew it could leave Athens unable
to meet its financing needs and cut its banks off from central bank
liquidity support.
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The ECB does not accept Greek sovereign bonds as collateral in its
refinancing operations as they are below investment grade. However,
it allows central bank financing to Greek banks as the country is in
a bailout program.
Erkki Liikanen, a member of the ECB's policymaking Governing
Council, said that funding, too, could dry up if Greece does not
remain in a program.
"Greece's program extension will expire in the end of February so
some kind of solution must be found, otherwise we can't continue
lending," Liikanen, also the governor of Finland's central bank,
told public broadcaster YLE.
Merkel said the ECB's Jan. 22 decision to pump billions of euros
into the euro zone with a bond-buying program did not mean countries
would end efforts to shape up their economies with structural
reforms.
She put the onus on the new Greek government to present a credible
economic policy.
"The goal of our policy was and is that Greece remains a permanent
part of the euro-community," Merkel said.
"To that end, Greece and the European partners make their
contribution. Apart from that, I am now waiting to see what concepts
the Greek government will present."
($1 = 0.8861 euros)
(Writing by Paul Carrel; Editing by Hugh Lawson)
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