Business World

Tuesday 16 January 2018

Merkel under pressure to soften bailout stance

Maeve Dineen and Patrick Cockburn

GERMAN Chancellor Angela Merkel is expected to come under intense new pressure to ease some of the austerity measures imposed on countries like Ireland after she signalled a softening of conditions on Greece.

Her foreign minister said negotiators might consider giving Greece more time to rein in its finances after that country gave the conservative New Democracy party a narrow majority in yesterday's elections. This may enable the party to form a coalition government -- possibly with the socialist Pasok party -- although it is likely to face strong opposition inside and outside parliament.

But the hint from Germany of even a slight softening of conditions is certain to give ammunition to other EU countries for an easing of the more draconian measures currently stifling growth. Ms Merkel's government said it would consider a possible extension of the timeframe for it to begin bringing in austerity measures.

The news of the possible softening of stance came as President François Hollande's Socialist government secured a clear majority in the final round of France's parliamentary elections yesterday, winning backing for his growth-led policies to tackle the eurozone crisis.

This is sure to heap even further pressure on Ms Merkel to consider more growth-orientated strategies than simply focusing on cuts.

An Italian official last night revealed that European leaders will today hold a conference call to discuss the Greek ballot.

German Chancellor Angela Merkel will take part in the call, along with Italian Prime Minister Mario Monti, French President Francois Hollande, and Spanish Prime Minister Mariano Rajoy

Italian Prime Minister Mario Monti will take part in the call with German Chancellor Angela Merkel, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy.

German Foreign Minister Guido Westerwelle said of the Greek situation: "I can imagine we could do something in terms of the time frame, because the standstill that has taken place over the past few weeks has done damage.

But one thing must be clear: the treaties must be valid in substance. They can't be cancelled or renegotiated."

The German government also shifted ground earlier this month supporting a European Commission proposal to give Spain more time to reduce its budget deficit, in a sign Berlin is prepared to take a more flexible approach to tackling the euro debt crisis.

The hint toward a softening of Germany's position echoes similar comments from Rainer Bruederle, the parliamentary caucus leader of Merkel's Free Democratic Party coalition partner.

At the same time, Mr Westerwelle said renegotiating Greece's bailout programme was out of the question, because European leaders would lose "credibility" with other countries under the bailout fund.

But it could open the door for aspects of the austerity measures to be tweaked.

And Taoiseach Enda Kenny said last night that it was time for a "political response" to the eurozone crisis in the wake of the Greek elections.

He revealed he was keeping track of the latest results -- and that there had been intensive contacts between Irish officials and their European counterparts over the past week about how to tackle the eurozone crisis.

In the election, the New Democracy party came in first and immediately proposed forming a pro-euro coalition government -- a development that eased, at least briefly, deep fears that the vote would unleash an economic tsunami.

With 37.4pc of the vote counted, official results showed the conservative New Democracy with 30.5pc of the vote, ahead of the radical anti-bailout Syriza party's 26pc and the pro-bailout Socialist PASOK with 12.9pc.

Coalition

Although official projections showed that no party would win enough seats in the 300-member parliament to form a government on its own, Greece's two traditional parties -- New Democracy and PASOK -- will have enough seats to form a coalition together.

"The Greek people today voted for Greece to remain on its European path and in the eurozone," New Democracy leader Antonis Samaras said, adding that voters chose "policies that will bring jobs, growth, justice and security".

His party beat Syriza, which wanted to cancel Greece's international bailouts. Syriza chief Alexis Tsipras has conceded the election.

Greece has been dependent on rescue loans since May 2010, after sky-high borrowing rates left it locked out of the international markets following years of profligate spending and falsifying financial data.

The spending cuts made in return have left the country mired in a fifth year of recession, with unemployment spiralling to above 22pc and tens of thousands of businesses shutting down.

Irish Independent

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