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Loose talk could take a huge toll in war of words over Greek debt

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A homeless man sleeps in the streets of Athens as talks over Greek debt are on a knife-edge

A homeless man sleeps in the streets of Athens as talks over Greek debt are on a knife-edge

AFP/Getty Images

Greek Prime Minister Alexis Tsipras

Greek Prime Minister Alexis Tsipras

REUTERS

Greek Finance Minister Yanis Varoufakis is aware Athens is down to its last few days of cash reserves

Greek Finance Minister Yanis Varoufakis is aware Athens is down to its last few days of cash reserves

REUTERS

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A homeless man sleeps in the streets of Athens as talks over Greek debt are on a knife-edge

It was the week in which Greece threatened to unleash a "wave of millions of economic migrants" and jihadists on Europe unless the eurozone backs down on austerity demands. The threats came from the country's defence and foreign ministers.

The threat comes as Greece struggles to convince the eurozone and International Monetary Fund to continue payments on a €242bn bailout of Greek finances.

Without the funding, Greece will go bust later this month, forcing the recession-ravaged and highly indebted country out of the EU's single currency.

Greece's border with Turkey is the EU's frontline against illegal immigration and European measures to stop extremists travelling to and from Islamic State of Iraq and the Levant (Isil) bases in Syria and Iraq.

Panos Kammenos, the Greek defence minister, warned that if the eurozone allowed Greece to go bust, it would give EU travel papers to illegal immigrants crossing its borders or to the 10,000 currently held in detention centres.

"If they deal a blow to Greece, then they should know that the migrants will get papers to go to Berlin," he said.

"If Europe leaves us in the crisis, we will flood it with migrants, and it will be even worse for Berlin if in that wave of millions of economic migrants there will be some jihadists of the Islamic State too. If they strike us, we will strike them."

Mr Kammenos, who is the leader of the Right-wing Independent Greeks party which is in coalition with Greece's ruling far-Left Syriza government, said that the EU's passport free "Schengen" travel zone left the eurozone vulnerable.

And there were no indications last night that jaw-jaw might be better than war-war.

In Munich, the line was firm. Greece must present detailed proposals on how it wants to complete its current bailout programme and should not expect special treatment from its euro zone partners, a close ally of Chancellor Angela Merkel insisted.

As things stand, international creditors have frozen the disbursement of any more bailout funds to Greece pending a review of the new leftist government's reform agenda. Economists have warned that without a cash injection, the country could go bust in the coming weeks.

"The Greek government now has to present its programme for the fulfilment of the current second aid package. That's the only thing we should now focus on," Volker Kauder, parliamentary leader of Ms Merkel's conservatives, told the mass-selling daily 'Bild'. Now is not the right time to discuss a possible third programme for Athens, he insisted, noting that Europe's bailout rules, that were also applied to help countries such as Spain, Portugal and Ireland, could not be changed for Greece alone.

"Greece won't get special treatment. We won't be swayed by yobbish speech from Athens," Mr Kauder stressed.

On Thursday, Athens accused German finance minister Wolfgang Schaeuble of insulting his Greek counterpart, further straining their difficult bilateral relationship.

But Mr Schaeuble, who has become a lightning rod for Greek frustrations with Germany, simply brushed aside the complaint as "nonsense".

All of this simply serves to highlight just how dangerously close Greece has become to breaking point with Europe's creditor powers.

Both sides have issued ultimatums, each insisting angrily on fixed positions and lashing out at each other with barely concealed animosity.

"If they decide to kick us out, the damage will be greater for them," said Manolis Glezos, the wartime resister who tore the Nazi flag from the Acropolis in 1941.

A disorderly Greek exit from the eurozone would mark "beginning of the end" for the currency union and spark a dangerous domino effect of market contagion across the continent, according warned EU's top finance commissioner.

Seeking to soothe talk of an "accidental" Grexit, Pierre Moscovici said any move to eject Greece from the bloc "would be a catastrophe - for the Greek economy, but also for the eurozone as a whole."

"If one country leaves this (monetary) union, the markets will immediately ask which country is next, and that could be the beginning of the end," the former French finance minister told 'Der Spiegel' magazine.

The situation is grave. Far from subsiding, the defiant language from Athens is growing louder.

"These comments [by Mr Kammenos about migrants] are a recipe for matters to get out of hand, and it is becoming increasingly hard for Germany to back down," said Mats Persson of Open Europe.

Alexis Tsipras, the Greek premier, is barely more diplomatic. He too has threatened a snap vote on the terms of austerity if Eurogroup finance ministers reject Greece's latest proposals.

"If we were to hold a referendum tomorrow with the question, 'do you want your dignity back or a continuation of these undignified policies,' then everyone would choose dignity regardless of difficulties that would come with it," Mr Tsipras said.

Mr Tsipras compared the eurozone to a woollen jumper. "Once it begins to unravel, you can't stop it," he said.

Yet the Eurogroup did in fact reject Greece's reform proposals in Brussels yesterday, and in caustic terms. "We have to stop wasting time and really start talks seriously," said Jeroen Dijsselbloem, the group's chief.

Once more Mr Schaeuble, among others, demonstrated his disdain by insisting on using the term "troika" - hated in Greece, and now officially abolished - seemingly wishing to humiliate Syriza.

Jean-Claude Juncker, the European Commission's chief, warns the EMU authorities must take care. "Not everybody in the European Union seems to have understood the seriousness of the situation in Greece," he told 'Die Welt'.

Mr Juncker issued a categorical guarantee that Greece will never be forced out of EMU. "The country is and will remain a member of monetary union. A Greek withdrawal would lead to an irreparable lost of global prestige for the whole EU."

Such comments - and similar words by the German and French leaders - are hazardous. If Europe fails to defuse the crisis after all and precipitates an EMU break-up, any pledges to defend Portugal, Italy and Spain against contagion would be greatly devalued.

They also embolden Mr Tsipras, since they appear to confirm his calculated gamble that the Eurogroup will have to yield as greater geostrategic forces come to bear. Yet he too must tread with care. His popularity has slipped from 84pc to 64pc since early in February. Almost 70pc of Greeks say they want Syriza to reach an "honourable compromise" with the Eurogroup. A further 27pc want a return to the drachma.

The two sides are talking past each other. Mr Tsipras warned of a fresh showdown if the European Central Bank withholds liquidity support for the Greek banking system, warning Frankfurt of the "great responsibility" it will have to carry if it pushes Greece over the edge.

This moment may already be close. Last week, Greece requested a €2bn increase in its emergency liquidity (ELA) ceiling to offset deposit flight and keep banks afloat. The ECB granted €500m. This has been exhausted.

Greek officials say the country will have to take radical action within days unless the ECB relents. It is understood that Frankfurt will hold an emergency session tomorrow.

Athens is down to its last days of cash reserves. "We have money to pay salaries and pensions of public employees. For the rest, we will see," said the finance minister Yanis Varoufakis.

It is clear that the four-month interim deal agreed in February between Syriza and EMU failed to address the true nature of Greece's crisis and is drifting towards collapse. One Syriza MP said the government had no idea how this would end. "One thing is sure: the party has learned quickly over the last three weeks that Europe is not a nice place," he said. (© Daily Telegraph, London)

Telegraph.co.uk