Merkel: Light at End of Tunnel

Samaras_Merkel2Greek Prime Minister Antonis Samaras, who’s been touting a “success story” for his country and predictions it will begin to recover next year from a crushing economic crisis, didn’t ask German Chancellor Angela Merkel’s blessing for debt relief yet after telling her there is no hole in the 2014 budget as international lenders claimed.

Meeting with her in Berlin on Nov. 22, Samaras made the case that Greece will show a primary surplus this year – not counting interest on loans, the cost of running state enterprises, cities and towns and some military costs – a benchmark that allows the government to ask for debt relief. German media said he would ask her to allow that but he didn’t.

“This possibility (of debt relief) will become a reality only after on April next year, the final results about the primary surplus will come about. Then a decision will be taken,” said Samaras.  “The current agreement is on track. We are on track. We don’t ask for anything else,” he said, standing beside Merkel.

Samaras said at a news conference with Merkel that he was optimistic there would be a deal on a new aid tranche with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which has delayed a one billion euro ($1.37 billion) installment because of what it said was a budget gap of as much as 2.9 billion euros.

The Greek government had insisted it was only 500 million euros and now Samaras said there’s none at all although he didn’t elaborate on why there was such a sharp difference between the estimates of the two sides.

He reiterated his pledge that there would be no more of the pay cuts, tax hikes and slashed pensions beyond what had already been agreed and insisted upon by Merkel, whose country puts up the biggest share of loans.

Merkel said she was impressed after Samaras told her, “There’s no doubt more has to be done. That’s why we are continuing. Remember how Greece was 15 months ago. We are entering a recovery phase after seven painful years of recession.”

“We already see the first fruit of the attempts of the Greek government. The most impressive achievement is the primary surplus. The Greek Prime Minister presented me with a series of impressive results …. Greece has made important progress,” she said, noting he told her Greece is aiming at bringing in more foreign investments.

Merkel and her Finance Minister, Wolfgang Schaeuble, have repeatedly ruled out any notion that Greece would hit the Troika with losses the same way it did private investors in 2011, stiffing them with a 74 percent write-down.

Germany is the biggest contributor to the two rescue packages of $325 billion but Merkel has insisted on unrelenting pay cuts, tax hikes, slashed pensions and worker firings in return.  If Greece is allowed a debt cut, the cost of repaying the difference would fall on taxpayers in the other 16 Eurozone countries, including Germans already angry Greece is getting help.

The German newspaper Sueddeutsche Zeitung said Samaras told her that Greece will post a primary surplus both this year and in 2014 in a bid to convince Merkel that Greece should be given a break and not repay all it loans.

At a landmark Eurogroup summit in November 2012, Eurozone officials had said that Greece’s achievement of a primary surplus would allow for a discussion to begin on debt relief, but now the lenders are backing away from it, skeptical that Greece really has achieved the benchmark.

Germany has repeatedly ruled out a second debt haircut for Greece. But Samaras asked for a reduction in the interest rates on Greece’s foreign loans and an extension on the maturities, terms he ruled out for Greeks crushed by austerity after he set aside measures for debt relief for them.

Merkel conceded that some economic reforms have been achieved but that much remains to be done. IMF Managing Director Christine Lagarde earlier said she wants the EU and ECB to take the hit but not her agency, ruling out any chance of a debt cut for Greece.