Reuters: German government says united on Greece, plays down talk of splits

Germany’s government said on Friday it remained united on the need to stabilize the Greek economy despite indications of divergent views between Chancellor Angela Merkel’s conservatives and their Social Democratic coalition partners.

Spokeswoman Ulrike Demmer declined to comment on a newspaper report that Foreign Minister Sigmar Gabriel had criticized the government’s handling of Greece in a letter to Merkel last month and had suggested easing a surplus requirement.

Greece needs a new tranche of financial aid under its 86 billion euro bailout by the third quarter of the year or it faces the risk of defaulting on its debts. Germany’s views on the deal are particularly closely watched as it contributes the most to the bailout.

Demmer said Berlin’s views remained unchanged. “The goal is to conclude the second program review,” she told a government news conference.

But comments on Friday from Gabriel, a Social Democrat, and Finance Minister Wolfgang Schaeuble, a member of Merkel’s Christian Democrats, suggested tensions remained.

Schaeuble signaled growing impatience with the process and said Greece must meet its commitments, or end up in an impossible position.

“If Greece again and again does not do what it has committed to, eventually that will not work,” Schaeuble told a business meeting in Saarbruecken in western Germany.

Asked about possible difference within the ruling coalition, Gabriel told reporters in New York that Germany should work to keep the euro zone together. “I expect the finance minister to do that, and I am certain he will deliver,” he said.

Demmer declined to comment on a report in the Handelsblatt newspaper that Gabriel had suggested easing a requirement for Athens to keep a 3.5 percent budget surplus in the medium-term.

Reports of a rift within the German government come as the country gears up for a national election in September, with polls showing growing support for the Social Democrats, who have vowed to regain the leading role in the government.

Gabriel told Merkel that the different perspectives of Schaeuble’s ministry and the International Monetary Fund (IMF) appeared to make reaching an agreement on another rescue plan impossible, the newspaper reported.

Germany, Europe’s largest economy, wants the IMF to have a stake in Greece’s bailout to give the rescue plan greater credibility, but opposes granting Athens the significant debt relief that the IMF is demanding.

Berlin has opposed large-scale debt relief unless Greece completes wide-ranging reforms and keeps running budget surpluses of 3.5 percent for the medium-term after the end of the bailout program in 2018.

Gabriel, who swapped into the foreign ministry from the economics ministry last week, had proposed that Greece only be required to keep a 3.5 percent budget surplus for three years, according to the newspaper.

Source: Reuters