Cyprus Mail

German ‘Grexit’ calls raise pressure on Merkel

French President Francois Hollande welcomes German Chancellor Angela Merkel before talks and a dinner at the Elysee Palace in Paris

By Noah Barkin

“Today we need the Iron Chancellor,” read the front-page headline in top-selling German newspaper Bild on Tuesday, next to a picture of Angela Merkel in a Prussian helmet.

On page two, Bild laid out a 5-point plan for Merkel to bring along with her to a summit in Brussels in the evening that could prove decisive in sealing Greece’s fate. The first point in the plan: the immediate exit of Greece from the euro zone.

Merkel heads to the summit under enormous domestic pressure to take a hard line with Athens.

Bild is just the tip of the iceberg. Many members of her own party, the conservative Christian Democrats (CDU), have come around to the view that the euro zone may be better off without Greece.

And her centre-left coalition partners, the Social Democrats (SPD), are also talking tough these days, limiting Merkel’s room to forge compromises with Greek Prime Minister Alexis Tsipras that would keep Greece in the currency bloc.

“After the political escalation of the past weeks, even Angela Merkel needs to pay attention to whether she has majorities behind her,” Stefan Kornelius wrote in an editorial in the Sueddeutsche Zeitung on Tuesday.

From Merkel’s major allies in Europe the pressure runs in the opposite direction. Key partners such as France clearly want a deal with Greece and appear more willing to make concessions to get one.

Merkel visited French President Francois Hollande on Monday evening to agree a common position before the summit, but differences in tone were evident in statements they made to reporters before sitting down to dinner.

On Tuesday, a chorus of European voices, seemingly pointed towards Berlin, cried out for a deal with Tsipras, who is expected to put forward new proposals in Brussels in the hopes of clinching a third bailout package and avoiding a risky “Grexit”.

“France is doing everything, and will do everything, for Greece to stay in the euro zone because its place is in the euro zone,” said French Prime Minister Manuel Valls.

European Commission President Jean-Claude Juncker, speaking in the European Parliament in Strasbourg, warned: “There are some in the European Union who openly or secretly are working to exclude Greece from the euro zone.”

Merkel’s biggest dilemma centres around whether to grant Greece debt relief. This has been a key demand of Tsipras from the start of the negotiations, and he has the International Monetary Fund (IMF) on his side.

German officials have signalled that they are open to stretching out the maturities of Europe’s loans to Greece, but first they want Tsipras to commit to reforms of Greek pensions, the labour market and the tax system.

They have all but ruled out a “haircut”, or outright writedown of the value of the loans, because this is seen in Merkel’s entourage as politically dangerous.

But pressure is rising on her to reconsider her stance. In recent days, a host of top European officials, including the finance ministers of France and Luxembourg, have said discussion of a debt writedown should not be taboo.

And on Tuesday, Bild also came out in favour of a debt cut. Point three of its five-point plan called for a 50 per cent haircut on Europe’s loans to Greece. Its condition for doing so however, was cutting Greece loose from the euro zone.

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