EU toughens stance after Tsipras names cabinet

EU toughens stance after Tsipras names cabinet

A day after Alexis Tsipras became prime minister of Greece, the euro region hardened its rhetoric.

Germany and the Netherlands led warnings to the new anti-austerity Greek government about rolling back budget cuts meant to get spending under control. The two countries pressed Tsipras to endorse the fiscal tightening that underpins the 240 billion-euro ($272 billion) aid program for Greece.

“Germany bears no responsibility for what happened in Greece,” Volker Kauder, the parliamentary caucus leader of German Chancellor Angela Merkel’s Christian Democrats, told reporters in Berlin on Tuesday. “The new prime minister must recognize that.”

The harder line points to the looming conflict between Greece’s biggest creditors and a prime minister emboldened by a decisive victory. He swept aside a ruling coalition of two parties that have dominated Greek politics for the past 40 years and which together endorsed German-backed budget austerity.

Tsipras, 40, wants to loosen the terms of Greece’s lifeline and win a writedown of some of the country’s debt mountain. His new finance minister, Yanis Varoufakis, is gearing up for negotiations with the euro area that have been on hold since December as Greece entered an election campaign.

“The message ‘we want your support but not your conditions’ won’t fly,” said Dutch Finance Minister Jeroen Dijsselbloem, who is due to confer with Tsipras and Varoufakis in Athens on Jan. 30. “My message will be that we’re open to cooperation but that the support from Europe also means the Greeks have to make an effort.”

Alongside Varoufakis, a 53-year-old economics professor who has branded Greece’s bailout a destructive “trap,” Tsipras unveiled Foreign Minister Nikos Kotzias, who has said sanctions against Russia aren’t in Greece’s interests.

Syriza won Sunday’s election with two seats short of a majority. It formed a coalition with Panos Kammenos’s Independent Greeks, a conservative party that also opposes austerity. Kammenos took the post of defense minister.

While Greece’s international creditors have long dangled the carrot of longer maturities on loans in return for budget cuts, a debt writedown has been a red line.

It still isn’t on the table, German Finance Minister Wolfgang Schaeuble said after a meeting of European Union finance ministers in Brussels, citing an interest-payment waiver on the country’s loans until 2020.

German Chancellor Angela Merkel told lawmakers in a closed meeting in Berlin that the new Greek government has to make it clear whether it is committed to the terms of the EU aid program, according to an official from her Christian Democratic party. She described the debate about a Greek debt reduction as astonishing, given the interest-payment waiver.

Assuming the budget conditions are fulfilled, the euro region has said, based on a 2012 pledge, it will consider further measures to help ease Greece’s debt of about 180 percent of gross domestic product. It already agreed to cut interest rates and extended maturities to help reduce the burden.

The deadline for Greece to qualify for an outstanding sum of 7.2 billion euros, including money from the International Monetary Fund, expires at the end of February. Finance ministers on Monday signaled that this deadline could be extended while the two sides negotiate.

Politicians from both parties in Germany’s grand coalition united behind the tough stance on Greece. That matters because Germany’s parliament can block any changes to bailout programs for countries like Greece.

Tsipras “has to keep agreements that have been made,” said Thomas Oppermann, the caucus leader in the lower house of parliament for Merkel’s Social Democratic partners. “It’s totally clear that we’re not going to come up with a special assistance program to finance expensive campaign gifts.”

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