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Greece looks to Berlin talks

Jannis Papadimitriou / jrb
November 21, 2013

Greek Prime Minister Antonis Samaras is set to arrive in Berlin for talks on Friday. Despite Greece's economic troubles, the government, experts say, is in a better position to negotiate today than in the past.

German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras (Photo by Carsten Koall/Getty Images)
Image: Getty Images

In early November, it was far from clear whether any agreements would be reached during a visit to Greece by the country's lenders, the so-called Troika consisting of the EU Commission, European Central Bank and the International Monetary Fund. Significant differences stood between the Greek coalition government and its lenders.

The biggest was the size of the looming deficit in the 2014 Greek budget. Greek Finance Minister Jannis Stournaras estimated it at a maximum of 500 million euros. The Troika, on the other hand, put it at a minimum of 2 billion euros and demanded new austerity measures.

Since then, officials have agreed to 1.3 billion euros in additional funding. But Greek Prime Minister Antonis Samaras refuses to take further austerity steps and cut wages. The government leader says Greek society is “exhausted” following seven years of an ongoing recession and record unemployment at 28 percent.

No elbow room

"The government wants to pursue a tougher negotiating position because it has no elbow room for one-sided austerity measures," says Kostas Botopoulos, a constitutional lawyer and a member of the co-ruling socialist party PASOK. What was agreed should be implemented, he says but warns of making new cuts.

Botopoulos also believes the Greek government is now in a stronger position to negotiate after achieving a primary budget surplus, which occurs when government revenues (excluding borrowing costs) exceed government spending. Such a fiscal success, he argues, must be considered in budget talks.

Makis Andronopoulos, a financial journalist and publicist based in Athens, has a different view. He believes Greek politicians, for tactical and domestic reasons, should have the public believe they're taking a tough position but continue to follow the Troika line. The Athens government, argues Andronopoulos who is currently working on a book about Germany, had hoped for a change of heart following the German elections and the opportunity to spare its citizens further austerity measures.

Anti-austerity protesters REUTERS/John Kolesidis
Domestic unrest is rising in GreeceImage: Reuters

That, however, didn't happen. At the first EU summit following the elections, Chancellor Angela Merkel showed Finance Minister Stournaras the cold shoulder, prompting the minister to admit later to a 1.3-billion deficit that threatened the 2014 budget. That move was directly followed by an invitation for the prime minister to come to Berlin on Friday (22.11.2013).

“We deliver - Europe helps,” said Samaras during the January crisis talks in Berlin. Even then, Chancellor Merkel remained polite but non-committal and urged further reforms in crisis-ridden Greece. This time, observers expect Samaras to seek greater clarity on the European political course of the planned grand coalition.

Growing domestic tension

Andronopoulos sees the need to explain the growing domestic tension in Greece as another reason for Samaras' diplomatic trip. The prime minister barely survived a vote of no-confidence sought by the left-wing opposition on November 11. Meanwhile, Panos Kammenos, head of the right-wing populist party “Independent Greeks,” called for an alliance against the government's austerity policy, an alliance that the left is also expected to join.

Parties of all stripes, including the right-wing extreme party Golden Dawn, see good opportunities to win votes in the upcoming European elections in May 2014. Local elections in Greece will also be held parallel to the European elections.

“If the political forces opposed to the current austerity policy were to gain the upper hand in the European and Greek local elections, the left-wing opposition would demand new Greek parliamentary elections the next day,” says Andronopoulos. And because of threatening instability, Prime Minister Samaras would seek understanding from the German chancellor to postpone implementing austerity measures, he adds.

Greek Financial Minister Yannis Stournaras REUTERS/John Kolesidis
Finance Minister Yannis Stournaras got the cold shoulderImage: Reuters

The socialist Botopoulos sees no reason to be alarmed. A party alliance against the austerity policy, he says, is nothing new. The right-wing populists, he notes, have long maintained contacts to the left and have even occasionally pursued a common course. However, such an alliance, he argues, would not be "enough to put the entire political system in doubt."

Another aid package?

The Greek rescue package expires in April 2014, with no further financing of the crisis-ridden country secured. What comes next is unclear. Ahead of the federal elections, German Finance Minister Wolfgang Schäuble indicated that another aid package for Greece could not be ruled out. Media reports suggest the package could be as high as 10 billion euros.

No decisions on the issue have been made. But Botopoulos notes that although the Greek government would ideally like to have a decision this year, such a quick decision is unrealistic.

"Given the political tension in Greece, successful government negotiations would be important for the European elections," he says. "But it appears that domestic policy considerations will also gain the upper hand in Germany and the debate on a new aid package for Greece will be postponed."