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Germany has set out three fundamental preconditions for any rescue package for Greece, including involvement of the International Monetary Fund, and a commitment by its European Union partners to tough new rules to control public debt and deficits in the eurozone – including necessary EU treaty changes.
A senior government official in Berlin said there would be no agreement at this week’s EU summit on a specific rescue package for the debt-strapped Greek government.
If there were to be agreement on a “mechanism” to provide such assistance, he said, it could only be triggered once Greece had exhausted its capacity to raise money on the international capital markets; the IMF had agreed to make a “substantial contribution” to a rescue package; and the EU members has agreed to negotiate new rules to prevent any reoccurrence of such a debt crisis.
The German position was revealed in response to growing pressure from the European Commission, and other EU member states, to reach agreement on the mechanics of a rescue package for Greece at the European Council meeting on Thursday and Friday.
In an interview with the FT on Monday, José Manuel Barroso, Commission president, said rapid agreement was needed to reassure financial markets, and ensure the stability of the euro. He expressed confidence that Angela Merkel, the German chancellor, would back a deal as a “committed European”.
The German response is that the government in Berlin is “negotiating in the European interest, and demonstrating our commitment to Europe in defending the stability of the euro”, the official said.
A negotiation (on help for Greece) should only come as a “last resort”, he said, and only happen subject to the three conditions.
The German demand that could meet the most resistance from its EU partners is the insistence that new rules to enforce budget discipline should be negotiated, even if that requires treaty changes. Both France and the UK are passionately opposed to any such suggestion of reopening treaty negotiations.
“We must draw the consequences for the future, with the goal of agreeing more effective sanctions and prevention measures against excessive indebtedness, [even if] that should include a treaty change,” the senior official said, speaking on condition of anonymity.
Involvement of the IMF in a Greek rescue package is a much more open debate inside the union, with Mr Barroso himself expressing no objection, provided that any Greek rescue is led by Europe. There have been clear divisions within Germany on the question, but advisers to Ms Merkel seem to have won the day in a fierce debate with Wolfgang Schäuble, finance minister, and his staff, who opposed bringing in the fund.
Although Germany has appeared increasingly isolated in the EU in holding out against any formal rescue package for Greece, there seems no prospect of any deal being agreed without Berlin’s agreement.
It might still be possible to agree a first step of a deal this week – setting out the conditions under which an emergency rescue would be launched – but without any direct connection to the Greek crisis, and only if it does not imply that any rescue would be automatic, according to the German view.
A senior government official in Berlin said there would be no agreement at this week’s EU summit on a specific rescue package for the debt-strapped Greek government.
If there were to be agreement on a “mechanism” to provide such assistance, he said, it could only be triggered once Greece had exhausted its capacity to raise money on the international capital markets; the IMF had agreed to make a “substantial contribution” to a rescue package; and the EU members has agreed to negotiate new rules to prevent any reoccurrence of such a debt crisis.
The German position was revealed in response to growing pressure from the European Commission, and other EU member states, to reach agreement on the mechanics of a rescue package for Greece at the European Council meeting on Thursday and Friday.
In an interview with the FT on Monday, José Manuel Barroso, Commission president, said rapid agreement was needed to reassure financial markets, and ensure the stability of the euro. He expressed confidence that Angela Merkel, the German chancellor, would back a deal as a “committed European”.
The German response is that the government in Berlin is “negotiating in the European interest, and demonstrating our commitment to Europe in defending the stability of the euro”, the official said.
A negotiation (on help for Greece) should only come as a “last resort”, he said, and only happen subject to the three conditions.
The German demand that could meet the most resistance from its EU partners is the insistence that new rules to enforce budget discipline should be negotiated, even if that requires treaty changes. Both France and the UK are passionately opposed to any such suggestion of reopening treaty negotiations.
“We must draw the consequences for the future, with the goal of agreeing more effective sanctions and prevention measures against excessive indebtedness, [even if] that should include a treaty change,” the senior official said, speaking on condition of anonymity.
Involvement of the IMF in a Greek rescue package is a much more open debate inside the union, with Mr Barroso himself expressing no objection, provided that any Greek rescue is led by Europe. There have been clear divisions within Germany on the question, but advisers to Ms Merkel seem to have won the day in a fierce debate with Wolfgang Schäuble, finance minister, and his staff, who opposed bringing in the fund.
Although Germany has appeared increasingly isolated in the EU in holding out against any formal rescue package for Greece, there seems no prospect of any deal being agreed without Berlin’s agreement.
It might still be possible to agree a first step of a deal this week – setting out the conditions under which an emergency rescue would be launched – but without any direct connection to the Greek crisis, and only if it does not imply that any rescue would be automatic, according to the German view.
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