New Greek Crisis? Angel Merkel Rejects Debt Relief Proposal

Greece finished its new round of elections and Angela Merkel is not happy.

The far-left Syriza party won on a platform of sticking it to Greece’s creditors, taking 149 of the 300 seats in Parliament. Being two seats from a majority, Syriza was forced to form a coalition with their ideological opposites, the far-right Independent Democrats, based on a mutual hatred of EU mandated austerity measures. The new coalition pledged to have half of the country’s debts written-off, a policy plan that Angela Merkel refuses to consider.

The BBC reports that German Prime Minister Merkel said, “I do not envisage fresh debt cancellation. There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece’s debt.”

That might not be good enough for the new Greek government.

According to the Economist, Alexis Tsipras’ first act as Greece’s new prime minister was to visit a memorial for the 200 Greeks killed by the Nazis in 1944, a implicit jab at Germany. He also rallied against the near-unanimous EU denouncement of Russia’s aggressive actions in Ukraine.

Likewise, Greece’s newest finance minister, Yanis Varoufakis, refused to work with the “troika” on Friday. The troika refers to a tripartite committee of the IMF, European Commission, and the European Central Bank (ECB) that governs the various loans and bail-out packages for Greece. Instead, Varoufakis wants to work directly with EU member-states and financial organizations.

Tsipras and Varoufakis might be ruffling Angela Merkel’s feathers, but their actions come with the approval of the Greek people, and for good reason.

Since 2008, Greece has suffered multiple recessions. In 2011, despite the troika’s 2010 €110 billion bailout loan, the Greece’s economy retracted almost nine percent. Likewise, unemployment has skyrocketed to over 27 percent in 2013 and individual income continues to drop, according to the World Bank.

The Greeks sent a message in the January 25 election that they’ve had enough, and much of that anger is directed at one woman: Angela Merkel. In addition to Tsipras’ symbolic insults, the Prime Minister has planned a trip to Italy, Cyprus, and France, intentionally leaving out Germany.

Germany’s finance minister, Wolfgang Schaeuble, warned Greece against aggressive negotiation tactics on debt forgiveness saying, “there’s no arguing with us about this, and what’s more we are difficult to blackmail.”

For her part, Merkel seems to be sending mixed messages. The Economist reports that she let it be known that a Greek exit would be “bearable” for the rest of the Eurozone.

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On the other hand, the Telegraph reports that Merkel is still looking for a solution to keep Greece in the currency union.

“Europe will continue to show its solidarity with Greece, as with other countries hard hit by the crisis if these countries carry out reforms and cost-saving measures.”

That may mean the solidarity is over; Greece began rolling back reforms mandated by EU organizations even before the election. A refusal to make further cuts to the government budget has already put Greek and EU officials at odds.

With the election ending only a week ago, Greece is abruptly raising a new risk of an exit from the Euro. To prevent the potentially disastrous departure, one side will have to blink, either Alexis Tsipras or Angela Merkel, and neither seems prepared for that.

[Image Credit: GlyneLow/Wikimedia Commons]