The Greek debt crisis is entering a surreal phase, where the leftist government in Athens has delusions of forcing Germany to pay reparations from World War II in the amount of $303 billion (279 billion euros).
After overcoming their astonishment, the German government reacted swiftly.
Germany’s economy minister branded Greece’s demand for 278.7 billion euros in reparations from World War Two as “stupid” on Tuesday, while the German opposition said Berlin should repay a forced loan dating from the Nazi occupation.
Greek Deputy Finance Minister Dimitris Mardas made the demand on Monday, seizing on an emotional issue in a country where many blame Germany, their biggest creditor, for the tough austerity measures and record high unemployment connected with two international bailouts totalling 240 billion euros.
“And this leeway has absolutely nothing to do with World War Two or reparation payments,” said Gabriel, who leads the Social Democrats (SPD), junior partner in the ruling coalition with Chancellor Angela Merkel’s conservatives.
Berlin is keen to draw a line under the reparations issue and officials have previously argued that Germany has honoured its obligations, including a 115-million deutsche mark payment made to Greece in 1960.
A spokeswoman for the finance ministry said on Tuesday that the government’s position was unchanged.
How desperate is Greece for cash? The government of Alex Tsipras keeps telling its creditors it will meet all obligations, but nobody is believing them. They have a 450 million euro payment due the IMF by April 9 and it’s unknown whether they can — or will — pay the bill. Over the next three months, much larger payments to creditors are coming due and without the remaining 7.9 billion euros in the bailout package being released by the EU, Greece will be in technical default.
Finance Minister Yanis Varoufakis has reiterated his country’s commitment to its creditors, however, saying on Sunday that Greece “intends to meet all obligations to all its creditors, ad infinitum,” Reuters reported Monday. He also told a Greek newspaper Monday that the country “must” reach an outline funding agreement with its lenders at the Eurogroup meeting on April 24.
Christian Schulz, a senior economist at Berenberg, said Tuesday that while the 279 billion euro figure that Greece was claiming in war damages would cover nearly 90 percent of Greece’s entire public debt, it would do little to help Greece’s current crisis.
“If the government were to support these claims, long legal battles between Germany and Greece might loom, but that would be of little help in the immediate crisis,” he said in a note Tuesday. As such, he said, “Europe’s trouble spot provides few reasons for optimism, to put it mildly” and that the new threat is snap elections or a referendum as early as May.
“If the T-bill auctions on 8 and 14 April go well and funds also cover pension and salary payments this month, the government may be able to keep going until the next scheduled meeting of the Eurogroup of finance ministers on 24 April,” he said.
“However, that would only be encouraging, if Prime Minister Tsipras’ coalition was close to an agreement with the EU, IMF and ECB about the necessary reforms to unlock the 7.2 billion euros left in the bailout fund.”
Tsipras will visit Moscow this week which has some EU members nervous. The Greek prime minister may be tempted by President Putin to swap some assets for a line of credit that could get Greece through some rough spots over the next few months.
Russia could offer debt-ridden Greece controversial loans and discounts on supplies of natural gas in exchange for the country’s “assets”, according to reports in Moscow.
Alexis Tsipras, Greece’s prime minister, is due to arrive in the city on Tuesday and will meet Vladimir Putin, Russia’s president, on Wednesday.
Athens overtures to Moscow have raised fears the Leftist government is pivoting east in search of alternatives sources of finance as it bids to avoid bankruptcy. Ahead of his visit, Mr Tsipras condemned economic sanctions on Moscow as “a road to nowhere”.
Greece’s dalliance with the Kremlin has also attracted criticism for potentially undermining the EU’s united front against Russia’s military intervention in Ukraine.
The Syriza leader’s flirtation with Moscow is likely to harden sympathetic European voices to Greek pleas of relief.
Martin Schulz, the president of the European Parliament, said on Saturday that it would be “unacceptable” if Mr Tsipras “jeopardised Europe’s common policy on Russia” in return for Kremlin aid.
But Kommersant newspaper quoted an anonymous Russian government source on Tuesday saying that lines of credit were on the table.
“We’re ready to consider the question of providing Greece discounts on gas: the price for it is tied to the cost of oil which has significantly fallen in recent months,” the source said.
“We are also ready to discuss the possibility of granting Greece new loans. But here we, in turn, are interested in reciprocal moves – in particular, in Russia receiving particular assets in Greece.”
Putin must be licking his chops. Pulling the Greeks into his web with promises of cash and cheap energy in exchange for a seaport or perhaps a natural gas company would be extra satisfying if he could drive a wedge between Athens and the rest of the EU. And, of course, the implications for NATO would be troubling.
For Tsipras, it must be flattering to have Russia so interested in helping him. But the Greek prime minister must know that any help from Putin will come with a price. And when the bill comes due, that price may be too high for Greece to pay.
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