Greece must respect the terms and timetable of its reform programme agreed as part of an EU-IMF bailout as the “only and right” way out of its debt crisis, the German finance ministry warned Monday.
The comments came as eurozone finance ministers return to action Monday with Greek political chaos and major doubts over Spanish banking health marking the end of a rare hiatus in the debt crisis.
Ministers from the 17 currency partners making up the Eurogroup meet in Brussels from 1500 GMT, aiming mainly to send a strong message to the feuding political parties in Athens that debt-laden Greece must respect the terms of a March deal for a reworked bailout package.
The alternative, increasingly floated by expert analysts and now beginning to be broached even among European Union political partners, is that Greece exits the euro.
Governments issued Athens with a clear warning last week when they withheld some monies already supposedly signed off for the immediate post-election period.
European Commission head Jose Manuel Barroso made it plain, warning that broken promises render agreements void and raising the prospect of Greece exiting the euro club.
Germany has echoed these noises, which represent something of a last throw of the dice for the EU and the eurozone as it stands after two years of “will they, won’t they” drama.
President Carolos Papoulias held a day of last-ditch meetings on Sunday with party leaders, who failed to forge a coalition in a succession of talks last week, amid mounting threats of a loan freeze should Greece falter on promised structural reforms.
If a unity cabinet cannot be formed by Thursday, when parliament convenes, new elections will have to be called in June — with the possibility that the anti-EU austerity voices that secured a majority in the May 6 poll could do even better.
German Finance Minister Wolfgang Schaeuble assured, in comments published Monday, that economic growth and budgetary discipline are not mutually exclusive goals.
Repeating his opposition to the idea of relaunching economies through more borrowing, the German minister insisted that getting national budgets under control “creates confidence without which spending and investment are inconceivable.”
While events in Athens in the short-term remain outside the control of Greece’s eurozone partners, the finance ministers will be looking for answers from Spain.
Public financial forecasts suggest Spain — mired in recession with one-in-four unemployed — has little chance of meeting even revised government deficit targets.
The overall goal is to meet the notional EU target of a public revenue shortfall equal to no more than 3.0 percent of gross domestic product by the end of next year.
Figures were already sliding before the scale of the problems facing Spanish banks, after the collapse of a property boom, were laid bare this week — but the question remains: can the latest estimates be trusted?
Drastic Spanish government reforms force banks to set up a new 30-billion-euro financial cushion and to remove risky property assets from their accounts.
Diplomats acknowledge that Monday’s talks will not get to the root of the problem.
Specific EU demands of national economic governance across the eurozone will be issued at the end of the month, so no major decisions on how to manage the Spanish question will be agreed beforehand, this diplomat underlined.
Spanish Finance Minister Luis de Guindos is expected to set out the Madrid government’s preferred strategy at the talks.