France, Germany Unify Approach to Greek Talks

By WILLIAM BOSTON

The Wall Street Journal

BERLIN—The leaders of Germany and France on Thursday agreed to speak to Greece with one voice in meetings with Greek Prime Minister Antonis Samaras this week, a German government official said.

The official spoke after German Chancellor Angela Merkel and French President François Hollande met for a working dinner in the chancellery for a wide-ranging discussion about the euro zone and international politics.

The main message the leaders plan to communicate to Mr. Samaras during separate meetings is "the euro crisis is a crisis of credibility," the official said, adding, "This is also true in the case of Greece and both of them want to make this point in their discussions with Samaras."

Mr. Samaras travels to Berlin on Friday for talks with Ms. Merkel and then to Paris for talks on Saturday with Mr. Hollande.

The official wouldn't comment on whether Ms. Merkel and Mr. Hollande plan to meet Mr. Samaras's request for an additional two years to reduce the deficit to within targets agreed with the troika commission of the European Commission, the European Central Bank and the International Monetary Fund.

The official added that Ms. Merkel and Mr. Hollande agreed that it was crucial for euro-zone members to improve the competitiveness of their economies, because "growth is based on competitiveness."

Ms. Merkel and Mr. Hollande chose two very different points to stress in brief comments before the dinner. Ms. Merkel stuck word-for-word to the well-worn German script, saying, "It is important for me that we all stick to our commitments. I will encourage Greece to stick to the reform path, even though it has demanded a great deal from the people in Greece."

The intention of her opaque response may be to keep the pressure on Greece until experts from the troika publish a much-awaited report by early October.

Mr. Hollande, however, refrained from sending any warning to Greece or insisting on further overhauls. Instead, he called for Greece to stay in the euro zone and stressed the rights of the Greek people to determine their fate. "I want Greece to remain in the euro zone," he said. "It is up to the Greek people to make the necessary efforts to reach this goal."

Their comments came as Germany and Greece continued verbal sparring ahead of a meeting between their leaders on Friday that could decide whether Athens is granted more time to implement painful economic overhauls or be allowed to default on its debt, possibly paving the way for Greece's euro-zone exit.

Mr. Samaras, speaking to German newspapers, appealed for more time to implement budget cuts and economic measures. He pledged to step up privatization of state-owned industry and to repay all money that Greece has borrowed from international lenders. He also vowed to fulfill all obligations agreed with the troika in exchange for a €173 billion ($215.7 billion) bailout, dismissing allegations in Germany that Greece will never pay back its loans.

"The Germans will get their money back," Mr. Samaras told the daily Sueddeutsche Zeitung in an interview published Thursday. "I guarantee that personally."

But in an interview with France's Le Monde, he said, "How can we privatize when, every day, European officials speculate publicly about a potential exit of Greece from the common currency? This has got to stop."

German politicians have ruled out giving any more money to Greece. Ms. Merkel, speaking Wednesday in Moldova, said no one should expect any decisions about Greece after her meeting with Mr. Samaras.

The impending decision over the Greek bailout—whether the next installment of aid will be given in the coming weeks—is widely seen as a turning point in efforts to stem the euro-zone debt crisis. Without further aid, it is almost certain that Greece will become insolvent and possibly be forced to leave the euro, economists say. But in Germany, the paymaster for any euro-zone bailout, there is growing support for allowing Greece to default and leave the euro rather than continue to throw good money after bad.

Mr. Samaras, noting that the Greek economy is in a tailspin, is appealing for more time to implement changes, which in the end means Europe would have to give more money to Athens. He is asking for a two-year extension to 2016 to meet the troika's deficit target. Mr. Samaras is expected to raise the issue with Ms. Merkel Friday, but he has said Greece is determined to fulfill its obligations.

"First we need to show everyone that we are delivering," he told the Sueddeutsche Zeitung, but added: "Our economy shrank 27%. Greece is bleeding. It is really bleeding."

The latest bailout for Greece was approved by European leaders just six months ago. That is too soon for Athens to come and say the agreed aid isn't sufficient, German Finance Minister Wolfgang Schäuble said Thursday in an interview with Germany's SWR2 radio.

"That way you'll never gain the trust of the financial markets," he said. "And so more time is no solution to the problems. The question is how we win back confidence. But for that we need to wait for the report of the troika that's due in September."

Ms. Merkel hasn't showed her hand yet, but her coalition government is deeply divided over the issue and she risks splitting the government if she agrees to give Greece more money, analysts said.

The pro-business Free Democrats, junior partner in Ms. Merkel's ruling center-right coalition, have insisted that Greece should be given no more aid and suggested it would be better for Athens to leave the euro.

"We want to help, but there won't be any substantial changes to the agreed reforms," Foreign Minister Guido Westerwelle, a senior FDP official, told the daily Maerkische Allgemeine newspaper in an interview published on Thursday.

German opposition parties oppose the government's apparent hard line on Greece.

"It's not very smart to abandon all conditions [for aid] over an extension of 12 months," said Frank-Walter Steinmeier in an interview with the left-leaning Frankfurter Rundschau newspaper.

—Harriet Torry and Noémie Bisserbe contributed to this article.

Write to William Boston at william.boston@dowjones.com