France Offers Support, but No Debt Relief, to Greece

By LIZ ALDERMANFEB. 1, 2015

The New York Times

PARIS — French officials said Sunday they would support the new Greek government’s efforts to get the country back on its feet after five years of crushing austerity, but warned that there would be no write-down of Greece’s debt and pressed Athens to continue with reforms that are still needed to help mend the country’s economy.

“France is more than prepared to support Greece,” Michel Sapin, the French finance minister, said during a news conference after a two-day visit by Yanis Varoufakis, his new Greek counterpart. “Greece needs time to put things to work,” he said. But he added, there was “no question” of forgiving Greek debt.

Closed businesses in Athens. The European Central Bank will meet this week to discuss emergency loans for some Greek banks.For Greece, Bank Trouble Looms Again as New Government Takes ShapeFEB. 1, 2015

Mr. Varoufakis was beginning the first of a series of visits to European capitals this week after the leftist Syriza party won power in elections last month in a populist backlash against austerity. He said that although Athens was “desperate” for money, it would not seek a 7 billion euro installment on its 240 billion euro international bailout package because that would require the nation to adhere to austerity terms.

Economists say Greece needs the money to cover looming funding needs and debt obligations, and to help a recovery after the economy contracted around 25 percent in five years.

“We have resembled drug addicts craving the next dose. What this government is all about is ending the addiction,” Mr. Varoufakis said, adding it was time to go “cold turkey.”

President Barack Obama, in his first remarks on the situation since the Syriza government came to power, cast doubt on the soundness of Europe’s austerity policies during an interview with CNN that aired on Sunday.

“You cannot keep squeezing countries that are in the midst of a depression,” he said of Greece. “At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits.”

Mr. Obama added: “More broadly I’m concerned about growth in Europe. Fiscal prudence is important, structural reforms are necessary in many of these countries. But what we’ve learnt in the U.S. experience is that the best way to reduce deficits and restore fiscal soundness is to grow.”

Mr. Obama said that he hoped Greece would remain within the eurozone. But he added that Greece still needed to tackle essential reforms, including improving tax collection, which he said was “famously terrible.” He added, “In order for Greece to compete in the world markets, they had to initiate a series of changes.”

Mr. Varoufakis said Greece aimed to agree on a new deal with creditors by May — just before some €6 billion in obligations to the European Central Bank and other creditors come due, he said. Athens also expected the E.C.B. to continue supporting Greek banks with a financial lifeline as Greece works on a new rescue deal with its partners through May.

In an interview with The New York Times on Thursday, Mr. Varoufakis played down worries over Greek banks, despite indications that billions of euros have been withdrawn amid uncertainty over the election.

Mr. Varoufakis said Greece would issue a detailed proposal within six weeks for reducing its debt burden. Greece’s bailout program is supposed to expire on Feb. 28.

Prime Minister Manuel Valls of France, who also met with Mr. Varoufakis, said: “Everyone understands that the punitive policies of austerity can no longer be a project for the European Union.” He added: “We must continue to convince others that our ideas, which are also defended by President François Hollande, are indispensable” for Europe to escape “weak growth and unemployment that is dramatically too high.”

On Sunday, Mr. Varoufakis said he planned to visit Berlin and Frankfurt this week to press Greece’s case with German officials, many of whom are incensed at the country’s withdrawal from austerity. On Saturday, Chancellor Angela Merkel of Germany reiterated that Greece would not receive any debt cancellation from its partners.

http://www.nytimes.com/2015/02/02/business/international/france-offers-support-but-no-debt-relief-to-greece.html