Merkel Points Tsipras Toward Deal With Greece’s Creditors

 Patrick DonahueJonathan StearnsAnthony Czuczka

7:57 PM EET

March 23, 2015

(Bloomberg) -- German Chancellor Angela Merkel encouraged Prime Minister Alexis Tsipras to follow the path set out by Greece’s creditors, saying his country belongs in Europe and she wants its economy to succeed.

Merkel gave Tsipras a red-carpet reception at the Chancellery in Berlin on Monday without giving any signal that the emergency aid the Greek government is urgently seeking would be unlocked. Instead, she talked at their joint briefing of how she wanted to build trust with her Greek counterpart.

“We want Greece to be economically strong, we want Greece to have growth,” Merkel said. “And I think we share the view that this requires structural reforms, solid finances and a functioning administration.”

Meeting the chancellor for the second time in five days in an effort to build bridges between their governments after weeks of sniping, Tsipras echoed her tone, while resisting the embrace of the policy prescriptions that she has shaped for the past five years.

“The Greek bailout program was an unprecedented adjustment effort but in our view it wasn’t a success story,” he said. “We’re trying to find common ground to reach an agreement soon on the reforms that the Greek economy needs and for the disbursement of the funds that it also needs.”

Tsipras will meet Merkel’s coalition partners and opposition lawmakers in Berlin on Tuesday as well as visiting the city’s holocaust memorial.

The two countries have often been at loggerheads since Tsipras’s January election victory as the Greek leader tries to shape an alternative to the austerity program set out in the country’s bailout agreement. Merkel insists Greece must stick to the broad terms of that deal, though holding out the prospect of some flexibility.

Pro-Tsipras Demonstrators

Tsipras said that governments have to respect international agreements, even though they may not like them.

“This may have been an olive branch,” said Christian Schulz, an economist at Berenberg Bank in London. “Tsipras seemed to dismiss some of the more extreme voices in his government.”

Greek government bonds were mixed with yields on three-year bonds falling 10 basis points at 9:47 a.m. in Athens to 21.63 percent. The benchmark 10-year bond was little changed with the yield at 11.47 percent after rising above 12 percent last week to a near two-year high.

With Greece’s financial predicament becoming ever more parlous, Tsipras was greeted by a group of supporters demonstrating outside the Chancellery who could be heard chanting during the ceremonial reception.

His government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Finance ministry officials may submit their latest plans as soon as this week, a Greek official said earlier.

War Reparations

Hinting at the prickly relationship between their respective finance ministers, Tsipras said that he wants to avoid widening splits in the euro area and urged Germans and Greeks to avoid stereotyping each other, saying Germany isn’t to blame for all of Greece’s problems.

“We have to understand each other better,” he said.

That didn’t prevent him from airing the Greek claim for reparations for atrocities committed by the Nazis more than 70 years ago. Compensation payments are an ethical issue not linked to the bailout negotiations, Tsipras said, with the German Chancellor watching him closely.

“We are aware what kind of cruelty we caused, the kind of tyranny inflicted by National Socialism in Greece and under which many people suffered,” she replied. “This injustice and suffering isn’t appreciated by many in Germany as perhaps it should be.”

She said that while the question of reparations is closed for Germany, she’s open to talks on a separate fund.

Eurogroup Decision

Merkel was clear that Greece still has to convince its official creditors that its economic policy program does enough to boost competitiveness and rein in spending before anymore aid will be released.

A European official said last week that finance ministers could gather as early as March 27 to approve a payment if Greece delivers an adequate list of reforms. Merkel gave no indication that that meeting will happen.

“Germany is not the institution that decides about the reform program,” she said. “I can’t offer anything, including liquidity.”

To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net; Jonathan Stearns in Berlin at jstearns2@bloomberg.net; Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Ben Sills