Germany urges Greece to undertake reforms to unlock funds

Sun May 17, 2015 9:09am EDT

BERLIN | BY MICHELLE MARTIN

 Reuters

German politicians kept up the pressure on Greece over the weekend to implement reforms, with Economy Minister Sigmar Gabriel warning Athens in an interview that a third aid package would not be on the cards unless the Greeks made some changes.

Greece is fast running out of cash and talks with its lenders have been deadlocked over their demands for Greece to implement reforms, including pension cuts and labor market liberalization.

Finance Minister Wolfgang Schaeuble suggested on Monday that Greece might need a referendum to approve painful economic reforms on which its creditors are insisting, and Gabriel said such a vote might speed up decisions.

Athens has said it had no plans for a referendum at the moment.

Gabriel, head of the Social Democrats (SPD), Chancellor Angela Merkel's junior coalition partner, stressed that the Greek government needed to take action in any case.

"A third aid package for Athens is only possible if the reforms are implemented. We can't simply send money there," he told the paper.

German conservative lawmaker Markus Ferber told German news magazine Der Spiegel that there was no majority in Germany for a third aid package for Greece.

Athens has depended on money from its 240 billion euro bailout by the European Union and the International Monetary Fund to pays its bills since 2010. It has not received any loan tranches since last August.

On Friday Greek Prime Minister Alexis Tsipras said Athens had found some common ground with its foreign lenders but the government would not back down from its red lines, such as no cuts to wages and pensions.

Volker Kauder, parliamentary leader of Merkel's conservatives, told Germany's Welt am Sonntag newspaper that the situation was "very difficult" and "the Greeks must show that they are continuing down the agreed path".

He added that people should not be talking about a third aid package for Athens when the final aid tranche from the second bailout had yet to be paid out.

Gabriel warned about the consequences of Greece quitting the single currency bloc, saying: "A Greek exit would not only be highly dangerous economically but also politically."

"Nobody would have any confidence in Europe anymore if we break up in our first big crisis. We shouldn't talk ourselves into a Grexit," he said.

But Hans-Peter Friedrich, deputy head of the conservative parliamentary group, told Der Spiegel: "If we don't insist on the reform commitments we'll really damage the currency union and this damage would be bigger than if Greece ultimately left."

(Reporting by Michelle Martin; Editing by Jon Boyle)