European Officials Vent Frustration Over Greece’s Debt Before G-7 Summit, Vow to Maintain Sanctions on Russia

Diverse agenda set to be overshadowed by crises in Ukraine and Greece

The Wall Street Journal

By ANTON TROIANOVSKI

Updated June 7, 2015 12:07 p.m. ET

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GARMISCH-PARTENKIRCHEN, Germany—European officials vented frustration with Athens and vowed to maintain sanctions on Russia at the outset of a summit in which world leaders are trying to avoid a new trans-Atlantic split over Ukraine and an escalation of Greece’s debt crisis.

Jean-Claude Juncker, who heads the European Union’s executive arm and represents one of the three institutions negotiating with Greece over its bailout, said that Greek Prime Minister Alexis Tsipras had misrepresented the creditors’ position in the talks in recent days and that he was still waiting for a counterproposal from Athens over how to resolve the crisis.

“He was my friend, he is my friend,” Mr. Juncker said just before the start of the summit of leaders from the Group of Seven major industrialized nations in the Bavarian Alps. ”But friendship, in order to be maintained, has to observe some minimum rules.”

Both the standoff—which could lead to a Greek default if negotiators fail to reach a deal to unlock aid for the government in Athens this month—and the conflict in eastern Ukraine are overshadowing the summit at the Alpine luxury resort Schloss Elmau.

This is the second year in a row that Russian President Vladimir Putin isn’t attending the annual meeting after getting kicked out of the exclusive club of world leaders because of the Ukraine crisis.

European Council President Donald Tusk, who represents EU heads of state and government, said he would seek to formally prolong the bloc’s sanctions against Russia before the council meets later this month. He described the fighting in eastern Ukraine in recent days as the worst since Russia and Ukraine agreed on a peace deal for the region in February.

“Given the current situation, if anybody wants to start debate about changing the sanctions regime, the discussion could only be about strengthening it,” Mr. Tusk said.

U.S. President Barack Obama, who landed in nearby Munich early Sunday to allow for a separate meeting with German Chancellor Angela Merkel before the summit, is under pressure at home to get tougher on Russia. Ms. Merkel, who is the host of the summit, has meanwhile spent recent days batting back criticism in Germany over Mr. Putin’s exclusion from the summit.

Ms. Merkel welcomed Mr. Obama in the village of Krün, where the pair drank wheat beer and sampled Bavarian white sausage with locals dressed in traditional garb. Mr. Obama said that the summit would focus on the global economy, the state of the EU, forging new trade partnerships, “and standing up to Russian aggression in Ukraine.”

“We cooperate because we need it, we cooperate because we want it, and because we share this responsibility together,” Ms. Merkel said of the U.S. as she welcomed Mr. Obama.

The two later discussed the Ukraine conflict and relations with Russia as well as the North Atlantic Treaty Organization and the free-trade agreement now being negotiated between the U.S. and the EU, a German government spokesman said. The two leaders spent more than half the meeting on Ukraine, a U.S. official said.

U.S. officials say they want to make sure the West stays unified in its stance on Ukraine even as Mr. Putin seeks to sow discord within the European bloc. The Russian president is visiting Italy later this week and spoke with Greece’s Mr. Tsipras by phone on Friday.

Mr. Obama and Ms. Merkel also discussed Greece’s bailout, agreeing that Greece and its partners should chart a way forward that builds on structural reforms and returns the country to a path of long-term growth, White House press secretary Josh Earnest said. The hope is that Greece and its partners can accomplish that without causing undue volatility in the global financial markets, he said.

The Obama administration has also been urging Greece and its main creditors—the rest of the eurozone and the International Monetary Fund—to come to an agreement over terms for much-needed financing for Greece, fearful of global economic repercussions if the country were to default on its debt. Mr. Tsipras struck a defiant tone in a speech to his parliament on Friday, calling a proposal by the country’s creditors “irrational.”

The government in Athens has been waiting for months on a €7.2 billion ($8.05 billion) payment from its €245 billion international bailout program. Greece, which is fast running out of cash, likely needs some sort of help this month to repay a set of IMF loans that are falling due. European officials say Athens probably can’t pay the entire amount unless it gets fresh financing in some form.

The EU’s Mr. Juncker said Sunday that he had declined Mr. Tsipras’s request to hold a phone call the day before because Greece still hadn’t submitted a counterproposal to the offer that creditors made to Athens last week. He said he wanted to see Greece’s proposal before Wednesday, when he plans to meet with Mr. Tsipras on the sidelines of an EU-Latin America summit in Brussels.

Mr. Juncker also warned that while he still was excluding the possibility of a Greek exit from the euro, no one would “pull a rabbit out of a hat” to allow Greece to avoid economic overhauls and budget cuts that creditors are demanding in exchange for more money.

“My friend Alexis Tsipras promised to present an alternative proposal by Thursday evening, then he promised to present it by Friday evening,” Mr. Juncker said. “He wanted to talk on the phone with me on Saturday, but I didn’t have the alternative proposal yet.”

Beyond the current crises, Ms. Merkel wants to use the summit to unite world leaders on such causes as free trade and climate, and has put other issues on the agenda, including public health and the role of women.

Ahead of a major United Nations climate conference in Paris that starts in November, Ms. Merkel has urged the G-7 nations to endorse the conference’s goal of limiting the warming of the earth to 2 degrees Celsius above preindustrial levels.

A senior German official said ahead of the summit that it wasn’t clear whether the seven countries would agree to endorse that goal at their meeting, which ends Monday afternoon.

“I hope that we as G-7 countries can say clearly: We are sticking to this goal,” Ms. Merkel said in her weekly video message on Saturday. “Otherwise I predict we won't have a climate accord in Paris, and all participants know this.”

On Saturday, thousands of protesters wound through the streets of this resort town near the summit venue. Thousands of police were also present, and the demonstration—held in part during fierce rain and lightning at the end of a muggy day—was mostly peaceful.

Protesters called for world peace, less power for corporations and the end of negotiations for a trans-Atlantic free-trade agreement. A lone protester carried a sign that read, “I like Putin.” Another sign on a passing float read: “Happiness is dead!”

—Valentina Pop and Colleen McCain Nelson contributed to this article.

Write to Anton Troianovski at anton.troianovski@wsj.com