Germany is signaling its focus on austerity may be easing as Greece begins its rehabilitation with international investors.
Chancellor Angela Merkel met with Prime Minister Antonis Samaras in Athens today, encouraging Greeks to seize the opportunities of economic revival a day after Greece’s first bond sale in four years was oversubscribed.
The trip by the policy maker blamed from Ireland to Greece for deepening Europe’s north-south economic gap with austerity comes after Merkel backed France’s deficit plans and offered support to Italian Prime Minister Matteo Renzi.
“Germany is more ready to contemplate a little extra leeway, if the structural reforms are serious,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a phone interview. “Germany is not in favor of moving the targets, but is ready to accept it if it sees serious reforms. So there is a gradual shift in Germany.”
Common Currency Leaves Crisis Behind
Merkel said she’s “absolutely certain” Greece will overcome unemployment and recession after four years of austerity and said Germany will contribute 100 million euros ($139 million) in loans to small-business financing through a development bank. During a meeting with Samaras and startup entrepreneurs in Athens, the German leader encouraged them to seek new export markets. She also met Greek business leaders.
Samaras made repeated references at a joint press briefing with Merkel to his country’s return to debt markets. Greece sold 3 billion euros in five-year bonds at a coupon of 4.75 percent yesterday. Orders exceeded 20 billion euros, Samaras said in a nationally televised speech.
Merkel said the sale was “a step toward normalcy.”
“You’ll be able to leave the rescue umbrella step by step. All I can say is I’m glad,” she told reporters. It means “we can return to a zone where we can deal with problems other than bond yields.”
As the debt crisis that began in Greece wanes, Merkel is pointing to signs of recovery across Europe in the countries that were dragged into the euro-area turmoil. She’s also pushing for European Union unity as conflict with Russia over Ukraine eclipses four years of euro-area discord.
German Finance Minister Wolfgang Schaeuble this week expressed understanding for France’s budget deficit, after Merkel gave a hopeful stamp of approval to Renzi, who has pledged to enforce the euro area’s limit on budget deficits.
Merkel’s visit to Athens contrasts with her last trip in October 2012, when anti-austerity protesters massed outside the Greek parliament and placed the capital in lockdown.
Even so, a car bomb exploded outside a central-bank building in Athens yesterday in a reminder of the upheaval affecting the EU’s most indebted country. No one was injured, police said. Some 5,000 police officers are on duty for Merkel’s visit, according to the in.gr news website.
“I very much believe that after a very, very difficult phase that Greece and its people have gone through, there are are an unbelievable number of possibilities in this nation that haven’t yet been tapped and that can be built on after such a difficult course,” Merkel told the entrepreneurs.
Merkel, who grew up in formerly communist East Germany, cited the economic adjustment of her home region after German reunification in 1990. “I’m absolutely certain that it will be similar in Greece despite the difficult crisis,” she said.
One success is a budget surplus before interest costs of almost 3 billion euros, which the government expects the European Union to confirm this month.
Greece still remains mired in deflation with the euro area’s highest jobless rate. Joblessness fell to 26.7 percent in January from a revised 27.2 percent in December and consumer prices fell 1.5 percent from a year earlier, data released yesterday show.
Merkel said that Greeks had made sacrifices to get through the crisis and “there’s a long road still ahead.”
“We will continue to support the Greek people,” she said. “Greeks have more opportunities than problems.”
To contact the reporters on this story: Patrick Donahue in Athens at email@example.com; Nikos Chrysoloras in Athens at firstname.lastname@example.org
To contact the editors responsible for this story: Alan Crawford at email@example.com Tony Czuczka