Greece's radical new government on Saturday began a search for European allies for its anti-austerity agenda, but German Chancellor Angela Merkel once again ruled out debt relief for Athens. Prime Minister Alexis Tsipras and his maverick Finance Minister Yanis Varoufakis are reaching out to France and Italy, whose centre-left governments are most likely to sympathise with its determination to end painful reforms.
Varoufakis will head to Paris late Saturday, his office said, bringing forward a European tour that was due to start in London on Monday and will also include Rome. Tsipras will make his first visit abroad as premier on Monday, when he travels to Cyprus, and will then visit his Italian and French counterparts on Tuesday and Wednesday.
Predictably, neither tour includes Germany, which has shouldered the bulk of Greece's huge bailout and where officials have already expressed outrage at the new Greek government's plans to renegotiate the rescue. Merkel on Saturday ruled out fresh debt relief for Greece, telling the Hamburger Abendblatt daily: "There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece's debt."
She added: "I do not envisage fresh debt cancellation." In a new poll published by German public television channel ZDF, 76 percent of Germans were against any reduction in Greece's debt. Portuguese Prime Minister Pedro Passos Coelho also said that he opposes any debt renegotiation.
The hard-left Greek government, which took office on Monday, has pledged to rip up the terms of the rescue package that helped Greece avoid a financial meltdown in 2010 and erased half the country's debt. Late Friday, Tsipras told senior officials according to the state ANA agency: "I think I'll keep my promises." In its first week in power, the Greek government has scrapped the privatisation of the country's two main ports and the state power company, and announced a major raise in the minimum wage.
Greece's new leaders also made clear their intentions Friday in meetings with Jeroen Dijsselbloem, who represents finance ministers from the 19-nation eurozone. Tsipras reportedly told him the austerity plan enforced as a condition of the multi-billion-euro loans "had failed" and had been "rejected" by the Greek people.
Varoufakis went further, saying Greece wanted direct access to its EU-IMF creditors and would no longer work with their fiscal audit staff team, known as the "troika". "Greece has not been reforming over the past five years, it has been deforming," Varoufakis told the BBC after talks with Dijsselbloem, which were clearly strained.
For his part, Dijsselbloem warned the Greek government that "taking unilateral steps or ignoring previous arrangements is not the way forward". Athens had been promised another 7.2 billion euros ($8.1 billion) in funds from the European Union, the IMF and the European Central Bank if it completed reforms required by its lenders by February 28. But despite warnings Greece would shortly run out of money, Varoufakis said his government did not want theAFP
"We don't want the seven billion euros... We want to sit down and rethink the whole programme," he told The New York Times before the Dijsselbloem meetings. The previous Greek finance minister Gikas Hardouvelis had said the country could manage without new loans until March. But Theodore Pelagidis, a senior fellow at the Brookings Institution, said a crunch could come as early as next month.
"There is no way that Greece will make it through February. The situation will get worse every day, and at the forefront of the drama will be the country's banks," he told Bloomberg News. Credit rating agency Standard & Poor's on Friday warned that the banks, which are helping Greece stay afloat by purchasing its treasury bills, would soon struggle with their liquidity.
Alexandre Delaigue, economics professor at the elite French military academy Saint-Cyr, said the prospect that Greece would be forced out of the eurozone had come a step closer. "A solution where everybody saves face seems to be getting further away," he told AFP, adding: "The possibility of a Grexit has increased."
At the start of 2012, Greece restructured its debt in a deal involving private creditors who took "haircuts" or wrote down parts of their holdings. This cut Greece's total debt burden by around 100 billion euros. But the country is still lumbered with a debt pile of more than 315 billion euros, upwards of 175 percent of gross domestic product (GDP), a record for the EU. Greek stocks have taken a battering this week and yields on Athens 10-year bonds rose past 10 percent, a sign that jittery investors are losing confidence.