In World Economy News 02/04/2015
Germany and France view Greece’s overtures toward Russia as a sideshow and won’t be drawn into a debate on the matter, three government officials said.
That strategy stems from Chancellor Angela Merkel and President Francois Hollande’s belief that Prime Minister Alexis Tsipras’ talks with President Vladimir Putin are not likely to yield significant aid — especially given Russia’s own economic woes — and are more political theater than any real geopolitical shift, said the officials, who asked not to be identified discussing internal deliberations.
Merkel has signaled repeatedly she wants Greece to remain in the euro, partly to avoid a perception of European weakness as Russia challenges the continent’s post-Cold War order. While she and Hollande are closely watching what develops, they’re publicly shrugging off Tsipras’s trip to Moscow next week, while talks with European partners on Greece’s bailout stall.
“We were also in Moscow and we’re still members of the European Union and stand unified,” Merkel said during a joint press conference with Hollande in Berlin Tuesday. The two visited Putin at the Kremlin in February to hold discussions over the conflict in Ukraine.
Hollande’s government views Tsipras’ actions as a restlessness stemming from the stalemate with Greece’s creditors over releasing more money from a 240 billion-euro ($258 billion) bailout fund, one of the people said. Still, it’s troublesome that Tsipras’s government seems to lack a consistent strategic plan, the person said.
Running Dry
Europe’s most indebted nation this week failed to win support from creditors for proposals to cut spending and receive 7 billion euros in bailout funds in return. Greece needs the money as government coffers empty out and bills come due, such as a debt payment to the International Monetary Fund on April 9, the day after Tsipras visits Putin in Moscow.
“We trust that the talks with the Russian leadership will be conducted in the spirit of our shared politics,” Michael Roth, Germany’s deputy minister for European affairs, said in an interview. “It’s not only advisable for Greece to remain in the euro economically speaking, but it’s also important from a European and foreign policy point of view.”
Russia is Greece’s biggest trading partner, mainly due to the latter’s reliance on energy imports, and the two have long historical ties. The countries share the Orthodox Christian faith and Russia played a key role in Greece winning its independence in 1832. The Mediterranean country’s geopolitical position between East and West was even reflected in its first two political parties, the conservative “Russian Party” and the liberal “English Party,” both of which were founded during the revolution against Ottoman rule.
Good Relations
“Greece had always good relations with Russia,” former Greek Prime Minister Antonis Samaras said in an interview in Athens on Wednesday. “But always within the context of our relations with Euro-Atlantic institutions. Anything within this context is fine. Anything outside is unacceptable.”
Tsipras, who met with the Russian ambassador in Athens as one of his first official acts after his January election, has turned back up his rhetoric on Russia as he’s struggled to strike a deal with creditors. In an interview published by Russian news service Tass on Tuesday, he denounced EU sanctions on Russia over the Ukraine conflict as “senseless” and a “road to nowhere” — reiterating a past position.
Russia’s decision to ultimately not help Cyprus during its 2013 bailout, despite suggesting that possibility, could be an indicator of how the talks with Greece will play out, the people said. Russia’s ability to provide aid, even if it wants to, is limited by its own deteriorating budget situation. The government, which is facing its biggest deficit in five years, estimates gross domestic product will shrink 3 percent in 2015.
“The fact that Greece is trying to play off Brussels against Moscow is unbelievably short-sighted,” said Judy Dempsey a researcher at the Carnegie Institute in Berlin. It “will make Tsipras’ relations within the euro zone even more difficult.”
