German government confident Greece will stick to reforms

The German government expects Greece to stick to its EU/IMF bailout deal after a January 25th election and a possible change of government in Athens, a spokesman for chancellor Angela Merkel has said.

However, spokesman Georg Streiter declined to comment on a report in Der Spiegel magazine that said Dr Merkel's chancellery had shifted its view and now believed the euro zone would be able to cope with a Greek exit if necessary.

“Greece has fulfilled its obligations in the past. The German government assumes it will continue to fulfil its contractual obligations to the troika,” Mr Streiter said. “Every new government has to abide by the contractual obligations of the previous government.”

The “troika” overseeing Greece’s €240 billion bailout comprises the European Central Bank, the European Commission and the International Monetary Fund.

Stick the course

As the euro zone’s paymaster,

Germany

insists that Greece must stick to a course of austerity – especially because it does not want to open the door for other strugglers to relax their reform efforts.

Greece’s woes have also created a headache for Dr Merkel by boosting support for a new right-wing party, Alternative für Deutschland, which taps into voters’ unease over the costs of euro zone bailouts.

Der Spiegel reported on Saturday that both Dr Merkel and finance minister Wolfgang Schäuble believe the euro zone has implemented enough reforms since the height of the crisis in 2012 to make a potential Greek exit manageable.

In addition, the euro zone now has an “effective” bailout fund, the European Stability Mechanism, another source said. Major banks would be protected by the banking union.

‘It will be difficult

’ A German finance ministry official would only say comments made by Mr Schäuble last week remained valid.

“If Greece takes another path, it will be difficult,” Mr Schäuble had said. “New elections will not change the agreements we have struck with the Greek government.”

Peter Bofinger, economic adviser to the German government, warned against a Greek exit. "There would be many high risks for the stability of the euro zone with such a step," he told Welt am Sonntag newspaper. "It would let a genie out of the bottle that would be hard to control."

Der Spiegel said Berlin considers an exit almost unavoidable if the left-wing Syriza opposition party, narrowly ahead in opinion polls, wins Greece's election. Syriza wants to cancel austerity measures and a chunk of Greek debt. – (Reuters)