BERLIN — An attempt by the Greek finance minister to shift the country’s debt narrative from austerity to forbearance ran into a wall of inflexibility during a two-day trip to Germany.
German officials here on Thursday, like European Central Bank officials the day before in Frankfurt, offered no sign that they consider the recent change of government in Greece to be an opportunity for a fresh start.
Instead, the message after meetings in which both sides groped for common ground was that the rules before the election still apply. On Thursday, in fact, the Greek and German finance ministers even failed to reach an agreement on whether or not they disagreed.
It was a lesson in eurozone realpolitik for Yanis Varoufakis, Greece’s finance minister. After a private meeting on Thursday with Wolfgang Schäuble, the German finance minister, who is regarded as Europe’s chief enforcer of the austerity doctrine, the two men struggled to come up with even the diplomatic platitudes of harmony that usually follow such meetings.
Mr. Schäuble told reporters afterward they had “agreed to disagree.” But Mr. Varoufakis disagreed.
“We didn’t agree to disagree,” Mr. Varoufakis retorted. “We agreed to enter into a discussion for a joint solution for all European partners.”
The exchange reflected the gulf that divides the two men, not only on their political positions, but also their personalities — which might also be emblematic of the divergent cultures of the countries they represent. The stark differences would seem to bode ill for the chances that Greece can negotiate new, easier terms for the billions in financial aid it needs to avoid bankruptcy and, in the worst case, an exit from the eurozone.
Mr. Varoufakis, a 53-year-old economist who enjoys engaging the world through the blog that he has vowed to continue even in his new position, has gained celebrity status in his home country. His freewheeling, open-shirt-collar style appeals to Greeks and has played well in other European countries like Italy. But it is entirely incongruous to the staid political environment in which Mr. Schäuble, a 72-year-old political veteran, operates.
Although Mr. Varoufakis on Thursday praised Mr. Schäuble as a European statesman whom he has followed since the 1980s, the German finance minister is widely viewed in Greece as the country’s nemesis — a sentiment captured in a political cartoon in Wednesday’s edition of the center-right Kathimerini newspaper. The cartoon showed Mr. Tsipras asking the Prime Minister Matteo Renzi of Italy how to knot the necktie he had been given, as Mr. Schäuble waves a tie knotted as a noose and says, “like this.”
The one common theme in the Greek and German finance ministers’ remarks on Thursday was their stated commitment to preserving the unity of Europe and its common currency. But experts were skeptical that Mr. Varoufakis had been able to persuade the Germans that the new leftist-led government of Prime Minister Alexis Tsipras deserves more time to renegotiate the terms of repaying the 240 billion euros, or about $274 billion, the country was granted.
“It looks pretty much like a disaster for him,” said Carsten Brzeski, chief economist of ING-DiBa bank in Frankfurt, said of the Greek minister’s appeal.
The message from both Mr. Schäuble and the European Central Bank the day before, Mr. Brzeski said, was: “We’re not going to play according to your rules. You’re going to play according to our rules. And then maybe we’ll talk.”
Mr. Varoufakis has been petitioning important European officials to help Athens find relief from Greece’s staggering debt, much of which it owes to the rest of Europe.
In a joint news conference after they met privately here on Thursday, Mr. Schäuble, who helped to draw up the bailout agreement that Mr. Varoufakis would now like to revise, sought to praise his new counterpart. He stressed their common desire to find a solution to Europe’s economic woes and described their talks as “open and intense.” But Mr. Schäuble said there had been no discussion of debt reduction or timing of the Greek payment.
Thursday’s cordial but fraught encounter in Berlin came the day after another vital player in the Greek debt drama, the policy board of the European Central Bank,dealt Greece a setback by shutting off a major source of lending for the country’s troubled financial institutions. That apparent rebuke came after Mr. Varoufakis met on Wednesday with the central bank’s president, Mario Draghi, in Frankfurt.
But Berlin’s role is just as crucial to Greece. Germany is the largest holder of Greek debt among eurozone countries. And the regimen of austerity budgets that have been a condition of Greece’s receiving bailout loans — and that the new Greek government blames for the country’s battered economy and high unemployment — have long been supported by Mr. Schäuble and Germany’s chancellor, Angela Merkel, as the best way for Greece to extract itself from debt.
Germany is the eurozone’s fiscal enforcer, largely responsible for imposing severe spending restrictions on Greece and other countries that became overly indebted before the financial crisis began in 2007. Many Germans regard Greeks as the most fiscally irresponsible on the Continent and think they must now suffer the consequences.
Despite backing off from his election campaign demands for a reduction in his country’s debt, Mr. Varoufakis has nevertheless steadfastly pushed to find a way to ease the economic pain for average Greeks. He proposed a bridging program until the end of May to allow the new government time to draw up a new proposal for handling the country’s debts. The current program is set to expire on Feb. 28.
In impassioned remarks that he prepared before the meeting and read aloud at the news conference, Mr. Varoufakis sought to appeal to Germany’s sense of morality, drawing a parallel between Greece’s problems and Germany’s economic crisis of the 1930s that helped pave the way for the rise of the Nazi party and World War II.
“I think that the German nation is the one nation in Europe that can understand us better than anyone else,” Mr. Varoufakis said.
As a sign of the newly hopeful public mood in Greece that the new government can secure a better deal, about 7,000 people staged an anti-austerity demonstration outside Parliament in central Athens on Thursday evening, an assembly that was entirely peaceful. It was the first such protest in years without riot police standing by.
Mr. Schäuble, in his own remarks on Thursday, sought to make clear the Germans had not shifted from their original position that Greece must uphold its existing commitments to its international creditors, reminding him more than once that, “Reliability is the prerequisite for trust.”
As the financial markets absorbed the Greek news, stocks in Athens on Thursday shuddered early, but regained some of the lost ground in late trading, closing down 3.3 percent for the day.
But bond prices stabilized, with the yield on the 10-year Greek government bond, which moves in the opposite direction of the price, edging down to 9.33 percent, after earlier in the day climbing above 10 percent. That neared its recent peak of 10.8 percent on Jan. 30, in the wake of the Greek election.
The divergence of the Greece and Germany’s economic fortunes is stark. Germany has the lowest unemployment rate in the euro currency block, at 4.8 percent, while Greece’s at 25.8 percent is the highest. Germany has a budget surplus and can sell government bonds at negative interest rates, meaning that investors essentially pay for the privilege of lending money to that government as a safe way to store their money.
Greece, meanwhile, is still trying to create a functioning tax collection system and has the highest debt in the eurozone as measured as a percentage of gross domestic product.
While Mr. Schäuble, a senior member of Ms. Merkel’s conservative Christian Democrats, kept to the conservative party line, Mr. Varoufakis on Thursday found a more sympathetic ear in Sigmar Gabriel, who is Germany’s economy and energy minister and leader of the center-left Social Democratic Party. Mr. Gabriel urged for a fresh program to be drawn up for Greece before the current one expires.
“I think this is in all of our interests,” Mr. Gabriel said after the meeting. NY TIMES
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