Germany cautious ahead of crunch Brussels talks

The German government has adopted a characteristically cautious response to new Greek reform proposals, warning that it won't ask for a Bundestag mandate to commence talks on a third Greek programme until Athens makes binding commitments.

Ahead of today’s eurogroup meeting in Brussels, reactions to Greece’s latest offer to creditors ran the gamut in Berlin from optimism to outright mockery.

A spokesman for chancellor Angela Merkel, was reticent, saying: "Only when the Greek government describes – seriously, and reliably – the key points it is ready to implement as reforms can the [German] government go to the Bundestag and ask for a mandate to begin reform negotiations."

Dr Merkel's junior coalition partner, the centre-left Social Democrats, adopted a more conciliatory line to the new proposals than to Sunday's referendum result, when SPD leader Sigmar Gabriel said the vote had "demolished" any possible bridge to crisis resolution.

Yesterday, SPD deputy Bundestag floor leader Carsten Schneider welcomed the latest Greek paper as a "very serious proposal".

Numbers add up

“This has substance and now one has to look to see if the numbers add up,” he said on German national radio. Asked if debt relief would be part of any new programme, Mr Schneider said it would depend on whether Greece’s economy recovers.

“I think that will be decided in one or two years, when the first [loan] repayments are due,” he said.

Senior sources in Berlin say that this weekend's talks in Brussels are just the first of several hurdles to German backing a third bailout package for Greece.

Other members of the Berlin coalition are less optimistic. Dr Merkel's Bavarian allies, the Christian Social Union, said the proposals contained little different previous proposals.

Given that they were rejected by Greek voters on Sunday, one CSU politician said, the Syriza-lead government was trying to “trick” either its creditors or its own voters.

Meanwhile, the influential economic council of Dr Merkel's Christian Democratic Union warned that "repeated bending" of euro zone rules would end in "chaos".

“Meeting the rules has to once again be the basic binding factor of European union,” it warned in a strategy paper.

Greece swap

Finance minister Wolfgang Schäuble caused amusement and some confusion on a discussion panel in Frankfurt, when he joked that he had offered to swap Greece for

Puerto Rico

.

Dr Schäuble’s attempt at humour didn’t amuse everyone in his audience, nor did his mixed signals on the prospect of Greek debt relief.

"We will talk in the next days about that but, regarding a reprofiling or restructuring of debt, I'm more sceptical than [French finance minister] Michel Sapin, " he said.

Today’s talks begin amid speculation that Berlin is calling for euro members to equip the euro zone with a new ejector seat for heavily indebted member states.

According to Saturday's Der Spiegel magazine, Dr Schäuble is determined to prevent a repeat of the endless Greek drama with a rule change that would enable a direct departure from the euro zone.

In addition, Der Spiegel reports that euro finance ministers are reportedly working on creating a firewall to protect countries susceptible to financial market contagion in case of a Greek exit.