Wolfgang Schäuble, Germany’s hardline finance minister, warned Athens that its euro membership was “not etched in stone” as he vowed to use the Greek debt crisis to shore up the structure of monetary and fiscal union.
Speaking at a conference in Frankfurt, Mr Schäuble commended his new Greek counterpart Euclid Tsakalotos for his "more conventional" approach. However, he said the best way for Greece to regain the confidence of the rest of the euro zone was to implement reforms immediately, even before striking a deal with creditors. "Just do it. That would win an incredible amount of trust."
Greece is trying to stay in the single currency. Creditors are waiting for detailed reform proposals from Athens before deciding whether the Syriza-led government has given enough ground to restart bailout talks. If euro zone finance ministers meeting tomorrow conclude that Athens has not gone far enough, European leaders will gather the next day to make preparations for its exit from the euro.
Debt-laden neighbours
The US and the International Monetary Fund have been pressing euro zone governments to be more accommodating to Athens and offer it debt relief. But Mr Schäuble recounted a conversation with his US counterpart in which he suggested swapping debt-laden neighbours.
"I offered my friend Jack Lew that we could take Puerto Rico into the euro zone if the US were willing to take Greece into the dollar union. He thought that was a joke."
Earlier yesterday, Jens Weidmann, the president of Germany's Bundesbank, said doubts about the solvency of Greek banks were "legitimate" and "rising by the day".
He said the majority of Greeks who had voted No in Sunday’s referendum had “spoken out ... against contributing any further to the solvency of their country through additional consolidation measures and reforms”.
Mr Weidmann, a member of the governing council of the European Central Bank who has called for Greek banks’ €89 billion liquidity lifeline to be scrapped, said it needed to be “crystal clear” that responsibility for Greece lay with Athens and international creditors, and not the ECB.
Despite the tough words from Germany, there were signs of more flexibility from other European leaders.
Donald Tusk, the European Council president who has been among the toughest critics of Athens' prevarication, said he had spoken to Alexis Tsipras, Greece's prime minister, and agreed that any bailout deal should include debt relief for Greece.
“I hope that today we will receive concrete and realistic proposals of reforms from Athens,” Mr Tusk said. “The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors. Only then will we have a win-win situation.”
Valdis Dombrovskis, the European Commission vice-president overseeing its response to the Greek crisis, said "there is some willingness to look at this issue" in the bloc. Debt relief was unlikely to come in the form of a haircut, however; more likely via an extension of the timeframe in which Greece would have to repay its debts to fellow euro zone members.
– Copyright The Financial Times Limited 2015