NEWS,09.05.2012.

Germans warn Greece: no cuts, no aid

Leading German politicians have warned Greece that the country would not receive a cent more aid unless it fulfills all the conditions of its international bailout.An election on Sunday in Greece failed to deliver a parliamentary majority for the two big pro-bailout parties, plunging the country into political limbo and increasing the risk that another vote may be required to resolve the impasse.On Tuesday, the leader of the Left Coalition party, which benefited from rising anger over austerity to take second place in Sunday's poll, declared Greece's policy pledges under its EU/IMF rescue null and void.As Europe's largest economy, Germany has contributed the biggest share of the financial guarantees under Greece's bailout, which is paid out in installments on the condition that Athens meets specific savings goals."The agreements must be respected. I don't think we can or should renegotiate," said Martin Schulz, a German politician and president of the European Parliament, on a visit to Berlin.Gerda Hasselfeldt, a senior member of the Bavarian Christian Social Union (CSU), sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU), echoed Schulz in warning Greece against any backsliding."Our position is unchanged. Aid can only flow if the conditions are met," Hasselfeldt told reporters.Greece must push a new round of spending cuts through parliament next month to qualify for an 11.5 billion euros aid installment that it needs to avoid bankruptcy. The post-election deadlock has raised questions about whether that timeline can be met.The vote in Greece and the victory of Socialist Francois Hollande in a French presidential election at the weekend underscored a growing backlash in Europe against austerity measures favoured by Berlin as the way out of the single currency bloc's debt crisis.France is struggling with weak economic growth, a gaping trade deficit, 10 percent unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut its triple-A credit rating in January.Despite this backdrop, Hollande promised during his campaign to raise the minimum wage, hire tens of thousands of new teachers and dilute the increase in France's retirement age that outgoing President Nicolas Sarkozy pushed through against strong opposition from unions and the French left.Hollande has promised to push back against German austerity policies, but many expect him to water down his plans after an audit of state finances that could be completed next month.Peter Altmaier, a leading conservative ally of Merkel, said on Tuesday that a new French government would have very little room to manoeuvre on fiscal policy."The French economy and the country's finances remain in a precarious position," Altmaier, parliamentary whip for Merkel's CDU, told reporters. "Any country that attempts through higher deficits ... to run a supply-driven policy will run foul of the markets very quickly and see its interest rates rise," he added. "There simply isn't any wiggle room."Altmaier said he was hopeful that, once French parliamentary elections are over in June, Berlin could reach a policy consensus with Paris that reaffirmed the path of budget consolidation in Europe "once and for all".Merkel, who publicly supported conservative incumbent Sarkozy in the French race, telephoned Hollande on Sunday after his victory and invited him to Berlin for talks.The two leaders are due to meet next week, after Hollande is sworn in as president, to try to iron out their differences.

Pressure builds on France's Hollande over EU debt plans

Pressure built on president-elect Francois Hollande to stand by France's austerity vows Tuesday, with Germany's Angela Merkel saying Europe was counting on them to resolve the bloc's debt crisis.Elected Sunday on a wave of anti-austerity feeling and pledges to put growth at the heart of European economic policy, Hollande attended his first official function Tuesday at a World War II commemoration ceremony.The Socialist joined his ousted right-wing rival Nicolas Sarkozy in laying a wreath at the Tomb of the Unknown Soldier beneath the Arc de Triomphe in Paris, as France marked the anniversary of the end of World War II in Europe.Hollande said the ceremony was a sign of French unity after a fierce campaign that highlighted the country's deep left-right divide and saw him win with 51.6 percent of the vote."There are issues that unite us all, beyond the person of Nicolas Sarkozy or of me," said Hollande, who is due to formally take office on May 15.But outside France divisions came to the fore, as Merkel noted in a letter to Hollande that he was assuming power in the European Union's second-largest economy "at a time full of challenges"."It is up to us to take the necessary decisions for the European Union and the eurozone, to prepare our societies for the future and protect and advance prosperity in a sustainable way," Merkel wrote in the letter released by her office.Merkel said Monday that she would welcome Hollande with "open arms" when he makes his first foreign trip as president to Berlin next week.But she also made clear she had no plans to renegotiate the fiscal pact setting tough budgetary rules for EU states that she spearheaded, despite calls by Hollande to rework it to do more to foster growth.Japan joined those raising concerns about his plans Tuesday, with Finance Minister Jun Azumi warning Hollande to keep France's fiscal discipline in place."We want (France) to do what has been decided so far," Azumi told a regular news conference, according to Dow Jones Newswires."I don't know whether Mr Hollande will immediately act on what he has said in heated debates during the election campaign."But realistically, I think it is impossible (for European nations) to give up on fiscal-rebuilding efforts," he said.Hollande promised cheering supporters Sunday that he would reopen talks to ensure the EU fiscal pact focused on growth rather than simply imposing deficit-cutting austerity rules.EU president Herman Van Rompuy announced Tuesday that the bloc's leaders would meet on May 23 for an informal dinner ahead of an EU summit on June 28 and 29 that is expected to focus on growth.Hollande's transition chief Pierre Moscovici said Tuesday the Socialist would not give up on his plan for "a European project that is more favourable to growth" and that France's partners would budge."We will find a compromise. And I am convinced that things are starting well," Moscovici told RTL radio.The uncertainty generated by Hollande's election and the political turmoil in Greece, where election gains by hard-left and extreme-right parties stripped the ruling coalition of its majority, have riled the markets.