German politician Gesine Schwan supports war reparations for Greece

Chris Papadopoullos
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Greece and Germany are still at loggerheads over Athens’ bailout moves
A respected German politician has called on the country to pay war reparations to Greece, as well as repay an occupation loan to its central bank.

“We should make a financial approach to victims and their families,” said Gesine Schwan, a member of the Social Democrats who are in coalition with Angela Merkel’s Christian Democratic Union. The move could prove divisive, with Ger­man officials previously dismissing the idea of paying Greece war reparations.

Schwan also told Spiegel online that an €11bn (£7.9bn) loan forced on the Bank of Greece by Germany during the war should “of course be repaid”. It comes ahead of talks between Greek Prime Minister Alexis Tsipras and Merkel on Monday. Time is against Greece as it tries to have reforms approved by its creditors, allowing its cash-strapped government to access a further slice of a bailout loan. Greek officials believe they are overhauling their current bailout, while German officials think it is being reviewed and extended.

Louka Katseli, an economics professor, OECD director and former minister in the socialist Pasok government between 2009 and 2011, hopes the two will clarify whether the bailout programme is being rehashed or continued. “According to Schaeuble and the Germans, this is a continuation of the old programme and we will do the fifth review as nothing has changed,” she told City A.M. “According to the Greek government this is a break with the past and we have four months to decide what we’re going to do.”

In a boost for Greece, Katseli, who will soon take up the role of chairwoman at one Greece’s largest commercial banks, confirmed earlier reports in City A.M. that deposit flows out of the country’s banking system had abated.

“They [bank deposit outflows] have stopped and now the situation has stabilised.”

However, she critical of the fact that the European Central Bank (ECB) has tied Greece’s near-term liquidity to the implementation of reforms that could take time. “It fuels widespread uncertainty and deposit withdrawals and provides incentives for capital flight and quick-fixes.”

The reforms currently under discussion by Greece and its creditors involve ways to expand the tax base, product market deregulation and reforms, simplifying procedures for licensing, cutting red tape, and reform of social benefits and employment regulation.

But some have suggested that Greece’s creditors are delaying as the crisis is not perceived as being contagious and the country is losing bargaining power.

“Syriza is not powerless in the negotiations with the Eurogroup, but its bargaining power is being steadily eroded by the boost to Eurozone asset markets from QE [quantitative easing],” said Claus Vistesen chief European economist at Pantheon Macro­­economics.

Greece’s next payment is on Friday – €440m to the International Mon­etary Fund and ECB.

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