Greece gets Obama boost as finance minister visits London

[LONDON] Greek Finance Minister Yanis Varoufakis meets his British counterpart on Monday as he seeks to build support for a renegotiation of his country's 240 billion euro (US$270 billion) bailout in the face of German opposition.

The latest stop on his European charm offensive comes as US President Barack Obama warned the world that imposing tough austerity programmes on Greece could backfire on its creditors.

"You cannot keep on squeezing countries that are in the midst of depression," Mr Obama told CNN's "Fareed Zakaria GPS".

"At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits."

Mr Obama said the Greek economy was in "dire need" of reform but warned that drastic changes were tough to implement in a struggling economy.

"It's very hard to initiate those changes if peoples' standards of living are dropping by 25 per cent. Over time, eventually, the political system - the society - can't sustain it," the US leader said.

Mr Varoufakis meets in London with George Osborne at 1100 GMT after a stop Sunday in Paris where he said he wanted to reach a new debt deal within months to end his country's loan "addiction", which was loading ever more liabilities on its economy.

Greece therefore did not want a promised loan tranche of 7.2 billion euros from its trio of creditors, the International Monetary Fund, European Union and European Central Bank (ECB), he reiterated.

"It's not that we don't need the money; we're desperate," he said at a joint press conference with his French counterpart Michel Sapin. "What this government is all about is ending this addiction."

Although not in the eurozone, Britain is in the IMF and Varoufakis is looking for as many allies as possible for any future political negotiations within the EU.

Mr Varoufakis is also expected to meet with key figures from London's key financial sector, which is home to many lenders exposed to Greek debt.

Greece's new anti-austerity government has refused to work with the so-called troika of international bailout inspectors charged with overseeing its painful fiscal reforms, instead seeking direct contacts with creditors and governments.

British minister Mr Osborne welcomed Mr Varoufakis's visit, saying the pair would discuss "the stability of the European economy and how to boost its growth."

Setting out a timetable for a revised debt agreement, which has met strong German opposition, Mr Varoufakis said if Athens had until the end of the month to come up with detailed proposals, it could reach an agreement with international partners six weeks later.

Prime Minister Alexis Tsipras earlier tried to calm nerves and spooked markets by saying he did not intend to renege on commitments to the EU and IMF.

"It has never been our intention to act unilaterally on Greek debt," Mr Tsipras said in a statement to Bloomberg News.

But the country "needs time to breathe and create our own medium-term recovery programme," said Mr Tsipras, who arrived for talks in fellow bailed out EU member Cyprus early on Monday on his first foreign trip since his election victory.

Greece's flurry of diplomacy saw Mr Tsipras phone ECB chief Mario Draghi late Saturday and book meetings with Italian Prime Minister Matteo Renzi, French President Francois Hollande and European Commission President Jean-Claude Juncker this week.

Mr Varoufakis told reporters in Paris that he also wanted to visit Germany, which has shouldered the bulk of Greece's loans.

"It is essential that we meet," Mr Varoufakis said, referring to German Finance Minister Wolfgang Schauble.

But the German finance ministry said it had not yet received an "official request" from Greece for such a visit.

German Chancellor Angela Merkel on Saturday ruled out fresh debt relief, telling the Hamburger Abendblatt daily: "There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece's debt."

Deputy Prime Minister Giannis Dragasakis insisted late Sunday on Mega TV that Greece could still reach a "political agreement" with the ECB, satisfying the central bank's demands for reform and maintaining liquidity to Greece's hard-hit lenders.

Despite a restructuring in 2012, Greece is still lumbered with debts of more than 315 billion euros, upwards of 175 percent of gross domestic product (GDP) - an EU record.

But in its first week in power, the government scrapped the privatisation of Greece's two main ports and the state power company and announced a major increase in the minimum wage.

The stunning success of Tsipras' hard-left Syriza party in polls a week ago sent shockwaves through the continent and has encouraged other anti-austerity parties.

At least 100,000 people took to the streets of Madrid on Saturday in support of the Spanish party Podemos, which has surged in polls ahead of elections late this year.

AFP