Greece and Germany — all talk and no action?

Still differences between Greece and Germany: Economist
Still differences between Greece and Germany: Economist   

There may have been a thawing in the permafrost between Greece and Germany Monday when Alexis Tsipras and Angela Merkel met in Berlin to discuss how Athens could avoid falling into default, but economists remain skeptical and are questioning how long it will take for concrete reforms to get going.

On Tuesday morning, a Greek government official said that the country was going to present a reform package to the Eurogroup of finance ministers by next Monday at the latest, Reuters reported.

Speaking to Greek television network Mega TV, spokesman Gabriel Sakellardis said Athens hoped the reforms would lead to the Eurogroup releasing much-needed cash for Greece. The reforms, he said, would not contain recessionary measures but structural changes.

He added that talks between Greek Prime Minister Alexis Tsipras met German Chancellor Angela Merkel in Berlin on Monday—designed to restore diplomatic relations after a period of tension and high-profile spats between Greek and German officials—did include a discussion of the outlines of reforms, but did not go into depth.

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Angela Merkel, Germany's chancellor, left, stands for a photograph with Alexis Tsipras, Greece's prime minister.
Krisztian Bocsi | Getty Images
Angela Merkel, Germany's chancellor, left, stands for a photograph with Alexis Tsipras, Greece's prime minister.

At a press conference following the talks in Berlin, Tsipras had struck a conciliatory note, saying it wasn't right to hold foreigners responsible for the country's problems. He also promised to launch "big structural reforms."

Greece was given a four-month extension to its bailout program in February but a condition of giving Greece more time was that it had to present a concrete list of reforms to its creditors. As yet, however, time is running out and reforms are on paper only.

Merkel remarked on Monday that Greece had to stick to the bailout extension conditions and it was up to the Eurogroup to decide on releasing more funds for Greece – funds it desperately needs to function and upcoming meet loan repayments.

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The chief economist at the German Chamber of Industry and Commerce (DIHK) told CNBC that while the meeting showed improvement in relations between the two countries, action needed to follow Tsipras' promises.

"The two heads of government they tried to show an improvement in the relationship but there are still a lot of substantial differences between Greece and Germany and this was clear yesterday as well," Alexander Schumann told CNBC Tuesday.

"I think it was a necessary step to improve the relationship but now more talks have to follow about what Greece is going to do, what are the concrete, detailed measures of structural reform that Tsipras mentioned. This is necessary now, Greece's government needs to show what it will do to reach this objective."

Other economists agreed that the Merkel meeting was not a resounding success for Greece. Carsten Brzeski, a senior economist at ING based in Brussels, said Tuesday that "all in all and as expected, yesterday's meeting was not a great breakthrough in the Greek crisis."

"The crucial question on how to make unsustainable public finances sustainable while at the same time restoring competitiveness was not even addressed. However, it might have been another small step towards the end of the recent political thaw. It's too early to tell whether this would eventually lead to a real happy end," he said in a note Tuesday.

Tsipras' visit to Germany continues on Tuesday with meetings with the foreign affairs minister, vice chancellor and opposition Green party members. He will also visit a Holocaust memorial today. Schumann said it was unlikely that Tsipras would find a friendlier reception from those meetings.

Rising risk of Grexit?

George Osborne, the U.K. Chancellor of the Exchequer, said on Tuesday that the risk of Greece exiting the euro zone was rising, because of discord between Athens and the rest of the currency union.

"The risks of Greece leaving are rising, because the ill-will round the table is palpable between the euro zone and Greece," Osborne told members of U.K. parliament, according to Reuters.

"Although I don't think anyone wishes the outcome of a Greek exit, it could happen through accident ... or misjudgment. I still don't think that's the likeliest outcome, but it's certainly something we need to be prepared for."

Following Osborne's comments, James Purcell, a cross-asset strategist at UBS Wealth Management in Zurich, told CNBC there was a 10-20 percent risk of Greece leaving the euro zone.

—By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. With contribution from CNBC's Katy Barnato.