Greece's Prime Minister Alexis Tsipras has locked horns with Germany's Angela Merkel amid an argument about a Christmas bonus payment for poor Greek pensioners in December. On Friday he visited Berlin to discuss the matter, but no progress was made.
The plan triggered euro zone lenders to suspend a new debt-relief deal. On Wednesday they halted 45 billion euro ($47.7 billion) in short-term debt relief to help the indebted country, which is suffering from a deep recession and high unemployment. In response, the Athens stock market fell sharply.
Freezing the flow of funds to Greece now threatens to trigger a renewed flare-up of the Greek debt crisis and would create a further test for the cohesion of Europe. The debt relief was intended to shore up liquidity.
Just as worrisome is that it precludes Greece from participating in the EU's quantitative easing program.
The harsh move by the EU came after Tsipras announced last week that 617 million euro ($654) will be distributed to 1.6 million low-income pensioners as emergency support. Currently, 1.2 million Greek pensioners live below the poverty level.
Tsipras told reporters before the meeting with Merkel that he would emphasize the "spectacular overachievement" Greece made on revenue targets. As he explained, "We want to heal the wounds of the crisis and help those who have made great sacrifices." He noted that the projections for the Greek economy are 2.7 percent growth in 2017 and 3.1 percent in 2018.
Greece infuriated Germany after announcing and legislating a one-off pre-Christmas payout for low-income pensioners without being consulted. It has asked the institutions involved in Greece's aid program — the IMF, European Central Bank and the ESM — to assess whether Tsipras' actions are compatible with its EU bailout obligations.
At a joint press conference, Merkel reiterated that decisions on the Greek bailout program lay in the hands of these institutions and the Eurogroup.