German threats boost anti-bailout party

Greece's escalating row with Germany over the European Union's austerity plans has boosted Greek support for Syriza, the Left-wing anti-bailout party, ahead of elections which will decide the country's future in the eurozone.

Greek politicians from all sides reacted furiously on Saturday to reports that Angela Merkel, the German chancellor, had suggested that the country hold a referendum on euro membership next month, alongside the new election.

"The Greek people have no need for a referendum to demonstrate their choice for the euro," said Antonis Samaras, leader of the right-of-centre New Democracy party, which won most seats in the May 6 election but could not find enough support from pro-bailout parties to form a government.

Alexis Tsipras, leader of Syriza - which shocked establishment parties by coming second on May 6 - said: "Mrs Merkel is used to talking to Greek political leaders as if she was addressing a protectorate." Greeks would give "a definitive answer" in next month's election, he said, "and are going to put an end to the policies of austerity and submission".

An official German denial that Mrs Merkel had even made the suggestion - said to have come during a conversation with the Greek president, Karalos Papoulias - was too late to prevent headlines such as "Merkel ultimatum" and criticism of what one newspaper called "a Merkel bomb".

As Mr Papoulias dissolved the Greek parliament yesterday, an opinion poll by Metron Analysis suggested Syriza - whose support had briefly dipped - was again ahead of all other parties, with 25.1 per cent of voters saying they would support it next month.

Mrs Merkel has insisted she wants Greece to remain within the eurozone, but that it must meet commitments to cut its deficit. But sensitivity over what many Greeks see as Germany's high-handed attitude was heightened when a German MP from Mrs Merkel's Christian Democratic Union contradicted her, calling for Greece to exit the eurozone.

"That could open the path to growth. We could also negotiate a sort of European Marshall Plan for Greece," Wolfgang Bosbach said in a magazine interview to be published tomorrow. He said that a further aid package would only make things "more expensive, not better".

The German chancellor's refusal to bend on the terms of the "fiskalpakt" treaty signed by 25 EU countries in March - but not by Britain - has led diplomats to warn of a German government "death wish" that is pushing Europe's economy towards disaster.

The Sunday Telegraph has learnt that the German attitude contributed directly to the collapse of Greek attempts last week to form a national unity government, causing market turbulence that now threatens Spain and Italy.

At a meeting of EU officials 11 days ago Wolfgang Schauble, Germany's finance minister, said that after the success of anti-austerity parties in the first Greek election, contingency plans were being drawn up for Greece to leave the euro. One EU source said: "He horrified his audience by saying that, unless the Greeks toed the line, life would be made so unpleasant that Greece would be left with no option but to ask to leave."

Mr Schauble suggested cutting off the EU financing on which Greece depends to prevent it going bankrupt, thus pushing it into default and out of the euro. Representatives of the eurozone bailout fund decided instead on a less dramatic course: withholding euros 1?billion of the euros 5.2?billion instalment of aid due to be paid to Greece on May 10.

But that signal backfired when Mr Papoulias convened talks with all his country's political parties last weekend. On the table was a secret deal from the EU that would have given Greece a breathing space to pay back its debts, and some new investment to help kick start its economy.

He said, according to official minutes, that Herman Van Rompuy, the EU president, had told him that the election of Francois Hollande as France's Socialist president meant "a new climate is forming in Europe and it will be a shame if we do not take advantage of it".

Other European governments are sympathetic to the need to tone down the rhetoric, rather than aggravate Greek voters further. But Mr Van Rompuy's promise was not enough to sweeten the German threat to push Greece out of the euro unless its politicians surrendered.

"Even the mainstream Greek parties could not swallow such naked threats," said one diplomat.

Another senior European diplomat said: "There was a deal on the table but the Germans made it impossible for anyone to take the step. It's a death wish. Politics is about adapting to changes in order to manage them, not defying reality because it's inconvenient for some EU deal that was a compromise anyway."

The debate will come to a head at an EU summit on Wednesday, which the French government hopes will show backing for Greece. "All issues must be put on the table: finance, the banking system, growth, protectionism," Jean-Marc Ayrault, the country's prime minister, said.