27 Jan 2015

Europe warns Greece to stick to austerity

7:24 am on 27 January 2015

The EU has issued a stern warning to Greece that its place in the eurozone is at risk if new Prime Minister Alexis Tsipras fails to meet the country's austerity and debt commitments.

Alexis Tsipras leaves the presidential palace after being sworn in as Greece's new Prime Minister.

Alexis Tsipras leaves the presidential palace after being sworn in as Greece's new Prime Minister. Photo: AFP

The 40-year-old leader of anti-austerity party Syriza has been sworn in as Greek prime minister - the youngest in 150 years.

Mr Tsipras - characteristically without a tie - also broke with tradition by taking a civil instead of a religious oath, pledging to "always serve the interests of the Greek people".

EU officials said they were ready to talk to the new government led by Mr Tsipras' radical left party Syriza, but insisted that Athens must stick to prior agreements with its international creditors.

Eurozone finance ministers were meeting in Brussels a day after Syriza stormed to victory in elections on the back of Mr Tsipras' promises to end "disastrous austerity" and seek a cancellation of Greek debt.

"Membership of the eurozone means that you comply with everything you have agreed with," said Eurogroup head Jeroen Dijsselbloem, adding that "on that basis, we're ready to work with them".

The Dutch finance minister did not rule out steps to help Greece - such as extending debt repayment deadlines or reducing interest rates - so long as the new government stuck to the austerity measures it has agreed with the EU and IMF since 2010.

But he dismissed suggestions that the EU could erase some of the debts that Greece incurred under the massive €240 billion international bailouts it received, as Mr Tsipras has demanded.

"Writing off debt in nominal value, I don't think there's a lot of support for that within the eurozone," Dijsselbloem said.

The mere fact that Mr Dijsselbloem brought up Greece's place in the 19-country eurozone will stoke fears about the effect of a Syriza win for the single currency, which traded at an 11-year low versus the dollar on Monday, AFP reports.

Syriza's stunning victory also has political implications beyond Greece, boosting anti-austerity movements across Europe, especially Spain's Podemos which is hoping for a similar general election win this year.

In Germany - the paymaster of the eurozone bailouts and where resistance runs deep to any attempts to abandon austerity - Chancellor Angela Merkel's spokesman took a similar line on what Europe expected.

"In our view it is important for the new government to take action to foster Greece's continued economic recovery," spokesman Steffen Seibert told reporters. "That also means Greece sticking to its previous commitments."

European Commission chief Jean-Claude Juncker said that the EU would "work closely" with Greece, adding that he was not "particularly nervous".