Date: May 11 2012
GERMANY has threatened to halt financial aid to Greece unless a new government commits to the terms of the country's bailout agreements.
Berlin warned it would withhold international aid to Greece in a move that could trigger a fresh, damaging countdown to default in Athens.
Amid rising anger in Berlin over the anti-euro backlash after the Greek elections, Greece was to receive a €4.2 billion ($A5.4 billion) cash injection yesterday as part of its €130 billion March bailout.
German Chancellor Angela Merkel has been forced to postpone her own Parliament's ratification of the eurozone's fiscal pact until after an Irish referendum on May 31, because of the Europe-wide backlash against austerity.
German Social Democrats have refused to support the pact's parliamentary passage unless it includes growth as well as austerity measures.
Dr Merkel had hoped to ratify the pact on May 25, six days before Ireland holds its referendum and before French legislative elections in June.
She had intended the ratification to be choreographed with a symbolic, simultaneous vote in the Italian Parliament, to pressure the Irish to vote yes, and as a signal to French president-elect Francois Hollande that the fiscal pact could not be tampered with.
In another setback for Dr Merkel, the technocrat appointed as Italy's Prime Minister, Mario Monti, yesterday appeared to switch his allegiance to Mr Hollande with a call for a European ''coalition of the willing'' on growth.
The delay for the fiscal pact, which has only been ratified in Greece, Slovenia and Portugal, has rallied anti-austerity campaigners for a no vote in the Irish referendum.
Athens is due to repay a €3.3 billion bond next Friday.
But German Foreign Minister Guido Westerwelle said Greece must see ''what's going to happen if it repeals agreements which have been made''.
Speaking at a conference marking Europe Day, he said, ''If Greece ends the reform process it has undertaken, then I can't see that the respective tranches [of aid] can be paid out.''
Stock and bond markets lurched at the prospect of another roller-coaster effort to avoid a Greek default.
Traders were already rattled by the expectation that Madrid will unveil an obligatory €30 billion bank recapitalisation program today. Spanish banks are already struggling with the €54 billion recapitalisation ordered in February.
Traders fear that Germany is losing its whip hand because it has more to lose than Greece if the eurozone collapses.
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