Greece and Germany are on the frontline in a fierce battle about the future of European economic policy, with Syriza determined to show that ditching austerity is a better recipe for economic recovery than relentless cuts, and Germany determined to make Athens stick to the deficit-cutting agenda – and pay back the €240bn (£180bn) in bailout loans it received from the international community.  As Varoufakis returned to Athens , thousands of people gathered on the streets to show solidarity in the party’s battle with Greece’s creditors.  The fresh outpouring of public concern, with protesters gathering in Syntagma Square, the centre of anti-government riots during repeated crises in recent years, came after the European Central Bank outraged policymakers by restricting access to emergency funds for Greece’s struggling banks.   In Berlin, Varoufakis promised to meet the alarmist warnings of some in the eurozone about the consequences of Syriza’s radical policies with “a frenzy of reasonableness”.   Just before the Berlin meeting the Russian president, Vladimir Putin, had ratcheted up the pressure on the eurozone to find a solution to the crisis by inviting the new Greek prime minister, Alexis Tsipras, to talks in Moscow in May.  Schäuble said Germany would “fully respect the mandate” handed to Varoufakis and his colleagues by the electorate in the general election last month, but Germany had its own democratic pressures.

"We dream but we take our dream seriously. More has been done in Greece in six days than many governments did in years."  Protesters are parading in the same streets that over the past six years have seen many other gatherings against financial crisis cutbacks imposed by successive governments.  One marcher, Jose Maria Jacobo, told Reuters news agency that people had to fight back against the political class.  "It is the only way..., to kick out all of those politicians who are taking everything from us. They even try to take our dignity away from us. But that they won't take that from us," he said.   But speaking in Barcelona, Spanish Prime Minister Mariano Rajoy said Podemos had no chance of winning elections.   "I don't accept the gloomy Spain which some want to portray because they think that by doing so they will replace those who are governing and have had to face the most difficult crisis in decades. They will not succeed," he said.  Uncompromising message -- Many Spaniards are enraged over reports of political corruption and public spending cuts implemented by Mr Rajoy's People's Party and before that by the Socialists.  The two big traditional parties have described the party - less than a year old and whose names translates as "we can" - as populist.   Our correspondent says that since Podemos stormed onto the political scene in last May's European elections, it has moved from strength to strength with its uncompromising message against austerity and corruption.   But both left-wing and right-wing media have criticised Podemos, accusing it of having ties with Venezuela's left-wing leaders and alleging financial misconduct by some of its senior members.  The party's leaders have in response promised to publish their tax returns, with Mr Iglesias remaining defiant.   In the face of their hatred, we smile," is one of his regular pronouncements, according to the AFP news agency. After the Syriza triumph in the Greek elections he said that "hope had been born".  Spain has now officially come out of recession but nearly one in four workers remains unemployed.  Last year was the first time there has been full-year economic growth in the country since 2008, when a property bubble burst, putting millions of people out of work and pushing the country to the brink of a bail-out.

Searching for support and "handouts" (from the US) as usual ...

German Chancellor (Merkel) arrives in Washington late  this sunday for upcoming  meetings with President Obama that start Monday..."We think it's wise to have an (...) accord tied to achievements and bench marks,"  = this is a funny statement though.  Anyway,  here's what they will talk about ( this is the "public agenda" - background talks about further economic support from the FED not made public by neither of the participants - Germany needs help for sure):

 

UKRAINE

"One of the most pressing issues is the crisis in Ukraine," said Peter Wittig, Germany's ambassador to Washington. "All of us are concerned this is a spiraling military conflict. We want to explore the diplomatic options."  Merkel's visit comes as Obama considers providing modern weapons to Ukraine, which has been losing territory in the country's eastern regions to pro-Russian separatists armed with tanks and personnel carriers sporting Russia's most advanced armor.

Ukrainian President Petro Poroshenko on Saturday asked Western leaders at the Munich Security Conference to push for a quick cease-fire and defensive weapons capable of countering the separatists' armored assaults... Merkel, French President Francois Hollande and Russian President Vladimir Putin agreed Friday during a meeting in Moscow to draft a peace plan for Ukraine based on ideas proposed by Putin and Poroshenko, but previous agreements have fallen apart even as the conflict has resulted in more than 5,300 dead in Ukraine.  Merkel has opposed sending weapons to Ukraine. On Saturday, she said she "cannot imagine any situation in which improved equipment for the Ukrainian army leads to President Putin being so impressed that he believes he will lose militarily," according to the Associated Press.  Wittig, who briefed reporters in Washington in advance of Merkel's visit, said that if the West delivered weapons to Ukraine, "Moscow would probably reciprocate" by providing separatists with more weapons.  "How far are we willing to escalate that military spiral? I'm not sure that we are," Wittig said.

TRADE

Finally, the two leaders will discuss a thorny trade pact, the Transatlantic Trade and Investment Partnership (TTIP), which would unite the economies of the USA and the 28-nations of the European Union. The deal would eliminate most trade barriers for many products and financial services.

Backers say it could produce free-market prosperity, but the negotiations have also been controversial because the pact would increase competition. Greece's new leftist ruling party, Syriza, has said it opposes the plan.

THE ISLAMIC "STATE"

Obama and Merkel will also discuss a training center Germany is setting up in Erbil, in Kurdish-controlled Iraq, to train and provide arms to Kurdish Peshmerga forces fighting against the Islamic State, which has seized territory in Iraq and Syria. Merkel will also discuss German interest in pursuing other tracks of destabilizing the militant group, including counter-financing and supporting messages that de-legitimize the group's claims that its actions, including the murder by fire last month of a captured Jordanian pilot, are backed by Muslim religious ideals.
Source - USA Today

^{Greece's finance minister spoke to ECB chief Mario Draghi in Frankfurt (Source: Getty)}

In return, Mr Varoufakis assured German voters his government would seek to dismantle the "cronyism and corruption" that has held back the country for decades.

"Germans have to understand that it doesn’t mean we’re turning away from the reform path if we give an additional €300 a year to a pensioner living on €300 a month. When we talk about reforms, we should talk about cartels, about rich Greeks who hardly pay any taxes."

The finance minister ruled out any plea for financial aid from Russia, and called on the German Chancellor to put forward a "Merkel Plan" based on the post-war Marshall loans granted by the United States to rehabilitate Germany after the war.

"I believe the EU would benefit if Germany conceived of itself as a hegemon," said Mr Varoufakis. "But a hegemon must shoulder responsibility for others.

"Germany would use its power to unite Europe. That would be a wonderful legacy for Germany’s federal chancellor."

^{Who owns Greek debt?}

^{(Source: Open Europe)}

Syriza swept to power pledging to rebuild Greece on four pillars - restarting the economy, regaining employment, transforming the political system and confronting the humanitarian crisis.

It has pledged to dramatically increase the minimum wage by over £100 a week, which was cut as part of the austerity programme and get 300,000 more people into work.

In a similar way to post-war Germany, Greece also wants Europe to write off most of its £240billion national debt.  The party also wants Germany to repay a loan that the Nazis forced the Bank of Greece to pay during the occupation and pay war reparations.  German Finance Minister Schaeuble has warned Greece over its negotiating tactics, saying the nation and the EU would not "be blackmailed".  In another newspaper interview this morning with Berliner Morgenpost, Chancellor Merkel said: "We - Germany and the other European partners - will now wait and see what concept the new Greek government come to us with."... However she added: "I don't see a further debt haircut". ... And as for demands over war reparations, she said: "This question doesn't arise."

New Greek PM Alexis Tsipras will visit Cyprus, Italy and France next week but there are no plans as yet to visit Germany. As well as scrapping some austerity measures demanded by the troika, such as a privatisation programme, Greece is now trying to negotiate with other EU members over its level of debt.  There are fears though that if Greece refuses to meet its debt demands, it could be forced out of the Eurozone.  Ms Merkel today said she wanted Greece to be successful and acknowledged "many people there have hard times behind them.  "The aim of our policies was and is for Greece to remain a part of the euro community permanently."

The problem with economists and journalists that report on economics is that they like simple, easy to understand, definitions and cannot think rationally if a definition is involved.  Take for instance deflation. Economists define deflation as inflation below o%. And although the only instance of real deflation was in 1930's USA, economists are almost united in saying it would be bad for any economy. Now, some countries in Europe that import every single drop of oil they use, had very low inflation. The recent steep fall in oil price meant that the economies of those countries were now officially in deflation and economists and journalists had a field day forecasting doom and gloom. Because the economies were in deflation.  But they forgot to include the reason for the fall into deflation into the equation.  Cheaper oil is a godsend to any economy dependent on oil imports, it is in no way a bad thing. It means cheaper transport, heating, manufacturing, farming, in fact cheaper everything that uses oil or oil derivatives.  But most economists and financial journalists, with their closed minds, can only see the minus sign in front of the inflation statistics and therefore denounce a bonanza as a catastrophe. The massive numbers of unemployed and underemployed, or those barely getting by on jobs in our neoliberal economic wonderland where living-wage salaries are a thing of the past, would welcome not having their purchasing power robbed by central bank debasement of the currency and asset bubbles, not to mention the unpayable debts they and their children are being saddled with by being forced to bail out financial speculators.