BERLIN/ATHENS Greece's government will not bow to pressure to scrap a pre-Christmas payout to poor pensioners, its finance minister said on Thursday, as it needed to maintain credibility with its people as well as its international lenders.
The lenders said on Wednesday they were suspending an agreement to offer short-term debt relief after Prime Minister Alexis Tsipras unexpectedly announced the payment in response to Greece exceeding its primary surplus target for 2016.
In Athens, lawmakers approved the 617 million euro ($640 million) handout late on Thursday.
Speaking during a visit to Berlin, Finance Minister Euclid Tsakalotos said European states needed to be allowed to show they could solve their own problems to help restore confidence after strong gains for populist parties in several elections.
"(Greek) people have to see that sacrifices of now six, seven years are at last starting to pay off," he said during a visit to Berlin for a conference.
"If the unemployed, pensioners do not see that they have a role, a part in the growth after the crisis, then this Europe is in very, very serious trouble."
The Greek government, clinging on to a razor-thin majority in parliament, had no intention of stepping down, Tsakalotos added.
On Thursday it faced the latest in a series of protests in Athens by pensioners, many of whom have seen their incomes slashed since 2010 during austerity programs implemented by a succession of governments to meet the terms of three international bailouts.
'BIGGER FISH TO FRY'
The handout proposed by Tsipras infuriated officials in Germany and some other euro zone states but, in another sign of European divisions over how to handle the country, French President Francois Hollande and his finance minister came to Greece's defense on Thursday.
Tsakalotos told Reuters there were "bigger fish to fry" than getting embroiled in a row over the one-off payment.
But even accounting for it, he was confident Greece would be well ahead of its primary fiscal target for 2016, and the economy had almost certainly grown in the first three quarters of the year.
The government would explain its views on the importance of the one-off payment, as well as a decision to maintain a 30-percent discount on levels of value-added tax charged on some Greek islands affected by the refugee crisis.
A top European Commission official on Thursday questioned the lenders' decision and said there was no reason to question the debt relief deal.
Tsakalotos said he was disappointed the International Monetary Fund had not done more to assert its view with the euro zone about the importance of providing debt relief to Greece.
(Editing by Madeline Chambers and John Stonestreet)