Greek, Ukraine crises loom over G7 summit

World leaders gathered for a G7 summit in the sun-drenched Bavarian Alps Sunday, their agenda clouded by the Ukraine conflict and the threat of Greece crashing out of the eurozone.

German Chancellor Angela Merkel kicked off the day by treating US President Barack Obama to some traditional Bavarian beer garden hospitality, with frothy ale, pretzels and oompah brass music played by locals in lederhosen.

While the two praised their countries' strong post-war friendship to cheers and warm applause, Obama had some sharp words for Russian President Vladimir Putin, who has been excluded for a third time from a meeting of what used to be the Group of Eight.

A key G7 issue would be "standing up to Russian aggression in Ukraine," Obama said ahead of their talks with Britain's David Cameron, France's Francois Hollande, Italy's Matteo Renzi, Canada's Stephen Harper and Japan's Shinzo Abe.
EU President Donald Tusk, also attending the meeting at the heavily guarded Elmau Castle retreat, said he wanted to "reconfirm G7 unity on sanctions policy" against Russia, after Abe and Harper made a point of visiting Kiev on their way to Germany to voice support for Ukraine's embattled leaders.

Obama, without naming crisis-hit Greece, also pointed at the European Union's ongoing troubles with debt-hit Athens, mentioning as the top summit issues "the global economy that creates jobs and opportunity" and "maintaining a strong and prosperous European Union".

- Greece debt drama -

Merkel -- the eurozone's key champion of tough reforms and austerity in return for loans -- had made a last-ditch effort to resolve the Greek crisis in the days before the G7 summit, huddling last Monday night with the heads of the EU executive, ECB and IMF in Berlin.

"It would be an absolute nightmare for her if Germany were portrayed as the chief culprit for a Greek bankruptcy, even an exit from the euro," commented newspaper Welt am Sonntag.
Yet the Greek drama threatened to overshadow the G7 summit, which Merkel has hoped to focus on other pressing global issues -- from climate change and Islamist extremism to the role of women, public health initiatives and the fight against poverty.

Greece's radical-left government and its creditors have been locked in negotiations for five months in a bid to unlock 7.2 billion euros (US$8 billion) in desperately-needed rescue funds.

The European Commission last week presented Greece with a five-page list of proposals, including sales tax hikes and cuts in civil servants' salaries and pensions.

Greek Prime Minister Alexis Tsipras rejected the demands as "absurd", while Athens withheld a 300-million-euro loan repayment to the IMF, opting instead to group four scheduled tranches into a single payment at the end of the month.

His Finance Minister Yanis Varoufakis told Proto Thema daily Sunday that the demands were "an aggressive move designed to terrorise the Greek government" and declared "this Greek government cannot be terrorised".

European Commission President Jean-Claude Juncker said Sunday that Athens had so far failed to provide a list of alternative reforms.
"Alexis Tsipras, my friend, had promised that by Thursday evening, he would present a second alternative proposal... I have never received this alternative proposal," he said.

Juncker had on Saturday snubbed a phone call from the radical leftist leader, with an EU official reportedly saying there was "nothing to discuss", although Tsipras, Merkel and Hollande later spoke by phone.

Greece's bailout agreement with its creditors expires at the end of June. Should Athens miss its loan payments and default, many fear this would set off a chain of events that could lead to a messy Greek exit from the euro.

Merkel had hoped to use the picture-book setting of lush Bavarian meadows and magnificent mountain peaks to showcase the homely side of Europe's biggest economy while searching for consensus on a catalogue of pressing global issues.
Instead, the event threatens to be overshadowed by two leaders who are absent, said the Munich daily Sueddeutsche Zeitung.

"While the government stoically insists everything is normal, two virtual guests are charging up the atmosphere in a way that threatens to dominate the summit: Russian President Vladimir Putin and -– some distance behind him -- Greek Prime Minister Alexis Tsipras," it said.

A day after thousands protested against the G7 in largely peaceful rallies, a handful of protesters staged a sit-in Sunday to block the main access road to the castle, meaning journalists were transported by helicopter to the location.

The protesters told AFP they had managed to sneak through the woods unnoticed by police, despite the presence of over 22,000 officers who have set up a ring of steel around the summit of world leaders.