No agreement to disagree on Athens’ debts as Varoufakis brings up spectre of Greek nazism and Schäuble offers 500 German tax collectors

Greece’s radical Syriza government remained locked in a bitter standoff with its German paymasters, as finance minister Yanis Varoufakis issued a stark warning of the rise of nazism in his country if the eurozone fails to heed the democratic voice of Greek voters.

As Varoufakis completed the last leg of a whistle-stop round-Europe tour to seek support for Syriza’s plans to halt austerity and renegotiate the country’s debts, he told a tetchy press conference on Thursday in Berlin that Greece had a proud record in fighting Nazis, but ignoring the clear message from Greek electors could feed far-right forces.

“No one understands better than the people of this land how a severely depressed economy, combined with a ritual national humiliation and unending hopelessness, can hatch the serpent’s egg within its society. When I return home tonight, I will find a country where the third-largest party is not a neo-nazi party, but a nazi party,” he said, referring to the far-right Golden Dawn. “We need the people of Germany on our side.”

However, Wolfgang Schäuble, his German counterpart, maintained that Greece must be held responsible for its own problems, saying: “We have to appreciate their efforts and their situation, and above all we have to appreciate the progress that has been achieved in Greece over recent years. At the same time, however, we must say that the reasons, the cause for the difficult journey to be undertaken by Greece, that the reason for this is to be found in Greece, and not outside Greece, and definitely not in Germany.”

Schäuble repeated an earlier offer to send 500 German tax collectors to help the Athens government collect taxes from wealthy Greeks.

He then told reporters he and Varoufakis had “agreed to disagree”, but the Greek said they had not even got that far: “We did not reach agreement because it was never on the cards that we would.”

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.

German public opinion is deeply sceptical about the need for fresh debt relief for Greece, after repeated bailouts since 2010. But Syriza argues that it has been burdened with a series of impossible-to-repay loans, and has seen growth hobbled by the austerity imposed as a quid pro quo.

Back in Athens, Tsipras told the Greek parliament: “Greece is no longer the miserable partner who listens to lectures to do its homework. Greece has its own voice.” Protesters on the streets held up placards saying “People Before Markets”.

Syriza and its coalition partners had hoped to receive temporary support from the ECB while it holds debt restructuring talks with its creditors, but Wednesday’s decision by the Frankfurt-based bank, which tightened the rules on the collateral Greek banks can post in exchange for loans, made the prospects of short-term support appear bleak.

As fears mounted of a fresh run on Greek bank deposits – one of the factors that led to the country’s previous financial bailouts – central bank governor Yannis Stournaras said: “The ECB’s decision can be taken back if there is a deal from the Greek government. Deposits and liquidity are absolutely safe.”

Greece’s bailout from the troika of the European commission, International Monetary Fund and the ECB – which came with stringent conditions, including hefty spending cuts – is due to expire at the end of the month. Syriza insists it will not accept an extension which would, it says, be tantamount to agreeing to a new bailout with foreign lenders..

Finance chiefs can’t agree to disagree over Athens’ debts as Varoufakis brings up spectre of Greek nazism and Schäuble offers 500 German tax collectors