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06/12/2016

EU leaders look to corner Tsipras over Greek debt deal

Euro & Finance

EU leaders look to corner Tsipras over Greek debt deal

Alexis Tsipras  arrives in Brussels for his first EU summit tomorrow (12 February) with a demand to cancel Greece’s EU/IMF bailout when it expires at the end of February, and a request for more time to negotiate a new debt settlement.

Although the topic is not officially on the agenda, EU leaders will discuss assistance to Athens beyond 28 February, when Greece’s current international bailout expires.

Tsipras promised that Athens would not cave in to EU demands for extending its bailout “no matter how much” Germany asked for it.

“We are not negotiating the bailout; it was canceled by its own failure,” Tsipras told members of the Greek Parliament before comfortably winning a confidence vote on Tuesday (10 February). 

>> Read: Tsipras wins parliament backing to cancel Greece’s EU-IMF bailout

Diplomats were scrambling today to chart a possible way out of the stalemate, while avoiding a full confrontation that could pave for the way for Greece to exit the eurozone.

Greece’s request for more time “implies a logical solution,” said one senior EU diplomat with direct knowledge of the talks – “it is the extension of the program”.

The difficulty is that the very concept of extending the bailout is unacceptable to Athens, the diplomat conceded. So EU negotiators are looking for sweeteners to help Tsipras swallow the pill, and sell an agreement to his electorate.

Greek Finance Minister Yanis Varoufakis has proposed a six-month transition to negotiate a rescheduling of the country’s debt. EU leaders are looking to use this as a basis for negotiating a formal extension of the bailout.

“Is there a way to go in this direction while leaving intact the notion of extending the program – I think that will be at the heart of the discussion” at the summit, the diplomat said.

Possible sweeteners include a rearranging of the bailout program in terms of “vocabulary, content, implementation modalities and monitoring,” the diplomat added, referring to the Troika, which supervises the implementation of reforms agreed to in exchange for bailout money.

The new Greek leadership, for its part, is not completely closed to implementing some of the reforms agreed to by the previous conservative-led government. Varoufakis said on Monday that Athens wants to scrap about 30% of the bailout’s current conditions, to be replaced by measures approved by the Organisation for Economic Cooperation and Development, and implement 70% of the recommendations.

“Which ones, in what proportion of the total and whether this is enough to actually speak about an extension of the program by the ECB and the task force – this is the scope of the discussion,” the diplomat said.

Background

The anti-austerity Syriza party marked a stunning victory in a Greek snap election held on 25 January, but did not ensure an absolute majority.

Its leader, Alexis Tsipras, said the “vicious cycle of austerity” wasover, triggering mixed reactions in the EU.

Tsipras stated that the Greek public debt is not viable, and asked for its restructuring, which amounts to 177% of GDP.

>> Read: Greek leftist scores victory over austerity

Timeline

Further Reading