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09/12/2016

Greece confident ahead of EU meeting, but sticking to its anti-austerity guns

Euro & Finance

Greece confident ahead of EU meeting, but sticking to its anti-austerity guns

Dijsselbloem and Varoufakis. Brussels, 11 February. [European Council]

Greece said on Sunday (15 February) it was confident of reaching agreement in negotiations with its eurozone partners, but reiterated it would not accept harsh austerity strings in any debt pact.

A day before a eurozone finance ministers’ meeting in Brussels to shore up Greece’s dwindling finances and help keep it in the eurozone, Prime Minister Alexis Tsipras told Germany’s Stern magazine that Athens needed time to implement its reform programme and shake off the mismanagement of the past.

“I expect difficult negotiations; nevertheless I am full of confidence,” he said. “I promise you: Greece will then, in six months’ time, be a completely different country.”

The Eurogroup of finance ministers meets in Brussels today (16 February) to try to find common ground with Tsipras’ new leftist government, elected on a pledge to scrap the austerity strictures of Greece’s international bailouts, on issues such as debt management, financing, privatisation and labour reform.

If the meeting produces no results, there is a concern that Greece will be headed for a credit crunch that would force it out of the eurozone. Progress, however, could mean further negotiations, perhaps later in the week.

“The irresistible force will be meeting the immovable object,” Vasileios Gkionakis, head of global FX strategy at UniCredit, wrote in a note.

European Central Bank President Mario Draghi refused to discuss the possibility of Greece leaving the eurozone if an agreement with European Union/International Monetary Fund lenders fell apart as a result of Greece’s demands to alleviate its debt burden. He simply reiterated the eurozone’s founding position that membership is “irreversible”.

Bridge programme?

Tsipras wants a bridge programme to be put in place for a few months while a new deal is agreed to replace the bailout, which has already forced drastic cutbacks onto ordinary Greeks.

The rest of the eurozone, particularly Germany, says Greece must continue with those commitments as a quid pro quo for the €240 billion ($274 billion) it has received in bailouts.

Slovak Finance Minister Peter Kazmir, whose country is said to be taking a tough line, tweeted that he was sceptical whether all details could be agreed on Monday.

Greece’s current bailout expires at the end of the month. A Eurogroup meeting last week ended without apparent progress although technical talks were later approved.

Greek government spokesman Gabriel Sakellaridis showed no sign that Greece was easing back on its core demand.

https://youtube.com/watch?v=LYMdqo-nZEU

“The Greek government is determined to stick to its commitment towards the public … and not continue a programme that has the characteristics of the previous bailout agreement,” he told Greece’s Skai television.

“What we have agreed on is that there is a need for a national reform plan, which European partners are listening closely to, and positively to tackle steady problems in Greece’s economy and society that date back decades.”

Some of the problems facing the Eurogroup are semantic. The Greeks, for example, will not countenance anything that smacks of an “extension” to the old bailout, preferring something new called a “bridge” agreement.

Wave of anger

This is political. Tsipras rode into power on a wave of anti-austerity and anti-bailout anger last month and would have a hard time explaining a row-back so soon. Thousands of Greeks massed outside parliament in Athens on Sunday to back his strategy.

But even a cosmetic change of labels could have practical consequences. An “extension” may not require many national ratifications unless it involves additional financial commitments from eurozone governments.

But any new bailout programme might require several national parliamentary ratifications and could also bring Germany’s Constitutional Court into play.

Among those requiring a parliamentary vote on a new bailout are Germany, Slovakia, Estonia and Finland, all identified by one veteran of EU meetings as part of a hard core of opponents to Greece’s plan.

The Eurogroup’s main debate with Greece’s “no-austerity” stance will revolve around the funding of a bridge programme, Greece’s request to reduce the ‘primary’ budget surpluses, excluding interest payments, that it is required to reach, and privatisations and labour reform.

Greece said on Saturday (14 February) that it was reviewing a €1.2 billion deal for Germany’s Fraport to run 14 regional airports, one of the biggest privatisation deals since Greece’s debt crisis began in 2009. It has also pulled the plug on the privatisation of the ports of Piraeus and Thessaloniki.

On the question of liberalising labour markets, government spokesman Sakellaridis remained tough:

“We will discuss it with workers and with pensioners. Whatever we do we will do through dialogue. We will not legislate at the sole behest of outside factors.” 

Eurogroup President Jeroen Dijsselbloem said on Friday (13 February) he was “very pessimistic” about the chances that the meeting would reach a debt deal with Greece.

Saying Greek voters’ expectations of their new government were “a mile high”, Dutch finance minister Dijsselbloem was asked whether a plan to resolve Athens’ financial problems would be achieved on Monday.

He replied, in a remark aired on Dutch television: “I’m really still very pessimistic about that now.”

Dijsselbloem said some changes to the current agreement on reforms could be done if they did not derail the budget.

“If that fits, then we could change the programme. Then we could extend the programme, and then the situation around Greece will stabilise again,” he said.

Dijsselbloem said Athens had great ambitions, but not much money and that it should scale down its expectations.

“We only lend money if there’s progress made, if new reforms are carried out, and that hasn’t been the case for months. And that’s getting continually more pressing. I can’t fix that, the first steps will really have to come from the Greek government,” he said.

Positions

Germany's Finance Minister Wolfgang Schäuble said in a radio interview that he was not very optimistic that Greece and its euro zone peers would reach a debt agreement in talks today (16 February).

Asked if the finance ministers will find a solution for the Greek debt problems in their negotiations on Monday, Schäuble said: "From what I've heard about the technical talks over the weekend, I'm very sceptical, but we will get a report today and then we'll see."

Schäuble said that Germany did not want a Greek exit from the euro zone, but that the new government in Athens had to fulfil "the minimum of the claims".

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” was over, 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

  • 16 February: Eurogroup meeting on Greece.