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28/09/2016

Progress on Greek deal seen as triumph for France

Euro & Finance

Progress on Greek deal seen as triumph for France

Alexis Tsipras (centre), with Angela Merkel and François Hollande.

[European Council]

As Greece inches closer to a bailout deal that will keep it in the eurozone, experts have hailed France for playing the role of pacifier in fractious debt talks and putting the brakes on a dreaded “Grexit”.

After a dramatic referendum in which Greek voters rejected the terms of a bailout deal, France called for “solidarity” and urgent talks with Athens even as Germany appeared unmoved by the prospect of Greece crashing out of the eurozone.

It may have appeared impossible on Sunday as post-referendum doomsday scenarios spread, but experts say the fact that Athens made proposals that appear palatable to its eurozone partners just days later was largely thanks to France’s role as mediator.

French President François Hollande and his Prime Minister Manuel Valls “pushed on the brakes” to warn against Greece leaving the single currency union, said Hans Stark, an analyst with the French Institute of International Relations.

While Berlin said the referendum shut the door on further talks with Athens, Valls warned of the major geopolitical implications of a “Grexit” from the euro, saying “you don’t play with history”.

“Hollande’s role is not trifling in the creation of a much more positive atmosphere since the day after the referendum, when some were saying: ‘There you go, the ‘Grexit’ is nearly here’,” said Stark.

“It is undeniably a success for him (Hollande),” he added.

While France publicly pushed maintaining communication with Athens, French officials said diplomats and senior figures in the treasury had also been working behind the scenes to mediate between Greece and its international creditors.

While retaining his demand for a restructuring of Athens’s debt, Greek Prime Minister Alexas Tsipras on Thursday night conceded ground on major sticking points including tax and pensions in a bid to secure a new bailout.

Hollande was the first to publically welcome the proposal, saying Friday: “The Greeks have shown a determination to want to stay in the eurozone because the programme they are presenting is serious and credible.”

He cautioned, though, that “nothing is decided yet” and any new Greek rescue needs to be approved unanimously by eurozone members.

France’s ‘decisive’ role

A deal would be a welcome boon to the deeply unpopular Hollande, who has faced criticism at home from both the right for breaking away from Germany’s line, and the extreme left who accuse him of waging a “financial coup d’état” against Greece.

But Berlin, seen as Europe’s paymaster and a key advocate of austerity, merely said it was too soon to comment and there was “very little leeway” for debt restructuring.

“If the deal happens it will confirm the relevance of the French position. France’s position that ‘there must absolutely be a deal’ has been decisive,” said Xavier Ragot, president of the French economic think-tank OFCE.

“This week, in recent days, France has played a real role,” Greek Minister for Administrative Reforms Georges Katrougalos told AFP, refusing to give any details.

Also encouraging a return to negotiations was US President Barack Obama, who spoke with Hollande by telephone on Monday, with both saying a deal would “require difficult compromises from all sides”.

Germany has ruled out forgiving more of Greece’s debt, but even Finance Minister Wolfgang Schäuble acknowledged that International Monetary Fund chief Christine Lagarde was correct in saying Greece needed debt restructuring.

This could involve pushing back repayments or lowering interest on loans.

“There is a change of tone on the German side that recognises the inevitable,” said Ragot, adding that while Germany was conscious of the need for debt restructuring “it wanted a firm commitment from Greece (on reforms)”.

Former Greek finance minister Yanis Varoufakis, who stepped down this week after leading months of fractious debt talks, on Saturday accused Germany of using Greece’s crisis to scare France.

France has been struggling with meagre growth and sky high unemployment and on Friday adopted reforms designed to help jump-start the country’s moribund economy.

“My conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone,” Varoufakis wrote in British newspaper The Guardian.

Timeline

  • 11 July: Eurogroup ministerial to start at 15.00 hours
  • 12 July: Possible extraordinary EU summit