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05/12/2016

Tusk arranges Greek crisis meeting at summit

Euro & Finance

Tusk arranges Greek crisis meeting at summit

Donald Tusk, President of the European Council. [European Commission]

European Council President Donald Tusk has agreed to convene a meeting on the Greek crisis at a European summit of heads of state and government this evening (19 March), despite not being on the agenda.

Requested by Greek Prime Minister Alexis Tsipras, the meeting will include German Chancellor Angela Merkel, French President François Hollande, European Central Bank President Mario Draghi, Commission President Jean Claude Juncker, and Eurogroup President Jeroen Disselbloem.

Tusk was under pressure to consider how the high-stakes negotiation between Greece and the eurozone – above all its principal powerhouse Germany – over the cash strapped Mediterranean state’s financial programme could be considered in the wings of today’s summit.

The issue was ruffling feathers in Brussels yesterday as a war of words between the two sides appeared to be reaching a showdown.

Greece is fast running out of cash, but its eurozone partners refuse to throw it a financial lifeline until they see evidence Greece is implementing reforms.

German Finance Minister Wolfgang Schäuble last week warned that Greece could accidentally stumble out of the eurozone, because its leaders had failed to negotiate new loans.

“The European Union is not prepared to keep Greece in the eurozone at any price,” according to Pierre Moscovici, the Commissioner for Economic and Financial Affairs, in a newspaper interview yesterday (18 March).

“The Eurogroup has an overwhelming will to keep Greece in the eurozone. Financial accidents can happen. Our task, however, is not to organise this but to prevent it,” PMoscovici told Germany’s Die Welt.

“We won’t keep Greece in the eurozone at any price, but under strict conditions which are acceptable for both sides,” Moscovici said, adding that any possible third aid package must look different to previous ones.

The day before (17 March), widespread reports relayed that Greek officials insisting that Athens would not be “blackmailed” over its debt crisis.

Moscovici warned a Greek exit from the single currency would still inflict great political damage.

“Everyone would ask, ‘which member state is next?'” he said.

Tusk’s meeting came after a flurry of diplomatic briefing in advance of today’s summit indicated that member states are increasingly fearful of the lack of progress in the Greek crisis talks since the establishment of the Tsipras government in January, and concerned that time is running out.

“Every day we hear something different from Athens. But ultimately the cash has been running out since Tsipras took over, and there has been no progress since then either, so patience is beginning to wear thin,” one EU diplomat said.

Another said that all was being done to keep the situation under control, but asked if the Greek situation was containable, he added: “That is not for us to assess, but for the Greeks themselves.”

The high stakes negotiation tactics of Greek Finance Minister Yanis Varoufakis – a game theorist – appear to be coming to a conclusion. However, with neither side flinching, tonight’s meeting will be closely watched to determine how the next phase of the crisis plays out.

Background

Greece secured a four-month extension of its financial rescue on 24 February, when its eurozone partners approved an economic reform plan that backed down on key measures and promised that spending to alleviate social distress would not derail its budget.

>> Read: Eurozone approves Greek reform plan with reservations

Germany's rejection of an initial Greek request for a six-month loan extension forced Athens into a string of politically sensitive concessions, postponing or backing away from campaign promises to reverse austerity, scrap the bailout and end cooperation with the "troika" of EU, ECB and IMF inspectors.

>> Read: Greece, eurozone agree to four-month loan extension, avert crunch

Further Reading