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07/12/2016

Tsipras hastens Russia visit amid Greek cash crunch

Europe's East

Tsipras hastens Russia visit amid Greek cash crunch

Alexis Tsipras and Jean-Claude Juncker on 4 February. [European Commission]

Greek Prime Minister Alexis Tsipras unveiled Tuesday (17 March) a surprise trip to Russia, but also sought talks with European leaders to break a deadlock over reforms that has revived default fears.

The Greek government said Tsipras, who was already scheduled to visit Russia in May for its annual Victory Day parade, would now also travel to Moscow on April 8 to see Russian President Vladimir Putin.

“The prime minister will visit the Kremlin following an invitation from Russian President Vladimir Putin,” a government source said without giving reasons for the change of date.

Tsipras, a former Communist, has made no secret of seeking closer ties to Russia at a time when Moscow is at loggerheads with the European Union over the conflict in Ukraine.

A number of Greek officials have openly broached the prospect of Athens turning to Russia or China for financial assistance if loan talks with the EU end in failure.

The prospect of NATO member Greece moving into the Russian orbit is alarming to some in Brussels, including European Council chief Donald Tusk.

“Can you imagine Europe without Greece,” the former Polish PM said in an interview with six European dailies this week.

“The consequences for Europe would not only be financial, the results would be the most dramatic chapter in all the history of the European Union,” he said.

Greek daily Ta Nea said the Moscow visit was linked to the cash crunch Athens is facing because it has not received the funds remaining in its 240-billion-euro ($255-billion) EU-IMF rescue package as Brussels has demanded to approve first Greece’s revised reform plan.

Athens “sought to bring forward” the meeting with Putin owing to “stifling economic conditions caused in the country from the European side,” the daily said on Tuesday.

Upon taking office in January, Tsipras immediately set about trying to renegotiate Greece’s hugely unpopular EU-IMF bailout, while at the same time courting Russia.

Days after he came to power, Greece protested against a European Union statement threatening further sanctions against Russia over the crisis in Ukraine.

The new foreign minister Nikos Kotzias later said that the EU should avoid “spasmodic” moves against Russia.

Embargo exemption

According to local media reports, Athens is seeking an exemption for Greek agricultural products from a retaliatory Russian embargo imposed on EU goods last year.

Greece is still locked in discussions with its European and international creditors about its planned reforms, and Tsipras on Monday said he was confident that a European summit later this week would provide a breakthrough.

Tsipras is also hoping that his first visit as prime minister to Berlin next Monday for talks with German Chancellor Angela Merkel will help Athens’ cause, and calm an ongoing war of words between Greek and German officials.

On Tuesday, Athens said Tsipras has also asked to meet other key actors in the Greek crisis – French President Francois Hollande, EU Commission chief Jean-Claude Juncker and European Central Bank president Mario Draghi – on the sidelines of the EU summit which opens Thursday.

Athens has been scrambling to raise 6.0 billion euros this month for debt repayments, but it has made little progress on persuading the European Central Bank to allow Greek banks to help out by purchasing more state debt.

The ECB is also holding back on 1.9 billion euros in Greek bond profits, until Athens reaches a reform deal with its international creditors.

The debt-wracked country managed on Monday to scrape together over 500 million euros to repay the International Monetary Fund. But it faces another debt deadline Friday when it has to pay over 300 million euros to the IMF, and redeem 1.6 billion euros in treasury bills.

To meet the payments, Athens will auction 1.0 billion euros in three-month treasury bills on Wednesday.

Greece’s staunchest critic, German Finance Minister Wolfgang Schaeuble, warned last week that an unintended and disorderly Greek euro exit or “Grexident” – playing on the popular term “Grexit” for a Greek exit from the euro and an accident – could not be excluded.

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

Timeline

  • 19-20 March: EU summit in Brussels