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EU blow hot and cold in Greek crisis

Written by Business World, on 17th Feb 2015. Posted in Economy

article headlineEU Union finance ministers wielded enticements and veiled threats today to press Greece to stay in an international bailout as financial markets slipped on fears of disruption if Athens' credit lines expire in 10 days time. However, the euro recovered from a dip that followed the acrimonious breakdown of talks on Monday night, as investors took the view that both sides would climb back from the brink. If there is no deal on further financing this month, Greece could face a bank meltdown and run out of money as early as March, possibly becoming the first country to leave the euro zone or issue a parallel currency. French Finance Minister Michel Sapin aired a compromise plan to let Greece run a smaller budget surplus and said reaching a deal was largely a matter of phraseology, since there was consensus that there would be no write-off of Greek debt. "It's a problem of wording, although the legal tool cannot be anything else than an extension of the (bailout) programme," he told reporters. Greek Finance Minister Yanis Varoufakis, who stayed in Brussels for a routine EU finance ministers' meeting on other issues, dismissed the argument that his only option was to ask them to extend a bailout his government was elected to scrap. "We will continue to deliberate, in order to enhance the chances and actually achieve a very good outcome for the average European," Varoufakis said, pledging an "honourable solution". Deputy foreign minister Nikos Chountis voiced "cautious optimism". But with impatience between seasoned Eurocrats and the radical novices from Athens mounting, he slammed the EU for sticking to its key demand: "We don't accept blackmail proposals, ultimatums about extending the bailout." Jeroen Dijsselbloem, the Dutch finance minister who chairs the Eurogroup of 19 countries using the common currency, stuck to his guns, saying Athens must seek an extension: "It's really up to the Greeks. We cannot make them or ask them. We stand ready to work with them, also (over) the next couple of days." Varoufakis's talk of "honour" reflects how far arguments are partly about semantics, important to both sides as they try to save political face. But some of his partners accused the new government of failing to grasp the gravity of the situation or put forward coherent proposals in writing. "It is troublesome that Greece has twice explained its goals orally, but no written presentation has been given yet," said Finnish Prime Minister Antti Rinne, one of the euro zone hawks. Time is running short and investors marked down Greek stocks and bonds after Monday's debacle, some saying the risk of Greece exiting the euro had risen. Three-year government bond yields rose more than a point to 19 percent, highlighting how far Athens remains unable to fund itself at manageable interest rates on the markets. "The Greek government must shift its position," Austrian Finance Minister Hans Joerg Schelling said. "Time is pressing." Dijsselbloem has said Friday is a deadline for a deal that would allow time for some national parliaments to ratify it before the expiry on Feb. 28 of the 240 billion euro credit package that rescued Greece from bankruptcy three years ago. From Britain, the biggest EU state not using the euro, finance minister George Osborne said "we're reaching crunch time for Greece and the euro zone" and warned failure to reach a deal would be "very severe for economic and financial stability". In Greece, however, novice Prime Minister Alexis Tsipras and his team continue to enjoy strong public backing after years of cutbacks demanded by international creditors. Much of the media reported Varoufakis's angry narrative of events on Monday. The Greek minister said that Dijsselbloem, a close ally of hawkish German Finance Minister Wolfgang Schaeuble, had quashed a proposal from EU economics commissioner Pierre Moscovici that Varoufakis had been willing to accept. "Yielding to Schaeuble and circumventing Moscovici's draft, which Athens was ready to sign, the Eurogroup blackmails Greece with an extension," Greek daily Efimerida Ton Syntakton said. Dijsselbloem dismissed the uproar over conflicting drafts leaked by the Greek delegation. Wording could be massaged to assuage political sensitivities, he said, but that ultimately Greece must seek funds with strings attached. Moscovici also denied any divisions among Greece's partners, saying there had been no "good cop, bad cop" strategy in the floating of various draft agreements. "We are all united, we all think a solution is possible," he said. "There is no Plan B." Money is streaming out of Greek banks and Greeks are holding off paying their taxes, adding to pressure on public finances and the banking sector if international money dries up. The European Central Bank's governing council will review on Wednesday how long it can continue emergency funding for Greek banks after it stopped accepting Greek government bonds as collateral earlier this month. A failure of the debt talks could lead to the imposition of capital controls. Austria's Schelling said the EU was waiting for figures on cashflows from Greece to make decisions. While insisting he saw no Greek exit from the euro, he echoed EU complaints that Athens may not be taking the situation seriously enough. "We are ready for a dialogue," he said. "But for that you need a partner who is willing and able to have this dialogue." The Greek government says it is others who are deaf to its view that austerity has spread poverty and wrecked its economy. Investment bank Barclays said the breakdown of talks had raised the risk that Greece would leave the euro zone and raised the prospect that Tsipras would have to call a referendum on whether to accept a deal with strings or ditch the euro. (Reuters) For more visit www.businessworld.ie

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