After awarm-up last week, Monday’s eurogroup meeting is going to have a huge impact on Greece’s financial future.
It’s looking grim so far. A Greek government official reportedly said that no agreement is possible.
The country has just about three weeks of cash left. Tax revenues have plunged and the country’s bailout officially terminates at the end of February. What’s more, the European Central Bank says that the emergency assistance currently being provided to Greece’s banks is tied to that bailout deal.
A failure to reach a deal could mean both crises both for Greece’s public finances and its already-shattered banking system. A banking collapse could lead to an exit from the euro (Grexit) without European assistance. The stakes are high.
Given that, Greek finance minister Yanis Varoufakis wants a bridging loan to tide Greece over for the next six months or so. Unlike the existing bailout, Varoufakis says he will not accept demands for economic reforms, austerity, and privatisation attached to the loan. He wants to negotiate those things after the Greek public finances get some temporary relief.
Varoufakis has an op-ed in the New York Times today titled “No Time for Games in Europe,” and it’s not very encouraging as far as getting a deal is concerned. Here’s the most important bit:
I am often asked: What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution? Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed.
And German finance minister Wolfgang Schaeuble says that what he’s heard so far about the negotiating positions does not make him optimistic, and that he doesn’t have to think about the options for Greece because, as things stand, the government doesn’t want to continue its bailout programme.
Both sides seem pretty set in stone and aren’t very close to each other.
In the long run, Syriza (the party that just won Greece’s election) wants major reductions in Greece’s debt burden. Support is running high for the government’s stance: Support for the party has climbed significantly since the election and 72% of Greeks back PM Alexis Tsipras’ position.
When they met previously the finance ministers almost agreed to this provisional deal on an extension of international funding for Greece, and the beginning of negotiations over new reform programmes. According to the FT’s Peter Spiegel, Varoufakis had agreed to that deal but it was torpedoed by Athens at the last minute.
Whether they will have any more luck today is anyone’s guess. Ministers like Germany’s Wolfgang Schaeuble have signalled little room to budge, and Greece’s new position seems incompatible with the rest of the eurozone. But at the same time, no government really wants to see Greece leave the euro.
Here’s where everyone stands so far:
- According to Reuters Schaeuble says he’s “very sceptical” of the discussions, which is not a good omen. Germany holds a lot of Greece’s debt and has significant clout in these sort of negotiations.
- Varoufakis has been similarly undiplomatic. On Friday he compared the current austerity programme to being waterboarded. He’s repeatedly stressed that the Greek government will not accept any continuation of the existing bailout.
- The European Commission were reportedly working on a new package for Greece last week, but a senior official also reportedly said that the “Greeks are digging their own graves“. So, mixed signals from Brussels.
- French finance minister Michel Sapin seems to be trying to find some middle ground, saying both that a negotiation over debt is needed but that Greece needs to respect European rules.
- But the Financial Times suggests even peripheral countries with their own austerity, like Ireland and Portugal are unlikely to split the difference with Greece’s new government. Finance ministers from other countries don’t want to come off as too lenient towards (or too much like) Greece.
The FT’s own reporting makes the chances of a deal sound pretty slim. Here’s a snippet:
People involved in the preparatory discussions, which were intended to define and compare respective positions, said Athens raised far more objections to the existing bailout conditions than the 30 per cent cited publicly by Mr Varoufakis in the past.
Such big differences make the likelihood of reaching a deal on extending Greece’s current €172bn bailout — which expires at the end of February — even more remote. Those involved in the talks said they were braced for a difficult week.
It’s not clear what time there’ll be any official announcements from the meeting, which kicked off at 2 p.m. GMT (9 a.m. ET).