Senior Greek officials started briefing journalists yesterday that the country will ask for a six month extension of its current loan agreement. This immediately sounded like a massive climb-down from their previous position, in which they rejected all possibility of continuing Greece’s current austere bailout programme.
You’d be forgiven for thinking that an extension of the existing loan agreement meant extending that programme. That’s what Germany wants too, right? So everyone’s in agreement?
The Greek sources that spoke to the WSJ and FT showed that what Greece is now asking for isn’t quite what it seemed initially.
Here’s the WSJ:
The extension of what the officials called Greece’s “loan agreement” could be for a period of four to six months, preventing the country’s current deal with the eurozone from expiring at the end of February and giving it time to negotiate a new bailout…
After talks over how to keep Greece afloat broke down on Monday, eurozone finance ministers set several preconditions for considering an extension.
So far, so promising. A continuation of Greece’s existing deal is what most of Europe seems to want. But it gets a little hazier. This from the WSJ again:
Those requirements include a promise from Greece to not roll back any budget cuts or economic overhauls implemented under the existing bailout deal and to coordinate any new legislation with its creditors. The ministers also want the new government in Athens to pledge that its debts to the eurozone would be repaid in full…
Another problem could arise from the Greek officials’ insistence that they would request an extension only of their “loan agreement” with the eurozone, not of the full bailout, which one of them said contains the “toxic” austerity measures they don’t want to implement.
Ah. A little less promising, maybe. Athens demands a loan without the existing austerity conditions. The rest of the eurozone rejects this out of hand, and has been pretty united in doing so up to now.
Here’s the FT:
“We will ask for an extension of the current bailout agreement within the framework of the Moscovici plan,” said a senior cabinet minister.
According to officials involved in the discussions, the plan would allow Athens to extend its bailout for four months beyond its expiry date of February 28 in exchange for agreeing to a series of principles. Greece would not roll back economic reforms; it would continue to run a primary budget surplus; it would pledge to pay its creditors in full. In exchange, Athens would be given leeway in deciding which reforms it would agree to.
That’s a plan by former French finance minister Pierre Moscovici, who’s now economic and financial commissioner for the EU. Greece preferred his plan, but it wasn’t acceptable to the eurogroup of finance ministers, who will ultimately call the shots on this.
In short, Greece and Europe are no closer to a deal than they were on Monday when other eurozone finance ministers rejected Moscovici’s plan, or the Wednesday before that when they were split over exactly the same issue.
The difference between the “bridging loan” that Greek finance minister Yanis Varoufakis wanted last week and the “extension of the current bailout agreement within the framework of the Moscovici plan” is semantic to Europe’s hardliners. The bailout agreement is not up for negotiation: Greece can extend it, with all of its conditions, or it can go it alone.
Greece and Europe may be closer to a new deal than it appears, but it seems extremely unlikely that this is it.