Feb. 13, 2015
(BRUSSELS) — Greece and its creditors in the 19-country eurozone took visible, if modest, steps Thursday to bridge their differences over Athens’ demands to lighten the load of its bailout, but an imminent deal appears still to be some way off.
Following weeks of haggling, the two sides made a series of encouraging noises at a summit of European Union leaders and even agreed to start technical discussions to inform a meeting of the eurozone’s finance ministers Monday. Investors are hopeful that a deal will be reached to avoid Greece’s exit from the euro — Greece’s main stock market closed about 6.7 percent higher Thursday.
“Europe always has been geared towards finding compromises,” said German Chancellor Angela Merkel. “Compromises are agreed when the advantages outweigh the disadvantages. Germany is ready for this.”
Merkel has faced a barrage of criticism in Greece for being the key cheerleader of the austerity policies that Greek Prime Minister Alexis Tsipras wants to consign to history. The Greek leader came to power last month on a promise to scrap the country’s bailout in favor of a new, lighter program. Despite the tensions surrounding their meeting, the two leaders exchanged warm greetings, holding each other by their elbows, and chatting amiably, if briefly.
Tsipras expressed his hope that a “mutually acceptable” debt deal can be secured next week at the eurogroup meeting and spoke in language that would likely cheer many of the skeptics in the eurozone.
“The Greek delegation will take part in these meetings with crystal clear proposals and we will try and convince, not blackmail, our partners about our proposals,” he said. “Our program will respect European rules …. we will keep balanced budget, respect the fiscal rules of the EU. We don’t want to go back to era of deficits.”
Tsipras also said his government will propose a set of reforms particularly dealing with the “shortcomings of the Greek state” such as corruption and tax evasion.
“The spirit that prevails in the European Union is a spirit of compromise to the benefit of all the parties,” he said.
In essence, the Greek government has said it won’t extend the current bailout program and its associated austerity and wants to negotiate a new bridge program that will tide Greece over the coming months and prevent a damaging exit from the euro. Tsipras and his left-wing Syriza party blame the current policies of budget austerity for choking Greece’s economy.
Despite a recent modest return to growth, the Greek economy is around 25 percent smaller than it was before the crisis and poverty and unemployment have swelled. Greece is lumbered by huge debts, which stand at around 175 percent of GDP, and it has repayments this year that it will have trouble meeting without outside help.
“The transition to a new program is the main subject of our negotiation,” he said. “The medicine that Greece has taken with this fiscal consolidation has devastated this country. This (the bailout) is over, forget it, it no longer exists.”
Without an agreed new program, Greece faces bankruptcy — and a possible exit from the eurozone, a development that would damage Greece’s economy, at least in the short-term, and throw global financial markets into turmoil.
Earlier, Tsipras following a conversation with Jeroen Dijsselbloem, the head of the eurogroup of finance ministers, agreed to allow representatives from his government to meet Friday with those from the European Commission, European Central Bank and International Monetary Fund to discuss technical matters regarding Greece’s current bailout. The findings will inform Monday’s eurogroup meeting, the last scheduled one before Greece’s bailout program expires after Feb. 28.
Dijsselbloem said he hoped, at the very least, that the discussions will clearly illustrate the issues, the extent of the differences between the two sides and “whether we could adjust the current program, put in the new ambitions and ideas of the Greek government, and still have a viable program to work on over the next months.”
However, he sought to downplay expectations that a deal on Monday would be ready to be signed.
“Let me seriously douse your expectations on that point,” he said. “It really will be difficult. We are politically far apart.”
It seems that Europe’s leaders are open to tweaking the policy requirements of the bailout to deal with the new Greek government’s priorities. However, they will want to see offsetting measures to increases in the minimum wage, say.
“A measure that is annulled must be replaced with another that has the same budgetary, fiscal impact,” said Jean-Claude Juncker, the president of the EU’s executive branch, the Commission. “It is on that basis that we will try to find an agreement over the coming days.”
Many of Greece’s European creditors, particularly Germany, are hesitant to give in to Greece too easily for fear of setting a precedent for countries that run up excessive debts. The 240 billion euros (currently $272 billion) in rescue loans Greece is getting come from taxpayers in other countries.
Many analysts think Europe will once again achieve a deal at the last-minute, with Greece agreeing to a bailout extension provided the required budget austerity measures are eased and Greece implements reforms.
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