Brussels, 12/02/2015 (Agence Europe) - Focusing on convergent ideas as the first stage was what was agreed upon on Thursday 12 February between the head of Eurogroup, Jeroen Dijsselbloem, and the Greek prime minister, Alexis Tsipras.
Tsipras was in Brussels for his baptism of fire so they didn't get down to negotiating as such, explained Donald Tusk (who chairs the summits) after the European Council meeting.
The decision to lay down a common basis was taken during a bilateral meeting with Dijsselbloem, the day after a failed Eurogroup meeting which two finance ministers had left, firmly believing that there had been a convergence of views on a joint statement, but then a telephone call by the Greek finance minister with Athens put paid to what had been achieved in six hours of talks (see EUROPE 11251). Tsipras said the Greek government had taken the collective decision not to sign the draft statement.
This bilateral meeting was backed by the president of the European Commission, Jean-Claude Juncker, who said on his arrival at the Summit that he was concerned, but a number of sources agreed that the big countries had all been consulted. When he left the Summit, Dijsselbloem said that Tsipras and he had agreed “to ask the institutions to engage with the Greek authorities to start work on a technical assessment of the common ground between the current programme and the Greek government's plans, in order to facilitate the discussions in Eurogroup on Monday February 16.” Dijsselbloem added “I am very cautious on the political side. It is going to be very difficult. It is going to take time. Don't get your hopes up yet.”
The Greek government explained several times that around 70% of the structural adjustment programme contained reforms that it could undertake. After the Summit, Juncker said they would have to see what can be done for the 30% where there is divergence, suggesting that any cancelled measure should be replaced by a new measure that produces the same effect in budgetary terms.
“I explained directly that we disagree with the rules that provoke austerity but are definitely obliged to stick to our obligations and stick to the rules,” explained Alexis Tsipras. A Greek government source explained on Thursday morning: “The basic difficulty is whether the basis for the discussion is the previous programme, agreed or not. We're looking for a new programme, we were elected with a mandate for a new programme to keep on with the previous one. These particular conditionalities have been rejected by the Greek people.” The source added: “We are a fresh government - insisting that the previous programme should be implemented is like saying that elections do not matter.”
Pointing out that Greece has a primary budget surplus, the French president, François Hollande, highlighted the structural reforms (such as reform of the civil service and tightening up tax controls) promoted by Alexis Tsipras.
One of the points that Greece wants to be changed is the target of a primary surplus of 4.5% of GDP in 2016 and beyond. “Could somebody please convince me that it's workable that Greece under any government could produce a primary surplus of 4.5%?” said the government source, but promised that there would be fiscal discipline.
Alexis Tsipras said “the old programme and its very stringent austerity, that's over. Forget it, the troika no longer exists, the MoU programme no longer exists”, but he said he was prepared to talk with the European Commission, the European Central Bank and the International Monetary Fund. The source explained that what the government refuses to go along with is dealing with technocrats.
It is difficult to imagine at this stage that Greece would agree to an extension to the current programme, which is what the eurozone recommends. The German chancellor, Angela Merkel, said she would be happy to receive requests for prolongation and if this programme were met, she would be happy. The above Greek government source said that Greeks don't want a new loan. She said that the profits that are to be handed over by the ECB on the Greek bonds that it owns (some €1.9 billion) was “not a loan, but just money”. In the meantime, Athens would ask for the increase of around €10 billion in the upper limit on the treasury bonds that Greece can issue.
Finally, Greece wants to be able to access some €10 billion that have been earmarked for stabilising the banking sector. The government source says this amount is already a burden for the public debt. A eurozone source said, however, that in order to access the €10 billion, Greece's national bank would have to prove that Greek banks do not need it and DG Competition at the European Commission would have to give the go-ahead, followed by the European Financial Stability Fund.
On Thursday, the ECB decided to raise to €65 billion the cap on emergency liquidity assistance (ELA) available for Greek banks. Greece doesn't want the final aid instalment from the EFSF. “Yes, we are able to fund ourselves, our needs are manageable,” said the Greek government source.
After this bridging funding that will last until September or so, Tsipras said Greece will begin a new “social contract for growth” with the eurozone. Asked how this programme would be funded, the source simply said the budget would be in balance. The government's budget surplus stood at €443 million in January, compared with the target of €1.37 billion. (Elodie Lamer with MD, EH, LC, MB, IL, AN)