Brussels, 16/02/2015 (Agence Europe) - After a Eurogroup meeting on Monday 16 February that was supposed to be the last chance, but which ended in failure, eurozone finance ministers demanded that Greece formally request an extension to its bailout programme.
“The best way forward for the Greek authorities would be to seek extension of the current programme”, said head of the Eurogroup, Jeroen Dijsselbloem, adding that if Athens makes a formal request rapidly, then a meeting of the Eurogroup could be held on Friday 20 February. However, it is now up to the Greek authorities to take action, he said. Economic Affairs Commissioner Pierre Moscovici said there was not any alternative to requesting an extension to the programme.
Athens' European lenders say that extending the current bailout programme, which expires at the end of February, would not only make it possible to make use of the still available finance, but would also win some time for negotiating a new contractual relationship. They say that extending the current bailout would provide flexibility for amending the structural adjustment measures that are to be applied in exchange for financial aid.
“There is always some flexibility, measures can be replaced,” said Dijsselbloem. Asked about the scale of such flexibility in budget terms, he said that extending the programme did not allow budget consolidation objectives to be thrown out of the window. Furthermore, precise commitments would be required, such as the requirement that any new measure to replace another measure should be fully financed and validated by the institutional lenders, along with close relations between Athens and its lenders when it comes to surveillance.
Greek finance minister Yanis Varoufakis said that he would have agreed to sign a document that was handed to him earlier by Moscovici. In Varoufakis' view, this document recognised the humanitarian crisis in Greece and stated that the Greek government needed to request an extension to the Greek loan agreement which would lead to a temporary four-month programme, in exchange for which the Greeks would pledge to respect the conditional measures and abstain from taking any unilateral measures. Dijsselbloem is reported to have withdrawn this document ahead of the Eurogroup meeting and replaced it with another that the Greeks found unacceptable. Varoufakis said that he had wanted to know what the flexibility was but had not received a clear answer, adding that nothing good ever came from issuing ultimatums. He said he was confident that within 48 hours Europe would be able to find the necessary elements of language to move forwards.
What would be the difference in terms of content between an extended aid programme and a new programme? “A new programme would not look very different: fiscal sustainability, competitive economy and a stable financial sector. All the above require reforms, some popular, some not so”, Dijsselbloem stated. After talking to the president of the European Council, Donald Tusk, the Dutch finance minister said that Tusk was not planning to convene a eurozone summit after the failure of this Eurogroup meeting. (Mathieu Bion)
Talks open amid ambient pessimism
Upon arrival at Eurogroup on Monday afternoon, several finance ministers hoped that Greece would clarify its real intentions and that the Greek finance minister would formally request a follow-up to the second bailout, which expires at the end of the month. The preference of the European Commission and Athens' lenders is clearly for an extension of the current programme to leave time to negotiate a new contract with Greece by the summer.
“They have to come with a concrete proposal,” commented Latvian minister Janis Reirs. “I don't know yet what their specific requests are. (…) If an extension is asked, some roadblocks may fall.” French finance minister Michel Sapin said a “good solution” that would provide “security” and “time to discuss the new programme” would be to extend the current programme “in conditions that respect the current government.” Euro Commissioner Valdis Dombrovskis made similar noises, saying that an extension to the aid programme by several months or half a year was the “most realistic” option.
Extending the programme would make it possible to use available financial reserves to prevent Greece defaulting on its loans, making it easier for Greek banks to access 'central bank' liquidity and for Europe to ensure that Greece sticks more closely to the structural adjustment programme endorsed by the previous government under Samaras. The new Tsipras government wants to shrug off as many of these constraints as possible, such as achieving a high budget surplus (not including debt repayment costs) or the privatisation programme, which it doesn't agree with. It says that troika technicians (European Commission, ECB and IMF) are not legitimate negotiators for an elected government and says any new contract would have to allow it to carry out the anti-austerity policies it was elected on (such as increasing the minimum wage and providing free energy to people on a low income).
“From what I've heard from the technical discussions, I'm very sceptical” there will be an agreement, said German finance minister Wolfgang Schäuble, regretting that Greece had not changed its position since the last Eurogroup meeting, last Wednesday (see EUROPE 11251). He said he didn't see the end to consider any other options because Greece doesn't want a new programme. Earlier, on German public radio, he said: “My guess is that it's all a big game of poker for this new government,” hinting that the government wanted to shrug off the commitments made by previous governments. Spanish finance minister Luis De Guindos talked about the Greek lenders' “red line” that the €240 billion in loans granted since 2010 have to be paid back in full.
On Monday afternoon, several ministers suggested that nothing would be decided at Eurogroup and there were rumours of a new Eurogroup meeting on Friday 20 February. Slovakian finance minister Peter Kazimir said it was too soon to talk about decisions on Monday evening and Eurogroup would have to meet again later in the week. Michael Noonan said that the idea of new talks on Friday had been mentioned on Monday morning and was a “remote possibility.” Economic Affairs Commissioner Pierre Moscovici, however, felt the meeting on Monday would be “decisive” and would lead to a new phase in relations between Greece and its lenders based on “responsibility and solidarity.” He said there was only one scenario - reaching agreement - and anything else was pure speculation.
On the fringes of the European Summit last Thursday, Greek prime minister Alexis Tsipras and the head of Eurogroup, Jeroen Dijsselbloem, agreed on a process to clear the way at technical level for the political negotiations at Eurogroup (see EUROPE 11252).
The technical talks took place in Brussels on Friday and Saturday, looking at the Greek budget and comparing the measures desired by the Tsipras government with those contained in the structural adjustment programme validated by the Samaras government at the end of 2014. The technicians were in fact the same representatives of the lenders in Athens, now called representatives of the 'institutions' rather than representatives of the 'troika'.
The president of the European Commission, Jean-Claude Juncker, held talks on Sunday with the young Greek prime minister, Alexis Tsipras. (Élodie Lamer and Mathieu Bion)