Home News Greece, Germany face off in last-chance debt talks

Greece, Germany face off in last-chance debt talks

Published on 20/02/2015

Germany and Greece face off at yet another eurozone meeting Friday in search of a last-minute bailout compromise, with Berlin insisting Athens accept continued austerity in return for fresh debt aid.

After days of sharp exchanges, the 19 eurozone finance ministers gather for the third time in little over a week to consider a take-it or leave-it proposal by Athens seeking the extension of an EU loan programme which expires this month.

Europe’s paymaster Germany initially rejected the request out of hand, denting hopes of a deal.

But a lengthy phone call between Greek Prime Minister Alexis Tspiras and German Chancellor Angela Merkel late Thursday appeared to calm the waters.

The conversation was “aimed at finding a mutually beneficial solution for Greece and the eurozone,” a Greek government source said, adding that it took place in a “positive climate”.

And Berlin said Friday the Greek request offered a “starting point” for further talks.

The Merkel-Tsipras call came after a Greek government source released a document said to outline Berlin’s defiant stance at official-level talks Thursday.

The Greek proposal “is not clear at all… It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current programme,” the German statement said, according to the source.

“On this basis it makes no sense to start drafting a Eurogroup statement on Friday.” it added.

Greece, whose new government is vehemently opposed to austerity measures demanded in the bailout deal, denied it had made any U-turns.

“We have not abandoned our red lines,” government spokesman Gabriel Sakellaridis told Greek television.

Financial markets were calm, reassured to some extent by the Tsipras-Merkel exchange while keeping a close eye on the finance ministers’ meeting due to start at 1400 GMT.

– Personality clash –

Time is pressing to find a solution before the current bailout programme ends, for fear that failure could see Greece run out of money and be forced out of the eurozone within weeks.

Analysts cautiously downplay the likelihood of a “Grexit”, saying the eurozone is much stronger now than at the height of the debt crisis in 2011-12.

But the uncertainty weighs heavily at a time when the economy has faltered and governments are desperate to boost growth.

A top European official said the stand-off had come down to a clash of personalities with German Finance Minister Wolfgang Schaeuble furious at the negotiating style of his Greek counterpart, the casual and fast-talking Yanis Varoufakis.

“There is a real problem of personalities and I understand that Schaeuble is outraged by comments made by Varoufakis,” the official said.

The issues go beyond personalities, however, and echo a divisive debate in the European Union over whether the austerity policies adopted to cope with the debt crisis have done more harm than good.

For Germany, fiscal discipline and tight spending controls are the only basis for the sustainable growth needed to deliver much-needed jobs.

For France and Italy, led by left wing governments, easing up on austerity is essential to give them the leeway to borrow to boost growth.

– Greek concessions –

In its request Thursday, Greece offered some major concessions including a return, if not in name, of the hated “troika” mission of creditors that has overseen Athens’s finances through two bailouts.

But stung by Schaeuble’s rejection, Athens said its request was final and that the EU had “just two choices. To accept or reject the Greek request.”

Tsipras insists he can satisfy both the demands of Greece’s partners and meet a promise to voters to end the detested austerity conditions which he says destroyed the economy.

“The government… is not asking for an extension to the memorandum,” an official source in Athens said, referring to the reform agreement between Greece and the troika — the EU, European Central Bank and International Monetary Fund creditors.

Instead, it wants an extension to the loan part of the mammoth 240-billion-euro ($270-billion) rescue in 2010 that came with commitments to push through austerity and deep reforms.

Until now, opponents led by Germany say this distinction is unacceptable and Greece has to accept the austerity commitments of the full programme.

Ireland and Portugal, fresh from their own painful bailouts, have little sympathy for Athens after they had no option but to take their austerity medicine.

“There is a framework within which we are prepared to talk to the Greek government. That framework is the current aid programme,” Portuguese Finance Minister Maria Luis Albuquerque told German business daily Handelsblatt.

“We are not prepared to talk under any other conditions.”