Greece Rejects Extension of Bailout Under Terms Offered by Eurozone Finance Ministers
BRUSSELS—Talks among eurozone finance ministers over a new financing arrangement for Greece broke down abruptly Monday, demonstrating a wide gulf between Athens and its official creditors and triggering a period of heightened uncertainty about the country’s future inside the currency bloc.
The breakdown came after Greece rejected an extension of its current €240 billion ($272 billion) bailout program under the conditions being offered by other ministers, even after warnings that the country’s financial situation is deteriorating rapidly.
Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, oppose the terms of that rescue deal, which expires at the end of the month, saying they are hurting its economy and society.
If the bailout ends without some kind of new accord in place with the eurozone, the new left-wing Greek government will lose access to the rescue loans that have sustained it for almost five years, potentially leaving it unable to make debt repayments looming in March. That could, in the worst case, trigger a series of events that would force Greece out of the eurozone.
“The general feeling [among ministers] is still that the best way forward would be for the Greek authorities to seek an extension of the current program,” said Jeroen Dijsselbloem, the Dutch minister who presides over the regular meetings with his counterparts. “We simply need more time,” he added.
After the meeting, Mr. Varoufakis said he had been ready to request a four-month extension to the existing bailout, but not under the conditions that Mr. Dijsselbloem and the other ministers were offering. “Our only condition for doing this was that we should not be asked to impose measures that are clearly recessionary and clearly uncalled for in the state of humanitarian crisis we have in Greece,” he said.
In particular, Mr. Varoufakis said, he was unwilling to accept further reductions to the pension of low-income retirees and an increase in the value-added tax.
The rupture between Greece and the rest of the eurozone is a question of hard financial figures—but the confrontation has also exposed a deep cultural rift between the two sides.
The Greek government, led by the far-left Syriza party following a landslide election victory last month, has brought a confrontational style to the rule-bound and clubby meetings of eurozone finance ministers, not apparent even in the depths of the bloc’s financial crisis. It also, according to European officials, appears ready to court serious risks that other bailout recipients have shied away from.
“It’s not a bluff, because it’s the only option we have,” Mr. Varoufakis said of his government’s position after the meeting. “It’s plan A, there is no plan B.”
During the meeting, ministers and other officials tried to convince Greece that the risks of leaving its rescue program behind without a new financing deal are too big. Mario Draghi , the president of the European Central Bank, warned ministers that the situation of Greece’s banks was deteriorating, as citizens and businesses withdraw deposits and economic growth slows, according to an official present at Monday’s talks.
The official said that Mr. Draghi didn’t say when the ECB may cut off liquidity support from Greece’s own central bank, but “it was clear from what he said that this is becoming an issue.”
Ministers from several countries, meanwhile, complained that Greece had failed to show what steps it was prepared to take in return for continued aid, the official said.
As ministers were holding talks in Brussels, they received press reports of Greek officials in Athens rejecting a statement that had been prepared by Mr. Dijsselbloem earlier in the day. The statement committed Greece to seeking a six-month extension to its bailout deal, but giving it some leeway on the budget cuts and economic reforms it has to implement in return.
Greek officials in Athens called the proposals “absurd and unacceptable,” adding that “there can be no agreement [on new financing] today.”
“That contributed to the [already negative] atmosphere,” said the official present at the Brussels talks. Shortly after, ministers decided to end the meeting.
In a news conference, Mr. Dijsselbloem said finance ministers were ready to hold another round of talks Friday, provided that the Greek government commits to a number of principles set out by the ministers.
Those principles included a promise by the Greek government not to roll back unilaterally already-implemented budget cuts and reform measures and to take any new measures only in coordination with the European institutions and International Monetary Fund. The government must also commit to repay all creditors, ensure the stability of the country’s financial sector—and conclude its existing bailout program.
As he left the building, Malta’s finance minister, offered a gloomy summary of Monday’s talks. Without an extension, “there won’t be anything,” said Edward Scicluna. “It would be a disaster.”
source:wsj.com
STUDIO 3 NEWCASTLE AUSTRALIA 