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Euro zone may need extra summit to clinch Greek deal | ASHARQ AL-AWSAT English Archive 2005 -2017
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A Greek and a European flag flutter outside the Greek embassy in Brussels on February 19, 2015. (Reuters/Yves Herman)

A Greek and a European flag flutter outside the Greek embassy in Brussels on February 19, 2015. (Reuters/Yves Herman)

A Greek and a European flag flutter outside the Greek embassy in Brussels on February 19, 2015. (Reuters/Yves Herman)

Brussels and Athens, Reuters—Euro zone finance ministers will try again on Friday to break a deadlock over Greece’s urgent need for further financing but it may take an emergency summit of the currency bloc in the coming week to clinch any deal.

With EU paymaster Germany and the new radical leftist-led government in Athens digging their heels in over demands that Greece stick to strict austerity conditions in its international bailout program, the two sides seemed far apart hours before a crucial Eurogroup meeting in Brussels.

The 240 billion euro bailout expires at the end of this month and Greece could run out of money by the end of March without new external funds, people familiar with the figures say, driving it nearer to the euro zone exit.

“The Greek government has done all it should at every level in an effort to find a mutually beneficial solution,” government spokesman Gabriel Sakellaridis told Mega TV.
“We are not discussing the continuation of the (bailout) program,” he said. “The Greek government will maintain this stance today, although conditions have matured for a solution to be found at last.”

Germany rejected a Greek letter on Thursday requesting an extension of its loan agreement from the euro zone as a “Trojan Horse”, deceptively designed to enable Athens to dodge past commitments to austerity measures and economic reforms.

Greek Prime Minister Alexis Tsipras, elected last month on a platform of scrapping the bailout, says austerity has strangled his country’s economy and caused a humanitarian crisis.

Diplomatic efforts to avert a breakdown that could cause turmoil in world financial markets intensified, with German Chancellor Angela Merkel and Tsipras holding their first substantive telephone call on Thursday, when they spoke for 50 minutes.

French President Francois Hollande, one of several EU leaders trying to mediate, told Tsipras he would work on Merkel when they meet in Paris on Friday, a Greek official said.

US Treasury Secretary Jack Lew weighed in to urge compromise in calls to his Greek, Dutch and French counterparts.

Washington, sympathetic to Greek demands for an easing of austerity, is worried that a breakdown in talks could affect an already weak global economy.

The German member of the European Commission, Guenther Oettinger, said he believed Greece and its creditors should be able to reach a deal but it might take another meeting of euro zone leaders next week.

“We are working so that Greece stays in the euro zone,” Oettinger told Deutschlandfunk radio. “On this basis I think an agreement will still be possible in the next eight days—if necessary via a further meeting of government leaders.”

Oettinger is a member of Merkel’s conservative Christian Democratic party and talks to her regularly.

Eurogroup chairman Jeroen Dijsselbloem has said this Friday is the deadline for Greece to reach a deal since any extension or change to the bailout agreement that expires on February 28 would have to be approved by several national parliaments.

However, EU deadlines often slip and Merkel has in the past agreed financial rescues only at the very last moment when she could tell Germans the future of the euro zone was at risk.

Berlin is Greece’s biggest creditor, owed 50 billion euros as its share of the EU/IMF bailouts. As Europe’s biggest economy, it would take a hit in the turmoil that might ensue if Greece defaulted and left the euro area.

However, whether for tactical reasons or out of deep exasperation with Athens, Berlin has conveyed the message that a Greek exit, while not desirable, would be manageable.

German Finance Minister Wolfgang Schaeuble, who has taken the hardest line, has pointed to calm on world markets this week.

European shares inched up on Friday, trading close to Thursday’s seven-year high, but borrowing costs for peripheral euro zone governments also rose in a sign of uncertainty about the outcome with Greece.

Senior euro zone officials worked late into Thursday evening to draft a statement for the finance ministers but it was not clear whether Greek Finance Minister Yanis Varoufakis would sign up to it. The text was being kept under wraps after previous documents were widely leaked.

Varoufakis rejected a Eurogroup text on Monday that explicitly called for an extension of the bailout and completion of the program.

Greek officials have sought to convince the public at home that they are fighting hard in the national interest and rejecting austerity, accusing past governments of bowing to Berlin.

“Have you seen any other Greek government negotiating in such a tough and effective way in Europe in the last five years, a government that has caused rifts within the German government itself?” Deputy Labour Minister Dimitris Stratoulis told Greek television, saying the preparatory talks had brought “some light, an air of optimism.”

Greek savers have continued to withdraw their money from the banks at an accelerating pace due to the uncertainty, despite government assurances that there is no plan to introduce capital controls to stem the outflows.

Deposit outflows picked up on Wednesday and Thursday to levels seen during January when an estimated 12 billion euros left the system, one banker told Reuters, speaking on condition of anonymity.

The banker said outflows topped 500 million euros in each of the two last days, with Greeks nervous ahead of a three-day weekend with memories of the way capital controls were imposed in Cyprus in 2013. Monday is a market holiday in Greece.