Greece Will Repay ECB, IMF, Reach Deal With EU, Tsipras Says

by Nikolaos Chrysoloras
5:40 AM PST
January 31, 2015


(Bloomberg) — Greek Prime Minister Alexis Tsipras sought to repair relations with creditors after a week-long selloff in bonds and stocks, triggered by his pledge to end the country’s bailout agreement.
Greece will repay its debts to the European Central Bank and the International Monetary Fund and reach a deal “soon” with the euro-area nations that funded most of the country’s financial rescue, Tsipras said in a statement e-mailed to Bloomberg News on Saturday.
“The deliberation with our European partners has just begun,” Tsipras said. “Despite the fact that there are differences in perspective, I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole.”
Bond yields surged on Friday after Finance Minister Yanis Varoufakis said the six-day-old government will turn its back on the rescue program that has allowed Greece to pay pensions and public wages for the past five years in exchange for a punishing regime of spending cuts that wiped out 25 percent of its economy.
“Europe will continue to show solidarity with Greece, as well as other countries particularly affected by the crisis, if these countries undertake their own reforms and savings efforts,” German chancellor Angela Merkel said in an interview with Hamburger Abendblatt.
Tsipras however is asking the euro area to accept a writedown of Greece’s debt to allow an alternative program with more public spending to revive the economy.
Diplomatic Push
“We need time to breathe and create our own medium-term recovery program, which amongst other things will incorporate the targets of primary balanced budgets and radical reforms to address the issues of tax evasion, corruption and clientelistic policies,” he said.
The diplomatic effort continues next week with Tsipras traveling to Cyprus on Monday to meet President Nicos Anastasiades before talks with Italy’s Matteo Renzi and France’s Francois Hollande on the following days. He’s so far not scheduled to meet Merkel, the biggest contributor to Greece’s bailout, until the European Union summit in Brussels on Feb. 12.

A spokesman for French Finance Minister Michel Sapin, who meets Varoufakis on Sunday, declined to comment on the statement.
The standoff triggered by Tsipras’s Jan. 25 election victory could see Greek banks effectively excluded from ECB liquidity operations leaving the government with no source of funding, having rejected European aid while still shut out of international markets. Outgoing Prime Minister Antonis Samaras said last month the government may run short of financing as early as March.
Bonds Tumble
At the moment, Greece has a special dispensation from the ECB because it’s complying with a bailout program. That means its debt can be used in central bank refinancing operations even though it is rated junk.
“There will be no surprises if we find out that a country is below that rating and there’s no longer a program that that waiver disappears,” ECB Vice President Vitor Constancio said at an event in Cambridge, England, on Saturday.
Greek bonds tumbled, with the yield on three-year government debt rising 187 basis points to 19.15 percent. Bank stocks fell 1.6 percent following Varoufakis’s statement after gaining as much as 9.5 percent in early trading.
Tsipras met Jeroen Dijsselbloem, chair of the euro area finance ministers’ group, on Friday in Athens, for about half an hour before the Dutch minister had more extensive talks with Varoufakis.
‘Constructive Meetings’
Euro-area governments are “committed to providing support for Greece during the life of the program and beyond until it has regained market access, provided Greece fully complies with the requirements and the objectives of the program,” Dijsselbloem said at a press conference afterward. “I had several constructive meetings and talks with the members of the new Greek government.”
“In diplomatic parlance, they say that talks were constructive and honest when they have ended in disagreement,” European Parliament President Martin Schulz said after his meeting with Tsipras on Thursday.
Still, the government also took the steps in rolling back the austerity program the euro area demanded as a condition of its support. Tsipras asked for the resignation of Emmanuel Kondylis, chairman of the fund overseeing the country’s privatization program, and Paschalis Bouhoris, the chief executive officer, a spokeswoman for the fund said late Friday.
‘Outside Reality’
Dijsselbloem said euro-area ministers will decide what to do once the Greek program ends before its Feb. 28 expiry date.
German Finance Ministry spokesman Martin Jaeger said earlier on Friday that Greece’s demand for a writedown is “outside reality” and the financial lifeline that has kept the country afloat since 2010 will expire unless Tsipras shows a “clear willingness” to meet the country’s existing agreements.
“The announcements from Athens are so far going in the opposite direction,” Jaeger told reporters in Berlin.
To contact the reporter on this story: Nikos Chrysoloras in Athens at
To contact the editors responsible for this story: Vidya Root at Ben Sills, Paul Abelsky

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