Greek finance minister enters euro zone lions’ den

Eurogroup President Dijsselbloem looks at Greek Finance Minister Varoufakis and IMF Managing Director Lagarde during an extraordinary euro zone Finance Ministers meeting in Brussels
BY COSTAS PITAS AND INGRID MELANDER
ATHENS/BRUSSELS Wed Feb 11, 2015 5:04pm EST

Eurogroup President Jeroen Dijsselbloem (L) looks at Greek Finance Minister Yanis Varoufakis (C) and International Monetary Fund (IMF) Managing Director Christine Lagarde (R) during an extraordinary euro zone Finance Ministers meeting to discuss Athens’ plans to reverse austerity measures agreed as part of its bailout, in Brussels February 11, 2015. REUTERS-Yves Herman
1 OF 9. Eurogroup President Jeroen Dijsselbloem (L) looks at Greek Finance Minister Yanis Varoufakis (C) and International Monetary Fund (IMF) Managing Director Christine Lagarde (R) during an extraordinary euro zone Finance Ministers meeting to discuss Athens’ plans to reverse austerity measures agreed as part of its bailout, in Brussels February 11, 2015
(Reuters) – Greek Finance Minister Yanis Varoufakis began tense talks with euro zone finance ministers on Wednesday after his new leftist-led government won a parliamentary confidence vote for its refusal to extend an international bailout.

The former academic said before leaving Athens he was ready for a clash with euro zone paymaster Germany and its allies over Greece’s decision to scrap austerity measures, end cooperation with the “troika” of EU/ECB/IMF officials overseeing its bailout program and demand a “haircut” reducing its debt burden.

“If a debt can no longer be paid off then that leads to a haircut,” Varoufakis told German magazine Stern in an interview released on Wednesday. “What is critical is that Greece’s debt cannot be paid off in the near future.”

German Finance Minister Wolfgang Schaeuble has said that if Greece is not willing to request an extension of its 240 billion euro bailout — the biggest in financial history — “then that’s it”, ruling out further assistance or debt forgiveness.

Euro zone ministers said they wanted to hear Greece’s ideas at a meeting in Brussels, at which Varoufakis was accompanied by Deputy Prime Minister Yanis Dragasakis. Athens’s partners warned that time was short since the bailout program expires at the end of this month with no solution in sight so far.

Spanish Finance Minister Luis de Guindos, whose country avoided a sovereign bailout but had to take EU aid to rescue its banks, spelt out the hard line. “Rules must be respected by all. They apply to all,” he told reporters on arrival.

Varoufakis had a prior meeting with International Monetary Fund chief Christine Lagarde, which both said was constructive. Lagarde flew to Brussels to join the Euro Group meeting in a sign of the importance the IMF attaches to the Greek crisis.

“They are competent, intelligent, they’ve thought about their issues. We have to listen to them, we are starting to work together and it is a process that is starting and is going to last a certain time,” she told reporters.

In Athens, a Greek official said Varoufakis had discussed with Lagarde and the Euro Group’s Dutch head Jeroen Dijsselbloem some form of “bridge agreement” for funding the state once the current bailout deal expires at the end of the month.

Greek bond yields rose and shares fell before the meeting, with investors concerned that failure to reach a deal in the next couple of weeks could lead to a possible Greek default and exit from the euro currency.

Asked whether a so-called “Grexit” was on the cards, Varoufakis told reporters on arrival: “Absolutely not.”

Meeting his counterparts collectively for the first time, he worked the room before talks started, shaking hands first with Schaeuble, then others. Varoufakis looking relaxed in a designer-label checked scarf and his trademark open-neck shirt.

EU sources said some ministers were surprised that the informal tone extended to him not offering a written document outlining proposals. Varoufakis simply made oral statements.

Economists polled by Reuters this week estimated a one in four chance of Greece leaving the 19-nation single currency area this year — the highest reading since the start of the Greek debt crisis in late 2009.

Most analysts said the odds were on an agreement between Greece and the euro zone emerging later this month after lots of sound and fury.

“We think that the European community and Greek authorities will reach a compromise such that there will not be an exit of Greece from the euro zone,” James McCormack, Global Head of Sovereign and Supranational Group at credit ratings agency Fitch Ratings, told Reuters.

European Union leaders will take up the issue at their first summit with Greek Prime Minister Alexis Tsipras on Thursday. EU officials said they would be briefed on the talks but there would be no room for debt negotiation at a summit mostly devoted to the Ukraine-Russia conflict, fighting terrorism and longer-term reform of the euro zone’s governance.

EU officials said a second Eurogroup meeting next Monday was likely to be the venue for the real negotiation.

DEFIANT TONE

Tsipras, 40, struck a defiant tone in parliament late on Tuesday, saying that “little Greece” was changing Europe by casting off austerity.

“We are not negotiating the bailout; it was canceled by its own failure,” the leader of the hard left Syriza party declared before winning the confidence vote with the backing of 162 lawmakers in the 300-seat chamber.

At least 10,000 Greeks took to the streets of Athens and other cities on Wednesday to demonstrate support for his government in the Brussels negotiations. Smaller leftist satellite rallies were planned in Brussels, outside the European Central Bank in Frankfurt and in London.

Protesters outside parliament in central Athens unfurled banners proclaiming “Bankrupt but Free” and “Stop Austerity”.

Tsipras tweeted a picture of the rally, with the message: “In the cities of Greece and Europe the people are fighting the negotiation battle. They are our strength.”

Earlier, he agreed to work on reforms with the Organisation for Economic Cooperation and Development, a Paris-based inter-governmental think-tank, but said they would not be imposed from outside.

OECD chief Angel Gurria appeared to endorse Tsipras’s criticisms of the current bailout program after they met in Athens, saying it had produced low growth, high unemployment, rising inequality and a loss of trust.

DEBT SWAP?

Varoufakis has proposed a six-month transition in which Greece would be allowed to issue more short-term debt, receive the proceeds of ECB holdings of Greek bonds and tap unused bank rescue funds while renegotiating its debt. Athens would swap its euro zone loans for GDP-linked bonds and its ECB-held debt for interest-bearing perpetual bonds with no reimbursement date.

EU officials have said the most Greece can expect is a further extension of the repayment deadline for its euro zone loans, a lower interest rate and perhaps a prolonged moratorium on debt service payments, in return for continued reforms under some form of external supervision.

Austria’s finance minister, Hans Joerg Schelling, said he thought a solution could be reached by the end of February if Greece wanted, otherwise things would enter a “critical phase” that could cause turmoil on financial markets.

(Additional reporting by Lefteris Papadimas, Angeliki Koutantou, Jeremy Gaunt and Deepa Babington in Athens, Caroline Copley in Berlin and Foo Yun Chee, Robin Emmott, Renee Maltezou, Tom Koerkemeier, Jan Strupczewski, Barbara Lewis, Adrian Croft, Philip Blenkinsop and Alastair Macdonald in Brussels; Writing by Paul Taylor; editing by David Stamp and Giles Elgood)

One response to “Greek finance minister enters euro zone lions’ den

  1. I recall Lagarde once said Greece was as well off as it was in 1943.

    I had to look at the year several times.

    So Greece was well off under the Nazis.

    But me old mum (God rest her) did say people were starving to death. Figures put the deaths at 40,000. But from the lack of food me old mother told me, the fact there was hyperinflation needing a wheelbarrow for the weekly wage and I have seen a 1 Million Drachma note needed to buy a loaf of bread, I am sure the figure would have been higher. My mother in gaining a loaf of bread had beggars asking for a piece of the bread all the way home.

    This is the number of elderly dying this winter in the UK in unheated homes due to the lowest state pension of all rich nations and welfare reform aka abolition. As I can tell you, an unheated home in winter is colder than outdoors.

    Wish Greece every success. Austerity has killed people in Greece. The lack of social medicine has hit adults and babies. The nil basic tax allowance and multi layers of taxes on each Euro, even when cashless is the reason for the bank savings being reduced. There is no bank run. The enfia massive burden of property tax, still needs paying February as well as left over taxes from last year.

    I once heard a divorce for a meat meal in Athens city centre. The lady mistook money left on the side as the housekeeping and went out and cooked her partner his favourite lunch. When he returned he found the money gone and went into a shrieking nervous breakdown, as this had been the money to pay a tax, that he had failed to inform his partner. After off and on domestic argument, the couple parted.

    The beggars have increased in Monastiriki, Athens city centre, sleeping rough in the underground foyer. Of all ages.

    I saw a beggar on Athinas Street begging for money to get his oxygen tank re-filled as he had respiratory problems, and pretty severe ones at that.

    Pensioners had had most if not all of their pensions cut from all sources by order of the Troika.

    No medicine, no food, homelessness even for the ex business owners of the shut up shops in the city centre of Athens, no food money.

    And the debt just kept getting bigger each so-called bail out, as each so-called help raised the debt and its interest, whilst the money poured out of Greece.

    And the UK government kept copying what Troika was being allowed to get away with in Greece by the EU government. Soon our UK pensioners will suffer Greece’s elderly and not so elderly’s fate, from 2016, with nil state pension for life, whilst benefits are cut.

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