Business World

Tuesday 20 February 2018

Greece nears euro exit after Germany rejects bailout deal

Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras
Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem
European Commission President Jean-Claude Juncker

Gavin McLoughlin and Thomas Molloy

Germany rejected a request from Athens for a six-month extension to Greece's bailout, but left the door open to a last-minute deal when finance ministers meet this afternoon.

After a day of pessimism, sources in Berlin said last night that German leaders regarded Greek proposals to be a basis for negotiations. The sources added that Germany did not necessarily want Greece to submit a fresh draft plan.

Berlin's stance, backed by fiscal hawks such as Finland and the Netherlands but also countries such as Spain and Portugal, set the scene for tough talks at today's crucial meeting.

In a day of considerable drama, Chancellor Angela Merkel spoke with Greek Prime Minister Alexis Tsipras for around 50 minutes yesterday afternoon. In a Twitter posting, Mr Tsipras said there was a "positive tone" and the call had resulted in an "interest in finding a mutually beneficial solution".

The positive stance adopted by Germany in the afternoon, the biggest contributor to Greece's €240bn rescue and the chief advocate of economic reforms in return, represented a step back from an earlier statement which suggested finance minister Wolfgang Schaeuble had rejected out of hand the Greek letter requesting an extension of its loan agreement.

Relations between the Greek and German delegations were tense in Brussels where finance ministry officials had been preparing for today's talks. The Greek government described Germany's approach to the discussions as "negative".

In a breach of protocol, officials in Athens emailed an account of the closed-doors meeting. They cited German delegates as describing the Greek request as a "Trojan horse" designed to obtain bridge financing while getting Mr Tsipras's government off the hook for the conditions set out in the existing bailout.

A Greek government official said that euro-area finance ministers have only two choices when they meet today: reject or accept Greece's proposal.

European Commission President Jean-Claude Juncker was optimistic of a deal yesterday. Mr Juncker "sees in this letter a positive sign, which in his assessment could pave the way for reasonable compromise in the interest of the financial stability in the euro area as whole", a spokeswoman said.

Financial markets were calm as investors bet that some sort of deal will be cobbled together. Various financial measures showed confidence remains well above the worst levels of pessimism during the past five years. Greek shares closed up with Greek banks doing well.

The dispute once again highlights the differences across Europe when it comes to Greece.

Finnish Prime Minister Alexander Stubb dismissed the Greek proposals yesterday, saying they lacked a commitment to genuine structural reform.

Taoiseach Enda Kenny said: "We understand and empathise with the humanitarian difficulties they have.

"The Greek prime minister made it perfectly clear he does not want to leave the euro, he doesn't want to break his contract, and he's looking for an opportunity to negotiate a sustainable future for Greece.

"We support that and I do expect that the meeting tomorrow in Brussels will be a long and difficult meeting."

Solution

French Prime Minister Manuel Valls said: "The most recent declaration of the decisions by the Greek prime minister, who wrote to Europe, is a very encouraging sign that a solution is possible, and very quickly."

Greece also has other sympathisers. Italian economy minister Pier Carlo Padoan warned of the risk involved in any Greek exit.

"We have to send a signal that the euro is irreversible," he said. "If a country were to leave, it wouldn't just mean one less country in the union, but the transformation of the euro into a mechanism that can be undone."

Irish Independent

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