News World News

Saturday 18 November 2017

Ministers meet over Greek debt fear

German finance minister Wolfgang Schaeuble and the finance minister of Greece, Yanis Varoufakis, address the media in Berlin (AP)
German finance minister Wolfgang Schaeuble and the finance minister of Greece, Yanis Varoufakis, address the media in Berlin (AP)

Greece's new finance minister has sought to convince his sceptical German counterpart to back a new approach on Greek debt - but an agreement still appears to be a long way off.

Meeting for the first time since the anti-bailout party Syriza took power in Athens, Yanis Varoufakis and Wolfgang Schaeuble held talks in the German capital Berlin about how to move ahead over Greece's attempts to renegotiate the terms of its debts.

Germany's Mr Schaeuble said the two "agreed to disagree" and that a writedown, or haircut, of Greece's debt is not on the table.

Germany's views matter as it is the biggest European contributor to Greece's five-year bailout programme.

Germany is a staunch proponent of austerity measures which have led to deep income cuts in Greece, record-high unemployment and an economic depression.

Mr Schaeuble renewed offers to help Greece strengthen its tax system and said that some things the new government has announced are a step in the right direction - such as getting the rich to pay tax and combating corruption.

But he added that "some of the measures that have been announced ... don't necessarily go in the right direction".

Mr Schaeuble also made it clear that it is important to respect existing agreements, arguing that "reliability is the condition for confidence".

Mr Varoufakis said Greece would do everything to avoid any default, and said he was confident that Athens and its partners would "put the D word out of court".

Mr Varoufakis said the Greek government is looking to a bridging programme between now and the end of May to give room for talks on "a new contract" with the European Central Bank (ECB), International Monetary Fund (IMF) and European Union.

The discussions between the two came as jittery investors dumped Greek shares after the ECB tightened the screws on the country's banking system, in a move that piles pressure on the new anti-austerity government to swiftly conclude a compromise deal with bailout creditors.

Shares on the volatile Athens stock exchange dived nearly 10% on opening, but later recovered a bit and were trading 5.5% down at midday. The interest rate on Greece's 10-year bonds also ratcheted 0.63 percentage point higher to 10.42%, in a further sign that investors are concerned about the new government's ability to quickly conclude a debt deal with its creditors.

The talks between the two finance ministers came a day after the ECB said it would stop lending to Greek banks using the nation's junk-rated government bonds as collateral.

The ECB justified the move by saying prospects appear uncertain for a new deal between the radical left government in Athens and its international bailout creditors.

Greek banks retain access to emergency lending, but at a higher cost and subject to ECB approval.

Gary Jenkins, chief credit strategist at LNG Capital said: "It is difficult to see this as anything other than a very aggressive move by the ECB."

Greek prime minister Alexis Tsipras' 10-day-old government played down the impact on Greece's banking system and insisted that it would stick to its anti-austerity agenda.

It said the ECB ruling put pressure on Athens and its creditors alike to strike a deal.

A complete cut-off from the ECB, including a refusal of more emergency credit, could pull the plug on Greek banks, leaving the government with no other source of funds to rescue them except for printing a new national currency.

However, analysts say the ECB will be reluctant to make such a move unless politicians have exhausted all their options for a compromise.

Press Association

Promoted Links

Today's news headlines, directly to your inbox every morning.

Promoted Links

Editors Choice

Also in World News