Greek Talks

Running Out of Time

Schäuble Karikatur
A caricature of the German Finance Minister Wolfgang Schäuble in a publication close to the left-leaning Syriza party. The heading reads: "The negotiation has begun.” Mr. Schäuble is dressed as a Nazi and says: "We insist on making soap out of your fat” and “We are discussing (making) fertilizer from your ashes”.
  • Why it matters

    Why it matters

    If Greece fails to reach a deal with its creditors by the end of this month, it will run out of money and may have to leave the euro zone.

  • Facts

    Facts

    • The 19 finance ministers of the euro zone will meet on Monday afternoon to discuss the options to keep funding Greece.
    • Greece might receive a new bailout program, using the unused billions of euros of the existing €240 billion package, an E.U. source told Handelsblatt.
    • The German finance minister, Wolfgang Schäuble, is skeptical a deal will be reached on Monday, he told a German broadcaster.
  • Audio

    Audio

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The euro zone finance ministers, including Germany’s Wolfgang Schäuble, will begin a high-stakes meeting later Monday to discuss the options for Greece before its €240 billion aid program runs out at the end of the month.

Without a new bailout program or an extension of the existing one, Greece could run out of money within months and in a worst case  scenario be forced to leave the 19-nation euro zone and reintroduce a national currency. Its banks, which have already seen billions of euros in capital leave the country, may see emergency funding from the European Central Bank cut off as early as March.

The euro zone countries, which have furnished Greece with most of its loans since 2010, are open to a new bailout program instead of extending the current one, a high-ranking European Union diplomat told Handelsblatt. German officials still favor an extension, according to government sources.

“In this matter something has to change in Greece, otherwise we have a problem.”

Wolfgang Schäuble, German Finance Minister

The willingness to consider a new program marks a shift for the euro zone countries, which as late as last week opposed a new bailout. But while time is running out, Germany’s finance minister said he remained skeptical that a deal could be reached as early as Monday.

Greece’s new left-wing government, which came to power in January, has demanded a new program that would ease Greece’s debt burden and relax the tough austerity measures that have been imposed on the country for the last six years as a condition for the bailout.

Representatives of the European Union, the European Central and the International Monetary Fund held talks over the weekend about which options were available to Greece.

A portion of the €240 billion, or $274 billion, of the old program, not all of which has been lent to Greece, could be funneled into the new program, the E.U. diplomat said. This prospect has given some observers hope that a last-minute deal is still possible.

“There is a chance for a deal, certainly. But if a compromise would be reached today, it would be a surprise,” Holger Schmieding, a London-based chief economist at German private Berenberg, told Handelsblatt Global Edition.

“Greece is moving but it has to move much further,” said Mr. Schmieding, referring to Greece’s position on reforms and austerity. The country is still too far removed from the euro zone’s position, which is insisting that many structural reform considered key to Greece’s long-term economic health remain in place.

Without continued reforms, the parliaments of Germany, Finland, Estonia and the Netherlands would not approve a new bailout program, Mr. Schmieding said.

 

Schäuble and Draghi _ action press
Two allies in their principles: Wolfgang Schäuble, left, and the ECB president Mario Draghi. Source: action press

 

In an interview published Sunday on the website of German magazine Stern, Greece’s prime minister, Alexis Tsipras, was quoted as saying Greece did not want new bailout loans.

“Instead of money we need time to realize our reform plans. I promise them: Greece will be a different country in six months’ time,” Mr. Tsipras was quoted as saying.

Greece’s new government has argued for a new program, saying the existing bailout program exacerbated unemployment and poverty in the Mediterranean country due to the focus on reforms and austerity.

Mr. Schäuble, effectively Greece’s paymaster because Germany, as the European Union’s largest economy and thus largest contributor to bailouts, said he did not believe a deal was likely on Monday.

“After hearing the details of technical conversations over the weekend, I have become very skeptical,” Mr. Schäuble told German radio station Deutschlandfunk. “But we will get a message later today, and then we’ll see.”

Germany’s government, led by Chancellor Angela Merkel, was not keen on a new program, Handelsblatt learned from a source familiar with the cabinet’s thinking.

“Negotiating a new program will take considerably more time than using the current one,” said the source, adding time was scarce.

Greece faces another hurdle on Wednesday, when the European Central Bank meets to decide whether to extend emergency loans for Greek banks.

A cartoon in a publication close to Mr. Tsipras left-wing party, Syriza, will not help the talks later on Monday. The cartoon, published February 8 with the heading “The negotiation has begun,” showed Mr. Schäuble dressed as a Nazi.

In the picture, Mr. Schäuble was shown as saying: “We insist to make soap out of your fat” and “We are discussing (making) fertilizer from your ashes.” The statements are references to the fate of Jews in Nazi death camps of World War II.

When asked by the German broadcaster Deutschlandfunk whether Mr. Schäuble was hurt or angry, he said he was neither. He did say earlier in the interview: “We are not sensitive that they are insulting constantly all those from which they at the same time want an incredible amount of help. But in this matter something has to change in Greece, otherwise we have a problem.”

Mr. Schmieding, the Berenberg chief economist, said the cartoon would not help Greece.

“It will rather limit Greece’s negotiation position a little bit. The other 18 euro zone countries will more closely unite and make clear who the disturbing force is, and who is isolating itself,” Mr. Schmieding said.

Greece faces another hurdle on Wednesday, when the European Central Bank meets to decide whether to extend emergency loans for Greek banks.

The country’s financial institutions, faced with an outflow of money stemming from the fear that Greece might leave the euro zone, have been dependent on more than €60 billion in emergency central bank funding. The banks were shut off from the ECB’s normal lending operations earlier this month, leaving the emergency lending source as the only option.

The ECB is not expected to withdraw the emergency funds yet, but it might happen at the end of the month if Greece has not agreed on new deal with its international lenders.

“The emergency loans will be extended as long as there is a certain probability that a deal will be reached,” Mr. Schmieding said.

While Greece’s participation in the euro zone remained in doubt, some high-profile investors were betting on a recovery. A subsidiary of New York City-based investment firm Third Point, founded by U.S. businessman Daniel S. Loeb, will take a 20-percent stake in Greek insurance firm Hellas Direct, the Greek firm said in a statement.

Hellas Direct, a firm founded a few years ago by two former Goldman Sachs managers, also includes private equity veteran Jon Moulton and former Goldman Sachs economist Jim O’Neill as its investors, the firm said.

 

Ruth Berschens has been Handelsblatt’s bureau chief in Brussels since 2009, leading coverage of European policy. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin. Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin, covering companies and markets. Gerd Höhler, Handelsblatt’s correspondent in Athens, contributed to this article. To contact the authors: berschens@handelsblatt.comhildebrand@handelsblatt.com and kreijger@handelsblatt.com, 

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