Troika Visits

E.U. Relents to Key Greek Demand

Greek leaders kick off European tour in diplomatic push for suppo
The European Commission said it planned to halt visits of supervisors to Athens, in an opening gambit in what may be a months-long negotiation over refinancing Greece's debt and keeping the country in the euro zone.
  • Why it matters

    Why it matters

    Greece needs a new deal with lenders to stave off bankruptcy. By agreeing to dissolve the troika, Mr. Juncker may be able to ease the way for a compromise with the government in Athens.

  • Facts

    Facts

    • The new Greek government has refused to cooperate with the troika of lenders – the ECB, EU and IMF.
    • Greece’s bailout runs out at the end of this month.
    • Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, are on a whirlwind tour of European capitals, with the exception of Berlin.
  • Audio

    Audio

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The “troika” of European lenders has become a dirty word — synonymous with onerous austerity and the public shame heaped upon euro zone sinners – and is nowhere more fervently hated than in Greece.

Now, the European Commission president, Jean-Claude Juncker, is offering the Greeks a fig leaf by planning to scrap the periodic, public visits of intermediaries to Athens sent by the European Central Bank, the European Union and International Monetary Fund.

According to sources close to the commission interviewed by Handelsblatt, troika representatives will no longer travel to Athens to check on the Greek compliance with the austerity conditions imposed in return for €240 billion in emergency loans.

“We have to find an alternative quickly,” the sources in Brussels told Handelsblatt.

It is a hopeful sign that Mr. Juncker is willing to meet the new left-led Greek government, which has threatened to stop paying Greece’s debts, half way.

While the commission president is reportedly sympathetic to the new Greek government’s plans to increase the minimum wage, he strictly opposes any write-down of Greek debt.

The new Greek prime minister, Alexis Tsipras, had vowed to end austerity after winning election over a week ago. The former communist and head of Greece’s Syriza party insisted during the campaign it would not deal with the troika, or work to extend its bailout program, which runs out February 28.

Mr. Tsipras during his campaign had pledged to negotiate a cut of Greece’s crippling debt burden cut by 50 percent, which lenders oppose.

The new government’s combative tone had caused Greek bond yields to soar and bank stocks to plummet last week, although there were signs of recovery on Monday.

“For the last five years, Greece has been living for the next loan tranche. We have resembled drug addicts craving the next dose.”

Yanis Varoufakis, Greek Finance Minister

The new Greek finance minister, economist Yanis Varoufakis, struck a defiant pose last week. On Friday, after talks with Jeroen Dijsselbloem, the head of the Eurogroup of euro zone finance ministers, he said he wanted direct access to Greece’s creditors, refusing to work with troika representatives.

Following Mr. Varoufakis’s outburst, Mr. Tsipras reportedly phoned Mr. Juncker and the ECB president, Mario Draghi, to smooth ruffled feathers.

Mr. Tsipras had promised that Syriza, his radical left party, would not to make unilateral moves. Now he and his government, a coalition of Syriza and the right-wing Independent Greeks, are proposing a stop-gap deal to gain breathing room to negotiate an agreement with more lenient conditions.

Mr. Tsipras and his finance minister are now embarking on a whirlwind tour of European capitals to make their case.

“For the last five years, Greece has been living for the next loan tranche. We have resembled drug addicts craving the next dose,” Mr. Varoufakis said after talks with his French counterpart, Michel Sapin, in Paris on Sunday.

He said Greece needed time to present its new reform proposals and expected to reach a new deal with its partners by the end of May.

Greece will need the ECB’s help to keep its banks afloat, Mr. Varoufakis said. “We’re not going to ask for any more loans,” he said. “During this period, it is perfectly possible in conjunction with the ECB to establish the liquidity provisions that are necessary.”

Greece is under enormous financial pressure.

The country is already experiencing capital flight as savers take their money abroad, fearing a Greek exit from the euro. The ratings agencies have slashed Greek bank credit ratings.

If a new bailout program is not agreed, Greek banks will no longer be able to get cheap loans from the ECB starting March 1. The Greek financial system would instead have to be propped up by so-called ELA emergency credit lines – an expensive form of central bank financing where all liability remains with Greece’s central bank.

In an effort to stave off financial disaster, the Athens government is trying to win over its European partners. The offer to halt the supervisory visits of troika lenders to Athens from Mr. Juncker, plus sympathetic statements from high-level French officials, are hopeful signs that a deal can be reached.

Without an agreement, Greece may default on its loans and precipitate another crisis for the euro, perhaps forcing the other 18 euro countries, including Germany, to legally throw Greece out of the euro zone.

After his Paris visit on Sunday, Mr. Varoufakis is meeting today in London with British finance minister George Osborne. The Greek finance minister will then travel to Rome on Tuesday.

Ahead of the London talks, Mr. Osborne released a statement: “I welcome this opportunity, so soon after the Greek election, to discuss face to face with Yanis Varoufakis the stability of the European economy and how to boost its growth.”

Mr. Varoufakis wants to travel to Berlin to meet with the German finance minister, Wolfgang Schäuble. “It is essential that we meet,” Mr. Varoufakis said on Sunday.

Meanwhile, Mr. Tsipras is to visit Paris and Rome this week before traveling to Brussels Wednesday for talks with Mr. Juncker. There has so far been no indication he plans to visit Berlin to talk with Ms. Merkel.

The two are scheduled to be at a European Union summit February 12.

Sources close to the German government say Berlin is open to reforming the troika and ending visits of controllers to Athens. However, German support is contingent on Greece’s new government abiding by the program of budget cuts and reforms agreed to by previous governments.

Speaking today in Cyprus, Mr. Tsipras hailed news of the possible end to troika supervisory visits to Athens. “It would be an important institutional step,” Mr. Tsipras said in a speech.

The government in Berlin has already indicated it will not concede one of Mr. Tsipras’ key demands: a renegotiation of Greece’s debt burden, which stands at around 175 percent of GDP, amounting to €320 billion.

Chancellor Angela Merkel on Saturday ruled out fresh debt relief, telling the Hamburger Abendblatt newspaper: “There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece’s debt.”

Germany, as the biggest and richest country in the European Union, has been the largest contributor to two Greek bailouts, which have delivered loans worth €240 billion since 2010.

Berlin has also spearheaded the push for reforms and cost-cutting in Greece, which has resulted in Ms. Merkel’s huge unpopularity in Greece.

In a sign that Berlin could become isolated over its insistence on austerity, U.S. President Barack Obama said in a television interview on Sunday: “You cannot keep on squeezing countries that are in the midst of depression. At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits.”

 

Greece  Green Shoots of Recovery-01

Greece’s deputy interior minister, George Katrougalos warned Germany that it would also lose out if Greece was forced out of the euro. “If Greece goes broke, than no one will get anything back, and that includes the Germans,” he told Bild, a mass-circulation German newspaper. “That is the practical argument for the fact that we must find a compromise, so that Greece recovers and Germany gets its loans back.”

Mr. Tsipras released a statement over the weekend indicating his willingness to negotiate.

“We need time to breathe and create our own medium-term recovery program,” Mr. 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.”

For many of Athens’ European partners, however, this is not enough.

“We expect Greece to apply for an extension of the bailout program, which is due to run out at the end of February,” sources close to the commission told Handelsblatt.

 

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. Thomas Hanke reports for Handelslbatt from Paris. Gerd Höhler is Handelsblatt’s Athens correspondent.  Siobhán Dowling, an editor at Handelsblatt Global Edition, also contributed to this article. To contact the authors: berschens@handelsblatt.com; hildebrand@handelsblatt.com; hanke@handelsblatt.com; hoehler@handelsblatt.com.

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