Athens Blinks?

Greece to Apply for Loan Extension

Tsipras Parl DPA
Alexis Tsipras, addressing parliament on Tuesday, said Greece will not be blackmailed. Source. DPA
  • Why it matters

    Why it matters

    A deal needs to be agreed and ratified by February 28 if a Grexit is to be avoided.

  • Facts

    Facts

    • Greece is to apply for a six-month extension of its loan agreement.
    • The eurogroup of euro-zone finance ministers has said Athens must apply to extend its current bailout program.
    • The ECB meets on Wednesday to discuss emergency lending to Greek banks.
  • Audio

    Audio

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Are the Greeks blinking first?

The government in Athens is preparing to apply for a six-month extension of its loan agreement with international creditors on Wednesday.

A Greek government spokesman on Wednesday morning confirmed the media reports circulating since Tuesday night.

It is still not clear, however, if Athens and its European partners can agree on the conditions.

Greece’s government distinguishes the loan agreement with its lenders – the European Union, the European Central Bank and the International Monetary Fund – from its full bailout program.

“All along, deliberations are going on to find common ground; we want to believe that we are on a good path,” spokesman Gabriel Sakellaridis told Greek TV station Antenna. “We are coming to the table to find a solution.”

“We want to believe that we are on a good path. We are coming to the table to find a solution.”

Gabriel Sakellaridis, Greek government spokesman

The Greeks had been given an ultimatum by their euro-zone partners: Apply for an extension of the existing bailout program by Friday, or the game is up.

Their current program runs out at the end of this month, leaving little time for a deal to be agreed and ratified by governments and some national parliaments, including Germany’s.

On Tuesday night in Brussels, Germany’s finance minister, Wolfgang Schäuble, told reporters: “On February 28, at midnight, it’s over.”

The heat is certainly on.

Talks on Monday broke down after the left-led government in Athens rejected the euro-zone deal, leaving the very real possibility that Greece could be forced out of the euro zone.

 

Greece Greek gov debt in percent and in billion of euro-01

 

The new leftist-led government, under Prime Minister Alexis Tspiras, has insisted it wants to end the bailout agreement and its austerity commitments. His left-wing Syriza party came to power in January after campaigning to put an end to five years of punishing austerity.

The government is reported to be looking for an agreement that “clearly” deviates from the previous bailout program.

It remains to be seen whether the euro zone will agree to this.

Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup of euro-zone finance ministers, has made it clear that the Greeks have to meet the obligations in the current bailout program.

Alexander Graf Lambsdorff, a German MEP and vice president of the European Parliament, was skeptical that a deal can be reached. “The whole thing is so vague at the moment that it is really difficult to say if it is really substantial and sustainable,” Mr. Lambsdorff told Deutschlandfunk radio on Wednesday.

“Just asking for money, but doing nothing in return, is not an option.”

Wolfgang Schäuble, German Finance Minister

In an interview with German broadcaster ARD on Tuesday night, Mr. Schäuble said that it was still not clear what Greece would commit to.

“We want something concrete,” he said. Athens has to offer “something reliable, sustainable.”

Mr. Schäuble argued that implementing the current program was the path to success. “If it is not carried out, then the Greek government has to say how it intends to solve Greece’s problems. And up to now, we have not received anything that approaches an answer.”

He said that just asking for money, but doing nothing in return, was not an option.

The German finance minister is not alone in his stance.

The Greek government has become increasingly isolated. And the more Mr. Tsipras and his finance minister, Yanis Varoufakis, take a confrontational approach, the less their European partners are prepared to make concessions.

Talks on Monday between Mr. Varoufakis and his 18 euro-zone counterparts broke down after he rejected the offer presented by Mr. Dijsselbloem.

The Greeks complained that a previous draft agreement, presented by Pierre Moscovici, the European Commissioner for economic and financial affairs, had been withdrawn. It was replaced with one demanding that Athens agree to fulfill the terms of the hated bailout deal, which has seen the country receive €240 billion in loans from international lenders, the European Union, the European Central Bank and the International Monetary Fund, since 2010.

Mr. Varoufakis said that the offer was “unacceptable.”

 

German GDP Greece Greek Euro Zone change in percent 2008-2016

 

A frenzy of diplomatic activity has broken out between officials of the eurogroup, the European Commission and the Greek finance ministry to find the right wording for a joint declaration, according to E.U. sources.

The fight over the right formulation might appear to be just semantics, but it is also about fundamental questions.

The other euro-zone countries want a water-tight agreement from the Greek government that it will stick to the bailout program, including its conditions.

That is something Athens so far has refused to do.

Instead, it appears that the Greeks want an extension of the “loan agreement” only.

The demands to sign up to the full bailout program will not be met, Greek government spokesman Mr. Sakellaridis said on Tuesday, “even if a pistol is held to our forehead.”

The confrontational approach is going down well with the Greek population, sick of years of austerity and recession. According to polls, the government’s tough line with Brussels is backed by 80 percent of the population.

At the same time, three quarters of Greeks say they want to stay in the euro zone.

Yet Mr. Tsipras must deal with the powerful left wing of his Syriza party, which would prefer to see Greece leave the euro rather than suffer any more austerity.

In Athens on Tuesday, Mr. Tsipras gave a fist-thumping speech to parliament, in which he refused to be “blackmailed” and promised to raise the minimum wage and to reverse some of the labor market reforms that had been implemented as part of the bailout program.

“Greece mustn’t be considered a country that’s a colony and the Greeks as pariahs,” he said, adding that he is sure the country will manage to escape “the self-fuelling trap of debt that it’s been in for the past five years.”

athens protests HB
Pro-government protests in Athens on Monday. Source: Giorgos Nikolaidis ROPI / Handelsblatt

 

Marcel Fratzscher, president of the German Institute for Economic Research (DIW), said he was optimistic that a deal could be reached with Greece over the next few days.

“That buys the Greek government some time, but does not solve the fundamental problem,” he told Swiss daily Neue Zürcher Zeitung. He said that Greece still faced an economic disaster. “If a rapid solution is not found then there is the likelihood of a deep financial crisis. This will push the economy deeper into crisis.”

On Wednesday, the European Central Bank is meeting to discuss the emergency lending or ELA to Greek banks.

According to sources close to the ECB, the central bank is likely to extend loans one more time in single-digit billion figures.  There is also likely to be a warning that the ELA loans will be stopped if there is no agreement between Athens and Brussels this week.

 

Siobhán Dowling is an editor with Handelsblatt Global Edition and covers European politics. Ruth Berschens in Brussels, Gerd Höhler in Athens, Thomas Hanke in Paris, Jan Hildebrand in Berlin, Jens Müchrath in Düsseldorf contributed to this report.  To contact the author: dowling@handelsblatt.com

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