Hellenic Hubris

The Trojan Rescue Plan

Yanis Greece Reuters
Yanis Varoufakis, Greece's combatitive finance minister.
  • Why it matters

    Why it matters

    Greece needs to access more funding as its coffers rapidly empty. Issuing threats, however, is unlikely to go down well in Brussels or Berlin.

  • Facts


    • In February, Athens reached a deal with its partners to extend its bailout until June.
    • Greece sent a list of seven reform proposals to Brussels last week.
    • The troika of lenders, the ECB, E.U. and IMF, want to send officials to Greece to assess its true financial situation.
  • Audio


  • Pdf

The Greeks are not prepared to take their medicine quietly.

The Athens government needs money, but is still trying to set the rules and conditions on the funds it needs to keep afloat.

As the euro zone’s 19 finance ministers gather in Brussels today to discuss Greece again, finance minister Yanis Varoufakis has threatened to hold a national referendum or a new election if the rest of Europe does not accept Syriza’s reform proposals.

Syriza came to power in January promising to abandon austerity measures but two weeks ago appeared to strike a tentative deal with creditors to continue the hated reforms in exchange for more money.

Greece’s lenders told the nation it had until the end of April to clarify which reforms it planned to make in exchange for further aid.

Last Thursday, Mr. Varoufakis sent a letter to Brussels outlining his reform plans. In an interview over the weekend with Italian newspaper Corriere della Sera, he threatened his lenders once again if they rejected the country’s reform plans.

“We are not yet glued to our chairs. We can return to elections, call a referendum,” Mr. Varoufakis told the newspaper.

His ministry later issued a statement saying that any referendum would “obviously regard the content of reforms and fiscal policy” and not membership in the euro zone.

According to polls, three quarters of Greece want to stay in the euro currency area “at all costs.”

“We are not yet glued to our chairs. We can return to elections, call a referendum.”

Yanis Varoufakis, Greek Finance Minister

The Syriza government, like its predecessors, is dependent on loans from its international creditors, which include the European Central Bank, the European Union and the International Monetary Fund.

The government came to power promising to end austerity cuts tied to the loans and end cooperation with the hated “troika” of lenders.

But the lenders have not budged, first rejecting Greece’s calls for a bridge loan. Then, the Greek government had to give in and apply for a four-month extension of the existing bailout program — under the existing terms — until the end of June.

The German government, the biggest contributor to the €240 billion in bailouts Greece has tapped so far, has lead a vanguard of those determined to wring an airtight reform commitment from Athens in exchange for further loans.

On Monday morning, a German deputy finance minister, Steffen Kampeter, said new Greek elections or referendum would lead to a delay in implementating the economic measures the country needs to climb out of its crisis.

According to government sources, his boss, Finance Minister Wolfgang Schäuble is irritated that the Greek government continues to come up with new ideas, rather than presenting a comprehensive reform concept.

The assumption in Berlin is that Athens is hoping to up the pressure to gain access to new loans ahead of April. There is still €7 billion due to the country under the current bailout program.

However, that is out of the question, according to one German government representative, saying that a prerequisite is that Greece embarks on reforms.

tourists Greece Reuters
One reform proposals is to recruit tourists, such as these at the Acropolis, to spy on tax dogers. Source: Reuters


There is growing frustration with the way Greece is stuck in a loop of promising compromise and then issuing threats.

“We are still stuck at the very beginning,” one high-ranking European Union diplomat told Handelsblatt.

The euro group is meeting on Monday for the fourth time since Syriza came to power to discuss how to proceed with the bailouts for Athens.

Contacts between the troika and Greece ended late last year. Talks with the renamed “institutions” need to be taken up again before further financial assistance can be offered.

Officials at the three bodies will have to go to Athens and assess how much money the Greeks really need. And how much any reform proposals from the government might cost.

Mr. Varoufakis last week sent a list of seven reform measures, including raising taxes on Internet games and reducing bureaucracy, as well as increasing state aid for the poorest Greeks. The proposals also included recruiting tourists to help spy on tax dodgers.

“No one in a position of responsibility in Europe is working for a Greece exit from the currency union.”

Jean-Claude Juncker, European Commission President

Euro group chairman, Jeroen Dijsselbloem welcomed the proposals as “helpful” but added that they had to be scrutinized by Greece’s international lenders.

“This document will be helpful in the process of specifying the first list of reform measures,” he wrote in his official response, adding that the proposals “will need to be further discussed with the institutions.”

However, an E.U. official told Handelsblatt that the proposals had nothing to do with the reforms that Greek had committed to. “There is no connection to further loan repayments.”

The European Central Bank is also taking a tough stance. “The ECB cannot finance the Greek government. We are not allowed to do that. It is illegal,” ECB governing council member, Benoit Couré, told the Frankfurter Allgemeine Zeitung daily.

The situation in Athens is precarious, to say the least. While tax income was €1 billion less than expected in January, the following month was even worse, with a €1.5 billion shortfall.

Greece, therefore, will struggle to meet its upcoming debt repayments. While it managed to pay €310 million to the IMF last Friday, it has to come up with another €2 billion by the end of the month. The government is already being forced to dip into the state’s pension reserves to make ends meet.

Nevertheless, Prime Minister Alexis Tsipras’ confrontational stance has gone down well so far in Greece. His party now enjoys 41.3 percent support, significantly higher than the 36 percent it won at the January 25 election.

However, another election campaign would likely paralyze the country for weeks, just when its coffers are emptying rapidly. Such a risky move could finally push Greece out of the euro zone.

Jean-Claude Juncker, the president of the European Commission, insisted that Athens would not be allowed to leave the euro zone, saying it would cause “irreparable damage” to the European Union.

“No one in a position of responsibility in Europe is working for a Greece exit from the currency union.” Mr. Juncker told the Welt am Sonntag newspaper. “The country is and will remain a member of the currency union.”


Ruth Berschens heads Handelsblatt’s Brussels bureau. Gerd Höhler is the paper’s Athens correspondent. Siobhán Dowling is an editor with Handelsblatt Global Edition in Berlin and covers European politics. To contact the authors: berschens@handelsblatt.com, hoehler@handelsblatt.com, dowling@handelsblatt.com.



We hope you enjoyed this article

Make sure to sign up for our free newsletters too!