Greece rejects bailout extension
Talks between Greece and eurozone finance ministers over the country’s debt crisis broke down on Monday night when Athens rejected a proposal for a six-month extension of its international bailout package as “unacceptable”.
The unexpectedly rapid collapse raised doubts about Greece’s future within the euro area after a new leftist-led government vowed to scrap the EUR 240 bln bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.
Eurozone Chairman and Dutch Finance Minister Jeroen Dijsselbloem said Athens had until Friday to request an extension, otherwise the bailout would expire at the end of the month.
The Greek state and its banks would then face a looming cash crunch, while the European Central Bank is expected to decide on Wednesday whether to maintain the emergency lending assistance (ELA) to Greek banks that are bleeding deposits at a rate of EYR 2 bln a week.
Seemingly determined not to be browbeaten by a chorus of EU ministers intoning that he needed to swallow Greek pride and come back to ask for the extension, Finance Minister Yanis Varoufakis voiced confidence that a deal on different terms was within reach within days, but warned that the language of ultimatum never worked in Europe.
He cited what he called a “splendid” proposal from the European Commission by which Greece would get four to six months credit in return for a freeze on its antiausterity policies. He said he had been ready to sign that - but that Dijsselbloem had then presented a different, and “highly problematic” deal.
A draft of what Dijsselbloem proposed, swiftly leaked by furious Greek officials, spoke of Athens extending and abiding by its “current programme” - anathema to a government which, as Varoufakis said, was elected last month to scrap the package.
Commission officials denied offering a separate plan and the man Varoufakis said presented it, Economics Commissioner Pierre Moscovici, stuck to the same script as Dijsselbloem.
Greece must extend its bailout on the current conditions, he said, even if that could be couched in language that did not embarrass Prime Minister Alexis Tsipras before his supporters.
Dijsselbloem, who insisted he was willing to be flexible on terminology that has become highly charged for Greek voters, said further talks would depend on Greece requesting a bailout. The talks, which had been expected to last late into the night, broke up in less than four hours - less even than a previous meeting last week after which EU officials voiced concern and astonishment at the Greeks’ lack of preparation.
Germany, the eurozone’s main paymaster and Greece’s biggest creditor, stuck to its hard line.
German Finance Minister Wolfgang Schauble said before the talks that Greece had lived beyond its means for a long time and there was no appetite in Europe for giving it any more money without guarantees it was getting its finances in order.
In a combative New York Times column, Varoufakis spelled out Greece’s refusal to be treated as a “debt colony” subjected to “the greatest austerity for the most depressed economy”, adding: “The lines that we have presented as red will not be crossed.”
An opinion poll showed 68% of Greeks want a “fair” compromise with eurozone partners while 30% said the government should stand tough even if it means reverting to the drachma. The poll found 81% want to stay in the euro.