Time is running out for Greece
TALKS BREAK UP WITHOUT DECISION Creditor nations split over potential bailout
athens — A high-stakes meeting to save Greece broke up early Sunday with Europe bitterly divided over how or whether to rescue this Mediterranean nation from imminent financial collapse.
Convening in Brussels, finance ministers from the 19 nations of the euro zone failed to greenlight talks for a fresh lifeline for Greece, exposing the fault lines that have developed over extending the deeply troubled nation its third bailout in five years. The ministers were set to reconvene later Sunday morning, followed by a planned summit of European leaders. But there was little sign an immediate breakthrough was likely even as Greece faced the risk of a banking collapse and an unprecedented exit from the euro zone.
“We have had an in-depth discussion of the Greek proposals,” Jeroen Dijsselbloem, head of the Euro Group of finance ministers, said as the session ended. “The issue of credibility and trust was discussed and also, of course, the financial issues involved. It is still very difficult, but work is still in progress.”
Yet at risk now is the fate not only of Greece but also of European unity more generally — with a handful of hard-line creditor nations including Germany and, even more so, Finland, blocking any rush toward a deal.
The resistance set up a dramatic
political struggle between those nations anxious to aid Greece and others that appeared to want to make an example of it. Those still reluctant to back a quick deal spoke of their profound lack of trust in the far-left government of Greek Prime Minister Alexis Tsipras, who only a week ago campaigned against a cash-for-cuts deal with Europe.
The Greek debt crisis is a half-decade-old leftover of the global credit bubble that burst in the late 2000s, puncturing subprime loans in the United States and national debt in a number of vulnerable European nations. In Greece’s case, years of government overborrowing, coupled with rampant tax evasion and a bloated public sector, sent the nation into a financial spiral that prompted two earlier bailouts.
Yet those bailouts came with tough conditions of austerity that plunged Greece into a historic depression. The coalition government that rode to power here in January did so on a backlash against such measures.
Now, Tsipras is pledging to make billions of euros worth of cuts and overhauls to secure such a deal, despite a resounding rejection of more austerity in the national referendum he called last week.
“We are not ready to accept calculations that are not believable,” German Finance Minister Wolfgang Schäuble told reporters in Brussels before the meeting started. “We cannot only rely on promises. Trust has been destroyed over the past months in an incredible manner.”
If no compromise is found by finance ministers on Sunday, it will fall to European heads of state, who will meet either way, to break the impasse. One Greek official with direct knowledge of the talks said that Finland was emerging as the single-toughest holdout against a deal. With the Greek issue becoming a political land mine for the government in Helsinki, Finland appeared so set against an agreement that securing one might require the invocation of emergency procedures to override its possible veto.
Other resistant European finance ministers appeared willing to back a deal but only under stricter conditions. They sought evidence that Greece was committed to enacting the roughly 13 billion euros in spending cuts and tax increases that it proposed in a bailout request Thursday, and some wanted Athens to pass legislation by Wednesday that set in stone the cuts and revisions, according to a member of the Greek delegation in Brussels who spoke on the condition of anonymity to discuss the negotiations.
About 10 countries demanded tougher austerity measures, according to the delegation member. A separate government official in Athens estimated the amount could total an additional 1 billion euros in spending cuts and tax increases, although the negotiations remain fluid.
Hard-liners, the official said, were also calling for strong oversight of Athens by Greece’s troika of creditors, as it is known: the European Union, the International Monetary Fund and the European Central Bank.
Athens had requested a bailout package of 53.5 billion euros that would carry it through the next three years. But there was a growing recognition among European officials that much more could be needed after two weeks of stringent capital controls have choked Greece’s economy. Estimates for the price tag ranged north of 70 billion euros.
Greek officials suggested they were willing to enact fresh austerity measures by the new Wednesday deadline. Athens, however, first wanted to weigh the outcome of Sunday’s summit of European heads of state before committing to a vote.
Greece had hoped that successful talks this weekend would pave the way for emergency funding through the European Central Bank. The ECB has allowed Greece’s nearly bankrupt banks access to an 89 billion euro lifeline and must approve an extension Monday.
The money has been just enough to keep Greece’s financial system alive, but only because banks have been closed since June 29 and ATM withdrawals limited to 60 euros per day.
Without a fresh infusion of cash, however, Greek bank officials have warned that they may need to curb withdrawals even further. Such a scenario could also trigger a series of rapid bank failures here and potentially prompt a fast exit of Greece from the euro.
“We don’t have the luxury of time,” said Thanos Dokos, director of the Hellenic Foundation for European and Foreign Policy, a think tank in Athens. “There will have to be a quick decision showing which way the wind is blowing. The Greek economy is slowly dying.”
European finance ministers must reach an unanimous agreement in order to move forward with negotiations over Greece’s bailout package, according to official protocol. But an obscure loophole could allow the group to support a deal with only 85 percent approval. However, a Greek official said the IMF, which must also back a deal, was insisting on full European unity to support a rescue package.
Some nations, such as France, were strongly backing a deal and seeking to overcome resistance. According to Sky News, the Slovakian finance minister, Peter Kazimir, was asked whether the outcome “was a yes or a no” after the meeting broke up. “No is the better answer,” he replied.
In a sign of how deep the divisions went, German media reported Saturday that Schäuble had drawn up a proposal in which Greece would leave the euro zone — though only temporarily. Alternatively, he proposed that Greece “transfer assets” worth at least 50 billion euros to European entities as collateral for its bailout — a humiliating option that might require the sale of national monuments, even Greek islands.
However, the proposal appeared to be an internal document and was never formally presented as an option Saturday, according to meeting participants.
But in a post on Facebook, Sigmar Gabriel, the German vice chancellor, said his party knew about Schäuble’s proposal, calling it “feasible” only if Greece decided that was the best option.