Time is run­ning out for Greece

TALKS BREAK UP WITH­OUT DE­CI­SION Cred­i­tor na­tions split over po­ten­tial bailout

The Washington Post Sunday - - FRONT PAGE - BY AN­THONY FAIOLA AND YLAN Q. MUI

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.

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