Clock ticking as creditors extend talks
Greece and its official creditors are extending talks over the weekend aimed at reaching a deal at a Monday meeting of finance ministers in Brussels on future financing for Europe’s most-indebted country.
Greece’s new anti-austerity government led by Alexis Tsipras wants to exit the current bailout program, which it blames for the country’s economic hardships, and replace it with a new plan while obtaining bridge financing to avoid defaulting on its international debt. The plan, which would include raising wages and reinstating government workers, is not getting much support from the country’s creditors.
“You can only spend money when you have it,” Dutch Finance Minister Jeroen Dijsselbloem, who also presides over eurozone finance ministers’ meetings, told reporters in The Hague on Friday. “Greece wants a lot but has very little money to do that. That’s really a problem.”
The creditors, which include eurozone governments, are also constrained because giving in to Greece’s demands may embolden and boost other anti-austerity parties in the region such as Spain’s Podemos. Germany, as the biggest country contributor to Greece’s $273-billion US twin bailouts and the chief proponent of economic reform and budget cuts, insists that Tsipras’s government commit to an extension of its current rescue program, which expires Feb. 28.
Tsipras was elected on a platform of ending austerity, a partial debt writedown and no more audits by the troika of the European Commission, the European Central Bank and the International Monetary Fund.
Greece’s stocks rallied to a twomonth high on Friday, and the rate on three-year government notes was the lowest this month as officials negotiating the future of the nation’s bailout program signalled a willingness to compromise.
Since his Jan. 25 election, Tsipras has watered down demands, no longer asking for a writedown on the nominal value of the bailout loans. He has also said Greece intends to maintain a budget surplus, excluding interest payments, albeit at a lower level than the 4.5 per cent of gross domestic product envisaged in the existing bailout.
With the clock ticking before the end of the current rescue, officials from Greece’s finance and foreign ministries are continuing “technical” discussions with representatives of creditors, aiming to lay the groundwork for a successor program, which governments could approve on Monday.
Uncertainty over the country’s prospects has triggered a run on deposits, with outflows in the last two months reaching about $21.6 billion US, according to Kathimerini, a Greek newspaper. The country’s lenders are now kept afloat thanks to $74 billion US of Emergency Liquidity Assistance, extended by the Bank of Greece, subject to approval by the ECB.