Greece, eurozone in last chance to end debt standoff

Published Thu, Feb 19, 2015 · 12:15 PM

[BRUSSELS] Europe and Greece on Thursday gave themselves one last chance to resolve a bitter feud over Greece's huge debt bailout, with a difficult compromise between Athens and Berlin hanging in the balance.

Eurogroup head Jeroen Dijsselbloem said finance ministers from the 19-member eurozone would meet in Brussels Friday to consider a make-or-break request by Athens to extend its European loan programme that expires at the end of the month.

This will be the third attempt to find a compromise with the new radical leftist government in Greece after previous meetings ended in acrimony and finger-pointing from both sides.

Greece made a formal request for a loan extension from eurozone finance ministers Thursday, saying it is "optimistic" about a compromise with the EU and the European Central Bank to avoid a looming "Grexit".

Greece said the request would satisfy the demands of its European partners, while also keeping a promise made to Greeks to end the hated austerity conditions in the bailout which it says has destroyed the economy and punished the poor.

"The government... is not asking for an extension to the memorandum," an official source in Athens said, referring to the reform agreement between Greece and its EU and International Monetary Fund creditors.

In its request sent to Brussels, Athens "pledges fiscal balance... and will carry out immediate reforms against tax evasion and corruption," the source added.

Wording is key to resolve the feud, with Greece's ruling Syriza party swearing that it is only requesting an extension to the loan part of the 240 billion euro rescue that came with commitments to push through austerity and deep reforms.

But key eurozone partners, led by powerhouse Germany, say the distinction is unacceptable, insisting that any extension include the austerity commitments of the full programme.

In confirming the request by Greece, Mr Dijsselbloem carefully avoided the wording row, leaving Friday's meeting hanging on whether both sides can agree on the language.

"Received Greek request for six months extension," Mr Dijsselbloem, who is also the Dutch finance minister, said in a tweet.

He did not elaborate.

In substance, the two sides are not that far apart, with new Prime Minister Alexis Tsipras willing to press on with reforms, but ones very different from those embraced by previous conservative governments.

In return, Mr Tsipras is demanding that the eurozone agree to short-term funding to buy the time needed to hammer out a new rescue deal, something the requested extension would provide.

But Germany has repeatedly poured cold water on offering Greece more time outside the current arrangement, especially the austerity commitments.

A spokesman for influential German Finance Minister Wolfgang Schaeuble earlier said any extension of loans was "inextricably" linked to the reforms agreed by Athens in the original bailout.

Mr Schaeuble has accused Athens of wanting something for nothing and has urged Tsipras to "Tell the Greeks the truth: there is no fast way out." Greece has proposed to stick to 70 per cent of the existing bailout programme but would overhaul the remaining 30 per cent which it sees as damaging to growth and toxic for ordinary Greeks.

Greek Finance Minister Yanis Varoufakis insisted Greece and the eurozone were "on the right path".

"I am optimistic it will end well tomorrow or the next day," Mr Varoufakis told reporters on Wednesday.

With the European portion of the bailout expiring at the end of February, Greece's creditors insist it needs extra financing to stave off the risk of a default and exit from the euro.

Providing much needed breathing room to Athens, the European Central Bank decided Wednesday to extend and increase the amount of emergency liquidity available to Greece's fragile banks.

The decision to raise the ceiling of that funding by only 3.3 billion euros, however, was seen by analysts as a cautionary note by the ECB reminding Athens to clinch a deal with its eurozone partners as soon as possible.

As the clock ticked down to a Friday deadline set by Mr Dijsselbloem, US Treasury Secretary Jacob Lew called Varoufakis to urge him to work on a deal based on the existing bailout agreement.

He told him "failure to reach an agreement would lead to immediate hardship in Greece, that the uncertainty is not good for Europe, and that time is of the essence," the Treasury said on Thursday.


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