Creditors unmoved by Greece's bailout promises

GMT 20:00 2015 Monday ,09 February

Arab Today, arab today Creditors unmoved by Greece's bailout promises

PM Alexis Tsipras
Athens - AFP

Greece and its creditors were at loggerheads again Monday after the new Athens government insisted it would not back down over renegotiating its massive bailout, sparking fresh jitters on financial markets over fears of a euro exit.
Prime Minister Alexis Tsipras's request for emergency EU funding to tide the country over while it renegotiates its huge debt left the European Commission and paymaster Germany cold.
Instead, European Commission chief Jean-Claude Juncker called on the Greek government to be realistic, saying it "must not assume that the overall mood in Europe has changed so much that the eurozone will unconditionally adopt the government programme of Tsipras".
Juncker also said he did not expect any new deal on Athens' demands to be reached at an EU summit in Brussels on Thursday, despite Tsipras saying he was "optimistic that we can reach a compromise".
The new leftist Greek premier's approach also appeared to baffle German Finance Minister Wolfgang Schaeuble.
"If they want our help, there needs to be a programme" agreed with creditors, rather than emergency assistance, the German minister said, adding: "I still don't understand how they (Greece) want to do it."
Greek Finance Minister Yanis Varoufakis said he would go to Brussels as "neither a 'yes man' nor a 'no man'," but promised to temper his aim to please the Greek people with his "duty to find a solution".
Varoufakis will meet fellow eurozone finance ministers on Wednesday.
A finance ministry source said Greece wants a new economic deal with its EU creditors to enter into force from September 1, which must include social support measures and more realistic budget goals.
The new left-wing government is only prepared to deliver a surplus of 1.5 percent of output, rather than the 4.0 percent forecasted for 2016 under the previous conservative administration, the source said.
- 'Likelihood is zero' -
But the government's overtures have fallen on deaf ears, with British Prime Minister David Cameron moving to draw up contingency plans for a Greek exit from the euro, or "Grexit", and Germany snubbing the request for aid.
Schaeuble, who is known for his acerbic comments on Greece's situation, said: "It is not us who need a programme. Germany has no need of a programme."
Fears that the country is heading into the financial mire were fuelled by Tsipras's rousing speech to parliament Sunday in which he swore he would stick to his anti-austerity guns.
The Greek stock exchange plunged nearly 5.0 percent on Monday, led by the banking sector, after Tsipras refused to extend the much-loathed 240 billion euro ($270 billion) bailout, with Berenberg financial analysts saying chances of a Grexit were 35 percent.
Athens is under pressure to woo its international creditors as quickly as possible because the European portion of Greece's EU-IMF bailout is due to expire at the end of the month.
A scheduled meeting of eurozone finance ministers next Monday is seen as the last chance for Greece to back down and request an extension to the current bailout or reach an interim deal.
Varoufakis had earlier warned of the damage a Greek exit could inflict on the euroone, telling Italian state television that Athens' departure would spark a domino effect leading to the collapse of the single currency bloc.
The eurozone "is like building a house of cards. If you take out the Greek card, the others will collapse," he said.
- 'Little time to spare' -
Experts said Tsipras had missed a step by failing to woo Greece's creditors in his parliamentary speech.
"With very little time to spare, Tsipras let an opportunity pass to reassure Greeks, the European partners and markets that his government will do what it takes to keep Greece in the euro," Berenberg's Christian Schultz said.
Swiss global financial services UBS said "crunch time" was approaching but thought a compromise was possible through an extension of debt maturities and reduction in Greece's primary surplus.
Under the previous conservative government, Greece was to record a primary surplus -- the budget balance before interest payments on debt -- of around 4.0 percent of output in 2016.
"But the overriding question is whether compromise will be found freely or be forced by economic and financial stress, or even fears of a Greek exit?" it said.
French Finance Minister Michel Sapin summed up the dilemma for EU leaders, saying that Greece needs to be assured it would not be "at the mercy of any sort of panic situation on the markets."
However, "we cannot simply say, we'll finance, we'll finance" Athens without "respect for European rules" in exchange.
In comments likely to fuel the flames, Germany's economy minister rejected calls by Greece for Berlin to pay reparations for World War II damages by the Nazis, insisting the issue was concluded 25 years ago.
"The likelihood is zero," said Sigmar Gabriel, who is also Germany's vice chancellor, in response to Tsipras's claim that his country had a "moral obligation" to request reparations and payment for a forced wartime loan.


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