‘Greece will never present a budget deficit again’

Agence France-Presse

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‘Greece will never present a budget deficit again’
'We need to end the malignancies that have afflicted the Greek economy in the past year,' said Greek Finance Minister Yanis Varoufakis, who was on a tour to drum up support for debt relief

ATHENS, Greece – Greek Finance Minister Yanis Varoufakis, on a whistlestop tour to drum up support for debt relief, said talks Wednesday at the European Central Bank had been “fruitful” and encouraging. (READ: Greece offers olive branch as search for allies begins

Varoufakis, who was expected to face stiff resistance from ECB chief Mario Draghi over proposals to renegotiate the terms of Greece’s massive bailout, told reporters afterward: “We had a very fruitful discussion and exchange.”

There was an “excellent line of communication” between him and Draghi, “which gives me a great deal of encouragement for the future,” the minister said after the meeting at the ECB’s Frankfurt headquarters. 

A report in the Financial Times had suggested that Draghi would take a tough line and might even block a key element of Athens’ plan.

Varoufakis said Draghi “was particularly helpful in outlining the mechanism by which the ECB supports eurozone member states including Greece”.

The ECB chief laid out the “constraints, the rules, the regulations, the process by which the relationship between Greece, the eurozone and, of course, the central bank must unfold,” he said.

As for his government’s own plans, “I had an opportunity to present to him our government’s utter and unwavering determination that it can’t possibly be business as usual for Greece,” Varoufakis said.

“We need to end the malignancies that have afflicted the Greek economy in the past year.”

Varoufakis and his Prime Minister Alexis Tsipras are on a charm offensive in Europe to drum up support for Athens’ planned renegotiation of its 240 billion euro ($270 billion) bailout.

Varoufakis has already taken his case to London and Rome, while Tsipras was scheduled to meet European Commission president Jean-Claude Juncker in Brussels on Wednesday before heading to Paris.

Tsipras said after meeting Wednesday with European Parliament President Martin Schulz in Brussels that he was optimistic for a “viable and mutually acceptable solution.”

The next stop for Varoufakis will be a meeting with his German counterpart Wolfgang Schaeuble in Berlin on Thursday. 

Varoufakis said he was “extremely eager” to meet Schaeuble, whom he described as “an intellectual force behind the project of the EU”.

Varoufakis’ visit to Frankfurt had been seen as especially important as the ECB is reported to be opposed to a pivotal part of his plan: a request for bridging finance needed to keep Greece solvent until June.

PROTEST. Greek pensioners gather outside the Finance Ministry in central Athens late on December 10, 2014. Photo by Louisa Gouliamaki/AFP

‘Bankrupt country’

According to the Financial Times, the ECB’s opposition could leave Athens running on empty at the end of February — a suggestion that may spook the markets.

Ahead of his talks with Draghi, Varoufakis told the German news weekly Die Zeit: “The European Central Bank should support our banks so that we can keep ourselves above water.”

In the interview published Wednesday, he said he was the “finance minister of a bankrupt country”.  

He also pledged: “I can promise you: Excluding interest payments, Greece will never present a budget deficit again. Never, never, never!”

The FT cited officials involved in deliberations as saying the ECB will refuse to raise an existing 15 billion euro cap on the amount of short-term treasury bills which Greek banks can place with the ECB in exchange for cash. 

Greece is looking to raise 10 billion euros in additional treasury bills — but the ECB would need to raise the cap on such debt issuance to 25 billion.

‘Debt swaps not haircuts’

The Greek finance minister is pushing the idea of debt swaps that would avoid the need for creditors to accept “haircuts” on the country’s 315 billion euro foreign debt, while easing the monthly financing burden on the Athens government.

He said Greece’s ideas would be put to eurozone finance ministers next week ahead of a summit of EU leaders.

Markets interpreted the Greek initiative as reducing the likelihood of any unilateral debt cancellation, which would entail a risk of reigniting the kind of financial turmoil that has severely damaged leading economies since 2007.

Led by the Athens bourse, which closed up more than 11 percent Tuesday, stock markets across Europe rose on the news, as did Wall Street and Asia in turn, while the euro was sharply higher.

The Greek government denied that the debt swaps proposal was a climbdown from election promises to force a renegotiation of its debt terms.

German Chancellor Angela Merkel was non-committal about the Greek proposals. 

“It is clear the Greek government is still establishing its position,” she said Tuesday. “We await their proposals and there will be time enough to discuss them.”

Privately, German officials said there was “little room for manoeuvre” on the debt conditions.

Greece’s debt is worth 1.75 times the country’s entire annual economic output. 

Because of severe spending cuts, the government now raises substantially more in taxes than it pays to fund services, but that surplus is more than wiped out by the cost of servicing the debt.

Tsipras has dismissed the “troika” system monitoring Greece’s economy – the International Monetary Fund, European Commission and ECB – as lacking legal status.

But he also says Greece has no intention of not meeting its outstanding obligations to the bailout creditors.

Tsipras will next visit Paris in search of support from France, the eurozone’s second-biggest economy and, like Italy, a critic of EU “austerity.” – Rappler.com 


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