Greece, creditors lay ground for last-ditch meeting

BRUSSELS, Belgium – Greece began tough negotiations with its creditors Friday as hopes rose that a make-or-break meeting next week could reach a deal on the new government’s demands to overhaul its huge international bailout.

The technical talks in Brussels came a day after Greece’s anti-austerity Prime Minister Alexis Tsipras laid out his plans to sceptical counterparts including German Chancellor Angela Merkel at his first European summit.

World stocks and the euro both rose Friday amid growing optimism that debt-stricken Athens could now thrash out a compromise with finance ministers from the 19-country eurozone at a critical meeting on Monday.

But the clock is ticking as the 240-billion-euro ($270-billion) EU-IMF bailout is due to expire at the end of February, and failure to reach a replacement agreement could trigger a Greek default and a chaotic exit from the euro.

Eurogroup chief Jeroen Dijsselbloem said Friday he was “pessimistic” about any quick deal with Greece, labouring under a mountain of debt equivalent to 175 percent of its annual economic output.

“The Greeks have sky-high ambitions. The possibilities, given the state of the Greek economy, are limited,” said Dijsselbloem, who is also Dutch finance minister, adding: “I don’t know if we’ll get there by Monday.”

Tsipras and his hard-left Syriza party won elections on January 25 on the back of his promises to replace Greece’s current bailout, and to ditch the hated “troika” of its creditors — the European Union, International Monetary Fund and European Central Bank.

‘Troika doesn’t exist’

Greek voters have been exhausted by five years of austerity overseen by the troika as a condition of a series of bailouts since 2010 that saved the Mediterranean nation from bankruptcy.

But there were signs of compromise on both sides on Friday.

Despite declaring after the summit that “the troika doesn’t exist”, Tsipras agreed to let Greek officials meet Friday for technical discussions with the EU, IMF and ECB.

Meanwhile a senior EU official said a new bailout programme was an option, even though the rest of the eurozone has previously ruled out any change.

“It is not crucial to extend. One could also agree that one will commence discussions on a new programme,” the official said on condition of anonymity, adding that it could even help to come up with a new name for the troika.

European Commission chief Jean-Claude Juncker meanwhile issued a fresh criticism of the troika, saying Friday that its ways of working, including sending bureaucrats to Athens to inspect the progress of austerity measures, “pose a lot of questions”.

In a sign that Germany, Europe’s largest economy and champion of austerity, could be softening, Merkel suggested at the EU summit that a “compromise” was possible and said her first meeting with Tsipras had been friendly.

European tensions

But the tensions between Athens and Berlin were underscored when Germany Friday condemned as “vile” a Greek newspaper caricature that showed finance minister Wolfgang Schaeuble in a Nazi-era army uniform, alluding to Germany’s wartime occupation of the country and demands for compensation.

Other countries that oppose Greece’s plans include Spain, where the leftist Podemos movement is ahead in the polls, and in former bailout countries like Ireland and Portugal that do not see why Greece should get an easy ride.

There was cautious optimism on Friday in Greece with stocks closing up over 5.0 percent after a week of volatile trade.

“Bridge of dialogue,” wrote the centre-left Ethnos daily after the summit while liberal Kathimerini saw a “window of opportunity for compromise.”

But the Greek government warned against celebrating before a deal was done.

“Greeks should understand that this is a critical and difficult negotiation, the pressure is enormous,” government spokesman Gabriel Sakellaridis said.

Tsipras said at the summit that he had discussed the possibility of a six-month bridging loan to give Greece time to work on a different programme that would be acceptable to its creditors.

Under the Greek proposals, Athens would stick to 70 percent of the existing bailout programme but it would overhaul the remaining 30 percent which it sees as damaging to growth and toxic for ordinary Greeks.

Athens also proposes debt swaps based on economic performance as the Greek economy moves out of recession. – Rappler.com