Angela Monaghan Friday 20 February 2015
Germany says Greek proposals for a six-month extension to its bailout programme do not go far enough
Before we close up for today, here is a summary of the main events:
- It was officially confirmed by euro group minister Jeroen Dijsselbloem on Twitter
- As details of the proposals emerged, commentators concluded that it amounted to a climb-down for Athens
- The European Commission welcomed the plans and said they could pave the way to Eurozone stability
- Meanwhile the European Central Bank published its first set of minutes, from its January policy meeting
Kate Connolly, the Guardian’s Berlin correspondent, brings us more on Germany’s rejection of Greek proposals:
Schauble continues to insist that Greece sticks to the bailout conditions agreed with previous governments under which financial support will be given only in exchange for substantial structural reforms.
The finance ministry’s position risks deepening splits within Europe over how to deal with Greece as an end of February deadline nears at which the previous bailout agreement with its creditors and the European Central Bank runs out, leaving Greece facing bankruptcy.
In contrast to Berlin, the EU commission president Jean-Claude Juncker welcomed the Greek application, saying in his opinion it could pave the way for a “sensible compromise in the interest of financial stability in the Eurozone as a whole”.
But experts said Greece was merely playing for time, and that its application had indeed contained no new commitments. “The Greeks have simply tried to pass the buck back to the middle,” Matthias Kullas from the Centre for European Politics in Freiburg told The Guardian.
He stressed the German reaction was not a rejection over reaching a compromise with Greece, but did mean that expectations of an agreement on Friday when finance ministers from the euro group meet again, were now “slim”.
“If an agreement is reached, it will be at the last minute,” he said. “It’s in the interest of both sides to stick to their guns. The earlier one of them diverts from his course, the weaker his position becomes and the more elbow room he leaves for the other.”
Greece: it's this deal or no deal
Reuters says the message from Greece is that euro group finance ministers have two options tomorrow - accept the deal it has put on the table or reject it.
- 19-Feb-2015 14:29 - GREEK GOVT SAYS EUROGROUP TOMORROW HAS ONLY TWO OPTIONS, TO EITHER ACCEPT OR REJECT OFFER MADE BY GREECE TODAY
- 19-Feb-2015 14:30 - GREEK GOVT SAYS EUROGROUP’S DECISION WILL SHOW WHO WANTS A SOLUTION AND WHO DOES NOT
Helena Smith brings us this update from Athens:
Eerie silence from Greek officials on Germany’s rejection of Athens’ proposal. Insiders expressed surprise that officials had “had the time” to properly contemplate the request but refused to be drawn further. When the response comes it will come from the top, they said.
Meanwhile, however, comments by former French president Valery Giscard d’Estaing re Greece leaving the euro zone have caused some commotion.
The former president, who worked hard to promote Greece’s entry to the European Union described Athens’ admission to the single currency in 2001 as “evidently a mistake” this morning and advocated that the debt-stricken now make a “friendly exit.”
One Greek official told me the former president’s intervention was “less than helpful at such a sensitive time. Old leaders should learn to shut up, he said.
Guardian economics editor Larry Elliott: “The white flag has been raised over Athens” Photograph: Murdo Macleod/Murdo Macleod
“The white flag has been raised over Athens” according to Larry Elliott, the Guardian’s economics editor.
Greece has bowed to the intense pressure of its Eurozone partners and will stick to austerity. After defiantly saying for the past three weeks that it will end the country’s fiscal waterboarding, the Syriza-led government is suing for peace.
That, bluntly, is the only way to interpret news that Greece has formally asked for a six-month extension to its bailout agreement. There is no longer the pretence that the bailout is to be replaced by a loan agreement with no strings attached. The hated troika of the European Central Bank, the European Union and the International Monetary Fund will be monitoring Greece’s economy for the next six months, something that has been anathema to Syriza until now.
The Greek government has some demands of its own. It wants to negotiate a new growth deal for the four years until 2019. It is asking for debt relief under the terms of the bailout agreement signed in November 2012. And it wants to be able to take steps to deal with the humanitarian crisis caused by the 25% collapse in the size of the economy over the past five years.
Germany’s rejection of Greece’s proposals is a reminder of how volatile and changeable the situation is.
Kathleen Brooks, research director at forex.com:
The Greek crisis remains fluid, and the situation continues to change on a daily basis. Yesterday, the outlook was bleak until the ECB stepped in a boosted its emergency lending assistance to Greek banks. Today, the situation improved further on the back of news that the euro group will meet on Friday , which is a sign that Greece may have shifted its negotiating position to a more euro group-friendly stance. However, excitement is being contained after Germany said it would reject the deal proposed by Greece in its current form.
The Euro group meeting on Friday, the third in a week, comes after Greece requested a 6-month bailout extension. The good news is that, if approved, Greece will be able to pay back the EUR 21 billion of principal debt repayments that come due between now and August. The bad news, is that even if this extension is approved, we will be back in the same position in 6-months’ time and Greece’s long-term debt problems remain unsolved.
In the longer term, the apparent U-turn by the Greek government seems at odds with Syriza’s election pledge. This could put pressure on the new government to continue to demand a new bailout agreement without austerity conditions when the next round of Greek bailout negotiations come round sometime in the summer. Don’t expect the Greek crisis to go away just because of any “positive” developments in the next few days.
Greek assets have been knocked off their highs on the back of the German comments that it rejects Greece’s proposal, however 10-year yields remain below 10%. If the rest of the EU agrees with Greece’s proposal, then surely Germany will have to acquiesce? If they do then expect European risk assets to stage a rally, if not, then we could see a sharp increase in risk aversion.