Greece rejects Eurozone's 'absurd' bailout offer as time runs out on talks

By Bruno Waterfield, in Brussels Wednesday 16 February 2015

Stand-off between Greece and its creditors looks no closer to ending as a second round of crisis talks between euro finance ministers began in Brussels

Unless a compromise can be found Greek banks will lose guarantees and emergency assistance at the end of month Photo: Reuters

The latest meeting between Greece and its international lenders over the debt-stricken country's €172bn bailout ended in disarray on Monday, as the Eurozone's offer was rejected as "absurd" and "unacceptable".

Greece has demanded an end to the EU and International Monetary Fund's “adjustment” programme of economic reforms and austerity agreed three years ago in return for a bailout.

Eurozone finance ministers met in Brussels on Monday hoping to reach a compromise before the bailout expires on February 28.

However, Greek politicians reacted with anger to a draft statement tabled by Jeroen Dijsselbloem, the Dutch finance minister who chairs meetings of Eurozone finance ministers.

The communiqué committed Greece's far-Left Syriza government to “successfully conclude” the EU-IMF programme

“The Greek authorities gave their firm commitment to refrain from unilateral action and will work in close agreement with its European and international partners, especially in the field of tax policy, privatisation, labour market reforms, financial sector and pensions,” the draft stated.

“The Greek authorities committed to ensure appropriate primary fiscal surpluses and financing in order to guarantee debt sustainability in line wit the targets agreed on the November 2012 Euro group statement. Moreover, any new measures should be funded, and not endanger financial stability.

“On this basis the Greek authorities expressed their intention to request a six-month technical extension of the current programme as an intermediate step. This would bridge the time for the Greek authorities and the eurogroup to work on a follow up arrangement.”

Greece's government blasted the document, with one source telling Reuters that "carrying out the bailout programme was off the table at the summit. Those who bring this back are wasting their time."

To replace the bailout, Greece is seeking a “bridging arrangement”, worth up to €21bn, that would allow the government in Athens breathing space to implement radical economic reforms.

Wolfgang Schaeuble, the German finance minister, accused the Greek government of “behaving irresponsibly” by threatening to tear up agreements made with the Eurozone in return for access to the loans which are all that stand between Greece and financial collapse.

“It seems like we have no results so far. I’m quite sceptical. The Greek government has not moved, apparently,” he said.

“As long as the Greek government doesn’t want a programme, I don’t have to think about options.”

Greece is asking the Eurozone to allow it to issue treasury bills backed by the European Central Bank (ECB) and to unlock bonds currently deposited as bank guarantees in the Hellenic Financial Stability Fund to be used for public financing.

Yanis Varoufakis, the Greek finance minister, has also told the Eurozone that Athens will not implement unpopular austerity measures, such as privatisations or changes to labour laws, that were promised in return for EU aid.

“We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our due,” he wrote in The New York Times on Monday.

Many Eurozone finance ministers expressed dismay that a weekend of talks between EU, International Monetary Fund and Greek technical experts had not generated any lines of possible compromise.

Eurozone finance ministers are preparing to continue negotiations on Thursday or Friday.

The ECB has allowed emergency funding for Greek banks worth €65bn and the policy is expected to remain unchanged as long as Greece is involved in negotiations for a new programme or an extension to existing measures.

Unless a compromise can be found Greek banks will lose guarantees and emergency assistance at the end of month, leaving the country facing almost certain financial collapse and unable to pay back its debts.

Michael Noonan, the Irish finance minister, criticised Greece for failing to provide the specifics of a compromise with the Eurozone and for refusing to agree to an extension of existing programmes to buy time for further talks.

“We would certainly accede to a Greek request for an extension of the programme. If that were to happen, some of the roadblocks would fall away and it would be possible to get down to specifics,” he said.

While EU officials are prepared to negotiate a new bailout programme for Greece there is widespread pessimism that there is not enough time over the next 12 days to find a compromise, making an extension of the existing measures the preferred option.

As well as being acceptable to the Eurozone's 18 other member countries, any new deal for Greece must be ratified in at least six national parliaments, including in Finland, where MPs are hostile to any new Greek loans ahead of elections in April.

“In my view, extension of the programme is the most immediate way of making progress but I would not rule out both; an extension of the current programme and the negotiation of a new programme somewhere around mid-summer,” said Mr Noonan.

Attitudes have hardened against Greece, and Hans Joerg Schelling, the Austrian finance minister, accused Mr Varoufakis of damaging trust by agreeing a joint statement with the Eurozone only to pull out at the last moment.

“We think it's possible to find a solution but it is very difficult. It is a problem of days not weeks,” he said.

Talks last Wednesday ended in deadlock when Greece objected to wording that committed it to exploring the “possibilities for extending and successfully concluding the present programme” as a "bridge to work on possible new contractual arrangements”.

Sympathy for Greece is also lacking in southern European countries such as Spain, where governments are facing insurgent popular parties modelled on Syriza and its path to power in Greece.

”Our red line is that loans must be paid back in full. Rules must be respected,” said Luis de Guindos, the Spanish finance minister.

Greece rejects Eurozone's 'absurd' bailout offer as time runs out on talks - Telegraph