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Phillip Inman and Helena Smith in Athens Tuesday 10 February 2015
Alexis Tsipras ‘optimistic’ about reaching compromise with Brussels on bailout despite downgrades and share falls appearing to weaken negotiating position
Prospects for a deal appeared to worsen after sources close to Alexis Tsipras’s government said the Greece would seek a bridging loan lasting until at least the end of August. Photograph: Patrick Domingo/AFP/Getty Images
The Greek prime minister, Alexis Tsipras, has vowed to strike a deal to stay inside the Eurozone after a succession of credit downgrades and spiralling bailout costs appeared to weaken his negotiating position with Brussels.
Tsipras said he was optimistic about reaching a compromise on renegotiating Greece’s €240bn international bailout.
Speaking after a meeting on Tuesday with the Austrian chancellor, Werner Faymann, he said: “There is a common desire to resolve this crisis. I am optimistic that we will reach a compromise with our European partners.”
But his comments came as ratings agency Moody’s downgraded five of Greece’s largest banks and fears of an exit from the euro drove Greek share prices down almost 5%. Shares in several of the banks plunged 10% or more.
Greece planning to ask Euro group for longer bridge programme - live updates
Greece’s government is considering asking the euro group for a bridging loan until the start of September, sources say
In London, the British prime minister, David Cameron, called a meeting of Cobra, the UK government’s emergency committee, to discuss UK preparations for a possible Greek exit.
Despite Tsipras’s comment the prospects for a deal appeared to worsen after sources close to the new government in Athens said the Greek finance ministry would now seek a bridging loan lasting until at least the end of August. This would be two months longer than previously anticipated.
A longer bridging loan would add to the expected €10bn cost under a new deal to fund the Greek exchequer through the summer. The need for extra time is expected to intensify opposition in Berlin, which has rebuffed Athens initial proposals to renegotiate interest payments to the troika of lenders – the European Union, the European Central Bank and the International Monetary Fund.
The German chancellor, Angela Merkel, said she would wait for a sustainable proposal from Greece on repaying its debt and other reform. “I think what counts is what Greece will put on the table,” she said.
Brussels, under pressure from Berlin, is withholding the final €7.2bn payment under the existing debt deal after Greece refused to comply with the troika’s austerity measures.
The Greek finance minister, Yanis Varoufakis, who wants to tie repayments to Greece’s GDP growth, said a deal was necessary to prevent the collapse of the Eurozone and a global recession
“I cannot possibly separate the fate of Greece from the fate of Europe … We are perfectly capable as Europeans to mess things up unnecessarily. We can find the accommodation between Greece and our creditors, our partners, the EU, ECB and IMF,” he told the Guardian, adding that in a depressed economy it was simply impossible for “contractionary contraction” to work.
“There is no economist I know in the world who thinks this programme has worked, or will work … it couldn’t work. It’s not a question of willpower or intelligence, it simply cannot be done in a depressed economy that has no viable banking system that is properly functioning and giving out loans.”
Varoufakis said he recognised that a loan agreement had been signed and that Athens had entered into a legal framework with its international creditors, but added: “There has to be continuity but at the same time the argument that the elections don’t change anything and that the government has to adopt a program it was elected to challenge the logic of, is absurd.”
The growing sense of confusion in European capitals over demands by Athens for an overhaul of its 2010 debt deal prompted further fears that Greece may eventually be forced out of the Eurozone.
On Monday the Greek stock markets fell by almost 5%, leading Paris and Frankfurt down after a recovery last week as investors senses a more conciliatory tone coming from Athens. London’s FTSE 100 headed slightly lower to finish the day at 6837.
The European commission president, Jean-Claude Juncker, told reporters on a visit to Germany: “Greece should not assume that the overall mood has so changed that the Eurozone will adopt Tsipras’s government programme unconditionally.”
The head of the EU’s executive arm, who met the Greek leader in Brussels last week, said he did not expect a deal on the way forward with Greece at an EU summit on Thursday or at a finance ministers’ meeting of the Eurozone on Wednesday.
“I don’t think we’ll reach final conclusions so soon,” Juncker said at a meeting of Germany’s Social Democratic party (SPD) in Nauen, near Berlin.
Speaking from the G20 finance ministers in Istanbul, the German finance minister, Wolfgang Schäuble, a long-time critic of Greek attempts to break with the existing deal, said that if Greece wanted Berlin’s help there needed to be a programme agreed with creditors, rather than the emergency assistance that Athens had called for.
“I still don’t understand how they [Greece] want to do it,” he added.
The one-hour Cobra meeting attended by Foreign Office, Treasury, Downing Street and banking officials examined the risk of contagion to the UK banking system if the Greeks were pushed out of the euro.
No 10 publicised Monday’s Cobra meeting either because Cameron wants to pressure Berlin and Brussels into reaching a deal with Greece or because he wants to highlight the continuing threat to the UK recovery posed by the Eurozone crisis an attempt to underline his government’s perceived economic competence in contrast with Labour
The chancellor, George Osborne, was not at the meeting because he was on his way to Turkey for a meeting of G20 finance ministers.
The UK government spokesman stressed that it was necessary to be vigilant about the developments, but added that since 2012 the European banks had taken steps to ensure that they were more resilient in the face of a further euro crisis.