Greek Talks With Euro-Area Finance Ministers Break Up

by Rebecca Christie Corina Ruhe Jonathan Stearns February 17, 2015

German Finance Minister Wolfgang Schaeuble speaks to the press as he arrives to attend an Euro group Finance ministers meeting at the European Council in Brussels, on Feb. 16, 2015. Photographer: Virginia Mayo/AP Photo

(Bloomberg) -- European Commission President Jean-Claude Juncker’s 11th-hour effort to strike a deal with Greece was parried by euro-area finance ministers refusing to loosen their grip on the country’s economy.

Talks Monday in Brussels ended abruptly and Greek Finance Minister Yanis Varoufakis claimed a bait-and-switch, saying Juncker’s commission had offered a path forward that euro-area finance ministers then refused to put on the table. Instead, Dutch Finance Minister Jeroen Dijsselbloem offered a different statement tying Greece to an extension of its existing program.

Varoufakis rejected that proposal out of hand.

According to seven European officials with direct knowledge of the talks, the meeting unravelled from that point. Dijsselbloem, who leads the finance ministers’ group, halted the proceedings, saying ministers could reconvene on Friday if there’s a breakthrough.

“The next step has to come from the Greek authorities,” Dijsselbloem told reporters after the meeting. “They have to make up their minds whether they will ask for an extension.”

Varoufakis said Greece had no choice but to refuse the statement on offer. “In the history of the European Union nothing good has ever come out of ultimatum,” he told reporters after the meeting.

Running Short

Greece is willing to extend the country’s current aid program as long as the step is done on the right terms, Varoufakis said. Prime Minister Alexis Tsipras’s government will now return to the bargaining table and “we are ready and willing to do whatever it takes to reach an honourable agreement over the next two days,” he said.

Monday’s impasse comes a day after Juncker took a personal stake in the Greek negotiations. Tsipras requested a call with Juncker that took place as the commission chief made a “last-ditch effort” to find common ground, an EU official said Sunday.

Officials are trying to agree on a program of financial support to keep Greece afloat beyond the end of the month when its existing program expires. Without a deal, Greece could run out of money by the end of March, forcing Tsipras to consider abandoning his promises to the electorate or even leaving the single currency.

Varoufakis said his government had been “happy” with a “splendid,” separate draft communiqué that was produced by European Economic Affairs Commissioner Pierre Moscovici before the meeting.

‘Absurd’ Demands

Moscovici, speaking after the meeting, called on euro-area finance ministers to be “logical, not ideological” as negotiations continue. He urged Greece to request an extension and said concessions so far leave ample room for a deal.

“We both agreed that it could be possible to keep 70 per cent of the current program and to replace measures, but which have to be fully financed, up to 30 per cent” of current requirements, Moscovici said. “Thirty per cent is not a minor room for politics.”

From Athens, the Greek government lashed out at Dijsselbloem’s demands, saying it was “absurd” and “unacceptable” to ask the country to request an extension of the current rescue deal.

Euro-area officials focused on the terms of the previous bailouts “are wasting their time,” the Greek statement said. “The insistence of some circles that the new government enforce the memorandum is absurd and unacceptable.”

Other People’s Pensions

Austrian Finance Minister Hans-Joerg Schelling said euro-area nations must be fully on board with any aid pledges made on behalf of their taxpayers, citing public resentment toward Tsipras’s election promises.

“It’s unacceptable that Greece raises pensions funded by the other countries even as in other countries pensions may be just half of what’s paid out in Greece,” he said.

Some finance chiefs countered that Greece didn’t put enough specific plans on the table. Greece did not present any new data or numbers in between when finance chiefs gathered last week and Monday’s meeting in Brussels, Pierre Gramegna, Luxembourg’s finance minister, told reporters after the meeting.

“Greece finds itself now closer to a new bankruptcy within the euro and potentially” leaving the currency union, Nicholas Economides, professor of economics at Stern Business School, New York University, said in an e-mail. “Greece could run out of money in March.”

Amid all the frustration, Italian Finance Minister Pier Carlo Padoan said Greece leaving the euro zone remains “out of the question,” in comments to reporters Monday night.

IMF Aid

“I am not worried,” Padoan said. “I am convinced that we will ultimately reach a common ground and a common decision.”

Greece has so far been promised 240 billion-euro ($274 billion) under two bailouts. Any deal might have set the stage for a follow-on aid program or credit line that would maintain oversight by the European Commission, the ECB and the International Monetary Fund.

IMF Managing Director Christine Lagarde said Greece will need to follow the rules to tap into more of its bailout. Any review would take weeks, if not months, to see if Greece could qualify for another aid disbursement, she said.

Dijsselbloem said flexibility “could commence immediately” if the Greeks ask to extend the current program. He said talks can’t take place if there’s no program or if certain areas are seen as off-limits before talks start.

“Within the program there is room to discuss,” Dijsselbloem said. As for any funds from the bailouts so far unused, “if the program expires, the money simply flows back,” he said.

Greek Talks With Euro-Area Finance Ministers Break Up - Bloomberg Business