Syriza offers compromise as Greek government blinks first

By Peter Spence, Economics Correspondent Tuesday 10 February 2015

A four-part plan put forward by a new Greek government has signalled that the left-wing Syriza could be willing to broker a deal with its creditors

Yanis Varoufakis, Greece's charismatic finance minister Photo: AFP

Greece’s hard left government has signalled that it could be willing to compromise, and has unveiled a moderate four-part plan to reduce the burden of austerity on the country’s economy.

The country's Syriza-led finance ministry has proposed that Greece’s 3pc of GDP primary surplus target for 2015 be reduced to 1.49pc, and that Greek debt is reduced, according to the Greek daily Kathimerini.

The demands were seen as a step down from more hostile comments made in previous days, and could signal a path to an eventual compromise between a new Greek government and its creditors.

Greece remains in pursuit of a bridge deal, to provide financing for upcoming payments it is obligated to make under the terms of its bailout. According to MNI the European Commission will propose a six month extension.

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Citing government sources Kathimerini reported that Syriza also suggested that 30pc of reforms imposed by the Troika - formed of the EU, European Central Bank (ECB) and International Monetary Fund - be undone.

In their place Greece would eliminate 10 new reforms, agreed by Greek officials and the Organisation for Economic Cooperation and Development.

The fourth recommendation put forward was for the implementation of measures set out by Alexis Tsipras, Greece’s Prime Minister, on Sunday night.

Syriza has rolled back on some of the moves it made during its first days in government, and will now go ahead with the privatisation of Piraeus Port, the Wall Street Journal said.

In recent weeks the Greek government "has been more confrontational that markets had expected", said Athanasios Vamvakidis, a strategist at Bank of America Merrill Lynch (BAML).

Tensions between Syriza and other parties, particularly Germany, have raised fears that a deal might not be done, and that Greece might exit the Eurozone as a result.

Greek stocks have taken a battering as a result, while the yields on government bonds have risen. "We expect the actual policy negotiations to be very difficult," said Mr Vamvakidis.

Shares on the Athens Stock Exchange rallied by just over 2pc on Tuesday morning as a compromise appeared in sight.

Yanis Varoufakis, Greece's finance minister, is due to meet with his European counterparts today. Michala Marcussen, of Societe Generale, said: "We expect the meetings to result in a short-term agreement which lays out a timeframe for the bargaining process."

"We see such an agreement as a pre-requisite for the ECB to continue financing Greek banks," she added.

Wolfgang Schauble, Germany’s finance minister, said on Monday that there could be no bridging agreement for Greece.

He said that the country must stick to the terms of its €245bn bail-out package and secure a negotiated extension. “If they want to deal with us, they need a programme,” he added.

If no agreement materialises, BAML said that this could lead to a "bank run and capital controls in Greece, eventually leading to euro exit". Odds offered by Paddy Power suggested that the chance of a 'Grexit' by the end of 2018 had risen from 3/1 last week to 5/4 on Monday.

George Osborne, the UK's Chancellor, has described the risks to the UK from a Greek stand off as "growing each day".

He has warned that the risks of a "very bad outcome" between Greece and the euro area have become heightened.

Syriza offers compromise as Greek government blinks first - Telegraph