By Bruno Waterfield, in Brussels, and Peter Spence 12 February 2015
Alexis Tsipras will clash with Angela Merkel at an EU summit today after the Greek prime minister personally intervened to block a provisional agreement between his country and the Eurozone on Wednesday night
Alexis Tsipras, the new Greek prime minister, will meet the German chancellor at an EU summit later today Photo: AFP
Time is running out for Greece ahead of the next round of talks between Eurozone finance ministers on Monday before a session of the European Central Bank’s governing council on Thursday.
EU officials were stunned after Nikos Pappas, the chief of staff for Mr Tsipras, intervened to torpedo a carefully crafted statement that followed seven hours of negotiations between the Eurozone and Yanis Varoufakis, his finance minister.
Eurozone leaders had hoped to defuse a tense meeting of the European Council on Thursday and head off a confrontation between Mr Tsipras and the German Chancellor. But the peace plan, involving concessions to Athens, was rejected.
According to officials and diplomats, figures in the far-Left Syriza leadership surrounding Mr Tsipras objected to wording that committed Greece to exploring the “possibilities for extending and successfully concluding the present programme”.
A draft statement seen by the Telegraph said: “The Greek authorities have agreed to work closely and constructively with the institutions to explore the possibilities for extending and successfully concluding the present programme taking into account the new government's plans.
Greece standoff: as it happened February 12 2015 12 Feb 2015
“If this is successful this will bridge the time for the Greek authorities and the Euro group to work on possible new contractual arrangements.”
Germany had made concessions to allow language holding out the possibility of “new contractual arrangements” diluting Eurozone-imposed austerity on Greece. It also held out the possibility of a “bridge”, possibly including new loans, for the new government.
Following the impasse and telephone talks with his government’s leadership, Mr Varoufakis withdrew Greek support for the statement. This meant that his first meeting with the Eurozone ended in disarray ahead of a crunch meeting next Monday.
“We explained that we were elected to question the logic of the programme. At the end of the road we need to find an equilibrium between the clash of theses two basic principles. We need to find some kind of bridge, something new. We put our proposals for a new agreement and contract with Europe.”
On Thursday morning, Mr Varoufakis hit out at “dubious claims based on dubious leaks” and denied “unseemly” speculation over the draft statement, which he said had not been agreed with Greece.
Greece must pay a grand total of €22.5bn back to its creditors, mainly the IMF (€8.7bn) and the EU (€6.7bn), over the course of the year. At the same time it must prop up teetering banks and fund Syriza’s Left-wing spending programme.
Without Eurozone aid in the form of a “bridging agreement” lasting until September, Greece will collapse.
Disagreement at the next meeting on February 16 could trigger a run on Greek banks which depend on Eurozone guarantees and assistance to survive.
The Greek government is the majority stakeholder in three out four of the country’s “systemic” banks and can not prop them up without EU support.
Two days later, the ECB’s governing council meets in Frankfurt and, if Mr Varoufakis has failed to cut a deal the euro’s all-powerful central bank, could threaten switch off assistance to Greek banks, as it did with Cyprus in 2013.
The resulting bank run would led to the collapse of finances in Greece within days.
Athens is seeking a “bridge financing” deal to alleviate the burden of debt on the Greek economy. Greece has proposed that some of its loans be replaced with growth-linked “Bisque bonds”.
These instruments would reduce the burden of debt payments on the Greek government until growth picked up. Leaders in Athens also want austerity targets eased, and to fund a humanitarian programme for those worst-affected by the country’s economic crisis.