Greece signals growing optimism over bailout deal

Helena Smith in Athens Friday 8 May 2015

Deputy PM Yannis Dragasakis says upcoming Eurozone meeting could herald agreement with creditors and end months of stalemate

The Greek prime minister, Alexis Tsipras, hugs finance ministry cleaners who were laid-off in 2013 but rehired on Thursday. Photograph: Michael Debets/Demotix/Corbis

Greece’s deputy prime minister has endorsed growing expressions of optimism over talks with the country’s creditors, saying enough common ground has been found to enable the two sides to reach an agreement.

Yannis Dragasakis said he hoped the meeting of Eurozone finance ministers on 11 May would finally break ground by signalling that progress had been made. “I hope on Monday a sign of progress will be given and [they say] an agreement is visible,” the 68-year-old politician told the Guardian in an interview.

“Talks, so far, have shown there is common ground in changes and political measures and, therefore, I believe a deal is possible and in the interests of everyone.”

But Dragasakis, a former communist who oversees the leftist-led government’s economic policy, cautioned that the debt-stricken country’s desperate liquidity problem would also have to be eased.

The European Central Bank’s decision on Wednesday to loosen the noose by increasing emergency financial assistance to the nation’s banking system was unlikely to provide enough breathing space for Athens to stay solvent and keep pace with debt repayments, as well as public sector salaries and pensions. “Co-operation is required from all sides so that the cash flow problem is confronted,” he said.

We have a mandate for a sustainable solution within the Eurozone

Yannis Dragasakis

Athens is in a race against the clock to unlock €7.2bn (£5.3bn) in rescue loans the EU and IMF have refused to disburse until the government delivers a convincing package of reforms. The prime minister, Alexis Tsipras, and his Syiza-dominated administration – elected on a platform to abolish the excoriating austerity that has been demanded in exchange for a €240bn bailout – faces debt repayment deadlines on around €5bn this month alone. Next Tuesday it must meet repayments of a €780m loan instalment to the IMF.

On Thursday the French finance minister, Michel Sapin, joined the chorus of optimism about a breakthrough, telling EU legislators that “the risk of things running off the rails for Greece also entails that risk for Europe”. Earlier this week, German finance minister Wolfgang Schäuble echoed that sentiment, saying “a catastrophe for Greece would be a catastrophe for Europe”, although he today played down expectations of any “spectacular results” on Monday.

Addressing a business forum in Brussels the Greek finance minister, Yanis Varoufakis, also said he believed an agreement would be “in the offing in the next days, at most weeks”.

Analysts said it was clear Athens’s close call with bankruptcy had begun to focus minds as public coffers have emptied in recent weeks, sending the country skating close to the edge of default. On Wednesday, after three months of fraught negotiations, Tsipras signalled he would be willing to discuss labour deregulation and pension reforms – two of the government’s biggest red lines.

 

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Dragasakis, the only left-wing minister to have previous government experience, insisted that an exit from the single currency was not an option. “We do not have a mandate to take Greece out of the Eurozone and it’s not an option either for the government or for Syriza. We have a mandate for a sustainable solution within the Eurozone.”

But an agreement, he said, would have to be enforceable – otherwise it was not beyond the realm of impossibility that the government would be forced to seek approval of the accord by resorting to a referendum. “We need an agreement that we can realise and that can take us out of the deadlock [of self-defeating austerity],” he added.

Dragasakis made clear that Athens was no longer going for a minimum or interim agreement but a comprehensive cash-for-reform deal. Listing the priorities for a deal to be workable, he said it would have to be based on a primary surplus of less than 2% and a revision of Athens’s runaway debt – at 180% of GDP, the highest in Europe – in addition to reforms and the investment programme Brussels was willing to extend to Greece.

The anti-austerity government, he said, had expected the talks to be hard. “We knew that, as the first in Europe trying to change policy, things would be difficult. The troika [of foreign lenders] weren’t just three institutions but a system of power, a state within a state, the real government of the country. We had to change this system, change the rules of the game.”

Reinforcing the sense that there was still some distance to cover before an agreement was sealed, Schäuble told reporters in Berlin: “One shouldn’t assume any kind of spectacular results [at Monday’s meeting] – that is not within the realm of possibilities.” He added that he would meet his Greek counterpart before the start of the meeting.

In a boon to Athens’ embattled government, it emerged last night that Russia “was willing” to consider financing a potential energy partnership that could create thousands of jobs for a nation blighted by record levels of unemployment.

The move – elaborated on in a telephone call between Tsipras and president Vladimir Putin – could see Moscow pouring as much as €2bn into the construction of a pipeline that would transfer natural gas to Europe from Greece’s border with Turkey.

Tsipras, who made an official visit to Moscow in April to discuss the project, has made improved ties with the fellow Orthodox state a central plank of his two-party coalition’s foreign policy – much to the consternation of the EU. His office said Putin had announced he was ready to finance the Greek companies that would construct the gas network.

The news came hours after the government sacked the head of its bank bailout fund in the light of the announcement by prosecutors that she would be among 40 to face criminal charges in connection with bad loans being issued by the defunct state lender Hellenic Postbank.

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