Greek charm offensive hit a wall in Berlin washington post
Protesters wave a Greek flag and shout slogans during an anti-austerity rally outside the Greek Parliament in Athens, Thursday, Feb. 5, 2015. The peaceful demonstration was organized on social media after the European Central Bank tightened bank limits on Greece, and drew thousands to rallies in Athens and Greece’s second largest city, Thessaloniki. (Thanassis Stavrakis/Associated Press)
BERLIN — A whistle-stop tour of European capitals netted Greece’s finance minister few, if any, concessions over the country’s debt — but the prevailing view in markets is that his anti-austerity government will reach agreement with its creditors in the coming weeks.
Barely 10 days after radical left-wing Syriza was swept to power in Athens, analysts expect a compromise over Greece’s debts to emerge, allowing it to remain a member of the 19-country eurozone.
Finance Minister Yanis Varoufakis’ breathless dash across Europe, which in less than a week took him to Paris, London, Rome and Frankfurt, came to an end with his visit Thursday to Berlin where he met with his counterpart, Wolfgang Schaeuble.
Despite his charm offensive, Varoufakis isn’t returning home to Athens with anything tangible. And following a decision late Wednesday by the European Central Bank to stop lending to Greek banks using the nation’s junk-rated government bonds as collateral, the financial backdrop may in fact be slightly more precarious.
Though no one expected Varoufakis to talk Schaeuble into a wholesale overhaul of Greece’s debt and austerity program, there were few signs that the two were positioned for a breakthrough any time soon. Schaeuble said he and Varoufakis “agreed to disagree” at their meeting in the German capital, and that a writedown, or haircut of Greece’s debt, wasn’t on the negotiating table.
“Greece belongs to the euro,” Schaeuble said. “But we don’t really agree on what we have to do now despite a very intense, open discussion.”
Gary Jenkins, chief credit strategist at LNG Capital, said an eventual compromise is still the most likely outcome — although he did warn of a so-called “Grexit” by accident.
“In order to avoid a default and an exit from the eurozone, the Greek politicians will have to moderate their position,” he said.
Germany will be key on how discussions pan out over the coming weeks, including at next week’s summit of European Union leaders in Brussels.
Germany’s views matter as it is the biggest European contributor to Greece’s five-year bailout program. Germany is a staunch proponent of the strict fiscal discipline that Greece has to impose in return for the rescue money that has prevented it going bankrupt. Still, the deep income and spending cuts hit the Greek economy hard. It’s now around a quarter smaller than it was six years ago while unemployment, particularly among the young, is near record-high levels.
Varoufakis — who went out of his way to praise the veteran Schaeuble as “a European statesman for whom European unity is a lifelong project” — insisted that it’s not Athens’ intention to default on its debts and that it wants to carve out a new compromise deal that will be to the mutual benefit of Germany and Greece.
He said Greece would do everything to avoid any default and said he was confident that Athens and its partners would “put the D-word out of court.”
“We didn’t discuss Greece’s debt schedule for repayments, we didn’t discuss a (debt) haircut,” Varoufakis said. “We set the scene for deliberations that will lead to an approach that will put an end to this seemingly never-ending crisis.”
Varoufakis said the Greek government is looking for a bridging program between now and the end of May to give room for talks on “a new contract” with the European Central Bank, International Monetary Fund and European Union.
Schaeuble renewed offers to help Greece strengthen its tax system and said some things the new government has announced go in the right direction — such as getting the rich to pay tax and combating corruption.
But he said that “some of the measures that have been announced ... don’t necessarily go in the right direction.” He also made it clear that it’s important to respect existing agreements, arguing that “reliability is the condition for confidence.”
The discussions came as jittery investors dumped Greek shares after the European Central Bank tightened the screws on the country’s banking system. Shares on the volatile Athens stock exchange dived nearly 10 percent on opening, but recovered a bit, particularly after Varoufakis’ meeting with Schaeuble, and closed 3.4 percent down. At one point, the interest rate on Greece’s 10-year bonds also ratcheted 0.63 percentage point higher to 10.42 percent but an easing of concerns saw it back down at 9.71 percent.
The Greek government played down the impact on Greece’s banking system from the ECB’s move, insisting it would stick to its anti-austerity agenda. It said the ECB ruling put pressure on Athens and its creditors alike to strike a deal.
“Greece now has clear negotiating strength,” Prime Minister Alexis Tsipras told his party lawmakers after the new parliament was sworn in Thursday. “It took just one week, with a new government and a new type of government, and we manage to change the agenda of the discussion in Europe.”
A complete cutoff from the ECB, including a refusal of more emergency credit, could pull the plug on Greek banks, leaving the government with no other source of funds to rescue them except for printing a new national currency. However, analysts say the ECB will be reluctant to make such a move unless politicians have exhausted all their options for a compromise.
After markets closed and the intense day of negotiations ended, thousands gathered in Athens and No. 2 city Thessaloniki, to attend an anti-austerity rally — the first not aimed against the government since the Greek crisis started five years ago.
At the gathering — strangely quiet compared with the dozens that had occurred before it — the protesters wandered up unopposed by police to the entrance of parliament, many forming small groups to discuss the day’s events.
“I’ve been to so many demonstrations, but none were like this. The feeling we all have is one of hope,” said Georgia Kakava, an unemployed film operator.
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Nicholas Paphitis contributed from Athens, Greece. Derek Gatopoulos in Athens, and Costas Kantouris in Thessaloniki contributed to this report.
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