Greek debt talks with eurozone end without breakthrough

AP News
Posted: Feb 11, 2015 7:43 PM
Greek debt talks with eurozone end without breakthrough

BRUSSELS (AP) — Talks between Greece and its creditors in the 19-country eurozone broke down Thursday without agreement or even a plan of action on how to move forward on the country's debts and bailout.

Following an emergency meeting of the eurogroup in Brussels, the two sides failed to even issue a statement, a sign that a compromise deal over Greece's debts at next Monday's follow-up meeting will be a struggle.

Jeroen Dijsselbloem, the head of the eurogroup of finance ministers, said detailed proposals weren't even discussed, adding that there wasn't enough common ground to chart the road to the next meeting.

"It was my ambition to agree on the steps to take the next couple of days so we could spend them well and make more progress between now and Monday," he said. "Unfortunately we've not been able to do that so we will continue our talks on Monday and move on from there."

Europe has been embroiled in another Greek crisis following the election of the radical-left Syriza government last month. The new government was elected on a mandate to drastically reduce the burden of the country's bailout and the associated budget austerity measures, which it blames in large part for the country's economic woes. Despite a recent modest return to growth, the Greek economy is around 25 percent smaller than it was and poverty and unemployment rates have swelled.

Not deterred by the failure to agree to a new plan, Greece's finance minister, Yanis Varoufakis, laid out the hope that progress could be made at Monday's meeting.

"We had a very constructive and extensive discussion of all the facets of the Greek crisis and the way in which the eurogroup can facilitate the transition to a new phase in the history of the Greek social economy so we overcome the debt deflationary crisis, the humanitarian crisis and so on," Varoufakis said.

Varoufakis said a deal at this meeting, his first as finance minister, was never on the cards.

"We understand each other much, much better now than we did this morning, so I think this is a major achievement because, you know, from understanding, the agreement follows," he said.

If Belgium's finance minister, Johan Van Overtveldt, is any guide, Monday's meeting could go either way.

"Like it was today it went from left to right and up and down, and so it's hard to take an average of it, but it will continue to be a very difficult discussion," he said.

Popular support for a change of course is strong in Greece, with thousands taking to the streets across the country Wednesday to give their backing to the government. Greek police say about 15,000 people attended a rally in Athens' central Syntagma Square. Another 5,000 gathered in the northern city of Thessaloniki.

Smaller similar anti-austerity demonstrations were held in London and Nicosia, and were planned in other European cities and even in New York. "Let Greece Breathe" was one banner on display in London.

Since winning the Greek general election last month, the Greek government has outlined its broad ambition but it has still to present concrete proposals. Varoufakis has said he wants to scrap Greece's current bailout program and agree on a new one. That would take time, though, and Greece's current bailout program ends after Feb. 28.

Without the bailout's financial support, Greece faces bankruptcy — and a possible exit from the eurozone, a development that could further damage Greece's economy at least in the short-term, and throw global financial markets into turmoil.

Varoufakis has suggested Greece be granted a "bridging loan" to tide it over for a few months. In return, Greece would commit to further reforms, particularly on how to deal with the country's notoriously inefficient tax system.

Dijsselbloem said "the possibility of an extension" was discussed. "For some, it is clear that that is the preferred option but we haven't quite come to that conclusion as yet," he said.

For Varoufakis, an extension to the current bailout deal, at least on its current terms, doesn't seem to be something he will consider.

"Greece would never agree to stay in this program because for us this program has been catastrophic," he said. "You only have to walk around the streets of Athens to see it."

On Thursday, the 28 European Union leaders take to the stage and the Greek crisis is likely to feature at least on the sidelines of the summit. The meeting will be the first at which new Greek Prime Minister Alexis Tsipras will be present.

Despite the divisions, the prevailing view in the markets is that some sort of compromise deal will be thrashed out in time for Greece to avoid defaulting on its debts and leaving the euro. Still, markets have been volatile over the past two weeks amid the uncertainty — the early Thursday outcome is unlikely to change that.

That uncertainty was evident in the government's latest sale of 13-week Treasury bills at a significantly higher interest rate than at a similar sale last month. The higher rate Greece had to pay Wednesday — 2.5 percent against 2.15 percent last time — indicates investors are more worried about Greece not repaying its debts.