International

Greece rejects extension of EU bailout

BRUSSELS: Greece rejected a proposal by its eurozone partners Monday that it should accept a six-month extension of its international bailout program while sticking to the terms of its agreement with lenders, casting talks on its debt into disarray.

EU officials said the talks were over unless Athens changed its mind after a leftist-led government won power last month and vowed to scrap the 240-billion euro bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.

A Greek official said Finance Minister Yanis Varoufakis had rebuffed a draft statement put to him at a eurozone finance ministers’ meeting in Brussels that spoke of Greece extending the current program.

“Some people’s insistence on the Greek government implementing the bailout is unreasonable and cannot be accepted,” the official said. “Those who keep returning to this issue are wasting their time. Under such circumstances, there cannot be a deal today.”

European Commission Vice-President Valdis Dombrovskis told reporters after the talks broke up after less than four hours that eurozone partners were willing to resume talks with Greece if and when it changed its position.

“It was clearly decided that if and once this request for an extension of the bailout is there, if there are certain commitments from the Greek authorities to stick to the program, then the chairman of the Eurogroup will announce the next Eurogroup,” Dombrovskis said.

German Finance Minister Wolfgang Schaeuble said before the talks that Greece had lived beyond its means for a long time and there was no appetite in Europe for giving it any more money without guarantees it was getting its finances in order.

Failure to reach a deal would raise fears that Greece could be forced out of the eurozone. The European Central Bank is due to review Wednesday how much longer it is prepared to allow the Greek central bank to continue providing emergency funds to keep Greek banks afloat.

As the meeting in Brusssels broke up, a senior Greek banker said Greece’s stance boded ill for the markets and the banks.

“It is a very negative development for the economy and the banks. The outflows will continue. We are losing 400-500 million every day and that means about 2 billion every week. We will have pressure on stocks and bond yields tomorrow.”

Varoufakis had spelled out in a combative New York Times article his country’s refusal to be treated as a “debt colony” subjected to “the greatest austerity for the most depressed economy.”

An opinion poll showed 68 percent of Greeks want a “fair” compromise with eurozone partners while 30 percent said the government should stand tough even if it means reverting to the drachma currency. The poll found 81 percent want to stay in the euro.

Deposit outflows in Greece have picked up. JP Morgan bank said money was fleeing Greek banks at about 2 billion euros ($2.2 billion) a week, leaving 14 weeks before the banks run out of collateral.

 
A version of this article appeared in the print edition of The Daily Star on February 17, 2015, on page 6.

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