BRUSSELS/ATHENS: A war of words between Greece and EU paymaster Germany escalated Tuesday with Athens’ new leftist prime minister rejecting what he called “blackmail” to extend an international bailout and vowing to rush through laws to reverse labor reforms.
Behind the scenes, a source familiar with the talks in Brussels said Greece Wednesday intends to ask for an extension for up to six months of its loan agreement with the eurozone, on conditions that are still under negotiation. He drew a distinction between a loan agreement and the full bailout program.
Financial markets held their nerve after the latest talks among eurozone finance ministers broke down Monday and EU partners gave Greece until the end of the week to request an extension or lose financial aid.
Many investors believe that whatever the rhetoric, both sides will find a face-saving formula before Athens’ credit lines expire in 10 days. If they fail, Greece could rapidly run out of cash and need its own currency.
Greek banking sources said outflows of deposits increased Tuesday after the failure Monday’s talks, but were not as severe as on some days last month around the election of a radical anti-austerity government.
The European Central Bank will review emergency funding for Greek banks Wednesday but should not cut the lifeline this week, a source familiar with the situation said. Both sides continue to insist Greece will remain in the euro.
Greek Prime Minister Alexis Tsipras told MPs in his Syriza party that the government – elected to scrap the bailout, repeal hated austerity measures and end cooperation with the “troika” of EU, ECB and IMF lenders – would not compromise.
Greece would no longer be treated like a colony of a pariah in Europe, Tsipras said. He accused “certain circles” in the eurozone of seeking to undermine his government and German Finance Minister Wolfgang Schaeuble of losing his cool and making comments that degraded Greece.Schaeuble, 72, drove home a take-it-or-leave-it message, wondering sarcastically whether Tsipras and his “famous economist” of a finance minister knew what they wanted or were making the right choices for the Greek people. “The question still remains if Greece wants a program at all or not,” he told reporters in Brussels after another day of meetings in Brussels. “All of us ... want the eurozone to stay together.
“But everyone must do their part and it’s a decision that’s up to Athens alone ... On Feb. 28, at midnight, it’s over.”
Seasoned Eurocrats said Tsipras and his team seemed unprepared, unrealistic and oblivious to the dangers they were courting by refusing to roll over a 240 billion euro credit deal and demanding easier terms.
Tsipras, 40, said he was in no rush and would not give in to “blackmail” from technocrats – a new hint that he hoped hitherto unresponsive EU leaders would step in and clinch with him a political agreement which they declined to do last week.
EU officials were unsure whether his fierce rhetoric was aimed at bolstering domestic support to avert a backlash against eventual compromise, or signaled that he was retreating from a deal.
Greek Finance Minister Yanis Varoufakis – an academic economist – dismissed suggestions that his only option was to ask for the bailout to be extended. He said he had been ready to sign a text floated by EU Economic Affairs Commissioner Pierre Moscovici that Greek officials said called for the “loan agreement” to be extended as part of a “transition” to a new deal.
An “honorable solution” was possible, Varoufakis insisted.
His French counterpart, Michel Sapin, suggested Greece could win leeway to run a smaller budget surplus of 1.5 percent of GDP and said clinching a deal was largely a matter of finding the right words.
It was not clear whether Sapin’s compromise ideas had any backing from Germany or other eurozone hard-liners.
Tsipras raised the stakes by vowing to move fast to scrap labor market deregulation brought in by his conservative predecessor to meet international creditors’ demands for less protection for workers’ rights. That contrasted with Varoufakis’ apparent readiness in Brussels to delay measures to unpick the bailout program for several months in return for continued funding.