Tough Talks On Greek Debt As D-Day Looms

Written By Unknown on Jumat, 20 Februari 2015 | 20.18

These could well prove the most important few days in the euro's existence.

In the corridors and meeting rooms of the Justus Lipsius building in Brussels, Greece and its euro counterparts have been charged with discussing how to keep the struggling nation in the single currency.

Their chances of success seem to be flagging.

Quite how we got here is a complicated story - it involves political and economic mistakes, financial jiggery-pokery, many decades of historical animosity and some big personality clashes.

Let's leave that aside for a moment and recall where we stand today.

Briefly: Greece is in dire need of money. The state has a series of debts to repay in March, some to the International Monetary Fund, some to the European Central Bank. 

It can't easily raise cash in the open markets (would you really want to lend to Athens right now?) so it will have to find that money elsewhere.

That means borrowing it from its eurozone colleagues. Greece is of course still receiving bailout support from the so-called Troika lenders (the European Commission, ECB and IMF), so the most straightforward thing would be to extend the existing bailout and withdraw some extra cash from it (there's about €7bn of it left, which would be very helpful right now).

However, extending the bailout would also mean extending the conditions attached to it - austerity, privatisations, labour market and pension reforms.

Syriza, the party which leads the new Greek government, adamantly set itself against that in its election campaign. It also said it would refuse to co-operate with the Troika in future.

That leaves it in a sticky place. Its finance minister, Yanis Varoufakis, has spent most of the past few weeks attempting to persuade his European counterparts to lend Greece some cash, but to do it as a "bridging loan" rather than as an extension of the "current programme".

That might seem like a mere terminological distinction - and in one sense it is. But underlying the terminology are real differences.

Signing up to the "current programme" again would mean obeying those hated conditions. A "bridging loan" of some sort, on the other hand, could have some discrete conditions of its own. Though some of these might be uncomfortable, they would at least be of Greece's new government's own making.

The problem is that Greece's creditors are reluctant to let the country off all those conditions they set when lending them money.

For one thing, Greece has already been forgiven a chunk of its debts in 2012; the interest rates and maturities of its debts have been stretched out way into the future, making them cheaper to service.

For another, those conditions were not merely there as punishment - they were there to make the economy more healthy in the future.

Raising retirement ages, removing archaic protections on employees, privatising nationalised industries - those are precisely the kinds of Thatcherite reforms many other countries had to go through long ago, and are reaping the rewards of today.

Then there's the politics: German voters are becoming increasingly disenchanted with the idea of funding a poor creditor elsewhere whose own people seem to hate them.

The Spanish government is desperate that Syriza doesn't succeed, for fear of encouraging its people to vote for their own upstart leftist anti-austerity rival party, Podemos. The Irish would be furious if a country was given special treatment they were denied.

These countervailing forces mean getting an agreement, either today or this weekend or in the coming months, will be very difficult. And, as if things couldn't already be more difficult, the process has also been waylaid by some personal histrionics.

The Greek negotiators have been unpredictable in the extreme - openly leaking bundles of documents, flagrantly disregarding the long-established rules of negotiations and publicly criticising their counterparts.

"These people are crazy," said one eurocrat when the talks broke down the last time, on Monday night. "They're totally crazy."

One can only assume yet more craziness to come in the next hours and days. The latest developments, on Thursday, included a letter from the Greek authorities which seemed to offer massive compromises on its position - including an extension of the bailout in some guise, and Troika supervision.

That was then dismissed abruptly by the Germans, who derided it as a "Trojan horse" gambit.

All of which threatens to make today's negotiations particularly awkward.

Meanwhile, hanging over all of this is the question of whether Greece will have money to pay its bills next month, whether it defaults, and, ultimately, whether it can stay in the euro.


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