Greece agreed on Thursday to talk to its creditors about the
way out of its hated international bailout in a political climbdown that could
prevent its new leftist-led government running out of money as early as next
month.
Prime Minister Alexis Tsipras, attending his first European
Union summit, agreed with the chairman of euro zone finance ministers, Jeroen
Dijsselbloem, that Greek officials would meet representatives of the European
Commission, the European Central Bank and the IMF on Friday.
"(We) agreed today to ask the institutions to engage
with the Greek authorities to start work on a technical assessment of the
common ground between the current program and the Greek government's
plans," Dijsselbloem tweeted. This, he said, would pave the way for
crucial talks between euro zone finance ministers next Monday.
The shift by Tsipras marked a potential first step towards
resolving a crisis that has raised the risk of Greece being forced to abandon
the euro, which could spark wider financial turmoil. A Greek official in Athens
said it was a positive move towards a new financial arrangement with creditors.
It came less than 24 hours after euro zone finance ministers
failed to agree on a statement on the next procedural steps because Athens did
not want any reference to the unpopular bailout or the "troika" of
lenders enforcing it.
Tsipras won election last month promising to scrap the 240
billion euro ($273 billion) bailout, end cooperation with the
"troika", reverse austerity measures that have cast many Greeks into
poverty and negotiate a reduction in the debt burden.
The procedural step forward came after the ECB's Governing
Council extended a cash lifeline for Greek banks for another week, authorizing
an extra 5 billion euros in emergency lending assistance (ELA) by the Greek
central bank. The council decided in a telephone conference to review the
program on Feb. 18.
Timing the review right after euro zone finance ministers
meet again next week keeps Athens on a short leash.
The ECB authorized the temporary funding expedient for banks
last week when it stopped accepting Greek government bonds in return for
liquidity.
Arriving for his first European Union summit, Tsipras told
reporters: "I'm very confident that together we can find a mutually viable
solution in order to heal the wounds of austerity, to tackle the humanitarian
crisis across the EU and bring Europe back to the road of growth and social
cohesion."
Chancellor Angela Merkel, vilified by the Greek left as
Europe's "austerity queen", said Germany was prepared for a
compromise and finance ministers had a few more days to consider Greece's
proposals before next Monday's meeting.
"Europe always aims to find a compromise, and that is
the success of Europe," she said on arrival in Brussels. "Germany is
ready for that. However, it must also be said that Europe's credibility
naturally depends on us respecting rules and being reliable with each
other."
The two leaders came face-to-face for the first time in the
EU Council chamber. According to Greek aides, a smiling Merkel congratulated
Tsipras on his election and said: "I hope we will have good cooperation
despite the difficulties." Tsipras smiled back and replied: "I hope
so."
Greek officials said no private meeting was planned between
the two during the one-day EU summit. They insisted to Greek reporters that
Tsipras had not agreed to deal with the "troika" but with a body
called the Eurogroup Working Group.
RESPECT DISCIPLINE
Other leaders said it was up to Greece to respect budget
discipline and economic reform commitments made by previous governments if it
wanted continued aid.
The two sides remain far apart on the subject of Greece's
future funding, fiscal and economic policies.
Finance Minister Yanis Varoufakis has proposed swapping euro
zone loans for long-dated GDP-linked bonds that would pay interest as the
economy recovers, and ECB holdings of Greek debt for interest-bearing perpetual
bonds with no repayment deadline.
ECB policymaker Jens Weidmann, head of Germany's Bundesbank,
said the official loans already had long maturities, low interest rates and in
some cases an interest repayment moratorium, so rescheduling would not help
Greek finances in the short term.
Greece should only receive more support if it complies with
its existing agreements, he said, adding that a relaxation of Greek targets
would be "counter-productive" to restoring investor confidence.
ECB executive board member Peter Praet said the central bank
would apply its ELA rules to Greece. "It is key that the banks benefiting
from emergency liquidity assistance remain solvent," he told the Financial
Times.
His comments appeared to signal that the central bank could
cut the cash lifeline if Greece failed to reach a deal with its creditors
before the bailout expires at the end of this month.
That would expose Greek banks to a risk of capital flight
and collapse, which analysts say could in turn trigger a Greek exit from the
euro zone.
Highlighting the precariousness of Greece's position, tax
revenues fell about 1 billion euros short of the budget target in January as
Greeks held off payments before the Jan. 25 election, anticipating that the new
leftist government would scrap an unpopular property levy.
SHORT SHRIFT
A Greek official played down the threat to the banking
system if the ECB were to cut off funding after Feb. 28.
"If we have a conclusion that says there is a program
in place, or if we are close to an agreement, no liquidity problems will
exist," he said.
The euro zone, the ECB and IMF are insisting on firm
conditions for any "bridge" financing. Other governments, including
Ireland, Portugal and Spain, which have had to seek help under tough
conditions, are also keen their own voters do not see Tsipras winning a better
deal than they did.
EU officials play down the risk of Greece being forced out
of the euro zone, something Tsipras and most Greeks do not want and which could
send destabilizing ripples across the bloc as it faces a confrontation with
Russia over Ukraine.
However, the politics of the Greek debate are difficult.
"The real risk in Athens seems to be that Tsipras has
raised expectations to such an extent that he could find it extremely difficult
to back down from his rhetoric and strike a deal which the rest of the Eurozone
could accept," Berenberg Bank economists wrote in a note on Thursday.
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