Greece is on course for a major showdown with its fellow eurozone members next week over the terms of the country’s bailout.
A Greek government official promised yesterday that the Syriza-led coalition will not be softening its approach in next Wednesday’s Eurogroup meeting of finance ministers and will demand a full overhaul of the terms of the country’s financial support programme.
“We will not accept any deal which is not related to a new programme,” the unnamed official told Reuters. Instead, the official said Greece will ask for a financial “bridge agreement” until Athens is able to present a new debt and reform programme for approval. Yanis Varoufakis, the Greek Finance Minister, raised the bridging-loan proposal after meeting his German counterpart, Wolfgang Schäuble, on Thursday.
Yet that proposal was apparently ruled out by the chair of the Eurogroup Jeroen Dijsselbloem yesterday, who told reporters in The Hague “we don’t do” bridge loans. Mr Dijsselbloem added: “A simple extension is possible as long as they fully take over the programme.”
The European Central Bank tightened the screw on Greece earlier this week when it said it would refuse to accept Greek government bonds as collateral from Greek banks when lending. However, the central bank was yesterday reported to have approved €60bn of Emergency Liquidity Assistance (ELA) for Greek banks. The emergency funding is sanctioned by the ECB but the risk of the loans sits on the National Bank of Greece’s balance sheet. It is more expensive for the banks involved, being priced at an interest rate of 1.55 per cent.
Members of the ECB’s governing council have to approve the renewal of the emergency funding every two weeks, but it could be pulled if the council decides by a two-thirds majority that it is being used to prop up insolvent banks.
That could set off a catastrophic chain reaction of bank failures, crippling Greece’s central bank and forcing the country out of the single currency. Bank shares were hit again yesterday after double-digit falls on Thursday.
Greece’s bail-out from the troika of the ECB, European Union and International Monetary Fund formally ends on 28 February. Syriza refuses to recognise the deadline
BNY Mellon analyst Neil Mellor said: “Ultimately [the ECB funding] will be taken away if there is no improvement. The stipulations have not changed. It’s not looking good as it stands.
“It’s very clear that Syriza’s strategy is injecting fears of a Greece exit… but both sides have a mutual distrust of the unknown.”
Prime Minister Alexis Tsipras will set out his plans to revive the Greek economy on Sunday at the start of a three-day debate culminating in a confidence vote to confirm his government.
Despite the tensions, some analysts said Mr Varoufakis’s tour of European capitals this week showed subtle signs of accomodation. “He talked to all institutions that form the ‘troika’ whose end he had proclaimed the Friday before,” noted Holger Schmieding of Berenberg. “He dropped the word ‘haircut’ from his discussion about debt relief and suggested Greece will not implement all of Syriza’s election promises and that it will not act before it has reached an understanding with its creditors.”Reuse content