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Banks, Financial

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Categorized | Economy

Greece will no longer deal with ‘troika’

Posted on January 30, 2015

Greek economist Yanis Varoufakis is seen outside the Syriza party headquarters in Athens on January 25 2015©Reuters

Yanis Varoufakis

Greece will no longer co-operate with the “troika” of international lenders that has overseen its four-year bailout programme, the country’s finance minister said, as the new Greek government adopted a defiant posture toward its creditors.

Yanis Varoufakis also said Greece would not accept an extension of its EU bailout, which expires at the end of February, and without which Greek banks could be shut off from European Central Bank funding.

“This position enabled us to win the trust of the Greek people,” Mr Varoufakis said during a joint news conference with Jeroen Dijsselbloem, chairman of the euroroup of eurozone finance ministers, who was visiting Athens for the first time since a leftwing government came to power this week.

    Mr Dijsselbloem countered by rejecting the government’s call for an international conference that would consider writing off part of Greece’s huge debt, which last year amounted to 175 per cent of national output.

    “As for the thought of a conference on debt restructuring, you must realise that this conference already exists and it’s called the eurogroup,” Mr Dijsselbloem said.

    The exchange — along with tough words from Berlin — captured the adversarial mood as the new government and its eurozone partners made their first formal contact, and set the stage for a tense stretch of negotiations that could determine Greece’s future in the eurozone.

    Speaking to the Financial Times in London, Pierre Moscovici, Europe’s economics commissioner, urged calm, saying: “We all need to be careful about the economic situation in Greece. Our common goal is to enhance growth. For that we need pragmatism and respect for commitments, from both sides.”

    But, since taking power this week, Greece’s government has alarmed creditors and investors with pledges to freeze privatisations, rehire state workers and otherwise roll back reforms previous governments adopted as part of the bailout.

    Mr Varoufakis, emboldened by his far-left Syriza party’s success in last Sunday’s election, said Greece “is working from the standpoint of the best possible co-operation with its institutional partners and the International Monetary Fund, but not with a (bailout) programme that we think is anti-European.”

    He also blasted the deeply unpopular bailout monitors from the European Commission, IMF and ECB — also known as “ the troika” — saying: “We are not going to co-operate with a rottenly constructed committee.”

    But Mr Dijsselbloem warned the new government against taking unilateral steps or ignoring current arrangements with lenders, saying “the problems of the Greek economy have not disappeared overnight with the elections.”

    We’re prepared for any discussions at any time, but the basis can’t be changed. Beyond that, it is hard to blackmail us

    – Wolfgang Schäuble

    Patience for Greece is running particularly thin in Germany, where Wolfgang Schäuble, finance minister, warned Athens on Friday against trying to “blackmail” Germany with its financial demands.

    Speaking at a business conference, Mr Schäuble said Germany was ready to co-operate but only on the basis of current agreements, which involve Athens completing structural reforms in return for financial support. “We’re prepared for any discussions at any time, but the basis can’t be changed,” he said. “Beyond that, it is hard to blackmail us.”

    Mindful of many Germans’ concerns about pouring more money into Greece, Mr Schäuble said the current €240bn bailout programme was “exceptionally generous” and that Berlin would work only “in this framework and no other”.

    If the bailout is not renewed before February 28, Greece would lose access to desperately needed ECB credit lines for its banks, raising the possibility of a liquidity crisis that could trigger “a credit event” similar to the forced closure of Cypriot banks in 2013 and the imposition of the eurozone’s first exchange controls.

    Martin Jäger, the finance ministry spokesman, said that any request for an extension of the existing financing programme would only be acceptable when it was “tied with a clear readiness of Greece to implement the agreed reforms”.

    The finance ministry did nothing to conceal the tension between Mr Schäuble and Mr Varoufakis, confirming that there had been no exchange of phone calls between ministers, as is normal with new EU appointments.

    The chancellery said there were no plans for Angela Merkel to meet Alexis Tsipras, the Greek prime minister before the next EU summit on February 12.

    Mr Tsipras softened his anti-German rhetoric during the election campaign but insisted there was “no reason” to visit Berlin immediately to discuss Greece’s plans for exiting its bailout and seeking a debt write-off.