European finance ministers started work on reviving Greece’s troubled rescue program as new Prime Minister Alexis Tsipras took office promising to end austerity.
Finance chiefs from the 19-nation euro area signaled their willingness to do a deal with Tsipras -- so long as the new Greek prime minister drops his demand for a debt writedown. At a meeting in Brussels on Monday, ministers agreed quickly to work with the new government to help keep Greece in the euro, Dutch Finance Minister Jeroen Dijsselbloem said.
“We stand ready to support them in that ambition,” said Dijsselbloem, who led the meeting.
Officials in Brussels and Athens, as well as Berlin, Frankfurt and Washington, must reconcile creditors demands for more reform with voters’ exhaustion with austerity in order to stop Greece running out of money by mid-year. In a post-election speech, Tsipras, 40, said he aims to give Greeks back their dignity.
The new prime minister drew congratulations and an invitation to Brussels from European Commission President Jean-Claude Juncker in a telephone call yesterday, an EU official said, and IMF Managing Director Christine Lagarde also lent her support to the new government. The outreach shows that authorities are anxious to find a way out of the standoff over Greece’s debts and remaining aid funds.
Euro-area ministers may “dangle the potential for future debt relief” through maturity extensions and interest rate cuts, while also preparing for hard negotiations as Greece’s cash needs increase, Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said in a telephone interview. He said at the end of the day, there still needs to be a deal on the current troika program.
“It’s true that the Greek electorate has spoken yesterday,” Kirkegaard said. Still, “Greece owes its debt to other taxpayers in the euro area and guess what, they have a vote too,” he added.
Tsipras’s Syriza party and the Independent Greeks announced plans for a coalition in Athens after Syriza won an emphatic election victory by harnessing a public backlash against years of job losses and hardship.
While Tsipras promised Greeks he’ll seek a writedown on the country’s debt from the European Central Bank, the International Monetary Fund and the euro area, most of the finance ministers said that is not up for debate. Monday’s meeting came too early for Greece’s incoming government to send its own finance minister.
“Nobody is forcing anything onto Greece but the obligations apply,” German Finance Minister Wolfgang Schaeuble said. “I don’t think it makes any sense now” to talk about a debt writedown, he added.
All the same, officials offered several areas for potential compromise.
Concessions to Greece
Thomas Wieser, the European Union official in charge of preparing meetings of euro-area finance ministers, told Austrian radio ORF that Greece’s official creditors will probably extend the deadline for the country to qualify for its next aid disbursement and Malta’s finance minister, Edward Scicluna, said the troika is also likely to ease its demands for further economic overhauls in Greece.
“The dialogue with the Greek authorities needs to be positive, calm and respectful,” French Finance Minister Michel Sapin told reporters after the meeting.
Greece’s program of austerity was in return for pledges of 240 billion euros ($270 billion) in aid since May 2010 with Germany as the biggest contributor.
For Yanis Varoufakis, an economist and Syriza lawmaker who is tipped as a potential Greek finance minister, the bailout wasn’t a rescue but “a vicious cycle,” that patently hasn’t worked.
“We want to sit down with our colleagues in Europe and find a mutually beneficial agreement,” he said in an interview with Bloomberg Television.
Dijsselbloem will travel to Athens to meet with the country’s new finance minister this week, according to a Greek official who asked not to be named.
Stavros Theodorakis, the leader of the centrist To Potami group which won 17 out of 300 seats in the new parliament, said his party is also willing to join negotiations with the troika because the country needs to present a united front. He spoke to Mega TV in Athens after meeting with Tsipras.
The euro climbed on Monday for the first time in three days against the dollar as investors concluded that a Greek exit from the single currency zone was less likely, while Greek stocks and bonds fell. Dijsselbloem said markets reacted moderately to the elections. EU finance ministers are used to elections and are prepared to take them in their stride, he added.