Germany and its allies turned up the pressure on Greece to accept their conditions to stay in the euro as the region’s top finance officials descended on Brussels to hammer out a deal.
An agreement on extending Greece’s bailout program, which expires at the end of February, appears unlikely, a European Union official said. That would lead to more talks Sunday or Monday, the official said. A preliminary round was proving “very difficult,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup, told reporters.
Without aid, Prime Minister Alexis Tsipras’s government in Athens risks running out of cash as early as next month. By bowing to German demands, the premier who promised to end austerity risks a domestic backlash.
“Germany, the Netherlands and others will be hard and they will insist that Greece pays back the solidarity shown by the member states by respecting the conditions,” Malta’s finance minister, Edward Scicluna, said in an interview. “They’ve now reached a point where they will tell Greece ‘if you really want to leave, leave.’”
In a formal request on Thursday to extend the financial lifeline for six months, Greek Finance Minister Yanis Varoufakis said he would accept the financial and procedural conditions of the existing deal while asking for negotiations on other elements.
Germany’s Finance Ministry almost immediately rebuffed the latest Greek formula, saying the country needs to make a firmer commitment to austerity. A subsequent conversation between Tsipras and German Chancellor Angela Merkel sparked investor optimism. Speaking in Paris Friday, she said “substantial improvements” are still needed to the Greek proposal.
Arriving in Brussels, the Dutch representative, Eric Wiebes, backed Schaeuble’s approach.
“The Netherlands agrees with the Germans that the letter gave insufficient confirmation to get sufficient clarity the Greeks are prepared to fulfill all the conditions,” he told reporters. “This session must make clear whether the Greek are prepared to fulfill all the conditions. When that’s the case an extension can of course be discussed.”
Varoufakis urged his euro-area antagonists to cut Greece a break after four years of austerity. The Greek economy is about a quarter smaller than it was in 2009.
“We are expecting our partners to meet us not halfway but one fifth of the way,” he said. “I have no doubts that there is going to be a very collegial discussion and, hopefully, at the end of this, we’ll come out with some white smoke.”
Investors are betting a potential financial calamity in the form of Greece being forced out of the euro will be avoided. Greek bonds rose for a third day, sending the yield on the three-year notes down 26 basis points to 16.8 percent at 5:25 p.m. in Athens. That compares with a record 128 percent in March 2012. The Athens Stock Exchange benchmark index slid 0.3 percent, paring initial gains.
“Hopes for a compromise at today’s Eurogroup have been raised,” analysts including Nikos Koskoletos at Athens-based Eurobank Equities wrote in a note to clients on Friday. “The key stumbling block remains the clearer language regarding the conclusion of the current program, as demanded by Greece’s creditors, and more details regarding the attainment of fiscal targets.”
The Bloomberg Greece Sovereign Bond Index shows confidence remains well above the worst levels of pessimism during the past five years. The index, a market-value weighted measure of Greece’s bonds, was at 90.89 at Thursday’s close. That’s more than five times higher than the level reached in 2012.
The euro-area finance ministers, who were originally set to convene at 3 p.m., had not gathered as of 4:30 p.m. They’ll be joined by European Central Bank President Mario Draghi, ECB Executive Board member Benoit Coeure, and Christine Lagarde, managing director of the International Monetary Fund.