After a collapse of negotiations over whether and how to resolve Syriza’s demands for a new deal with the Eurozone with the insistence of its counterparties that the new government adhere to the terms of its existing deal, technical discussions are set to resume Friday. The drop-dead date is Monday, since any extension or modification of the current so-called bailout needs to happen by February 28, when it expires. The lead time is necessary because the Germany Bundestag and the Finnish Parliament must approve any new or extended deal.
Greece has requested a new bridge facility with different terms in place, to carry it over while it hopefully works out a broader new set of arrangements with the Troika. There were widespread reports of unified opposition of the Eurogroup, which are the Eurozone finance ministers, prior to their emergency meeting Wednesday. English language reports painted a confusing picture of what transpired. On the one hand, they continued to depict the two sides as hopelessly far apart on their basic positions. Yet leaks while the meeting was underway indicated that progress was being made, only to lead to the apparent disagreement over a formal statement that led to an shambles at the end of the meeting and no plan to continue working-level talks prior to the Monday deadline.
Today, various media outlets reported the resumption of the talks for Friday, along with more conciliatory words from both Merkel and Tsipras. But there was considerable disagreement as to how much thawing had actually occurred.
The most optimistic readings appear to come from the Germany. My big hesitation about saying that is this conclusion comes from a long-standing colleague who on the one hand, is a very close and thorough reader of the German press, but on the other hand, has long believed that a deal would get done because the Troika side was always willing to offer some breaks on debt restructuring and relief on the fiscal surplus that Syriza was now required to meet (4.5%). I’ve only been able to read (through Google Translate) the stories in Frankfurt Allgemeine, and I can’t independently confirm all (or even much) of what he states. So I look to other readers of German newspapers to weigh in.
Separately, Syriza appears to be limited in how much it can retreat from its campaign promises, particularly given the forceful stands it has taken since it has been the lead actor in the new government. So the normal American “surely there is a middle ground when so much is at stake” assumption may not hold, particularly when both sides have little time to propagandize their voters into accepting a significant deviation from stances they previously depicted as inviolable.
Another fly in the ointment is Finland, which is more hard-line than Germany. The Guardian quoted Finnish prime minister Alexander Stubbs’ remarks earlier this week on BBC 4 (hat tip Swedish Lex):
“There are basically two options here. Number one is that Greece continues the programme and we give an extension to that programme. The other option, which I don’t like personally, would be a so-called ‘dirty exit’, where Greece would be on its own trying to claw its way back to the markets.”
My German-reading expert, in addition a Washington insider who has some knowledge of the US exchanges with Germany, contend that Finland won’t be able to stand in the way of a deal if Germany wants one. Operationally, that isn’t narrowly true; the other Eurozone countries would need to find a work-around. How that maps onto the evident need for Germany parliamentary approval for any deal is above my pay grade (ie, would the Monday deal need to have sorted out that fix? That introduces another large measure of complexity).
With those substantial caveats, let’s look at the contrast between the German press reports and the rather large span of readings in the English language press.
My German press reader says that the German media explained the apparent mystery of the eleventh-hour collapse of the talks yesterday. The claim that substantial progress was made is allegedly valid; Germany offered concessions on debt levels and on the primary surplus, and apparently on at least some of the infrastructure sales. Mind you, even before the talks started, the consensus view was that the Troika was prepared to offer debt relief, most likely through an extension of maturities beyond the current 30 years, as well as a reduction in the primary surplus required of Greece. So these changes in financial terms are not as significant in the way of concessions as they might appear, unless the Greeks win their sought-after primary surplus of 1% to 1.5% (from a current level of 4.5%).
The big bone of contention has been the Syriza demand that a significant number of terms in the previously-agreed structural reforms be waived or modified; the Germans, Finns, and Dutch in particular have seen that as tantamount to reneging on a deal and therefore not acceptable. It’s also problematic for all the other countries that agreed to austerity, such as Rajoy’s government in Spain, since if itty bitty Greece could get a break, why couldn’t Spain?
The Greek government, which rejected Troika bailout monitors visiting Greece, reportedly did agree to let them talk to Greek experts. However, the outtrade occurred over drafting a memo stating the position of the parties. The Germans and the Greeks were trying to square the circle of the Germans signaling that what was going on was consistent with their “we are not allowing the deal to be changed” with the Greek need to maintain that they were not giving ground either.
The German media has also apparently reported that Portugal is supporting the Greek position; note that this is inconsistent with a Reuters report as of 6:35 PM yesterday.
One development outside the negotiations was that the ECB increased the amount that Greece could use under the ELA by €5 billion to €65 billion. Business Insider read that as a measure to reassure the markets after the Eurogroup talks fell apart.
Now to the spectrum of opinion in the English-language press. Bloomberg, with Greece and Germany Are Working Toward a Compromise, was upbeat:
Greece and Germany are pursuing a deal on the conditions required to continue the Greek bailout as each side signals a willingness to compromise, according to government officials taking part in the talks.
Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget surplus requirement and conditions to sell off government assets.
For its part, Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Prime Minister Alexis Tsipras’s coalition also might be willing to compromise on privatizations, one of the officials said. All the officials asked not to be named because the deliberations are private and ongoing.
The Wall Street Journal, in Greece, EU Strike Friendlier Tone After Hopes of Quick Deal Are Dashed, was more measured:
The friendlier comments came after an unsuccessful meeting of eurozone finance ministers Wednesday night…
At Thursday’s news conference, Mr. Tsipras dodged the question on whether his government could request an extension of the program after all—a move that he has so far ruled out, claiming that the budget cuts and economic overhauls it entails would drive his country’s economy further into crisis…
Germany Chancellor Angela Merkel , who leads Europe’s biggest economy, said that her first meeting with Mr. Tsipras was “very friendly” and that both of them expressed a willingness to work together.
But Ms. Merkel made few concessions, saying Greece either has to request an extension for its bailout or demonstrate that the conditions attached to that program can be implemented by the end of the month.
“Those are the only two possibilities,” she said.
Earlier Thursday, Mr. Tsipras held talks with Dutch Finance Minister Jeroen Dijsselbloem, who presides over the regular meetings of his eurozone counterparts, in an effort to patch over some of Wednesday night’s disagreements. After that talk, the two agreed that technical work would begin to define “common ground” between measures mandated under the existing bailout and the plans of the new government in Athens….
Finnish Prime Minister Alexander Stubb said the agreement between Messrs. Tsipras and Dijsselbloem was a good sign. But he stressed that there was still distance between the two sides. “We’re 18 countries that have commitments—and then there’s Greece, which has demands,” he said.
And the Financial Times, with Merkel keeps up the heat on Greece, emphasized the distance that needs to be covered:
Angela Merkel, German chancellor, reiterated her government’s hardline stance on Greece’s options for a fiscal rescue, saying Athens could either complete all the requirements of its €172bn bailout by the end of the month or request an extension of the programme beyond its February 28 expiry.
Ms Merkel’s stance, her first public comments on the intensifying Greek stand-off after meeting the country’s new prime minister Alexis Tsipras at Thursday’s EU summit in Brussels, continued to shut off Mr Tsipras’ preferred path: a new, revised bailout agreement with less austerity demands than the current programme…
In a sign the two sides were making incremental progress, Mr Tsipras and Jeroen Dijsselbloem, the Dutch finance minister who chairs the committee of his 18 counterparts, agreed to start technical negotiations between Athens and its international creditors on a way forward…
But Mr Dijsselbloem struck a cautious note, saying that, while it may be possible to begin the technical work of determining which parts of the current bailout the Tsipras government would agree to continue and which reforms it seeks to scrap, reaching a political agreement on Monday would be more difficult.
“I am very cautious on the political side,” Mr Dijsselbloem said. “It is going to be very difficult. It is going to take time. Don’t get your hopes up yet.”
Note that I ran the pink paper’s account account by my German press watcher, and he was dismissive, contending that Merkel was setting herself out to be the rescuer of the Eurozone, and was separately also getting pressure from the US. He puts the odds of a deal at 60/40 or even 65/35. Even though he is normally quite cynical, I don’t see him taking seriously enough the possibility that all the leaks to German journalists about how accommodating its government has been is a no-lose proposition for Merkel: it allows Merkel (in fairness, with some justification since Germany is the linchpin) to take credit if a deal gets done by Monday, and to pin blame even more on the Greeks if the two sides fail to come to terms.
Again, between the fluid nature of the situation and the inevitable spin-doctoring by all parties, it is hard to get a reading on the state of play. We will likely get more leaks over the next few days as negotiations progress. Readers in Europe are very much encouraged to provide updates in the form of news reports and germane analyses in the comments section.