Greece looks to Putin as standoff in EU puts repayment in doubt

As a European deal to give more aid to Athens falters and the prospect of a default looms, Greek prime minister Alexis Tsipras is preparing to meet Russian president Vladimir Putin next week .

The timing has raised questions. Is the visit an ordinary component of the new Greek government's multipronged foreign policy, or a pivot toward Russia for financial aid in the event that talks with European officials collapse outright?

Greece told its creditors on Wednesday that it will run out of money on April 9th. It appealed for more loans before reforms on which new disbursements hinge are agreed and implemented. The request was rejected, euro zone officials said.

The appeal was made by Athens at a teleconference of euro zone deputy finance ministers organised to assess how far Athens was from meeting the conditions for unlocking new financial aid.

Greece’s appeal echoed remarks on Wednesday by interior minister Nikos Voutsis, that the country would have to choose whether to pay back €450 million to the International Monetary Fund on April 9th or pay salaries and pensions. Voutsis said it would choose the latter.

A government spokesman later denied that Greece would miss the IMF repayment deadline. But the choice Athens said it would face was repeated at the closed teleconference with creditors.

Greece can get €7.2 billion in new loans from the IMF and the euro zone if it implements reforms that the previous government agreed would be the condition for disbursement. The new government does not want to implement most of these measures because they go against its election promises of ending budget consolidation policies.

No postmortem

The government is now negotiating a new list of steps that would keep both sides satisfied. The Greek representative on the call said that a deal on the reforms should not be a “postmortem” for the country as “there is no way we can go beyond April 9th”. He added that holding off with new loans until a deal with creditors can be reached was unrealistic.

But others on the call, including Germany, reiterated that for Greece to get the reminder of the €240 billion bailout, Athens would have to agree on the reforms and implement them – and that there was no chance of releasing the funds on April 9th.

Tsipras, who came to power in January, is meeting Putin on April 8th. He originally planned to travel to Moscow in May but he accelerated the meeting with Putin a couple of weeks ago as Greece came to loggerheads with Germany and other European countries over the terms for releasing the money. Without it, Greece could go bankrupt or possibly exit the euro zone.

The visit to Moscow is being billed by Athens as a routine meeting to strengthen the relationship between the countries, which have longstanding political and religious ties. But some Greek officials have suggested that Athens might be tempted to assess whether Russia, which is itself squaring off with Europe over the conflict in Ukraine, could be willing to ride in as a white knight if Europe steps back.

"This is an attempt to ratchet up the pressure on the rest of the euro zone to make concessions to Greece," said Simon Tilford, deputy director of the Centre for European Reform in London. If so, he added, it is a gamble that could backfire.

“Flirting with Russia is guaranteed to antagonise the rest of the euro zone,” Tilford said. “It will make it harder for those in Germany who were arguing for a more conciliatory line toward Greece to keep it.”

As Tsipras struggles to secure a financial bailout to stay in the euro, his chief domestic rival said he’s open to offering a political rescue.

Opposition leader Antonis Samaras, who was ousted by Tsipras in the January elections, signalled his willingness to join a unity government if the concessions required to win emergency loans drive a wedge through the ruling anti-austerity coalition.

“If the plan is to keep Greece in the euro area, we will provide support,” Samaras said in an interview in Athens on Wednesday. “Exit would signal a total catastrophe.”

ECB ally

Earlier, Germany’s top envoy for Europe urged Greece to end its spat with the European Central Bank, saying ECB president Mario Draghi was an ally in the country’s struggle for funding.

Deputy foreign minister Michael Roth said he made the point in talks with Greek government officials in Athens this week. Confrontation with the ECB won’t help Greece and it would be disastrous if Europe failed to put the country on the path to prosperity, he said.

As Greece and its European creditors seek a financing deal, Roth’s trip to Athens reflects a German effort to smooth relations and keep Greece in the euro zone.

While Tsipras and German chancellor Angela Merkel both say they want Greece to stay in the euro, Roth said Europe and the Greek government need to avoid letting the standoff drift to a point of a Greek exit by accident.

“Nobody has the slightest interest in a ‘Graccident,’ least of all the Greek government,” he said. “Time is very much running out, and that’s clear to everybody. Every day, every hour counts.”

Relations between the new Greek government and other European countries have been strained almost since Tsipras took office.With tax revenues falling quickly, Greece will be hard-pressed to pay the €450 million owed to the IMF on April 9th, the day after before Tsipras’ visit to Moscow.

Russian aid

Most top Greek government officials have rejected suggestions in recent weeks that they might turn to Russia for aid. But others have courted the idea publicly, including Panos Kammenos, Greece’s defence minister.

Greece could seek financial help from Russia, China or the United States as a plan B if Germany “remains rigid and wants to blow Europe apart”, Kammenos declared last month.

Russia's foreign minister, Sergei Lavrov, has said Moscow would consider a Greek request for aid if one is made – an offer the Russian ambassador to Greece repeated in an interview with a Greek newspaper over the weekend.

Last Monday, Greek energy minister Panagiotis Lafazanis travelled to Moscow to meet with his Russian counterpart and the chief executive of the Russian energy giant Gazprom. As he prepared to leave for Moscow, Lafazanis lashed out at the EU and Germany for "tightening the noose" around the Greek economy.

Last month, Donald Tusk, president of the European Council, said in an interview that Tsipras had assured him he would not be a "troublemaker" over European policy toward Russia.

But few people have forgotten how the new Syriza-led government in Greece, just days after it was elected in January, denounced EU sanctions against Russia over Ukraine.

The move took EU leaders by surprise and threatened to upend Europe’s policy toward Moscow. Facing pressure, Athens quickly reversed its position and joined other countries in a unanimous vote to continue sanctions for Russia.

Still, some officials in Brussels saw Greece’s flip-flop as a bargaining ploy to win concessions from EU creditors over the terms of Greece’s bailout package.

Contracting economy

Even if Greece eventually sought financial assistance from Moscow, Russia’s economy – under pressure amid a collapse in oil prices and the lengthy conflict in Ukraine – is expected to contract at least 4 per cent this year.

While the rouble has been rising in recent days and the sense that the Kremlin may be getting things under control increases, Russia may think twice if Tsipras were to seek large sums of financial aid, especially if loans risked not being repaid any time in the foreseeable future.

“Moscow could provide a little bit of funding to tide over the Greeks,” Tilford said. “But it is not in a position to provide the kind of money that Greece would need to stay in the euro zone.”

Greece’s European partners have suggested that Athens may need to apply for a third bailout this summer, before an additional €7 billion worth of debts to the IMF and the ECB come due.

Any new package could be in the tens of billions of euros, and would most certainly hinge on a string of harsh conditions that Greece would rather avoid.

In the meantime, the haggling between Athens and Brussels continues.

Greece sent a more detailed list of planned reforms to institutions representing the creditors (the European Commission, the ECB and the IMF) earlier on Wednesday. But the list was a work in progress and far from satisfactory, representatives of the institutions said on the call.

Some policies, such as social measures, went in the right direction; others still lacked detail or an estimation of how much they would cost, they said.

Others still, like some measures on tax, the labour market, a law to allow the payment of tax debt in instalments and steps to limit the autonomy of public revenue administrations, went clearly against earlier agreed objectives, officials said.

Fiscal reform assumptions were far too optimistic, some officials on the call said.

April deal impossible

Euro zone officials said on the call that even though teams of creditor representatives have been in Athens for three weeks, useful work went on only in the past several days . At this rate, they said, reaching a deal by the end of April was impossible.

They said creditor representatives were struggling to get information on the policy intentions of the Geek government because Greek officials were sometimes unaware of plans or not allowed to talk about them.

Euro zone deputy finance ministers and the institutions representing the creditors will hold further discussions on Greece on April 8th, but it is unlikely that a deal could be reached by then, officials said.

They said the aim was to have an agreed list of reforms, including their impact on the Greek budget by the week of the next meeting of euro zone finance ministers, on April 24th in Riga. – (Copyright New York Times 2015/ Reuters)