Greece faces ultimatum over looming funding gap

New coalition government to get final opportunity to seek extension to bailout programme

Protesters gather in front of parliament during an anti-austerity and pro-government demonstration in Athens on Sunday. Photograph: Reuters

Protesters gather in front of parliament during an anti-austerity and pro-government demonstration in Athens on Sunday. Photograph: Reuters

 

Greece faces a European ultimatum on today over a looming funding gap as finance ministers gather for more talks on its international bailout.

The country’s new left-led government has been told it will be presented with a final opportunity at the meeting in Brussels to seek an extension to its international rescue programme.

After three days of informal talks with Athens, European negotiators remained in considerable doubt as to the exact parameters of the Greek position.

The two sides remained very far apart as the weekend ended, and the lack of appreciable progress served to underline the challenge facing ministers in the quest for a deal.

Greek finance minister Yanis Varoufakis is likely to be told it is for Greece to specify what precisely it is seeking and to set out the commitment it is prepared to undertake in return for further European aid. Only then can a push be made to “converge” the position of the country and its creditors.

Although the current Greek rescue programme itself does not expire until February 28th, European negotiators have set today as the deadline for a formal application from Athens because parliamentary approval is required in Finland, Germany, the Netherlands and Estonia to prolong the current scheme.

European negotiators have been arguing that a 10-day window is required to secure such approval as documents must be drawn up, committees convened and an assortment of parliamentary procedures complied with.

With the other 18 euro zone countries united in their objection to the Greece’s claim for a big debt write-down from its creditors, the country’s new government has appeared increasingly isolated in its European engagements.

Policy promises

Premier Alexis Tsipras has refused thus far to seek such a continuation, arguing that Athens should receive special bridging loans without the same kind of policy oversight by external bodies which accompanied its previous bailouts.

The country’s commercial banks are increasingly reliant on ad hoc emergency funding from the Greek central bank, which is required to seek regular approval from the European Central Bank to continue such activities.

For its part, the ECB has repeatedly warned Athens that it will not restore an alternative source of aid if the current rescue plan is not prolonged.

The stance of the ECB has raised serious concern that Greek banks could quickly run out of cash if there is no new deal to continue the current bailout, as the quality of the banks’ collateral for aid from the cental bank in Athens is weakening rapidly.

Attempts were made over the weekend to achieve a compromise in advance of the Brussels meeting, but there was little if any substantive headway in the engagements between Greek negotiators and officials from the EU-IMF troika.

Reform plan

He insisted, however, that the Tsipras administration would not renege on commitments made to the Greek people and that there would be no continuation of a programme “that has the characteristics of the previous bailout agreements”,

Three weeks after Mr Tsipras took office, it is understood that his administration has still not set out a detailed set of formal demands to European negotiators in a single consolidated document.

The meeting in Brussels today follows stalemate and confusion at emergency talks last Wednesday at which Mr Varoufakis withdrew support at the last minute for a resumption of talks with the troika.