Greece’s hard line will renew fears of a default
An estimated €700m to €1bn is flowing out of Greek banks daily
Taking the hard line: Greece’s newly appointed finance minister, Yanis Varoufakis. Photograph: Aris Messinisaris Messinis/AFP/Getty Images
When the Syriza-led coalition took power in Greece, nobody was sure whether it would quickly head on a collision course with Europe, or whether there would be a move towards some kind of compromise.
The decision of new finance minister Yanis Varoufakis to say clearly in a meeting with EU finance commissioner Jeroen Dijsselbloem on Friday that Greece was not seeking an extension of the EU/IMF bailout, which runs out at the end of February, suggests that Greece is taking a hard line. It has also said it will not deal any further with the troika – which it has branded a “rottenly constructed committee” – instead only talking to other euro governments.
In rejecting the whole architecture around which Europe has done its business, the new government’s move will renew fears about the risk of a Greek default, instability in its financial system and even a threat to Greek membership of the euro.
Two questionsFinancial Times
Greece also needs money to meet debt repayments due over the rest of the year. Greece is due to make repayments of about €15 billion on longer term loans this year, including €6.5 billion owed to the ECB. Greece’s public finances are broadly in balance, but plans for new spending are based on a large portion of Greece’s debt being written down. There was some speculation yesterday of a loan from Russia, to whom the Greek government has made political overtures, but this looks like a long shot.
Germany, Europe’s biggest creditor nation, appears in no mood to write down Greek debt, with finance minister Wolfang Schäuble saying yesterday that Germany could not be “blackmailed”. Brussels is also rejecting Greece’s’s demands for a debt conference to discuss debt across the periphery.
The signal from Europe to Greece has been that some flexibility in renegotiating debt terms might be possible, but only if Greece plays by the existing rules. Syriza, however, wants to tear up the rule book. Greece’s markets are likely to face further turmoil next week. The question is whether the nervousness will spread, or whether investors believe the Greek question can be largely contained.