Greek and German ministers can’t even ‘agree to disagree’

Yanis Varoufakis requests bridging loan while he develops reform plan for country

 

Greek finance minister Yanis Varoufakis used a tense visit to Berlin Thursday to request a three-month bridging loan while he develops an alternative reform plan for his country.

Less than 24 hours after the European Central Bank announced it would no longer accept Greek sovereign bonds as loan collateral, Mr Varoufakis made no effort to mask the gulf with Berlin following talks with finance minister Wolfgang Schäuble.

When Dr Schäuble suggested at a joint press conference in English that the two ministers had “agreed to disagree” on the best way forward, Mr Varoufakis said: “We didn’t even agree to disagree, we agreed to enter deliberations as partners.”

After their first meeting overran by an almost an hour the two men parted company after a frosty press conference perhaps even further far apart than before.

Shock decision

As markets reeled from Wednesday’s shock decision by the ECB to stop accepting Greek debt as collateral, there was some reprieve for Athens today as the ECB agreed to allow the Greek central bank to offer banks emergency funding - known as emergency liquidity assistance (ELA) - of up to €60 billion.

Meanwhile, speaking in Brussels following talks with the head of the European Commission and European Council, Taoiseach Enda Kenny emphasised the need for Greece to constructively engage with the euro group, while also warning that conditions go with EU support.

“Getting support from Europe does require conditions to be adhered to,” the Taoiseach said. “The government of Greece are fully entitled to engage with the euro group. And to say, this is the scale of the problems, these are the conditions we believe we can meet, and get on with that constructive negotiation.”

Different space

He said Ireland had succeeded in achieving a restructuring of €50 billion worth of loans by negotiating with the euro group. “Clearly we are now in a very different space than Greek is . . . That Ireland offered a 30-year bond last week at 2 per cent speaks for itself.”

The unfolding crisis in Greece was discussed during both his meetings with commission president Jean-Claude Juncker and council head Donald Tusk today, though the Taoiseach did not raise the question of any possible further debt relief for Ireland.

Meanwhile, Italian prime minister Matteo Renzi backed the ECB’s decision to stop accepting Greek government debt as collateral for funding, describing the surprise move yesterday as “legitimate and opportune”.

In Berlin, significant differences remained between Greece and Germany. After a week of Greek shuttle diplomacy around the continent Mr Varoufakis ramped up his rhetoric again.

Asked what particular problems he had with the existing EU-IMF programme, he paused before saying: “I could talk for hours.”

Wrong prescription

Mr Varoufakis said he agreed with “60 to 70 per cent” of the programme though it was the wrong prescription for Greece and based on an incorrect diagnosis of the country’s ailments. Ordinary Greeks were suffering needlessly, tax evasion and corruption had not been tackled and extremist politics had blossomed, he said, all because the EU and IMF had treated an insolvency problem in Greece as a liquidity problem.

“The largest loan in history was given to an insolvent country under conditions that incomes are shrunk,” he said. “To sell the whole thing a [to-do] list was created as a fig leaf, though it couldn’t work, and that is why we are here today.”

Dr Schäuble said it was important to recognise the sacrifices made by the Greek people in recent years. But his tone turned cool as the press conference wore on, reminding his visitor that Greece’s problems were not caused by the EU or Germany but by “years of unsustainable politics in Greece, in which financial markets eventually lost confidence”.

He said it was no bad thing if the new Syriza-lead government was anxious to meet its election promises, “but not if they are made at a cost to others”.

Progress made

Citing falling unemployment and a recent budget surplus, Dr Schäuble said reform progress had been made and urged Athens to stay the course with the troika. He disputed as “nonsense” claims the Greek EU-IMF programe was “about creating a German Europe”. The programme, he said, was part of a wider reform agenda to future-proof the EU for a more competitive, globalised world.