Tsipras Scrambles to Find a Way Forward for Greece
by Nikolaos ChrysolorasEleni ChrepaCorina
RuheMarcus Bensasson / http://www.bloomberg.com/news/articles/2015-02-07/tsipras-charts-path-forward-for-greece-as-funds-at-risk
(Bloomberg) -- Prime Minister Alexis
Tsipras will outline his plans to keep Greece financially afloat while
breaking free from its bailout program when he addresses the nation’s
parliament on Sunday.
“It is very unlikely that the euro zone
will give new money to Greece for months, as the Greek positions are uncertain
and significant negotiation is necessary,” Nicholas Economides, professor of
economics at New York University’s Stern School of Business, said by e-mail.
“This puts cash-strapped Greece
in a very dire position.”
Jeroen Dijsselbloem, head of the group of
19 euro-area finance ministers, on Friday rejected a short-term financing
agreement while Greece
negotiates a successor program to its current bailout provided by the European
Union and International Monetary Fund. The prime minister will need to address
doubts about Greece ’s
ability to pay its bills, possibly as early as the end of the month.
Tsipras will set out measures for the
government to take from now until the end of June, corresponding to the bridge
program it has requested from country’s creditors, a government official said
after a cabinet meeting Saturday. The prime minister will also set out policies
for the next 3 1/2 years, said the official, who commented by e-mail and asked
not to be identified in line with policy. The speech is scheduled to start at 7
p.m. local time.
Negotiations Necessary
Tsipras, 40, will be addressing lawmakers
exactly two weeks after his Syriza party swept into power with a promise to
reject EU demands for more budget austerity.
“Faced with financial reality, the new
Greek government will have to reverse or severely pare down its pre-election
program,” Economides said. “Already, in a major U-turn, the government has
abandoned the position that Greece
will not fully pay its debt.”
The next showdown with Greece ’s EU partners is scheduled for Feb. 11 in Brussels , when Finance Minister Yanis
Varoufakis faces his 18 euro-area counterparts in an emergency meeting.
Standard & Poor’s lowered Greece ’s
long-term credit rating one level to B- and kept the ratings on CreditWatch
negative.
The rating downgrade to B- pushes Greece ’s debt
six levels into non-investment grade, or junk status. S&P said it plans to
“update or resolve” the CreditWatch status by next month.
“We could lower our ratings on Greece if we
perceive that the likelihood of a distressed exchange of Greece’s commercial
debt has increased further because official funding has been curtailed,
government borrowing requirements have deteriorated beyond our expectations, or
Greece’s external financing has come under greater stress,” S&P said in a
statement on Friday.
Stocks, Bonds
Greek stocks and bonds rebounded at the
start of last week after the government dropped its debt writedown demand. The
trend reversed on Feb. 5, and the yield on 10-year bonds jumped 42 basis points
to 10.11 percent on Friday, with the Athens Stock Exchange index falling 2
percent, after Dijsselbloem rejected the bridge financing.
The U.S.
urged Greece to exercise
fiscal prudence and continue structural reforms in meetings between U.S.
Treasury Department Assistant Secretary Daleep Singh, Varoufakis and other
Greek officials in Athens
Friday, the U.S. Embassy said in a statement on its website.
‘Very Important’
“The United States believes that it is
very important for the Greek government to work cooperatively with its European
colleagues, as well as with the IMF,” U.S. Ambassador to Greece David Pearce
said in the statement.
Varoufakis has said his government won’t
accept any more cash under the terms of Greece ’s existing bailout, leaving
7 billion euros of potential aid on the table, rather than complying with
demands for more austerity attached to the country’s international bailout
agreement.
The standoff may leave Europe ’s
most-indebted state without any funding as of the end of this month, following
the Jan. 25 election victory of Tsipras’s Syriza party.
To contact the reporters on this story:
Nikos Chrysoloras in Athens at nchrysoloras@bloomberg.net; Eleni Chrepa in
Athens at echrepa@bloomberg.net; Corina Ruhe in Amsterdam at
cruhe@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net
To contact the editors responsible for this
story: Vidya Root at vroot@bloomberg.net Kevin Costelloe, Andrew Atkinson
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