Greek
bailout monitors hold emergency summit
Stefan Wagstyl in
Berlin, Peter Spiegel in Brussels and Claire Jones in Frankfurt
German chancellor
Angela Merkel on Monday night hosted an emergency summit in Berlin
over the Greek crisis to thrash out differences between the
debt-laden country’s bailout monitors and to accelerate efforts to
reach a deal with Athens.
Christine Lagarde,
the managing director of the International Monetary Fund, and Mario
Draghi, head of the European Central Bank, arrived secretly in Berlin
on Monday to join France’s President François Hollande and
European Commission president Jean-Claude Juncker, who were already
in Berlin for a pre-arranged meeting with the German chancellor.
The hastily called
gathering came amid mounting uncertainty about Greece’s capacity to
keep paying its bills and tensions between the creditor organisations
which are under intense pressure to release a desperately needed
€7.2bn so that Greece can avoid a possible default and a rapid exit
from the eurozone.
The long
negotiations have seen differences emerging between the bailout
monitors, and this summit was called to try to settle matters. The
IMF has been holding to a tough line, out of respect for its own
lending rules and regard for pressure from countries in other parts
of the world, which say Athens has already enjoyed very favourable
treatment.
The European
Commission has argued for more generous terms for Athens because it
sets a high priority on keeping the eurozone intact — a key symbol
of EU unity. The ECB, too, wants to keep the common currency together
but is also afraid of damaging its credibility by overextending its
role as a central bank.
According to a
senior official from one of Greece’s bailout monitors, the Berlin
talks were focused on a technical paper prepared by the commission
which all sides are to use in an attempt to find trade-offs
acceptable to all creditors.
Officials insisted
that if a compromise had been reached in Berlin, it would not be used
as a “take it or leave it” ultimatum for Athens, but rather an
outline to be presented to Alexis Tsipras, the Greek prime minister,
for a “quick reaction.”
The official said
there were no new concessions to Athens in the commission paper.
Rather, it was intended to spell out the core principles creditors
need to conclude a deal. Yanis Varoufakis, the Greek finance
minister, has long argued that Athens accepts 70 per cent of the
existing bailout programme, and creditors are hoping any compromise
reached in Berlin could serve as the 70 per cent Mr Varoufakis and Mr
Tsipras can accept.
Officials cautioned
that the final creditor position may need to be fleshed out in the
coming days, but their intention would be to present it to Athens
this week.
The talks ended at
about 11.30 Berlin time, with officials giving no details. A German
government spokesman only said that Ms Merkel, Mr Hollande, Mr
Juncker, and Ms Lagarde agreed that the talks over Greece had to be
intensified. The expectation is that any agreement that they have
reached will be put confidentially first to Greek prime minister
Alexis Tsipras to avoid giving any impression of giving him an
ultimatum.
The German
government spokesman said: “The participants in the talks were in
close contact in recent days and want this to remain the case in the
coming days — both among themselves and of course with the Greek
government.”
Athens faces a
critical month, with €1.6bn due for repayment to the IMF in June.
The Berlin meeting follows months of talks between the radical
Syriza-led Greek government, which is trying to renegotiate the
country’s loan terms, and the bailout monitors — the commission,
the ECB and the IMF.
While Athens has
periodically claimed that a deal is in sight, the creditors have
insisted that there has been little progress in months of talks, with
Wolfgang Schäuble, Germany’s finance minister, refusing to rule
out a default and Ms Lagarde last week saying that Greece’s exit
from the eurozone was “a potential”.
The two sides remain
far apart on how hard Athens should squeeze public finances. The new
government has rejected the current arrangement with the creditors
which involved a target primary surplus — the excess of government
revenues over spending (before debt financing costs) — of 4.5 per
cent of gross domestic product. Athens wants a figure closer to 1 per
cent. The creditors may be willing to see a reduction, but not of
this scale.
Greece and its
creditors are also divided on key issues such as the creditors’
demands for cuts in the costly Greek pensions programme, public
sector payroll reductions and labour market reforms.
Within the eurozone,
most finance ministers have supported Mr Schäuble in maintaining a
tough line on Athens. At the margin, France’s Michel Sapin has been
a bit more flexible than his German counterpart. Ms Merkel, Europe’s
most powerful leader, has largely kept her own counsel. She shares Mr
Schäuble’s commitment to fiscal prudence but sets a high store on
European unity at a time when Europe faces serious threats such as
the Ukraine crisis and upheaval in the Middle East.
If she is now
pressing for compromise, it is likely that it is the eurozone that
will have to provide new financial concessions, not the IMF. And the
probable channel will not be the ECB but the ESM, the eurozone rescue
fund.
According to an
official briefed on the talks, even if creditors agree to allow
Athens to lower their primary budget surplus this year to 1 per cent
of GDP, they will still have to take significant new steps since,
under current forecasts, Greece is headed for a deficit.
They also must
decide on a medium-term surplus target. Although it is unlikely to be
as high as the 4.5 per cent of GDP demanded in the current programme,
it could be around 3.5 per cent — significantly higher than levels
sought by Athens.
Because time for an
agreement on a new bailout to deal with nearly €7bn in debts owed
in July and August is no longer available, creditors are also
discussing a “solution that also covers the summer”, the official
said.
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