A constructive fifty-minute telephone conversation between the Greek Prime Minister Alexis Tsipras and the German Chancellor Angela Merkel was held on Thursday afternoon, only a few hours ahead of today’s crucial Eurogroup meeting in Brussels. According to a Greek official, cited by Reuters, the conversation between the two leaders “was held in a positive climate, geared towards finding a mutually beneficial solution for Greece and the Eurozone.”
Earlier on Thursday, the German government rejected the Greek loan agreement six-month extension request, submitted by the Finance Minister Yanis Varoufakis. According to German reasoning, Greece’s proposal does not meet the Eurozone’s conditions for continuing the aid program.
Berlin‘s stance — describing the carefully worded Greek letter as a “Trojan horse“ for shirking commitments — set the scene for today’s tough talks at the crucial meeting in Brussels. Greece’s SYRIZA-led government is scrabbling to avoid liquidity shortage, at the end of the month, as the country’s existing program signed with the creditors by the previous government is due to expire within weeks and is already facing heavy pressure to make further concessions in its pre-election promises. The Greek reasoning is based on the fact that the loan agreement six-month extension will be used to negotiate a long-term deal for recovery and growth incorporating further debt relief measures and abolishing the unpopular austerity measures.
Mr. Tsipras also had a phone conversation with the French President Francois Hollande, who — according to sources close to the Greek government — promised to discuss the issue with the German Chancellor during her visit in Paris today.
Germany leaves the door open for a deal based on Greek proposal
In the wake of the phone conversation between the Greek and the German leaders, Berlin officials appear willing to compromise. According to Bloomberg, Germany is leaving the door open to an agreement on Greece’s bailout funding as the Eurozone Finance Ministers prepare their negotiating positions for today’s Eurogroup meeting. German leaders regard the proposal submitted by Greece’s Finance Minister to the rest of the 18 Euro area partners as a basis for negotiations and do not necessarily see a need for the submission of a new draft, an unnamed government official told Bloomberg.
This stance of Germany is seen as a step back from the previous statement issued by the hardliner Finance Minister Wolfgang Schaeuble, who immediately rejected the Greek proposal as submitted by Mr. Varoufakis. Although, Mr. Schaeuble will be the one sitting at the table with the single currency Finance Minister in today’s meeting.
The Greek reasoning for the loan agreement six-month extension
As described by the Greek Finance Minister in his letter to the Eurogroup President Jeroen Dijsselbloem and the rest of Eurozone’s Finance Ministers, the purpose of the requested six-month extension of the agreement’s duration is based on seven axes:
(a) To agree to the mutually acceptable financial and administrative terms, the implementation of which, in collaboration with the institutions, will stabilize Greece’s fiscal position, attain appropriate primary fiscal surpluses, guarantee debt stability and assist in the attainment of fiscal targets for 2015 that take into account the present economic situation.
(b) To ensure, working closely with our European and international partners, that any new measures be fully funded while refraining from unilateral action that would undermine fiscal targets, economic recovery and financial stability.
(c) To allow the European Central Bank to re-introduce the waiver in accordance with its procedures and regulations.
(d) To extend the availability of the EFSF bonds held by the HFSF for the duration of the Agreement.
(e) To commence work between the technical teams on a possible new Contract for Recovery and Growth that the Greek authorities envisage between Greece, Europe and the International Monetary Fund, which could follow the current Agreement.
(f) To agree on supervision under the EU and ECB framework and, in the same spirit, with the International Monetary Fund for the duration of the extended Agreement.
(g) To discuss means of enacting the November 2012 Eurogroup decision regarding possible further debt measures and assistance for implementation after the completion of the extended Agreement and as part of the follow-up Contract.
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