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Greece bailout talks break down after Athens rejects 'irrational and unacceptable' demand from eurozone partners Greek talks with euro creditors collapse as 'disaster' moves closer
(about 3 hours later)
A meeting of eurozone finance ministers to discuss Greece's financial bailout has broken down amid signs that the discussions ended in discord. Greece’s crunch talks with its European creditors broke down after just four hours today, pushing the country closer towards a potential exit from the single currency.
Hopes for a deal took a hit after some finance ministers, including Germany's Wolfgang Schaeuble, raised concerns over the new Greek government's negotiating tactics and demands. Greece refused to countenance an extension of the existing €172bn bailout programme, while the rest of the eurozone’s finance ministers said this was a non-negotiable first step to talks.
The gathering broke up after Greece rejected what it said was an "irrational and unacceptable" demand from its euro partners at the start of discussions in Brussels. “There is no alternative to a request to an extension of the programme” said Pierre Moscovici, the European Commission’s economics and financial affairs commissioner. That  was echoed by Jeroen Dijsselbloem, the chairman of the Eurogroup. “It is up to the Greek authorities now to decide whether they would want such an extension” he said. “There was a very strong opinion across the whole Eurogroup that it has to come from the Greek authorities... They have to make up their mind whether they will ask for an extension of the current programme.”
A Greek government official said the proposals were a "radical departure" from what was previously discussed. Mr Dijsselbloem said there could be a new Eurogroup meeting on Friday if Greece requested an extension over the next few days. However, the Greek side suggested that Mr Dijsselbloem had gone back on an earlier understanding by trying to push Greece into extending the existing agreement.
The draft eurogroup statement, which the Greek authorities rejected, envisioned Athens requesting a 6-month technical extension to its current bailout program, agreeing to "make the best use of the existing built-in flexibility of the current program," and refraining from taking "unilateral action." A draft text leaked from the Brussels meeting of eurozone finance ministers contained the suggestion that Greece would “successfully conclude the [bailout] programme” and “request a six-month technical extension”. The Athens government has repeatedly said it will not agree to continue with the existing programme, which it blames for pushing Greece into a deep economic depression. It is instead demanding a bridge loan from creditors until the summer while an entirely new programme can be fashioned. It wants this to include a cancellation of a large tranche of the country’s debt and an easing of the requirement for Greece to run primary budget surpluses for the forseeable future.
With the divisions wide, it looks increasingly like another meeting may be needed. Irish Finance Minister Michael Noonan ventured the possibility of another meeting on Friday, which would be the third in a little over a week. The Finance Minister, Yanis Varoufakis, tonight said there would be no capitulation to the pressure from the Eurogroup. “Nothing good has ever come out of ultimatums... In the next few days any notion of ultimatum is going to be withdrawn,” he said.
The Greek government, which took power three weeks ago on an anti-austerity platform, wants to scrap its existing bailout deal, which has been worth 240 billion euros (currently £177 billion) from other countries that use the euro and the International Monetary Fund.
German Finance Minister Wolfgang Schaeuble was one of many to raised their concerns (AP)German Finance Minister Wolfgang Schaeuble was one of many to raised their concerns (AP)
It blames the austerity measures the country has had to enact in return for the rescue money for many of the country's current ills. Despite a modest return to growth in 2014, Greece's economy is still around a quarter smaller than 2008, while unemployment and poverty rates have swelled dramatically. The country’s bailout is due to lapse on 28 February. Without a new agreement in place by then, Greece could find its banking system shut off from access to the European Central Bank’s liquidity lifeline.
Instead, Athens wants its creditors to agree to a new, short-term "bridge agreement" that can keep it solvent after Feb. 28, when the current bailout deals ends. Greek three-year bond yields yesterday rose above 17 per cent, while 10-year bond yields hit 9.47 per cent. The higher near-term effective borrowing costs of the country imply heightened investors default concerns. “With every day of stalemate, the Greek economy, its banking system and its tax revenues are likely to weaken further,” said Holger Schmieding of Berenberg Bank.
The government of Greek Prime Minister Alexis Tsipras has still to deliver concrete proposals of its plan, though it has insisted it does not want to extend the current bailout program, which is the preferred option of many of the eurozone's finance ministers. There were few signs of support for Greece from other eurozone states last night. “There is no chance of a bridge loan [for Greece],  so this has left us working with the extension of the programme,” said Edward Scicluna, the Maltese Finance Minister. Asked what would happen if the Greeks did not ask for a programme extension, he added: “That would be it; it would be a disaster.”
PA/AP