Greece debt standoff: George Osborne urges Athens and Brussels to strike deal
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Version 0 of 1. Related: Syriza has bold solutions to the forces of austerity that are strangling Europe | Costas Lapavitsas George Osborne, has warned that the standoff between Greece and the eurozone over the country’s debt is “the greatest risk to the global economy” after meeting the new Greek finance minister. The chancellor hosted a meeting at 11 Downing Street with his Greek counterpart, Yanis Varoufakis, who, just a week after being elected, is on a whistlestop tour of Europe to win support for renegotiating Greece’s €240bn (£181bn) bailout. “We had a constructive discussion, and it is clear that the standoff between Greece and the eurozone is the greatest risk to the global economy,” Osborne said. “I urge the Greek finance minister to act responsibly but it’s also important that the eurozone has a better plan for jobs and growth. “It is a rising threat to the British economy. And we have got to make sure that in Europe, as in Britain, we choose competence over chaos.” Varoufakis, fresh from talks in France on Sunday, was in London before meetings with the Italian prime minister, Matteo Renzi, and the head of the European commission, Jean-Claude Juncker. Varoufakis expressed optimism that a deal could be achieved within days. “There will be a deal within a very short space of time that is going to make it perfectly clear to everyone that Greece can play within the rules and in a way that puts the Greek crisis away, once and for all,” he told Channel 4 News. The economist, who was appointed finance minister last week after anti-austerity party Syriza swept to power, has offered to produce proposals for a reworked debt deal within a month. He has appointed Lazard, the US investment bank, to advise on Greece’s negotiations about its debt, which amounts to more than 175% of GDP. Syriza insists it will make good on its promises to halve Greece’s debt obligations and scrap a range of swingeing budget measures that were imposed in exchange for the loans. It has already started to step back from some of the measures attached to the bailout by freezing the sell-off of public companies and raising the minimum wage. In an interview with the Financial Times, Varoufakis said he would create new growth-linked bonds to swap for outstanding debt, run a permanent budget surplus and target wealthy tax evaders. “What I’ll say to our partners is that we are putting together a combination of a primary budget surplus and a reform agenda,” he said. “I’ll say, ‘Help us to reform our country and give us some fiscal space to do this, otherwise we shall continue to suffocate and become a deformed rather than a reformed Greece’.” Related: Giving debt relief to Greece makes economic and moral sense | Letters: Rowan Williams, Rabnawaz Akbar, Larry Tabick, Paul Oestreicher and others The current bailout programme officially expires on 28 February but it is widely hoped the deadline will be extended so the European Central Bank is allowed to continue providing funding for Greek banks. Athens wants a bridging deal to allow time for a new, more manageable debt agreement to be negotiated. But Varoufakis and his party face opposition from Germany, where leader Angela Merkel has ruled out further debt cuts from its creditor nations. A Greek government official lashed out at Britain’s Economist magazine on Monday for suggesting Greece was threatening Germany with a front cover featuring the Venus de Milo statue brandishing a gun and the caption “Go ahead, Angela, make my day”. “It’s completely obnoxious and ridiculous to suggest we could blackmail Europe,” the official said. Greece’s new prime minister, Alexis Tsipras, is also touring European capitals. On his first stop in Cyprus, “We are in substantial negotiations with our partners in Europe and those that have lent to us. We have obligations towards them,” Tsipras said at a news conference. He ruled out seeking aid from Russia, which had suggested it would be open to calls for help from Athens. But he welcomed the news that the EU was considering axing the deeply unpopular troika of international auditors representing the country’s creditors calling it a “mature and necessary development for Europe”. He was backed by Nikos Anastasiades, the president of Cyprus, who said the troika’s demise would be a “positive institutional step.” Like Greece, the Cypriot economy is regularly monitored by troika officials since its economic meltdown two years ago. Tsipras’s party Syriza won the election on a promise to ditch the strict austerity cuts tied to Greece’s bailout from the troika of lenders – the European Union, European Central Bank and International Monetary Fund. But some commentators have warned he will not be able to align his anti-austerity vow to voters with an ambition to stay in the eurozone. They warn that Brussels officials will be loth to set any precedents by forgiving Greek debt. “Tsipras really is between a rock and a hard place. He has two basic choices. Either he effectively breaks his election promises and accepts the troika’s conditions for continued financial support … or Greece leaves the euro,” said Ruth Lea, economic adviser to the Arbuthnot Banking Group. “There is still enormous political will within the commission, France and Germany for keeping Greece within the eurozone. But not at any price – and certainly not at the price of tearing up the rule book for euro membership.” Germany has been adamant that eurozone creditor nations must hold the line on Greece’s debt. Merkel has said Tsipras would be a “welcome guest” in Berlin. The two leaders will meet at a European summit on 12 February if not before.The US president, Barack Obama, added to the debate in a CNN interview, saying: “You cannot keep on squeezing countries that are in the midst of depression. At some point, there has to be a growth strategy in order to pay off their debts and eliminate some of their deficits.” His comments brought relief to Greek stockmarkets where the main ATG index gained more than 4%. Yields on Greek government bonds came off their highs as signs of a more conciliatory approach from the new government eased fears in debt markets over the chances of a default or restructuring. |