Greece confirms it will ask for bridging loan from eurozone partners

http://www.theguardian.com/world/2015/feb/18/greece-bailout-bridging-loan-debt-crisis-eurozone

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Athens has confirmed it will ask for a bridging loan from its eurozone partners, as it battles to reach a deal that will secure its future as a member of the single currency.

However, a leaked negotiating document from the Greek finance minister, Yanis Varoufakis, suggested the country remained committed to repealing some austerity measures attached to its original bailout.

“Let’s wait today for the request for an extension of the loan contract to be submitted by the finance minister Varoufakis,” the government spokesman, Gabriel Sakellaridis, said. He told Sky news that the loan request would be submitted to officials in Brussels on Thursday, a day later than it was originally expected.

Pressure is mounting on Greece to reach a swift compromise. In a robust intervention from the US, Treasury secretary Jack Lew warned Varoufakis that Greece would face “immediate hardship” without an agreement and said the current deadlock was not good for Europe.

Meanwhile, the Fitch credit ratings agency warned that “continued brinkmanship” could do lasting damage to the Greek economy. Analysts at Fitch said they were ready to lower their 2015 forecast for economic growth in Greece, having already cut it by one percentage point last month to 1.5%.

With the clock ticking down to a eurozone-imposed deadline of Friday for an agreement, Greece has repeatedly insisted that it will not ask for an extension to its €240bn bailout from the “troika” of the European commission, the International Monetary Fund and the European Central Bank.

The rescue programme is due to expire at the end of this month but Varoufakis has been locked in talks with fellow eurozone finance ministers this week to try to achieve a compromise that is politically palatable for both sides.

With talks between eurozone leaders expected to resume on Friday, the European commission delivered an uncompromising message that Greece would have to stick to an austerity course. “The most realistic way forward is the extension of the current programme,” Valdis Dombrovskis, vice-president of the commission, told reporters in Brussels. Greece would be offered some flexibility, he said, but only by swapping some austerity measures for others of equal value.

According to Reuters, the German government has reacted positively to Greece’s request, with the economy minister, Sigmar Gabriel, describing the move as a signal that Greece is ready to negotiate. However, Garbiel also warned that Greece’s loan agreement cannot be separated from its reform commitments.

* German economy minister gabriel says welcomes signal from Greek government that it is ready to negotiate - RTRS

In Athens the ultra-left anti-capitalist Antarsia party reacted with fury to the government’s decision to request an extension of its loan agreement.

Under the headline “It is time to break away from the European Union” Antarsia (which is to the left of Syriza and has strong representation on Greece’s powerful trade union of civil servants ADEDY) has blasted the euro group and the Syriza-led government for its handling of the Greek crisis.

“What has happened has proved yet again that the EU is the most reactionary, undemocratic and authoritarian construct in Europe after Nazism,” it announced today.

“We have a Greek government that in reality accepts the overwhelming debt and the immediate obligations that derive from this, commits itself to [pulling off] a primary surplus (that is to say austerity) has asked for an extension of the current loan agreement and declared that it accepts 70 % of the memorandum.”

Even if the government pulls off its ultimate goal of coming up with “a bridging agreement” in the months ahead, the party warned that ultimately it will amount to kicking the can down the road.

“The same problems will crop up again with the same result of austerity, privatisations and changes in the [domains of] labour and pension reforms,” the ultra-leftists said. “The European Union’s blackmailing is not the exception but the rule. There is no democratic EU, nor is there an EU of the people.”

Greece’s minister of state Alekos Flamboraris, a close aide of prime minister Alexis Tsipras, further stirred the waters this morning by saying Greece may request an emergency EU summit is held because the Greek crisis is as much political as economic.

But EU leaders have little appetite for another gathering so soon after last week’s meeting dedicated to the crisis in Ukraine. The head of the eurogroup, Jeroen Dijsselbloem, said on Monday there was no intention to convene an EU leaders’ summit over Greece.

Without fresh funding from next week, Greece is likely to run into a cashflow crisis rapidly. The ECB, which is playing a crucial funding role in keeping Greece’s banking system afloat, is also meeting on Wednesday to discuss whether to maintain its support. Although the ECB is expected to continue the funding under the emergency liquidity assistance programme, it is keeping the situation under regular review.

In Varoufakis’s leaked negotiating document, he rejects the “unrealistic, self-defeating fiscal targets” imposed on his government by the troika.

We want to believe that we are on a good path. We are coming to the table to find a solution

But he strikes a more emollient note on some other policies, including public sector privatisations and the rehiring of some sacked public-sector workers. He adds that Greece is working on ways of cutting its debt burden, including debt-swaps – but in the short term would need to work on “bridge financing”.

At Monday’s fruitless talks in Brussels between eurozone finance ministers, Varoufakis called for “an in principle agreement that during this period, the Greek state will be funded under a minimalist menu that solves the short-term cash-flow problem”.

In return, Varoufakis said Greece would pledge to honour its financial obligations to its partners in full, and take no actions that would derail the existing budget agreement with the troika. In the longer term, he promised to proceed with a range of reforms urged by the troika, including cleaning up Greece’s tax courts, and improving its bankruptcy regime.

Sakellaridis said Athens would seek temporary funding, while negotiations continue. “All along deliberations are going on to find common ground. We want to believe that we are on a good path. We are coming to the table to find a solution.”

The government appeared to be seeking to revive a compromise plan suggested on Monday by the European commissioner Pierre Moscovici, before talks collapsed in acrimony. Eurogroup finance ministers gave Greece a deadline of Wednesday evening to ask for a loan extension.