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E.C.B. President Hints at Concession for Greece European Central Bank President Hints at Concession for Greece
(about 14 hours later)
FRANKFURT — The message to Greece from European Central Bank headquarters in Frankfurt on Wednesday was, on the surface, much the same as it has always been: Stick to the program.FRANKFURT — The message to Greece from European Central Bank headquarters in Frankfurt on Wednesday was, on the surface, much the same as it has always been: Stick to the program.
But beneath the customary rhetoric about how Greece must keep a tight rein on government spending and slog onward with a deeply unpopular economic overhaul, there was a softer subtext.But beneath the customary rhetoric about how Greece must keep a tight rein on government spending and slog onward with a deeply unpopular economic overhaul, there was a softer subtext.
Mario Draghi, the president of the European Central Bank, said that “social fairness” — a new phrase from him — should be an element in the program that Greece will need to accept in order to receive more financial support from the rest of the eurozone. And he indicated a willingness to slightly ease the fiscal targets that Greece has been asked to meet.Mario Draghi, the president of the European Central Bank, said that “social fairness” — a new phrase from him — should be an element in the program that Greece will need to accept in order to receive more financial support from the rest of the eurozone. And he indicated a willingness to slightly ease the fiscal targets that Greece has been asked to meet.
His words suggest that one very influential eurozone leader is willing to make some concessions to Athens’s demands for a less painful economic program — although probably nowhere near as painless as the leftist Syriza government would like. It remains an open question whether Greece and the creditors can bridge their huge differences and make a deal before the country runs out of money, perhaps within weeks, which could lead to its exit from the eurozone.His words suggest that one very influential eurozone leader is willing to make some concessions to Athens’s demands for a less painful economic program — although probably nowhere near as painless as the leftist Syriza government would like. It remains an open question whether Greece and the creditors can bridge their huge differences and make a deal before the country runs out of money, perhaps within weeks, which could lead to its exit from the eurozone.
“The Governing Council of the E.C.B. wants Greece to stay in the euro,” Mr. Draghi said on Wednesday at a news conference after a meeting of the council, the bank’s decision-making body.“The Governing Council of the E.C.B. wants Greece to stay in the euro,” Mr. Draghi said on Wednesday at a news conference after a meeting of the council, the bank’s decision-making body.
“The current downgraded growth perspectives of the Greek economy,” he said, “should be taken into account in determining what the appropriate budget surplus figures should be.” Translated, that means Greece should be given a little slack in its fiscal targets.“The current downgraded growth perspectives of the Greek economy,” he said, “should be taken into account in determining what the appropriate budget surplus figures should be.” Translated, that means Greece should be given a little slack in its fiscal targets.
Mr. Draghi habitually plays down the role of the central bank in negotiations over Greece and did so again on Wednesday. “We are not either interfering or in any way taking a stance with respect to the current negotiations,” he said.Mr. Draghi habitually plays down the role of the central bank in negotiations over Greece and did so again on Wednesday. “We are not either interfering or in any way taking a stance with respect to the current negotiations,” he said.
Despite his demurrals, the central bank is in fact a crucial party to talks that will determine Greece’s fate.Despite his demurrals, the central bank is in fact a crucial party to talks that will determine Greece’s fate.
Mr. Draghi took part in a meeting about Greece late Monday in Berlin that also included Angela Merkel, the German chancellor; Christine Lagarde, the managing director of the International Monetary Fund; and François Hollande, the president of France. Mr. Draghi said on Wednesday that he would not take part in further discussions in Brussels.Mr. Draghi took part in a meeting about Greece late Monday in Berlin that also included Angela Merkel, the German chancellor; Christine Lagarde, the managing director of the International Monetary Fund; and François Hollande, the president of France. Mr. Draghi said on Wednesday that he would not take part in further discussions in Brussels.
The European Central Bank also provides emergency credit to Greek banks. Without that cash, the Greek financial system probably would have collapsed long ago.The European Central Bank also provides emergency credit to Greek banks. Without that cash, the Greek financial system probably would have collapsed long ago.
Mr. Draghi couched his remarks on Wednesday in tough language about the need for Greece to stick to conditions imposed by creditors. And he faulted Greek leaders for failing to put into effect terms they had agreed to during five years of bailout programs.Mr. Draghi couched his remarks on Wednesday in tough language about the need for Greece to stick to conditions imposed by creditors. And he faulted Greek leaders for failing to put into effect terms they had agreed to during five years of bailout programs.
“Programs have been designed, have been agreed, and have been implemented only partly,” he said.“Programs have been designed, have been agreed, and have been implemented only partly,” he said.
Mr. Draghi also implicitly criticized the new Greek government for taking positions that he considered unrealistic. “Some of the things that have been discussed in the course of the previous months have been clearly fiscally unsustainable,” Mr. Draghi said.Mr. Draghi also implicitly criticized the new Greek government for taking positions that he considered unrealistic. “Some of the things that have been discussed in the course of the previous months have been clearly fiscally unsustainable,” Mr. Draghi said.
He did not say what he was referring to, but other eurozone officials have criticized the Greek government for, among other things, wanting to restore cuts in pension benefits. Creditors considered retirement benefits in Greece too generous in relation to the country’s standard of living and its financial resources. Cutting pensions was a condition for aid.He did not say what he was referring to, but other eurozone officials have criticized the Greek government for, among other things, wanting to restore cuts in pension benefits. Creditors considered retirement benefits in Greece too generous in relation to the country’s standard of living and its financial resources. Cutting pensions was a condition for aid.
At the same time, Mr. Draghi dangled incentives for Greece to reach an agreement. The Governing Council would consider raising the limit on Greek banks’ use of short-term government debt as collateral for central bank loans, Mr. Draghi said. A higher limit would be important because issuing Treasury bills is one of the few ways the government can borrow money. But no banks outside Greece will buy the debt, and Greek banks will do so only if they can use the paper as collateral for credit from the E.C.B.At the same time, Mr. Draghi dangled incentives for Greece to reach an agreement. The Governing Council would consider raising the limit on Greek banks’ use of short-term government debt as collateral for central bank loans, Mr. Draghi said. A higher limit would be important because issuing Treasury bills is one of the few ways the government can borrow money. But no banks outside Greece will buy the debt, and Greek banks will do so only if they can use the paper as collateral for credit from the E.C.B.
“The Greek economy is a viable economy,” Mr. Draghi said. But, he added, “It has to have the right set of policies.” He defined those as “growth with social fairness and fiscal sustainability.”“The Greek economy is a viable economy,” Mr. Draghi said. But, he added, “It has to have the right set of policies.” He defined those as “growth with social fairness and fiscal sustainability.”
Analysts at Barclays said in a research note on Wednesday that Mr. Draghi’s choice of words “signals the willingness for Europe to also consider Greece’s needs and Greek government views.”Analysts at Barclays said in a research note on Wednesday that Mr. Draghi’s choice of words “signals the willingness for Europe to also consider Greece’s needs and Greek government views.”
Mr. Draghi also indicated that he would support less stringent requirements on the size of the so-called primary budget surplus that Greece is required to maintain — in other words, the amount of revenue the government should have left over after its expenses, not including the cost of paying interest on debt.Mr. Draghi also indicated that he would support less stringent requirements on the size of the so-called primary budget surplus that Greece is required to maintain — in other words, the amount of revenue the government should have left over after its expenses, not including the cost of paying interest on debt.
It remains to be seen whether Mr. Draghi’s sentiments are shared by other eurozone leaders, particularly in Germany. It is also unclear whether the softer tone opens up space for compromise between Greece and the other eurozone countries, as well as the I.M.F.It remains to be seen whether Mr. Draghi’s sentiments are shared by other eurozone leaders, particularly in Germany. It is also unclear whether the softer tone opens up space for compromise between Greece and the other eurozone countries, as well as the I.M.F.
If there is an agreement, Mr. Draghi said, the benefits to Greece could flow quickly.If there is an agreement, Mr. Draghi said, the benefits to Greece could flow quickly.
“Everything else would then follow,” he said, “and I’m pretty sure it would follow easily.”“Everything else would then follow,” he said, “and I’m pretty sure it would follow easily.”