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article imageGreece seeks bridge financing as debt deal may take time

By Ken Hanly     Feb 14, 2015 in Politics
Brussels - Greece and its EU creditors are extending talks over the weekend in order to possibly reach a deal at talks with EU finance ministers on Monday at Brussels.
Greek Premier Alexis Tsipras, and his Finance Minister Yanis Varoufakis have remained firm in their commitment to exit the present bailout program and will not deal with the Troika on February 28th when a meeting on the next installment of the loan is scheduled. Greece wants to obtain bridge financing until a new plan is agreed upon. The ECB no longer will accept Greek sovereign debt as collateral but there is still emergency liquidity assistance (ELA). Reuters reports that the ECB has authorized the Greek central bank to disperse up to $74 billion.
Varoufakis has suggested that Greek debt obligations could be met by a debt swap in which existing securities would be traded for new debt instruments in which repayments would be tied to the growth of the Greek economy. The current government plans include an increase in wages, and re-hiring some government workers. Further government spending has little support among creditors. Dutch Finance Minister Jeroen Dijsselbloem, who chairs euro area finance ministers' meetings, said:“You can only spend money when you have it,Greece wants a lot but has very little money to do that. That’s really a problem.” Greek creditors are reluctant to give much to Greece since if they did so, other anti-austerity parties such as Podemos in Spain will gain support creating pressure to change the debt regimes in other countries. So far, Greece seems to have gained nothing even though it caved on the issue of writing off debt. The government also announced that it would go ahead with privatization of the port of Piraeus after having halted the process:
The full privatization plan was to include selling a variety of assets, including the operating concessions to 14 airports around the country, the natural-gas distribution network and some state-run hotels and property. The new government insists that some things won’t be sold, such as the state-owned national utility, but senior EU officials say the Piraeus sale is a key test case.
Tsipras statements suggest that progress was made but a deal is not yet done: “Our peers met with a Greece that knew what it wants and what it claims. An important step was made, however it’s too early to say we have a deal. Negotiations at Monday’s Eurogroup meeting will be tough. Our power will be, for one more time, the Greek people’s support.” The important steps no doubt are that Syriza has already abandoned any hope of a debt write off and also committed to privatization of a key public asset. Both these moves reject key aspects of the platform upon which they were elected.
Finance MInister, Varoufakis, indicated that there was no Grexit plan saying that “it’s one thing to say you shouldn’t have gotten into the euro, it’s quite another to say you should get out of the euro. If we backtrack, we fall off a cliff.” Markets seemed to take developments as positive and Greek stocks rallied to a two month high, climbing 5.6 per cent on Friday. Greece no doubt will claim a symbolic victory in that any new agreement will not refer to the Troika but instead to "institutions". What if any practical difference this will make or how it helps Greece out of the debt trap is not at all clear.
Belgian Finance Minister, Johan Van Overtvelldt, said in an interview: “Athens can expect only symbolic concessions, Everyone acknowledges Syriza has a democratic mandate, but whoever joins the euro zone relinquishes some parts of its sovereignty. Just because you win the elections, your involvement in the monetary union isn’t worth less overnight.”
Tsipras says that Greece can agree to more than two thirds of its bailout promises. The creditors may agree to lower the target of 4 per cent of GDP as a surplus and also compromise on privatization according to anonymous officials involved with ongoing talks. Minor alterations such as this would be designed to provide political cover for a Syriza cave in on their campaign promises. Perhaps, Varoufakis and Tsipras will decide that they simply cannot gain enough from negotiations and opt for a Grexit strategy. However, so far they have not outlined any Plan B if negotiations fail.
More about Grexit, greek debt crisis, Alexis Tsipras
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