Just four hours after they started, talks between Greece and the European Union collapsed. The two sides were trying to hammer out an agreement that would allow Greece to continue receiving bailout help from its Eurozone partners.
But both sides walked out of the talks and reiterated their hard lines: The European Union insisted that Greece’s new leftist government recommit to the terms the previous government had agreed to, and Greek negotiators said they would not agree to the harsh austerity imposed by the bailout package.
As The Wall Street Journal sees it, this means Greece’s membership in the Eurozone is uncertain and may very well throw the currency bloc into crisis.
The paper reports:
“The rupture between Greece and the rest of the euro zone is a question of hard financial figures—but the confrontation has also exposed a deep cultural rift between the two sides.
“The government of Prime Minister Alexis Tsipras and his finance minister Yanis Varoufakis has brought a confrontational style to the rule-bound and clubby meetings of euro-zone finance ministers, not apparent even in the heights of the bloc’s financial crisis. It also, according to European officials, appears ready to court serious risks that other bailout recipients have shied away from.”
Varoufakis previewed today’s meeting with a strongly worded op-ed in The New York Times in which he said he was not playing games with these negotiations. This government, he wrote, is different.
“We are determined to clash with mighty vested interests in order to reboot Greece and gain our partners’ trust,” he wrote. “We are also determined not to be treated as a debt colony that should suffer what it must. The principle of the greatest austerity for the most depressed economy would be quaint if it did not cause so much unnecessary suffering.”
Varoufakis goes on to say that the country is willing to do what is “right,” despite the consequences. Without the bailout, Greece is likely to quickly default on its debt, potentially throwing a part of the world financial system into disarray.
The BBC has some details on the kind of deal Greece is seeking:
“Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds.
“The second part of the plan would see the country’s debt refinanced. Part of this might be through ‘GDP bonds’ – bonds carrying an interest rate linked to economic growth.
“Greece also wants to see a reduction in the primary surplus target – the surplus the government must generate (excluding interest payments on debt) – from 3% to 1.49% of GDP.”
Greece’s current bailout expires Feb. 28.