Monday, February 16, 2015

Hopes of Greek debt deal rapidly fade before crunch talks: live – Telegraph.co.uk

Could it be the end of €1 souvenirs in Greece? The country’s future in the single currency could be decided today 

• Eurogroup convened at 2pm in Brussels
• German finance minister dubs Syriza as an “irresponsible” government
• Yanis Varoufakis: “We are asking for a few months of financial stability”
• Grexit is ‘inevitable’, former Chancellor Ken Clarke warns

15.00 Hmmm…the eurogroup meeting seems to have kicked off without the main attraction – Yanis Varoufakis.

14.35 Writing in the New York Times today, Greece’s finance minister said his country would not cross the “red lines” it has presented to its creditors.

Well, Mr de Guindos of Spain, says his country also has a red line: the repayment of all of Greece’s loans in full. Zing.

14.25 Contender for the soundtrack for today’s meeting, courtesy of the Rolling Stones and Immanuel Kant

14.14 Could it be a case of the northen creditor bloc v the rest today? Germany, Austria, and now the Fins have all come out singing from the same hymn sheet today.

Finland, who are due to hold a general election next month, have been ardent opponents of any Greek debt relief. And not much seems to have changed today.

There are softer tones emerging from the rest however. Spain’s finance minister has now joined the calls from his French and Irish counterparts about finding a compromise:

14.12 Lithuania, the newest members of the euro, are at the party

14.10 Our man at the Eurogroup Bruno Waterfield thinks Michael Noonan, Ireland’s finance minister is a pretty good gauge of where things stands between Europe’s leaders.

Mr Noonan told reporters earlier today he thinks there will be a move to give Greece more time to negotiate a new debt deal and the “the ball is back in the Greek court to explain to the rest of us what exactly are looking for.”

Quotes from Bruno Waterfield:

QuoteThe programme runs out for Greece at the end of February and I don't know what their specific requests are.

So I would like it if the Greek finance ministers were to put specific requests to the meeting today. Obviously many of the European countries are amenable to making progress today. We would certainly accede to a Greek request for an extension of the programme.

If that were to happen some of the roadblocks would fall away then and it would be possible to get down to specifics. Nothing happened over the weekend that could be described as a breakthrough.

"The second alternative would be the negotiation of a new programme but with the programme ending so soon, if it goes to a new programme, time begins to run out.

“In my view extension of the programme is the most immediate way of making progress but I would rule out both; an extension of the current programme and the negotiation of a new programme somewhere around mid-summer.

14.00 The clamour for *another* Eurogroup meeting grows

13.58 Former Tory chancellor Norman Lamont has told Sky News Greece needs an outright debt-write off should it stay in the euro.

The prospects of that happening however are almost nil, and no longer form part of the demands being made by Syriza from their creditors. A prolongation of Greece’s debt profile, and a bond swap are more likely outcomes.

Here’s Mr Lamont in full:

QuoteI think the next best thing would be if a large part of Greece’s debts were just simply written off, rather than extending, cutting the interest rate, which is actually wiping off part of their debt but pretending you haven't done so.

Frankly, I think the austerity which has been inflicted on Greece – and I’m a supporter of balanced budgets, I’m a supporter of austerity in many countries – but I think what was imposed on Greece was just not practical, and I think it has been completely counterproductive.”

13.52 Should no deal be concluded today, there may well be another interminable session of the Eurogroup scheduled later this week, with Thursday or Friday touted as potential dates.

Ireland’s Michael Noonan is hinting the end of the week could be when we get to do this all over again. Joy.

13.50 A more concilliatory tone is being struck by France’s finance minister, who is concurring with Greece’s claims that it needs more time to be able to negotiate a new bail-out arrangement.

The Irish also seem to be on board. From their finance minister Michael Noonan

13.40 The great and good of Europe’s policymakers are making their way to the Eurogroup meeting.

Speaking to reporters, Germany’s Wolfgang Schauble has repeated he is sceptical about the chances of any deal being struck and reiterated that Greece needs to agree to extend its current programme which expires at the end of the month.

His Austrian counterpart has also pitched in:

13.25 Worried about a Grexit? Well investment bank Morgan Stanley are giving their investors tips on how best to hedge against the risk that could emerge from the country’s ejection from the monetary bloc.

MS think there is a 23pc chance Greece will be forced to leave, and are recommending investors sell the euro and buy stocks in the interim.

13.10

13.00 Greek bond yields are up and stocks down today as hope of a successful end to the Greek drama evaporates.

Greece’s three-year paper has jumped 1.19pc, while the Athens benchmark index is down 4pc.

12.30 Europe’s commissioner for economic affairs Pierre Moscovici, is trying to revive hopes of a successful outcome from today’s talks.

Mr Moscovici, a former French finance minister, told the press there is political will to reach a “positive conclusion”.

12.20

12.15 Greece’s finance minister has penned an op-ed in the New York Times today.

Mr Varoufakis, famously a Game Theory academic in his previous life, argues he is not engaging in “bluffs, stratagems and outside options, struggling to improve upon a weak hand” in Greece’s debt negotiations.

Instead, the “rock-star” finance minister sees himself more as a follower of German Immanuel Kant, evoking the philosopher’s famous “categorial imperative” which “taught us that the rational and the free escape the empire of expediency by doing what is right.”

An excerpt:

QuoteThe trouble with game theory, as I used to tell my students, is that it takes for granted the players' motives. In poker or blackjack this assumption is unproblematic. But in the current deliberations between our European partners and Greece's new government, the whole point is to forge new motives. To fashion a fresh mind-set that transcends national divides, dissolves the creditor-debtor distinction in favor of a pan-European perspective, and places the common European good above petty politics, dogma that proves toxic if universalized, and an us-versus-them mind-set.

I am often asked: What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution? Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed. Otherwise, they would not be truly red, but merely a bluff.

12.00

11.55 In other finance minister chit chat, France’s Michel Sapin has hinted at the potential division between Germany and the rest of the eurozone over how to best handle Greece’s demands.

Speaking to France 2 television, Mr Sapin said Europe’s leaders have to “find a way of functioning together”, and the new Greek government is “right” not to cede to an extension of existing bail-out conditions.

His quotes in full:

QuoteThe Germans are right from a certain point of view. Greece, not the government of today, the country, signed a number of agreements.

They must respect those agreements independently of the change of government. But the Greeks say, and they are right, I support them, ‘we have just changed government, so we are not going to do everything as before.”

11.40 Not promising. Germany’s finance minister Wolfgang Schaeuble has told a radio station today he is “very sceptical” any satisfactory solution can be thrashed out today meeting and called the new Greek government “irresponsible.”

Mr Schaeuble told Deutschlandfunk: “Greece must see that you can’t keep living above your means and then keep making proposals for how others should pay even more.”

“I feel sorry for the Greeks. They’ve elected a government that’s behaving pretty irresponsibly at the moment.”

11.35 In addition to today’s meeting between Greece and its creditors, Wednesday will see the ECB meet in Frankfurt. The central bank is likely to make some decision on the provision of emergency liquidity (ELA) to Greek banks.

This source of financing is contingent on Greece remaining in some semblance of bail-out programme. By removing it, the ECB would effectively be dumping Greece out of the euro, leading to potential capital controls and the reintroduction of the drachma.

Any vote on withdrawing ELA would however require a two-thirds majority from the governing council.

The chief economist of the ECB, Peter Praet, has hinted to a Spanish newspaper that ELA may well continue whatever the outcome of today’s meeting.

11.30

11.10 An interesting political development could be weighing on Germany’s leaders in the run up to today’s showdown.

The eurosceptic Alternative for Germany (AfD) has delivered an embarrassing blow to the German Chancellor Angela Merkel by defeating her Christian Democrats in regional elections in Hamburg.

The CDU saw their vote share fall by 5.9pc in one of their worst recorded outings in recent history.

In an ominous sign of the state of public sentiment in Germany, the AfD- which is not opposed to the EU – wants an end to the single currency, starting with the expulsion of poorly performing economies like Greece.

11.00 Three hours before we kick off in Brussels and Greek daily Ekathimerini is reporting a Syriza spokesman who has dubbed Germany’s behaviour in the eurozone as “irresponsible.”

“Who is irresponsible and who is responsible is subjective” Gavriil Sakellaridis told Parapolitika. “I could also say that Germany’s behavior is irresponsible. But I don’t want to trade in smear words.”

10.30 In other eurozone news, the monetary bloc’s trade surplus has grew to a record in December. At €23.3bn, the euroarea’s trade surplus is bigger than that boasted by China in the last decade.

Net trade also contributed 0.3pc to quarter-on-quarter GDP growth in fourth quarter of 2014.

9.15 Stocks have taken a tumble ahead of the Eurogroup meeting.

The impression is that Greece’s left wing government won’t be able to make a deal with its creditors today.

Jeremy Cook, chief economist at currency firm World First, said: “If we get some form of compromise today, that will obviously give EU parliaments a fortnight to vote upon it.”

“I am certainly cancelling any plans that I had on February 27, to make sure that I am here to cover what is likely to be a 13th hour meeting, to make sure that Greece is not without a bailout come March 1,” he continued.

9.00 Here’s our best impression of what’s coming up, and when (all times GMT).

• 9.30 Technical briefing ahead of main Eurogroup meeting (EC website)
• 12.30 Finance minister arrive – expect brief comments as they do (EC audiovisual)
• 14.00 Meeting begins (EC website)

We’re not sure when this will all wrap up, but remember that Wednesday’s meeting finished after 11pm, with a presser after midnight.

Greek Finance Minister Yanis Varoufakis, fourth right Photo: AP

8.30 Greece’s finances are now in a precarious state.

At the start of the month Bloomberg was told the country could face a “cash crunch” as early as March.

Investment bank JP Morgan has said that Greek bank deposits are now falling at a rate of €2bn a week (£1.48bn).

It warned that at such a pace the country’s banks will run out of collateral in 14 weeks.

Total outflows have hit roughly €21bn this year, with €4bn of that in February, the bank said.

This implies that bank borrowing from the European Central Bank and the Bank of Greece has reached nearly €80bn in the year to date.

8.15 All eyes on Greece today, as Yanis Varoufakis, the country’s finance minister, presses for a compromise with his European peers.

He wants the burden of Greece’s debts reduced, but has so far been unsuccessful. Wednesday’s Eurogroup meeting ended in deadlock.

Comments from Wolfgang Schaeuble, the German finance minister, on Monday morning also lacked promise.

Speaking in a radio interview with Deutschlandfunk, the minister said that he was “very sceptical” that a Greek solution will be reached today.

French finance minister Michel Sapin said that any Greek debt writedown would be the “worst message”, as fears grow that any deal would spread contagion into other states.

If a deal is not struck, then Greece will toe further towards the expiry of an assistance programme provided by the Troika – composed of the EU, European Central Bank, and International Monetary Fund.

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