Trust issues rule Greece bailout talks

By: | Published: July 12, 2015 12:21 AM

Sceptical European finance ministers gathered on Saturday to decide whether to negotiate a third bailout for Greece after Prime Minister Alexis Tsipras...

Sceptical European finance ministers gathered on Saturday to decide whether to negotiate a third bailout for Greece after Prime Minister Alexis Tsipras won lawmakers’ backing for painful austerity measures his leftist party was elected to prevent.

With Athens staring at a bankruptcy that could see it crash out of the euro zone after financial markets reopen on Monday, EU officials forecast agreement would be reached by the end of the weekend to keep Greece afloat, but not before ministers and government leaders had vented their wrath at Tsipras.

Wolfgang Schaeuble, finance minister of its biggest creditor Germany and a veteran stickler for the EU’s fiscal rules, said negotiations would be “exceptionally difficult”.

Since Tsipras’s leftist government won power in January, he said, emerging optimism about Greece had been “destroyed in an incredible way in the last few months”.

Other ministers arriving for the Eurogroup meeting also spoke of a fundamental lack of trust after years of broken Greek promises and a snap referendum Tsipras called, in which voters massively rejected creditors’ terms he has since had to embrace.

However, sources familiar with a preparatory meeting earlier on Saturday said ministers’ aides had endorsed with reservations a recommendation by EU institutions and the IMF that Tsipras’s proposals did provide a basis to launch negotiations. “We are still far away,” said Jeroen Dijsselbloem, the Dutch FM who was chairing the meeting. “On both content and the more complicated question of trust, even if it’s all good on paper the question is whether it will get off the ground and will it happen … We are facing a difficult negotiation.”

But Germany, the biggest lender in two previous bailouts totalling 240 billion euros ($265 billion) since 2010, is deeply sceptical after five months of abortive talks with Tsipras. “The high figures for financing needs over the next three years may be too high and too sudden,” one euro zone source said. He said officials believed Greece may need 82 billion euros, factoring in cash from the IMF and other EU sources. Slovak finance minister Peter Kazimir, one of the most hawkish critics of Greece, said making the country’s debt sustainable was going to be “a huge problem”.

A positive assessment of the Greek proposals delivered by the European Commission, European Central Bank and International Monetary Fund late on Friday, along with bullish comments from Athens’ key euro zone ally France, had raised expectations that the Eurogroup would give a green light to new loan negotiations.

But several ministers said on arrival that more spending cuts and reform measures were needed, with swift enactment by parliament to show that Greece was serious this time. Even French finance minister Michel Sapin, Greece’s most powerful ally in the euro zone, said: “Confidence has been ruined by every Greek government over many years. Now we need to have confidence again.”

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