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18/02 -Greece buckling under intense pressure?

Greece shows signs of buckling to intense pressure as it prepares to seek an extension of a loan agreement for up to six months
European and US media continue to report on the talks held in Brussels on Monday between Greece and its eurozone creditors – some focusing on the breakdown in the discussions and Europe’s ultimatum to Greece for an extension to the bailout programme, others on future possible ECB action. Most media report on past stages of the negotiations, stressing that the Greek delegation was told that the country should be willing to extend its bailout package, meaning the continuation of austerity policies that the newly elected government had promised to put an end to, and that the only concession made was to stop using the word troika, detested by the Greeks.

Greek media, and a few others, for their part have some breaking news. As European officials insisted yesterday on taking a hard line with Greece’s request for an extension to its current bailout programme, as Greek newspaper Kathimerini notes in a tone of concern, all Greek media including Kathimerini, Naftemporiki and Efimerida ton Syntakton report that, in order to break the deadlock, the Greek government actually accepted the extension to the loan agreement, but not to the programme – news finding coverage in Cypriot, Hungarian and British media as well – with British media focusing on the “intense pressure” from Greece’s European partners which, as the front page of The Guardian highlights, made Greek officials show signs of buckling.

The Greek government is to send a letter to Eurogroup Chairman Jeroen Dijsselbloem asking for the extension to the bailout programme only as far as the part of the loan agreement is concerned. The government will propose redefining measures that accompany the loan agreement, Efimerida ton Syntakton further reports. The Greek side would commit not to proceeding to any unilateral action that will affect the fiscal state of the country until August. A European official however told Kathimerini that an extension to the loan agreement and not to the programme would create a legal problem for the German Parliament, since it cannot approve an extension to something that has changed.

In earlier media reports, Lithuanian Finance Minister Rimantas Sadzius told Les Echos that the Eurogroup does not have “a sufficiently clear view on the new government’s plans.” The Greek government needs to take domestic decisions on which reforms are “acceptable” for its voters and then tell the Eurogroup what measures it is going to take. Mr Sadzius pleaded for an extension to the current aid programme, even though it is politically difficult to accept it for Athens, recalling how his party, which took power in Lithuania in 2012, decided to continue budget discipline as a precondition to growth.

While wanting to end the current programmes, the new Greek government has not presented any alternatives yet, German Finance Minister Wolfgang Schäuble stressed in an interview with ARD. In an article titled “Greek Minister’s Style Irks His Eurozone Peers,” WSJE wrote that there have been concerns that comments by Greek Finance Minister Yanis Varoufakis about the financial state of the country could accelerate the flight of deposits from Greek banks. It is reported that ECB President Mario Draghi warned Mr Varoufakis about the need to take more care in his public pronouncements when they met at the euro area Finance Ministers meetings Monday and last week.

Today the ECB is expected to extend the emergency liquidity assistance (ELA) to Greek banks, reports Les Echos. The ELA has helped Greek banks stay afloat since the ECB announced, on February 4, that it would no longer accept Greek bonds as collateral. “Nobody can imagine that the ECB will abruptly pull the plug on Greek banks amid ongoing negotiations between governments to find a crisis exit,” Les Echos stresses. Bank sources believe that the ECB will continue financing the Greek banking system, says Kathimerini. Diario Economico and Le Figaro take the opposite view. The ECB board meeting may add significant pressure by cutting Greek banks’ access to ELA, but there are no certainties about such decision, says Diario Economico, while Le Figaro claims that the ECB may well decide to close the tap of the emergency credit lines (ELA) to Greek banks if it considers their collateral inadequate. According to Barclays, if this happens, the Greek state would opt for an implementation of capital controls and a limit to withdrawals.

Such a step by the ECB could either push for a compromise or lead Greece to a payment default and a eurozone exit. Speaking at a news conference, German Finance Minister Wolfgang Schäuble suggested, as WSJE reports, that a Greek withdrawal from the euro area is possible. “We all want the eurozone to stay together,” Mr Schäuble said, “but everyone has to contribute their part. It’s entirely a decision for Athens.”©EuropeanUnion2015

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