Greece rejects 'blackmail' in eurozone debt deal row

Alex Pigman
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Greek Finance Minister Yanis Varoufakis is still confident the different sides will find agreement in time to set up a new meeting for Friday

Greek Finance Minister Yanis Varoufakis is still confident the different sides will find agreement in time to set up a new meeting for Friday (AFP Photo/Emmanuel Dunand)

Brussels (AFP) - European ministers raised the pressure on Greece to accept a last-minute debt deal on Tuesday as the radical leftist government in Athens remained defiant refusing "blackmail" from Brussels.

Europe and Greece are racing to come to an agreement and avoid a catastrophic Greek exit from the eurozone, after talks ended bitterly on Monday with both sides digging in to their positions.

"We will not accept psychological blackmail," Greek Prime Minister Alexis Tsipras said in a speech to parliament as he named former conservative minister Prokopis Pavlopoulos as his party's candidate for president.

Tsipras is also going ahead with reform measures that flout Greece's bailout obligations, calling for parliament to vote on a series of anti-austerity reform bills at the end of the week.

But Greece is becoming increasingly isolated and is facing a united front of its eurozone partners. Led by paymaster Germany, the single currency bloc will not allow Athens to side step its austerity-filled bailout programme which expires at the end of the month.

"There was a completely unanimous position of the Eurogroup on the Greek issue," said influential German Finance Minister Wolfgang Schaeuble, a day after the debt talks collapsed.

The tense meeting ended abruptly Monday with Eurogroup head Jeroen Dijsselbloem, who is also Dutch finance minister, giving Greece just 48 hours to request an extension to the bailout.

The Tsipras government has bitterly rejected the extension demand and is seeking a new arrangement that would ease up on the harsh austerity it says has damaged the Greek economy.

"The Greek government will not accept ultimatums," a government source said in Athens where popular support for the Tsipras government is running strong.

"It's the first time a government is standing with dignity in Europe," said pensioner Thomas Argiros on the iconic Syntagma square in Athens.

Monday's meeting was the second time in a week that talks among eurozone ministers ended in acrimony amid accusations by Greece that Dijsselbloem, backed by Germany, had torpedoed deliberations with "absurd" demands.

- 'An honourable solution' -

Despite the wall of opposition, Greek Finance Minister Yanis Varoufakis said the different sides would find agreement in time to set up a new meeting for Friday.

"We know in Europe how to deliberate in such a way to create a very good solution, an honourable solution out of initial disagreements," Varoufakis said on Tuesday.

The chaos surrounding the debt talks alarmed analysts, with economists at Commerzbank now predicting that a Greek exit from the euro was 50 percent likely, up from 25 percent.

"After the eurozone finance ministers again failed to find an agreement with Greece today, the euro membership of the country hangs in the balance," it said in a note Monday, cited by Bloomberg.

Tsipras swept into power last month on a promise to tear up the bailout agreement, all the while keeping the country in the 19-member eurozone.

But with the European portion of the 240-billion-euro ($270-billion) bailout expiring at the end of February, the exit from the euro remains a serious risk if no other financing is secured.

"We're reaching crunch time for Greece and the eurozone and I'm here to urge all sides to reach an agreement," said George Osborne, finance minister of non-euro Britain.

"Not having an agreement would be very severe for economic and financial stability," he said.


- 'Inevitable' -

In theory, the two sides are not that far apart.

Tsipras is demanding that the eurozone agree to short-term funding to buy the time needed to hammer out a new deal, with lighter austerity conditions attached.

Greece has proposed to stick to 70 percent of the existing bailout programme but would overhaul the remaining 30 percent which it sees as damaging to growth and toxic for ordinary Greeks.

Varoufakis told reporters Monday that the European Commission had made a proposal along this line but instead Dijsselbloem offered a different draft statement tying Greece to its current agreement.

This demand is key to Greece's 18 eurozone partners, especially Spain, Portugal and Ireland -- countries that also had to adopt tough austerity measures in return for loans after the 2009 global financial crisis.