Greece told to scale back expectations ahead of EU talks

John Hadoulis, Ella Ide
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Greek Prime Minister Alexis Tsipras is pushing for creditors to soften the tough conditions of the 240 billion euro bailout

Greek Prime Minister Alexis Tsipras is pushing for creditors to soften the tough conditions of the 240 billion euro bailout (AFP Photo/Patrick Domingo)

Athens (AFP) - The EU warned Greece's new leftist government Tuesday to scale back its plans to revise the country's unpopular bailout if it wants to secure a fund lifeline at critical talks this week.

European Economic Affairs Commissioner Pierre Moscovici said the existing bailout deal was "the anchor" on which discussions should be held, while German Finance Minister Wolfgang Schaeuble ruled out any renegotiation of the agreement.

Speaking during a G20 meeting in Istanbul, Moscovici said the Greek people's desire for change should not be "brushed aside" but Athens should also keep in mind voters in other European countries.

Schaeuble was even more emphatic, telling reporters in Istanbul that "it's over" if Greece doesn't want the final tranche of its multi-billion euro aid programme on the current terms, according to Bloomberg.

Their comments came after Greece's outspoken energy and environment minister Panagiotis Lafazanis threw down the gauntlet to the EU and paymaster Germany.

"If someone dares to issue an ultimatum, they should know they have picked the wrong country, the wrong people, and the wrong government," he said.

Almost 8 in 10 Greeks approve the government's policies, a GPO poll commissioned by Mega TV showed Tuesday, and over 73 percent expect a compromise solution to be forged between Athens and its EU peers.


- 'Non-negotiable' -


Greece was racing to fine-tune a 10-point plan aimed at persuading its international creditors to reluctantly rethink their bailout terms and prevent the country from going bust.

Prime Minister Alexis Tsipras faced a late-night confidence vote in parliament over his policies, but while he was expected to pass his first domestic political test, time to woo the holders of the purse strings was running out.

Tsipras is pushing for creditors to soften the tough conditions of the 240 billion euro ($270 billion) bailout that Greece accepted during the financial crisis.

At an emergency meeting of eurozone finance ministers Wednesday, Greece will plead its case for stop-gap financing with a view to clinching a reform deal that will not exacerbate poverty, to run from September 1.

Defence Minister Panos Kammenos warned that if negotiations with the eurozone fail, the country will go to a "Plan B", which could involve asking for funding from the United States, Russia or China.

But government spokesman Gabriel Sakellaridis flatly denied that was an option, saying that "our relations with the EU are non-negotiable. Nobody is discussing a change of direction."

According to a finance ministry source, the government is ready to cooperate on 70 percent of its bailout obligations but wants to overhaul the remaining 30 percent -- which it would replace with the 10-step plan.

It will offer a series of measures including lower budget surplus targets and cutting debt through a swap plan to replace its current EU-IMF bailout deal obligations.

The initiative was welcomed by the Greek market, which clawed back Monday's losses to rise more than 8.0 percent, while the benchmark 10-year bond also recovered ground.

But while a steady performance on the European markets also suggested that the draft measures had soothed some jitters among investors, the continent's leaders were unlikely to be so easily swayed.

German Chancellor Angela Merkel has said she expects a "sustainable" finance plan that respects the "basic rules" of the bailout programme, while British PM David Cameron moved Monday to draw up contingency plans for a Greek exit from the eurozone -- dubbed a "Grexit".

The government wants a bridging loan to buy time for negotiations without the austerity shackles.

A finance ministry source said such a deal could be reached to let both sides save face: "We call it a bridge. They can call it a technical extension."

Greece is under pressure to win approval for a new deal as quickly as possible because the European portion of the EU-IMF bailout is due to expire at the end of the month.

An accord is not expected before a further eurozone financial ministers meeting next Monday at the earliest.


- 'Standing up, not bowed' -


Greece's Finance Minister Yanis Varoufakis hailed the beginning of the talks as a watershed moment, saying "this is the first government that goes to the Eurogroup standing up, not bowed."

Garry Jenkins, LNG Capital analyst, said the eurozone may believe that "behind closed doors the Greek government will be prepared to compromise."

"However it is very unlikely that Merkel will be prepared to allow the Greek government to set the economic policy for the eurozone as a whole: the probability of her changing course 180 degrees is remote," he said.

Tsipras's legislative programme will go to a vote at midnight Tuesday (2200 GMT) in parliament, where the new prime minister has a comfortable majority.

His proposals, unveiled Sunday, include raising the minimum wage and ditching an unpopular property tax -- all of which have been cheered by ordinary Greeks but raised eyebrows on the international stage.