Greece races to win bailout extension

Simon Sturdee
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Greece said it would miss a midnight deadline to provide a list of reforms to its international lenders aimed at obtaining a four-month extension of its bailout

Greece said it would miss a midnight deadline to provide a list of reforms to its international lenders aimed at obtaining a four-month extension of its bailout (AFP Photo/Luisa Gouliamaki)

Athens (AFP) - Greece's new anti-austerity government scrambled Monday to meet a midnight deadline to nail down and despatch to Brussels a list of proposed reforms to secure a four-month extension of its debt bailout lifeline.

If the measures fail to win the approval of Greece's EU creditors, the country's safety net will collapse on Saturday, leaving the government at risk of running out of cash, a run on banks and even a eurozone exit.

But hard-left Prime Minister Alexis Tsipras, whose Syriza party swept to power last month, could also face a voter backlash if he fails to deliver on promises to ease the pain of ordinary Greeks after years of recession and cuts.

In the latest in a series of dramatic showdowns over Greece's 240-billion-euro ($270-billion) bailout, flamboyant new Finance Minister Yanis Varoufakis secured the extension from his 18 fellow eurozone partners in Brussels on Friday.

The deal however came with the proviso that Greece provide by Monday a list of measures to quash concerns, not least in powerhouse Germany, that Athens might backtrack on promises to cut spending and pass root-and-branch reforms.

This in turn might prompt other eurozone countries like Spain, Portugal, France and Italy to go easy on the "tough love" austerity measures that Berlin sees as vital to preventing a return of the eurozone debt crisis.

A source in Brussels said that Athens has provided a list of reforms but that it was "not definitive".

Other sources said Brussels and Athens were in regular communication and seeking to finalise the document by a midnight (2300 GMT) deadline.

"The fundamentals -- namely assistance in exchange for reform -- must remain the same," German Foreign Minister Frank-Walter Steinmeier told the Bild daily.

"Of course there will be measures that fit with the philosophy of Syriza... but they also have to take account of budgetary balance and the need to repay debts," EU Economic Affairs Commissioner Pierre Moscovici told France 2.

In Berlin, a finance ministry spokesman said the list needed to be "coherent and plausible".

- Reality bites -

Tsipras has vowed to end the "humiliation" and "vicious circle" of the spending cuts demanded by Greece's creditors in return for two massive bailouts since 2010.

He wants to use the next four months to draw up a new reform package that puts the country -- where unemployment stands at 25 percent -- on a fairer road to recovery after years of recession, spending cuts and state job losses.

But the tough and united negotiating stance of Germany and other eurozone countries has obliged the former motorbike-riding communist activist and his tieless finance minister Varoufakis to give ground.

Athens pledged on Friday to refrain from one-sided measures that could compromise fiscal targets and had to abandon plans to tap some 11 billion euros in leftover European bank support funds.

UniCredit economist Erik Nielsen called it a "complete political surrender to the world of reality".

Tsipras insisted at the weekend that his coalition government had achieved an "important negotiating success" which "cancels out austerity". Athens says that it, not the country's creditors, is now calling the shots.

Government spokesman Gabriel Sakellaridis insisted on Skai television Monday that Greece still has "red lines" such as raising the minimum wage and maintaining pension levels.

But cracks were already beginning to show, with Manolis Glezos, a 92-year-old wartime resistance hero and one of Syriza's most respected members, distancing himself from Tsipras.

- Tax hit list -

There were few details about the new measures.

Minister of state Nikos Pappas told television channel Mega on Sunday they were aimed at making "the Greek civil service more effective and to combat tax evasion".

According to Bild, the measures will include a 7.3 billion-euro tax hit list targeting the fortunes of the super-rich, back taxes and a crackdown on smuggling.

Once the European Commission, the European Central Bank and the International Monetary Fund -- the "troika" holding most of Greece's 320 billion euros in debts -- approve the list, the extension can go ahead.

Certain European parliaments also need to give the green light, however.

But if the proposals are not approved, it will be back to the drawing board and yet more drama for Greece.

"The chance of policy mistakes, political volatility and implementation risks remains quite high, and may rise," said Daniele Antonucci, economist at Morgan Stanley.

Experts at IHS said they now expect Greece to re-enter recession in the current quarter, just a year after returning to growth.