Trust the main issue with Greece, say eurozone leaders

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Greek Finance Minister Euclid Tsakalotos reaches under the table during a meeting of eurozone finance ministers at the EU Lex building in Brussels today. PA

An emergency meeting of eurozone finance ministers is well underway in Brussels this evening, as Greece seeks around €70bn from its international creditors in exchange for economic reforms.

The Greek government is seeking to persuade its international creditors that it can be trusted to bring in promised reforms after it managed to convince its parliament to back a harsh austerity package to avoid financial collapse.

Finance ministers and top officials of the eurozone all have the same message: we don’t fully trust you.

Greece, they said, needed to do a lot more than just publish a 13-page plan of reform commitments before they could sign off on another multibillion-euro bailout deal that would keep the country afloat and prevent its exit from the euro.

Meanwhile, reports from a German Sunday newspaper say that German Finance Minister Wolfgang Schauble has again raised the prospect of a Greek withdrawal from the euro.

The Sunday edition of German newspaper Frankfurter Allgemeine has published extracts from a leaked German finance ministry paper that raises a so-called Grexit as one of two options to prevent further deterioration of the Greek crisis.

The paper reportedly gives two possible scenarios. The first would see Greece, give assets worth €50bn to a trustee fund which would sell them in order to pay back Greek debt.

The second – if the EU agrees – is a temporary Grexit of at least five years to allow Athens restructure its debts while remaining a full EU member. It would also see administrative and financial support for measures to boost growth and address the growing humanitarian needs of its citizens.

The Greek government is reportedly denying the claims in the newspaper.

‘Trust is the toughrer issue’

Jeroen Dijsselbloem, the eurozone’s top official, said on his arrival at today’s meeting: “We are still a long way out, both on the issue of content as on the tougher issue of trust.

“On paper it is not good enough yet – and even if it is good on paper, then we still have the question: will it really happen?”

Greece is running out of time to convince its creditors. Tomorrow’s summit of European Union leaders could be its last chance.

Greece’s banks have been shuttered for the best part of two weeks and daily withdrawals from ATMs have been limited to €60. The economy is in freefall and the country faces a raft of big debt repayments.

Early today, Greek prime minister Alexis Tsipras cleared one hurdle as Greek parliamentarians overwhelmingly backed a package of economic reforms and further austerity measures, in the hope that it will convince its European partners to back a third bailout of the country.

Greece has made a request to Europe’s bailout fund for a €53.5bn three-year financial package.

However, the measures proposed, which include changes long-demanded by creditors, such as changes to pensions and sales taxes, do not appear to be enough, just yet.

Following months of deteriorating relations, creditors are demanding firm legislative action to back up the proposals.

German Finance Minister Wolfgang Schaeuble, pictured today. PA
German Finance Minister Wolfgang Schaeuble, pictured today. PA

German finance minister Wolfgang Schaeuble, who has taken a hard line on Greece over recent months, said the Greek government will have to do a lot more than just say it wants to reform if it is going to get more money.

“We will definitely not be able to rely on promises,” he said.

“We are determined to not make calculations that everyone knows one cannot believe in.”

Mr Schaeuble was clear in who he blamed for current crisis. He put that firmly on the shoulders of the radical left Syriza government that was elected in January on an anti-austerity platform.

The “hopeful” economic situation regarding Greece at the end of last year has been “destroyed by the last months”, said Mr Schaeuble, who anticipates an “extraordinarily difficult” meeting.

Greece hopes enough progress will be made at Saturday’s finance ministers meeting to allow EU government leaders on Sunday to formally back a bailout program.

The summit of the European Union’s 28 leaders has been billed as Greece’s last chance.

The eurozone ministers have to give their blessing to Greece’s bailout request to the European Stability Mechanism. Traditionally, eurozone ministers agree by mutual consensus.

The task facing the new Greek finance minister, Euclid Tsakalotos, is to convince his sceptical counterparts that Greece deserves another bailout, which would be its third in five years.

Managing Director of the International Monetary Fund Christine Lagarde arrives for today's meeting of eurozone finance ministers. Picture: PA
Managing Director of the International Monetary Fund Christine Lagarde arrives for today’s meeting of eurozone finance ministers. PA

Greece has received bailouts totalling €240bn in return for deep spending cuts, tax increases and reforms from successive governments.

Though the country’s annual budget deficit has come down dramatically, Greece’s debt burden has increased as the economy has shrunk by a quarter.

The Greek government has made some form of debt relief a key priority and will hope that a comprehensive solution will involve European creditors at least agreeing to delayed repayments or lower interest rates.

French finance minister Michel Sapin said Europe wants to hear the nitty-gritty around Greece’s proposals: “How are you going to do it? At what moment are you doing to do it? At what tempo are you going to do it?”

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