ATHENS – As Prime Minister and Radical Left SYRIZA leader Alexis Tsipras tried to defend bowing to international lenders, Germany issued a warning that Greece’s new government must follow up vague promises of reforms with action or face more consequences.
German Finance Minister Wolfgang Schaeuble, whose country has put up much of the 240 billion euros ($272 billion) in two bailouts from the troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which Greece now calls The Institutions, fired a shot across Tsipras’ bow.
Schaeuble, whose hard line broke the will of Greek Finance Minister Yanis Varoufakis to reverse austerity and get debt relief, said the Eurozone gave initial approval to a laundry list of undetailed reforms from Greece but wants a fast follow-up by the time the extension expires in June.
“It wasn’t easy an easy decision for us but neither was it easy for the Greek government because (they) had told the people something completely different in the campaign and afterwards,” the German finance minister told SWR2 radio in an interview, again mocking Tsipras for going back on his campaign promises not to deal with the Troika, to see debt relief, and not to take a bailout extension.
“The question now is whether one can believe the Greek government’s assurances or not. There’s a lot of doubt in Germany, that has to be understood,” said Schaeuble.
Despite his misgivings, he has urged German lawmakers to approve the Greek extension in a vote in parliament expected on Feb. 26. The other 18 Parliaments of Eurozone countries must also give their okay so Greece can get a 7.2- billion euro installment Tsipras vowed never to accept.
Tsipras bowed to pressure from the markets and as the country’s banks were bleeding cash so fast by depositors yanking money by the billions, fearful of a Eurozone exit.
Feeling the heat from some elements in his party angry he went back on his word, Tsipras called a Feb. 25 meeting of his lawmakers to brief them on why he did it.
The meeting was being held privately as Tsipras tried to quell growing dissent over concessions he made, reneging on campaign pledges, although he continued to insist he had won the day against the Eurozone by Greece being allowed to make its own reforms – subject to the lenders’ approval.
There have been warnings too from other EU officials that unless Greece meets fiscal targets – at the same time Tsipras is trying to restore social benefits with tax revenues declining and cash running out – that he would be forced to sign a new memorandum with the troika group.
THE BIG CAVEAT
There continued to be great wariness in the Eurozone as well over whether the list of reforms prepared by Varoufakis, an economist/blogger, would work as there were no financial details and just vague promises the country will do better in a wide number of areas.
While the month-old government in Athens was praised for coming up with a workable package of measures including maintaining state-asset sales and collecting more tax, the lenders said they want to see if that will translate into results.
“The conditional agreement to extend the current program is just the first hurdle in a long race,” Maria Paola Toschi, Global Market Strategist at JPMorgan Asset Management, wrote in a note to clients, the Bloomberg news agency reported. “We expect the negotiation process to continue to blow hot and cold,” she said.
The measures were a condition for extending the availability of bailout funds for another four months based on an initial agreement on Feb. 20.
The list is “not very specific” and doesn’t convey “clear assurances” that reforms will happen, IMF Managing Director Christine Lagarde wrote in a letter to the head of the euro region’s group of finance ministers. Commission officials and ECB President Mario Draghi also said the key to Greece winning more funding were “commitments” on legislation.
The current program, which Greece now calls a framework, was due to end on Feb. 28. Tsipras and Varoufakis had banked on their threat of walking on a big chunk of the debt and the prospect Greece would be forced out of the Eurozone would make the troika back down but it was the new coalition government, which includes the Independent Greeks (ANEL) which mostly relented.
Greece has until April to refine the details and show the finance ministers how it will meet the goals and it won’t get the next installment until it does.
The government and its creditors can now also begin talks on how to overcome the cash squeeze next month, with issuance of more Treasury bills one option to consider, an official told Bloomberg.
Even so, the agreement marks a turning point for Greece and Europe, the government said in an e-mail to reporters. Greece managed to escape from the “death trap” that extreme austerity had created, it said, even if another looms.