EU Economy
Greece gives mixed signals on debt talks
By Michael Hennigan, Finfacts founder and editor
Feb 2, 2015 - 7:20 AM

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Alexis Tsipras (r), prime minister, meeting Jeroen Dijsselbloem, Eurogroup head and Dutch finance minister, Athens, Jan 30, 2015

Greece in recent days has been giving mixed signals on debt talks with Bloomberg News reporting that Alexis Tsipras, prime minister, called Mario Draghi, ECB president, late Friday following a tetchy meeting in Athens between Yanis Varoufakis, finance minister, and Jeroen Dijsselbloem, Eurogroup head and Dutch finance minister.

At a press conference before it was cut short by Dijsselbloem making a fast exit, Varoufakis, who has been a professor of economics at the University of Athens until this week, said that the new government would not negotiate with the bailout troika - the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission (EC) - and he rejected the February 28 deadline for extending the current bailout.

Late Friday, the prime minister phoned Mario Draghi to assure him that Athens was looking for an agreement, according to a senior government official. “Talks were conducted in a good and reassuring spirit,” the official told Bloomberg News.

“The deliberation with our European partners has just begun,” Tsipras said in a statement emailed to Bloomberg News Saturday. “Despite the fact that there are differences in perspective, I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole.”

Also on Saturday the Greek government announced that US investment bank Lazard is to advise it on its debt burden. Lazard was an adviser to the Greek government in 2012 and has experience in assisting several countries in this area.

Chancellor Angela Merkel on Saturday in a published newspaper interview  ruled out a further writedown of Greece’s €315bn of debt, which last year was at 175% of GDP, saying that Greece should abide by the terms of its bailout arrangement. Speaking to the Hamburger Abendblatt newspaper, Merkel said she did “not envisage fresh debt cancellation” for Greece.

"Europe will continue to show its solidarity with Greece, as with other countries hard hit by the crisis, if these countries carry out reforms and cost-saving measures," she said.

Her comments were echoed by Wolfgang Schäuble, German finance minister, who told the Saturday edition of the Welt newspaper that he saw no need to talk of any debt reduction, as "anyone informed about the financing of Greek debt knew that by 2020 there would be no problems."

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The Financial Times reports that Standard & Poor’s said on Friday that domestic deposits at Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank had fallen by €5.4bn to €213.3bn at the end of December, adding: “We expect deposit outflows to have likely accelerated in January.”

Bankers familiar with the matter told the FT this week that between €700m and €1bn a day has been withdrawn from Greek lenders this week while about 40% of the value of the banks was wiped out in five days of trading on the Athens exchange.

Yanis Varoufakis in Paris Sunday for a meeting with Michel Sapin, French finance minister, said Greece had been living for the next loan tranche for the past five years. “We have resembled drug addicts craving the next dose. What this government is all about is ending the addiction,” he said, noting it was time to go “cold turkey.”

Varoufakis said that the Greek government will make proposals within a month for a “new contract” with the Eurozone, which would be in place by the end of May. “We are not going to ask for any loans during this period. It is perfectly possible to establish liquidity provisions with the ECB.”

However, with the bailout agreement expiring it is not clear that the ECB will agree to support Greek banks in that situation.

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