Greece Says Extension is “Absurd”

Talks between Greece and eurozone officials were expected to last through the night. Instead Greece Bailout Talks Collapsed in Acrimony after four hours.

A crucial meeting of eurozone finance ministers over the future of Greece’s bailout broke down in acrimony after Athens angrily rejected the bloc’s insistence that it extend its current €172bn rescue as “absurd” and “unacceptable”.

It is the second time in five days that negotiations between the new anti-austerity Greek government and its eurozone creditors have collapsed and it means Athens, whose public finances are deteriorating fast, could soon be left with no European financial backstop.

The eurozone gave Athens until Wednesday night to reverse course. Jeroen Dijsselbloem, chairman of the eurogroup of finance ministers, said the time available for a Greek request was almost out: “We can use this week, but that’s about it,” he said. “There was a very strong opinion across the eurogroup that the next step has to come from the Greek authorities,” he added.

Monday’s talks collapsed when Yanis Varoufakis, Greek finance minister, strongly objected to a draft statement according to which Athens would drop its fierce opposition to prolonging its bailout.

Mr Dijsselbloem said holding another finance ministers this week to discuss Greece was contingent on a request for a bailout extension from Athens. He added that he had spoke with Donald Tusk, president of the European Council, and that Mr Tusk had no intention of calling a summit of eurozone heads of government.

79% Support Syriza Negotiation Stance

It’s easier to take a hard stance when you have the support of the country as does Syriza. The BBC has poll data in its report Greece Rejects EU Bailout Offer as ‘Absurd’.

Talks between Greece and European finance ministers have collapsed early after Greece rejected the EU’s bailout offer as ‘absurd’ and ‘unacceptable’.

Before the meeting, German finance minister Wolfgang Schaeuble had already said he was not optimistic a deal would be reached.

Mr Schaeuble told German radio: “The problem is that Greece has lived beyond its means for a long time and that nobody wants to give Greece money any more without guarantees,” Mr Schaeuble said.

Greece has proposed a new bailout programme that involves a bridging loan to keep the country going for six months and help it repay €7bn (£5.2bn) of maturing bonds.

The second part of the plan would see the county’s debt refinanced. Part of this might be through “GDP bonds” – bonds carrying an interest rate linked to economic growth.

Greece also wants to see a reduction in the primary surplus target – the surplus the government must generate (excluding interest payments on debt) – from 3% to 1.49% of GDP.

In Greece last week, two opinion polls indicated that more than three-quarters of Greeks supported Mr Tsipras’s hardline stance.

According to the polls, 79% of Greeks backed the government’s policies and 74% believed its negotiating strategy would succeed.

Drop the Debt Rally

Protesters showed their solidarity with Greece at a rally in Trafalgar Square over the weekend. AP

How Long Can Greece Last Without Funds?

Andrew Walker, World Service economics correspondent, offers his opinion on how long Greece can last if the ECB pulls the plug.

Two pressing financial issues loom over Greece: whether the government can pay its bills and the stability of the banks. Greek officials have said the government could keep going for several months, but there are doubts. How long it takes depends to a great extent on Greek taxpayers. The banks have already seen money being withdrawn and increasingly need central bank loans.

If there is no bailout programme, the European Central Bank could pull the plug on the banks. If it came to that, it really would mean a major financial crisis, with perhaps the imposition of extensive financial controls to prop up the banks and possibly even the re-introduction of a national currency. It’s hard to nail down a date by which an agreement must be done to avert some sort of financial Armageddon, because it depends on the actions of taxpayers, bank customers and the ECB. But time is getting short.

Primary Account Surplus

How long Greece can remain on the euro depends on how long Greece can keep a primary account surplus. Tax revenues are key, but so is a run on the banks.

If the ECB pulls the plug, and it will if talks break down, Syriza will have no choice but to quickly see capital controls. Then it will be up to the tax collectors.

Given that capital controls can come at any time, I once again repeat my message to Greek citizens Get Out While You Still Can; Buy Gold.

For further discussion of how Greece can default and still stay on the euro, please see …

By the way, it appears we have the answer to this question: Austerity Queen Angela Merkel Ready for Compromise on Greece?

Mike “Mish” Shedlock