Greece readies for EU debt talks
February 4, 2015, 11:00 pm

Updated with ECB decision on Greek Junk Bonds

Greece’s Tsipras, left, hopes Hollande can offset German apprehension regarding a re-positioning of Greek debt repayments [Xinhua]

The meeting in Berlin will likely be challenging for both parties which have in recent days indicated they will not back down.

Varoufakis is a member of the popular leftist Syriza party which swept into power after winning the January 25 snap elections.

The party’s platform centered around revisiting the merits of the current austerity agreements put in place after the EU and IMF agreed to provide a $300 billion bailout. Syriza will now likely push for debt restructuring, repayment deadline extension – or even a write-off.

Analysts expect tough negotiations ahead.

On Wednesday, Varoufakis met with European Central Bank (ECB) chief Mario Draghi in Frankfurt and informed him of Greece’s “utter and unwavering determination that it can’t possibly be business as usual”.

He told reporters that Greeks were suffering from current austerity measures and were facing a humanitarian crisis.

Update: But late on Wednesday the ECB announced that it had suspended a waiver given to Greek government bonds, rated as junk, to be used as collateral for regular central bank loans.

A junk rating falls below an ECB standard, which is why Greek government bonds had been issued a waiver from such restrictions.

Analysts agree that the ECB decision indicates the Eurozone is unlikely to agree to a restructuring of Greece’s massive debt repayment scheme.

Financial woes

The Greek economy began to unravel in 2009 when the government announced it could not meet its huge debt due to massive overspending.

Its budget deficit began to surge shortly after government financed the 2004 Athens Olympics.

The debt crisis was further exacerbated when the global economic crisis hit and the government feared defaulting on its loans. It had no choice but to seek help from the EU and the IMF.

Although the EU and IMF agreed to a total of over $300 billion in bailout loans, they demanded that the Greek government take severe measures to cut spending.

Athens agreed but this measure was met with millions of Greeks taking to the streets in protest sometimes with violence reported between demonstrators and police.

Upbeat Tsipras

With a new leftist, anti-austerity government in power, the Greeks have launched a charm offensive trying to convince major players like Germany and France to agree to some kind of re-positioning of the remaining debt repayment.

Greece’s Prime Minister Alexis Tsipras on Wednesday said he hoped he could reach a “viable agreement” after meeting with European Commission President Jean-Claude Juncker.

But it won’t be an easy sell to the Germans who since 2008 were against bailing out the Greek economy and now may take an even tougher line.

On Wednesday, German Chancellor Angela Merkel said no decisions had been made and that the onus was on Greece to make “concrete proposals”.

But France’s Francois Hollande, who received Tsipras in Paris late Wednesday, said he was open to a long-term solution based on serious dialogue over Greece’s debt while also respecting EU financial rules.

The BRICS Post with inputs from Agencies