BRUSSELS: Greece goes into talks with its eurozone partners on Monday demanding changes to a massive international bailout which could lead to its exit from the single currency bloc and into the unknown.
In the worst case scenario, a chaotic “Grexit” could jeopardize the whole euro project but analysts say this is very much less likely now than it was at the height of the debt crisis three or four years ago.
Brussels is in favor of a straight rollover of the current program that ends this month, but new hard-left Greek Prime Minister Alexis Tsipras won office last month on a promise to ditch it outright for damaging Greece, not helping it.
That leaves the most likely option a deal to cover Greece’s short-term finance needs until it gets to the point where the economy is growing fast enough to cope with a crippling debt burden, analysts say.
“We don’t need money, we need time to realize our reform plans,” Tsipras was quoted as saying by German news weekly Stern on Sunday.
“I promise you Greece will be a different country in six months.”
Tens of thousands of Greeks took to the streets Sunday in support of their government calling on Brussels to loosen the noose of austerity.
Tsipras spoke by phone with European Commission President Jean-Claude Juncker on the eve of the crucial eurozone finance ministers’ meeting.
“President Juncker is making a last effort in an extremely difficult situation,” an EU official told Agence France-Presse.
The problem is to find wording that satisfies both sides when the 19 eurozone finance ministers sit down at 2 p.m. local time on Monday, after their first informal meeting on the matter last week ended acrimoniously.
“The failure of the Eurogroup last week to agree even on steps for further discussions on Greece does not bode well for the emergence of a full solution at Monday’s meeting,” Capital Economics said in a research note.
“This could prompt nerves over whether the European Central Bank will cut off emergency funding to Greek banks on Wednesday.”
The European Union and the International Monetary Fund rescued Greece in 2010 and again in 2012 at a cost of some 240 billion euros ($273 billion), plus a hugely controversial private sector debt write-down worth more than 100 billion euros.
In return, Athens agreed to a series of stinging austerity measures and much-resented oversight by the EU, IMF and ECB ‘troika’ to make sure it stuck to the bailout terms.
The deal kept Greece in the eurozone but it also left Athens with a debt mountain of 315 billion euros, about 1.75 times the size of its economy.
Athens says this burden must be eased to give it the leeway to help an economy which only returned to growth in 2014 after years in recession and has recently shown fresh signs of weakness.
“Even if a plan is agreed, it is likely only to tackle Greece’s near-term financing requirements and hence kick the can down the road,” Capital Economics said.
“Finding a lasting solution to Greece’s debt burden that would guarantee its future inside the currency union [eurozone]will be a much bigger challenge.”
Germany key to accord
To get a deal Tsipras must come to terms with German Chancellor Angela Merkel, who believes fiscal discipline is the only true basis for sustainable economic growth, not borrowing and public excess.
A first meeting at an EU leaders summit on Thursday went better than expected, with Merkel recognizing the need for compromise in response to Tsipras’s apparent willingness to be flexible, accepting 70 percent of the current program while dropping the remainder.
At the same, the chancellor also called for Greece to respect all the bailout conditions.
BNP Paribas warned the finance ministers will find it hard going but with Athens under “fierce pressure,” agreement was still possible.
“An agreement on short-term financing for Greece is imperative. Although the Greek government has begun to soften its stance, major concessions are still needed to reach a deal,” it said in a research note.