ATHENS: Greece’s new anti-austerity government faced a deadline on Monday to provide international creditors with firm reform commitments to justify a four-month extension of the country’s lifeline debt bailout.
If the measures fail to convince, Greece’s safety net will lapse on Saturday and Prime Minister Alexis Tsipras’s one-month-old administration risks running out of cash, a run on banks and even a eurozone exit.
On Friday in Brussels, in the latest in a series of dramatic showdowns, Yanis Varoufakis, Greece’s flamboyant new finance minister, secured the four-month breathing space from his 18 fellow eurozone finance ministers.
This was on condition however that Athens provided on Monday a convincing list of measures to ease fears that the extension would not let Greece off the hook in its commitments to get its fiscal house in order.
“Europe has some breathing space, nothing more, and certainly not a resolution.
Now it’s up to Athens,” Frank-Walter Steinmeier, foreign minister of eurozone powerhouse Germany, said in comments published Monday.
“The fundamentals—namely assistance in exchange for reform —must remain the same,” Steinmeier told the Bild daily.
“If the list of reforms is not agreed, this agreement is dead,” Varoufakis said in Brussels.
On Tuesday, the European Commission, the European Central Bank and the International Monetary Fund — the so-called “troika” holding most of Greece’s debts of 320 billion euros ($365 billion) —will chew over the proposals.
If they are satisfied, the extension can go ahead—pending approval from some European countries’ parliaments — but if not, it’s back to the drawing board with another eurozone finance ministers meeting this week.
Tsipras, 40, and his Syriza party swept to power in January vowing to end the “humiliation” and “vicious circle” of spending cuts demanded by Greece’s creditors in return for two bailouts of 240 billion euros.
His election victory sent shockwaves through Europe, not least in Germany, whose Chancellor Angela Merkel fears that reneging on austerity might catch on elsewhere and bring the eurozone debt crisis back with a vengeance.
Tsipras plans to use the four-month breathing space to negotiate a new reform package that puts the country—where one in four people is out of work—back on the road to recovery after years of recession and pain.
But walking a tightrope between its commitments to European creditors and its electoral pledges, the first signs of dissent over the weekend began to appear among Tsipras’s supporters.
To win Friday’s hard-fought deal, Athens pledged to refrain from one-sided measures that could compromise fiscal targets and had to abandon plans to tap some 11 billion euros in leftover European bank support funds.
The government had promised to spend two billion euros this year on poverty relief for thousands of families hit by five years of wage cuts and tax hikes.
Last week it presented legislation offering debt forgiveness to low-income citizens owing money to the state, but Brussels has now demanded to vet such measures beforehand.